**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-Q**

**March      31, 2006**

*For      The Transition Period from ____ to ____*

| Commission                     |   | Registrant,                State of Incorporation,                            |   | I.R.S.                Employer    |
|--------------------------------|--------|-------------------------------------------------------------------------------|--------|-----------------------------------|
| File                Number     |   | Address                of Principal Executive Offices, and Telephone Number   |   | Identification                No. |
|                           |   |                                                                          |   |                              |
| 1-3525                         |   | AMERICAN                ELECTRIC POWER COMPANY, INC. (A New York Corporation) |   | 13-4922640                        |
| 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                        |
|                           |   |                                                                          |   |                              |
| All                Registrants |   | 1                Riverside Plaza, Columbus, Ohio 43215-2373                   |   |                              |
|                           |   | Telephone                (614) 716-1000                                       |   |                              |

| *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** ___     * |

| *Indicate                by check mark whether American Electric Power Company, Inc. is a                large                accelerated filer, an accelerated filer, or a non-accelerated filer.                See                definition of ‘accelerated filer and large accelerated filer’ in Rule                12b-2 of the Exchange Act. (Check One)* |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Large                accelerated filer**  X  **                  Accelerated filer ___**    **Non-accelerated                filer** ___     *                                                                                                                                               |

| *Indicate                by check mark whether 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, are large accelerated filers, accelerated                filers,                or non-accelerated filers. See definition of ‘accelerated filer and large                accelerated filer’ in Rule 12b-2 of the Exchange Act. (Check                One)* |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Large                accelerated filer** ___   **                  Accelerated filer** ___   **Non-accelerated                filer**  X  *                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| *Indicate                by check mark whether the registrants are shell companies (as defined                in                Rule 12b-2 of the Exchange Act.)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *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 H(1)(a) and (b) of Form 10-Q and      are      therefore filing this Form 10-Q with the reduced disclosure format specified      in      General Instruction H(2) to Form 10-Q.*

----

|                                                 |   | **Aggregate                market value of voting and non-voting common equity held by non-affiliates                of the registrants** **as                of June 30, 2005, the last trading date of the registrants’ most recently                completed second fiscal quarter** |   |   **Number                of shares of common stock outstanding of the registrants                at****April                28, 2006** |
|------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                 |   |                                                                                                                                                                                                                                                                                                |   |                                                                                                                                              |
| 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. |   | $14,172,701,867                                                                                                                                                                                                                                                                                     |   | 393,914,882                                                                                                                                       |
|                                                 |   |                                                                                                                                                                                                                                                                                                |   | ($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)                                                                                                                    |

----

**AMERICAN      ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES**

**INDEX      TO QUARTERLY REPORTS ON FORM 10-Q**

**March      31, 2006**

|                                                                                              |                                                                                                                                                                                                                      |   |
|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Glossary                of Terms                                                                  |                                                                                                                                                                                                                      |   |
|                                                                                              |                                                                                                                                                                                                                      |   |
| Forward-Looking                Information                                                        |                                                                                                                                                                                                                      |   |
|                                                                                              |                                                                                                                                                                                                                      |   |
| Part                I. FINANCIAL INFORMATION                                                      |                                                                                                                                                                                                                      |   |
|                                                                                              |                                                                                                                                                                                                                      |   |   |
|                                                                                              | Items                1, 2 and 3 - Financial Statements, Management’s Financial Discussion and                Analysis and Quantitative and Qualitative Disclosures About Risk                Management Activities: |   |   |
| **American                Electric Power Company, Inc. and Subsidiary                Companies:** |                                                                                                                                                                                                                      |   |
|                                                                                              | Management’s                Financial Discussion and Analysis of Results of Operations                                                                                                                              |   |   |
|                                                                                              | Quantitative                and Qualitative Disclosures About Risk Management                Activities                                                                                                                   |   |   |
|                                                                                              | Condensed                Consolidated Financial Statements                                                                                                                                                                |   |   |
|                                                                                              | Index                to Condensed Notes to Condensed Consolidated Financial                Statements                                                                                                                     |   |   |
|                                                                                              |                                                                                                                                                                                                                      |   |   |
| **AEP                Generating Company:**                                                        |                                                                                                                                                                                                                      |   |
|                                                                                              | Management’s                Narrative Financial Discussion and Analysis                                                                                                                                             |   |   |
|                                                                                              | Condensed                Financial Statements                                                                                                                                                                             |   |   |
|                                                                                              | Index                to Condensed Notes to Condensed Financial Statements of Registrant                Subsidiaries                                                                                                       |   |   |
|                                                                                              |                                                                                                                                                                                                                      |   |   |
| **AEP                Texas Central Company and Subsidiary:**                                      |                                                                                                                                                                                                                      |   |
|                                                                                              | Management’s                Financial Discussion and Analysis                                                                                                                                                       |   |   |
|                                                                                              | Quantitative                and Qualitative Disclosures About Risk Management                Activities                                                                                                                   |   |   |
|                                                                                              | Condensed                Consolidated Financial Statements                                                                                                                                                                |   |   |
|                                                                                              | Index                to Condensed Notes to Condensed Financial Statements of Registrant                Subsidiaries                                                                                                       |   |   |
|                                                                                              |                                                                                                                                                                                                                      |   |   |
| **AEP                Texas North Company:**                                                       |                                                                                                                                                                                                                      |   |
|                                                                                              | Management’s                Narrative Financial Discussion and Analysis                                                                                                                                             |   |   |
|                                                                                              | Quantitative                and Qualitative Disclosures About Risk Management                Activities                                                                                                                   |   |   |
|                                                                                              | Condensed                Financial Statements                                                                                                                                                                             |   |   |
|                                                                                              | Index                to Condensed Notes to Condensed Financial Statements of Registrant                Subsidiaries                                                                                                       |   |   |
|                                                                                              |                                                                                                                                                                                                                      |   |   |
| **Appalachian                Power Company and Subsidiaries:**                                    |                                                                                                                                                                                                                      |   |
|                                                                                              | Management’s                Financial Discussion and Analysis                                                                                                                                                       |   |   |
|                                                                                              | Quantitative                and Qualitative Disclosures About Risk Management                Activities                                                                                                                   |   |   |
|                                                                                              | Condensed                Consolidated Financial Statements                                                                                                                                                                |   |   |
|                                                                                              | Index                to Condensed Notes to Condensed Financial Statements of Registrant                Subsidiaries                                                                                                       |   |   |
|                                                                                              |                                                                                                                                                                                                                      |   |   |
| **Columbus                Southern Power Company and Subsidiaries:**                              |                                                                                                                                                                                                                      |   |
|                                                                                              | Management’s                Narrative Financial Discussion and Analysis                                                                                                                                             |   |   |
|                                                                                              | Quantitative                and Qualitative Disclosures About Risk Management                Activities                                                                                                                   |   |   |
|                                                                                              | Condensed                Consolidated Financial Statements                                                                                                                                                                |   |   |
|                                                                                              | Index                to Condensed Notes to Condensed Financial Statements of Registrant                Subsidiaries                                                                                                       |   |   |
|                                                                                              |                                                                                                                                                                                                                      |   |   |
| **Indiana                Michigan Power Company and Subsidiaries:**                               |                                                                                                                                                                                                                      |   |
|                                                                                              | Management’s                Financial Discussion and Analysis                                                                                                                                                       |   |   |
|                                                                                              | Quantitative                and Qualitative Disclosures About Risk Management                Activities                                                                                                                   |   |   |
|                                                                                              | Condensed                Consolidated Financial Statements                                                                                                                                                                |   |   |
|                                                                                              | Index                to Condensed Notes to Condensed Financial Statements of Registrant                Subsidiaries                                                                                                       |   |   |
|                                                                                              |                                                                                                                                                                                                                      |   |   |

| **Kentucky                  Power Company:**                                                                     |                                                                                                                    |                                                                         |
|------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|
|                                                                                                             | Management’s                  Narrative Financial Discussion and Analysis                                         |                                                                         |   |
|                                                                                                             | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities             |                                                                         |   |
|                                                                                                             | Condensed                  Financial Statements                                                                         |                                                                         |   |
|                                                                                                             | Index                  to Condensed Notes to Condensed Financial Statements of Registrant                  Subsidiaries |                                                                         |   |
|                                                                                                             |                                                                                                                    |                                                                         |   |
| **Ohio                  Power Company Consolidated:**                                                            |                                                                                                                    |                                                                         |
|                                                                                                             | Management’s                  Financial Discussion and Analysis                                                   |                                                                         |   |
|                                                                                                             | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities             |                                                                         |   |
|                                                                                                             | Condensed                  Consolidated Financial Statements                                                            |                                                                         |   |
|                                                                                                             | Index                  to Condensed Notes to Condensed Financial Statements of Registrant                  Subsidiaries |                                                                         |   |
|                                                                                                             |                                                                                                                    |                                                                         |   |
| **Public                  Service Company of Oklahoma:**                                                         |                                                                                                                    |                                                                         |
|                                                                                                             | Management’s                  Narrative Financial Discussion and Analysis                                         |                                                                         |   |
|                                                                                                             | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities             |                                                                         |   |
|                                                                                                             | Condensed                  Financial Statements                                                                         |                                                                         |   |
|                                                                                                             | Index                  to Condensed Notes to Condensed Financial Statements of Registrant                  Subsidiaries |                                                                         |   |
|                                                                                                             |                                                                                                                    |                                                                         |   |
| **Southwestern                  Electric Power Company Consolidated:**                                           |                                                                                                                    |                                                                         |
|                                                                                                             | Management’s                  Financial Discussion and Analysis                                                   |                                                                         |   |
|                                                                                                             | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities             |                                                                         |   |
|                                                                                                             | Condensed                  Consolidated Financial Statements                                                            |                                                                         |   |
|                                                                                                             | Index                  to Condensed Notes to Condensed Financial Statements of Registrant                  Subsidiaries |                                                                         |   |
|                                                                                                             |                                                                                                                    |                                                                         |   |
| Condensed                  Notes to Condensed Financial Statements of Registrant                  Subsidiaries   |                                                                                                                    |                                                                         |
|                                                                                                             |                                                                                                                    |                                                                         |   |
| Combined                  Management’s Discussion and Analysis of Registrant                  Subsidiaries |                                                                                                                    |                                                                         |
|                                                                                                             |                                                                                                                    |                                                                         |   |
|                                                                                                             | Item                  4.                                                                                                | Controls                  and Procedures                                     |   |   |
|                                                                                                             |                                                                                                                    |                                                                         |   |   |
| Part                  II. OTHER INFORMATION                                                                      |                                                                                                                    |                                                                         |
|                                                                                                             |                                                                                                                    |                                                                         |
|                                                                                                             | Item                  1.                                                                                                | Legal                  Proceedings                                           |   |   |
|                                                                                                             | Item                  1A.                                                                                               | Risk                  Factors                                                |   |   |
|                                                                                                             | Item                  2.                                                                                                | Unregistered                  Sales of Equity Securities and Use of Proceeds |   |   |
|                                                                                                             | Item                  5.                                                                                                | Other                  Information                                           |   |   |
|                                                                                                             | Item                  6.                                                                                                | Exhibits:                                                                    |   |   |
|                                                                                                             |                                                                                                                    |                                                                         |   | Exhibit                  12 |   |   |   |
|                                                                                                             |                                                                                                                    |                                                                         |   | Exhibit                  31(a) |   |   |   |
|                                                                                                             |                                                                                                                    |                                                                         |   | Exhibit                  31(b) |   |   |   |
|                                                                                                             |                                                                                                                    |                                                                         |   | Exhibit                  31(c) |   |   |   |
|                                                                                                             |                                                                                                                    |                                                                         |   | Exhibit                  31(d) |   |   |   |
|                                                                                                             |                                                                                                                    |                                                                         |   | Exhibit                  32(a) |   |   |   |
|                                                                                                             |                                                                                                                    |                                                                         |   | Exhibit                  32(b) |   |   |   |
|                                                                                                             |                                                                                                                    |                                                                         |   |   |   |   |   |
| SIGNATURE                                                                                                        |                                                                                                                    |                                                                         |   |

| This                combined Form 10-Q is separately filed by 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 and Southwestern Electric                Power Company. Information contained herein relating to any individual                registrant is filed by such registrant on its own behalf. Each registrant                makes no representation as to information relating to the other                registrants. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**GLOSSARY      OF TERMS**

**When      the following terms and abbreviations appear in the text of this report, they      have the meanings indicated below.**

|  **Term** |   |  **M****eaning** |
|----------------|--------|-----------------------|

| AEGCo                                                                             |   | AEP                Generating Company, an AEP electric generating                subsidiary.                                                                                                                                                              |
|-----------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| AEP                or Parent                                                      |   | American                Electric Power Company, Inc.                                                                                                                                                                                                      |
| AEP                Consolidated                                                   |   | AEP                and its majority owned consolidated subsidiaries and consolidated                entities.                                                                                                                                             |
| AEP                East companies                                                 |   | APCo,                CSPCo, I&M, KPCo and OPCo.                                                                                                                                                                                                       |
| AEPES                                                                             |   | AEP                Energy Services, Inc., a subsidiary of AEP Resources,                Inc.                                                                                                                                                              |
| AEP                System or the System                                           |   | American                Electric Power System, an integrated electric utility system, owned                and                operated by AEP’s electric utility subsidiaries.                                                                      |
| AEP                System Power Pool or AEP                  Power Pool |   | Members                are APCo, CSPCo, I&M, KPCo and OPCo. The Pool shares the generation,                cost of generation and resultant wholesale off-system sales of the                member                companies.                         |
| AEPSC                                                                             |   | American                Electric Power Service Corporation, a service subsidiary providing                management and professional services to AEP and its                subsidiaries.                                                                |
| AEP                West companies                                                 |   | PSO,                SWEPCo, TCC and TNC.                                                                                                                                                                                                                  |
| AFUDC                                                                             |   | Allowance                for Funds Used During Construction.                                                                                                                                                                                              |
| ALJ                                                                               |   | Administrative                Law Judge.                                                                                                                                                                                                                  |
| APCo                                                                              |   | Appalachian                Power Company, an AEP electric utility subsidiary.                                                                                                                                                                             |
| CAA                                                                               |   | Clean                Air Act.                                                                                                                                                                                                                             |
| Cook                Plant                                                         |   | Donald                C. Cook Nuclear Plant, a two-unit, 2,110 MW nuclear plant owned by                I&M.                                                                                                                                          |
| CSPCo                                                                             |   | Columbus                Southern Power Company, an AEP electric utility                subsidiary.                                                                                                                                                        |
| CSW                                                                               |   | Central                and South West Corporation, a subsidiary of AEP (Effective January                21,                2003, the legal name of Central and South West Corporation was changed                to                AEP Utilities, Inc.). |
| CSW                Operating Agreement                                            |   | Agreement,                dated January 1, 1997, by and among PSO, SWEPCo, TCC and TNC governing                their generating capacity allocation. AEPSC acts as the                agent.                                                             |
| CTC                                                                               |   | Competition                Transition Charge.                                                                                                                                                                                                             |
| DETM                                                                              |   | Duke                Energy Trading and Marketing L.L.C., a risk management                counterparty.                                                                                                                                                   |
| EPACT                                                                             |   | Energy                Policy Act of 2005.                                                                                                                                                                                                                 |
| ERCOT                                                                             |   | Electric                Reliability Council of Texas.                                                                                                                                                                                                     |
| FASB                                                                              |   | Financial                Accounting Standards Board.                                                                                                                                                                                                      |
| Federal                EPA                                                        |   | United                States Environmental Protection Agency.                                                                                                                                                                                             |
| FERC                                                                              |   | Federal                Energy Regulatory Commission.                                                                                                                                                                                                      |
| GAAP                                                                              |   | Accounting                Principles Generally Accepted in the United States of                America.                                                                                                                                                   |
| HPL                                                                               |   | Houston                Pipe Line Company LP, a former AEP subsidiary that was sold in January                2005.                                                                                                                                        |
| IGCC                                                                              |   | Integrated                Gasification Combined Cycle, technology that turns coal into a                cleaner-burning gas.                                                                                                                              |
| I&M                                                                           |   | Indiana                Michigan Power Company, an AEP electric utility                subsidiary.                                                                                                                                                         |
| IRS                                                                               |   | Internal                Revenue Service.                                                                                                                                                                                                                  |
| IPP                                                                               |   | Independent                Power Producers.                                                                                                                                                                                                               |
| IURC                                                                              |   | Indiana                Utility Regulatory Commission.                                                                                                                                                                                                     |
| KPCo                                                                              |   | Kentucky                Power Company, an AEP electric utility subsidiary.                                                                                                                                                                                |
| KPSC                                                                              |   | Kentucky                Public Service Commission.                                                                                                                                                                                                        |
| kV                                                                                |   | Kilovolt.                                                                                                                                                                                                                                                 |
| KWH                                                                               |   | Kilowatthour.                                                                                                                                                                                                                                             |
| MISO                                                                              |   | Midwest                Independent Transmission System                Operator.                                                                                                                                                                           |

| MTM                                                 |   | Mark-to-Market.                                                                                                                                                                                                                       |
|-----------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| MW                                                  |   | Megawatt.                                                                                                                                                                                                                             |
| MWH                                                 |   | Megawatthour.                                                                                                                                                                                                                         |
| NOx                                                 |   | Nitrogen                oxide.                                                                                                                                                                                                        |
| Nonutility                Money Pool                |   | AEP                System’s Nonutility Money Pool.                                                                                                                                                                              |
| NRC                                                 |   | Nuclear                Regulatory Commission.                                                                                                                                                                                         |
| NSR                                                 |   | New                Source Review.                                                                                                                                                                                                     |
| NYMEX                                               |   | New                York Mercantile Exchange.                                                                                                                                                                                          |
| OATT                                                |   | Open                Access Transmission Tariff.                                                                                                                                                                                       |
| OCC                                                 |   | Corporation                Commission of the State of Oklahoma.                                                                                                                                                                       |
| OPCo                                                |   | Ohio                Power Company, an AEP electric utility subsidiary.                                                                                                                                                                |
| OTC                                                 |   | Over                the counter.                                                                                                                                                                                                      |
| PJM                                                 |   | Pennsylvania                - New Jersey - Maryland regional transmission                organization.                                                                                                                                |
| PSO                                                 |   | Public                Service Company of Oklahoma, an AEP electric utility                subsidiary.                                                                                                                                 |
| PTB                                                 |   | Price-to-Beat.                                                                                                                                                                                                                        |
| PUCO                                                |   | Public                Utilities Commission of Ohio.                                                                                                                                                                                   |
| PUCT                                                |   | Public                Utility Commission of Texas.                                                                                                                                                                                    |
| PURPA                                               |   | Public                Utility Regulatory Policies Act of 1978.                                                                                                                                                                        |
| Registrant                Subsidiaries              |   | AEP                subsidiaries which are SEC registrants; AEGCo, APCo, CSPCo, I&M, KPCo,                OPCo, PSO, SWEPCo, TCC and TNC.                                                                                          |
| REP                                                 |   | Texas                Retail Electric Provider.                                                                                                                                                                                        |
| Risk                Management Contracts            |   | Trading                and nontrading derivatives, including those derivatives designated                as cash                flow and fair value hedges.                                                                           |
| Rockport                Plant                       |   | A                generating plant, consisting of two 1,300 MW coal-fired generating                units                near Rockport, Indiana owned by AEGCo and I&M.                                                            |
| RTO                                                 |   | Regional                Transmission Organization.                                                                                                                                                                                    |
| S&P                                             |   | Standard                and Poor’s.                                                                                                                                                                                             |
| SEC                                                 |   | United                States Securities and Exchange Commission.                                                                                                                                                                      |
| SECA                                                |   | Seams                Elimination Cost Allocation.                                                                                                                                                                                     |
| SFAS                                                |   | Statement                of Financial Accounting Standards issued by the FASB.                                                                                                                                                        |
| SFAS                133                             |   | Statement                of Financial Accounting Standards No. 133, “Accounting for Derivative                Instruments and Hedging Activities.”                                                                        |
| SIA                                                 |   | System                Integration Agreement.                                                                                                                                                                                          |
| SO2                                                 |   | Sulfur                Dioxide.                                                                                                                                                                                                        |
| SPP                                                 |   | Southwest                Power Pool.                                                                                                                                                                                                  |
| STP                                                 |   | South                Texas Project Nuclear Generating Plant.                                                                                                                                                                          |
| Sweeny                                              |   | Sweeny                Cogeneration Limited Partnership, owner and operator of a four unit,                480                MW gas-fired generation facility, owned 50% by AEP.                                                      |
| SWEPCo                                              |   | Southwestern                Electric Power Company, an AEP electric utility                subsidiary.                                                                                                                                |
| TCC                                                 |   | AEP                Texas Central Company, an AEP electric utility subsidiary.                                                                                                                                                         |
| TEM                                                 |   | SUEZ                Energy Marketing NA, Inc. (formerly known as Tractebel Energy Marketing,                Inc.).                                                                                                                    |
| Texas                Restructuring Legislation |   | Legislation                enacted in 1999 to restructure the electric utility industry in                Texas.                                                                                                                      |
| TNC                                                 |   | AEP                Texas North Company, an AEP electric utility subsidiary.                                                                                                                                                           |
| True-up                Proceeding                   |   | A                filing made under the Texas Restructuring Legislation to finalize                the                amount of stranded costs and other true-up items and the recovery                of such                amounts. |
| Utility                Money Pool                   |   | AEP                System’s Utility Money Pool.                                                                                                                                                                                 |
| VaR                                                 |   | Value                at Risk, a method to quantify risk exposure.                                                                                                                                                                     |
| Virginia                SCC                         |   | Virginia                State Corporation Commission.                                                                                                                                                                                 |
| WPCo                                                |   | Wheeling                Power Company, an AEP electric distribution subsidiary.                                                                                                                                                       |
| WVPSC                                               |   | Public                Service Commission of West                Virginia.                                                                                                                                                             |

----

**FORWARD-LOOKING      INFORMATION**

| · | Electric                load and customer growth.                                                                                                                                                                                                                                         |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Weather                conditions, including storms.                                                                                                                                                                                                                                      |
| · | Available                sources and costs of, and transportation for, fuels and the                creditworthiness of fuel suppliers and transporters.                                                                                                                                  |
| · | Availability                of generating capacity and the performance of our generating                plants.                                                                                                                                                                           |
| · | Our                ability to recover regulatory assets and stranded costs in connection                with                deregulation.                                                                                                                                                 |
| · | Our                ability to recover increases in fuel and other energy costs through                regulated or competitive electric rates.                                                                                                                                            |
| · | Our                ability to build or acquire generating capacity when needed at acceptable                prices and terms and to recover those costs through applicable rate                cases                or competitive rates.                                                 |
| · | New                legislation, litigation and government regulation including requirements                for reduced emissions of sulfur, nitrogen, mercury, carbon and other                substances.                                                                                |
| · | Timing                and resolution of pending and future rate cases, negotiations and                other                regulatory decisions (including rate or other recovery for new                investments, transmission service and environmental                compliance). |
| · | Resolution                of litigation (including pending Clean Air Act enforcement actions                and                disputes arising from the bankruptcy of Enron Corp. and related                matters).                                                                   |
| · | Our                ability to constrain operation and maintenance costs.                                                                                                                                                                                                                  |
| · | Our                ability to sell assets at acceptable prices and other acceptable                terms.                                                                                                                                                                                 |
| · | The                economic climate and growth in our service territory and changes                in market                demand and demographic patterns.                                                                                                                              |
| · | Inflationary                and interest rate trends.                                                                                                                                                                                                                                     |
| · | Our                ability to develop and execute a strategy based on a view regarding                prices                of electricity, natural gas and other energy-related                commodities.                                                                              |
| · | Changes                in the creditworthiness of the counterparties with whom we have                contractual arrangements, including participants in the energy trading                market.                                                                                       |
| · | Changes                in the financial markets, particularly those affecting the availability                of                capital and our ability to refinance existing debt at attractive                rates.                                                                    |
| · | Actions                of rating agencies, including changes in the ratings of                debt.                                                                                                                                                                                       |
| · | Volatility                and changes in markets for electricity, natural gas and other                energy-related commodities.                                                                                                                                                        |
| · | Changes                in utility regulation, including implementation of EPACT and membership                in                and integration into regional transmission structures.                                                                                                    |
| · | Accounting                pronouncements periodically issued by accounting standard-setting                bodies.                                                                                                                                                                        |
| · | The                performance of our pension and other postretirement benefit                plans.                                                                                                                                                                                      |
| · | Prices                for power that we generate and sell at wholesale.                                                                                                                                                                                                                   |
| · | Changes                in technology, particularly with respect to new, developing or alternative                sources of generation.                                                                                                                                                   |
| · | Other                risks and unforeseen events, including wars, the effects of terrorism                (including increased security costs), embargoes and other catastrophic                events.                                                                                   |

----

**AMERICAN      ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES**

**MANAGEMENT’S      FINANCIAL DISCUSSION AND ANALYSIS OF RESULTS OF      OPERATIONS**

**EXECUTIVE      OVERVIEW**

***Regulatory      Activity***

| · | In January 2006, we implemented              our Ohio Rate Stabilization Plans, resulting in increased revenues              of $49              million for the three months ended March 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                Kentucky Public Service Commission approved our $41 million rate                case                settlement agreement. New rates became effective on March 30,                2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| · | In                March 2006, after the February 2006 receipt of an order in our Texas                stranded costs proceeding, we filed with the Public Utility Commission                of                Texas (PUCT) for approval of a financing order to issue $1.8 billion                in                securitization bonds. We expect an order in June or July                2006.                                                                                                                                                                                                                                                                     |
| · | In                April 2006, the Public Utilities Commission of Ohio (PUCO) approved                our                recovery of the pre-construction costs for the Integrated Gasification                Combined Cycle (IGCC) clean-coal plant in Meigs County, Ohio. The                PUCO                also ruled that it is reasonable to recover the pre-construction                costs of                the facility through a provider of last resort recovery mechanism.                We                subsequently submitted tariffs for PUCO approval related to recovery                of                our IGCC pre-construction costs. |
| · | In                April 2006, we reached a tentative settlement in our APCo and WPCo                rate                case, subject to approval by the Public Service Commission of West                Virginia, providing for a $44 million increase in rates effective                July 28,                2006.                                                                                                                                                                                                                                                                                                                                              |
| · | In                May 2006, we filed a base rate case in Virginia requesting a net                rate                increase of $198 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

| · | A                TCC competition transition charge (CTC) filing with the PUCT in the                second                quarter to address a $491 million credit to customers from the True-up                Proceeding. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Issuance                of securitization bonds in Texas in the third quarter of                2006.                                                                                                                       |

***Fuel      Costs***

**RESULTS      OF OPERATIONS**

| · | Utility                Operations:  |
|--------|-------------------------------------|
|   |                                | Generation                of electricity for sale to U.S. retail and wholesale                customers. |
|   |                                | Electricity                transmission and distribution in the U.S. |
| · | Investments                - Other: |
|   |                                | Bulk                commodity barging operations, wind farms, IPPs and other energy                supply-related businesses. |

|                                                         |   | **2006**     |   | **2005**                   |   |
|--------------------------------------------------------------|--------|--------------|--------|----------------------------|--------|
|                                                         |   | **Earnings** |   | **EPS                (c)** |   | **Earnings** |   | **EPS                (c)** |   |
| Utility                Operations                            |   | $            | 365    |                       | $      | 0.93 |   | $ | 353 |   | $ | 0.90 |   |
| Investments                - Other                           |   |         | 16     |                       |   | 0.04 |   |   | 5 |   |   | 0.01 |   |
| All                Other (a)                                 |   |         | (2     | )                          |   | (0.01 | ) |   | (14 | ) |   | (0.04 | ) |
| Investments                - Gas Operations (b)              |   |         | (1     | )                          |   | - |   |   | 10 |   |   | 0.03 |   |
| **Income                Before Discontinued Operations**     |   | $            | 378    |                       | $      | 0.96 |   | $ | 354 |   | $ | 0.90 |   |
|                                                         |   |         |   |                       |   |   |   |   |   |   |   |   |   |
| **Weighted                Average Basic Shares Outstanding** |   |         |   |                       |   | 394 |   |   |   |   |   | 393 |   |

| (a) | All                Other includes the parent company’s interest income and expense, as well                as other nonallocated costs.                                                                                                                                                                           |   |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| (b) | We                sold our remaining gas pipeline and storage assets in                2005.                                                                                                                                                                                                                            |   |
| (c) | The                earnings per share of any segment does not represent a direct legal                interest in the assets and liabilities allocated to any one segment                but                rather represents a direct equity interest in AEP’s assets and liabilities                as a whole. |   |

**Utility      Operations**

|                                                                      |   | **Three                Months Ended****March                31,** |   |
|---------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                      |   | **2006**                                                          |   | **2005** |   |
|                                                                      |   | **(in                millions)**                                  |   |
| Revenues                                                                  |   | $                                                                 | 2,969  |   | $ | 2,684 |   |
| Fuel                and Purchased Energy                                  |   |                                                              | 1,127  |   |   | 923 |   |
| **Gross                Margin**                                           |   |                                                              | 1,842  |   |   | 1,761 |   |
| Depreciation                and Amortization                              |   |                                                              | 333    |   |   | 318 |   |
| Other                Operating Expenses                                   |   |                                                              | 846    |   |   | 805 |   |
| **Operating                Income**                                       |   |                                                              | 663    |   |   | 638 |   |
| Other                Income (Expense), Net                                |   |                                                              | 42     |   |   | 30 |   |
| Interest                Expense and Preferred Stock Dividend Requirements |   |                                                              | 154    |   |   | 144 |   |
| Income                Tax Expense                                         |   |                                                              | 186    |   |   | 171 |   |
| **Income                Before Discontinued Operations**                  |   | $                                                                 | 365    |   | $ | 353 |   |

**Summary      of Selected Sales and Weather Data**

**For      Utility Operations**

**For      the Three Months Ended March 31, 2006 and 2005**

|                                  |   | **2006**                                |   | **2005** |   |
|---------------------------------------|--------|-----------------------------------------|--------|----------|--------|
| **Energy                Summary**     |   | **(in                millions of KWH)** |   |
| Retail:                               |   |                                    |   |     |   |
| Residential                           |   |                                    | 12,938 |     |   | 13,224 |   |
| Commercial                            |   |                                    | 8,909  |     |   | 8,732 |   |
| Industrial                            |   |                                    | 13,221 |     |   | 12,774 |   |
| Miscellaneous                         |   |                                    | 589    |     |   | 645 |   |
| Subtotal                              |   |                                    | 35,657 |     |   | 35,375 |   |
| Texas                Retail and Other |   |                                    | 68     |     |   | 228 |   |
| **Total**                             |   |                                    | 35,725 |     |   | 35,603 |   |
|                                  |   |                                    |   |     |   |   |   |
| Wholesale                             |   |                                    | 10,844 |     |   | 12,635 |   |
|                                  |   |                                    |   |     |   |   |   |
| Texas                Wires Delivery   |   |                                    | 5,546  |     |   | 5,519 |   |

|                                             |                                                                                                                                               | **2006**                            |   | **2005** |   |   |
|--------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|--------|----------|--------|--------|
| **Weather                Summary**               |                                                                                                                                               | **(in                degree days)** |   |
| Eastern                Region                    |                                                                                                                                               |                                |   |     |   |   |
| Actual                - Heating (a)              |                                                                                                                                               | 1,456                               |   | 1,774    |   |   |
| Normal                - Heating (b)              |                                                                                                                                               | 1,817                               |   | 1,811    |   |   |
|                                             |                                                                                                                                               |                                |   |     |   |   |
| Actual                - Cooling (c)              |                                                                                                                                               | 1                                   |   | -        |   |   |
| Normal                - Cooling (b)              |                                                                                                                                               | 3                                   |   | 3        |   |   |
|                                             |                                                                                                                                               |                                |   |     |   |   |
| Western                Region                (d) |                                                                                                                                               |                                |   |     |   |   |
| Actual                - Heating (a)              |                                                                                                                                               | 658                                 |   | 769      |   |   |
| Normal                - Heating (b)              |                                                                                                                                               | 972                                 |   | 973      |   |   |
|                                             |                                                                                                                                               |                                |   |     |   |   |
| Actual                - Cooling (c)              |                                                                                                                                               | 43                                  |   | 20       |   |   |
| Normal                - Cooling (b)              |                                                                                                                                               | 17                                  |   | 18       |   |   |
|                                             |                                                                                                                                               |                                |
| (a)                                              | Eastern                Region and Western Region heating degree days are calculated on a                55                degree temperature base. |                                |   |
| (b)                                              | Normal                Heating/Cooling represents the 30-year average of degree                days.                                                |                                |   |
| (c)                                              | Eastern                Region and Western Region cooling days are calculated on a 65 degree                temperature base.                       |                                |   |
| (d)                                              | Western                Region statistics represent PSO/SWEPCo customer base only.                                                                  |                                |   |

**Reconciliation      of First Quarter of 2005 to First Quarter of 2006**

**Income      from Utility Operations Before Discontinued Operations**

**(in      millions)**

| **First                Quarter of 2005**                        |   |   |   |   | $      | 353    |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                Margins                                   |   |   | 111    |   |   |   |   |
| Off-system                Sales                                 |   |   | (24    | )      |   |   |   |
| Other                                                           |   |   | (6     | )      |   |   |   |
| **Total                Change in Gross Margin**                 |   |   |   |   |   | 81     |   |
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Maintenance                and Other Operation                  |   |   | 6      |   |   |   |   |
| Gain                on Sales of Assets, Net                     |   |   | (46    | )      |   |   |   |
| Depreciation                and Amortization                    |   |   | (15    | )      |   |   |   |
| Taxes                Other Than Income Taxes                    |   |   | (1     | )      |   |   |   |
| Other                Income (Expense), Net                      |   |   | 12     |   |   |   |   |
| Interest                and Other Charges                       |   |   | (10    | )      |   |   |   |
| **Total                Change in Operating Expenses and Other** |   |   |   |   |   | (54    | )      |
|                                                            |   |   |   |   |   |   |   |
| Income                Tax Expense                               |   |   |   |   |   | (15    | )      |
|                                                            |   |   |   |   |   |   |   |
| **First                Quarter of 2006**                        |   |   |   |   | $      | 365    |   |

| ·                               | Retail                Margins increased $111 million primarily due to the                following:                                                                                                                                            |
|--------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·      | A                $49 million increase related to new rates implemented in our Ohio                jurisdiction as approved by the PUCO in our RSPs;                                                                                            |
| ·      | A                $28 million increase related to increased usage and customer growth                in the                industrial and commercial classes;                                                                                   |
| ·      | An                $11 million increase related to increased usage and customer growth                in the                residential class; and                                                                                              |
| ·      | A                $26 million increase related to increased sales to municipal, cooperative                and other wholesale customers primarily as a result of new power                supply                contracts; partially offset by |
| ·      | A                $25 million decrease in usage related to mild weather. As compared                to the                prior year, heating degree days were 18% lower in the east and 14%                lower                in the west.   |
| ·                               | Margins                from Off-system Sales for 2006 were $24 million lower than in 2005                due to                lower volumes in part from the sale of STP in May 2005 and lower                optimization activities.        |
| ·                               | Other                revenues decreased $6 million primarily due to a decrease in construction                activities performed for third                parties.                                                                           |

| · | Maintenance                and Other Operation expenses decreased $6 million primarily due to                a                decrease in construction activities performed for third parties.                                                                                                                                                                                                                                                                                                             |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Gain                on Sales of Assets, Net decreased $46 million resulting from revenues                related to the earnings sharing agreement with Centrica as stipulated                in                the purchase and sale agreement from the sale of our REPs in 2002.                In                2005, we received $112 million related to two years of earnings sharing                whereas in 2006 we received $70 million related to one year of earnings                sharing. |
| · | Depreciation                and Amortization expense increased $15 million primarily due to increased                Ohio and Texas regulatory asset amortization.                                                                                                                                                                                                                                                                                                                                         |
| · | Other                Income (Expense), Net increased $12 million primarily due to capitalized                carrying costs on environmental and system reliability capital                expenditures for APCo. APCo began capitalizing carrying costs in                conjunction with its environmental and reliability costs filing in                Virginia in the third quarter of 2005.                                                                                                        |
| · | Interest                and Other Charges increased $10 million from the prior period primarily                due to new debt issued during 2005 and increasing interest                rates.                                                                                                                                                                                                                                                                                                            |
| · | Income                Tax Expense increased $15 million due to the increase in pretax income.                See “AEP System Income Taxes” section below for further discussion of                fluctuations related to income                taxes.                                                                                                                                                                                                                                         |

**Investments      - Other**

**Other**

*Parent*

*Investments      - Gas Operations*

**AEP      System Income Taxes**

**FINANCIAL      CONDITION**

**Debt      and Equity Capitalization**
**      ($ in millions)**

|                                                                 |   | **March                31, 2006** |   | **December                31, 2005** |   |
|----------------------------------------------------------------------|--------|-----------------------------------|--------|--------------------------------------|--------|
| Common                Equity                                         |   | $                                 | 9,384  |                                 |   | 43.0 | % | $ | 9,088 |   |   | 42.5 | % |
| Preferred                Stock                                       |   |                              | 61     |                                 |   | 0.3 |   |   | 61 |   |   | 0.3 |   |
| Long-term                Debt, including amounts due within one year |   |                              | 12,142 |                                 |   | 55.7 |   |   | 12,226 |   |   | 57.2 |   |
| Short-term                Debt                                       |   |                              | 226    |                                 |   | 1.0 |   |   | 10 |   |   | 0.0 |   |
|                                                                 |   |                              |   |                                 |   |   |   |   |   |   |   |   |   |
| **Total                Debt and Equity Capitalization**              |   | $                                 | 21,813 |                                 |   | 100.0 | % | $ | 21,385 |   |   | 100.0 | % |

**Liquidity**

***Credit      Facilities***

|                                                    | **Amount**                                                 |   | **Maturity** |
|---------------------------------------------------------|------------------------------------------------------------|--------|--------------|
|                                                    | **(in                  millions)**                         |   |         |
| Commercial                  Paper Backup:               |                                                       |   |         |   |
|                                                    | Revolving                  Credit Facility                 | $      | 1,000        |   | May                  2007 |
|                                                    | Revolving                  Credit Facility                 |   | 1,500        |   | March                  2010 |
| Letter                  of Credit Facility              |                                                       | 200    |         | September                  2006 |
| **Total**                                               |                                                       | 2,700  |         |   |
| Cash                  and Cash Equivalents              |                                                       | 276    |         |   |
| **Total                  Liquidity Sources**            |                                                       | 2,976  |         |   |
| Less:                  AEP Commercial Paper Outstanding |                                                       | 215    |         |   |
|                                                    | Letter                  of Credit Drawn on Credit Facility |   | 31           |   |   |
| **Net                  Available Liquidity**            | $                                                          | 2,730  |         |   |

***Debt      Covenants and Borrowing Limitations***

***Credit      Ratings***

|                                     | **Moody’s** |   |   | **S&P** |   |   | **Fitch** |
|------------------------------------------|-------------------|--------|--------|-------------|--------|--------|-----------|
|                                     |              |   |   |        |   |   |      |
| AEP                Short Term Debt       | P-2               |   |   | A-2         |   |   | F-2       |
| AEP                Senior Unsecured Debt | Baa2              |   |   | BBB         |   |   | BBB       |

**Cash      Flow**

|                                                                    |   | **Three                Month Ended****March                31,** |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|
|                                                                    |   | **2006**                                                         |   | **2005** |   |
|                                                                    |   | **(in                millions)**                                 |   |
| **Cash                and Cash Equivalents at Beginning of Period**     |   | $                                                                | 401    |   | $ | 320 |   |
| Net                Cash Flows From Operating Activities                 |   |                                                             | 590    |   |   | 667 |   |
| Net                Cash Flows From (Used For) Investing Activities      |   |                                                             | (757   | ) |   | 842 |   |
| Net                Cash Flows From (Used For) Financing Activities      |   |                                                             | 42     |   |   | (568 | ) |
| **Net                Increase (Decrease) in Cash and Cash Equivalents** |   |                                                             | (125   | ) |   | 941 |   |
| **Cash                and Cash Equivalents at End of Period**           |   | $                                                                | 276    |   | $ | 1,261 |   |

***Operating      Activities***

|                                                        |   | **Three                Months Ended****March                31,** |   |
|-------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                        |   | **2006**                                                          |   | **2005** |   |
|                                                        |   | **(in                millions)**                                  |   |
| **Net                Income**                               |   | $                                                                 | 381    |   | $ | 355 |   |
| Less:                Income From Discontinued Operations    |   |                                                              | (3     | ) |   | (1 | ) |
| **Income                From Continuing Operations**        |   |                                                              | 378    |   |   | 354 |   |
| Noncash                Items Included in Earnings           |   |                                                              | 317    |   |   | 325 |   |
| Changes                in Assets and Liabilities            |   |                                                              | (105   | ) |   | (12 | ) |
| **Net                Cash Flows From Operating Activities** |   | $                                                                 | 590    |   | $ | 667 |   |

***Investing      Activities***

|                                                                   |   | **Three                Months Ended****March                31,** |   |
|------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                   |   | **2006**                                                          |   | **2005** |   |
|                                                                   |   | **(in                millions)**                                  |   |
| Construction                Expenditures                               |   | $                                                                 | (772   | ) | $ | (434 | ) |
| Change                in Other Temporary Cash Investments, Net         |   |                                                              | 27     |   |   | (9 | ) |
| Investment                Securities:                                  |   |                                                              |   |   |   |   |   |
| Purchases                of Investment Securities                      |   |                                                              | (2,469 | ) |   | (1,311 | ) |
| Sales                of Investment Securities                          |   |                                                              | 2,380  |   |   | 1,396 |   |
| Change                in Investment Securities, Net                    |   |                                                              | (89    | ) |   | 85 |   |
| Proceeds                from Sales of Assets                           |   |                                                              | 111    |   |   | 1,184 |   |
| Other                                                                  |   |                                                              | (34    | ) |   | 16 |   |
| **Net                Cash Flows From (Used for) Investing Activities** |   | $                                                                 | (757   | ) | $ | 842 |   |

***Financing      Activities***

|                                                                   |   | **Three                Months Ended****March                31,** |   |
|------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                   |   | **2006**                                                          |   | **2005** |   |
|                                                                   |   | **(in                millions)**                                  |   |
| Issuance                of Common Stock                                |   | $                                                                 | 5      |   | $ | 17 |   |
| Repurchase                of Common Stock                              |   |                                                              | -      |   |   | (434 | ) |
| Issuance/Retirement                of Debt, Net                        |   |                                                              | 129    |   |   | 65 |   |
| Dividends                Paid on Common Stock                          |   |                                                              | (146   | ) |   | (138 | ) |
| Other                                                                  |   |                                                              | 54     |   |   | (78 | ) |
| **Net                Cash Flows From (Used for) Financing Activities** |   | $                                                                 | 42     |   | $ | (568 | ) |

**Off-balance      Sheet Arrangements**

**Summary      Obligation Information**

**Other**

***Texas      REPs***

**SIGNIFICANT      FACTORS**

**Texas      Regulatory Activity**

***Texas      Restructuring***

|                                                                                                       |   | **(in                millions)** |   |
|------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
| Stranded                Generation Plant Costs                                                             |   | $                                | 969    |   |
| Net                Generation-related Regulatory Asset                                                     |   |                             | 249    |   |
| Excess                Earnings                                                                             |   |                             | (49    | ) |
| **Recorded                Net Stranded Generation Plant Costs**                                            |   |                             | 1,169  |   |
| Recorded                Debt Carrying Costs on Recorded Net Stranded Generation Plant                Costs |   |                             | 284    |   |
| **Recorded                Securitizable True-up Regulatory Asset**                                         |   |                             | 1,453  |   |
| Unrecorded                But Recoverable Equity Carrying Costs                                            |   |                             | 212    |   |
| Unrecorded                Estimated April 2006 - August 2006 Debt Carrying Costs                           |   |                             | 40     |   |
| Unrecorded                Securitization Issuance Costs                                                    |   |                             | 24     |   |
| Unrecorded                Excess Earnings, Related Return and Other                                        |   |                             | 75     |   |
| **Securitization                Request**                                                                  |   | $                                | 1,804  |   |

|                                                                         |   | **(in                millions)** |   |
|------------------------------------------------------------------------------|--------|----------------------------------|--------|
| Wholesale                Capacity Auction True-up                            |   | $                                | 61     |   |
| Carrying                Costs on Wholesale Capacity Auction True-up          |   |                             | 17     |   |
| Retail                Clawback                                               |   |                             | (61    | ) |
| Deferred                Over-recovered Fuel Balance                          |   |                             | (177   | ) |
| **Recorded                Net Regulatory Liabilities - Other True-up Items** |   |                             | (160   | ) |
| ADFIT                Benefit                                                 |   |                             | (328   | ) |
| Unrecorded                Carrying Costs and Other                           |   |                             | (3     | ) |
| **Estimated                CTC Request**                                     |   | $                                | (491   | ) |

**Litigation**

**Environmental      Matters**

| · | Requirements                under the Clean Air Act (CAA) to reduce emissions of sulfur dioxide                (SO2),                nitrogen oxide (NOx),                particulate matter (PM), and mercury from fossil fuel-fired power                plants; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Requirements                under the Clean Water Act (CWA) to reduce the impacts of water intake                structures on aquatic species at certain of our power plants;                and                                                                  |
| · | Possible                future requirements to reduce carbon dioxide (CO2)                emissions to address concerns about global climate                change.                                                                                                |

***Clean      Air Act Requirements***

***Estimated      Air Quality Environmental Investments***

***Potential      Regulation of CO***
***2***

***Emissions***

***Environmental      Litigation***

***Other      Environmental Concerns***

**Critical      Accounting Estimates**

**Adoption      of New Accounting Pronouncements**

----

**QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT      ACTIVITIES**

**Market      Risks**

**Mark-to-Market      Risk Management Contract Net Assets (Liabilities)**

**Reconciliation      of MTM Risk Management Contracts to**

**Condensed      Consolidated Balance Sheet**

**March      31, 2006**

**(in      millions)**

|                                                                                                                             | **Utility                  Operations** |   | **Investments                  - Gas Operations** |   | **Sub-Total                  MTM Risk Management Contracts** |   | **PLUS:                  MTM of Cash Flow and Fair Value Hedges** |   | **Total** |   |
|----------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|--------|---------------------------------------------------|--------|--------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|-----------|--------|
| Current                  Assets                                                                                                  | $                                       | 437    |                                              | $      | 134                                                          |   | $                                                                 | 571    |      | $      | 54 |   | $ | 625 |   |
| Noncurrent                  Assets                                                                                               |                                    | 449    |                                              |   | 199                                                          |   |                                                              | 648    |      |   | 7 |   |   | 655 |   |
| **Total                  Assets**                                                                                                |                                    | 886    |                                              |   | 333                                                          |   |                                                              | 1,219  |      |   | 61 |   |   | 1,280 |   |
|                                                                                                                             |                                    |   |                                              |   |                                                         |   |                                                              |   |      |   |   |   |   |   |   |
| Current                  Liabilities                                                                                             |                                    | (379   | )                                                 |   | (139                                                         | )      |                                                              | (518   | )         | (21    | ) |   | (539 | ) |
| Noncurrent                  Liabilities                                                                                          |                                    | (293   | )                                                 |   | (204                                                         | )      |                                                              | (497   | )         |   | (3 | ) |   | (500 | ) |
| **Total                  Liabilities**                                                                                           |                                    | (672   | )                                                 |   | (343                                                         | )      |                                                              | (1,015 | )         |   | (24 | ) |   | (1,039 | ) |
|                                                                                                                             |                                    |   |                                              |   |                                                         |   |                                                              |   |      |   |   |   |   |   |   |
| **Total                  MTM** **Derivative                  Contract Net****                   Assets (Liabilities)** | $                                       | 214    |                                              | $      | (10                                                          | )      | $                                                                 | 204    |      | $      | 37 |   | $ | 241 |   |

**MTM      Risk Management Contract Net Assets (Liabilities)**

**Three      Months Ended March 31, 2006**

**(in      millions)**

|                                                                                                                                                                           |   | **Utility                Operations** |   | **Investments-Gas                Operations** |   | **Total** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|-----------------------------------------------|--------|-----------|--------|
| **Total                MTM Risk Management****Contract                Net Assets (Liabilities) at**** December                31, 2005**                                  |   | $                                     | 215    |                                          | $      | (19       | )      | $ | 196 |   |
| (Gain)                Loss from Contracts Realized/Settled During                the Period and Entered in a Prior Period                                            |   |                                  | (5     | )                                             |   | 7         |   |   | 2 |   |
| Fair                Value of New Contracts at Inception When                Entered During the Period (a)                                                                      |   |                                  | 1      |                                          |   | -         |   |   | 1 |   |
| Net                Option Premiums Paid/(Received) for Unexercised                or Unexpired Option Contracts                                 Entered During The Period |   |                                  | (4     | )                                             |   | -         |   |   | (4 | ) |
| Changes                in Fair Value Due to Valuation Methodology                Changes on Forward Contracts                                                                  |   |                                  | 1      |                                          |   | -         |   |   | 1 |   |
| Changes                in Fair Value due to Market Fluctuations During the Period                (b)                                                                      |   |                                  | 8      |                                          |   | 2         |   |   | 10 |   |
| Changes                in Fair Value Allocated to Regulated                Jurisdictions (c)                                                                                   |   |                                  | (2     | )                                             |   | -         |   |   | (2 | ) |
| **Total                MTM Risk Management Contract****Net                Assets (Liabilities) at March 31, 2006**                                                             |   | $                                     | 214    |                                          | $      | (10       | )      |   | 204 |   |
| Net                Cash Flow and Fair Value Hedge Contracts                                                                                                                    |   |                                  |   |                                          |   |      |   |   | 37 |   |
| **Ending                Net Risk Management Assets at****March                31, 2006**                                                                                       |   |                                  |   |                                          |   |      |   | $ | 241 |   |

| (a) | Most                of the fair value comes from longer term fixed price contracts with                customers that seek to limit their risk against fluctuating energy                prices.                Inception value is only recorded if observable market data can be                obtained                for valuation inputs for the entire contract term. The contract prices                are                valued against market curves associated with the delivery location                and                delivery term. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                fluctuations are attributable to various factors such as supply/demand,                weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (c) | “Change                in Fair Value Allocated to Regulated Jurisdictions” relates to the net                gains (losses) of those contracts that are not reflected in the Condensed                Consolidated Statements of Operations. These net gains (losses) are                recorded as regulatory assets/liabilities for those subsidiaries                that                operate in regulated jurisdictions.                                                                                                          |

**Maturity      and Source of Fair Value of MTM Risk Management Contract Net Assets      (Liabilities)**

| · | The                method of measuring fair value used in determining the carrying amount                of                our total MTM asset or liability (external sources or modeled                internally). |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                maturity, by year, of our net assets/liabilities, giving an indication                of                when these MTM amounts will settle and generate                cash.                      |

**Maturity      and Source of Fair Value of MTM**

**Risk      Management Contract Net Assets (Liabilities)**

**Fair      Value of Contracts as of March 31, 2006**

**(in      millions)**

|                                                                                                                  |   | ** Remainder                2006** |   | **2007**     |   | **2008**     |   | **2009**     |   | **2010**     |   | **After                2010** |   | **Total**    |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|--------------|--------|--------------|--------|--------------|--------|--------------|--------|-------------------------------|--------|--------------|--------|
| **Utility                Operations:**                                                                                |   |                               |   |    |   |    |   |    |   |    |   |                     |   |    |   |
| Prices                Actively Quoted -  Exchange Traded Contracts                                               |   | $                                       | 38     |         | $      | (1           | )      | $            | 3      |         | $      | -                             |   | $            | -      |   | $ | - |   | $ | 40 |   |
| Prices                Provided by Other External Sources                - OTC Broker                  Quotes (a) |   |                                    | 13     |         |   | 39           |   |         | 28     |         |   | 23                            |   |         | -      |   |   | - |   |   | 103 |   |
| Prices                Based on Models and Other Valuation                Methods (b)                                  |   |                                    | (7     | )            |   | 17           |   |         | 14     |         |   | 14                            |   |         | 29     |   |   | 4 |   |   | 71 |   |
| **Total**                                                                                                             |   | $                                       | 44     |         | $      | 55           |   | $            | 45     |         | $      | 37                            |   | $            | 29     |   | $ | 4 |   | $ | 214 |   |
|                                                                                                                  |   |                                    |   |         |   |         |   |         |   |         |   |                          |   |         |   |   |   |   |   |   |   |   |
| **Investments**-                **Gas                Operations:**                                                    |   |                                    |   |         |   |         |   |         |   |         |   |                          |   |         |   |   |   |   |   |   |   |   |
| Prices                Actively Quoted -  Exchange Traded Contracts                                               |   | $                                       | (3     | )            | $      | 12           |   | $            | -      |         | $      | -                             |   | $            | -      |   | $ | - |   | $ | 9 |   |
| Prices                Provided by Other External Sources                - OTC Broker                  Quotes (a) |   |                                    | (1     | )            |   | (9           | )      |         | -      |         |   | -                             |   |         | -      |   |   | - |   |   | (10 | ) |
| Prices                Based on Models and Other Valuation                Methods (b)                                  |   |                                    | (2     | )            |   | -            |   |         | (1     | )            |   | (4                            | )      |         | (3     | ) |   | 1 |   |   | (9 | ) |
| **Total**                                                                                                             |   | $                                       | (6     | )            | $      | 3            |   | $            | (1     | )            | $      | (4                            | )      | $            | (3     | ) | $ | 1 |   | $ | (10 | ) |
|                                                                                                                  |   |                                    |   |         |   |         |   |         |   |         |   |                          |   |         |   |   |   |   |   |   |   |   |
| **Total:**                                                                                                            |   |                                    |   |         |   |         |   |         |   |         |   |                          |   |         |   |   |   |   |   |   |   |   |
| Prices                Actively Quoted -  Exchange Traded Contracts                                               |   | $                                       | 35     |         | $      | 11           |   | $            | 3      |         | $      | -                             |   | $            | -      |   | $ | - |   | $ | 49 |   |
| Prices                Provided by Other External Sources                - OTC Broker                  Quotes (a) |   |                                    | 12     |         |   | 30           |   |         | 28     |         |   | 23                            |   |         | -      |   |   | - |   |   | 93 |   |
| Prices                Based on Models and Other Valuation                Methods (b)                                  |   |                                    | (9     | )            |   | 17           |   |         | 13     |         |   | 10                            |   |         | 26     |   |   | 5 |   |   | 62 |   |
| **Total**                                                                                                             |   | $                                       | 38     |         | $      | 58           |   | $            | 44     |         | $      | 33                            |   | $            | 26     |   | $ | 5 |   | $ | 204 |   |

| (a) | Prices                Provided by Other External Sources - OTC Broker Quotes reflects                information obtained from over-the-counter (OTC) brokers, industry                services, or multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Prices                Based on Models and Other Valuation Methods is in the absence of                pricing                information from external sources. Modeled information is derived                using                valuation models developed by the reporting entity, reflecting when                appropriate, option pricing theory, discounted cash flow concepts,                valuation adjustments, etc. and may require projection of prices                for                underlying commodities beyond the period that prices are available                from                third-party sources. In addition, where external pricing information                or                market liquidity is limited, such valuations are classified as                modeled. |

**Maximum      Tenor of the Liquid Portion of Risk Management Contracts**

**As      of March 31, 2006**

| **Commodity**              |   | **Transaction                Class**           |                                   | **Market/Region**                                          |   | **Tenor**                      |
|----------------------------|--------|------------------------------------------------|----------------------------------------|------------------------------------------------------------|--------|--------------------------------|
|                       |   |                                           |                                   |                                                       |   | **(in                Months)** |
| Natural                Gas |   | Futures                                        |                                   | NYMEX                / Henry Hub                           |   | 60                             |
|                       |   | Physical                Forwards               |                                   | Gulf                Coast, Texas                           |   | 21                             |
|                       |   | Swaps                                          |                                   | Northeast,                Mid-Continent, Gulf Coast, Texas |   | 21                             |
|                       |   | Exchange                Option Volatility      |                                   | NYMEX                / Henry Hub                           |   | 12                             |
| Power                      |   | Futures                                        |                                   | AEP                East - PJM                              |   | 36                             |
|                       |   | Physical                Forwards               |                                   | AEP                East                                    |   | 45                             |
|                       |   | Physical                Forwards               |                                   | AEP                West                                    |   | 45                             |
|                       |   | Physical                Forwards               |                                   | West                Coast                                  |   | 45                             |
|                       |   | Peak                Power Volatility (Options) | AEP                East - Cinergy, PJM |                                                       | 12     |
| Emissions                  |   | Credits                                        |                                   | SO2,                NOx                                    |   | 33                             |
| Coal                       |   | Physical                Forwards               |                                   | PRB,                NYMEX, CSX                             |   | 33                             |

**Cash      Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)      on      the Condensed Consolidated Balance Sheets**

**Total      Accumulated Other Comprehensive Income (Loss) Activity for Cash Flow      Hedges**

**Three      Months Ended March 31, 2006**

**(in      millions)**

|                                                                                                                        |   |  **Power                and Gas** |   |  **Interest                Rate** |   |  **Total** |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|----------------------------------------|--------|-----------------|--------|
| **Beginning                Balance in AOCI, December 31, 2005**                                                             |   | $                                      | (6     | )                                      | $      | (21             | )      | $ | (27 | ) |
| Changes                in Fair Value                                                                                        |   |                                   | 22     |                                   |   | 9               |   |   | 31 |   |
| Reclassifications                from AOCI to Net Income for Cash                Flow Hedges                  Settled  |   |                                   | 3      |                                   |   | 1               |   |   | 4 |   |
| **Ending                Balance in AOCI, March 31, 2006**                                                                   |   | $                                      | 19     |                                   | $      | (11             | )      | $ | 8 |   |
|                                                                                                                        |   |                                   |   |                                   |   |            |   |   |   |   |
| **After                Tax Portion Expected to be Reclassified to Earnings****                 During Next 12 Months** |   | $                                      | 18     |                                   | $      | (1              | )      | $ | 17 |   |

**Credit      Risk**

| **Counterparty                Credit Quality** |   | **Exposure                Before Credit Collateral** |   | **Credit                Collateral** |   | **Net                Exposure** |   | **Number                of Counterparties >10%** |   | **Net                Exposure of Counterparties >10%** |   |
|------------------------------------------------|--------|------------------------------------------------------|--------|--------------------------------------|--------|---------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------------------------|--------|
| Investment                Grade                |   | $                                                    | 807    |                                 | $      | 145                             |   | $                                                   | 662    |                                                      |   | 1 |   | $ | 87 |   |
| Split                Rating                    |   |                                                 | 4      |                                 |   | 2                               |   |                                                | 2      |                                                      |   | 2 |   |   | 2 |   |
| Noninvestment                Grade             |   |                                                 | 134    |                                 |   | 125                             |   |                                                | 9      |                                                      |   | 1 |   |   | 8 |   |
| No                External Ratings:            |   |                                                 |   |                                 |   |                            |   |                                                |   |                                                      |   |   |   |   |   |   |
| Internal                Investment Grade       |   |                                                 | 85     |                                 |   | -                               |   |                                                | 85     |                                                      |   | 1 |   |   | 64 |   |
| Internal                Noninvestment Grade    |   |                                                 | 32     |                                 |   | 17                              |   |                                                | 15     |                                                      |   | 2 |   |   | 14 |   |
| **Total**                                      |   | $                                                    | 1,062  |                                 | $      | 289                             |   | $                                                   | 773    |                                                      |   | 7 |   | $ | 175 |   |

**Generation      Plant Hedging Information**

**Generation      Plant Hedging Information**

**Estimated      Next Three Years**

**As      of March 31, 2006**

|                                         | **Remainder****2006** | **2007** | **2008** |
|----------------------------------------------|-----------------------|----------|----------|
| Estimated                Plant Output Hedged | 90%                   | 91%      | 92%      |

**VaR      Associated with Risk Management Contracts**

***Commodity      Price Risk***

**VaR      Model**

| **Three                Months Ended****March                31, 2006** |   |     |   |        | **Twelve                Months Ended****December                31, 2005** |
|------------------------------------------------------------------------|--------|----------|--------|-------------|----------------------------------------------------------------------------|
| **(in                millions)**                                       |   |     |   |        | **(in                millions)**                                           |
| **End**                                                                |   | **High** |   | **Average** |                                                                       | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $2                                                                     |   | $6       |   | $3          |                                                                       | $2 |   |   |   |   | $3 |   | $5 |   | $3 |   | $1 |

***Interest      Rate Risk***

----

**AMERICAN      ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS**

**For      the Three Months Ended March 31, 2006 and 2005**

**(in      millions, except per-share amounts)**

**(Unaudited)**

|                                                                                                                             |   | **2006** |   | **2005** |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
| **REVENUES**                                                                                                                     |   |     |   |     |   |
| Utility                Operations                                                                                                |   | $        | 2,987  |     | $      | 2,605 |   |
| Gas                Operations                                                                                                    |   |     | (18    | )        |   | 357 |   |
| Other                                                                                                                            |   |     | 139    |     |   | 103 |   |
| **TOTAL**                                                                                                                        |   |     | 3,108  |     |   | 3,065 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **EXPENSES**                                                                                                                     |   |     |   |     |   |   |   |
| Fuel                and Other Consumables Used for Electric Generation                                                           |   |     | 961    |     |   | 789 |   |
| Purchased                Energy for Resale                                                                                       |   |     | 166    |     |   | 130 |   |
| Purchased                Gas for Resale                                                                                          |   |     | -      |     |   | 249 |   |
| Maintenance                and Other Operation                                                                                   |   |     | 828    |     |   | 837 |   |
| Gain/Loss                on Disposition of Assets, Net                                                                           |   |     | (68    | )        |   | (115 | ) |
| Depreciation                and Amortization                                                                                     |   |     | 341    |     |   | 327 |   |
| Taxes                Other Than Income Taxes                                                                                     |   |     | 191    |     |   | 188 |   |
| **TOTAL**                                                                                                                        |   |     | 2,419  |     |   | 2,405 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **OPERATING                INCOME**                                                                                              |   |     | 689    |     |   | 660 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| Interest                and Investment Income                                                                                    |   |     | 8      |     |   | 11 |   |
| Carrying                Costs Income                                                                                             |   |     | 30     |     |   | 20 |   |
| Allowance                For Equity Funds Used During Construction                                                               |   |     | 6      |     |   | 6 |   |
| Gain                on Disposition of Equity Investments, Net                                                                    |   |     | 3      |     |   | - |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **INTEREST                AND OTHER CHARGES**                                                                                    |   |     |   |     |   |   |   |
| Interest                Expense                                                                                                  |   |     | 168    |     |   | 173 |   |
| Preferred                Stock Dividend Requirements of Subsidiaries                                                             |   |     | 1      |     |   | 2 |   |
| **TOTAL**                                                                                                                        |   |     | 169    |     |   | 175 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **INCOME                BEFORE INCOME TAX EXPENSE, MINORITY****  INTEREST                EXPENSE AND EQUITY EARNINGS** |   |     | 567    |     |   | 522 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| Income                Tax Expense                                                                                                |   |     | 189    |     |   | 172 |   |
| Minority                Interest Expense                                                                                         |   |     | -      |     |   | 1 |   |
| Equity                Earnings of Unconsolidated Subsidiaries                                                                    |   |     | -      |     |   | 5 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **INCOME                BEFORE DISCONTINUED OPERATIONS**                                                                         |   |     | 378    |     |   | 354 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **DISCONTINUED                OPERATIONS, Net of Tax**                                                                           |   |     | 3      |     |   | 1 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **NET                INCOME**                                                                                                    |   | $        | 381    |     | $      | 355 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **WEIGHTED                AVERAGE NUMBER OF BASIC SHARES OUTSTANDING**                                                           |   |     | 394    |     |   | 393 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **BASIC                EARNINGS PER SHARE**                                                                                      |   |     |   |     |   |   |   |
| Income                Before Discontinued Operations                                                                             |   | $        | 0.96   |     | $      | 0.90 |   |
| Discontinued                Operations, Net of Tax                                                                               |   |     | 0.01   |     |   | - |   |
| **TOTAL                BASIC EARNINGS PER SHARE**                                                                                |   | $        | 0.97   |     | $      | 0.90 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **WEIGHTED                AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING**                                                         |   |     | 396    |     |   | 394 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **DILUTED                EARNINGS PER SHARE**                                                                                    |   |     |   |     |   |   |   |
| Income                Before Discontinued Operations                                                                             |   | $        | 0.95   |     | $      | 0.90 |   |
| Discontinued                Operations, Net of Tax                                                                               |   |     | 0.01   |     |   | - |   |
| **TOTAL                DILUTED EARNINGS PER SHARE**                                                                              |   | $        | 0.96   |     | $      | 0.90 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| **CASH                DIVIDENDS PAID PER SHARE**                                                                                 |   | $        | 0.37   |     | $      | 0.35 |   |
|                                                                                                                             |   |     |   |     |   |   |   |
| *See Condensed Notes              to              Condensed Consolidated Financial Statements.*                                  |   |     |   |     |   |   |   |

----

**AMERICAN      ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**March      31, 2006 and December 31, 2005**

**(in      millions)**

**(Unaudited)**

|                                                               |   | **2006**     |   | **2005**     |   |
|--------------------------------------------------------------------|--------|--------------|--------|--------------|--------|
| **CURRENT                ASSETS**                                  |   |    |   |    |   |
| Cash                and Cash Equivalents                           |   | $            | 276    |         | $      | 401 |   |
| Other                Temporary Cash Investments                    |   |         | 202    |         |   | 127 |   |
| Accounts                Receivable:                                |   |         |   |         |   |   |   |
| Customers                                                          |   |         | 673    |         |   | 826 |   |
| Accrued                Unbilled Revenues                           |   |         | 315    |         |   | 374 |   |
| Miscellaneous                                                      |   |         | 45     |         |   | 51 |   |
| Allowance                for Uncollectible Accounts                |   |         | (33    | )            |   | (31 | ) |
|                  Total Receivables                            |   |         | 1,000  |         |   | 1,220 |   |
| Fuel,                Materials and Supplies                        |   |         | 776    |         |   | 726 |   |
| Risk                Management Assets                              |   |         | 625    |         |   | 926 |   |
| Margin                Deposits                                     |   |         | 171    |         |   | 221 |   |
| Regulatory                Asset for Under-Recovered Fuel Costs     |   |         | 92     |         |   | 197 |   |
| Other                                                              |   |         | 107    |         |   | 127 |   |
| **TOTAL**                                                          |   |         | 3,249  |         |   | 3,945 |   |
|                                                               |   |         |   |         |   |   |   |
| **PROPERTY,                PLANT AND EQUIPMENT**                   |   |         |   |         |   |   |   |
| Electric:                                                          |   |         |   |         |   |   |   |
| Production                                                         |   |         | 16,726 |         |   | 16,653 |   |
| Transmission                                                       |   |         | 6,477  |         |   | 6,433 |   |
| Distribution                                                       |   |         | 10,895 |         |   | 10,702 |   |
| Other                (including gas, coal mining and nuclear fuel) |   |         | 3,146  |         |   | 3,116 |   |
| Construction                Work in Progress                       |   |         | 2,538  |         |   | 2,217 |   |
| **Total**                                                          |   |         | 39,782 |         |   | 39,121 |   |
| Accumulated                Depreciation and Amortization           |   |         | 14,974 |         |   | 14,837 |   |
| **TOTAL                - NET**                                     |   |         | 24,808 |         |   | 24,284 |   |
|                                                               |   |         |   |         |   |   |   |
| **OTHER                NONCURRENT ASSETS**                         |   |         |   |         |   |   |   |
| Regulatory                Assets                                   |   |         | 3,213  |         |   | 3,262 |   |
| Securitized                Transition Assets and Other             |   |         | 583    |         |   | 593 |   |
| Spent                Nuclear Fuel and Decommissioning Trusts       |   |         | 1,160  |         |   | 1,134 |   |
| Investments                in Power and Distribution Projects      |   |         | 47     |         |   | 97 |   |
| Goodwill                                                           |   |         | 76     |         |   | 76 |   |
| Long-term                Risk Management Assets                    |   |         | 655    |         |   | 886 |   |
| Employee                Benefits and Pension Assets                |   |         | 1,090  |         |   | 1,105 |   |
| Other                                                              |   |         | 840    |         |   | 746 |   |
| **TOTAL**                                                          |   |         | 7,664  |         |   | 7,899 |   |
|                                                               |   |         |   |         |   |   |   |
| **Assets                Held for Sale**                            |   |         | 44     |         |   | 44 |   |
|                                                               |   |         |   |         |   |   |   |
| **TOTAL                ASSETS**                                    |   | $            | 35,765 |         | $      | 36,172 |   |

*See      Condensed Notes to Condensed Consolidated Financial      Statements.*

----

**AMERICAN      ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**LIABILITIES      AND SHAREHOLDERS’ EQUITY**

**March      31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                                                                                            |   | **2006**                           |        | **2005** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-------------|----------|--------|
| **CURRENT                  LIABILITIES**                                                                                                        |   | **(in                  millions)** |        |
| Accounts                  Payable                                                                                                               | $      | 1,033                              |        | $        | 1,144  |   |
| Short-term                  Debt                                                                                                                |   | 226                                |        |     | 10     |   |
| Long-term                  Debt Due Within One Year                                                                                             |   | 1,061                              |        |     | 1,153  |   |
| Risk                  Management Liabilities                                                                                                    |   | 539                                |        |     | 906    |   |
| Accrued                  Taxes                                                                                                                  |   | 829                                |        |     | 651    |   |
| Accrued                  Interest                                                                                                               |   | 180                                |        |     | 183    |   |
| Customer                  Deposits                                                                                                              |   | 415                                |        |     | 571    |   |
| Other                                                                                                                                           |   | 581                                |        |     | 842    |   |
| **TOTAL**                                                                                                                                       |   | 4,864                              |        |     | 5,460  |   |
|                                                                                                                                            |   |                               |        |     |   |   |
| **NONCURRENT                  LIABILITIES**                                                                                                     |   |                               |        |     |   |   |
| Long-term                  Debt                                                                                                                 |   | 11,081                             |        |     | 11,073 |   |
| Long-term                  Risk Management Liabilities                                                                                          |   | 500                                |        |     | 723    |   |
| Deferred                  Income Taxes                                                                                                          |   | 4,847                              |        |     | 4,810  |   |
| Regulatory                  Liabilities and Deferred Investment Tax Credits                                                                     |   | 2,760                              |        |     | 2,747  |   |
| Asset                  Retirement Obligations                                                                                                   |   | 950                                |        |     | 936    |   |
| Employee                  Benefits and Pension Obligations                                                                                      |   | 342                                |        |     | 355    |   |
| Deferred                  Gain on Sale and Leaseback - Rockport Plant Unit 2                                                                    |   | 155                                |        |     | 157    |   |
| Deferred                  Credits and Other                                                                                                     |   | 821                                |        |     | 762    |   |
| **TOTAL**                                                                                                                                       |   | 21,456                             |        |     | 21,563 |   |
|                                                                                                                                            |   |                               |        |     |   |   |
| **TOTAL                  LIABILITIES**                                                                                                          |   | 26,320                             |        |     | 27,023 |   |
|                                                                                                                                            |   |                               |        |     |   |   |
| Cumulative                  Preferred Stock Not Subject to Mandatory Redemption                                                                 |   | 61                                 |        |     | 61     |   |
|                                                                                                                                            |   |                               |        |     |   |   |
| Commitments                  and Contingencies (Note 5)                                                                                         |   |                               |        |     |   |   |
|                                                                                                                                            |   |                               |        |     |   |   |
| **COMMON                  SHAREHOLDERS’ EQUITY**                                                                                          |   |                               |        |     |   |   |
| Common                  Stock Par Value $6.50:                                                                                                  |   |                               |        |     |   |   |
|                                                                                                                                            |   |                               | 2006        |     |   | 2005 |   |   |   |   |   |   |   |
| Shares                  Authorized                                                                                                              |   |                               | 600,000,000 |     |   | 600,000,000 |   |   |   |   |   |   |   |
| Shares                  Issued                                                                                                                  |   |                               | 415,412,203 |     |   | 415,218,830 |   |   |   |   |   |   |   |
| (21,499,992                  shares were held in treasury at March 31, 2006 and**  **December                  31**,**** **2005) |   | 2,700                              |        |     | 2,699  |   |
| Paid-in                  Capital                                                                                                                |   | 4,137                              |        |     | 4,131  |   |
| Retained                  Earnings                                                                                                              |   | 2,520                              |        |     | 2,285  |   |
| Accumulated                  Other Comprehensive Income (Loss)                                                                                  |   | 27                                 |        |     | (27    | ) |
| **TOTAL**                                                                                                                                       |   | 9,384                              |        |     | 9,088  |   |
|                                                                                                                                            |   |                               |        |     |   |   |
| **TOTAL                  LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                           | $      | 35,765                             |        | $        | 36,172 |   |

*See      Condensed Notes to Condensed Consolidated Financial      Statements.*

----

**AMERICAN      ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For      the Three Months Ended March 31, 2006 and 2005**

**(in      millions)**

**(Unaudited)**

|                                                                                                |   | **2006**     |   | **2005**     |   |
|-----------------------------------------------------------------------------------------------------|--------|--------------|--------|--------------|--------|
| **OPERATING                ACTIVITIES**                                                             |   |    |   |    |   |
| **Net                Income**                                                                       |   | $            | 381    |         | $      | 355 |   |
| Less:                Income from Discontinued Operations                                            |   |         | (3     | )            |   | (1 | ) |
| **Income                from Continuing Operations**                                                |   |         | 378    |         |   | 354 |   |
| **Adjustments                for Noncash Items:**                                                   |   |         |   |         |   |   |   |
| Depreciation                and Amortization                                                        |   |         | 341    |         |   | 327 |   |
| Accretion                of Asset Retirement Obligations                                            |   |         | 15     |         |   | 18 |   |
| Deferred                Income Taxes                                                                |   |         | 7      |         |   | (19 | ) |
| Deferred                Investment Tax Credits                                                      |   |         | (7     | )            |   | (8 | ) |
| Carrying                Costs Income                                                                |   |         | (30    | )            |   | (20 | ) |
| Mark-to-Market                of Risk Management Contracts                                          |   |         | (9     | )            |   | 27 |   |
| Deferred                Property Taxes                                                              |   |         | (82    | )            |   | (82 | ) |
| Pension              Contributions to Qualified Plan Trusts                                         |   |         | -      |         |   | (102 | )  |
| Fuel                Under-Recovery                                                                  |   |         | 103    |         |   | 52 |   |
| Gain                on Sales of Assets and Equity Investments, Net                                  |   |         | (71    | )            |   | (115 | ) |
| Change                in Other Noncurrent Assets                                                    |   |         | 73     |         |   | (60 | ) |
| Change                in Other Noncurrent Liabilities                                               |   |         | (5     | )            |   | (45 | ) |
| **Changes                in Certain Components of Working Capital:**                                |   |         |   |         |   |   |   |
| Accounts                Receivable, Net                                                             |   |         | 214    |         |   | 104 |   |
| Fuel,                Materials and Supplies                                                         |   |         | (50    | )            |   | 64 |   |
| Accounts                Payable                                                                     |   |         | (115   | )            |   | 7 |   |
| Accrued                Taxes                                                                        |   |         | 176    |         |   | 245 |   |
| Customer                Deposits                                                                    |   |         | (157   | )            |   | 55 |   |
| Other                Current Assets                                                                 |   |         | 69     |         |   | (8 | ) |
| Other                Current Liabilities                                                            |   |         | (260   | )            |   | (127 | ) |
| **Net                Cash Flows From Operating Activities**                                         |   |         | 590    |         |   | 667 |   |
|                                                                                                |   |         |   |         |   |   |   |
| **INVESTING                ACTIVITIES**                                                             |   |         |   |         |   |   |   |
| Construction                Expenditures                                                            |   |         | (772   | )            |   | (434 | ) |
| Change                in Other Temporary Cash Investments, Net                                      |   |         | 27     |         |   | (9 | ) |
| Purchases                of Investment Securities                                                   |   |         | (2,469 | )            |   | (1,311 | ) |
| Sales                of Investment Securities                                                       |   |         | 2,380  |         |   | 1,396 |   |
| Proceeds                from Sales of Assets                                                        |   |         | 111    |         |   | 1,184 |   |
| Other                                                                                               |   |         | (34    | )            |   | 16 |   |
| **Net                Cash Flows From (Used For) Investing Activities**                              |   |         | (757   | )            |   | 842 |   |
|                                                                                                |   |         |   |         |   |   |   |
| **FINANCING                ACTIVITIES**                                                             |   |         |   |         |   |   |   |
| Issuance                of Common Stock                                                             |   |         | 5      |         |   | 17 |   |
| Repurchase                of Common Stock                                                           |   |         | -      |         |   | (434 | ) |
| Change                in Short-term Debt, Net                                                       |   |         | 216    |         |   | (5 | ) |
| Issuance                of Long-term Debt                                                           |   |         | 55     |         |   | 580 |   |
| Retirement                of Long-term Debt                                                         |   |         | (142   | )            |   | (510 | ) |
| Dividends                Paid on Common Stock                                                       |   |         | (146   | )            |   | (138 | ) |
| Other                                                                                               |   |         | 54     |         |   | (78 | ) |
| **Net                Cash Flows From (Used For) Financing Activities**                              |   |         | 42     |         |   | (568 | ) |
|                                                                                                |   |         |   |         |   |   |   |
| **Net                Increase (Decrease) in Cash and Cash Equivalents**                             |   |         | (125   | )            |   | 941 |   |
| **Cash                and Cash Equivalents at Beginning of Period**                                 |   |         | 401    |         |   | 320 |   |
| **Cash                and Cash Equivalents at End of Period**                                       |   | $            | 276    |         | $      | 1,261 |   |
|                                                                                                |   |         |   |         |   |   |   |
| **SUPPLEMENTARY                INFORMATION**                                                        |   |         |   |         |   |   |   |
| Cash                paid for interest (net of capitalized amounts)                                  |   | $            | 159    |         | $      | 170 |   |
| Cash                paid (received) for income taxes, net of refunds                                |   |         | 13     |         |   | (57 | ) |
| Noncash                acquisitions under capital leases                                            |   |         | 20     |         |   | 9 |   |
| Construction                Expenditures Included in Accounts Payable at March 31,                  |   |         | 246    |         |   | 146 |   |
|                                                                                                |   |         |   |         |   |   |   |
| *See                Condensed Notes to Condensed Consolidated Financial                Statements.* |   |         |   |         |   |   |   |

----

**AMERICAN      ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS’ EQUITY      AND**

**COMPREHENSIVE      INCOME (LOSS)**

**For      the Three Months Ended March 31, 2006 and 2005**

**(in      millions)**

**(Unaudited)**

|                                                              |                                                                                                 | **Common                Stock** |   |       |   |                               |   | **Accumulated                Other Comprehensive Income (Loss)** |   |   |      |
|-------------------------------------------------------------------|------------------------------------------------------------------------------------------------------|---------------------------------|--------|------------|--------|------------------------------------|--------|------------------------------------------------------------------|--------|--------|-----------|
|                                                              |                                                                                                 | **Shares**                      |   | **Amount** |   | **Paid-in                Capital** |   | **Retained                Earnings**                             |   |   | **Total** |   |
| **DECEMBER                31, 2004**                              |                                                                                                 |                            | 405    |       | $      | 2,632                              |   | $                                                                | 4,203  |   | $         | 2,024 |   | $ | (344 | ) | $ | 8,515 |   |
| Issuance                of Common Stock                           |                                                                                                 |                            |   |       |   | 3                                  |   |                                                             | 14     |   |      |   |   |   |   |   |   | 17 |   |
| Common                Stock Dividends                             |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      | (138 | ) |   |   |   |   | (138 | ) |
| Repurchase                of Common Stock                         |                                                                                                 |                            |   |       |   |                               |   |                                                             | (434   | )      |      |   |   |   |   |   |   | (434 | ) |
| Other                                                             |                                                                                                 |                            |   |       |   |                               |   |                                                             | 3      |   |      |   |   |   |   |   |   | 3 |   |
| **TOTAL**                                                         |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   | 7,963 |   |
|                                                              |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                           |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   |   |   |
| **Other                Comprehensive Income (Loss), Net of Tax:** |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   |   |   |
|                                                              | Foreign                Currency Translation Adjustments,   Net                of Tax of $0 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   | 1 |   |   | 1 |   |
|                                                              | Cash                Flow Hedges, Net of Tax of $28                                                   |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   | (51 | ) |   | (51 | ) |
| **NET                INCOME**                                     |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      | 355 |   |   |   |   |   | 355 |   |
| **TOTAL                COMPREHENSIVE INCOME**                     |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   | 305 |   |
| **MARCH                31, 2005**                                 |                                                                                                 |                            | 405    |       | $      | 2,635                              |   | $                                                                | 3,786  |   | $         | 2,241 |   | $ | (394 | ) | $ | 8,268 |   |
|                                                              |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   |   |   |
| **DECEMBER                31, 2005**                              |                                                                                                 |                            | 415    |       | $      | 2,699                              |   | $                                                                | 4,131  |   | $         | 2,285 |   | $ | (27 | ) | $ | 9,088 |   |
| Issuance                of Common Stock                           |                                                                                                 |                            |   |       |   | 1                                  |   |                                                             | 4      |   |      |   |   |   |   |   |   | 5 |   |
| Common                Stock Dividends                             |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      | (146 | ) |   |   |   |   | (146 | ) |
| Other                                                             |                                                                                                 |                            |   |       |   |                               |   |                                                             | 2      |   |      |   |   |   |   |   |   | 2 |   |
| **TOTAL**                                                         |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   | 8,949 |   |
|                                                              |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                           |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   |   |   |
| **Other                Comprehensive Income, Net of Tax:**        |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   |   |   |
|                                                              | Cash                Flow Hedges, Net of Tax of $19                                                   |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   | 35 |   |   | 35 |   |
|                                                              | Securities                Available for Sale, Net of Tax of $10                                      |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   | 19 |   |   | 19 |   |
| **NET                INCOME**                                     |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      | 381 |   |   |   |   |   | 381 |   |
| **TOTAL                COMPREHENSIVE INCOME**                     |                                                                                                 |                            |   |       |   |                               |   |                                                             |   |   |      |   |   |   |   |   |   | 435 |   |
| **MARCH                31, 2006**                                 |                                                                                                 |                            | 415    |       | $      | 2,700                              |   | $                                                                | 4,137  |   | $         | 2,520 |   | $ | 27 |   | $ | 9,384 |   |

*        See Condensed Notes to Condensed Consolidated Financial      Statements.*

----

**AMERICAN      ELECTRIC POWER, INC. AND SUBSIDIARY COMPANIES**

**INDEX      TO CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL      STATEMENTS**

|  1. | Significant                Accounting Matters                                 |
|----------|-------------------------------------------------------------------------------|
|  2. | New                Accounting Pronouncements                                  |
|  3. | Rate                Matters                                                   |
|  4. | Customer                Choice and Industry Restructuring                     |
|  5. | Commitments                and Contingencies                                  |
|  6. | Guarantees                                                                    |
|  7. | Company-wide                Staffing and Budget Review                        |
|  8. | Dispositions,                Discontinued Operations and Assets Held for Sale |
|  9. | Benefit                Plans                                                  |
| 10.      | Stock-Based                Compensation                                       |
| 11.      | Business                Segments                                              |
| 12.      | Financing                Activities                                           |

----

**AMERICAN      ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES**

**CONDENSED      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**1.**
**SIGNIFICANT      ACCOUNTING MATTERS**

***General***

***Components      of Accumulated Other Comprehensive Income (Loss)***

|                                                     |   | **March                31,**     |   | **December                31,** |   |
|----------------------------------------------------------|--------|----------------------------------|--------|---------------------------------|--------|
|                                                     |   | **2006**                         |   | **2005**                        |   |
| **Components**                                           |   | **(in                millions)** |   |
| Securities                Available for Sale, Net of Tax |   | $                                | 38     |                            | $      | 19 |   |
| Cash                Flow Hedges, Net of Tax              |   |                             | 8      |                            |   | (27 | ) |
| Minimum                Pension Liability, Net of Tax     |   |                             | (19    | )                               |   | (19 | ) |
| **Total**                                                |   | $                                | 27     |                            | $      | (27 | ) |

***Stock-Based      Compensation Plans***
* *

*Pro      Forma Information Under SFAS 123, “Accounting for Stock-Based Compensation,” for      Periods Presented Prior to January 1, 2006*

* *

|                                                                                                                                                                                            |   | **2005**                                                                              |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                            |   |   **(in                millions, except****per                share data)** |   |
| Net                Income, as reported                                                                                                                                                          |   | $                                                                                     | 355    |   |
| Add:                Stock-based compensation expense included in reported Net Income,                net of related                  tax effects                                           |   |                                                                                  | 2      |   |
| Deduct:                Stock-based compensation expense determined under fair                value based method for                  all awards, net                of related tax effects |   |                                                                                  | (2     | ) |
| Pro                Forma Net Income                                                                                                                                                             |   | $                                                                                     | 355    |   |
|                                                                                                                                                                                            |   |                                                                                  |   |   |
| Earnings                Per Share:                                                                                                                                                              |   |                                                                                  |   |   |
| Basic                - as Reported                                                                                                                                                              |   | $                                                                                     | 0.90   |   |
| Basic                - Pro Forma (a)                                                                                                                                                            |   | $                                                                                     | 0.90   |   |
|                                                                                                                                                                                            |   |                                                                                  |   |   |
| Diluted                - as Reported                                                                                                                                                            |   | $                                                                                     | 0.90   |   |
| Diluted                - Pro Forma (a)                                                                                                                                                          |   | $                                                                                     | 0.90   |   |

| (a) | The                pro forma amounts are not representative of the effects on reported                net                income for future years. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|

***Earnings      Per Share (EPS)***

|                                                        |   | **Three                Months Ended March 31,**            |   |
|-------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|                                                        |   | **2006**                                                   |   | **2005** |   |
|                                                        |   | **(in                millions, except****per share data)** |   |
|                                                        |   |                                                  |   | $/share |   |    |   | $/share |   |
| Earnings                applicable to common stock          |   | $                                                          | 381    |   |   |   |   | $ | 355 |   |   |   |   |
|                                                        |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Average                number of basic shares outstanding   |   |                                                       | 393.7  |   | $ | 0.97 |   |   | 393.1 |   | $ | 0.90 |   |
| Average                dilutive effect of:                  |   |                                                       |   |   |   |   |   |   |   |   |   |   |   |
| Performance                Share Units                      |   |                                                       | 1.4    |   |   | (0.01 | ) |   | 0.8 |   |   | - |   |
| Stock                Options                                |   |                                                       | 0.3    |   |   | - |   |   | 0.3 |   |   | - |   |
| Restricted                Stock Units                       |   |                                                       | 0.1    |   |   | - |   |   | - |   |   | - |   |
| Restricted                Shares                            |   |                                                       | 0.1    |   |   | - |   |   | - |   |   | - |   |
| Average                number of diluted shares outstanding |   |                                                       | 395.6  |   | $ | 0.96 |   |   | 394.2 |   | $ | 0.90 |   |

***Related      Party Transactions***

|                                                                                                                                                                                                    |   | **Three                Months Ended****March                31,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|
|                                                                                                                                                                                                    |   | **2006**                                                          |   | **2005** |   |
|                                                                                                                                                                                                    |   | **(in                millions)**                                  |   |
| AEP                Consolidated Purchased Energy:                                                                                                                                                       |   |                                                         |   |    |   |
| Ohio                Valley Electric Corporation (43.47% Owned)                                                                                                                                          |   | $                                                                 | 55     |   | $ | 43 |   |
| Sweeny                Cogeneration Limited Partnership (50% Owned)                                                                                                                                      |   |                                                              | 34     |   |   | 29 |   |
| AEP                Consolidated Other Revenues - Barging and Other Transportation                Services - Ohio Valley Electric                   Corporation  (43.47% Owned) |   |                                                              | 7      |   |   | 4 |   |

***Reclassifications***

**2.**
**NEW      ACCOUNTING PRONOUNCEMENTS**

***SFAS      123 (revised 2004) “Share-Based Payment”***

***SFAS      156 “Accounting for Servicing of Financial Assets - An Amendment of FASB      Statement No. 140” (SFAS 156)***

***Future      Accounting Changes***

**3.**
**RATE      MATTERS**

** **

***APCo      Virginia Environmental and Reliability Costs***

***APCo      Virginia Base Rate Case***

***APCo      and WPCo West Virginia Rate Case***

| · | An                Expanded Net Energy Cost (ENEC) increase of $56 million for fuel                and                purchased power expenses;                                                                                                                                                                            |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | A                $23 million special construction surcharge providing recovery of                the costs                of the Wyoming-Jacksons Ferry 765 kV line and scrubbers to                date;                                                                                                                 |
| · | A                general base rate reduction of $18 million of which $9 million relates                to                a reduction in depreciation expense which affects cash flows but                not                earnings; and                                                                                 |
| · | A                $17 million credit for prior over-recoveries of ENEC costs, currently                recorded in regulatory liabilities on the Condensed Consolidated                Balance                Sheets. Therefore, this item impacts cash flows but has no effect                on                earnings. |

***I&M      Depreciation Study Filing***

***KPCo      Rate Filing***

***PSO      Fuel and Purchased Power and its Possible Impact on AEP East companies and      AEP      West companies***

***SWEPCo      Louisiana Fuel Inquiry***

***SWEPCo      PUCT Staff Review of Earnings***

***ERCOT      Price-to-Beat (PTB) Fuel Factor Appeal***

***RTO      Formation/Integration Costs***

***Transmission      Rate Proceedings at the FERC***

*SECA      Revenue *

*AEP      East Transmission Revenue Requirement and Rates *

*PJM      Regional Transmission Rate Proceeding*

| · | In                Kentucky, KPCo settled a rate case, which provides for the recovery                of the                transmission revenue shortfall.                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | APCo                filed a settlement agreement in West Virginia, which included recovery                of                the lost T&O/SECA transmission revenues.  |
| · | A                pending rate request filed in February 2006 in Ohio addresses the                significant reduction in FERC transmission revenues.                    |
| · | In                Virginia, APCo filed a request for revised rates, which includes                recovery                of the lost T&O/SECA transmission revenues. |
| · | In                Indiana, I&M is precluded by a rate cap from raising its rates until                July 1, 2007.                                                   |

***Allocation      Agreement between AEP East companies and AEP West companies***

**4.**
**CUSTOMER      CHOICE AND INDUSTRY RESTRUCTURING**

**TEXAS      RESTRUCTURING **

***TCC      Securitization Proceeding***

|                                                                                                       |   | **(in                millions)** |   |
|------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
| Stranded                Generation Plant Costs                                                             |   | $                                | 969    |   |
| Net                Generation-related Regulatory Asset                                                     |   |                             | 249    |   |
| Excess                Earnings                                                                             |   |                             | (49    | ) |
| **Recorded                Net Stranded Generation Plant Costs**                                            |   |                             | 1,169  |   |
| Recorded                Debt Carrying Costs on Recorded Net Stranded Generation Plant                Costs |   |                             | 284    |   |
| **Recorded                Securitizable True-up Regulatory Asset**                                         |   |                             | 1,453  |   |
| Unrecorded                But Recoverable Equity Carrying Costs                                            |   |                             | 212    |   |
| Unrecorded                Estimated April 2006 - August 2006 Debt Carrying Costs                           |   |                             | 40     |   |
| Unrecorded                Securitization Issuance Costs                                                    |   |                             | 24     |   |
| Unrecorded                Excess Earnings, Related Return and Other                                        |   |                             | 75     |   |
| **Securitization                Request**                                                                  |   | $                                | 1,804  |   |

***Deferred      Investment Tax Credits and Excess Deferred Federal Income      Taxes***

***CTC      Proceeding for Other True-up Items***

|                                                                         |   | **(in                millions)** |   |
|------------------------------------------------------------------------------|--------|----------------------------------|--------|
| Wholesale                Capacity Auction True-up                            |   | $                                | 61     |   |
| Carrying                Costs on Wholesale Capacity Auction True-up          |   |                             | 17     |   |
| Retail                Clawback                                               |   |                             | (61    | ) |
| Deferred                Over-recovered Fuel Balance                          |   |                             | (177   | ) |
| **Recorded                Net Regulatory Liabilities - Other True-up Items** |   |                             | (160   | ) |
| ADFIT                Benefit                                                 |   |                             | (328   | ) |
| Unrecorded                Carrying Costs and Other                           |   |                             | (3     | ) |
| **Estimated                CTC Request**                                     |   | $                                | (491   | ) |

***Fuel      Balance Recoveries***

***Carrying      Costs on Net True-up Regulatory Assets Impacting Securitization and CTC      Proceedings***

***Summary***

***Texas      Restructuring - SPP***

**OHIO      RESTRUCTURING **

***Rate      Stabilization Plans***

***IGCC      Plant***

***Transmission      Rate Filing***

***Storm      Cost Recovery Filing***

***PUCO      Staff Report on Service Reliability***

***Customer      Choice Deferrals***

**5.**
**COMMITMENTS      AND CONTINGENCIES**

**ENVIRONMENTAL**

***Federal      EPA Complaint and Notice of Violation***

***SWEPCo      Notice of Enforcement and Notice of Citizen Suit***

***Carbon      Dioxide Public Nuisance Claims***

***Ontario      Litigation***

**OPERATIONAL**

***Power      Generation Facility***
* *
***and      TEM Litigation***

***Enron      Bankruptcy***

***Shareholder      Lawsuits***

***Natural      Gas Markets Lawsuits***

***Cornerstone      Lawsuit***

***FERC      Long-term Contracts***

**6.**
**GUARANTEES**

**LETTERS      OF CREDIT**

**GUARANTEES      OF THIRD-PARTY OBLIGATIONS**

***SWEPCo***

**INDEMNIFICATIONS      AND OTHER GUARANTEES**

***Contracts***

***Master      Operating Lease***

***Railcar      Lease***

**7.**
**COMPANY-WIDE      STAFFING AND BUDGET REVIEW**

|                                               |   | **Amount****(in                millions)** |   |
|----------------------------------------------------|--------|--------------------------------------------|--------|
| Accrual                at December 31, 2005        |   | $                                          | 12     |   |
| Less:                Total Payments                |   |                                       | 8      |   |
| Less:                Accrual Adjustments           |   |                                       | 2      |   |
| Remaining                Accrual at March 31, 2006 |   | $                                          | 2      |   |

**8.**
**DISPOSITIONS,        DISCONTINUED OPERATIONS AND ASSETS HELD FOR        SALE**

**DISPOSITIONS**

**2006**

***Compresion      Bajio S de R.L. de C.V. (Investments - Other segment)***

**2005**

***Houston      Pipe Line Company LP (HPL) (Investments - Gas Operations      segment)***

***Texas      REPs (Utility Operations segment)***

**DISCONTINUED      OPERATIONS**

| **Three                Months ended March 31, 2006 and 2005:** |
|----------------------------------------------------------------|
|                                                           |   | **SEEBOARD                (a)** |   | **U.K.****Generation** **(b)** |   | **Total** |   |
| 2006                Revenue                                    |   | $ | - |   | $ | - |   | $ | - |   |
| 2006                Pretax Income                              |   |   | - |   |   | 5 |   |   | 5 |   |
| 2006                Earnings, Net of Tax                  |   |   | - |   |   | 3 | (c) |   | 3 |   |
|                                                           |   |   |   |   |   |   |   |   |   |   |
| 2005                Revenue (Expense)                          |   | $ | - |   | $ | (8 | ) | $ | (8 | ) |
| 2005                Pretax Loss                                |   |   | - |   |   | (8 | ) |   | (8 | ) |
| 2005                Earnings (Loss), Net of Tax           |   |   | 6 |   |   | (5 | )(d) |   | 1 |   |

| (a) | Relates                to purchase price true-up adjustments and tax adjustments from the                sale of                SEEBOARD.                                                                                                                                                             |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | The                2006 amounts relate to a release of accrued liabilities for the London                office lease and tax adjustments from the sale. Amounts in 2005 relate                to                purchase price true-up adjustments and tax adjustments from the                sale. |
| (c) | Earnings                per share related to the UK Operations was $0.01.                                                                                                                                                                                                                             |
| (d) | Earnings                per share related to the UK Operations was                $(0.01).                                                                                                                                                                                                            |

**ASSETS      HELD FOR SALE**

***Texas      Plants - Oklaunion Power Station (Utility Operations      segment)***

|                                              |   | **March                31,**     |   | **December                31,** |   |
|---------------------------------------------------|--------|----------------------------------|--------|---------------------------------|--------|
| **Texas                Plants**                   |   | **2006**                         |   | **2005**                        |   |
| **Assets:**                                       |   | **(in                millions)** |   |
| Other                Current Assets               |   | $                                | 1      |                            | $      | 1 |   |
| Property,                Plant and Equipment, Net |   |                             | 43     |                            |   | 43 |   |
| **Total                Assets Held for Sale**     |   | $                                | 44     |                            | $      | 44 |   |

**9.      BENEFIT PLANS**

***Components      of Net Periodic Benefit      Cost***

|                                                 |   | **Pension                Plans** |   | **Other                Postretirement Benefit Plans** |   |
|------------------------------------------------------|--------|----------------------------------|--------|-------------------------------------------------------|--------|
|                                                 |   | **2006**                         |   | **2005**                                              |   | **2006** |   | **2005** |   |
|                                                 |   | **(in                millions)** |   |
| Service                Cost                          |   | $                                | 24     |                                                  | $      | 23 |   | $ | 10 |   | $ | 11 |   |
| Interest                Cost                         |   |                             | 57     |                                                  |   | 56 |   |   | 25 |   |   | 27 |   |
| Expected                Return on Plan Assets        |   |                             | (83    | )                                                     |   | (77 | ) |   | (23 | ) |   | (23 | ) |
| Amortization                of Transition Obligation |   |                             | -      |                                                  |   | - |   |   | 7 |   |   | 7 |   |
| Amortization                of Net Actuarial Loss    |   |                             | 20     |                                                  |   | 13 |   |   | 5 |   |   | 7 |   |
| **Net                Periodic Benefit Cost**         |   | $                                | 18     |                                                  | $      | 15 |   | $ | 24 |   | $ | 29 |   |

**10.**
**STOCK-BASED      COMPENSATION**

**Stock      Options**

|                                                       |   | **Options** |      | **Weighted                Average Exercise Price** |   |
|------------------------------------------------------------|--------|-------------|-----------|----------------------------------------------------|--------|
|                                                       |   |        |      |                                          |   |
| Outstanding                at beginning of quarter         |   |        | 6,221,839 |                                               | $      | 34.16 |   |
| Granted                                                    |   |        | -         |                                               |   | N/A |   |
| Exercised/converted                                        |   |        | (172,722  | )                                                  |   | 28.67 |   |
| Expired                                                    |   |        | (87,611   | )                                                  |   | 48.43 |   |
| Forfeited                                                  |   |        | -         |                                               |   | N/A |   |
| Outstanding                at end of quarter               |   |        | 5,961,506 |                                               |   | 34.11 |   |
|                                                       |   |        |      |                                               |   |   |   |
| Options                exercisable at end of quarter  |   |        | 5,689,652 |                                               | $      | 34.34 |   |
|                                                       |   |        |      |                                               |   |   |   |
| Weighted                average exercise price of options: |   |        |      |                                               |   |   |   |
| Granted                above Market Price                  |   |        | -         |                                               | $      | N/A |   |
| Granted                at Market Price                     |   |        | -         |                                               | $      | N/A |   |

** **
**Options      Outstanding**

| **2006                Range of****Exercise                Prices** |   |  **Number****Outstanding** |      |  **Weighted                Average****Remaining                Life** |   | **Weighted                Average****Exercise                Price** |   | **Aggregate****Intrinsic                Value** |   |
|--------------------------------------------------------------------|--------|---------------------------------|-----------|----------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|-------------------------------------------------|--------|
|                                                               |   |                       |      |  **(in                years)**                                        |   |                                                            |   |                                            |   |
| $25.73                - $27.95                                     |   |                            | 1,465,615 |                                                                       |   | 6.9                                                                  |   | $                                               | 27.37  |   | $ | 9,693,895 |   |
| $30.76                - $38.65                                     |   |                            | 4,110,408 |                                                                       |   | 4.6                                                                  |   |                                            | 35.45  |   |   | 823,032 |   |
| $43.79                - $49.00                                     |   |                            | 385,483   |                                                                       |   | 5.4                                                                  |   |                                            | 45.52  |   |   | - |   |
|                                                               |   |                            | 5,961,506 |                                                                       |   | 5.2                                                                  |   |                                            | 34.11  |   | $ | 10,516,927 |   |

** **
**Options      Exercisable**

| **2006                Range of****Exercise                Prices** |   |  **Number****Exercisable** |      |  **Weighted                Average****Remaining                Life** |   | **Weighted                Average****Exercise                Price** |   | **Aggregate****Intrinsic                Value** |   |
|--------------------------------------------------------------------|--------|---------------------------------|-----------|----------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|-------------------------------------------------|--------|
|                                                               |   |                       |      |  **(in                years)**                                        |   |                                                            |   |                                            |   |
| $25.73                - $27.95                                     |   |                            | 1,260,528 |                                                                       |   | 6.1                                                                  |   | $                                               | 27.29  |   | $ | 8,473,587 |   |
| $30.76                - $38.65                                     |   |                            | 4,050,741 |                                                                       |   | 3.6                                                                  |   |                                            | 35.50  |   |   | 602,951 |   |
| $43.79                - $49.00                                     |   |                            | 378,383   |                                                                       |   | 5.0                                                                  |   |                                            | 45.49  |   |   | - |   |
|                                                               |   |                            | 5,689,652 |                                                                       |   | 4.2                                                                  |   |                                            | 34.34  |   | $ | 9,076,538 |   |

**Performance      Units**

|                                                                                                        |   | **2006**       |    | **2005**     |     |
|-------------------------------------------------------------------------------------------------------------|--------|----------------|---------|--------------|----------|
| **Performance                Units**                                                                        |   |      |    |    |     |
| Awarded                Units                                                                                |   |           | 864,420 |         |     | 1,012,597 |   |
| Unit                Fair Value at Grant Date                                                                |   | $              | 37.36   |         | $        | 34.02 |   |
| Vesting                Period (years)                                                                       |   |           | 3       |         |     | 3 |   |
|                                                                                                        |   |           |         |         |     |   |   |
|                                                                                                        |   |  **2006** |    |         | **2005** |   |
| **Performance                Units and AEP Career Shares****(Reinvested                Dividends Portion)** |   |           |    |         |     |   |   |
| Awarded                Units                                                                                |   |           | 30,277  |         |     | 23,939 |   |
| Unit                Fair Value at Grant Date                                                                |   | $              | 35.31   |         | $        | 34.21 |   |
| Vesting                Period (years)                                                                       |   |           | 3       |         |     | 3 |   |

** **

**Restricted      Shares and Restricted Stock Units **

|                                                  |   | **2006**     |   | **2005**     |   |
|-------------------------------------------------------|--------|--------------|--------|--------------|--------|
| **Restricted                Stock Units**             |   |    |   |    |   |
| Awarded                Units                          |   |         | 37,199 |         |   | 27,100 |   |
| Weighted                Average Grant Date Fair Value |   | $            | 35.80  |         | $      | 33.11 |   |

| **Nonvested                Restricted Shares and Restricted Stock Units** |   | **Shares/Units** |    | **Weighted                Average****Grant                Date Fair Value** |   |
|---------------------------------------------------------------------------|--------|------------------|---------|-----------------------------------------------------------------------------|--------|
|                                                                      |   |             |    |                                                                   |   |
| Nonvested                at beginning of quarter                          |   |             | 496,716 |                                                                        | $      | 32.19 |   |
| Granted                                                                   |   |             | 37,199  |                                                                        |   | 35.80 |   |
| Vested                                                                    |   |             | (78,944 | )                                                                           |   | 28.88 |   |
| Forfeited                                                                 |   |             | (565    | )                                                                           |   | 32.81 |   |
| Nonvested                at end of quarter                                |   |             | 454,406 |                                                                        |   | 33.06 |   |

***Share-based      Compensation Plans***

**11.**
**BUSINESS      SEGMENTS**

**Utility      Operations**

| · | Generation                of electricity for sale to U.S. retail and wholesale                customers. |
|--------|----------------------------------------------------------------------------------------------------------|
| · | Electricity                transmission and distribution in the                U.S.                      |

**Investments      - Gas Operations **

| · | Gas                pipeline and storage services.                                                                                                                                                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Gas                marketing and risk management activities.                                                                                                                                      |
| · | Our                gas pipeline and storage assets were disposed of in 2005 with the                sale of                HPL (see “Dispositions” section of Note                8). |

**Investments      - UK Operations**

| · | International                generation of electricity for sale to wholesale                customers.                                       |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
| · | Coal                procurement and transportation to our plants.                                                                            |
| · | UK                Operations were classified as Discontinued Operations during 2003                and were                sold during 2004. |

**Investments      - Other **

| · | Bulk                commodity barging operations, wind farms, IPPs and other energy                supply-related businesses. |
|--------|-------------------------------------------------------------------------------------------------------------------------------|

|                                                                        |   |                                  |   | **Investments**                   |   |                             |    |         |   |                             |   |
|------------------------------------------------------------------------|--------|---------------------------------------|--------|-----------------------------------|--------|----------------------------------|---------|--------------|--------|----------------------------------|--------|
|                                                                   |   | **Utility                Operations** |   | **Gas                Operations** |   | **UK                Operations** |    | **Other**    |   | **All                Other (a)** |   | **Reconciling                Adjustments** |   | **Consolidated** |   |
|                                                                   |   | **(in                millions)**      |   |
| **Three                Months Ended****March                31, 2006** |   |                             |   |                         |   |                        |    |    |   |                        |   |    |   |    |   |
| Revenues                from:                                          |   |                             |   |                         |   |                        |    |    |   |                        |   |    |   |    |   |
| External                Customers                                      |   | $                                     | 2,987  |                              | $      | (18                              | )  | $            | -      |                             | $      | 139 |   | $ | - |   | $ | - |   | $ | 3,108 |   |
| Other                Operating Segments                                |   |                                  | (18    | )                            |   | 21                               |    |         | -      |                             |   | 3 |   |   | 1 |   |   | (7 | ) |   | - |   |
| Total                Revenues                                          |   | $                                     | 2,969  |                              | $      | 3                                |    | $            | -      |                             | $      | 142 |   | $ | 1 |   | $ | (7 | ) | $ | 3,108 |   |
|                                                                   |   |                                  |   |                              |   |                             |    |         |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                (Loss) Before Discontinued Operations            |   | $                                     | 365    |                              | $      | (1                               | )       | $            | -      |                             | $      | 16 |   | $ | (2 | ) | $ | - |   | $ | 378 |   |
| Discontinued                Operations, Net of Tax                     |   |                                  | -      |                              |   | -                                |    |         | 3      |                             |   | - |   |   | - |   |   | - |   |   | 3 |   |
| Net                Income (Loss)                                       |   | $                                     | 365    |                              | $      | (1                               | )       | $            | 3      |                             | $      | 16 |   | $ | (2 | ) | $ | - |   | $ | 381 |   |

|                                                                            |   |                                    |   | **Investments**                     |   |                               |    |         |   |                               |   |
|----------------------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------|--------|------------------------------------|---------|--------------|--------|------------------------------------|--------|
|                                                                       |   | **Utility                  Operations** |   | **Gas                  Operations** |   | **UK                  Operations** |    | **Other**    |   | **All                  Other (a)** |   | **Reconciling                  Adjustments** |   | **Consolidated** |   |
|                                                                       |   | **(in                  millions)**      |   |
| **Three                  Months Ended****March                  31, 2005** |   |                               |   |                           |   |                          |    |    |   |                          |   |    |   |    |   |
| Revenues                  from:                                            |   |                               |   |                           |   |                          |    |    |   |                          |   |    |   |    |   |
| External                  Customers                                        |   | $                                       | 2,605  |                                | $      | 357                                |    | $            | -      |                               | $      | 103 |   | $ | - |   | $ | - |   | $ | 3,065 |   |
| Other                  Operating Segments                                  |   |                                    | 79     |                                |   | (73                                | )  |         | -      |                               |   | 6 |   |   | 1 |   |   | (13 | ) |   | - |   |
| Total                  Revenues                                            |   | $                                       | 2,684  |                                | $      | 284                                |    | $            | -      |                               | $      | 109 |   | $ | 1 |   | $ | (13 | ) | $ | 3,065 |   |
|                                                                       |   |                                    |   |                                |   |                               |    |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (Loss) Before Discontinued Operations              |   | $                                       | 353    |                                | $      | 10                                 |    | $            | -      |                               | $      | 5 |   | $ | (14 | ) | $ | - |   | $ | 354 |   |
| Discontinued                  Operations, Net of Tax                       |   |                                    | -      |                                |   | -                                  |    |         | (5     | )                             |   | 6 |   |   | - |   |   | - |   |   | 1 |   |
| Net                  Income (Loss)                                         |   | $                                       | 353    |                                | $      | 10                                 |    | $            | (5     | )                             | $      | 11 |   | $ | (14 | ) | $ | - |   | $ | 355 |   |

|                                                              |   |                                      |   | **Investments**                       |   |                                 |   |      |   |                             |   |
|--------------------------------------------------------------|--------|-------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|-----------|--------|----------------------------------|--------|
|                                                         |   | **Utility                    Operations** |   | **Gas                    Operations** |   | **UK                    Operations** |   | **Other** |   | **All                    Other** |   | **Reconciling                    Adjustments (b)** |   | **Consolidated** |   |
|                                                         |   | **(in                    millions)**      |   |
| **As                    of March 31, 2006**                  |   |                                      |   |                                  |   |                                 |   |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                    Property, Plant and Equipment       |   | $                                         | 38,943 |                                  | $      | 2                                    |   | $         | -      |                             | $      | 834 |   |   | 3 |   | $ | - |   | $ | 39,782 |   |
| Accumulated                    Depreciation and Amortization |   |                                      | 14,852 |                                  |   | 1                                    |   |      | -      |                             |   | 119 |   |   | 2 |   |   | - |   |   | 14,974 |   |
| Total                    Property, Plant and Equipment - Net |   | $                                         | 24,091 |                                  | $      | 1                                    |   | $         | -      |                             | $      | 715 |   | $ | 1 |   | $ | - |   | $ | 24,808 |   |
|                                                         |   |                                      |   |                                  |   |                                 |   |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                         |   |                                      |   |                                  |   |                                 |   |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                    Assets                              |   | $                                         | 34,178 |                                  | $      | 830                                  | (c)    | $         | 625    | (d)                              | $      | 593 |   | $ | 10,782 |   | $ | (11,243 | ) | $ | 35,765 |   |
| Assets                    Held for Sale                      |   |                                      | 44     |                                  |   | -                                    |   |      | -      |                             |   | - |   |   | - |   |   | - |   |   | 44 |   |

|                                                       |   |                                    |   | **Investments**                     |   |                               |   |      |   |                           |   |
|------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------|--------|------------------------------------|--------|-----------|--------|--------------------------------|--------|
|                                                       |   | **Utility                  Operations** |   | **Gas                  Operations** |   | **UK                  Operations** |   | **Other** |   | **All                  Other** |   | **Reconciling                  Adjustments (b)** |   | **Consolidated** |   |
|                                                       |   | **(in                  millions)**      |   |
| **As                  of December 31, 2005**               |   |                                    |   |                                |   |                               |   |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Property, Plant and Equipment       |   | $                                       | 38,283 |                                | $      | 2                                  |   | $         | -      |                           | $      | 833 |   |   | 3 |   | $ | - |   | $ | 39,121 |   |
| Accumulated                  Depreciation and Amortization |   |                                    | 14,723 |                                |   | 1                                  |   |      | -      |                           |   | 112 |   |   | 1 |   |   | - |   |   | 14,837 |   |
| Total                  Property, Plant and Equipment - Net |   | $                                       | 23,560 |                                | $      | 1                                  |   | $         | -      |                           | $      | 721 |   | $ | 2 |   | $ | - |   | $ | 24,284 |   |
|                                                       |   |                                    |   |                                |   |                               |   |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |                                    |   |                                |   |                               |   |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Assets                              |   | $                                       | 34,339 |                                | $      | 1,199                              | (e)    | $         | 632    | (f)                            | $      | 509 |   | $ | 9,463 |   | $ | (9,970 | ) | $ | 36,172 |   |
| Assets                  Held for Sale                      |   |                                    | 44     |                                |   | -                                  |   |      | -      |                           |   | - |   |   | - |   |   | - |   |   | 44 |   |

| (a) | All                Other includes interest, litigation and other miscellaneous parent                company                expenses.                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Reconciling                Adjustments for Total Assets primarily include the elimination of                intercompany advances to affiliates and intercompany accounts receivable                along with the elimination of AEP’s investments in subsidiary                companies.                                                                                                                                                                                                                                     |
| (c) | Total                Assets of $830 million for the Investments-Gas Operations segment                include                $349 million in affiliated accounts receivable related to the corporate                borrowing program and risk management contracts that are eliminated                in                consolidation. The majority of the remaining $481 million in assets                represents third party risk management contracts, margin deposits,                and                accounts receivable. |
| (d) | Total                Assets of $625 million for the Investments-UK Operations segment                include                $613 million in affiliated accounts receivable related mainly to                federal                income taxes that are eliminated in consolidation. The majority of                the                remaining $12 million in assets represents cash equivalents with                value-added tax receivables.                                                                                  |
| (e) | Total                Assets of $1.2 billion for the Investments-Gas Operations segment                include                $429 million in affiliated accounts receivable related to the corporate                borrowing program and risk management contracts that are eliminated                in                consolidation. The majority of the remaining $770 million in assets                represents third party risk management contracts, margin deposits,                and                accounts receivable. |
| (f) | Total                Assets of $632 million for the Investments-UK Operations segment                include                $613 million in affiliated accounts receivable related to federal                income                taxes that are eliminated in consolidation. The majority of the remaining                $19 million in assets represents cash equivalents with value-added                tax                receivables.                                                                                         |

**12.**
**FINANCING      ACTIVITIES**

***Long-term      Debt***

|                                                |   | **March                31,**     |   | **December                31,** |   |
|-----------------------------------------------------|--------|----------------------------------|--------|---------------------------------|--------|
| **Type                of Debt**                     |   | **2006**                         |   | **2005**                        |   |
|                                                |   | **(in                millions)** |   |
|                                                |   |                        |   |                       |   |
| Pollution                Control Bonds              |   | $                                | 1,985  |                            | $      | 1,935 |   |
| Senior                Unsecured Notes               |   |                             | 8,226  |                            |   | 8,226 |   |
| First                Mortgage Bonds                 |   |                             | 96     |                            |   | 196 |   |
| Defeased                First Mortgage Bonds (a)    |   |                             | 26     |                            |   | 26 |   |
| Notes                Payable                        |   |                             | 899    |                            |   | 904 |   |
| Securitization                Bonds                 |   |                             | 617    |                            |   | 648 |   |
| Notes                Payable To Trust               |   |                             | 113    |                            |   | 113 |   |
| Other                Long-Term Debt (b)             |   |                             | 238    |                            |   | 236 |   |
| Unamortized                Discount (net)           |   |                             | (58    | )                               |   | (58 | ) |
| **Total                Long-term Debt Outstanding** |   |                             | 12,142 |                            |   | 12,226 |   |
| **Less                Portion Due Within One Year** |   |                             | 1,061  |                            |   | 1,153 |   |
| **Long-term                Portion**                |   | $                                | 11,081 |                            | $      | 11,073 |   |

| (a)    | In                May 2004, we deposited cash and treasury securities with a trustee                to                defease all of TCC’s outstanding First Mortgage Bonds. The defeased TCC                First Mortgage Bonds had a balance of $18 million at both March 31,                2006                and December 31, 2005. Trust fund assets related to this obligation                of $2                million are included in Other Temporary Cash Investments at both                March 31,                2006 and December 31, 2005 and $21 million is included in Other Noncurrent                Assets in the Condensed Consolidated Balance Sheets at both March                31, 2006                and December 31, 2005. In December 2005, we deposited cash and treasury                securities with a trustee to defease the remaining TNC outstanding                First                Mortgage Bond. The defeased TNC First Mortgage Bond had a balance                of $8                million at both March 31, 2006 and December 31, 2005. Trust fund                assets                related to this obligation of $1 million at both March 31, 2006 and                December 31, 2005 are included in Other Temporary Cash Investments                and $9                million and $8 million are included in Other Noncurrent Assets in                the                Condensed Consolidated Balance Sheets at March 31, 2006 and December                31,                2005, respectively. Trust fund assets are restricted for exclusive                use in                funding the interest and principal due on the First Mortgage                Bonds. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (b)    | Pursuant                to the Nuclear Waste Policy Act of 1982, I&M (a nuclear licensee) has                an obligation with the United States Department of Energy for spent                nuclear fuel disposal. The obligation includes a one-time fee for                nuclear                fuel consumed prior to April 7, 1983. Trust fund assets of $266 million                and $264 million related to this obligation are included in Spent                Nuclear                Fuel and Decommissioning Trusts in the Condensed Consolidated Balance                Sheets at March 31, 2006 and December 31, 2005,                respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

| **Company**                        |   | **Type                of Debt**        |   | **Principal                Amount** |   | **Interest                Rate** |     | **Due                Date** |   |
|------------------------------------|--------|----------------------------------------|--------|-------------------------------------|--------|----------------------------------|----------|-----------------------------|--------|
|                               |   |                                   |   | **(in                millions)**    |   | **(%)**                          |     |                        |   |
| **Issuances:**                     |   |                                   |   |                                |   |                             |     |                        |   |
| APCo                               |   | Pollution                Control Bonds |   | $                                   | 50     |                             | Variable |                        | 2036   |   |
| SWEPCo                             |   | Notes                Payable           |   |                                | 6      |                             | Variable |                        | 2006   |   |
| **Total                Issuances** |   |                                   |   | $                                   | 56     | (a)                              |     |                        |   |   |

| (a) | Amount                indicated on statement of cash flows of $55 million is net of issuance                costs and unamortized premium or                discount. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Company**                                                                                 |   | **Type                of Debt**     |   | **Principal                Amount Paid** |   | **Interest                Rate** |     | **Due                Date** |   |
|---------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|------------------------------------------|--------|----------------------------------|----------|-----------------------------|--------|
|                                                                                        |   |                                |   | **(in                millions)**         |   | **(%)**                          |     |                        |   |
| **Retirements                and  ****                 Principal Payments:** |   |                                |   |                                     |   |                             |     |                        |   |
| APCo                                                                                        |   | First                Mortgage Bonds |   | $                                        | 100    |                             | 6.80     |                        | 2006   |   |
| OPCo                                                                                        |   | Notes                Payable        |   |                                     | 1      |                             | 6.81     |                        | 2008   |   |
| OPCo                                                                                        |   | Notes                Payable        |   |                                     | 3      |                             | 6.27     |                        | 2009   |   |
| SWEPCo                                                                                      |   | Notes                Payable        |   |                                     | 2      |                             | 4.47     |                        | 2011   |   |
| SWEPCo                                                                                      |   | Notes                Payable        |   |                                     | 1      |                             | Variable |                        | 2006   |   |
| SWEPCo                                                                                      |   | Notes                Payable        |   |                                     | 1      |                             | Variable |                        | 2008   |   |
| TCC                                                                                         |   | Securitization                Bonds |   |                                     | 31     |                             | 5.01     |                        | 2010   |   |
| **Non-Registrant:**                                                                         |   |                                |   |                                     |   |                             |     |                        |   |   |
| AEP                Subsidiaries                                                             |   | Notes                Payable        |   |                                     | 3      |                             | Variable |                        | 2017   |   |
| **Total                Retirements**                                                        |   |                                |   | $                                        | 142    |                             |     |                        |   |   |

***Credit      Facilities***

----

**AEP        GENERATING COMPANY**

----

**AEP        GENERATING COMPANY**

**MANAGEMENT’S        NARRATIVE FINANCIAL DISCUSSION AND ANALYSIS**

**Results        of Operations**

**Reconciliation        of First Quarter of 2005 to First Quarter of 2006 Net        Income**

**(in        millions)**

| **First                  Quarter of 2005**                        |   |   |   |   | $      | 2.5    |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |   |
| **Change                  in Gross Margin:**                      |   |   |   |   |   |   |   |
| Wholesale                  Sales                                  |   |   |   |   |   | 2.8    |   |
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                  Operation and Maintenance                  |   |   | (1.7   | )      |   |   |   |
| Taxes                  Other Than Income Taxes                    |   |   | (0.1   | )      |   |   |   |
| Interest                  Expense                                 |   |   | (0.1   | )      |   |   |   |
| **Total                  Change in Operating Expenses and Other** |   |   |   |   |   | (1.9   | )      |
|                                                              |   |   |   |   |   |   |   |
| Income                  Tax Expense                               |   |   |   |   |   | (0.5   | )      |
|                                                              |   |   |   |   |   |   |   |
| **First                  Quarter of 2006**                        |   |   |   |   | $      | 2.9    |   |

*Income        Taxes*

**Off-Balance        Sheet Arrangements**

**Summary        Obligation Information**

**Significant        Factors**

**Critical        Accounting Estimates**

----

**AEP        GENERATING COMPANY**

**CONDENSED        STATEMENTS OF INCOME**

**For        the Three Months Ended March 31, 2006 and 2005**

**(Unaudited)**

**(in        thousands)**

|                                            |   | **2006** |   | **2005** |   |
|-------------------------------------------------|--------|----------|--------|----------|--------|
|                                            |   |     |   |     |   |
| **OPERATING                  REVENUES**         |   | $        | 78,151 |     | $      | 66,546 |   |
|                                            |   |     |   |     |   |   |   |
| **EXPENSES**                                    |   |     |   |     |   |   |   |
| Fuel                  for Electric Generation   |   |     | 43,961 |     |   | 35,135 |   |
| Rent                  - Rockport Plant Unit 2   |   |     | 17,071 |     |   | 17,071 |   |
| Other                  Operation                |   |     | 3,095  |     |   | 2,447 |   |
| Maintenance                                     |   |     | 2,786  |     |   | 1,718 |   |
| Depreciation                  and Amortization  |   |     | 5,948  |     |   | 5,956 |   |
| Taxes                  Other Than Income Taxes  |   |     | 1,070  |     |   | 1,024 |   |
| **TOTAL**                                       |   |     | 73,931 |     |   | 63,351 |   |
|                                            |   |     |   |     |   |   |   |
| **OPERATING                  INCOME**           |   |     | 4,220  |     |   | 3,195 |   |
|                                            |   |     |   |     |   |   |   |
| Interest                  Expense               |   |     | (722   | )        |   | (634 | ) |
|                                            |   |     |   |     |   |   |   |
| **INCOME                  BEFORE INCOME TAXES** |   |     | 3,498  |     |   | 2,561 |   |
| Income                  Tax Expense             |   |     | 570    |     |   | 45 |   |
|                                            |   |     |   |     |   |   |   |
| **NET                  INCOME**                 |   | $        | 2,928  |     | $      | 2,516 |   |

**CONDENSED        STATEMENTS OF RETAINED EARNINGS**

**For        the Three Months Ended March 31, 2006 and 2005**

**(Unaudited)**

**(in        thousands)**

|                                                |   | **2006** |   | **2005** |   |
|-----------------------------------------------------|--------|----------|--------|----------|--------|
|                                                |   |     |   |     |   |
| **BALANCE                  AT BEGINNING OF PERIOD** |   | $        | 26,038 |     | $      | 24,237 |   |
|                                                |   |     |   |     |   |   |   |
| Net                  Income                         |   |     | 2,928  |     |   | 2,516 |   |
|                                                |   |     |   |     |   |   |   |
| Cash                  Dividends Declared            |   |     | 1,998  |     |   | 940 |   |
|                                                |   |     |   |     |   |   |   |
| **BALANCE                  AT END OF PERIOD**       |   | $        | 26,968 |     | $      | 25,813 |   |

*The        common stock of AEGCo is wholly-owned by AEP.*

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        GENERATING COMPANY**

**CONDENSED        BALANCE SHEETS**

**ASSETS**

**March        31, 2006 and December 31, 2005**

**(Unaudited)**

**(in        thousands)**

|                                                        |   | **2006**     |    | **2005**     |   |
|-------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **CURRENT                  ASSETS**                         |   |    |    |    |   |
| Accounts                  Receivable - Affiliated Companies |   | $            | 28,064  |         | $      | 29,671 |   |
| Fuel                                                        |   |         | 15,675  |         |   | 14,897 |   |
| Materials                  and Supplies                     |   |         | 7,283   |         |   | 7,017 |   |
| Accrued                  Tax Benefits                       |   |         | -       |         |   | 2,074 |   |
| Prepayments                  and Other                      |   |         | 44      |         |   | 9 |   |
| **TOTAL**                                                   |   |         | 51,066  |         |   | 53,668 |   |
|                                                        |   |         |    |         |   |   |   |
| **PROPERTY,                  PLANT AND EQUIPMENT**          |   |         |    |         |   |   |   |
| Electric                  - Production                      |   |         | 688,479 |         |   | 684,721 |   |
| Other                                                       |   |         | 2,240   |         |   | 2,369 |   |
| Construction                  Work in Progress              |   |         | 9,818   |         |   | 12,252 |   |
| **Total**                                                   |   |         | 700,537 |         |   | 699,342 |   |
| Accumulated                  Depreciation and Amortization  |   |         | 387,933 |         |   | 382,925 |   |
| **TOTAL                  - NET**                            |   |         | 312,604 |         |   | 316,417 |   |
|                                                        |   |         |    |         |   |   |   |
| Noncurrent                  Assets                          |   |         | 9,312   |         |   | 6,618 |   |
|                                                        |   |         |    |         |   |   |   |
| **TOTAL                  ASSETS**                           |   | $            | 372,982 |         | $      | 376,703 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        GENERATING COMPANY**

**CONDENSED        BALANCE SHEETS**

**LIABILITIES        AND SHAREHOLDER’S EQUITY**

**March        31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                                                                        |   | **2006**                            |    | **2005** |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|----------|--------|
| **CURRENT                  LIABILITIES**                                                                                    |   | **(in                  thousands)** |    |
| Advances                  from Affiliates                                                                                   |   | $                                   | 13,317  |     | $      | 35,131 |   |
| Accounts                  Payable:                                                                                          |   |                                |    |     |   |   |   |
| General                                                                                                                     |   |                                | 1,569   |     |   | 926 |   |
| Affiliated                  Companies                                                                                       |   |                                | 19,450  |     |   | 22,161 |   |
| Long-term                  Debt Due Within One Year                                                                         |   |                                | 44,831  |     |   | 44,828 |   |
| Accrued                  Taxes                                                                                              |   |                                | 7,160   |     |   | 3,055 |   |
| Accrued                  Rent - Rockport Plant Unit 2                                                                       |   |                                | 23,427  |     |   | 4,963 |   |
| Other                                                                                                                       |   |                                | 849     |     |   | 1,228 |   |
| **TOTAL**                                                                                                                   |   |                                | 110,603 |     |   | 112,292 |   |
|                                                                                                                        |   |                                |    |     |   |   |   |
| **NONCURRENT                  LIABILITIES**                                                                                 |   |                                |    |     |   |   |   |
| Deferred                  Income Taxes                                                                                      |   |                                | 22,659  |     |   | 23,617 |   |
| Asset                  Retirement Obligations                                                                               |   |                                | 1,397   |     |   | 1,370 |   |
| Regulatory                  Liabilities and Deferred Investment Tax Credits                                                 |   |                                | 82,107  |     |   | 82,689 |   |
| Deferred                  Gain on Sale and Leaseback - Rockport Plant Unit 2                                                |   |                                | 92,941  |     |   | 94,333 |   |
| Obligations                  Under Capital Leases                                                                           |   |                                | 11,873  |     |   | 11,930 |   |
| **TOTAL**                                                                                                                   |   |                                | 210,977 |     |   | 213,939 |   |
|                                                                                                                        |   |                                |    |     |   |   |   |
| **TOTAL                  LIABILITIES**                                                                                      |   |                                | 321,580 |     |   | 326,231 |   |
|                                                                                                                        |   |                                |    |     |   |   |   |
| Commitments                  and Contingencies (Note 5)                                                                     |   |                                |    |     |   |   |   |
|                                                                                                                        |   |                                |    |     |   |   |   |
| **COMMON                  SHAREHOLDER’S EQUITY**                                                                      |   |                                |    |     |   |   |   |
| Common                  Stock - $1,000 Par Value Per Share  Authorized                  and Outstanding - 1,000 Shares |   |                                | 1,000   |     |   | 1,000 |   |
| Paid-in                  Capital                                                                                            |   |                                | 23,434  |     |   | 23,434 |   |
| Retained                  Earnings                                                                                          |   |                                | 26,968  |     |   | 26,038 |   |
| **TOTAL**                                                                                                                   |   |                                | 51,402  |     |   | 50,472 |   |
|                                                                                                                        |   |                                |    |     |   |   |   |
| **TOTAL                  LIABILITIES AND SHAREHOLDER’S EQUITY**                                                       |   | $                                   | 372,982 |     | $      | 376,703 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        GENERATING COMPANY**

**CONDENSED        STATEMENTS OF CASH FLOWS**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                                                               |   | **2006**     |    | **2005**     |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                  ACTIVITIES**                                                                          |   |    |    |    |   |
| **Net                  Income**                                                                                    |   | $            | 2,928   |         | $      | 2,516 |   |
| **Adjustments                  for Noncash Items:**                                                                |   |         |    |         |   |   |   |
| Depreciation                  and Amortization                                                                     |   |         | 5,948   |         |   | 5,956 |   |
| Deferred                  Income Taxes                                                                             |   |         | (1,126  | )            |   | (1,192 | ) |
| Deferred                  Investment Tax Credits                                                                   |   |         | (827    | )            |   | (834 | ) |
| Amortization                  of Deferred Gain on Sale and Leaseback                  - Rockport Plant Unit 2 |   |         | (1,392  | )            |   | (1,392 | ) |
| Deferred                  Property Taxes                                                                           |   |         | (2,734  | )            |   | (2,884 | ) |
| Changes                  in Other Noncurrent Assets                                                                |   |         | (376    | )            |   | (233 | ) |
| Changes                  in Other Noncurrent Liabilities                                                           |   |         | 374     |         |   | 448 |   |
| **Changes                  in Components of Working Capital:**                                                     |   |         |    |         |   |   |   |
| Accounts                  Receivable                                                                               |   |         | 1,607   |         |   | (1,170 | ) |
| Fuel,                  Materials and Supplies                                                                      |   |         | (1,044  | )            |   | 5,416 |   |
| Accounts                  Payable                                                                                  |   |         | (2,068  | )            |   | (2,953 | ) |
| Accrued                  Taxes, Net                                                                                |   |         | 6,179   |         |   | 359 |   |
| Accrued                  Rent - Rockport Plant Unit 2                                                              |   |         | 18,464  |         |   | 18,464 |   |
| Other                  Current Assets                                                                              |   |         | (35     | )            |   | (35 | ) |
| Other                  Current Liabilities                                                                         |   |         | (379    | )            |   | (351 | ) |
| **Net                  Cash Flows From Operating Activities**                                                      |   |         | 25,519  |         |   | 22,115 |   |
|                                                                                                               |   |         |    |         |   |   |   |
| **INVESTING                  ACTIVITIES**                                                                          |   |         |    |         |   |   |   |
| Construction                  Expenditures                                                                         |   |         | (1,693  | )            |   | (1,379 | ) |
|                                                                                                               |   |         |    |         |   |   |   |
| **FINANCING                  ACTIVITIES**                                                                          |   |         |    |         |   |   |   |
| Change                  in Advances from Affiliates, Net                                                           |   |         | (21,814 | )            |   | (19,784 | ) |
| Principal                  Payments for Capital Lease Obligations                                                  |   |         | (14     | )            |   | (12 | ) |
| Dividends                  Paid                                                                                    |   |         | (1,998  | )            |   | (940 | ) |
| **Net                  Cash Flows Used For Financing Activities**                                                  |   |         | (23,826 | )            |   | (20,736 | ) |
|                                                                                                               |   |         |    |         |   |   |   |
| **Net                  Change in Cash and Cash Equivalents**                                                       |   |         | -       |         |   | - |   |
| **Cash                  and Cash Equivalents at Beginning of Period**                                              |   |         | -       |         |   | - |   |
| **Cash                  and Cash Equivalents at End of Period**                                                    |   | $            | -       |         | $      | - |   |

| **SUPPLEMENTAL                  DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                  paid for interest net of capitalized amounts was $1,109,000 and                  $1,021,000                  and for income taxes net of refunds was $0 and $5,439,000 in 2006                  and                  2005, respectively. Noncash capital lease acquisitions were $27,000                  and                  $18,000 in 2006 and 2005,                  respectively. |

*          See Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        GENERATING COMPANY**

**INDEX        TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT        SUBSIDIARIES**

|                                                     | **Footnote                  Reference** |
|----------------------------------------------------------|-----------------------------------------|
|                                                     |                                    |
| Significant                  Accounting Matters          | Note                  1                 |
| New                  Accounting Pronouncements           | Note                  2                 |
| Commitments                  and Contingencies           | Note                  5                 |
| Guarantees                                               | Note                  6                 |
| Company-wide                  Staffing and Budget Review | Note                  7                 |
| Business                  Segments                       | Note                  10                |
| Financing                  Activities                    | Note                  11                |

----

**AEP        TEXAS CENTRAL COMPANY AND SUBSIDIARY**

----

**AEP        TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**MANAGEMENT’S        FINANCIAL DISCUSSION AND ANALYSIS**

**Results        of Operations**

**Reconciliation        of First Quarter of 2005 to First Quarter of 2006 Net        Income**

**(in        millions)**

| **First                  Quarter of 2005**                        |   |   |   |   | $      | 1      |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Gross Margin:**                     |   |   |   |   |   |   |   |
| Texas                  Supply                                     |   |   | (44    | )      |   |   |   |
| Texas                  Wires                                      |   |   | 3      |   |   |   |   |
| Transmission                  Revenues                            |   |   | (4     | )      |   |   |   |
| Other                                                             |   |   | (3     | )      |   |   |   |
| **Total                  Change in Gross Margin**                 |   |   |   |   |   | (48    | )      |
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                  Operation and Maintenance                  |   |   | 31     |   |   |   |   |
| Depreciation                  and Amortization                    |   |   | (4     | )      |   |   |   |
| Taxes                  Other Than Income Taxes                    |   |   | 2      |   |   |   |   |
| Carrying                  Costs on Stranded Cost Recovery         |   |   | 24     |   |   |   |   |
| **Total                  Change in Operating Expenses and Other** |   |   |   |   |   | 53     |   |
|                                                              |   |   |   |   |   |   |   |
| Income                  Tax Expense                               |   |   |   |   |   | (2     | )      |
|                                                              |   |   |   |   |   |   |   |
| **First                  Quarter of 2006**                        |   |   |   |   | $      | 4      |   |

| · | Texas                  Supply margins decreased $44 million primarily due to lower nonaffiliated                  sales of $54 million and lower ERCOT energy sales of $4 million.                  These                  decreases were partially offset by lower fuel and purchased power                  expenses                  of $18 million. We substantially exited the generation market with                  the                  sale of STP in May 2005. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Texas                  Wires revenues increased $3 million primarily due to an increase                  in sales                  volumes resulting in large part from an increase in degree                  days.                                                                                                                                                                                                                                                      |
| · | Transmission                  Revenues decreased $4 million primarily due to lower ERCOT rates.                                                                                                                                                                                                                                                                                                                                                                           |
| · | Other                  revenues decreased $3 million primarily due to lower third party                  construction project revenues, primarily related to work performed                  for the                  Lower Colorado River Authority.                                                                                                                                                                                                                |

| · | Other                  Operation and Maintenance expenses decreased $31 million primarily                  due to                  an $8 million decrease in power plant operations, $10 million decrease                  in                  plant maintenance and the absence of $5 million in accretion expense                  related to the sale of STP. An additional $6 million decrease resulted                  from lower expenses related to construction activities performed                  for third                  parties, primarily the Lower Colorado River Authority.  |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Carrying                  Costs on Stranded Cost Recovery increased $24 million primarily                  due to a                  $27 million negative adjustment recorded in the first quarter of                  2005                  related to prior years**.**                                                                                                                                                                                                                                                                                                                          |

*Income        Taxes*

**Financial        Condition**

**Credit        Ratings**

|                                   | **Moody’s** |   | **S&P** |   | **Fitch** |
|----------------------------------------|-------------------|--------|-------------|--------|-----------|
|                                   |              |   |        |   |      |
| First                  Mortgage Bonds  | Baa1              |   | BBB         |   | A         |
| Senior                  Unsecured Debt | Baa2              |   | BBB         |   | A-        |

**Cash        Flow**

|                                                                  |   | **2006**                            |    | **2005** |   |
|-----------------------------------------------------------------------|--------|-------------------------------------|---------|----------|--------|
|                                                                  |   | **(in                  thousands)** |    |
| **Cash                  and Cash Equivalents at Beginning of Period** |   | $                                   | -       |     | $      | 26 |   |
| Net                  Cash Flows From (Used For):                      |   |                                |    |     |   |   |   |
| Operating                  Activities                                 |   |                                | 45,728  |     |   | (118,918 | ) |
| Investing                  Activities                                 |   |                                | (57,795 | )        |   | 1,716 |   |
| Financing                  Activities                                 |   |                                | 12,067  |     |   | 118,185 |   |
| Net                  Increase in Cash and Cash Equivalents            |   |                                | -       |     |   | 983 |   |
| **Cash                  and Cash Equivalents at End of Period**       |   | $                                   | -       |     | $      | 1,009 |   |

*Operating        Activities*

*Investing        Activities*

*Financing        Activities*

**Financing        Activity**

|                                      |   | **Principal****Amount** |                                | **Interest** |     | **Due** |
|-------------------------------------------|--------|-------------------------|-------------------------------------|--------------|----------|---------|
| **Type                  of Debt**         |   |                    | **Rate**                            |         | **Date** |
|                                      |   |                    | **(in                  thousands)** |         | **(%)**  |    |   |
|                                      |   |                    |                                |         |     |    |   |
| Notes                  Payable-Affiliated |   | $                       | 125,000                             |         | 5.14     |    | 2007 |

|                                  |   | **Principal****Amount** |                                | **Interest** |     | **Due** |
|---------------------------------------|--------|-------------------------|-------------------------------------|--------------|----------|---------|
| **Type                  of Debt**     |   |                    | **Rate**                            |         | **Date** |
|                                  |   |                    | **(in                  thousands)** |         | **(%)**  |    |   |
|                                  |   |                    |                                |         |     |    |   |
| Securitization                  Bonds |   | $                       | 30,641                              |         | 5.01     |    | 2010 |

**Liquidity**

**Summary        Obligation Information**

**Significant        Factors**

***Texas        Restructuring***

|                                                                                                           |   | **(in                  millions)** |   |
|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
| Stranded                  Generation Plant Costs                                                               |   | $                                  | 969    |   |
| Net                  Generation-related Regulatory Asset                                                       |   |                               | 249    |   |
| Excess                  Earnings                                                                               |   |                               | (49    | ) |
| **Recorded                  Net Stranded Generation Plant Costs**                                              |   |                               | 1,169  |   |
| Recorded                  Debt Carrying Costs on Recorded Net Stranded Generation Plant                  Costs |   |                               | 284    |   |
| **Recorded                  Securitizable True-up Regulatory Asset**                                           |   |                               | 1,453  |   |
| Unrecorded                  But Recoverable Equity Carrying Costs                                              |   |                               | 212    |   |
| Unrecorded                  Estimated April 2006 - August 2006 Debt Carrying Costs                             |   |                               | 40     |   |
| Unrecorded                  Securitization Issuance Costs                                                      |   |                               | 24     |   |
| Unrecorded                  Excess Earnings, Related Return and Other                                          |   |                               | 75     |   |
| **Securitization                  Request**                                                                    |   | $                                  | 1,804  |   |

|                                                                           |   | **(in                  millions)** |   |
|--------------------------------------------------------------------------------|--------|------------------------------------|--------|
| Wholesale                  Capacity Auction True-up                            |   | $                                  | 61     |   |
| Carrying                  Costs on Wholesale Capacity Auction True-up          |   |                               | 17     |   |
| Retail                  Clawback                                               |   |                               | (61    | ) |
| Deferred                  Over-recovered Fuel Balance                          |   |                               | (177   | ) |
| **Recorded                  Net Regulatory Liabilities - Other True-up Items** |   |                               | (160   | ) |
| ADFIT                  Benefit                                                 |   |                               | (328   | ) |
| Unrecorded                  Carrying Costs and Other                           |   |                               | (3     | ) |
| **Estimated                  CTC Request**                                     |   | $                                  | (491   | ) |

***Removal        from CSW Operating Agreement and SIA***

***Litigation        and Regulatory Activity***

**Critical        Accounting Estimates**

----

**QUANTITATIVE        AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT        ACTIVITIES**

**Market        Risks**

**MTM        Risk Management Contract Net Assets**

**Reconciliation        of MTM Risk Management Contracts to**

**Condensed        Consolidated Balance Sheet**

**As        of March 31, 2006**

**(in        thousands)**

|                                                           |   | **MTM                  Risk Management Contracts** |   | **Cash                  Flow Hedges** |   | **Total** |   |
|----------------------------------------------------------------|--------|----------------------------------------------------|--------|---------------------------------------|--------|-----------|--------|
| Current                  Assets                                |   | $                                                  | 536    |                                  | $      | 84        |   | $ | 620 |   |
| Noncurrent                  Assets                             |   |                                               | 536    |                                  |   | 5         |   |   | 541 |   |
| **Total                  MTM Derivative Contract Assets**      |   |                                               | 1,072  |                                  |   | 89        |   |   | 1,161 |   |
|                                                           |   |                                               |   |                                  |   |      |   |   |   |   |
| Current                  Liabilities                           |   |                                               | (455   | )                                     |   | (31       | )      |   | (486 | ) |
| Noncurrent                  Liabilities                        |   |                                               | (316   | )                                     |   | (3        | )      |   | (319 | ) |
| **Total                  MTM Derivative Contract Liabilities** |   |                                               | (771   | )                                     |   | (34       | )      |   | (805 | ) |
|                                                           |   |                                               |   |                                  |   |      |   |   |   |   |
| **Total                  MTM Derivative Contract Net Assets**  |   | $                                                  | 301    |                                  | $      | 55        |   | $ | 356 |   |

**MTM        Risk Management Contract Net Assets**

**Three        Months Ended March 31, 2006**

**(in        thousands)**

| **Total                  MTM Risk Management Contract Net Assets at December 31,                  2005**                                           |   | $      | 5,426  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                  Loss from Contracts Realized/Settled During the Period and Entered                  in a                  Prior Period     |   |   | (944   | )      |
| Fair                  Value of New Contracts at Inception When Entered During the Period                  (a)                                      |   |   | 2      |   |
| Net                  Option Premiums Paid/(Received) for Unexercised or Unexpired Option                  Contracts Entered During the Period |   |   | (7     | )      |
| Changes                  in Fair Value Due to Valuation Methodology Changes on Forward                  Contracts                                  |   |   | 5      |   |
| Changes                  in Fair Value Due to Market Fluctuations During the Period                  (b)                                           |   |   | (4,181 | )      |
| Changes                  in Fair Value Allocated to Regulated Jurisdictions (c)                                                                    |   |   | -      |   |
| **Total                  MTM Risk Management Contract Net Assets**                                                                                 |   |   | 301    |   |
| Net                  Cash Flow Hedge Contracts                                                                                                     |   |   | 55     |   |
| **Total                  MTM Risk Management Contract Net Assets at March 31,                  2006**                                              |   | $      | 356    |   |

| (a) | Most                  of the fair value comes from longer term fixed price contracts                  with                  customers that seek to limit their risk against fluctuating energy                  prices.                  Inception value is only recorded if observable market data can                  be obtained                  for valuation inputs for the entire contract term. The contract                  prices are                  valued against market curves associated with the delivery location                  and                  delivery term. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                  fluctuations are attributable to various factors such as supply/demand,                  weather, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (c) | “Changes                  in Fair Value Allocated to Regulated Jurisdictions” relates to the net                  gains (losses) of those contracts that are not reflected in the                  Condensed                  Consolidated Statements of Income. These net gains (losses) are                  recorded                  as regulatory liabilities/assets for those subsidiaries that operate                  in                  regulated jurisdictions.                                                                                                    |

**Maturity        and Source of Fair Value of MTM Risk Management Contract Net        Assets**

| · | The                  method of measuring fair value used in determining the carrying                  amount of                  our total MTM asset or liability (external sources or modeled                  internally). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                  maturity, by year, of our net assets/liabilities giving an indication                  of                  when these MTM amounts will settle and generate                  cash.                       |

**Maturity        and Source of Fair Value of MTM**

**Risk        Management Contract Net Assets**

**Fair        Value of Contracts as of March 31, 2006**

**(in        thousands)**

|                                                                                                                            |   | **Remainder****2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **After****2010** |   | **Total** |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-----------|--------|
| Prices                  Actively Quoted - Exchange Traded                  Contracts                                       |   | $                     | 68     |     | $      | 14       |   | $        | 6      |     | $      | (1                | )      | $         | -      |   | $ | - |   | $ | 87 |   |
| Prices                  Provided by Other External Sources                  - OTC Broker  Quotes                  (a) |   |                  | 28     |     |   | 17       |   |     | 44     |     |   | 41                |   |      | -      |   |   | - |   |   | 130 |   |
| Prices                  Based on Models and Other Valuation                  Methods (b)                                        |   |                  | (26    | )        |   | 28       |   |     | 17     |     |   | 11                |   |      | 34     |   |   | 20 |   |   | 84 |   |
| **Total**                                                                                                                       |   | $                     | 70     |     | $      | 59       |   | $        | 67     |     | $      | 51                |   | $         | 34     |   | $ | 20 |   | $ | 301 |   |

| (a) | “Prices                  Provided by Other External Sources - OTC Broker Quotes” reflects                  information obtained from over-the-counter brokers, industry services,                  or                  multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Prices                  Based on Models and Other Valuation Methods” is used in absence of pricing                  information from external sources. Modeled information is derived                  using                  valuation models developed by the reporting entity, reflecting                  when                  appropriate, option pricing theory, discounted cash flow concepts,                  valuation adjustments, etc. and may require projection of prices                  for                  underlying commodities beyond the period that prices are available                  from                  third-party sources. In addition, where external pricing information                  or                  market liquidity are limited, such valuations are classified as                  modeled.                  The determination of the point at which a market is no longer liquid                  for                  placing it in the modeled category varies by                  market. |

**Cash        Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)        on        the Condensed Consolidated Balance Sheet**

**Total        Accumulated Other Comprehensive Income (Loss) Activity**

**Three        Months Ended March 31, 2006**

**(in        thousands)**

|                                                                                          |   | **Power** |   |
|-----------------------------------------------------------------------------------------------|--------|-----------|--------|
| **Beginning                  Balance in AOCI December 31, 2005**                              |   | $         | (224   | ) |
| Changes                  in Fair Value                                                        |   |      | 255    |   |
| Reclassifications                  from AOCI to Net Income for Cash  Flow Hedges Settled |   |      | 7      |   |
| **Ending                  Balance in AOCI March 31, 2006**                                    |   | $         | 38     |   |

**Credit        Risk**

**VaR        Associated with Risk Management Contracts**

| **Three                  Months Ended****March                  31, 2006** |   |     |   |        | **Twelve                  Months Ended****December                  31, 2005** |
|----------------------------------------------------------------------------|--------|----------|--------|-------------|--------------------------------------------------------------------------------|
| **(in                  thousands)**                                        |   |     |   |        | **(in                  thousands)**                                            |
| **End**                                                                    |   | **High** |   | **Average** |                                                                           | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $5                                                                         |   | $11      |   | $6          |                                                                           | $3 |   |   |   |   | $111 |   | $184 |   | $88 |   | $32 |

**VaR        Associated with Debt Outstanding**

----

**AEP        TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**CONDENSED        CONSOLIDATED STATEMENTS OF INCOME**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                 |   | **2006** |    | **2005** |   |
|----------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **REVENUES**                                                         |   |     |    |     |   |
| Electric                  Generation, Transmission and Distribution  |   | $        | 123,211 |     | $      | 182,147 |   |
| Sales                  to AEP Affiliates                             |   |     | 1,598   |     |   | 4,964 |   |
| Other                  - Nonaffiliated                               |   |     | 10,479  |     |   | 14,246 |   |
| **TOTAL**                                                            |   |     | 135,288 |     |   | 201,357 |   |
|                                                                 |   |     |    |     |   |   |   |
| **EXPENSES**                                                         |   |     |    |     |   |   |   |
| Fuel                  and Other Consumables for Electric Generation  |   |     | 1,726   |     |   | 6,098 |   |
| Purchased                  Electricity for Resale                    |   |     | 1,680   |     |   | 15,370 |   |
| Other                  Operation                                     |   |     | 58,927  |     |   | 80,749 |   |
| Maintenance                                                          |   |     | 7,789   |     |   | 17,039 |   |
| Depreciation                  and Amortization                       |   |     | 33,335  |     |   | 29,286 |   |
| Taxes                  Other Than Income Taxes                       |   |     | 20,363  |     |   | 22,531 |   |
| **TOTAL**                                                            |   |     | 123,820 |     |   | 171,073 |   |
|                                                                 |   |     |    |     |   |   |   |
| **OPERATING                  INCOME**                                |   |     | 11,468  |     |   | 30,284 |   |
|                                                                 |   |     |    |     |   |   |   |
| **Other                  Income (Expense):**                         |   |     |    |     |   |   |   |
| Interest                  Income                                     |   |     | 505     |     |   | 1,498 |   |
| Carrying                  Costs Income (Expense)                     |   |     | 19,423  |     |   | (5,141 | ) |
| Allowance                  for Equity Funds Used During Construction |   |     | 373     |     |   | 551 |   |
| Interest                  Expense                                    |   |     | (26,773 | )        |   | (27,079 | ) |
|                                                                 |   |     |    |     |   |   |   |
| **INCOME                  BEFORE INCOME TAXES**                      |   |     | 4,996   |     |   | 113 |   |
|                                                                 |   |     |    |     |   |   |   |
| Income                  Tax Expense (Credit)                         |   |     | 1,223   |     |   | (1,024 | ) |
|                                                                 |   |     |    |     |   |   |   |
| **NET                  INCOME**                                      |   |     | 3,773   |     |   | 1,137 |   |
|                                                                 |   |     |    |     |   |   |   |
| Preferred                  Stock Dividend Requirements               |   |     | 60      |     |   | 60 |   |
|                                                                 |   |     |    |     |   |   |   |
| **EARNINGS                  APPLICABLE TO COMMON STOCK**             |   | $        | 3,713   |     | $      | 1,077 |   |

*The        common stock of TCC is owned by a wholly-owned subsidiary of        AEP.*

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**CONDENSED        CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S**

**EQUITY        AND COMPREHENSIVE INCOME (LOSS)**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                                     |   | **Common                  Stock** |   | **Paid-in                  Capital** |   | **Retained                  Earnings** |   | **Accumulated                  Other Comprehensive Income (Loss)** |      | **Total**    |   |
|------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|--------------------------------------|--------|----------------------------------------|--------|--------------------------------------------------------------------|-----------|--------------|--------|
|                                                                                     |   |                         |   |                            |   |                              |   |                                                          |      |    |   |
| **DECEMBER                  31, 2004**                                                   |   | $                                 | 55,292 |                                 | $      | 132,606                                |   | $                                                                  | 1,084,904 |         | $      | (4,159 | ) | $ | 1,268,643 |   |
|                                                                                     |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| Preferred                  Stock Dividends                                               |   |                              |   |                                 |   |                                   |   |                                                               | (60       | )            |   |   |   |   | (60 | ) |
| **TOTAL**                                                                                |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   | 1,268,583 |   |
|                                                                                     |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| **COMPREHENSIVE                  LOSS**                                                  |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| **Other                  Comprehensive Loss, Net of Taxes:**                             |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| Cash                  Flow Hedges, Net of Tax of $2,335                                  |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   | (4,336 | ) |   | (4,336 | ) |
| **NET                  INCOME**                                                          |   |                              |   |                                 |   |                                   |   |                                                               | 1,137     |         |   |   |   |   | 1,137 |   |
| **TOTAL                  COMPREHENSIVE LOSS**                                            |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   | (3,199 | ) |
|                                                                                     |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| **MARCH                  31, 2005**                                                      |   | $                                 | 55,292 |                                 | $      | 132,606                                |   | $                                                                  | 1,085,981 |         | $      | (8,495 | ) | $ | 1,265,384 |   |
|                                                                                     |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| **DECEMBER                  31, 2005**                                                   |   | $                                 | 55,292 |                                 | $      | 132,606                                |   | $                                                                  | 760,884   |         | $      | (1,152 | ) | $ | 947,630 |   |
|                                                                                     |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| Preferred                  Stock Dividends                                               |   |                              |   |                                 |   |                                   |   |                                                               | (60       | )            |   |   |   |   | (60 | ) |
| **TOTAL**                                                                                |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   | 947,570 |   |
|                                                                                     |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                                                |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| **Other                  Comprehensive Income,**** Net                  of Taxes:** |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| Cash                  Flow Hedges, Net of Tax of $141                                    |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   | 262 |   |   | 262 |   |
| **NET                  INCOME**                                                          |   |                              |   |                                 |   |                                   |   |                                                               | 3,773     |         |   |   |   |   | 3,773 |   |
| **TOTAL                  COMPREHENSIVE INCOME**                                          |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   | 4,035 |   |
|                                                                                     |   |                              |   |                                 |   |                                   |   |                                                               |      |         |   |   |   |   |   |   |
| **MARCH                  31, 2006**                                                      |   | $                                 | 55,292 |                                 | $      | 132,606                                |   | $                                                                  | 764,597   |         | $      | (890 | ) | $ | 951,605 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**March        31, 2006 and December 31, 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                |   | **2006**     |      | **2005**     |   |
|---------------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **CURRENT                  ASSETS**                                 |   |    |      |    |   |
| Cash                  and Cash Equivalents                          |   | $            | -         |         | $      | - |   |
| Other                  Cash Deposits                                |   |         | 36,417    |         |   | 66,153 |   |
| Advances                  to Affiliates                             |   |         | 32,101    |         |   | - |   |
| Accounts                  Receivable:                               |   |         |      |         |   |   |   |
| Customers                                                           |   |         | 93,123    |         |   | 209,957 |   |
| Affiliated                  Companies                               |   |         | 22,304    |         |   | 23,486 |   |
| Accrued                  Unbilled Revenues                          |   |         | 22,488    |         |   | 25,606 |   |
| Allowance                  for Uncollectible Accounts               |   |         | (376      | )            |   | (143 | ) |
| Total                  Accounts Receivable                          |   |         | 137,539   |         |   | 258,906 |   |
| Unbilled                  Construction Costs                        |   |         | 19,784    |         |   | 19,440 |   |
| Materials                  and Supplies                             |   |         | 16,237    |         |   | 13,897 |   |
| Risk                  Management Assets                             |   |         | 620       |         |   | 14,311 |   |
| Prepayments                  and Other                              |   |         | 2,259     |         |   | 5,231 |   |
| **TOTAL**                                                           |   |         | 244,957   |         |   | 377,938 |   |
|                                                                |   |         |      |         |   |   |   |
| **PROPERTY,                  PLANT AND EQUIPMENT**                  |   |         |      |         |   |   |   |
| Electric:                                                           |   |         |      |         |   |   |   |
| Transmission                                                        |   |         | 827,837   |         |   | 817,351 |   |
| Distribution                                                        |   |         | 1,506,415 |         |   | 1,476,683 |   |
| Other                                                               |   |         | 227,411   |         |   | 233,361 |   |
| Construction                  Work in Progress                      |   |         | 133,785   |         |   | 129,800 |   |
| **Total**                                                           |   |         | 2,695,448 |         |   | 2,657,195 |   |
| Accumulated                  Depreciation and Amortization          |   |         | 629,538   |         |   | 636,078 |   |
| **TOTAL                  - NET**                                    |   |         | 2,065,910 |         |   | 2,021,117 |   |
|                                                                |   |         |      |         |   |   |   |
| **OTHER                  NONCURRENT ASSETS**                        |   |         |      |         |   |   |   |
| Regulatory                  Assets                                  |   |         | 1,698,100 |         |   | 1,688,787 |   |
| Securitized                  Transition Assets                      |   |         | 582,513   |         |   | 593,401 |   |
| Long-term                  Risk Management Assets                   |   |         | 541       |         |   | 11,609 |   |
| Employee                  Benefits and Pension Assets               |   |         | 114,004   |         |   | 114,733 |   |
| Deferred                  Charges and Other                         |   |         | 78,200    |         |   | 53,011 |   |
| **TOTAL**                                                           |   |         | 2,473,358 |         |   | 2,461,541 |   |
|                                                                |   |         |      |         |   |   |   |
| **Assets                  Held for Sale - Texas Generation Plants** |   |         | 44,435    |         |   | 44,316 |   |
|                                                                |   |         |      |         |   |   |   |
| **TOTAL                  ASSETS**                                   |   | $            | 4,828,660 |         | $      | 4,904,912 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

**LIABILITIES        AND SHAREHOLDERS’ EQUITY**

**March        31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                            |   | **2006**                            |      | **2005** |   |
|---------------------------------------------------------------------------------|--------|-------------------------------------|-----------|----------|--------|
| **CURRENT                  LIABILITIES**                                        |   | **(in                  thousands)** |      |
| Advances                  from Affiliates                                       |   | $                                   | -         |     | $      | 82,080 |   |
| Accounts                  Payable:                                              |   |                                |      |     |   |   |   |
| General                                                                         |   |                                | 67,644    |     |   | 82,666 |   |
| Affiliated                  Companies                                           |   |                                | 26,405    |     |   | 65,574 |   |
| Long-term                  Debt Due Within One Year - Nonaffiliated             |   |                                | 154,383   |     |   | 152,900 |   |
| Risk                  Management Liabilities                                    |   |                                | 486       |     |   | 13,024 |   |
| Accrued                  Taxes                                                  |   |                                | 61,420    |     |   | 54,566 |   |
| Accrued                  Interest                                               |   |                                | 16,345    |     |   | 32,497 |   |
| Other                                                                           |   |                                | 31,952    |     |   | 45,927 |   |
| **TOTAL**                                                                       |   |                                | 358,635   |     |   | 529,234 |   |
|                                                                            |   |                                |      |     |   |   |   |
| **NONCURRENT                  LIABILITIES**                                     |   |                                |      |     |   |   |   |
| Long-term                  Debt - Nonaffiliated                                 |   |                                | 1,518,525 |     |   | 1,550,596 |   |
| Long-term                  Debt - Affiliated                                    |   |                                | 275,000   |     |   | 150,000 |   |
| Long-term                  Risk Management Liabilities                          |   |                                | 319       |     |   | 7,857 |   |
| Deferred                  Income Taxes                                          |   |                                | 1,046,944 |     |   | 1,048,372 |   |
| Regulatory                  Liabilities and Deferred Investment Tax Credits     |   |                                | 658,887   |     |   | 652,143 |   |
| Deferred                  Credits and Other                                     |   |                                | 12,805    |     |   | 13,140 |   |
| **TOTAL**                                                                       |   |                                | 3,512,480 |     |   | 3,422,108 |   |
|                                                                            |   |                                |      |     |   |   |   |
| **TOTAL                  LIABILITIES**                                          |   |                                | 3,871,115 |     |   | 3,951,342 |   |
|                                                                            |   |                                |      |     |   |   |   |
| Cumulative                  Preferred Stock Not Subject to Mandatory Redemption |   |                                | 5,940     |     |   | 5,940 |   |
|                                                                            |   |                                |      |     |   |   |   |
| Commitments                  and Contingencies (Note 5)                         |   |                                |      |     |   |   |   |
|                                                                            |   |                                |      |     |   |   |   |
| **COMMON                  SHAREHOLDER’S EQUITY**                          |   |                                |      |     |   |   |   |
| Common                  Stock - $25 Par Value Per Share:                        |   |                                |      |     |   |   |   |
| Authorized                  - 12,000,000 Shares                                 |   |                                |      |     |   |   |   |
| Outstanding                  - 2,211,678 Shares                                 |   |                                | 55,292    |     |   | 55,292 |   |
| Paid-in                  Capital                                                |   |                                | 132,606   |     |   | 132,606 |   |
| Retained                  Earnings                                              |   |                                | 764,597   |     |   | 760,884 |   |
| Accumulated                  Other Comprehensive Income (Loss)                  |   |                                | (890      | )        |   | (1,152 | ) |
| **TOTAL**                                                                       |   |                                | 951,605   |     |   | 947,630 |   |
|                                                                            |   |                                |      |     |   |   |   |
| **TOTAL                  LIABILITIES AND SHAREHOLDERS’ EQUITY**           |   | $                                   | 4,828,660 |     | $      | 4,904,912 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                     |   | **2006**     |    | **2005**     |   |
|--------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                  ACTIVITIES**                                |   |    |    |    |   |
| **Net                  Income**                                          |   | $            | 3,773   |         | $      | 1,137 |   |
| **Adjustments                  for Noncash Items:**                      |   |         |    |         |   |   |   |
| Depreciation                  and Amortization                           |   |         | 33,335  |         |   | 29,286 |   |
| Accretion                  of Asset Retirement Obligations               |   |         | 18      |         |   | 4,529 |   |
| Deferred                  Income Taxes                                   |   |         | 2,928   |         |   | (5,045 | ) |
| Carrying                  Costs on Stranded Cost Recovery                |   |         | (19,423 | )            |   | 5,141 |   |
| Mark-to-Market                  of Risk Management Contracts             |   |         | 5,125   |         |   | 6,879 |   |
| Over/Under                  Fuel Recovery                                |   |         | -       |         |   | 2,900 |   |
| Deferred                  Property Taxes                                 |   |         | (25,755 | )            |   | (29,820 | ) |
| Change                  in Other Noncurrent Assets                       |   |         | (683    | )            |   | (7,892 | ) |
| Change                  in Other Noncurrent Liabilities                  |   |         | 1,380   |         |   | 4,898 |   |
| **Changes                  in Components of Working Capital:**           |   |         |    |         |   |   |   |
| Accounts                  Receivable, Net                                |   |         | 121,367 |         |   | 39,038 |   |
| Fuel,                  Materials and Supplies                            |   |         | (2,569  | )            |   | 98 |   |
| Accounts                  Payable                                        |   |         | (53,124 | )            |   | (25,008 | ) |
| Accrued                  Taxes, Net                                      |   |         | 6,854   |         |   | (117,785 | ) |
| Customer                  Deposits                                       |   |         | (6,514  | )            |   | (1,173 | ) |
| Accrued                  Interest                                        |   |         | (16,152 | )            |   | (21,638 | ) |
| Other                  Current Assets                                    |   |         | 2,629   |         |   | (1,879 | ) |
| Other                  Current Liabilities                               |   |         | (7,461  | )            |   | (2,584 | ) |
| **Net                  Cash Flows From (Used for) Operating Activities** |   |         | 45,728  |         |   | (118,918 | ) |
|                                                                     |   |         |    |         |   |   |   |
| **INVESTING                  ACTIVITIES**                                |   |         |    |         |   |   |   |
| Construction                  Expenditures                               |   |         | (58,645 | )            |   | (26,402 | ) |
| Change                  in Other Cash Deposits, Net                      |   |         | 29,736  |         |   | 31,541 |   |
| Change                  in Advances to Affiliates, Net                   |   |         | (32,101 | )            |   | - |   |
| Purchases                  of Investment Securities                      |   |         | -       |         |   | (26,872 | ) |
| Sales                  of Investment Securities                          |   |         | -       |         |   | 23,349 |   |
| Proceeds                  from Sale of Assets                            |   |         | 3,215   |         |   | - |   |
| Other                                                                    |   |         | -       |         |   | 100 |   |
| **Net                  Cash Flows From (Used For) Investing Activities** |   |         | (57,795 | )            |   | 1,716 |   |
|                                                                     |   |         |    |         |   |   |   |
| **FINANCING                  ACTIVITIES**                                |   |         |    |         |   |   |   |
| Issuance                  of Long-term Debt - Affiliated                 |   |         | 125,000 |         |   | - |   |
| Issuance                  of Long-term Debt - Nonaffiliated              |   |         | -       |         |   | 159,252 |   |
| Change                  in Advances from Affiliates, Net                 |   |         | (82,080 | )            |   | 238,486 |   |
| Retirement                  of Long-term Debt                            |   |         | (30,641 | )            |   | (279,386 | ) |
| Principal                  Payments for Capital Lease Obligations        |   |         | (152    | )            |   | (107 | ) |
| Dividends                  Paid on Cumulative Preferred Stock            |   |         | (60     | )            |   | (60 | ) |
| **Net                  Cash From Financing Activities**                  |   |         | 12,067  |         |   | 118,185 |   |
|                                                                     |   |         |    |         |   |   |   |
| **Net                  Increase in Cash and Cash Equivalents**           |   |         | -       |         |   | 983 |   |
| **Cash                  and Cash Equivalents at Beginning of Period**    |   |         | -       |         |   | 26 |   |
| **Cash                  and Cash Equivalents at End of Period**          |   | $            | -       |         | $      | 1,009 |   |

| **SUPPLEMENTAL                DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                  paid for interest net of capitalized amounts was $40,646,000 and                  $44,721,000 and for income taxes                  net of refunds                  was $485,000 and $132,960,000 in 2006 and 2005, respectively. Noncash                  capital lease acquisitions were $680,000 and $157,000 in 2006 and                  2005,                  respectively. Noncash construction expenditures included in Accounts                  Payable of $9,970,000 and $2,970,000 were outstanding as of March                  31, 2006                  and 2005, respectively. |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries*

----

**AEP        TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**INDEX        TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT        SUBSIDIARIES**

|                                                        | **Footnote                  Reference** |
|-------------------------------------------------------------|-----------------------------------------|
|                                                        |                                    |
| Significant                  Accounting Matters             | Note                  1                 |
| New                  Accounting Pronouncements              | Note                  2                 |
| Rate                  Matters                               | Note                  3                 |
| Customer                  Choice and Industry Restructuring | Note                  4                 |
| Commitments                  and Contingencies              | Note                  5                 |
| Guarantees                                                  | Note                  6                 |
| Company-wide                  Staffing and Budget Review    | Note                  7                 |
| Assets                  Held for Sale                       | Note                  8                 |
| Benefit                  Plans                              | Note                  9                 |
| Business                  Segments                          | Note                  10                |
| Financing                  Activities                       | Note                  11                |

----

**AEP        TEXAS NORTH COMPANY**

----

**AEP        TEXAS NORTH COMPANY**

**MANAGEMENT’S        NARRATIVE FINANCIAL DISCUSSION AND ANALYSIS**

**Results        of Operations**

**Reconciliation        of First Quarter of 2005 to First Quarter of 2006 Net        Income**

**(in        millions)**

| **First                  Quarter of 2005**                        |   |   |   |   | $      | 7      |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Gross Margin:**                     |   |   |   |   |   |   |   |
| Texas                  Supply                                     |   |   | (3     | )      |   |   |   |
| Off-system                  Sales                                 |   |   | 1      |   |   |   |   |
| Other                                                             |   |   | (39    | )      |   |   |   |
| **Total                  Change in Gross Margin**                 |   |   |   |   |   | (41    | )      |
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                  Operation and Maintenance                  |   |   | 34     |   |   |   |   |
| Interest                  Expense                                 |   |   | 1      |   |   |   |   |
| **Total                  Change in Operating Expenses and Other** |   |   |   |   |   | 35     |   |
|                                                              |   |   |   |   |   |   |   |
| Income                  Tax** **Expense                      |   |   |   |   |   | 3      |   |
|                                                              |   |   |   |   |   |   |   |
| **First                  Quarter of 2006**                        |   |   |   |   | $      | 4      |   |

| · | Texas                  Supply margins decreased $3 million primarily due to a $7 million                  decrease                  in dedicated ERCOT energy sales, offset by an increase of $1 million                  in                  provision for refund primarily due to the fuel reconciliation adjustment                  in 2005 and $3 million of lower fuel and purchased power                  cost. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Other                  revenues decreased $39 million primarily due to a $36 million decrease                  in                  revenue resulting from the completion of certain third party construction                  projects, primarily with the Lower Colorado River Authority.                                                                                                                         |

| · | Other                  Operation and Maintenance expenses decreased $34 million primarily                  due to                  lower expenses related to the completion of certain third party                  construction projects, primarily with the Lower Colorado River                  Authority, of $36 million offset by slightly increased maintenance                  expenses. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Income        Taxes*

**Financial        Condition**

**Credit        Ratings**

|                                   | **Moody’s** |   | **S&P** |   | **Fitch** |
|----------------------------------------|-------------------|--------|-------------|--------|-----------|
|                                   |              |   |        |   |      |
| First                  Mortgage Bonds  | A3                |   | BBB         |   | A         |
| Senior                  Unsecured Debt | Baa1              |   | BBB         |   | A-        |

**Financing        Activity**

**Liquidity**

**Summary        Obligation Information**

**Significant        Factors**

***Removal        from CSW Operating Agreement and SIA***

***Litigation        and Regulatory Activity***

**Critical        Accounting Estimates**

----

**QUANTITATIVE        AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT        ACTIVITIES**

**Market        Risks**

**MTM        Risk Management Contract Net Assets**

**Reconciliation        of MTM Risk Management Contracts to**

**Condensed        Balance Sheet**

**As        of March 31, 2006**

**(in        thousands)**

|                                                           |   | **MTM                  Risk Management Contracts** |   | **Cash                  Flow Hedges** |   | **Total** |   |
|----------------------------------------------------------------|--------|----------------------------------------------------|--------|---------------------------------------|--------|-----------|--------|
| Current                  Assets                                |   | $                                                  | 1,109  |                                  | $      | 173       |   | $ | 1,282 |   |
| Noncurrent                  Assets                             |   |                                               | 1,108  |                                  |   | 11        |   |   | 1,119 |   |
| **Total                  MTM Derivative Contract Assets**      |   |                                               | 2,217  |                                  |   | 184       |   |   | 2,401 |   |
|                                                           |   |                                               |   |                                  |   |      |   |   |   |   |
| Current                  Liabilities                           |   |                                               | (855   | )                                     |   | (64       | )      |   | (919 | ) |
| Noncurrent                  Liabilities                        |   |                                               | (653   | )                                     |   | (6        | )      |   | (659 | ) |
| **Total                  MTM Derivative Contract Liabilities** |   |                                               | (1,508 | )                                     |   | (70       | )      |   | (1,578 | ) |
|                                                           |   |                                               |   |                                  |   |      |   |   |   |   |
| **Total                  MTM Derivative Contract Net Assets**  |   | $                                                  | 709    |                                  | $      | 114       |   | $ | 823 |   |

**MTM        Risk Management Contract Net Assets**

**Three        Months Ended March 31, 2006**

**(in        thousands)**

| **Total                  MTM Risk Management Contract Net Assets at December 31,                  2005**                                       |   | $      | 2,698  |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                  Loss from Contracts Realized/Settled During the Period and Entered                  in a                  Prior Period |   |   | (395   | )      |
| Fair                  Value of New Contracts at Inception When Entered During the Period                  (a)                                  |   |   | 4      |   |
| Net                  Option Premiums Paid/(Received) for Unexercised or Unexpired Option                  Contracts Entered During the Period  |   |   | (13    | )      |
| Change                  in Fair Value Due to Valuation Methodology Changes on Forward                  Contracts                               |   |   | 11     |   |
| Changes                  in Fair Value Due to Market Fluctuations During the Period                  (b)                                       |   |   | (1,596 | )      |
| Changes                  in Fair Value Allocated to Regulated Jurisdictions (c)                                                                |   |   | -      |   |
| **Total                  MTM Risk Management Contract Net Assets**                                                                             |   |   | 709    |   |
| Net                  Cash Flow Hedge Contracts                                                                                                 |   |   | 114    |   |
| **Total                  MTM Risk Management Contract Net Assets at March 31,                  2006**                                          |   | $      | 823    |   |

| (a) | Most                  of the fair value comes from longer term fixed price contracts                  with                  customers that seek to limit their risk against fluctuating energy                  prices.                  Inception value is only recorded if observable market data can                  be obtained                  for valuation inputs for the entire contract term. The contract                  prices are                  valued against market curves associated with the delivery location                  and                  delivery term. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                  fluctuations are attributable to various factors such as supply/demand,                  weather, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (c) | “Changes                  in Fair Value Allocated to Regulated Jurisdictions” relates to the net                  gains (losses) of those contracts that are not reflected in the                  Condensed                  Statements of Income. These net gains (losses) are recorded as                  regulatory                  liabilities/assets for those subsidiaries that operate in regulated                  jurisdictions.                                                                                                                                  |

**Maturity        and Source of Fair Value of MTM Risk Management Contract Net        Assets**

| · | The                  method of measuring fair value used in determining the carrying                  amount of                  our total MTM asset or liability (external sources or modeled                  internally). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                  maturity, by year, of our net assets/liabilities giving an indication                  of                  when these MTM amounts will settle and generate                  cash.                       |

**Maturity        and Source of Fair Value of MTM**

**Risk        Management Contract Net Assets**

**Fair        Value of Contracts as of March 31, 2006**

**(in        thousands)**

|                                                                                                                                   |   | **Remainder                  2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **After****2010** |   | **Total** |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-----------|--------|
| Prices                  Actively Quoted - Exchange Traded                  Contracts                                              |   | $                                   | 141    |     | $      | 29       |   | $        | 13     |     | $      | (1                | )      | $         | -      |   | $ | - |   | $ | 182 |   |
| Prices                  Provided by Other External Sources                  - OTC Broker                     Quotes (a) |   |                                | 58     |     |   | 35       |   |     | 91     |     |   | 85                |   |      | -      |   |   | - |   |   | 269 |   |
| Prices                  Based on Models and Other Valuation                  Methods (b)                                               |   |                                | 30     |     |   | 57       |   |     | 36     |     |   | 22                |   |      | 71     |   |   | 42 |   |   | 258 |   |
| **Total**                                                                                                                              |   | $                                   | 229    |     | $      | 121      |   | $        | 140    |     | $      | 106               |   | $         | 71     |   | $ | 42 |   | $ | 709 |   |

| (a) | “Prices                  Provided by Other External Sources - OTC Broker Quotes” reflects                  information obtained from over-the-counter brokers, industry services,                  or                  multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Prices                  Based on Models and Other Valuation Methods” is used in absence of pricing                  information from external sources. Modeled information is derived                  using                  valuation models developed by the reporting entity, reflecting                  when                  appropriate, option pricing theory, discounted cash flow concepts,                  valuation adjustments, etc. and may require projection of prices                  for                  underlying commodities beyond the period that prices are available                  from                  third-party sources. In addition, where external pricing information                  or                  market liquidity are limited, such valuations are classified as                  modeled.                  The determination of the point at which a market is no longer liquid                  for                  placing it in the modeled category varies by                  market. |

**Cash        Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)        on        the Condensed Balance Sheet**

**Total        Accumulated Other Comprehensive Income (Loss) Activity**

**Three        Months Ended March 31, 2006**

**(in        thousands)**

|                                                                                    |   | **Power** |   |
|-----------------------------------------------------------------------------------------|--------|-----------|--------|
| **Beginning                  Balance in AOCI December 31, 2005**                        |   | $         | (111   | ) |
| Changes                  in Fair Value                                                  |   |      | 176    |   |
| Reclassifications                  from AOCI to Net Income for Cash Flow Hedges Settled |   |      | 13     |   |
| **Ending                  Balance in AOCI March 31, 2006**                              |   | $         | 78     |   |

**Credit        Risk**

**VaR        Associated with Risk Management Contracts**

| **Three                  Months Ended****March                  31, 2006** |   |     |   |        | **Twelve                  Months Ended****December                  31, 2005** |
|----------------------------------------------------------------------------|--------|----------|--------|-------------|--------------------------------------------------------------------------------|
| **(in                  thousands)**                                        |   |     |   |        | **(in                  thousands)**                                            |
| **End**                                                                    |   | **High** |   | **Average** |                                                                           | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $10                                                                        |   | $23      |   | $13         |                                                                           | $6 |   |   |   |   | $55 |   | $92 |   | $44 |   | $16 |

**VaR        Associated with Debt Outstanding**

----

**AEP        TEXAS NORTH COMPANY**

**CONDENSED        STATEMENTS OF INCOME**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                 |   | **2006** |   | **2005** |   |
|----------------------------------------------------------------------|--------|----------|--------|----------|--------|
| **REVENUES**                                                         |   |     |   |     |   |
| Electric                  Generation, Transmission and Distribution  |   | $        | 68,825 |     | $      | 71,889 |   |
| Sales                  to AEP Affiliates                             |   |     | 6,025  |     |   | 11,290 |   |
| Other                                                                |   |     | (184   | )        |   | 35,728 |   |
| **TOTAL**                                                            |   |     | 74,666 |     |   | 118,907 |   |
|                                                                 |   |     |   |     |   |   |   |
| **EXPENSES**                                                         |   |     |   |     |   |   |   |
| Fuel                  and Other Consumables for Electric Generation  |   |     | 12,115 |     |   | 12,983 |   |
| Purchased                  Electricity for Resale                    |   |     | 14,396 |     |   | 16,360 |   |
| Other                  Operation                                     |   |     | 18,556 |     |   | 53,670 |   |
| Maintenance                                                          |   |     | 5,201  |     |   | 4,219 |   |
| Depreciation                  and Amortization                       |   |     | 10,223 |     |   | 10,155 |   |
| Taxes                  Other Than Income Taxes                       |   |     | 5,540  |     |   | 5,705 |   |
| **TOTAL**                                                            |   |     | 66,031 |     |   | 103,092 |   |
|                                                                 |   |     |   |     |   |   |   |
| **OPERATING                  INCOME**                                |   |     | 8,635  |     |   | 15,815 |   |
|                                                                 |   |     |   |     |   |   |   |
| **Other                  Income (Expense):**                         |   |     |   |     |   |   |   |
| Interest                  Income                                     |   |     | 219    |     |   | 256 |   |
| Allowance                  for Equity Funds Used During Construction |   |     | 382    |     |   | 73 |   |
| Interest                  Expense                                    |   |     | (4,362 | )        |   | (4,984 | ) |
|                                                                 |   |     |   |     |   |   |   |
| **INCOME                  BEFORE INCOME TAXES**                      |   |     | 4,874  |     |   | 11,160 |   |
|                                                                 |   |     |   |     |   |   |   |
| Income                  Tax Expense                                  |   |     | 1,040  |     |   | 3,766 |   |
|                                                                 |   |     |   |     |   |   |   |
| **NET                  INCOME**                                      |   |     | 3,834  |     |   | 7,394 |   |
|                                                                 |   |     |   |     |   |   |   |
| Preferred                  Stock Dividend Requirements               |   |     | 26     |     |   | 26 |   |
| Gain                  on Reacquired Preferred Stock                  |   |     | 2      |     |   | - |   |
|                                                                 |   |     |   |     |   |   |   |
| **EARNINGS                  APPLICABLE TO COMMON STOCK**             |   | $        | 3,810  |     | $      | 7,368 |   |

*The        *
*common        stock of TNC is owned by a wholly-owned subsidiary of AEP.*

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        TEXAS NORTH COMPANY**

**CONDENSED        STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S**

**EQUITY        AND COMPREHENSIVE INCOME (LOSS)**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                |   | **Common                  Stock** |    | **Paid-in                  Capital** |   | **Retained                  Earnings** |   | **Accumulated                  Other Comprehensive Income (Loss)** |    | **Total** |   |
|---------------------------------------------------------------------|--------|-----------------------------------|---------|--------------------------------------|--------|----------------------------------------|--------|--------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                  31, 2004**                              |   | $                                 | 137,214 |                                 | $      | 2,351                                  |   | $                                                                  | 170,984 |      | $      | (128 | ) | $ | 310,421 |   |
|                                                                |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| Common                  Stock Dividends                             |   |                              |    |                                 |   |                                   |   |                                                               | (9,427  | )         |   |   |   |   | (9,427 | ) |
| Preferred                  Stock Dividends                          |   |                              |    |                                 |   |                                   |   |                                                               | (26     | )         |   |   |   |   | (26 | ) |
| **TOTAL**                                                           |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   | 300,968 |   |
|                                                                |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                           |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **Other                  Comprehensive Loss, Net of Taxes:**        |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| Cash                  Flow Hedges, Net of Tax of $416               |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   | (774 | ) |   | (774 | ) |
| **NET                  INCOME**                                     |   |                              |    |                                 |   |                                   |   |                                                               | 7,394   |      |   |   |   |   | 7,394 |   |
| **TOTAL                  COMPREHENSIVE INCOME**                     |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   | 6,620 |   |
|                                                                |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **MARCH                  31, 2005**                                 |   | $                                 | 137,214 |                                 | $      | 2,351                                  |   | $                                                                  | 168,925 |      | $      | (902 | ) | $ | 307,588 |   |
|                                                                |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **DECEMBER                  31, 2005**                              |   | $                                 | 137,214 |                                 | $      | 2,351                                  |   | $                                                                  | 174,858 |      | $      | (504 | ) | $ | 313,919 |   |
|                                                                |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| Common                  Stock Dividends                             |   |                              |    |                                 |   |                                   |   |                                                               | (8,000  | )         |   |   |   |   | (8,000 | ) |
| Preferred                  Stock Dividends                          |   |                              |    |                                 |   |                                   |   |                                                               | (26     | )         |   |   |   |   | (26 | ) |
| Gain                  on Reacquired Preferred Stock                 |   |                              |    |                                 |   |                                   |   |                                                               | 2       |      |   |   |   |   | 2 |   |
| **TOTAL**                                                           |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   | 305,895 |   |
|                                                                |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                           |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **Other                  Comprehensive Income, Net of Taxes:** |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| Cash                  Flow Hedges, Net of Tax of $102               |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   | 189 |   |   | 189 |   |
| **NET                  INCOME**                                     |   |                              |    |                                 |   |                                   |   |                                                               | 3,834   |      |   |   |   |   | 3,834 |   |
| **TOTAL                  COMPREHENSIVE INCOME**                     |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   | 4,023 |   |
|                                                                |   |                              |    |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **MARCH                  31, 2006**                                 |   | $                                 | 137,214 |                                 | $      | 2,351                                  |   | $                                                                  | 170,668 |      | $      | (315 | ) | $ | 309,918 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        TEXAS NORTH COMPANY**

**CONDENSED        BALANCE SHEETS**

**ASSETS**

**March        31, 2006 and December 31, 2005**

**(in        thousands)**

**(Unaudited)**

|                                                       |   | **2006**     |      | **2005**     |   |
|------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **CURRENT                  ASSETS**                        |   |    |      |    |   |
| Cash                  and Cash Equivalents                 |   | $            | -         |         | $      | - |   |
| Advances                  to Affiliates                    |   |         | 3,046     |         |   | 34,286 |   |
| Accounts                  Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                  |   |         | 55,249    |         |   | 77,678 |   |
| Affiliated                  Companies                      |   |         | 12,340    |         |   | 26,149 |   |
| Accrued                  Unbilled Revenues                 |   |         | 4,423     |         |   | 5,016 |   |
| Allowance                  for Uncollectible Accounts      |   |         | (23       | )            |   | (18 | ) |
| Total                  Accounts Receivable                 |   |         | 71,989    |         |   | 108,825 |   |
| Fuel                                                       |   |         | 4,342     |         |   | 2,636 |   |
| Materials                  and Supplies                    |   |         | 7,308     |         |   | 6,858 |   |
| Risk                  Management Assets                    |   |         | 1,282     |         |   | 7,114 |   |
| Prepayments                  and Other                     |   |         | 2,736     |         |   | 5,204 |   |
| **TOTAL**                                                  |   |         | 90,703    |         |   | 164,923 |   |
|                                                       |   |         |      |         |   |   |   |
| **PROPERTY,                  PLANT AND EQUIPMENT**         |   |         |      |         |   |   |   |
| Electric:                                                  |   |         |      |         |   |   |   |
| Production                                                 |   |         | 289,505   |         |   | 288,934 |   |
| Transmission                                               |   |         | 294,733   |         |   | 289,029 |   |
| Distribution                                               |   |         | 497,005   |         |   | 492,878 |   |
| Other                                                      |   |         | 161,710   |         |   | 167,849 |   |
| Construction                  Work in Progress             |   |         | 51,030    |         |   | 46,424 |   |
| **Total**                                                  |   |         | 1,293,983 |         |   | 1,285,114 |   |
| Accumulated                  Depreciation and Amortization |   |         | 477,100   |         |   | 478,519 |   |
| **TOTAL                  - NET**                           |   |         | 816,883   |         |   | 806,595 |   |
|                                                       |   |         |      |         |   |   |   |
| **OTHER                  NONCURRENT ASSETS**               |   |         |      |         |   |   |   |
| Regulatory                  Assets                         |   |         | 9,432     |         |   | 9,787 |   |
| Long-term                  Risk Management Assets          |   |         | 1,119     |         |   | 5,772 |   |
| Employee                  Benefits and Pension Assets      |   |         | 45,996    |         |   | 46,289 |   |
| Deferred                  Charges and Other                |   |         | 23,067    |         |   | 10,468 |   |
| **TOTAL**                                                  |   |         | 79,614    |         |   | 72,316 |   |
|                                                       |   |         |      |         |   |   |   |
| **TOTAL                  ASSETS**                          |   | $            | 987,200   |         | $      | 1,043,834 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        TEXAS NORTH COMPANY**

**CONDENSED        BALANCE SHEETS**

**LIABILITIES        AND **
**SHAREHOLDERS’**
**        EQUITY**

**March        31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                            |   | **2006**                            |    | **2005** |   |
|---------------------------------------------------------------------------------|--------|-------------------------------------|---------|----------|--------|
| **CURRENT                  LIABILITIES**                                        |   | **(in                  thousands)** |    |
| Accounts                  Payable:                                              |   |                                |    |     |   |   |   |
| General                                                                         |   | $                                   | 28,806  |     | $      | 19,739 |   |
| Affiliated                  Companies                                           |   |                                | 38,137  |     |   | 84,923 |   |
| Risk                  Management Liabilities                                    |   |                                | 919     |     |   | 6,475 |   |
| Accrued                  Taxes                                                  |   |                                | 25,271  |     |   | 21,212 |   |
| Other                                                                           |   |                                | 10,304  |     |   | 21,050 |   |
| **TOTAL**                                                                       |   |                                | 103,437 |     |   | 153,399 |   |
|                                                                            |   |                                |    |     |   |   |   |
| **NONCURRENT                  LIABILITIES**                                     |   |                                |    |     |   |   |   |
| Long-term                  Debt - Nonaffiliated                                 |   |                                | 276,868 |     |   | 276,845 |   |
| Long-term                  Risk Management Liabilities                          |   |                                | 659     |     |   | 3,906 |   |
| Deferred                  Income Taxes                                          |   |                                | 131,683 |     |   | 132,335 |   |
| Regulatory                  Liabilities and Deferred Investment Tax Credits     |   |                                | 141,102 |     |   | 139,732 |   |
| Deferred                  Credits and Other                                     |   |                                | 21,184  |     |   | 21,341 |   |
| **TOTAL**                                                                       |   |                                | 571,496 |     |   | 574,159 |   |
|                                                                            |   |                                |    |     |   |   |   |
| **TOTAL                  LIABILITIES**                                          |   |                                | 674,933 |     |   | 727,558 |   |
|                                                                            |   |                                |    |     |   |   |   |
| Cumulative                  Preferred Stock Not Subject to Mandatory Redemption |   |                                | 2,349   |     |   | 2,357 |   |
|                                                                            |   |                                |    |     |   |   |   |
| Commitments                  and Contingencies (Note 5)                         |   |                                |    |     |   |   |   |
|                                                                            |   |                                |    |     |   |   |   |
| **COMMON                  SHAREHOLDER’S EQUITY**                          |   |                                |    |     |   |   |   |
| Common                  Stock - $25 Par Value Per Share:                        |   |                                |    |     |   |   |   |
| Authorized                  - 7,800,000 Shares                                  |   |                                |    |     |   |   |   |
| Outstanding                  - 5,488,560 Shares                                 |   |                                | 137,214 |     |   | 137,214 |   |
| Paid-in                  Capital                                                |   |                                | 2,351   |     |   | 2,351 |   |
| Retained                  Earnings                                              |   |                                | 170,668 |     |   | 174,858 |   |
| Accumulated                  Other Comprehensive Income (Loss)                  |   |                                | (315    | )        |   | (504 | ) |
| **TOTAL**                                                                       |   |                                | 309,918 |     |   | 313,919 |   |
|                                                                            |   |                                |    |     |   |   |   |
| **TOTAL                  LIABILITIES AND SHAREHOLDERS’ EQUITY**           |   | $                                   | 987,200 |     | $      | 1,043,834 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**AEP        TEXAS NORTH COMPANY**

**CONDENSED        STATEMENTS OF CASH FLOWS**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                     |   | **2006**     |    | **2005**     |   |
|--------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                  ACTIVITIES**                                |   |    |    |    |   |
| **Net                  Income**                                          |   | $            | 3,834   |         | $      | 7,394 |   |
| **Adjustments                  for Noncash Items:**                      |   |         |    |         |   |   |   |
| Depreciation                  and Amortization                           |   |         | 10,223  |         |   | 10,155 |   |
| Deferred                  Income Taxes                                   |   |         | (1,323  | )            |   | (1,221 | ) |
| Mark-to-Market                  of Risk Management Contracts             |   |         | 1,989   |         |   | 2,973 |   |
| Over/Under                  Fuel Recovery                                |   |         | -       |         |   | 1,400 |   |
| Deferred                  Property Taxes                                 |   |         | (12,360 | )            |   | (12,218 | ) |
| Change                  in Other Noncurrent Assets                       |   |         | (2,003  | )            |   | (1,705 | ) |
| Change                  in Other Noncurrent Liabilities                  |   |         | 652     |         |   | 1,613 |   |
| **Changes                  in Components of Working Capital:**           |   |         |    |         |   |   |   |
| Accounts                  Receivable, Net                                |   |         | 36,836  |         |   | 24,967 |   |
| Fuel,                  Materials and Supplies                            |   |         | (2,156  | )            |   | (2,704 | ) |
| Accounts                  Payable                                        |   |         | (36,932 | )            |   | 1,108 |   |
| Accrued                  Taxes, Net                                      |   |         | 4,059   |         |   | (10,912 | ) |
| Other                  Current Assets                                    |   |         | 1,676   |         |   | 4,361 |   |
| Other                  Current Liabilities                               |   |         | (9,775  | )            |   | (4,368 | ) |
| **Net                  Cash Flows From (Used For) Operating Activities** |   |         | (5,280  | )            |   | 20,843 |   |
|                                                                     |   |         |    |         |   |   |   |
| **INVESTING                  ACTIVITIES**                                |   |         |    |         |   |   |   |
| Construction                  Expenditures                               |   |         | (18,662 | )            |   | (10,045 | ) |
| Change                  in Other Cash Deposits, Net                      |   |         | 792     |         |   | - |   |
| Change                  In Advances to Affiliates, Net                   |   |         | 31,240  |         |   | (1,232 | ) |
| Proceeds                  from Sale of Assets                            |   |         | -       |         |   | 250 |   |
| **Net                  Cash Flows From (Used For) Investing Activities** |   |         | 13,370  |         |   | (11,027 | ) |
|                                                                     |   |         |    |         |   |   |   |
| **FINANCING                  ACTIVITIES**                                |   |         |    |         |   |   |   |
| Principal                  Payments for Capital Lease Obligations        |   |         | (64     | )            |   | (59 | ) |
| Dividends                  Paid on Common Stock                          |   |         | (8,000  | )            |   | (9,427 | ) |
| Dividends                  Paid on Cumulative Preferred Stock            |   |         | (26     | )            |   | (26 | ) |
| **Net                  Cash Flows Used For Financing Activities**        |   |         | (8,090  | )            |   | (9,512 | ) |
|                                                                     |   |         |    |         |   |   |   |
| **Net                  Increase in Cash and Cash Equivalents**           |   |         | -       |         |   | 304 |   |
| **Cash                  and Cash Equivalents at Beginning of Period**    |   |         | -       |         |   | - |   |
| **Cash                  and Cash Equivalents at End of Period**          |   | $            | -       |         | $      | 304 |   |

| **SUPPLEMENTAL                  DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                  paid for interest net of capitalized amounts was $6,113,000 and                  $6,236,000                  and for income taxes                  net of refunds was                  $0 and $17,447,000 in 2006 and 2005, respectively. Noncash capital                  lease                  acquisitions were $224,000 and $137,000 in 2006 and 2005, respectively.                  Noncash Construction Expenditures included in Accounts Payable                  of                  $2,372,000 and $1,081,000 were outstanding as of March 31, 2006                  and 2005,                  respectively. |
|  *See                  Condensed Notes to Condensed Financial Statements of Registrant                  Subsidiaries.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

----

**AEP        TEXAS NORTH COMPANY**

**INDEX        TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT        SUBSIDIARIES**

|                                                        | **Footnote                  Reference** |
|-------------------------------------------------------------|-----------------------------------------|
|                                                        |                                    |
| Significant                  Accounting Matters             | Note                  1                 |
| New                  Accounting Pronouncements              | Note                  2                 |
| Rate                  Matters                               | Note                  3                 |
| Customer                  Choice and Industry Restructuring | Note                  4                 |
| Commitments                  and Contingencies              | Note                  5                 |
| Guarantees                                                  | Note                  6                 |
| Company-wide                  Staffing and Budget Review    | Note                  7                 |
| Benefit                  Plans                              | Note                  9                 |
| Business                  Segments                          | Note                  10                |
| Financing                  Activities                       | Note                  11                |

----

**APPALACHIAN        POWER COMPANY**

**AND        SUBSIDIARIES**

----

**APPALACHIAN        POWER COMPANY AND SUBSIDIARIES**

**MANAGEMENT’S        FINANCIAL DISCUSSION AND ANALYSIS**

**Results        of Operations**

**Reconciliation        of First Quarter of 2005 to First Quarter of 2006 Net        Income**

**(in        millions)**

| **First                  Quarter of 2005**                        |   |   |   |   | $      | 47     |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                  Margins                                   |   |   | 28     |   |   |   |   |
| Transmission                  Revenues                            |   |   | 1      |   |   |   |   |
| Other                                                             |   |   | 2      |   |   |   |   |
| **Total                  Change in Gross Margin**                 |   |   |   |   |   | 31     |   |
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                  Operation and Maintenance                  |   |   | 13     |   |   |   |   |
| Depreciation                  and Amortization                    |   |   | 2      |   |   |   |   |
| Taxes                  Other Than Income Taxes                    |   |   | 1      |   |   |   |   |
| Carrying                  Costs Income                            |   |   | 6      |   |   |   |   |
| Interest                  Expense                                 |   |   | (6     | )      |   |   |   |
| **Total                  Change in Operating Expenses and Other** |   |   |   |   |   | 16     |   |
|                                                              |   |   |   |   |   |   |   |
| Income                  Tax Expense                               |   |   |   |   |   | (20    | )      |
|                                                              |   |   |   |   |   |   |   |
| **First                  Quarter of 2006**                        |   |   |   |   | $      | 74     |   |

| · | Retail                  Margins increased by $28 million in comparison to 2005 primarily                  due to a                  $16 million increase in revenues related to financial transmission                  rights,                  net of congestion, and a $10 million increase in retail revenues                  related                  to two new industrial customers. The increase in financial transmission                  rights revenue is due to improved management of price risk related                  to                  serving retail load. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Other                  Operation and Maintenance expenses decreased by $13 million primarily                  due                  to a decrease of $14 million related to planned outages and a decrease                  of                  $5 million in removal costs in comparison to 2005. These decreases                  were                  partially offset by a $6 million increase related to the settlement                  and                  cancellation of the COLI (corporate owned life insurance) policy                  in                  February 2005. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Carrying                  Costs Income increased $6 million primarily due to the establishment                  of a                  regulatory asset for carrying costs related to the Virginia environmental                  and reliability costs incurred.                                                                                                                                                                                                                                                                                                                        |
| · | Interest                  Expense increased $6 million primarily due to recent long-term                  debt                  issuances and higher interest rates on replacement                  debt.                                                                                                                                                                                                                                                                                                                                                                               |

*Income        Taxes*

**Financial        Condition**

**Credit        Ratings**

|                                   | **Moody’s** |   | **S&P** |   | **Fitch** |
|----------------------------------------|-------------------|--------|-------------|--------|-----------|
|                                   |              |   |        |   |      |
| Senior                  Unsecured Debt | Baa2              |   | BBB         |   | BBB+      |

**Cash        Flow **

|                                                                    |   | **2006**                              |     | **2005** |   |
|-------------------------------------------------------------------------|--------|---------------------------------------|----------|----------|--------|
|                                                                    |   | **(in                    thousands)** |     |
| **Cash                    and Cash Equivalents at Beginning of Period** |   | $                                     | 1,741    |     | $      | 1,543 |   |
| Net                    Cash Flows From (Used For):                      |   |                                  |          |     |   |   |   |
| Operating                    Activities                                 |   |                                  | 212,542  |     |   | 80,946 |   |
| Investing                    Activities                                 |   |                                  | (196,459 | )        |   | (165,691 | ) |
| Financing                    Activities                                 |   |                                  | (16,372  | )        |   | 85,337 |   |
| Net                    Increase (Decrease) in Cash and Cash Equivalents |   |                                  | (289     | )        |   | 592 |   |
| **Cash                    and Cash Equivalents at End of Period**       |   | $                                     | 1,452    |     | $      | 2,135 |   |

*Operating        Activities *

*Investing        Activities*

*Financing        Activities*

**Financing        Activity**

|                                     |   | **Principal****Amount** |                                | **Interest** |     | **Due** |
|------------------------------------------|--------|-------------------------|-------------------------------------|--------------|----------|---------|
| **Type                  of Debt**        |   |                    | **Rate**                            |         | **Date** |
|                                     |   |                    | **(in                  thousands)** |         | **(%)**  |    |   |
|                                     |   |                    |                                |         |     |    |   |
| Pollution                  Control Bonds |   | $                       | 50,275                              |         | Variable |    | 2036 |

|                                  |   | **Principal****Amount                  Paid** |                                | **Interest** |     | **Due** |
|---------------------------------------|--------|-----------------------------------------------|-------------------------------------|--------------|----------|---------|
| **Type                  of Debt**     |   |                                          | **Rate**                            |         | **Date** |
|                                  |   |                                          | **(in                  thousands)** |         | **(%)**  |    |   |
|                                  |   |                                          |                                |         |     |    |   |
| First                  Mortgage Bonds |   | $                                             | 100,000                             |         | 6.80     |    | 2006 |
| Other                  Debt           |   |                                          | 3                                   |         | 13.718   |    | 2026 |

**Liquidity**

**Summary        Obligation Information**

**Significant        Factors**

***Coal        Contract Amendment***

***Litigation        and Regulatory Activity***

**Critical        Accounting Estimates**

----

**QUANTITATIVE        AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT        ACTIVITIES**

**Market        Risks**

**MTM        Risk Management Contract Net Assets**

**Reconciliation        of MTM Risk Management Contracts to**

**Condensed        Consolidated Balance Sheet**

**As        of March 31, 2006**

**(in        thousands)**

|                                                                                               |   | **MTM                  Risk Management Contracts** |     | **Cash                  Flow &****Fair                  Value Hedges** |   | **DETM                  Assignment (a)** |   | **Total** |    |
|----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|----------|----------------------------------------------------------------------------|--------|------------------------------------------|--------|-----------|---------|
| Current                  Assets                                                                    |   | $                                                  | 101,475  |                                                                       | $      | 20,235                                   |   | $         | -       |   | $ | 121,710 |   |
| Noncurrent                  Assets                                                                 |   |                                               | 158,144  |                                                                       |   | 755                                      |   |      | -       |   |   | 158,899 |   |
| **Total                  MTM Derivative Contract Assets**                                          |   |                                               | 259,619  |                                                                       |   | 20,990                                   |   |      | -       |   |   | 280,609 |   |
|                                                                                               |   |                                               |     |                                                                       |   |                                     |   |      |    |   |   |   |   |
| Current                  Liabilities                                                               |   |                                               | (83,014  | )                                                                          |   | (5,006                                   | )      |      | (1,240  | ) |   | (89,260 | ) |
| Noncurrent                  Liabilities                                                            |   |                                               | (114,717 | )                                                                          |   | (1,581                                   | )      |      | (10,863 | ) |   | (127,161 | ) |
| **Total                  MTM Derivative Contract  Liabilities**                               |   |                                               | (197,731 | )                                                                          |   | (6,587                                   | )      |      | (12,103 | ) |   | (216,421 | ) |
|                                                                                               |   |                                               |     |                                                                       |   |                                     |   |      |    |   |   |   |   |
| **Total                  MTM Derivative Contract Net  Assets                  (Liabilities)** |   | $                                                  | 61,888   |                                                                       | $      | 14,403                                   |   | $         | (12,103 | ) | $ | 64,188 |   |

| (a) | See                  “Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual                  Report. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

**MTM        Risk Management Contract Net Assets**

**Three        Months Ended March 31, 2006**

**(in        thousands)**

| **Total                  MTM Risk Management Contract Net Assets at December 31,                  2005**                                            |   | $      | 56,407  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| (Gain)                  Loss from Contracts Realized/Settled During the Period and Entered                  in a                  Prior Period      |   |   | (3,099  | )      |
| Fair                  Value of New Contracts at Inception When Entered During the Period                  (a)                                       |   |   | 170     |   |
| Net                  Option Premiums Paid/(Received) for Unexercised or Unexpired Option                  Contracts Entered  During the Period |   |   | (1,182  | )      |
| Change                  in Fair Value Due to Valuation Methodology Changes on Forward                  Contracts                                    |   |   | 448     |   |
| Changes                  in Fair Value Due to Market Fluctuations During the Period                  (b)                                            |   |   | 2,406   |   |
| Changes                  in Fair Value Allocated to Regulated Jurisdictions (c)                                                                     |   |   | 6,738   |   |
| **Total                  MTM Risk Management Contract Net Assets**                                                                                  |   |   | 61,888  |   |
| Net                  Cash Flow & Fair Value Hedge Contracts                                                                                     |   |   | 14,403  |   |
| DETM                  Assignment (d)                                                                                                                |   |   | (12,103 | )      |
| **Total                  MTM Risk Management Contract Net Assets at March 31,                  2006**                                               |   | $      | 64,188  |   |

| (a) | Most                  of the fair value comes from longer term fixed price contracts                  with                  customers that seek to limit their risk against fluctuating energy                  prices.                  Inception value is only recorded if observable market data can                  be obtained                  for valuation inputs for the entire contract term. The contract                  prices are                  valued against market curves associated with the delivery location                  and                  delivery term. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                  fluctuations are attributable to various factors such as supply/demand,                  weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (c) | “Changes                  in Fair Value Allocated to Regulated Jurisdictions” relates to the net                  gains (losses) of those contracts that are not reflected in the                  Condensed                  Consolidated Statements of Income. These net gains (losses) are                  recorded                  as regulatory liabilities/assets for those subsidiaries that operate                  in                  regulated jurisdictions.                                                                                                    |
| (d) | See                  “Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual                  Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

**Maturity        and Source of Fair Value of MTM Risk Management Contract Net        Assets**

| · | The                  method of measuring fair value used in determining the carrying                  amount of                  our total MTM asset or liability (external sources or modeled                  internally). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                  maturity, by year, of our net assets/liabilities giving an indication                  of                  when these MTM amounts will settle and generate                  cash.                       |

**Maturity        and Source of Fair Value of MTM**

**Risk        Management Contract Net Assets**

**Fair        Value of Contracts as of March 31, 2006**

**(in        thousands)**

|                                                                                                                                   |   | **Remainder****2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **After****2010** |   | **Total** |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-----------|--------|
| Prices                  Actively Quoted - Exchange Traded                  Contracts                                              |   | $                     | 9,768  |     | $      | 2,033    |   | $        | 903    |     | $      | (72               | )      | $         | -      |   | $ | - |   | $ | 12,632 |   |
| Prices                  Provided by Other External Sources                  - OTC Broker                     Quotes (a) |   |                  | 7,005  |     |   | 5,987    |   |     | 8,140  |     |   | 6,725             |   |      | -      |   |   | - |   |   | 27,857 |   |
| Prices                  Based on Models and Other Valuation                  Methods (b)                                          |   |                  | (1,427 | )        |   | 5,761    |   |     | 3,863  |     |   | 3,976             |   |      | 8,515  |   |   | 711 |   |   | 21,399 |   |
| **Total**                                                                                                                              |   | $                     | 15,346 |     | $      | 13,781   |   | $        | 12,906 |     | $      | 10,629            |   | $         | 8,515  |   | $ | 711 |   | $ | 61,888 |   |

| (a) | “Prices                  Provided by Other External Sources - OTC Broker Quotes” reflects                  information obtained from over-the-counter brokers, industry services,                  or                  multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Prices                  Based on Models and Other Valuation Methods” is used in absence of pricing                  information from external sources. Modeled information is derived                  using                  valuation models developed by the reporting entity, reflecting                  when                  appropriate, option pricing theory, discounted cash flow concepts,                  valuation adjustments, etc. and may require projection of prices                  for                  underlying commodities beyond the period that prices are available                  from                  third-party sources. In addition, where external pricing information                  or                  market liquidity are limited, such valuations are classified as                  modeled.                  The determination of the point at which a market is no longer liquid                  for                  placing it in the modeled category varies by                  market. |

**Cash        Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)        on        the Condensed Consolidated Balance Sheet **

**Total        Accumulated Other Comprehensive Income (Loss) Activity**

**Three        Months Ended March 31, 2006**

**(in        thousands)**

|                                                                                                                       |   | **Power** |   | **Foreign****Currency** |   | **Interest****Rate** |   | **Total** |    |
|----------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|-------------------------|--------|----------------------|--------|-----------|---------|
| **Beginning                  Balance in AOCI December 31, 2005**                                                           |   | $         | (1,480 | )                       | $      | (171                 | )      | $         | (14,770 | ) | $ | (16,421 | ) |
| Changes                  in Fair Value                                                                                     |   |      | 5,964  |                    |   | -                    |   |      | 5,340   |   |   | 11,304 |   |
| Reclassifications                  from AOCI to Net Income for Cash Flow                     Hedges Settled |   |      | 899    |                    |   | 2                    |   |      | 1,063   |   |   | 1,964 |   |
| **Ending                  Balance in AOCI March 31, 2006**                                                                 |   | $         | 5,383  |                    | $      | (169                 | )      | $         | (8,367  | ) | $ | (3,153 | ) |

**Credit        Risk**

**VaR        Associated with Risk Management Contracts**

| **Three                  Months Ended****March                  31, 2006** |   |     |   |        | **Twelve                  Months Ended****December                  31, 2005** |
|----------------------------------------------------------------------------|--------|----------|--------|-------------|--------------------------------------------------------------------------------|
| **(in                  thousands)**                                        |   |     |   |        | **(in                  thousands)**                                            |
| **End**                                                                    |   | **High** |   | **Average** |                                                                           | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $682                                                                       |   | $1,604   |   | $867        |                                                                           | $427 |   |   |   |   | $732 |   | $1,216 |   | $579 |   | $209 |

**VaR        Associated with Debt Outstanding**

----

**APPALACHIAN        POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF INCOME**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                                            |   | **2006** |    | **2005** |   |
|-------------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **REVENUES**                                                                                    |   |     |    |     |   |
| Electric                  Generation, Transmission and Distribution                             |   | $        | 559,993 |     | $      | 476,027 |   |
| Sales                  to AEP Affiliates                                                        |   |     | 71,772  |     |   | 79,170 |   |
| Other                                                                                           |   |     | 2,676   |     |   | 2,498 |   |
| **TOTAL**                                                                                       |   |     | 634,441 |     |   | 557,695 |   |
|                                                                                            |   |     |    |     |   |   |   |
| **EXPENSES**                                                                                    |   |     |    |     |   |   |   |
| Fuel                  and Other Consumables for Electric Generation                             |   |     | 166,853 |     |   | 115,144 |   |
| Purchased                  Electricity for Resale                                               |   |     | 27,616  |     |   | 28,233 |   |
| Purchased                  Electricity from AEP Affiliates                                      |   |     | 122,399 |     |   | 126,963 |   |
| Other                  Operation                                                                |   |     | 70,197  |     |   | 73,773 |   |
| Maintenance                                                                                     |   |     | 37,839  |     |   | 47,190 |   |
| Depreciation                  and Amortization                                                  |   |     | 47,972  |     |   | 49,959 |   |
| Taxes                  Other Than Income Taxes                                                  |   |     | 23,092  |     |   | 24,074 |   |
| **TOTAL**                                                                                       |   |     | 495,968 |     |   | 465,336 |   |
|                                                                                            |   |     |    |     |   |   |   |
| **OPERATING                  INCOME**                                                           |   |     | 138,473 |     |   | 92,359 |   |
|                                                                                            |   |     |    |     |   |   |   |
| **Other                  Income (Expense):**                                                    |   |     |    |     |   |   |   |
| Interest                  Income                                                                |   |     | 951     |     |   | 562 |   |
| Carrying                  Costs Income                                                          |   |     | 6,011   |     |   | 98 |   |
| Allowance                  for Equity Funds Used During Construction                            |   |     | 2,476   |     |   | 2,211 |   |
| Interest                  Expense                                                               |   |     | (30,268 | )        |   | (24,199 | ) |
|                                                                                            |   |     |    |     |   |   |   |
| **INCOME                  BEFORE INCOME TAXES**                                                 |   |     | 117,643 |     |   | 71,031 |   |
|                                                                                            |   |     |    |     |   |   |   |
| Income                  Tax Expense                                                             |   |     | 44,049  |     |   | 24,359 |   |
|                                                                                            |   |     |    |     |   |   |   |
| **NET                  INCOME**                                                                 |   |     | 73,594  |     |   | 46,672 |   |
|                                                                                            |   |     |    |     |   |   |   |
| Preferred                  Stock Dividend Requirements including Capital Stock** **Expense |   |     | 238     |     |   | 797 |   |
|                                                                                            |   |     |    |     |   |   |   |
| **EARNINGS                  APPLICABLE TO COMMON STOCK**                                        |   | $        | 73,356  |     | $      | 45,875 |   |

*The        common stock of APCo is wholly-owned by AEP.*

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**APPALACHIAN        POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S**

**EQUITY        AND COMPREHENSIVE INCOME (LOSS)**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                              |   | **Common                  Stock** |    | **Paid-in                  Capital** |   | **Retained                  Earnings** |   | **Accumulated                  Other Comprehensive Income (Loss)** |    | **Total**    |   |
|-----------------------------------------------------------------------------------|--------|-----------------------------------|---------|--------------------------------------|--------|----------------------------------------|--------|--------------------------------------------------------------------|---------|--------------|--------|
|                                                                              |   |                         |    |                            |   |                              |   |                                                          |    |    |   |
| **DECEMBER                  31, 2004**                                            |   | $                                 | 260,458 |                                 | $      | 722,314                                |   | $                                                                  | 508,618 |         | $      | (81,672 | ) | $ | 1,409,718 |   |
|                                                                              |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| Capital                  Contribution From Parent                                 |   |                              |    |                                 |   | 100,000                                |   |                                                               |    |         |   |   |   |   | 100,000 |   |
| Preferred                  Stock Dividends                                        |   |                              |    |                                 |   |                                   |   |                                                               | (200    | )            |   |   |   |   | (200 | ) |
| Capital                  Stock Expense                                            |   |                              |    |                                 |   | 597                                    |   |                                                               | (597    | )            |   |   |   |   | - |   |
| **TOTAL**                                                                         |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   | 1,509,518 |   |
|                                                                              |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                                         |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| **Other                  Comprehensive Loss, Net of Taxes:**                      |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| Cash                  Flow Hedges, Net of Tax of $4,151                           |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   | (7,710 | ) |   | (7,710 | ) |
| **NET                  INCOME**                                                   |   |                              |    |                                 |   |                                   |   |                                                               | 46,672  |         |   |   |   |   | 46,672 |   |
| **TOTAL                  COMPREHENSIVE INCOME**                                   |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   | 38,962 |   |
|                                                                              |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| **MARCH                  31, 2005**                                               |   | $                                 | 260,458 |                                 | $      | 822,911                                |   | $                                                                  | 554,493 |         | $      | (89,382 | ) | $ | 1,548,480 |   |
|                                                                              |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| **DECEMBER                  31, 2005**                                            |   | $                                 | 260,458 |                                 | $      | 924,837                                |   | $                                                                  | 635,016 |         | $      | (16,610 | ) | $ | 1,803,701 |   |
|                                                                              |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| Common                  Stock Dividends                                           |   |                              |    |                                 |   |                                   |   |                                                               | (2,500  | )            |   |   |   |   | (2,500 | ) |
| Preferred                  Stock Dividends                                        |   |                              |    |                                 |   |                                   |   |                                                               | (200    | )            |   |   |   |   | (200 | ) |
| Capital                  Stock Expense                                            |   |                              |    |                                 |   | 38                                     |   |                                                               | (38     | )            |   |   |   |   | - |   |
| **TOTAL**                                                                         |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   | 1,801,001 |   |
|                                                                              |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                                         |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| **Other                  Comprehensive Income, Net of Taxes:**               |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| Cash                  Flow Hedges, Net of Tax** **of                  $7,144 |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   | 13,268 |   |   | 13,268 |   |
| **NET                  INCOME**                                                   |   |                              |    |                                 |   |                                   |   |                                                               | 73,594  |         |   |   |   |   | 73,594 |   |
| **TOTAL                  COMPREHENSIVE INCOME**                                   |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   | 86,862 |   |
|                                                                              |   |                              |    |                                 |   |                                   |   |                                                               |    |         |   |   |   |   |   |   |
| **MARCH                  31, 2006**                                               |   | $                                 | 260,458 |                                 | $      | 924,875                                |   | $                                                                  | 705,872 |         | $      | (3,342 | ) | $ | 1,887,863 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**APPALACHIAN        POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**March        31, 2006 and December 31, 2005**

**(in        thousands)**

**(Unaudited)**

|                                                       |   | **2006**     |      | **2005**     |   |
|------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **CURRENT                  ASSETS**                        |   |    |      |    |   |
| Cash                  and Cash Equivalents                 |   | $            | 1,452     |         | $      | 1,741 |   |
| Accounts                  Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                  |   |         | 171,749   |         |   | 141,810 |   |
| Affiliated                  Companies                      |   |         | 63,086    |         |   | 153,453 |   |
| Accrued                  Unbilled Revenues                 |   |         | 34,704    |         |   | 51,201 |   |
| Miscellaneous                                              |   |         | 3,908     |         |   | 527 |   |
| Allowance                  for Uncollectible Accounts      |   |         | (3,539    | )            |   | (1,805 | ) |
| Total                  Accounts Receivable                 |   |         | 269,908   |         |   | 345,186 |   |
| Fuel                                                       |   |         | 52,128    |         |   | 64,657 |   |
| Materials                  and Supplies                    |   |         | 54,468    |         |   | 54,967 |   |
| Risk                  Management Assets                    |   |         | 121,710   |         |   | 132,247 |   |
| Accrued                  Tax Benefits                      |   |         | -         |         |   | 32,979 |   |
| Margin                  Deposits                           |   |         | 36,888    |         |   | 28,936 |   |
| Prepayments                  and Other                     |   |         | 32,714    |         |   | 46,193 |   |
| **TOTAL**                                                  |   |         | 569,268   |         |   | 706,906 |   |
|                                                       |   |         |      |         |   |   |   |
| **PROPERTY,                  PLANT AND EQUIPMENT**         |   |         |      |         |   |   |   |
| Electric:                                                  |   |         |      |         |   |   |   |
| Production                                                 |   |         | 2,818,411 |         |   | 2,798,157 |   |
| Transmission                                               |   |         | 1,275,354 |         |   | 1,266,855 |   |
| Distribution                                               |   |         | 2,190,230 |         |   | 2,141,153 |   |
| Other                                                      |   |         | 326,997   |         |   | 323,158 |   |
| Construction                  Work in Progress             |   |         | 735,480   |         |   | 647,638 |   |
| **Total**                                                  |   |         | 7,346,472 |         |   | 7,176,961 |   |
| Accumulated                  Depreciation and Amortization |   |         | 2,541,697 |         |   | 2,524,855 |   |
| **TOTAL                  - NET**                           |   |         | 4,804,775 |         |   | 4,652,106 |   |
|                                                       |   |         |      |         |   |   |   |
| **OTHER                  NONCURRENT ASSETS**               |   |         |      |         |   |   |   |
| Regulatory                  Assets                         |   |         | 454,658   |         |   | 457,294 |   |
| Long-term                  Risk Management Assets          |   |         | 158,899   |         |   | 176,231 |   |
| Deferred                  Charges and Other                |   |         | 262,869   |         |   | 261,556 |   |
| **TOTAL**                                                  |   |         | 876,426   |         |   | 895,081 |   |
|                                                       |   |         |      |         |   |   |   |
| **TOTAL                  ASSETS**                          |   | $            | 6,250,469 |         | $      | 6,254,093 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**APPALACHIAN        POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

**LIABILITIES        AND SHAREHOLDERS’ EQUITY**

**March        31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                            |   | **2006**                            |      | **2005** |   |
|---------------------------------------------------------------------------------|--------|-------------------------------------|-----------|----------|--------|
| **CURRENT                  LIABILITIES**                                        |   | **(in                  thousands)** |      |
| Advances                  from Affiliates                                       |   | $                                   | 164,192   |     | $      | 194,133 |   |
| Accounts                  Payable:                                              |   |                                |      |     |   |   |   |
| General                                                                         |   |                                | 222,271   |     |   | 230,570 |   |
| Affiliated                  Companies                                           |   |                                | 65,134    |     |   | 85,941 |   |
| Long-term                  Debt Due Within One Year - Nonaffiliated             |   |                                | 46,927    |     |   | 146,999 |   |
| Risk                  Management Liabilities                                    |   |                                | 89,260    |     |   | 121,165 |   |
| Customer                  Deposits                                              |   |                                | 66,324    |     |   | 79,854 |   |
| Accrued                  Taxes                                                  |   |                                | 73,034    |     |   | 49,833 |   |
| Accrued                  Interest                                               |   |                                | 44,125    |     |   | 28,614 |   |
| Other                                                                           |   |                                | 60,079    |     |   | 80,132 |   |
| **TOTAL**                                                                       |   |                                | 831,346   |     |   | 1,017,241 |   |
|                                                                            |   |                                |      |     |   |   |   |
| **NONCURRENT                  LIABILITIES**                                     |   |                                |      |     |   |   |   |
| Long-term                  Debt - Nonaffiliated                                 |   |                                | 1,954,664 |     |   | 1,904,379 |   |
| Long-term                  Debt - Affiliated                                    |   |                                | 100,000   |     |   | 100,000 |   |
| Long-term                  Risk Management Liabilities                          |   |                                | 127,161   |     |   | 147,117 |   |
| Deferred                  Income Taxes                                          |   |                                | 948,109   |     |   | 952,497 |   |
| Regulatory                  Liabilities and Deferred Investment Tax Credits     |   |                                | 206,492   |     |   | 201,230 |   |
| Deferred                  Credits and Other                                     |   |                                | 177,050   |     |   | 110,144 |   |
| **TOTAL**                                                                       |   |                                | 3,513,476 |     |   | 3,415,367 |   |
|                                                                            |   |                                |      |     |   |   |   |
| **TOTAL                  LIABILITIES**                                          |   |                                | 4,344,822 |     |   | 4,432,608 |   |
|                                                                            |   |                                |      |     |   |   |   |
| Cumulative                  Preferred Stock Not Subject to Mandatory Redemption |   |                                | 17,784    |     |   | 17,784 |   |
|                                                                            |   |                                |      |     |   |   |   |
| Commitments                  and Contingencies (Note 5)                         |   |                                |      |     |   |   |   |
|                                                                            |   |                                |      |     |   |   |   |
| **COMMON                  SHAREHOLDER’S EQUITY**                          |   |                                |      |     |   |   |   |
| Common                  Stock - No Par Value:                                   |   |                                |      |     |   |   |   |
| Authorized                  - 30,000,000 Shares                                 |   |                                |      |     |   |   |   |
| Outstanding                  - 13,499,500 Shares                                |   |                                | 260,458   |     |   | 260,458 |   |
| Paid-in                  Capital                                                |   |                                | 924,875   |     |   | 924,837 |   |
| Retained                  Earnings                                              |   |                                | 705,872   |     |   | 635,016 |   |
| Accumulated                  Other Comprehensive Income (Loss)                  |   |                                | (3,342    | )        |   | (16,610 | ) |
| **TOTAL**                                                                       |   |                                | 1,887,863 |     |   | 1,803,701 |   |
|                                                                            |   |                                |      |     |   |   |   |
| **TOTAL                  LIABILITIES AND SHAREHOLDERS’ EQUITY**           |   | $                                   | 6,250,469 |     | $      | 6,254,093 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**APPALACHIAN        POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                      |   | **2006**     |     | **2005**     |   |
|---------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|
| **OPERATING                  ACTIVITIES**                                 |   |    |     |    |   |
| **Net                  Income**                                           |   | $            | 73,594   |         | $      | 46,672 |   |
| **Adjustments                  for Noncash Items:**                       |   |         |     |         |   |   |   |
| Depreciation                  and Amortization                            |   |         | 47,972   |         |   | 49,959 |   |
| Deferred                  Income Taxes                                    |   |         | (11,423  | )            |   | 9,445 |   |
| Carrying                  Costs Income                                    |   |         | (6,011   | )            |   | (98 | ) |
| Mark-to-Market                  of Risk Management Contracts              |   |         | (5,696   | )            |   | (13,360 | ) |
| Pension                  Contributions to Qualified Plan Trusts           |   |         | -        |         |   | (19,937 | ) |
| Over/Under                  Fuel Recovery, Net                            |   |         | 7,832    |         |   | 3,320 |   |
| Change                  in Other Noncurrent Assets                        |   |         | 5,878    |         |   | (19,490 | ) |
| Change                  in Other Noncurrent Liabilities                   |   |         | 5,848    |         |   | (414 | ) |
| **Changes                  in Components of Working Capital:**            |   |         |     |         |   |   |   |
| Accounts                  Receivable, Net                                 |   |         | 75,278   |         |   | 3,113 |   |
| Fuel,                  Materials and Supplies                             |   |         | 13,028   |         |   | (5,764 | ) |
| Accounts                  Payable                                         |   |         | (30,148  | )            |   | 32,411 |   |
| Accrued                  Taxes, Net                                       |   |         | 56,180   |         |   | (21,316 | ) |
| Customer                  Deposits                                        |   |         | (13,530  | )            |   | 13,557 |   |
| Accrued                  Interest                                         |   |         | 15,511   |         |   | 16,965 |   |
| Other                  Current Assets                                     |   |         | (1,718   | )            |   | (7,918 | ) |
| Other                  Current Liabilities                                |   |         | (20,053  | )            |   | (6,199 | ) |
| **Net                  Cash Flows From Operating Activities**             |   |         | 212,542  |         |   | 80,946 |   |
|                                                                      |   |         |     |         |   |   |   |
| **INVESTING                  ACTIVITIES**                                 |   |         |     |         |   |   |   |
| Construction                  Expenditures                                |   |         | (196,561 | )            |   | (129,823 | ) |
| Change                  in Other Cash Deposits, Net                       |   |         | -        |         |   | (13,947 | ) |
| Change                  in Advances to Affiliates, Net                    |   |         | -        |         |   | (29,054 | ) |
| Proceeds                  from Sales of Assets                            |   |         | 102      |         |   | 7,133 |   |
| **Net                  Cash Flows Used For Investing Activities**         |   |         | (196,459 | )            |   | (165,691 | ) |
|                                                                      |   |         |     |         |   |   |   |
| **FINANCING                  ACTIVITIES**                                 |   |         |     |         |   |   |   |
| Capital                  Contributions from Parent                        |   |         | -        |         |   | 100,000 |   |
| Issuance                  of Long-term Debt - Nonaffiliated               |   |         | 49,677   |         |   | 198,189 |   |
| Change                  in Advances from Affiliates, Net                  |   |         | (29,941  | )            |   | (211,060 | ) |
| Retirement                  of Long-term Debt - Nonaffiliated             |   |         | (100,003 | )            |   | - |   |
| Principal                  Payments for Capital Lease Obligations         |   |         | (1,483   | )            |   | (1,592 | ) |
| Funds                  From Amended Coal Contract                         |   |         | 68,078   |         |   | - |   |
| Dividends                  Paid on Common Stock                           |   |         | (2,500   | )            |   | - |   |
| Dividends                  Paid on Cumulative Preferred Stock             |   |         | (200     | )            |   | (200 | ) |
| **Net                  Cash Flows From (Used For) Financing Activities**  |   |         | (16,372  | )            |   | 85,337 |   |
|                                                                      |   |         |     |         |   |   |   |
| **Net                  Increase (Decrease) in Cash and Cash Equivalents** |   |         | (289     | )            |   | 592 |   |
| **Cash                  and Cash Equivalents at Beginning of Period**     |   |         | 1,741    |         |   | 1,543 |   |
| **Cash                  and Cash Equivalents at End of Period**           |   | $            | 1,452    |         | $      | 2,135 |   |

| **SUPPLEMENTAL                  DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                  paid for interest net of capitalized amounts was $14,686,000 and                  $5,842,000 and for income taxes                  net of refunds was                  $1,771,000 and $38,845,000 in 2006 and 2005, respectively. Noncash                  capital                  lease acquisitions were $1,184,000 and $460,000 in 2006 and 2005,                  respectively. Noncash Construction Expenditures included in Accounts                  Payable of $83,682,000 and $46,146,000 were outstanding as of March                  31,                  2006 and 2005, respectively. |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**APPALACHIAN        POWER COMPANY AND SUBSIDIARIES**

**INDEX        TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT        SUBSIDIARIES**

|                                                     | **Footnote                  Reference** |
|----------------------------------------------------------|-----------------------------------------|
|                                                     |                                    |
| Significant                  Accounting Matters          | Note                  1                 |
| New                  Accounting Pronouncements           | Note                  2                 |
| Rate                  Matters                            | Note                  3                 |
| Commitments                  and Contingencies           | Note                  5                 |
| Guarantees                                               | Note                  6                 |
| Company-wide                  Staffing and Budget Review | Note                  7                 |
| Benefit                  Plans                           | Note                  9                 |
| Business                  Segments                       | Note                  10                |
| Financing                  Activities                    | Note                  11                |

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**COLUMBUS        SOUTHERN POWER COMPANY**

**AND        SUBSIDIARIES**

----

**COLUMBUS        SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**MANAGEMENT’S        NARRATIVE FINANCIAL DISCUSSION AND ANALYSIS **

**Results        of Operations**

**Reconciliation        of First Quarter of 2005 to First Quarter of 2006 Net        Income**

**(in        millions)**

| **First                  Quarter of 2005**                        |   |   |   |   | $      | 47     |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                  Margins                                   |   |   | 24     |   |   |   |   |
| Off-system                  Sales                                 |   |   | 8      |   |   |   |   |
| Transmission                  Revenues                            |   |   | 2      |   |   |   |   |
| Other                                                             |   |   | 6      |   |   |   |   |
| **Total                  Change in Gross Margin**                 |   |   |   |   |   | 40     |   |
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                  Operation and Maintenance                  |   |   | (15    | )      |   |   |   |
| Depreciation                  and Amortization                    |   |   | (8     | )      |   |   |   |
| Taxes                  Other Than Income Taxes                    |   |   | (3     | )      |   |   |   |
| Carrying                  Costs Income                            |   |   | (2     | )      |   |   |   |
| Interest                  Expense                                 |   |   | (5     | )      |   |   |   |
| **Total                  Change in Operating Expenses and Other** |   |   |   |   |   | (33    | )      |
|                                                              |   |   |   |   |   |   |   |
| Income                  Tax Expense                               |   |   |   |   |   | (3     | )      |
|                                                              |   |   |   |   |   |   |   |
| **First                  Quarter of 2006**                        |   |   |   |   | $      | 51     |   |

| · | Retail                  Margins were $24 million higher than the prior period primarily                  due to                  Rate Stabilization Plan and Transition Regulatory Asset rate increases                  effective January 1, 2006 as well as the addition of Monongahela                  Power                  Ohio customers on December 31, 2005, partially offset by reduced                  fuel                  margins. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Off-system                  Sales increased $8 million primarily due to increased AEP Power                  Pool sales                  partially offset by lower optimization activity.                                                                                                                                                                                                                                                          |
| · | Other                  revenues increased $6 million primarily due to higher gains on                  sale of                  emission allowances.                                                                                                                                                                                                                                                                                               |

| · | Other                  Operation and Maintenance expense increased $15 million due to                  the 2005                  establishment of a regulatory asset for PJM administrative fees,                  an                  increase in transmission expenses related to the AEP Transmission                  Equalization Agreement and favorable adjustments in the prior year                  quarter                  related to the corporate owned life insurance policy and storm                  expense. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation                  and Amortization expense increased $8 million primarily due to                  increased                  amortization of regulatory assets and an increase in depreciation                  expense                  due to a greater depreciable base resulting primarily from the                  acquisitions of the Waterford Plant and Monongahela Power’s Ohio                  assets.                                                                                            |
| · | Taxes                  Other Than Income Taxes increased $3 million due to increases in                  real and                  personal property taxes.                                                                                                                                                                                                                                                                                                                                                                     |
| · | Interest                  Expense increased $5 million primarily due to a new long-term debt                  issuance during the fourth quarter of                  2005.                                                                                                                                                                                                                                                                                                                                                      |

*Income        Tax*

**Financial        Condition**

**Credit        Ratings**

|                                   | **Moody’s** |   | **S&P** |   | **Fitch** |
|----------------------------------------|-------------------|--------|-------------|--------|-----------|
|                                   |              |   |        |   |      |
| Senior                  Unsecured Debt | A3                |   | BBB         |   | A-        |

**Financing        Activity**

**Liquidity**

**Summary        Obligation Information**

**Significant        Factors**

***Litigation        and Regulatory Activity***

**Critical        Accounting Estimates**

----

**QUANTITATIVE        AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT        ACTIVITIES**

**Market        Risks**

**MTM        Risk Management Contract Net Assets**

**Reconciliation        of MTM Risk Management Contracts to**

**Condensed        Consolidated Balance Sheet**

**As        of March 31, 2006**

**(in        thousands)**

|                                                                                               |   | **MTM                  Risk Management Contracts** |     | **Cash                  Flow Hedges** |   | **DETM                  Assignment (a)** |   | **Total** |   |
|----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|----------|---------------------------------------|--------|------------------------------------------|--------|-----------|--------|
| Current                  Assets                                                                    |   | $                                                  | 59,753   |                                  | $      | 7,087                                    |   | $         | -      |   | $ | 66,840 |   |
| Noncurrent                  Assets                                                                 |   |                                               | 93,183   |                                  |   | 446                                      |   |      | -      |   |   | 93,629 |   |
| **Total                  MTM Derivative Contract Assets**                                          |   |                                               | 152,936  |                                  |   | 7,533                                    |   |      | -      |   |   | 160,469 |   |
|                                                                                               |   |                                               |     |                                  |   |                                     |   |      |   |   |   |   |   |
| Current                  Liabilities                                                               |   |                                               | (48,676  | )                                     |   | (2,614                                   | )      |      | (733   | ) |   | (52,023 | ) |
| Noncurrent                  Liabilities                                                            |   |                                               | (67,300  | )                                     |   | (231                                     | )      |      | (6,423 | ) |   | (73,954 | ) |
| **Total                  MTM Derivative Contract  Liabilities**                               |   |                                               | (115,976 | )                                     |   | (2,845                                   | )      |      | (7,156 | ) |   | (125,977 | ) |
|                                                                                               |   |                                               |     |                                  |   |                                     |   |      |   |   |   |   |   |
| **Total                  MTM Derivative Contract Net  Assets                  (Liabilities)** |   | $                                                  | 36,960   |                                  | $      | 4,688                                    |   | $         | (7,156 | ) | $ | 34,492 |   |

| (a) | See                  “Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual                  Report. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|

**MTM        Risk Management Contract Net Assets**

**Three        Months Ended March 31, 2006**

**(in        thousands)**

| **Total                  MTM Risk Management Contract Net Assets at December 31,                  2005**                                       |   | $      | 33,322 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                  Loss from Contracts Realized/Settled During the Period and Entered                  in a                  Prior Period |   |   | (3,337 | )      |
| Fair                  Value of New Contracts at Inception When Entered During the Period                  (a)                                  |   |   | 173    |   |
| Net                  Option Premiums Paid/(Received) for Unexercised or Unexpired Option                  Contracts Entered During the Period  |   |   | (665   | )      |
| Change                  in Fair Value Due to Valuation Methodology Changes on Forward                  Contracts                               |   |   | 456    |   |
| Changes                  in Fair Value Due to Market Fluctuations During the Period                  (b)                                       |   |   | 7,022  |   |
| Changes                  in Fair Value Allocated to Regulated Jurisdictions (c)                                                                |   |   | (11    | )      |
| **Total                  MTM Risk Management Contract Net Assets**                                                                             |   |   | 36,960 |   |
| Net                  Cash Flow Hedge Contracts                                                                                                 |   |   | 4,688  |   |
| DETM                  Assignment (d)                                                                                                           |   |   | (7,156 | )      |
| **Total                  MTM Risk Management Contract Net Assets at March 31,                  2006**                                          |   | $      | 34,492 |   |

| (a) | Most                  of the fair value comes from longer term fixed price contracts                  with                  customers that seek to limit their risk against fluctuating energy                  prices.                  Inception value is only recorded if observable market data can                  be obtained                  for valuation inputs for the entire contract term. The contract                  prices are                  valued against market curves associated with the delivery location                  and                  delivery term. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                  fluctuations are attributable to various factors such as supply/demand,                  weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (c) | “Changes                  in Fair Value Allocated to Regulated Jurisdictions” relates to the net                  gains (losses) of those contracts that are not reflected in the                  Condensed                  Consolidated Statements of Income. These net gains (losses) are                  recorded                  as regulatory liabilities/assets for those subsidiaries that operate                  in                  regulated jurisdictions.                                                                                                    |
| (d) | See                  “Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual                  Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

**Maturity        and Source of Fair Value of MTM Risk Management Contract Net        Assets**

| · | The                  method of measuring fair value used in determining the carrying                  amount of                  our total MTM asset or liability (external sources or modeled                  internally). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                  maturity, by year, of our net assets/liabilities giving an indication                  of                  when these MTM amounts will settle and generate                  cash.                       |

**Maturity        and Source of Fair Value of MTM**

**Risk        Management Contract Net Assets**

**Fair        Value of Contracts as of March 31, 2006**

**(in        thousands)**

|                                                                                                                                   |   | **Remainder****2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **After****2010** |   | **Total** |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-----------|--------|
| Prices                  Actively Quoted - Exchange Traded                  Contracts                                              |   | $                     | 5,775  |     | $      | 1,202    |   | $        | 534    |     | $      | (42               | )      | $         | -      |   | $ | - |   | $ | 7,469 |   |
| Prices                  Provided by Other External Sources                  - OTC                     Broker Quotes (a) |   |                  | 4,260  |     |   | 3,399    |   |     | 4,766  |     |   | 3,976             |   |      | -      |   |   | - |   |   | 16,401 |   |
| Prices                  Based on Models and Other Valuation                                      Methods (b)            |   |                  | (820   | )        |   | 3,667    |   |     | 2,438  |     |   | 2,351             |   |      | 5,034  |   |   | 420 |   |   | 13,090 |   |
| **Total**                                                                                                                              |   | $                     | 9,215  |     | $      | 8,268    |   | $        | 7,738  |     | $      | 6,285             |   | $         | 5,034  |   | $ | 420 |   | $ | 36,960 |   |

| (a) | “Prices                  Provided by Other External Sources - OTC Broker Quotes” reflects                  information obtained from over-the-counter brokers, industry services,                  or                  multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Prices                  Based on Models and Other Valuation Methods” is used in absence of pricing                  information from external sources. Modeled information is derived                  using                  valuation models developed by the reporting entity, reflecting                  when                  appropriate, option pricing theory, discounted cash flow concepts,                  valuation adjustments, etc. and may require projection of prices                  for                  underlying commodities beyond the period that prices are available                  from                  third-party sources. In addition, where external pricing information                  or                  market liquidity are limited, such valuations are classified as                  modeled.                  The determination of the point at which a market is no longer liquid                  for                  placing it in the modeled category varies by                  market. |

**Cash        Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)        on        the Condensed Consolidated Balance Sheet **

**Total        Accumulated Other Comprehensive Income (Loss) Activity**

**Three        Months Ended March 31, 2006**

**(in        thousands)**

|                                                                                                          |   | **Power** |   |
|---------------------------------------------------------------------------------------------------------------|--------|-----------|--------|
| **Beginning                  Balance in AOCI December 31, 2005**                                              |   | $         | (859   | ) |
| Changes                  in Fair Value                                                                        |   |      | 3,510  |   |
| Reclassifications                  from AOCI to Net Income for Cash Flow                  Hedges Settled |   |      | 531    |   |
| **Ending                  Balance in AOCI March 31, 2006**                                                    |   | $         | 3,182  |   |

**Credit        Risk**

**VaR        Associated with Risk Management Contracts**

| **Three                  Months Ended****March                  31, 2006** |   |     |   |        | **Twelve                  Months Ended****December                  31, 2005** |
|----------------------------------------------------------------------------|--------|----------|--------|-------------|--------------------------------------------------------------------------------|
| **(in                  thousands)**                                        |   |     |   |        | **(in                  thousands)**                                            |
| **End**                                                                    |   | **High** |   | **Average** |                                                                           | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $403                                                                       |   | $948     |   | $513        |                                                                           | $253 |   |   |   |   | $424 |   | $705 |   | $335 |   | $121 |

**VaR        Associated with Debt Outstanding**

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**COLUMBUS        SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF INCOME**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                 |   | **2006** |    | **2005** |   |
|----------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **REVENUES**                                                         |   |     |    |     |   |
| Electric                  Generation, Transmission and Distribution  |   | $        | 413,669 |     | $      | 328,603 |   |
| Sales                  to AEP Affiliates                             |   |     | 13,769  |     |   | 34,814 |   |
| Other                                                                |   |     | 1,330   |     |   | 3,716 |   |
| **TOTAL**                                                            |   |     | 428,768 |     |   | 367,133 |   |
|                                                                 |   |     |    |     |   |   |   |
| **EXPENSES**                                                         |   |     |    |     |   |   |   |
| Fuel                  and Other Consumables for Electric Generation  |   |     | 69,820  |     |   | 66,435 |   |
| Purchased                  Electricity for Resale                    |   |     | 24,765  |     |   | 9,203 |   |
| Purchased                  Electricity from AEP Affiliates           |   |     | 82,477  |     |   | 79,775 |   |
| Other                  Operation                                     |   |     | 55,961  |     |   | 43,229 |   |
| Maintenance                                                          |   |     | 17,934  |     |   | 15,384 |   |
| Depreciation                  and Amortization                       |   |     | 45,812  |     |   | 38,198 |   |
| Taxes                  Other Than Income Taxes                       |   |     | 39,502  |     |   | 36,242 |   |
| **TOTAL**                                                            |   |     | 336,271 |     |   | 288,466 |   |
|                                                                 |   |     |    |     |   |   |   |
| **OPERATING                  INCOME**                                |   |     | 92,497  |     |   | 78,667 |   |
|                                                                 |   |     |    |     |   |   |   |
| **Other                  Income (Expense):**                         |   |     |    |     |   |   |   |
| Interest                  Income                                     |   |     | 455     |     |   | 917 |   |
| Carrying                  Costs Income                               |   |     | 716     |     |   | 2,757 |   |
| Allowance                  for Equity Funds Used During Construction |   |     | 464     |     |   | 279 |   |
| Interest                  Expense                                    |   |     | (17,520 | )        |   | (12,912 | ) |
|                                                                 |   |     |    |     |   |   |   |
| **INCOME                  BEFORE INCOME TAXES**                      |   |     | 76,612  |     |   | 69,708 |   |
|                                                                 |   |     |    |     |   |   |   |
| Income                  Tax Expense                                  |   |     | 25,275  |     |   | 22,240 |   |
|                                                                 |   |     |    |     |   |   |   |
| **NET                  INCOME**                                      |   |     | 51,337  |     |   | 47,468 |   |
|                                                                 |   |     |    |     |   |   |   |
| Capital                  Stock Expense                               |   |     | 39      |     |   | 254 |   |
|                                                                 |   |     |    |     |   |   |   |
| **EARNINGS                  APPLICABLE TO COMMON STOCK**             |   | $        | 51,298  |     | $      | 47,214 |   |

*The        common stock of CSPCo is wholly-owned by AEP.*

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

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**COLUMBUS        SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S**

**EQUITY        AND COMPREHENSIVE INCOME (LOSS)**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                |   | **Common                  Stock** |   | **Paid-in                  Capital** |   | **Retained                  Earnings** |   | **Accumulated                  Other Comprehensive Income (Loss)** |    | **Total** |   |
|---------------------------------------------------------------------|--------|-----------------------------------|--------|--------------------------------------|--------|----------------------------------------|--------|--------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                  31, 2004**                              |   | $                                 | 41,026 |                                 | $      | 577,415                                |   | $                                                                  | 341,025 |      | $      | (60,816 | ) | $ | 898,650 |   |
|                                                                |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| Common                  Stock Dividends                             |   |                              |   |                                 |   |                                   |   |                                                               | (28,500 | )         |   |   |   |   | (28,500 | ) |
| Capital                  Stock Expense                              |   |                              |   |                                 |   | 254                                    |   |                                                               | (254    | )         |   |   |   |   | - |   |
| **TOTAL**                                                           |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   | 870,150 |   |
|                                                                |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                           |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **Other                  Comprehensive Loss, Net of Taxes:**        |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| Cash                  Flow Hedges, Net of Tax of $3,109             |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   | (5,774 | ) |   | (5,774 | ) |
| **NET                  INCOME**                                     |   |                              |   |                                 |   |                                   |   |                                                               | 47,468  |      |   |   |   |   | 47,468 |   |
| **TOTAL                  COMPREHENSIVE INCOME**                     |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   | 41,694 |   |
|                                                                |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **MARCH                  31, 2005**                                 |   | $                                 | 41,026 |                                 | $      | 577,669                                |   | $                                                                  | 359,739 |      | $      | (66,590 | ) | $ | 911,844 |   |
|                                                                |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **DECEMBER                  31, 2005**                              |   | $                                 | 41,026 |                                 | $      | 580,035                                |   | $                                                                  | 361,365 |      | $      | (880 | ) | $ | 981,546 |   |
|                                                                |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| Common                  Stock Dividends                             |   |                              |   |                                 |   |                                   |   |                                                               | (22,500 | )         |   |   |   |   | (22,500 | ) |
| Capital                  Stock Expense                              |   |                              |   |                                 |   | 39                                     |   |                                                               | (39     | )         |   |   |   |   | - |   |
| **TOTAL**                                                           |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   | 959,046 |   |
|                                                                |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                           |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **Other                  Comprehensive Income, Net of Taxes:** |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| Cash                  Flow Hedges, Net of Tax of $2,176             |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   | 4,041 |   |   | 4,041 |   |
| **NET                  INCOME**                                     |   |                              |   |                                 |   |                                   |   |                                                               | 51,337  |      |   |   |   |   | 51,337 |   |
| **TOTAL                  COMPREHENSIVE INCOME**                     |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   | 55,378 |   |
|                                                                |   |                              |   |                                 |   |                                   |   |                                                               |    |      |   |   |   |   |   |   |
| **MARCH                  31, 2006**                                 |   | $                                 | 41,026 |                                 | $      | 580,074                                |   | $                                                                  | 390,163 |      | $      | 3,161 |   | $ | 1,014,424 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**COLUMBUS        SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**March        31, 2006 and December 31, 2005**

**(in        thousands)**

**(Unaudited)**

|                                                       |   | **2006**     |      | **2005**     |   |
|------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **CURRENT                  ASSETS**                        |   |    |      |    |   |
| Cash                  and Cash Equivalents                 |   | $            | 757       |         | $      | 940 |   |
| Advances                  to Affiliates                    |   |         | 6,867     |         |   | - |   |
| Accounts                  Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                  |   |         | 57,283    |         |   | 43,143 |   |
| Affiliated                  Companies                      |   |         | 22,610    |         |   | 67,694 |   |
| Accrued                  Unbilled Revenues                 |   |         | 6,080     |         |   | 10,086 |   |
| Miscellaneous                                              |   |         | 3,828     |         |   | 2,012 |   |
| Allowance                  for Uncollectible Accounts      |   |         | (1,243    | )            |   | (1,082 | ) |
| Total                  Accounts Receivable                 |   |         | 88,558    |         |   | 121,853 |   |
| Fuel                                                       |   |         | 36,099    |         |   | 28,579 |   |
| Materials                  and Supplies                    |   |         | 27,430    |         |   | 27,519 |   |
| Emission                  Allowances                       |   |         | 15,350    |         |   | 20,181 |   |
| Risk                  Management Assets                    |   |         | 66,840    |         |   | 76,507 |   |
| Margin                  Deposits                           |   |         | 21,809    |         |   | 16,832 |   |
| Accrued                  Tax Benefits                      |   |         | 15,417    |         |   | 36,838 |   |
| Prepayments                  and Other                     |   |         | 8,760     |         |   | 6,714 |   |
| **TOTAL**                                                  |   |         | 287,887   |         |   | 335,963 |   |
|                                                       |   |         |      |         |   |   |   |
| **PROPERTY,                  PLANT AND EQUIPMENT**         |   |         |      |         |   |   |   |
| Electric:                                                  |   |         |      |         |   |   |   |
| Production                                                 |   |         | 1,883,412 |         |   | 1,874,652 |   |
| Transmission                                               |   |         | 468,553   |         |   | 457,937 |   |
| Distribution                                               |   |         | 1,411,856 |         |   | 1,380,722 |   |
| Other                                                      |   |         | 186,223   |         |   | 184,096 |   |
| Construction                  Work in Progress             |   |         | 152,937   |         |   | 129,246 |   |
| **Total**                                                  |   |         | 4,102,981 |         |   | 4,026,653 |   |
| Accumulated                  Depreciation and Amortization |   |         | 1,539,816 |         |   | 1,500,858 |   |
| **TOTAL                  - NET**                           |   |         | 2,563,165 |         |   | 2,525,795 |   |
|                                                       |   |         |      |         |   |   |   |
| **OTHER                  NONCURRENT ASSETS**               |   |         |      |         |   |   |   |
| Regulatory                  Assets                         |   |         | 225,936   |         |   | 231,599 |   |
| Long-term                  Risk Management Assets          |   |         | 93,629    |         |   | 101,512 |   |
| Deferred                  Charges and Other                |   |         | 228,604   |         |   | 237,925 |   |
| **TOTAL**                                                  |   |         | 548,169   |         |   | 571,036 |   |
|                                                       |   |         |      |         |   |   |   |
| **TOTAL                  ASSETS**                          |   | $            | 3,399,221 |         | $      | 3,432,794 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**COLUMBUS        SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

**LIABILITIES        AND SHAREHOLDER’S EQUITY**

**March        31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                        |   | **2006**                            |      | **2005** |   |
|-----------------------------------------------------------------------------|--------|-------------------------------------|-----------|----------|--------|
| **CURRENT                  LIABILITIES**                                    |   | **(in                  thousands)** |      |
| Advances                  from Affiliates                                   |   | $                                   | -         |     | $      | 17,609 |   |
| Accounts                  Payable:                                          |   |                                |      |     |   |   |   |
| General                                                                     |   |                                | 84,371    |     |   | 59,134 |   |
| Affiliated                  Companies                                       |   |                                | 47,503    |     |   | 59,399 |   |
| Risk                  Management Liabilities                                |   |                                | 52,023    |     |   | 69,036 |   |
| Customer                  Deposits                                          |   |                                | 39,112    |     |   | 47,013 |   |
| Accrued                  Taxes                                              |   |                                | 128,435   |     |   | 157,729 |   |
| Accrued                  Interest                                           |   |                                | 14,781    |     |   | 18,908 |   |
| Other                                                                       |   |                                | 24,750    |     |   | 31,321 |   |
| **TOTAL**                                                                   |   |                                | 390,975   |     |   | 460,149 |   |
|                                                                        |   |                                |      |     |   |   |   |
| **NONCURRENT                  LIABILITIES**                                 |   |                                |      |     |   |   |   |
| Long-term                  Debt - Nonaffiliated                             |   |                                | 1,097,021 |     |   | 1,096,920 |   |
| Long-term                  Debt - Affiliated                                |   |                                | 100,000   |     |   | 100,000 |   |
| Long-term                  Risk Management Liabilities                      |   |                                | 73,954    |     |   | 84,291 |   |
| Deferred                  Income Taxes                                      |   |                                | 504,062   |     |   | 498,232 |   |
| Regulatory                  Liabilities and Deferred Investment Tax Credits |   |                                | 171,700   |     |   | 165,344 |   |
| Deferred                  Credits and Other                                 |   |                                | 47,085    |     |   | 46,312 |   |
| **TOTAL**                                                                   |   |                                | 1,993,822 |     |   | 1,991,099 |   |
|                                                                        |   |                                |      |     |   |   |   |
| **TOTAL                  LIABILITIES**                                      |   |                                | 2,384,797 |     |   | 2,451,248 |   |
|                                                                        |   |                                |      |     |   |   |   |
| Commitments                  and Contingencies (Note 5)                     |   |                                |      |     |   |   |   |
|                                                                        |   |                                |      |     |   |   |   |
| **COMMON                  SHAREHOLDER’S EQUITY**                      |   |                                |      |     |   |   |   |
| Common                  Stock - No Par Value Per Share:                     |   |                                |      |     |   |   |   |
| Authorized                  - 24,000,000 Shares                             |   |                                |      |     |   |   |   |
| Outstanding                  - 16,410,426 Shares                            |   |                                | 41,026    |     |   | 41,026 |   |
| Paid-in                  Capital                                            |   |                                | 580,074   |     |   | 580,035 |   |
| Retained                  Earnings                                          |   |                                | 390,163   |     |   | 361,365 |   |
| Accumulated                  Other Comprehensive Income (Loss)              |   |                                | 3,161     |     |   | (880 | ) |
| **TOTAL**                                                                   |   |                                | 1,014,424 |     |   | 981,546 |   |
|                                                                        |   |                                |      |     |   |   |   |
| **TOTAL                  LIABILITIES AND SHAREHOLDER’S EQUITY**       |   | $                                   | 3,399,221 |     | $      | 3,432,794 |   |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**COLUMBUS        SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For        the Three Months Ended March 31, 2006 and 2005**

**(in        thousands)**

**(Unaudited)**

|                                                                              |   | **2006**     |    | **2005**     |   |
|-----------------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                  ACTIVITIES**                                         |   |    |    |    |   |
| **Net                  Income**                                                   |   | $            | 51,337  |         | $      | 47,468 |   |
| **Adjustments                  for Noncash Items:**                               |   |         |    |         |   |   |   |
| Depreciation                  and Amortization                                    |   |         | 45,812  |         |   | 38,198 |   |
| Deferred                  Income Taxes                                            |   |         | 3,816   |         |   | (2,613 | ) |
| Carrying                  Costs Income                                            |   |         | (716    | )            |   | (2,757 | ) |
| Mark-to-Market                  of Risk Management Contracts                      |   |         | (3,624  | )            |   | (5,120 | ) |
|    Pension                  Contributions to Qualified Plan Trusts |   |         | -       |         |   | (12,611 | ) |
| Deferred                  Property Taxes                                          |   |         | 10,884  |         |   | 15,938 |   |
| Change                  in Other Noncurrent Assets                                |   |         | (11,084 | )            |   | (18,027 | ) |
| Change                  in Other Noncurrent Liabilities                           |   |         | 5,800   |         |   | 171 |   |
| **Changes                  in Components of Working Capital:**                    |   |         |    |         |   |   |   |
| Accounts                  Receivable, Net                                         |   |         | 33,295  |         |   | 14,059 |   |
| Fuel,                  Materials and Supplies                                     |   |         | (7,431  | )            |   | 7,529 |   |
| Accounts                  Payable                                                 |   |         | 12,540  |         |   | (18,636 | ) |
| Accrued                  Taxes, Net                                               |   |         | (7,873  | )            |   | (61,908 | ) |
| Customer                  Deposits                                                |   |         | (7,901  | )            |   | 6,173 |   |
| Accrued                  Interest                                                 |   |         | (4,127  | )            |   | (8,271 | ) |
| Other                  Current Assets                                             |   |         | (728    | )            |   | (3,926 | ) |
| Other                  Current Liabilities                                        |   |         | (6,571  | )            |   | (8,031 | ) |
| **Net                  Cash Flows From (Used For) Operating Activities**          |   |         | 113,429 |         |   | (12,364 | ) |
|                                                                              |   |         |    |         |   |   |   |
| **INVESTING                  ACTIVITIES**                                         |   |         |    |         |   |   |   |
| Construction                  Expenditures                                        |   |         | (65,032 | )            |   | (36,227 | ) |
| Change                  in Other Cash Deposits, Net                               |   |         | (1,151  | )            |   | (7,125 | ) |
| Change                  in Advances to Affiliates, Net                            |   |         | (6,867  | )            |   | 82,134 |   |
| Proceeds                  from Sale of Assets                                     |   |         | 306     |         |   | 3,663 |   |
| **Net                  Cash Flows From (Used For) Investing Activities**          |   |         | (72,744 | )            |   | 42,445 |   |
|                                                                              |   |         |    |         |   |   |   |
| **FINANCING                  ACTIVITIES**                                         |   |         |    |         |   |   |   |
| Change                  in Advances from Affiliates, Net                          |   |         | (17,609 | )            |   | - |   |
| Principal                  Payments for Capital Lease Obligations                 |   |         | (759    | )            |   | (935 | ) |
| Dividends                  Paid on Common Stock                                   |   |         | (22,500 | )            |   | (28,500 | ) |
| **Net                  Cash Flows Used For Financing Activities**                 |   |         | (40,868 | )            |   | (29,435 | ) |
|                                                                              |   |         |    |         |   |   |   |
| **Net                  Increase (Decrease) in Cash and Cash Equivalents**         |   |         | (183    | )            |   | 646 |   |
| **Cash                  and Cash Equivalents at Beginning of Period**             |   |         | 940     |         |   | 58 |   |
| **Cash                  and Cash Equivalents at End of Period**                   |   | $            | 757     |         | $      | 704 |   |

| **SUPPLEMENTAL                  DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                  paid for interest net of capitalized amounts was $22,320,000 and                  $21,898,000 and for income taxes net of refunds was $2,533,000                  and                  $57,037,000 in 2006 and 2005, respectively. Noncash capital lease                  acquisitions in 2006 and 2005 were $1,102,000 and $160,000, respectively.                  Noncash construction expenditures included in Accounts Payable                  of                  $12,054,000 and $2,771,000 were outstanding as of March 31, 2006                  and 2005,                  respectively. |

*See        Condensed Notes to Condensed Financial Statements of Registrant        Subsidiaries.*

----

**COLUMBUS        SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**INDEX        TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT        SUBSIDIARIES**

|                                                        | **Footnote****Reference** |
|-------------------------------------------------------------|---------------------------|
|                                                        |                      |
| Significant                  Accounting Matters             | Note                  1   |
| New                  Accounting Pronouncements              | Note                  2   |
| Rate                  Matters                               | Note                  3   |
| Customer                  Choice and Industry Restructuring | Note                  4   |
| Commitments                  and Contingencies              | Note                  5   |
| Guarantees                                                  | Note                  6   |
| Company-wide                  Staffing and Budget Review    | Note                  7   |
| Benefit                  Plans                              | Note                  9   |
| Business                  Segments                          | Note                  10  |
| Financing                  Activities                       | Note                  11  |

----

**INDIANA          MICHIGAN POWER COMPANY**

**AND          SUBSIDIARIES**

----

**INDIANA          MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**MANAGEMENT’S          FINANCIAL DISCUSSION AND ANALYSIS**

**Results          of Operations**

**Reconciliation          of First Quarter of 2005 to First Quarter of 2006 Net          Income**

**(in          millions)**

| **First                    Quarter of 2005**                        |   |   |   |   | $      | 40     |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                    Margins                                   |   |   | 6      |   |   |   |   |
| Off-System                    Sales (a)                             |   |   | 16     |   |   |   |   |
| Transmission                    Revenues                            |   |   | 2      |   |   |   |   |
| Other                                                               |   |   | 12     |   |   |   |   |
| **Total                    Change in Gross Margin**                 |   |   |   |   |   | 36     |   |
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                  |   |   | (4     | )      |   |   |   |
| Depreciation                    and Amortization                    |   |   | (1     | )      |   |   |   |
| Interest                    Expense                                 |   |   | (2     | )      |   |   |   |
| **Total                    Change in Operating Expenses and Other** |   |   |   |   |   | (7     | )      |
|                                                                |   |   |   |   |   |   |   |
| Income                    Tax Expense                               |   |   |   |   |   | (11    | )      |
|                                                                |   |   |   |   |   |   |   |
| **First                    Quarter of 2006**                        |   |   |   |   | $      | 58     |   |

| (a) | Includes                    firm wholesale sales to municipals and                    cooperatives. |
|-----|-----------------------------------------------------------------------------------------------------|

| · | Retail                    Margins increased $6 million primarily due to increases in industrial                    sales and capacity settlement revenues of $3 million under the                    Interconnection Agreement.                                                                                                                                                                                                                                                                                                                                                                          |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Off-system                    Sales increased $16 million primarily due to the addition of                    new municipal                    contracts including new rates and increased demand beginning                    January                    2006.                                                                                                                                                                                                                                                                                                                                          |
| · | Other                    revenues                    increased $12 million primarily due to increased River Transportation                    Division (RTD) revenues for barging coal to affiliated companies’ plants                    and gains on sales of emission allowances. Related expenses which                    offset                    the RTD revenue increase are included in Other Operation on the                    Condensed                    Consolidated Statements of Income resulting in our earning only                    an                    approved return. |

| · | Other Operation                    and Maintenance expenses increased $4 million primarily due to                    higher                    expenses for RTD and the gain for settlement and cancellation                    of the                    corporate owned life insurance policies in February 2005 partially                    offset                    by a reduction in distribution maintenance expense. Prior year                    distribution maintenance expense for overhead power lines included                    the                    costs of the January 2005 ice                    storm. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Income          Taxes*

**Financial          Condition**

**Credit          Ratings**

|                                     | **Moody’s** |   | **S&P** |   | **Fitch** |
|------------------------------------------|-------------------|--------|-------------|--------|-----------|
|                                     |              |   |        |   |      |
| Senior                    Unsecured Debt | Baa2              |   | BBB         |   | BBB       |

**Cash          Flow**

|                                                                    |   | **2006**                              |     | **2005**     |   |
|-------------------------------------------------------------------------|--------|---------------------------------------|----------|--------------|--------|
|                                                                    |   | **(in                    thousands)** |     |
|                                                                    |   |                             |     |    |   |
| **Cash                    and Cash Equivalents at Beginning of Period** |   | $                                     | 854      |         | $      | 511 |   |
| Net                    Cash Flows From (Used For):                      |   |                                  |     |         |   |   |   |
| Operating                    Activities                                 |   |                                  | 195,328  |         |   | 70,893 |   |
| Investing                    Activities                                 |   |                                  | (139,649 | )            |   | (82,849 | ) |
| Financing                    Activities                                 |   |                                  | (55,924  | )            |   | 12,019 |   |
| Net                    Increase (Decrease) in Cash and Cash Equivalents |   |                                  | (245     | )            |   | 63 |   |
| **Cash                    and Cash Equivalents at End of Period**       |   | $                                     | 609      |         | $      | 574 |   |

*Operating          Activities*

*Investing          Activities*

*Financing          Activities*

**Financing          Activity**

**Liquidity**

**Off-Balance          Sheet Arrangements**

**Summary          Obligation Information**
** **

**Significant          Factors**

***Litigation          and Regulatory Activity***

**Critical          Accounting Estimates**

----

**QUANTITATIVE          AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT          ACTIVITIES**

**Market          Risks**

**MTM          Risk Management Contract Net Assets**

**Reconciliation          of MTM Risk Management Contracts to**

**Condensed          Consolidated Balance Sheet**

**As          of March 31, 2006**

**(in          thousands)**

|                                                                                                   |   | **MTM                    Risk Management Contracts** |     | **Cash                    Flow &****Fair                    Value Hedges** |   | **DETM                    Assignment (a)** |   | **Total** |   |
|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|----------|--------------------------------------------------------------------------------|--------|--------------------------------------------|--------|-----------|--------|
| Current                    Assets                                                                      |   | $                                                    | 60,866   |                                                                           | $      | 7,239                                      |   | $         | -      |   | $ | 68,105 |   |
| Noncurrent                    Assets                                                                   |   |                                                 | 94,960   |                                                                           |   | 456                                        |   |      | -      |   |   | 95,416 |   |
| **Total                    MTM Derivative Contract Assets**                                            |   |                                                 | 155,826  |                                                                           |   | 7,695                                      |   |      | -      |   |   | 163,521 |   |
|                                                                                                   |   |                                                 |     |                                                                           |   |                                       |   |      |   |   |   |   |   |
| Current                    Liabilities                                                                 |   |                                                 | (49,439  | )                                                                              |   | (3,264                                     | )      |      | (749   | ) |   | (53,452 | ) |
| Noncurrent                    Liabilities                                                              |   |                                                 | (68,380  | )                                                                              |   | (237                                       | )      |      | (6,560 | ) |   | (75,177 | ) |
| **Total                    MTM Derivative Contract  Liabilities**                                 |   |                                                 | (117,819 | )                                                                              |   | (3,501                                     | )      |      | (7,309 | ) |   | (128,629 | ) |
|                                                                                                   |   |                                                 |     |                                                                           |   |                                       |   |      |   |   |   |   |   |
| **Total                    MTM Derivative Contract Net  Assets                    (Liabilities)** |   | $                                                    | 38,007   |                                                                           | $      | 4,194                                      |   | $         | (7,309 | ) | $ | 34,892 |   |

| (a) | See                    “Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual                    Report. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

**MTM          Risk Management Contract Net Assets**

**Three          Months Ended March 31, 2006**

**(in          thousands)**

| **Total                    MTM Risk Management Contract Net Assets at December 31,                    2005**                                                                                 |   | $      | 33,932 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                    Loss from Contracts Realized/Settled During the Period and Entered                    in a                    Prior Period                                         |   |   | 977    |   |
| Fair                    Value of New Contracts at Inception When Entered During the Period                    (a)                                                                            |   |   | -      |   |
| Net                    Option Premiums Paid/(Received) for Unexercised or Unexpired                    Option                    Contracts Entered During                    the Period |   |   | (655   | )      |
| Change                    in Fair Value Due to Valuation Methodology Changes on Forward                    Contracts                                                                         |   |   | -      |   |
| Changes                    in Fair Value Due to Market Fluctuations During the Period                    (b)                                                                                 |   |   | (2,054 | )      |
| Changes                    in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                                            |   |   | 5,807  |   |
| **Total                    MTM Risk Management Contract Net Assets**                                                                                                                         |   |   | 38,007 |   |
| Net                    Cash Flow & Fair Value Hedge Contracts                                                                                                                            |   |   | 4,194  |   |
| DETM                    Assignment (d)                                                                                                                                                       |   |   | (7,309 | )      |
| **Total                    MTM Risk Management Contract Net Assets at March 31,                    2006**                                                                                    |   | $      | 34,892 |   |

| (a) | Most                    of the fair value comes from longer term fixed price contracts                    with                    customers that seek to limit their risk against fluctuating energy                    prices.                    Inception value is only recorded if observable market data can                    be obtained                    for valuation inputs for the entire contract term. The contract                    prices are                    valued against market curves associated with the delivery location                    and                    delivery term. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                    fluctuations are attributable to various factors such as supply/demand,                    weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (c) | “Changes                    in Fair Value Allocated to Regulated Jurisdictions” relates to the net                    gains (losses) of those contracts that are not reflected in our                    Condensed                    Consolidated Statements of Income. These net gains (losses) are                    recorded                    as regulatory liabilities/assets for those subsidiaries that                    operate in                    regulated jurisdictions.                                                                                                          |
| (d) | See                    “Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual                    Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

**Maturity          and Source of Fair Value of MTM Risk Management Contract Net          Assets**

| · | The                    method of measuring fair value used in determining the carrying                    amount of                    our total MTM asset or liability (external sources or modeled                    internally). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                    maturity, by year, of our net assets/liabilities giving an indication                    of                    when these MTM amounts will settle and generate                    cash.                       |

**Maturity          and Source of Fair Value of MTM**

**Risk          Management Contract Net Assets**

**Fair          Value of Contracts as of March 31, 2006**

**(in          thousands)**

|                                                                                                                                         |   | **Remainder                    2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **After****2010** |   | **Total** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-----------|--------|
| Prices                    Actively Quoted - Exchange Traded                    Contracts                                                |   | $                                     | 5,899  |     | $      | 1,228    |   | $        | 545    |     | $      | (43               | )      | $         | -      |   | $ | - |   | $ | 7,629 |   |
| Prices                    Provided by Other External Sources                    - OTC Broker                       Quotes (a) |   |                                  | 4,433  |     |   | 3,374    |   |     | 4,836  |     |   | 4,061             |   |      | -      |   |   | - |   |   | 16,704 |   |
| Prices                    Based on Models and Other Valuation                    Methods (b)                                            |   |                                  | (819   | )        |   | 3,926    |   |     | 2,595  |     |   | 2,401             |   |      | 5,142  |   |   | 429 |   |   | 13,674 |   |
| **Total**                                                                                                                                    |   | $                                     | 9,513  |     | $      | 8,528    |   | $        | 7,976  |     | $      | 6,419             |   | $         | 5,142  |   | $ | 429 |   | $ | 38,007 |   |

| (a) | “Prices                    Provided by Other External Sources - OTC Broker Quotes” reflects                    information obtained from over-the-counter brokers, industry                    services, or                    multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Prices                    Based on Models and Other Valuation Methods” is used in absence of pricing                    information from external sources. Modeled information is derived                    using                    valuation models developed by the reporting entity, reflecting                    when                    appropriate, option pricing theory, discounted cash flow concepts,                    valuation adjustments, etc. and may require projection of prices                    for                    underlying commodities beyond the period that prices are available                    from                    third-party sources. In addition, where external pricing information                    or                    market liquidity are limited, such valuations are classified                    as modeled.                    The determination of the point at which a market is no longer                    liquid for                    placing it in the modeled category varies by                    market. |

**Cash          Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)          on          the Condensed Consolidated Balance Sheet **

**Total          Accumulated Other Comprehensive Income (Loss) Activity**

**Three          Months Ended March 31, 2006**

**(in          thousands)**

|                                                                                                              |   | **Power** |   | **Interest                    Rate** |   | **Total** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------------------------------------|--------|-----------|--------|
| **Beginning                    Balance in AOCI December 31, 2005**                                                |   | $         | (877   | )                                    | $      | (2,590    | )      | $ | (3,467 | ) |
| Changes                    in Fair Value                                                                          |   |      | 3,585  |                                 |   | -         |   |   | 3,585 |   |
| Reclassifications                    from AOCI to Net Income for Cash Flow                    Hedges Settled |   |      | 542    |                                 |   | 80        |   |   | 622 |   |
| **Ending                    Balance in AOCI March 31, 2006**                                                      |   | $         | 3,250  |                                 | $      | (2,510    | )      | $ | 740 |   |

**Credit          Risk**

**VaR          Associated with Risk Management Contracts**

| **Three                    Months Ended****March                    31, 2006** |   |     |   |        | **Twelve                    Months Ended****December                    31, 2005** |
|--------------------------------------------------------------------------------|--------|----------|--------|-------------|------------------------------------------------------------------------------------|
| **(in                    thousands)**                                          |   |     |   |        | **(in                    thousands)**                                              |
| **End**                                                                        |   | **High** |   | **Average** |                                                                               | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $412                                                                           |   | $968     |   | $524        |                                                                               | $258 |   |   |   |   | $433 |   | $720 |   | $343 |   | $124 |

**VaR          Associated with Debt Outstanding**

----

**INDIANA          MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED          CONSOLIDATED STATEMENTS OF INCOME**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                                     |   | **2006** |    | **2005** |   |
|------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **REVENUES**                                                                             |   |     |    |     |   |
| Electric                    Generation, Transmission and Distribution                    |   | $        | 403,769 |     | $      | 348,353 |   |
| Sales                    to AEP Affiliates                                               |   |     | 88,534  |     |   | 92,538 |   |
| Other                    - Affiliated                                                    |   |     | 15,094  |     |   | 10,339 |   |
| Other                    - Nonaffiliated                                                 |   |     | 8,382   |     |   | 6,329 |   |
| **TOTAL**                                                                                |   |     | 515,779 |     |   | 457,559 |   |
|                                                                                     |   |     |    |     |   |   |   |
| **EXPENSES**                                                                             |   |     |    |     |   |   |   |
| Fuel                    and Other Consumables for Electric Generation                    |   |     | 89,452  |     |   | 79,237 |   |
| Purchased                    Electricity for Resale                                      |   |     | 11,010  |     |   | 11,272 |   |
| Purchased                    Electricity from AEP Affiliates                             |   |     | 86,422  |     |   | 74,009 |   |
| Other                    Operation                                                       |   |     | 117,206 |     |   | 104,402 |   |
| Maintenance                                                                              |   |     | 45,219  |     |   | 54,322 |   |
| Depreciation                    and Amortization                                         |   |     | 44,126  |     |   | 42,745 |   |
| Taxes                    Other Than Income Taxes                                         |   |     | 18,906  |     |   | 18,682 |   |
| **TOTAL**                                                                                |   |     | 412,341 |     |   | 384,669 |   |
|                                                                                     |   |     |    |     |   |   |   |
| **OPERATING                    INCOME**                                                  |   |     | 103,438 |     |   | 72,890 |   |
|                                                                                     |   |     |    |     |   |   |   |
| **Other                    Income (Expense):**                                           |   |     |    |     |   |   |   |
| Interest                    Income                                                       |   |     | 694     |     |   | 433 |   |
| Allowance                    for Equity Funds Used During Construction                   |   |     | 1,924   |     |   | 1,649 |   |
| Interest                    Expense                                                      |   |     | (17,533 | )        |   | (15,606 | ) |
|                                                                                     |   |     |    |     |   |   |   |
| **INCOME                    BEFORE INCOME TAXES**                                        |   |     | 88,523  |     |   | 59,366 |   |
|                                                                                     |   |     |    |     |   |   |   |
| Income                    Tax Expense                                                    |   |     | 30,645  |     |   | 19,697 |   |
|                                                                                     |   |     |    |     |   |   |   |
| **NET                    INCOME**                                                        |   |     | 57,878  |     |   | 39,669 |   |
|                                                                                     |   |     |    |     |   |   |   |
| Preferred                    Stock Dividend Requirements including Capital Stock Expense |   |     | 85      |     |   | 118 |   |
|                                                                                     |   |     |    |     |   |   |   |
| **EARNINGS                    APPLICABLE TO COMMON STOCK**                               |   | $        | 57,793  |     | $      | 39,551 |   |

*The          common stock of I&M is wholly-owned by AEP.*

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**INDIANA          MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED          CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S**

**EQUITY          AND COMPREHENSIVE INCOME (LOSS)**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                                         |   | **Common                    Stock** |   | **Paid-in                    Capital** |   | **Retained                    Earnings** |   | **Accumulated                    Other Comprehensive Income (Loss)** |    | **Total** |   |
|----------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|----------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                    31, 2004**                                                     |   | $                                   | 56,584 |                                   | $      | 858,835                                  |   | $                                                                    | 221,330 |      | $      | (45,251 | ) | $ | 1,091,498 |   |
|                                                                                         |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Common                    Stock Dividends                                                    |   |                                |   |                                   |   |                                     |   |                                                                 | (21,000 | )         |   |   |   |   | (21,000 | ) |
| Preferred                    Stock Dividends                                                 |   |                                |   |                                   |   |                                     |   |                                                                 | (85     | )         |   |   |   |   | (85 | ) |
| Capital                    Stock Expense                                                     |   |                                |   |                                   |   | 33                                       |   |                                                                 | (33     | )         |   |   |   |   | - |   |
| **TOTAL**                                                                                    |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 1,070,413 |   |
|                                                                                         |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                                                  |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:**                               |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $3,400                                    |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   | (6,313 | ) |   | (6,313 | ) |
| **NET                    INCOME**                                                            |   |                                |   |                                   |   |                                     |   |                                                                 | 39,669  |      |   |   |   |   | 39,669 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                                            |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 33,356 |   |
|                                                                                         |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **MARCH                    31, 2005**                                                        |   | $                                   | 56,584 |                                   | $      | 858,868                                  |   | $                                                                    | 239,881 |      | $      | (51,564 | ) | $ | 1,103,769 |   |
|                                                                                         |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **DECEMBER                    31, 2005**                                                     |   | $                                   | 56,584 |                                   | $      | 861,290                                  |   | $                                                                    | 305,787 |      | $      | (3,569 | ) | $ | 1,220,092 |   |
|                                                                                         |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Common                    Stock Dividends                                                    |   |                                |   |                                   |   |                                     |   |                                                                 | (10,000 | )         |   |   |   |   | (10,000 | ) |
| Preferred                    Stock Dividends                                                 |   |                                |   |                                   |   |                                     |   |                                                                 | (85     | )         |   |   |   |   | (85 | ) |
| **TOTAL**                                                                                    |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 1,210,007 |   |
|                                                                                         |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                                                  |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Income, ****Net                    of Taxes:** |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $2,265                                    |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   | 4,207 |   |   | 4,207 |   |
| **NET                    INCOME**                                                            |   |                                |   |                                   |   |                                     |   |                                                                 | 57,878  |      |   |   |   |   | 57,878 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                                            |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 62,085 |   |
|                                                                                         |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **MARCH                    31, 2006**                                                        |   | $                                   | 56,584 |                                   | $      | 861,290                                  |   | $                                                                    | 353,580 |      | $      | 638 |   | $ | 1,272,092 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**INDIANA          MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**March          31, 2006 and December 31, 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                                                      |   | **2006**     |      | **2005**     |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **CURRENT                    ASSETS**                                                                     |   |    |      |    |   |
| Cash                    and Cash Equivalents                                                              |   | $            | 609       |         | $      | 854 |   |
| Accounts                    Receivable:                                                                   |   |         |      |         |   |   |   |
| Customers                                                                                                 |   |         | 68,193    |         |   | 62,614 |   |
| Affiliated                    Companies                                                                   |   |         | 79,243    |         |   | 127,981 |   |
| Miscellaneous                                                                                             |   |         | 2,131     |         |   | 1,982 |   |
| Allowance                    for Uncollectible Accounts                                                   |   |         | (907      | )            |   | (898 | ) |
| Total                    Accounts Receivable                                                              |   |         | 148,660   |         |   | 191,679 |   |
| Fuel                                                                                                      |   |         | 29,747    |         |   | 25,894 |   |
| Materials                    and Supplies                                                                 |   |         | 121,380   |         |   | 118,039 |   |
| Risk                    Management Assets                                                                 |   |         | 68,105    |         |   | 78,134 |   |
| Accrued                    Tax Benefits                                                                   |   |         | 26,000    |         |   | 51,846 |   |
| Margin                    Deposits                                                                        |   |         | 22,276    |         |   | 17,115 |   |
| Prepayments                    and Other                                                                  |   |         | 8,602     |         |   | 14,188 |   |
| **TOTAL**                                                                                                 |   |         | 425,379   |         |   | 497,749 |   |
|                                                                                                      |   |         |      |         |   |   |   |
| **PROPERTY,                    PLANT AND EQUIPMENT**                                                      |   |         |      |         |   |   |   |
| Electric:                                                                                                 |   |         |      |         |   |   |   |
| Production                                                                                                |   |         | 3,146,481 |         |   | 3,128,078 |   |
| Transmission                                                                                              |   |         | 1,031,154 |         |   | 1,028,496 |   |
| Distribution                                                                                              |   |         | 1,053,772 |         |   | 1,029,498 |   |
| Other                    (including nuclear fuel and coal mining)                                         |   |         | 463,346   |         |   | 465,130 |   |
| Construction                    Work in Progress                                                          |   |         | 332,470   |         |   | 311,080 |   |
| **Total**                                                                                                 |   |         | 6,027,223 |         |   | 5,962,282 |   |
| Accumulated                    Depreciation, Depletion and Amortization                                   |   |         | 2,850,675 |         |   | 2,822,558 |   |
| **TOTAL                    - NET**                                                                        |   |         | 3,176,548 |         |   | 3,139,724 |   |
|                                                                                                      |   |         |      |         |   |   |   |
| **OTHER                    NONCURRENT ASSETS**                                                            |   |         |      |         |   |   |   |
| Regulatory                    Assets                                                                      |   |         | 215,523   |         |   | 222,686 |   |
| Nuclear                    Decommissioning and Spent Nuclear Fuel Disposal Trust                    Funds |   |         | 1,160,089 |         |   | 1,133,567 |   |
| Long-term                    Risk Management Assets                                                       |   |         | 95,416    |         |   | 103,645 |   |
| Deferred                    Charges and Other                                                             |   |         | 171,164   |         |   | 164,938 |   |
| **TOTAL**                                                                                                 |   |         | 1,642,192 |         |   | 1,624,836 |   |
|                                                                                                      |   |         |      |         |   |   |   |
| **TOTAL                    ASSETS**                                                                       |   | $            | 5,244,119 |         | $      | 5,262,309 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**INDIANA          MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**LIABILITIES          AND SHAREHOLDERS’ EQUITY**

**March          31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                              |   | **2006**                              |      | **2005** |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------------|-----------|----------|--------|
| **CURRENT                    LIABILITIES**                                        |   | **(in                    thousands)** |      |
| Advances                    from Affiliates                                       |   | $                                     | 49,137    |     | $      | 93,702 |   |
| Accounts                    Payable:                                              |   |                                  |      |     |   |   |   |
| General                                                                           |   |                                  | 117,455   |     |   | 139,334 |   |
| Affiliated                    Companies                                           |   |                                  | 40,241    |     |   | 60,324 |   |
| Long-term                    Debt Due Within One Year                             |   |                                  | 364,406   |     |   | 364,469 |   |
| Risk                    Management Liabilities                                    |   |                                  | 53,452    |     |   | 71,032 |   |
| Customer                    Deposits                                              |   |                                  | 41,227    |     |   | 49,258 |   |
| Accrued                    Taxes                                                  |   |                                  | 73,592    |     |   | 56,567 |   |
| Other                                                                             |   |                                  | 110,506   |     |   | 112,839 |   |
| **TOTAL**                                                                         |   |                                  | 850,016   |     |   | 947,525 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **NONCURRENT                    LIABILITIES**                                     |   |                                  |      |     |   |   |   |
| Long-term                    Debt                                                 |   |                                  | 1,083,098 |     |   | 1,080,471 |   |
| Long-term                    Risk Management Liabilities                          |   |                                  | 75,177    |     |   | 86,159 |   |
| Deferred                    Income Taxes                                          |   |                                  | 340,347   |     |   | 335,264 |   |
| Regulatory                    Liabilities and Deferred Investment Tax Credits     |   |                                  | 729,080   |     |   | 710,015 |   |
| Asset                    Retirement Obligations                                   |   |                                  | 749,858   |     |   | 737,959 |   |
| Deferred                    Credits and Other                                     |   |                                  | 136,367   |     |   | 136,740 |   |
| **TOTAL**                                                                         |   |                                  | 3,113,927 |     |   | 3,086,608 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES**                                          |   |                                  | 3,963,943 |     |   | 4,034,133 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Cumulative                    Preferred Stock Not Subject to Mandatory Redemption |   |                                  | 8,084     |     |   | 8,084 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Commitments                    and Contingencies (Note 5)                         |   |                                  |      |     |   |   |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **COMMON                    SHAREHOLDER’S EQUITY**                          |   |                                  |      |     |   |   |   |
| Common                    Stock - No Par Value:                                   |   |                                  |      |     |   |   |   |
| Authorized                    - 2,500,000 Shares                                  |   |                                  |      |     |   |   |   |
| Outstanding                    - 1,400,000 Shares                                 |   |                                  | 56,584    |     |   | 56,584 |   |
| Paid-in                    Capital                                                |   |                                  | 861,290   |     |   | 861,290 |   |
| Retained                    Earnings                                              |   |                                  | 353,580   |     |   | 305,787 |   |
| Accumulated                    Other Comprehensive Income (Loss)                  |   |                                  | 638       |     |   | (3,569 | ) |
| **TOTAL**                                                                         |   |                                  | 1,272,092 |     |   | 1,220,092 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES AND SHAREHOLDERS’ EQUITY**           |   | $                                     | 5,244,119 |     | $      | 5,262,309 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**INDIANA          MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED          CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                                                                |   | **2006**     |     | **2005**     |   |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|
| **OPERATING                    ACTIVITIES**                                                                         |   |    |     |    |   |
| **Net                    Income**                                                                                   |   | $            | 57,878   |         | $      | 39,669 |   |
| **Adjustments                    for Noncash Items:**                                                               |   |         |     |         |   |   |   |
| Depreciation                    and Amortization                                                                    |   |         | 44,126   |         |   | 42,745 |   |
| Accretion                    of Asset Retirement Obligations                                                        |   |         | 11,907   |         |   | 11,664 |   |
| Deferred                    Income Taxes                                                                            |   |         | 3,493    |         |   | (876 | ) |
| Deferred                    Investment Tax Credits                                                                  |   |         | (1,820   | )            |   | (1,832 | ) |
| Amortization                    (Deferral) of Incremental Nuclear Refueling Outage Expenses,                    Net |   |         | (1,639   | )            |   | 5,517 |   |
| Amortization                    of Nuclear Fuel                                                                     |   |         | 13,596   |         |   | 14,394 |   |
| Mark-to-Market                    of Risk Management Contracts                                                      |   |         | (4,060   | )            |   | (5,722 | ) |
| Pension                    Contributions to Qualified Plan Trusts                                                   |   |         | -        |         |   | (15,350 | ) |
| Deferred                    Property Taxes                                                                          |   |         | (9,839   | )            |   | (9,089 | ) |
| Change                    in Other Noncurrent Assets                                                                |   |         | 11,184   |         |   | 4,699 |   |
| Change                    in Other Noncurrent Liabilities                                                           |   |         | 8,752    |         |   | 2,830 |   |
| **Changes                    in Components of Working Capital:**                                                    |   |         |     |         |   |   |   |
| Accounts                    Receivable, Net                                                                         |   |         | 43,019   |         |   | 23,265 |   |
| Fuel,                    Materials and Supplies                                                                     |   |         | (7,194   | )            |   | 4,455 |   |
| Accounts                    Payable                                                                                 |   |         | (7,010   | )            |   | (12,771 | ) |
| Accrued                    Taxes, Net                                                                               |   |         | 42,871   |         |   | (46,291 | ) |
| Accrued                    Interest                                                                                 |   |         | 11,623   |         |   | 9,607 |   |
| Customer                    Deposits                                                                                |   |         | (8,031   | )            |   | 4,751 |   |
| Accrued                    Rent - Rockport Plant Unit 2                                                             |   |         | 18,464   |         |   | 18,464 |   |
| Other                    Current Assets                                                                             |   |         | 428      |         |   | (5,072 | ) |
| Other                    Current Liabilities                                                                        |   |         | (32,420  | )            |   | (14,164 | ) |
| **Net                    Cash Flows From Operating Activities**                                                     |   |         | 195,328  |         |   | 70,893 |   |
|                                                                                                                |   |         |     |         |   |   |   |
| **INVESTING                    ACTIVITIES**                                                                         |   |         |     |         |   |   |   |
| Construction                    Expenditures                                                                        |   |         | (89,411  | )            |   | (52,456 | ) |
| Change                    in Advances to Affiliates, Net                                                            |   |         | -        |         |   | 5,093 |   |
| Changes                    in Other Cash Deposits, Net                                                              |   |         | (3       | )            |   | (7,966 | ) |
| Purchases                    of Investment Securities                                                               |   |         | (150,239 | )            |   | (151,980 | ) |
| Sales                    of Investment Securities                                                                   |   |         | 134,258  |         |   | 136,743 |   |
| Acquisitions                    of Nuclear Fuel                                                                     |   |         | (34,427  | )            |   | (21,444 | ) |
| Proceeds                    from Sales of Assets                                                                    |   |         | 173      |         |   | 9,161 |   |
| **Net                    Cash Flows Used For Investing Activities**                                                 |   |         | (139,649 | )            |   | (82,849 | ) |
|                                                                                                                |   |         |     |         |   |   |   |
| **FINANCING                    ACTIVITIES**                                                                         |   |         |     |         |   |   |   |
| Change                    in Advances from Affiliates, Net                                                          |   |         | (44,565  | )            |   | 95,967 |   |
| Retirement                    of Cumulative Preferred Stock                                                         |   |         | -        |         |   | (61,445 | ) |
| Principal                    Payments for Capital Lease Obligations                                                 |   |         | (1,274   | )            |   | (1,418 | ) |
| Dividends                    Paid on Common Stock                                                                   |   |         | (10,000  | )            |   | (21,000 | ) |
| Dividends                    Paid on Cumulative Preferred Stock                                                     |   |         | (85      | )            |   | (85 | ) |
| **Net                    Cash Flows From (Used For) Financing Activities**                                          |   |         | (55,924  | )            |   | 12,019 |   |
|                                                                                                                |   |         |     |         |   |   |   |
| **Net                    Increase (Decrease) in Cash and Cash Equivalents**                                         |   |         | (245     | )            |   | 63 |   |
| **Cash                    and Cash Equivalents at Beginning of Period**                                             |   |         | 854      |         |   | 511 |   |
| **Cash                    and Cash Equivalents at End of Period**                                                   |   | $            | 609      |         | $      | 574 |   |

| **SUPPLEMENTAL                    DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                    paid for interest net of capitalized amounts was $4,776,000 and                    $5,035,000                    and for income taxes net of refunds was $1,324,000 and $82,338,000                    in 2006                    and 2005, respectively. Noncash capital lease acquisitions were                    $2,218,000                    and $404,000 in 2006 and 2005, respectively. Noncash construction                    expenditures included in Accounts Payable of $27,624,000 and                    $16,823,000                    were outstanding as of March 31, 2006 and 2005,                    respectively. |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**INDIANA          MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**INDEX          TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT          SUBSIDIARIES**

|                                                       | **Footnote****Reference**  |
|------------------------------------------------------------|----------------------------|
|                                                       |                       |
| Significant                    Accounting Matters          | Note                    1  |
| New                    Accounting Pronouncements           | Note                    2  |
| Rate                    Matters                            | Note                    3  |
| Commitments                    and Contingencies           | Note                    5  |
| Guarantees                                                 | Note                    6  |
| Company-wide                    Staffing and Budget Review | Note                    7  |
| Benefit                    Plans                           | Note                    9  |
| Business                    Segments                       | Note                    10 |
| Financing                    Activities                    | Note                    11 |

----

**KENTUCKY          POWER COMPANY**

----

**KENTUCKY          POWER COMPANY**

**MANAGEMENT’S          NARRATIVE FINANCIAL DISCUSSION AND ANALYSIS**

**Results          of Operations**

**Reconciliation          of First Quarter of 2005 to First Quarter of 2006 Net          Income**

**(in          millions)**

| **First                    Quarter of 2005**        |   |   |   |   | $      | 10     |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**     |   |   |   |   |   |   |   |
| Retail                    Margins                   |   |   | (4     | )      |   |   |   |
| Off-system                    Sales                 |   |   | 1      |   |   |   |   |
| Other                                               |   |   | 6      |   |   |   |   |
| **Total                    Change in Gross Margin** |   |   |   |   |   | 3      |   |
|                                                |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance  |   |   |   |   |   | (1     | )      |
|                                                |   |   |   |   |   |   |   |
| Income                    Tax Expense               |   |   |   |   |   | (2     | )      |
|                                                |   |   |   |   |   |   |   |
| **First                    Quarter of 2006**        |   |   |   |   | $      | 10     |   |
|                                                |   |   |   |   |   |   |   |

| · | Retail                    Margins decreased by $4 million in comparison to 2005 primarily                    due to                    increased capacity settlement payments.                                                                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Other                    revenues increased                    $6 million due primarily to a $3 million adjustment of the Demand                    Side                    Management Program regulatory asset in March 2005 and current                    period gains                    on the sale of emission allowances. |

*Income          Taxes*

**Financial          Condition**

**Credit          Ratings**

|                                     | **Moody’s** |   | **S&P** |   | **Fitch** |
|------------------------------------------|-------------------|--------|-------------|--------|-----------|
|                                     |              |   |        |   |      |
| Senior                    Unsecured Debt | Baa2              |   | BBB         |   | BBB       |

**Financing          Activities**

**Liquidity**

**Summary          Obligation Information**

**Significant          Factors**

***Litigation          and Regulatory Activity***

**Critical          Accounting Estimates**

----

**QUANTITATIVE          AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT          ACTIVITIES**

**Market          Risks**

**MTM          Risk Management Contract Net Assets**

**Reconciliation          of MTM Risk Management Contracts to**

**Condensed          Balance Sheet**

**As          of March 31, 2006**

**(in          thousands)**

|                                                                                                   |   | **MTM                    Risk Management Contracts** |    | **Cash                    Flow &****Fair                    Value Hedges** |   | **DETM                    Assignment (a)** |   | **Total** |   |
|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|---------|--------------------------------------------------------------------------------|--------|--------------------------------------------|--------|-----------|--------|
| Current                    Assets                                                                      |   | $                                                    | 24,318  |                                                                           | $      | 2,874                                      |   | $         | -      |   | $ | 27,192 |   |
| Noncurrent                    Assets                                                                   |   |                                                 | 37,902  |                                                                           |   | 181                                        |   |      | -      |   |   | 38,083 |   |
| **Total                    MTM Derivative Contract Assets**                                            |   |                                                 | 62,220  |                                                                           |   | 3,055                                      |   |      | -      |   |   | 65,275 |   |
|                                                                                                   |   |                                                 |    |                                                                           |   |                                       |   |      |   |   |   |   |   |
| Current                    Liabilities                                                                 |   |                                                 | (19,880 | )                                                                              |   | (1,687                                     | )      |      | (297   | ) |   | (21,864 | ) |
| Noncurrent                    Liabilities                                                              |   |                                                 | (27,474 | )                                                                              |   | (473                                       | )      |      | (2,605 | ) |   | (30,552 | ) |
| **Total                    MTM Derivative Contract  Liabilities**                                 |   |                                                 | (47,354 | )                                                                              |   | (2,160                                     | )      |      | (2,902 | ) |   | (52,416 | ) |
|                                                                                                   |   |                                                 |    |                                                                           |   |                                       |   |      |   |   |   |   |   |
| **Total                    MTM Derivative Contract Net  Assets                    (Liabilities)** |   | $                                                    | 14,866  |                                                                           | $      | 895                                        |   | $         | (2,902 | ) | $ | 12,859 |   |

| (a) | See                    “Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual                    Report. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

**MTM          Risk Management Contract Net Assets**

**Three          Months Ended March 31, 2006**

**(in          thousands)**

| **Total                    MTM Risk Management Contract Net Assets at December 31,                    2005**                                                         |   | $      | 13,518 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                    Loss from Contracts Realized/Settled During the Period and Entered                    in a                    Prior Period                 |   |   | 457    |   |
| Fair                    Value of New Contracts at Inception When Entered During the Period                    (a)                                                    |   |   | -      |   |
| Net                    Option Premiums Paid/(Received) for Unexercised or Unexpired                    Option                    Contracts Entered During the Period |   |   | (281   | )      |
| Change                    in Fair Value Due to Valuation Methodology Changes on Forward                    Contracts                                                 |   |   | -      |   |
| Changes                    in Fair Value Due to Market Fluctuations During the Period                    (b)                                                         |   |   | (918   | )      |
| Changes                    in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                    |   |   | 2,090  |   |
| **Total                    MTM Risk Management Contract Net Assets**                                                                                                 |   |   | 14,866 |   |
| Net                    Cash Flow & Fair Value Hedge Contracts                                                                                                    |   |   | 895    |   |
| DETM                    Assignment (d)                                                                                                                               |   |   | (2,902 | )      |
| **Total                    MTM Risk Management Contract Net Assets at March 31, 2006**                                                                               |   | $      | 12,859 |   |

| (a) | Most                    of the fair value comes from longer term fixed price contracts                    with                    customers that seek to limit their risk against fluctuating energy                    prices.                    Inception value is only recorded if observable market data can                    be obtained                    for valuation inputs for the entire contract term. The contract                    prices are                    valued against market curves associated with the delivery location                    and                    delivery term. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                    fluctuations are attributable to various factors such as supply/demand,                    weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (c) | “Changes                    in Fair Value Allocated to Regulated Jurisdictions” relates to the net                    gains (losses) of those contracts that are not reflected in the                    Condensed                    Statements of Income. These net gains (losses) are recorded as                    regulatory                    liabilities/assets for those subsidiaries that operate in regulated                    jurisdictions.                                                                                                                                          |
| (d) | See                    “Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual                    Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

**Maturity          and Source of Fair Value of MTM Risk Management Contract Net          Assets**

| · | The                    method of measuring fair value used in determining the carrying                    amount of                    our total MTM asset or liability (external sources or modeled                    internally). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                    maturity, by year, of our net assets/liabilities giving an indication                    of                    when these MTM amounts will settle and generate                    cash.                       |

**Maturity          and Source of Fair Value of MTM**

**Risk          Management Contract Net Assets**

**Fair          Value of Contracts as of March 31, 2006**

**(in          thousands)**

|                                                                                                                                         |   | ** Remainder****2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **After****2010** |   | **Total** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-----------|--------|
| Prices                    Actively Quoted - Exchange Traded                    Contracts                                                |   | $                           | 2,342  |     | $      | 487      |   | $        | 217    |     | $      | (17               | )      | $         | -      |   | $ | - |   | $ | 3,029 |   |
| Prices                    Provided by Other External Sources                    - OTC Broker                       Quotes (a) |   |                        | 1,688  |     |   | 1,426    |   |     | 1,949  |     |   | 1,612             |   |      | -      |   |   | - |   |   | 6,675 |   |
| Prices                    Based on Models and Other Valuation                    Methods (b)                                            |   |                        | (340   | )        |   | 1,399    |   |     | 937    |     |   | 954               |   |      | 2,042  |   |   | 170 |   |   | 5,162 |   |
| **Total**                                                                                                                                    |   | $                           | 3,690  |     | $      | 3,312    |   | $        | 3,103  |     | $      | 2,549             |   | $         | 2,042  |   | $ | 170 |   | $ | 14,866 |   |

| (a) | “Prices                    Provided by Other External Sources - OTC Broker Quotes” reflects                    information obtained from over-the-counter brokers, industry                    services, or                    multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Prices                    Based on Models and Other Valuation Methods” is used in absence of pricing                    information from external sources. Modeled information is derived                    using                    valuation models developed by the reporting entity, reflecting                    when                    appropriate, option pricing theory, discounted cash flow concepts,                    valuation adjustments, etc. and may require projection of prices                    for                    underlying commodities beyond the period that prices are available                    from                    third-party sources. In addition, where external pricing information                    or                    market liquidity are limited, such valuations are classified                    as modeled.                    The determination of the point at which a market is no longer                    liquid for                    placing it in the modeled category varies by                    market. |

**Cash          Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)          on          the Condensed Balance Sheet **

**Total          Accumulated Other Comprehensive Income (Loss) Activity**

**Three          Months Ended March 31, 2006**

**(in          thousands)**

|                                                                                           |   | **Power** |   | **Interest                    Rate** |   | **Total** |   |
|------------------------------------------------------------------------------------------------|--------|-----------|--------|--------------------------------------|--------|-----------|--------|
| **Beginning                    Balance in AOCI December 31, 2005**                             |   | $         | (352   | )                                    | $      | 158       |   | $ | (194 | ) |
| Changes                    in Fair Value                                                       |   |      | 1,427  |                                 |   | -         |   |   | 1,427 |   |
| Reclassifications                    from AOCI to Net Income for Cash Flow Hedges Settled |   |      | 216    |                                 |   | (22       | )      |   | 194 |   |
| **Ending                    Balance in AOCI March 31, 2006**                                   |   | $         | 1,291  |                                 | $      | 136       |   | $ | 1,427 |   |

**Credit          Risk**

**VaR          Associated with Risk Management Contracts**

| **Three                    Months Ended****March                    31, 2006** |   |     |   |        | **Twelve                    Months Ended****December                    31, 2005** |
|--------------------------------------------------------------------------------|--------|----------|--------|-------------|------------------------------------------------------------------------------------|
| **(in                    thousands)**                                          |   |     |   |        | **(in                    thousands)**                                              |
| **End**                                                                        |   | **High** |   | **Average** |                                                                               | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $164                                                                           |   | $385     |   | $208        |                                                                               | $102 |   |   |   |   | $174 |   | $289 |   | $138 |   | $50 |

**VaR          Associated with Debt Outstanding**

----

**KENTUCKY          POWER COMPANY**

**CONDENSED          STATEMENTS OF INCOME**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                   |   | **2006** |    | **2005** |   |
|------------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **REVENUES**                                                           |   |     |    |     |   |
| Electric                    Generation, Transmission and Distribution  |   | $        | 137,620 |     | $      | 109,081 |   |
| Sales                    to AEP Affiliates                             |   |     | 13,968  |     |   | 18,548 |   |
| Other                                                                  |   |     | 259     |     |   | 431 |   |
| **TOTAL**                                                              |   |     | 151,847 |     |   | 128,060 |   |
|                                                                   |   |     |    |     |   |   |   |
| **EXPENSES**                                                           |   |     |    |     |   |   |   |
| Fuel                    and Other Consumables for Electric Generation  |   |     | 43,966  |     |   | 28,679 |   |
| Purchased                    Electricity for Resale                    |   |     | 973     |     |   | 2,124 |   |
| Purchased                    Electricity from AEP Affiliates           |   |     | 49,526  |     |   | 42,739 |   |
| Other                    Operation                                     |   |     | 13,748  |     |   | 13,942 |   |
| Maintenance                                                            |   |     | 7,141   |     |   | 5,916 |   |
| Depreciation                    and Amortization                       |   |     | 11,457  |     |   | 11,152 |   |
| Taxes                    Other Than Income Taxes                       |   |     | 2,512   |     |   | 2,425 |   |
| **TOTAL**                                                              |   |     | 129,323 |     |   | 106,977 |   |
|                                                                   |   |     |    |     |   |   |   |
| **OPERATING                    INCOME**                                |   |     | 22,524  |     |   | 21,083 |   |
|                                                                   |   |     |    |     |   |   |   |
| **Other                    Income (Expense):**                         |   |     |    |     |   |   |   |
| Interest                    Income                                     |   |     | 166     |     |   | 140 |   |
| Allowance                    for Equity Funds Used During Construction |   |     | 101     |     |   | 92 |   |
| Interest                    Expense                                    |   |     | (7,296  | )        |   | (7,370 | ) |
|                                                                   |   |     |    |     |   |   |   |
| **INCOME                    BEFORE INCOME TAXES**                      |   |     | 15,495  |     |   | 13,945 |   |
|                                                                   |   |     |    |     |   |   |   |
| Income                    Tax Expense                                  |   |     | 5,665   |     |   | 4,060 |   |
|                                                                   |   |     |    |     |   |   |   |
| **NET                    INCOME**                                      |   | $        | 9,830   |     | $      | 9,885 |   |

*The          common stock of KPCo is wholly-owned by AEP.*

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**KENTUCKY          POWER COMPANY**

**CONDENSED          STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S**

**EQUITY          AND COMPREHENSIVE INCOME (LOSS)**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                                             |   | **Common                      Stock** |   | **Paid-in                      Capital** |   | **Retained                      Earnings** |   | **Accumulated                      Other Comprehensive Income (Loss)** |   | **Total** |   |
|--------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|------------------------------------------|--------|--------------------------------------------|--------|------------------------------------------------------------------------|--------|-----------|--------|
| **DECEMBER                      31, 2004**                                                       |   | $                                     | 50,450 |                                     | $      | 208,750                                    |   | $                                                                      | 70,555 |      | $      | (8,775 | ) | $ | 320,980 |   |
|                                                                                             |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| **COMPREHENSIVE                      INCOME**                                                    |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| **Other                      Comprehensive Loss, Net of Taxes:**                                 |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| Cash                      Flow Hedges, Net of Tax of $1,415                                      |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   | (2,627 | ) |   | (2,627 | ) |
| **NET                      INCOME**                                                              |   |                                  |   |                                     |   |                                       |   |                                                                   | 9,885  |      |   |   |   |   | 9,885 |   |
| **TOTAL                      COMPREHENSIVE INCOME**                                              |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   | 7,258 |   |
|                                                                                             |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| **MARCH                      31, 2005**                                                          |   | $                                     | 50,450 |                                     | $      | 208,750                                    |   | $                                                                      | 80,440 |      | $      | (11,402 | ) | $ | 328,238 |   |
|                                                                                             |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| **DECEMBER                      31, 2005**                                                       |   | $                                     | 50,450 |                                     | $      | 208,750                                    |   | $                                                                      | 88,864 |      | $      | (223 | ) | $ | 347,841 |   |
|                                                                                             |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| Common                      Stock Dividends                                                      |   |                                  |   |                                     |   |                                       |   |                                                                   | (2,500 | )         |   |   |   |   | (2,500 | ) |
| **TOTAL**                                                                                        |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   | 345,341 |   |
|                                                                                             |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| **COMPREHENSIVE                      INCOME**                                                    |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| **Other                      Comprehensive Income,** **Net                      of Taxes:** |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| Cash                      Flow Hedges, Net of Tax of $873                                        |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   | 1,621 |   |   | 1,621 |   |
| **NET                      INCOME**                                                              |   |                                  |   |                                     |   |                                       |   |                                                                   | 9,830  |      |   |   |   |   | 9,830 |   |
| **TOTAL                      COMPREHENSIVE INCOME**                                              |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   | 11,451 |   |
|                                                                                             |   |                                  |   |                                     |   |                                       |   |                                                                   |   |      |   |   |   |   |   |   |
| **MARCH                      31, 2006**                                                          |   | $                                     | 50,450 |                                     | $      | 208,750                                    |   | $                                                                      | 96,194 |      | $      | 1,398 |   | $ | 356,792 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**KENTUCKY          POWER COMPANY**

**CONDENSED          BALANCE SHEETS**

**ASSETS**

**March          31, 2006 and December 31, 2005**

**(in          thousands)**

**(Unaudited)**

|                                                         |   | **2006**     |      | **2005**     |   |
|--------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **CURRENT                    ASSETS**                        |   |    |      |    |   |
| Cash                    and Cash Equivalents                 |   | $            | 423       |         | $      | 526 |   |
| Advances                    to Affiliates                    |   |         | 5,923     |         |   | - |   |
| Accounts                    Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                    |   |         | 28,183    |         |   | 26,533 |   |
| Affiliated                    Companies                      |   |         | 7,287     |         |   | 23,525 |   |
| Accrued                    Unbilled Revenues                 |   |         | 4,393     |         |   | 6,311 |   |
| Miscellaneous                                                |   |         | 455       |         |   | 35 |   |
| Allowance                    for Uncollectible Accounts      |   |         | (210      | )            |   | (147 | ) |
| Total                    Accounts Receivable                 |   |         | 40,108    |         |   | 56,257 |   |
| Fuel                                                         |   |         | 11,892    |         |   | 8,490 |   |
| Materials                    and Supplies                    |   |         | 9,587     |         |   | 10,181 |   |
| Risk                    Management Assets                    |   |         | 27,192    |         |   | 31,437 |   |
| Margin                    Deposits                           |   |         | 8,845     |         |   | 6,895 |   |
| Accrued                    Tax Benefits                      |   |         | 3,920     |         |   | 6,598 |   |
| Prepayments                    and Other                     |   |         | 2,305     |         |   | 6,324 |   |
| **TOTAL**                                                    |   |         | 110,195   |         |   | 126,708 |   |
|                                                         |   |         |      |         |   |   |   |
| **PROPERTY,                    PLANT AND EQUIPMENT**         |   |         |      |         |   |   |   |
| Electric:                                                    |   |         |      |         |   |   |   |
| Production                                                   |   |         | 473,778   |         |   | 472,575 |   |
| Transmission                                                 |   |         | 388,292   |         |   | 386,945 |   |
| Distribution                                                 |   |         | 462,999   |         |   | 456,063 |   |
| Other                                                        |   |         | 60,989    |         |   | 63,382 |   |
| Construction                    Work in Progress             |   |         | 35,289    |         |   | 35,461 |   |
| **Total**                                                    |   |         | 1,421,347 |         |   | 1,414,426 |   |
| Accumulated                    Depreciation and Amortization |   |         | 427,358   |         |   | 425,817 |   |
| **TOTAL                    - NET**                           |   |         | 993,989   |         |   | 988,609 |   |
|                                                         |   |         |      |         |   |   |   |
| **OTHER                    NONCURRENT ASSETS**               |   |         |      |         |   |   |   |
| Regulatory                    Assets                         |   |         | 115,885   |         |   | 117,432 |   |
| Long-term                    Risk Management Assets          |   |         | 38,083    |         |   | 41,810 |   |
| Deferred                    Charges and Other                |   |         | 43,055    |         |   | 45,467 |   |
| **TOTAL**                                                    |   |         | 197,023   |         |   | 204,709 |   |
|                                                         |   |         |      |         |   |   |   |
| **TOTAL                    ASSETS**                          |   | $            | 1,301,207 |         | $      | 1,320,026 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**KENTUCKY          POWER COMPANY**

**CONDENSED          BALANCE SHEETS**

**LIABILITIES          AND SHAREHOLDER’S EQUITY**

**March          31, 2006 and December 31, 2005 **

**(Unaudited)**

|                                                                          |   | **2006**                              |      | **2005** |   |
|-------------------------------------------------------------------------------|--------|---------------------------------------|-----------|----------|--------|
| **CURRENT                    LIABILITIES**                                    |   | **(in                    thousands)** |      |
| Advances                    from Affiliates                                   |   | $                                     | -         |     | $      | 6,040 |   |
| Accounts                    Payable:                                          |   |                                  |      |     |   |   |   |
| General                                                                       |   |                                  | 32,895    |     |   | 32,454 |   |
| Affiliated                    Companies                                       |   |                                  | 19,199    |     |   | 29,326 |   |
| Long-term                    Debt Due Within One Year - Affiliated            |   |                                  | 39,374    |     |   | 39,771 |   |
| Risk                    Management Liabilities                                |   |                                  | 21,864    |     |   | 28,770 |   |
| Customer                    Deposits                                          |   |                                  | 18,516    |     |   | 21,643 |   |
| Accrued                    Taxes                                              |   |                                  | 8,803     |     |   | 8,805 |   |
| Accrued                    Interest                                           |   |                                  | 9,361     |     |   | 7,428 |   |
| Other                                                                         |   |                                  | 10,683    |     |   | 14,096 |   |
| **TOTAL**                                                                     |   |                                  | 160,695   |     |   | 188,333 |   |
|                                                                          |   |                                  |      |     |   |   |   |
| **NONCURRENT                    LIABILITIES**                                 |   |                                  |      |     |   |   |   |
| Long-term                    Debt - Nonaffiliated                             |   |                                  | 427,435   |     |   | 427,219 |   |
| Long-term                    Debt - Affiliated                                |   |                                  | 20,000    |     |   | 20,000 |   |
| Long-term                    Risk Management Liabilities                      |   |                                  | 30,552    |     |   | 35,302 |   |
| Deferred                    Income Taxes                                      |   |                                  | 238,993   |     |   | 234,719 |   |
| Regulatory                    Liabilities and Deferred Investment Tax Credits |   |                                  | 56,852    |     |   | 56,794 |   |
| Deferred                    Credits and Other                                 |   |                                  | 9,888     |     |   | 9,818 |   |
| **TOTAL**                                                                     |   |                                  | 783,720   |     |   | 783,852 |   |
|                                                                          |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES**                                      |   |                                  | 944,415   |     |   | 972,185 |   |
|                                                                          |   |                                  |      |     |   |   |   |
| Commitments                    and Contingencies (Note 5)                     |   |                                  |      |     |   |   |   |
|                                                                          |   |                                  |      |     |   |   |   |
| **COMMON                    SHAREHOLDER’S EQUITY**                      |   |                                  |      |     |   |   |   |
| Common                    Stock - $50 Par Value Per Share:                    |   |                                  |      |     |   |   |   |
| Authorized                    - 2,000,000 Shares                              |   |                                  |      |     |   |   |   |
| Outstanding                    - 1,009,000 Shares                             |   |                                  | 50,450    |     |   | 50,450 |   |
| Paid-in                    Capital                                            |   |                                  | 208,750   |     |   | 208,750 |   |
| Retained                    Earnings                                          |   |                                  | 96,194    |     |   | 88,864 |   |
| Accumulated                    Other Comprehensive Income (Loss)              |   |                                  | 1,398     |     |   | (223 | ) |
| **TOTAL**                                                                     |   |                                  | 356,792   |     |   | 347,841 |   |
|                                                                          |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES AND SHAREHOLDER’S EQUITY**       |   | $                                     | 1,301,207 |     | $      | 1,320,026 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**KENTUCKY          POWER COMPANY**

**CONDENSED          STATEMENTS OF CASH FLOWS**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                        |   | **2006**     |    | **2005**     |   |
|-----------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                    ACTIVITIES**                                 |   |    |    |    |   |
| **Net                    Income**                                           |   | $            | 9,830   |         | $      | 9,885 |   |
| **Adjustments                    for Noncash Items:**                       |   |         |    |         |   |   |   |
| Depreciation                    and Amortization                            |   |         | 11,457  |         |   | 11,152 |   |
| Deferred                    Income Taxes                                    |   |         | 2,217   |         |   | 988 |   |
| Mark-to-Market                    of Risk Management Contracts              |   |         | (1,378  | )            |   | (3,290 | ) |
| Pension                    Contributions to Qualified Plan Trusts           |   |         | -       |         |   | (3,045 | ) |
| Change                    in Other Noncurrent Assets                        |   |         | 2,650   |         |   | 1,722 |   |
| Change                    in Other Noncurrent Liabilities                   |   |         | 1,845   |         |   | 4,533 |   |
| **Changes                    in Components of Working Capital:**            |   |         |    |         |   |   |   |
| Accounts                    Receivable, Net                                 |   |         | 16,149  |         |   | (1,133 | ) |
| Fuel,                    Materials and Supplies                             |   |         | (2,808  | )            |   | (873 | ) |
| Accounts                    Payable                                         |   |         | (6,212  | )            |   | 1,717 |   |
| Accrued                    Taxes, Net                                       |   |         | 2,676   |         |   | 2,415 |   |
| Customer                    Deposits                                        |   |         | (3,127  | )            |   | 3,400 |   |
| Accrued                    Interest                                         |   |         | 1,933   |         |   | 2,238 |   |
| Over/Under                    Fuel Recovery, Net                            |   |         | 2,682   |         |   | (5,203 | ) |
| Other                    Current Assets                                     |   |         | (613    | )            |   | (2,234 | ) |
| Other                    Current Liabilities                                |   |         | (3,413  | )            |   | (833 | ) |
| **Net                    Cash Flows From Operating Activities**             |   |         | 33,888  |         |   | 21,439 |   |
|                                                                        |   |         |    |         |   |   |   |
| **INVESTING                    ACTIVITIES**                                 |   |         |    |         |   |   |   |
| Construction                    Expenditures                                |   |         | (19,376 | )            |   | (8,987 | ) |
| Change                    in Other Cash Deposits, Net                       |   |         | -       |         |   | (3,314 | ) |
| Change                    in Advances to Affiliates, Net                    |   |         | (5,923  | )            |   | (8,607 | ) |
| Proceeds                    from Sale of Assets                             |   |         | 191     |         |   | - |   |
| **Net                    Cash Flows Used For Investing Activities**         |   |         | (25,108 | )            |   | (20,908 | ) |
|                                                                        |   |         |    |         |   |   |   |
| **FINANCING                    ACTIVITIES**                                 |   |         |    |         |   |   |   |
| Change                    in Advances from Affiliates, Net                  |   |         | (6,040  | )            |   | - |   |
| Principal                    Payments for Capital Lease Obligations         |   |         | (343    | )            |   | (382 | ) |
| Dividends                    Paid on Common Stock                           |   |         | (2,500  | )            |   | - |   |
| **Net                    Cash Flows Used For Financing Activities**         |   |         | (8,883  | )            |   | (382 | ) |
|                                                                        |   |         |    |         |   |   |   |
| **Net                    Increase (Decrease) in Cash and Cash Equivalents** |   |         | (103    | )            |   | 149 |   |
| **Cash                    and Cash Equivalents at Beginning of Period**     |   |         | 526     |         |   | 132 |   |
| **Cash                    and Cash Equivalents at End of Period**           |   | $            | 423     |         | $      | 281 |   |

| **SUPPLEMENTAL                    DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                    paid for interest net of capitalized amounts was $4,156,000 and                    $3,570,000                    and for income taxes net                    of refunds was                    $214,000 and $691,000 in 2006 and 2005, respectively. Noncash                    capital                    lease acquisitions were $224,000 and $126,000 in 2006 and 2005,                    respectively. Noncash Construction Expenditures included in Accounts                    Payable of $3,079,000 and $1,289,000 were outstanding as of March                    31, 2006                    and 2005, respectively. |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**KENTUCKY          POWER COMPANY**

**INDEX          TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT          SUBSIDIARIES**

|                                                       | **Footnote                    Reference** |
|------------------------------------------------------------|-------------------------------------------|
|                                                       |                                      |
| Significant                    Accounting Matters          | Note                    1                 |
| New                    Accounting Pronouncements           | Note                    2                 |
| Rate                    Matters                            | Note                    3                 |
| Commitments                    and Contingencies           | Note                    5                 |
| Guarantees                                                 | Note                    6                 |
| Company-wide                    Staffing and Budget Review | Note                    7                 |
| Benefit                    Plans                           | Note                    9                 |
| Business                    Segments                       | Note                    10                |
| Financing                    Activities                    | Note                    11                |

----

**OHIO          POWER COMPANY CONSOLIDATED**

----

**OHIO          POWER COMPANY CONSOLIDATED**

**MANAGEMENT’S          FINANCIAL DISCUSSION AND ANALYSIS**

**Results          of Operations**

**Reconciliation          of First Quarter of 2005 to First Quarter of 2006 Net          Income**

**(in          millions)**

| **First                    Quarter of 2005**                        |   |   |   |   | $      | 99     |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                    Margins                                   |   |   | 25     |   |   |   |   |
| Off-system                    Sales                                 |   |   | (3     | )      |   |   |   |
| Transmission                    Revenues                            |   |   | 2      |   |   |   |   |
| Other                                                               |   |   | 9      |   |   |   |   |
| **Total                    Change in Gross Margin**                 |   |   |   |   |   | 33     |   |
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                  |   |   | (23    | )      |   |   |   |
| Depreciation                    and Amortization                    |   |   | (5     | )      |   |   |   |
| Carrying                    Costs Income                            |   |   | (18    | )      |   |   |   |
| Interest                    Expense                                 |   |   | 3      |   |   |   |   |
| **Total                    Change in Operating Expenses and Other** |   |   |   |   |   | (43    | )      |
|                                                                |   |   |   |   |   |   |   |
| Income                    Tax Expense                               |   |   |   |   |   | 6      |   |
|                                                                |   |   |   |   |   |   |   |
| **First                    Quarter of 2006**                        |   |   |   |   | $      | 95     |   |

| · | Retail                    Margins were $25 million higher than the prior period primarily                    due to the                    Rate Stabilization Plan rate increase effective January 1, 2006                    and a                    favorable variance from the receipt of SO2                    allowances from Buckeye Power, Inc. under the Cardinal Station                    Allowance                    Agreement, partially offset by decreased capacity settlements                    under the                    Interconnection Agreement related to an increase in an affiliate’s peak                    load. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Other                    revenues increased $9 million primarily due to higher gains on                    sale of                    emission allowances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

| · | Other                    Operation and Maintenance expenses increased $23 million primarily                    due to                    a planned outage at the Gavin Plant and the establishment of                    a regulatory                    asset for PJM administrative fees which reduced expenses in the                    prior year                    quarter partially offset by major ice storm expense in the same                    period.                                                         |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation                    and Amortization expense increased $5 million due to increased                    amortization of regulatory assets and an increase in depreciation                    expense                    due to a greater depreciable base in electric utility plants.                                                                                                                                                                                                                              |
| · | Carrying                    Costs Income decreased $18 million primarily due to the completion                    of                    deferrals on the environmental carrying costs from 2004 and 2005                    that are                    being recovered during 2006 through 2008 according to the Rate                    Stabilization Plan. We recorded $16 million in environmental                    carrying                    costs in the first quarter of 2005 related to                    2004. |

*Income          Taxes*

**Financial          Condition**

**Credit          Ratings**

|                                     | **Moody’s** |   | **S&P** |   | **Fitch** |
|------------------------------------------|-------------------|--------|-------------|--------|-----------|
|                                     |              |   |        |   |      |
| Senior                    Unsecured Debt | A3                |   | BBB         |   | BBB+      |

**Cash          Flow**

|                                                                      |   |  **2006**                          |     | **2005**     |   |
|---------------------------------------------------------------------------|--------|-----------------------------------------|----------|--------------|--------|
|                                                                      |   | **(in                      thousands)** |     |
|                                                                      |   |                               |     |    |   |
| **Cash                      and Cash Equivalents at Beginning of Period** |   | $                                       | 1,240    |         | $      | 9,337 |   |
| Net                      Cash Flows From (Used For):                      |   |                                    |     |         |   |  |   |
|                         Operating Activities                    |   |                                    | 184,391  |         |   | 41,223 |   |
|                         Investing Activities                    |   |                                    | (224,251 | )            |   | (24,025 | ) |
|                         Financing Activities                    |   |                                    | 39,577   |         |   | (25,418 | ) |
| Net                      Decrease in Cash and Cash Equivalents            |   |                                    | (283     | )            |   | (8,220 | ) |
| **Cash                      and Cash Equivalents at End of Period**       |   | $                                       | 957      |         | $      | 1,117 |   |

*Operating          Activities*

*Investing          Activities*

*Financing          Activities*

**Financing          Activity**

|                                |   |  **Principal**                         |   | **Interest** |   | **Due**  |   |
|-------------------------------------|--------|---------------------------------------------|--------|--------------|--------|----------|--------|
| **Type                    of Debt** |   |  **Amount**                            |   | **Rate**     |   | **Date** |   |
|                                |   |  **(in                    thousands)** |   | **(%)**      |   |     |   |
| Notes                    Payable    |   | $                                           | 1,463  |         |   | 6.81     |   |   | 2008 |   |
| Notes                    Payable    |   |                                        | 3,250  |         |   | 6.27     |   |   | 2009 |   |

**Liquidity**

**Summary          Obligation Information**

**Significant          Factors**

***Litigation          and Regulatory Activity***

**Critical          Accounting Estimates**

----

**QUANTITATIVE          AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT          ACTIVITIES**

**Market          Risks**

**MTM          Risk Management Contract Net Assets**

**Reconciliation          of MTM Risk Management Contracts to**

**Condensed          Consolidated Balance Sheet**

**As          of March 31, 2006**

**(in          thousands)**

|                                                                                                  |   | **MTM                    Risk Management Contracts** |     | **Cash                    Flow Hedges** |   | **DETM                    Assignment (a)** |   | **Total** |   |
|-------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|----------|-----------------------------------------|--------|--------------------------------------------|--------|-----------|--------|
| Current                    Assets                                                                     |   | $                                                    | 79,205   |                                    | $      | 12,434                                     |   | $         | -      |   | $ | 91,639 |   |
| Noncurrent                    Assets                                                                  |   |                                                 | 121,959  |                                    |   | 575                                        |   |      | -      |   |   | 122,534 |   |
| **Total                    MTM Derivative Contract Assets**                                           |   |                                                 | 201,164  |                                    |   | 13,009                                     |   |      | -      |   |   | 214,173 |   |
|                                                                                                  |   |                                                 |     |                                    |   |                                       |   |      |   |   |   |   |   |
| Current                    Liabilities                                                                |   |                                                 | (67,418  | )                                       |   | (4,008                                     | )      |      | (944   | ) |   | (72,370 | ) |
| Noncurrent                    Liabilities                                                             |   |                                                 | (89,828  | )                                       |   | (298                                       | )      |      | (8,274 | ) |   | (98,400 | ) |
| **Total                    MTM Derivative Contract ****Liabilities**                             |   |                                                 | (157,246 | )                                       |   | (4,306                                     | )      |      | (9,218 | ) |   | (170,770 | ) |
|                                                                                                  |   |                                                 |     |                                    |   |                                       |   |      |   |   |   |   |   |
| **Total                    MTM Derivative Contract Net Assets                    (Liabilities)** |   | $                                                    | 43,918   |                                    | $      | 8,703                                      |   | $         | (9,218 | ) | $ | 43,403 |   |

| (a) | See                    “Natural Gas Contracts with DETM” section of Note 17 in the 2005 Annual                    Report. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

**MTM          Risk Management Contract Net Assets**

**Three          Months Ended March 31, 2006**

**(in          thousands)**

| **Total                    MTM Risk Management Contract Net Assets at December 31,                    2005**                                                         |   | $      | 40,894 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                    Loss from Contracts Realized/Settled During the Period and Entered                    in a                    Prior Period                 |   |   | (1,742 | )      |
| Fair                    Value of New Contracts at Inception When Entered During the Period                    (a)                                                    |   |   | 223    |   |
| Net                    Option Premiums Paid/(Received) for Unexercised or Unexpired                    Option                    Contracts Entered During the Period |   |   | (1,060 | )      |
| Change                    in Fair Value Due to Valuation Methodology Changes on Forward                    Contracts                                                 |   |   | 587    |   |
| Changes                    in Fair Value Due to Market Fluctuations During the Period                    (b)                                                         |   |   | 5,037  |   |
| Changes                    in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                    |   |   | (21    | )      |
| **Total                    MTM Risk Management Contract Net Assets**                                                                                                 |   |   | 43,918 |   |
| Net                    Cash Flow Hedge Contracts                                                                                                                     |   |   | 8,703  |   |
| DETM                    Assignment (d)                                                                                                                               |   |   | (9,218 | )      |
| **Total                    MTM Risk Management Contract Net Assets at March 31, 2006**                                                                               |   | $      | 43,403 |   |

| (a) | Most                    of the fair value comes from longer term fixed price contracts                    with                    customers that seek to limit their risk against fluctuating energy                    prices.                    Inception value is only recorded if observable market data can                    be obtained                    for valuation inputs for the entire contract term. The contract                    prices are                    valued against market curves associated with the delivery location                    and                    delivery term. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                    fluctuations are attributable to various factors such as supply/demand,                    weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (c) | “Changes                    in Fair Value Allocated to Regulated Jurisdictions” relates to the net                    gains (losses) of those contracts that are not reflected in the                    Condensed                    Consolidated Statements of Income. These net gains (losses) are                    recorded                    as regulatory liabilities/assets for those subsidiaries that                    operate in                    regulated jurisdictions.                                                                                                          |
| (d) | See                    “Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual                    Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

**Maturity          and Source of Fair Value of MTM Risk Management Contract Net          Assets**

| · | The                    method of measuring fair value used in determining the carrying                    amount of                    our total MTM asset or liability (external sources or modeled                    internally). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                    maturity, by year, of our net assets/liabilities giving an indication                    of                    when these MTM amounts will settle and generate                    cash.                       |

**Maturity          and Source of Fair Value of MTM**

**Risk          Management Contract Net Assets**

**Fair          Value of Contracts as of March 31, 2006**

**(in          thousands)**

|                                                                                                                      |   | **Remainder                      2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **After****2010** |   | **Total** |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-----------|--------|
| Prices                      Actively Quoted - Exchange Traded Contracts                                              |   | $                                       | 7,439  |     | $      | 1,548    |   | $        | 688    |     | $      | (55               | )      | $         | -      |   | $ | - |   | $ | $9,620 |   |
| Prices                      Provided by Other External Sources - OTC                         Broker Quotes (a)  |   |                                    | 3,302  |     |   | 5,245    |   |     | 6,416  |     |   | 5,122             |   |      | -      |   |   | - |   |   | 20,085 |   |
| Prices                      Based on Models and   Other Valuation                         Methods (b) |   |                                    | (1,241 | )        |   | 3,173    |   |     | 2,227  |     |   | 3,028             |   |      | 6,485  |   |   | 541 |   |   | 14,213 |   |
| **Total**                                                                                                                 |   | $                                       | 9,500  |     | $      | 9,966    |   | $        | 9,331  |     | $      | 8,095             |   | $         | 6,485  |   | $ | 541 |   | $ | 43,918 |   |

| (a) | “Prices                    Provided by Other External Sources - OTC Broker Quotes” reflects                    information obtained from over-the-counter brokers, industry                    services, or                    multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Prices                    Based on Models and Other Valuation Methods” is used in absence of pricing                    information from external sources. Modeled information is derived                    using                    valuation models developed by the reporting entity, reflecting                    when                    appropriate, option pricing theory, discounted cash flow concepts,                    valuation adjustments, etc. and may require projection of prices                    for                    underlying commodities beyond the period that prices are available                    from                    third-party sources. In addition, where external pricing information                    or                    market liquidity are limited, such valuations are classified                    as modeled.                    The determination of the point at which a market is no longer                    liquid for                    placing it in the modeled category varies by                    market. |

**Cash          Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)          on          the Condensed Consolidated Balance Sheet **

**Total          Accumulated Other Comprehensive Income (Loss) Activity**

**Three          Months Ended March 31, 2006**

**(in          thousands)**

|                                                                                                                                |   | **Power** |   | **Foreign****Currency** |   | **Interest                    Rate** |   | **Total** |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|-------------------------|--------|--------------------------------------|--------|-----------|--------|
| **Beginning                    Balance in AOCI December 31, 2005**                                                                  |   | $         | (392   | )                       | $      | (344                                 | )      | $         | 1,491  |   | $ | 755 |   |
| Changes                    in Fair Value                                                                                            |   |      | 4,564  |                    |   | -                                    |   |      | 1,833  |   |   | 6,397 |   |
| Reclassifications                    from AOCI to Net Income for                       Cash Flow Hedges Settled |   |      | (89    | )                       |   | 3                                    |   |      | (135   | ) |   | (221 | ) |
| **Ending                    Balance in AOCI March 31, 2006**                                                                        |   | $         | 4,083  |                    | $      | (341                                 | )      | $         | 3,189  |   | $ | 6,931 |   |

**Credit          Risk**

**VaR          Associated with Risk Management Contracts**

| **Three                    Months Ended****March                    31, 2006** |   |     |   |        | **Twelve                    Months Ended****December                    31, 2005** |
|--------------------------------------------------------------------------------|--------|----------|--------|-------------|------------------------------------------------------------------------------------|
| **(in                    thousands)**                                          |   |     |   |        | **(in                    thousands)**                                              |
| **End**                                                                        |   | **High** |   | **Average** |                                                                               | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $520                                                                           |   | $1,221   |   | $660        |                                                                               | $325 |   |   |   |   | $583 |   | $968 |   | $461 |   | $166 |

**VaR          Associated with Debt Outstanding**

----

**OHIO          POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF INCOME**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                   |   | **2006** |    | **2005** |   |
|------------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **REVENUES**                                                           |   |     |    |     |   |
| Electric                    Generation, Transmission and Distribution  |   | $        | 544,639 |     | $      | 471,010 |   |
| Sales                    to AEP Affiliates                             |   |     | 149,259 |     |   | 173,726 |   |
| Other                    - Affiliated                                  |   |     | 3,709   |     |   | 3,454 |   |
| Other                    - Nonaffiliated                               |   |     | 4,999   |     |   | 6,964 |   |
| **TOTAL**                                                              |   |     | 702,606 |     |   | 655,154 |   |
|                                                                   |   |     |    |     |   |   |   |
| **EXPENSES**                                                           |   |     |    |     |   |   |   |
| Fuel                    and Other Consumables for Electric Generation  |   |     | 235,130 |     |   | 227,049 |   |
| Purchased                    Electricity for Resale                    |   |     | 21,714  |     |   | 18,762 |   |
| Purchased                    Electricity from AEP Affiliates           |   |     | 28,572  |     |   | 25,618 |   |
| Other                    Operation                                     |   |     | 86,637  |     |   | 64,570 |   |
| Maintenance                                                            |   |     | 47,524  |     |   | 46,475 |   |
| Depreciation                    and Amortization                       |   |     | 78,813  |     |   | 73,947 |   |
| Taxes                    Other Than Income Taxes                       |   |     | 47,153  |     |   | 47,299 |   |
| **TOTAL**                                                              |   |     | 545,543 |     |   | 503,720 |   |
|                                                                   |   |     |    |     |   |   |   |
| **OPERATING                    INCOME**                                |   |     | 157,063 |     |   | 151,434 |   |
|                                                                   |   |     |    |     |   |   |   |
| **Other                    Income (Expense):**                         |   |     |    |     |   |   |   |
| Interest                    Income                                     |   |     | 637     |     |   | 887 |   |
| Carrying                    Costs Income                               |   |     | 3,383   |     |   | 22,037 |   |
| Allowance                    for Equity Funds Used During Construction |   |     | 738     |     |   | 427 |   |
| Interest                    Expense                                    |   |     | (23,414 | )        |   | (26,163 | ) |
|                                                                   |   |     |    |     |   |   |   |
| **INCOME                    BEFORE INCOME TAXES**                      |   |     | 138,407 |     |   | 148,622 |   |
|                                                                   |   |     |    |     |   |   |   |
| Income                    Tax Expense                                  |   |     | 43,375  |     |   | 49,139 |   |
|                                                                   |   |     |    |     |   |   |   |
| **NET                    INCOME**                                      |   |     | 95,032  |     |   | 99,483 |   |
|                                                                   |   |     |    |     |   |   |   |
| Preferred                    Stock Dividend Requirements               |   |     | 183     |     |   | 183 |   |
|                                                                   |   |     |    |     |   |   |   |
| **EARNINGS                    APPLICABLE TO COMMON STOCK**             |   | $        | 94,849  |     | $      | 99,300 |   |

*The          common stock of OPCo is wholly-owned by AEP.*

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**OHIO          POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S**

**EQUITY          AND COMPREHENSIVE INCOME (LOSS)**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                  |   | **Common                    Stock** |    | **Paid-in                    Capital** |   | **Retained                    Earnings** |   | **Accumulated                    Other Comprehensive Income (Loss)** |      | **Total** |   |
|-----------------------------------------------------------------------|--------|-------------------------------------|---------|----------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------|-----------|-----------|--------|
| **DECEMBER                    31, 2004**                              |   | $                                   | 321,201 |                                   | $      | 462,485                                  |   | $                                                                    | 764,416   |      | $      | (74,264 | ) | $ | 1,473,838 |   |
|                                                                  |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| Common                    Stock Dividends                             |   |                                |    |                                   |   |                                     |   |                                                                 | (7,500    | )         |   |   |   |   | (7,500 | ) |
| Preferred                    Stock Dividends                          |   |                                |    |                                   |   |                                     |   |                                                                 | (183      | )         |   |   |   |   | (183 | ) |
| **TOTAL**                                                             |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   | 1,466,155 |   |
|                                                                  |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                           |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:**        |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $4,273             |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   | (7,936 | ) |   | (7,936 | ) |
| **NET                    INCOME**                                     |   |                                |    |                                   |   |                                     |   |                                                                 | 99,483    |      |   |   |   |   | 99,483 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                     |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   | 91,547 |   |
|                                                                  |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| **MARCH                    31, 2005**                                 |   | $                                   | 321,201 |                                   | $      | 462,485                                  |   | $                                                                    | 856,216   |      | $      | (82,200 | ) | $ | 1,557,702 |   |
|                                                                  |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| **DECEMBER                    31, 2005**                              |   | $                                   | 321,201 |                                   | $      | 466,637                                  |   | $                                                                    | 979,354   |      | $      | 755 |   | $ | 1,767,947 |   |
| Capital                    Contribution From Parent                   |   |                                |    |                                   |   | 35,000                                   |   |                                                                 |      |      |   |   |   |   | 35,000 |   |
| Preferred                    Stock Dividends                          |   |                                |    |                                   |   |                                     |   |                                                                 | (183      | )         |   |   |   |   | (183 | ) |
| **TOTAL**                                                             |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   | 1,802,764 |   |
|                                                                  |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                           |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| **Other                    Comprehensive Income, Net of Taxes:** |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $3,326             |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   | 6,176 |   |   | 6,176 |   |
| **NET                    INCOME**                                     |   |                                |    |                                   |   |                                     |   |                                                                 | 95,032    |      |   |   |   |   | 95,032 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                     |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   | 101,208 |   |
|                                                                  |   |                                |    |                                   |   |                                     |   |                                                                 |      |      |   |   |   |   |   |   |
| **MARCH                    31, 2006**                                 |   | $                                   | 321,201 |                                   | $      | 501,637                                  |   | $                                                                    | 1,074,203 |      | $      | 6,931 |   | $ | 1,903,972 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**OHIO          POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**March          31, 2006 and December 31, 2005**

**(in          thousands)**

**(Unaudited)**

|                                                         |   | **2006**     |      | **2005**     |   |
|--------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **CURRENT                    ASSETS**                        |   |    |      |    |   |
| Cash                    and Cash Equivalents                 |   | $            | 957       |         | $      | 1,240 |   |
| Accounts                    Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                    |   |         | 119,430   |         |   | 125,404 |   |
| Affiliated                    Companies                      |   |         | 76,327    |         |   | 167,579 |   |
| Accrued                    Unbilled Revenues                 |   |         | 21,640    |         |   | 14,817 |   |
| Miscellaneous                                                |   |         | 5,134     |         |   | 15,644 |   |
| Allowance                    for Uncollectible Accounts      |   |         | (2,470    | )            |   | (1,517 | ) |
| Total                    Accounts Receivable                 |   |         | 220,061   |         |   | 321,927 |   |
| Fuel                                                         |   |         | 114,508   |         |   | 97,600 |   |
| Materials                    and Supplies                    |   |         | 62,267    |         |   | 60,937 |   |
| Emission                    Allowances                       |   |         | 30,679    |         |   | 39,251 |   |
| Risk                    Management Assets                    |   |         | 91,639    |         |   | 115,020 |   |
| Accrued                    Tax Benefits                      |   |         | -         |         |   | 39,965 |   |
| Margin                    Deposits                           |   |         | 28,594    |         |   | 23,053 |   |
| Prepayments                    and Other                     |   |         | 9,807     |         |   | 4,386 |   |
| **TOTAL**                                                    |   |         | 558,512   |         |   | 703,379 |   |
|                                                         |   |         |      |         |   |   |   |
| **PROPERTY,                    PLANT AND EQUIPMENT**         |   |         |      |         |   |   |   |
| Electric:                                                    |   |         |      |         |   |   |   |
| Production                                                   |   |         | 4,284,994 |         |   | 4,278,553 |   |
| Transmission                                                 |   |         | 1,000,501 |         |   | 1,002,255 |   |
| Distribution                                                 |   |         | 1,271,554 |         |   | 1,258,518 |   |
| Other                                                        |   |         | 293,835   |         |   | 293,794 |   |
| Construction                    Work in Progress             |   |         | 876,384   |         |   | 690,168 |   |
| **Total**                                                    |   |         | 7,727,268 |         |   | 7,523,288 |   |
| Accumulated                    Depreciation and Amortization |   |         | 2,772,156 |         |   | 2,738,899 |   |
| **TOTAL                    - NET**                           |   |         | 4,955,112 |         |   | 4,784,389 |   |
|                                                         |   |         |      |         |   |   |   |
| **OTHER                    NONCURRENT ASSETS**               |   |         |      |         |   |   |   |
| Regulatory                    Assets                         |   |         | 377,447   |         |   | 398,007 |   |
| Long-term                    Risk Management Assets          |   |         | 122,534   |         |   | 144,015 |   |
| Deferred                    Charges and Other                |   |         | 283,348   |         |   | 300,880 |   |
| **TOTAL**                                                    |   |         | 783,329   |         |   | 842,902 |   |
|                                                         |   |         |      |         |   |   |   |
| **TOTAL                    ASSETS**                          |   | $            | 6,296,953 |         | $      | 6,330,670 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**OHIO          POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**LIABILITIES          AND SHAREHOLDERS’ EQUITY**

**March          31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                              |   | **2006**                              |      | **2005** |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------------|-----------|----------|--------|
| **CURRENT                    LIABILITIES**                                        |   | **(in                    thousands)** |      |
| Advances                    from Affiliates                                       |   | $                                     | 81,043    |     | $      | 70,071 |   |
| Accounts                    Payable:                                              |   |                                  |      |     |   |   |   |
| General                                                                           |   |                                  | 207,220   |     |   | 210,752 |   |
| Affiliated                    Companies                                           |   |                                  | 97,767    |     |   | 147,470 |   |
| Short-term                    Debt - Nonaffiliated                                |   |                                  | 11,002    |     |   | 10,366 |   |
| Long-term                    Debt Due Within One Year - Affiliated                |   |                                  | 200,000   |     |   | 200,000 |   |
| Long-term                    Debt Due Within One Year - Nonaffiliated             |   |                                  | 12,354    |     |   | 12,354 |   |
| Risk                    Management Liabilities                                    |   |                                  | 72,370    |     |   | 108,797 |   |
| Customer                    Deposits                                              |   |                                  | 38,712    |     |   | 51,209 |   |
| Accrued                    Taxes                                                  |   |                                  | 121,925   |     |   | 158,774 |   |
| Accrued                    Interest                                               |   |                                  | 25,300    |     |   | 36,298 |   |
| Other                                                                             |   |                                  | 87,284    |     |   | 111,480 |   |
| **TOTAL**                                                                         |   |                                  | 954,977   |     |   | 1,117,571 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **NONCURRENT                    LIABILITIES**                                     |   |                                  |      |     |   |   |   |
| Long-term                    Debt - Nonaffiliated                                 |   |                                  | 1,782,749 |     |   | 1,787,316 |   |
| Long-term                    Debt - Affiliated                                    |   |                                  | 200,000   |     |   | 200,000 |   |
| Long-term                    Risk Management Liabilities                          |   |                                  | 98,400    |     |   | 119,247 |   |
| Deferred                    Income Taxes                                          |   |                                  | 995,059   |     |   | 987,386 |   |
| Regulatory                    Liabilities and Deferred Investment Tax Credits     |   |                                  | 177,394   |     |   | 168,492 |   |
| Deferred                    Credits and Other                                     |   |                                  | 149,853   |     |   | 154,770 |   |
| **TOTAL**                                                                         |   |                                  | 3,403,455 |     |   | 3,417,211 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES**                                          |   |                                  | 4,358,432 |     |   | 4,534,782 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Minority                    Interest                                              |   |                                  | 17,910    |     |   | 11,302 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Cumulative                    Preferred Stock Not Subject to Mandatory Redemption |   |                                  | 16,639    |     |   | 16,639 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Commitments                    and Contingencies (Note 5)                         |   |                                  |      |     |   |   |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **COMMON                    SHAREHOLDER’S EQUITY**                          |   |                                  |      |     |   |   |   |
| Common                    Stock - No Par Value Per Share:                         |   |                                  |      |     |   |   |   |
| Authorized                    - 40,000,000 Shares                                 |   |                                  |      |     |   |   |   |
| Outstanding                    - 27,952,473 Shares                                |   |                                  | 321,201   |     |   | 321,201 |   |
| Paid-in                    Capital                                                |   |                                  | 501,637   |     |   | 466,637 |   |
| Retained                    Earnings                                              |   |                                  | 1,074,203 |     |   | 979,354 |   |
| Accumulated                    Other Comprehensive Income (Loss)                  |   |                                  | 6,931     |     |   | 755 |   |
| **TOTAL**                                                                         |   |                                  | 1,903,972 |     |   | 1,767,947 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES AND SHAREHOLDERS’ EQUITY**           |   | $                                     | 6,296,953 |     | $      | 6,330,670 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**OHIO          POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                       |   | **2006**     |     | **2005**     |   |
|----------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|
| **OPERATING                    ACTIVITIES**                                |   |    |     |    |   |
| **Net                    Income**                                          |   | $            | 95,032   |         | $      | 99,483 |   |
| **Adjustments                    for Noncash Items:**                      |   |         |     |         |   |   |   |
| Depreciation                    and Amortization                           |   |         | 78,813   |         |   | 73,947 |   |
| Deferred                    Income Taxes                                   |   |         | 3,604    |         |   | 4,092 |   |
| Carrying                    Costs Income                                   |   |         | (3,383   | )            |   | (22,037 | ) |
| Mark-to-Market                    of Risk Management Contracts             |   |         | (3,616   | )            |   | (2,477 | ) |
| Pension                    Contributions to Qualified Plan Trusts          |   |         | -        |         |   | (20,007 | ) |
| Deferred                    Property Taxes                                 |   |         | 17,331   |         |   | 15,658 |   |
| Change                    in Other Noncurrent Assets                       |   |         | 4,852    |         |   | (19,261 | ) |
| Change                    in Other Noncurrent Liabilities                  |   |         | 13,855   |         |   | 20,969 |   |
| **Changes                    in Components of Working Capital:**           |   |         |     |         |   |   |   |
| Accounts                    Receivable, Net                                |   |         | 101,866  |         |   | (25,474 | ) |
| Fuel,                    Materials and Supplies                            |   |         | (18,238  | )            |   | (483 | ) |
| Accounts                    Payable                                        |   |         | (60,411  | )            |   | (38,830 | ) |
| Accrued                    Taxes, Net                                      |   |         | 3,116    |         |   | (73,250 | ) |
| Customer                    Deposits                                       |   |         | (12,497  | )            |   | 8,371 |   |
| Interest                    Accrued                                        |   |         | (10,998  | )            |   | (16,209 | ) |
| Other                    Current Assets                                    |   |         | (739     | )            |   | 40,237 |   |
| Other                    Current Liabilities                               |   |         | (24,196  | )            |   | (3,506 | ) |
| **Net                    Cash Flows From Operating Activities**            |   |         | 184,391  |         |   | 41,223 |   |
|                                                                       |   |         |     |         |   |   |   |
| **INVESTING                    ACTIVITIES**                                |   |         |     |         |   |   |   |
| Construction                    Expenditures                               |   |         | (222,600 | )            |   | (105,707 | ) |
| Change                    in Other Cash Deposits, Net                      |   |         | (1,651   | )            |   | (9,952 | ) |
| Change                    in Advances to Affiliates, Net                   |   |         | -        |         |   | 84,564 |   |
| Proceeds                    from Sale of Assets                            |   |         | -        |         |   | 7,070 |   |
| **Net                    Cash Flows Used For Investing Activities**        |   |         | (224,251 | )            |   | (24,025 | ) |
|                                                                       |   |         |     |         |   |   |   |
| **FINANCING                    ACTIVITIES**                                |   |         |     |         |   |   |   |
| Capital                    Contributions from Parent Company               |   |         | 35,000   |         |   | - |   |
| Issuance                    of Long-term Debt - Nonaffiliated              |   |         | -        |         |   | 216,798 |   |
| Change                    in Short-term Debt, Net - Nonaffiliated          |   |         | 636      |         |   | (4,796 | ) |
| Change                    in Advances from Affiliates, Net                 |   |         | 10,972   |         |   | - |   |
| Retirement                    of Long-term Debt - Nonaffiliated            |   |         | (4,713   | )            |   | (222,713 | ) |
| Retirement                    of Cumulative Preferred Stock                |   |         | -        |         |   | (5,000 | ) |
| Principal                    Payments for Capital Lease Obligations        |   |         | (2,135   | )            |   | (2,024 | ) |
| Dividends                    Paid on Common Stock                          |   |         | -        |         |   | (7,500 | ) |
| Dividends                    Paid on Cumulative Preferred Stock            |   |         | (183     | )            |   | (183 | ) |
| **Net                    Cash Flows From (Used For) Financing Activities** |   |         | 39,577   |         |   | (25,418 | ) |
|                                                                       |   |         |     |         |   |   |   |
| **Net                    Decrease in Cash and Cash Equivalents**           |   |         | (283     | )            |   | (8,220 | ) |
| **Cash                    and Cash Equivalents at Beginning of Period**    |   |         | 1,240    |         |   | 9,337 |   |
| **Cash                    and Cash Equivalents at End of Period**          |   | $            | 957      |         | $      | 1,117 |   |

| **SUPPLEMENTAL                    DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                    paid for interest net of capitalized amounts was $29,152,000                    and                    $37,519,000 and for income taxes net of refunds was $922,000                    and                    $87,763,000 in 2006 and 2005, respectively. Noncash acquisitions                    under                    capital leases were $927,000 and $555,000 in 2006 and 2005, respectively.                    Noncash construction expenditures included in Accounts Payable                    of                    $82,024,000 and $64,611,000 were outstanding as of March 31,                    2006 and                    2005, respectively. |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**OHIO          POWER COMPANY CONSOLIDATED**

**INDEX          TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT          SUBSIDIARIES**

|                                                          | **Footnote****Reference**  |
|---------------------------------------------------------------|----------------------------|
|                                                          |                       |
| Significant                    Accounting Matters             | Note                    1  |
| New                    Accounting Pronouncements              | Note                    2  |
| Rate                    Matters                               | Note                    3  |
| Customer                    Choice and Industry Restructuring | Note                    4  |
| Commitments                    and Contingencies              | Note                    5  |
| Guarantees                                                    | Note                    6  |
| Company-wide                    Staffing and Budget Review    | Note                    7  |
| Benefit                    Plans                              | Note                    9  |
| Business                    Segments                          | Note                    10 |
| Financing                    Activities                       | Note                    11 |

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

**MANAGEMENT’S          NARRATIVE FINANCIAL DISCUSSION AND ANALYSIS**

**Results          of Operations**

**Reconciliation          of First Quarter of 2005 to First Quarter of 2006 Net Income          (Loss)**

**(in          millions)**

| **First                    Quarter of 2005**                        |   |   |   |   | $      | 1      |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                    and Off-system Sales Margins              |   |   | 3      |   |   |   |   |
| Transmission                    Revenues                            |   |   | 1      |   |   |   |   |
| Other                                                               |   |   | 2      |   |   |   |   |
| **Total                    Change in Gross Margin**                 |   |   |   |   |   | 6      |   |
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                  |   |   | (15    | )      |   |   |   |
| Depreciation                    and Amortization                    |   |   | 1      |   |   |   |   |
| Interest                    Expense                                 |   |   | (1     | )      |   |   |   |
| **Total                    Change in Operating Expenses and Other** |   |   |   |   |   | (15    | )      |
|                                                                |   |   |   |   |   |   |   |
| Income                    Tax Credit                                |   |   |   |   |   | 3      |   |
|                                                                |   |   |   |   |   |   |   |
| **First                    Quarter of 2006**                        |   |   |   |   | $      | (5     | )      |

| · | Retail                    and Off-system Sales Margins increased $3 million primarily                    due to an increase in capacity revenue.                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Other                    revenues                    increased                    $2 million primarily due to a settlement with an electric                    cooperative. |

| · | Other                    Operation and Maintenance expenses increased $15 million. Maintenance                    expense increased $9 million primarily due to a $5 million increase                    in                    scheduled power plant maintenance and a $3 million increase in                    scheduled                    overhead line maintenance. Other Operation expense increased                    $6 million                    primarily due to increased customer-related expenses, factoring                    of                    accounts receivable and outside                    services. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Income          Taxes*

**Financial          Condition**

**Credit          Ratings**

|                                     | **Moody’s** |   | **S&P** |   | **Fitch** |
|------------------------------------------|-------------------|--------|-------------|--------|-----------|
|                                     |              |   |        |   |      |
| Senior                    Unsecured Debt | Baa1              |   | BBB         |   | A-        |

**Financing          Activity**

**Liquidity**

**Summary          Obligation Information**

**Significant          Factors**

***Litigation          and Regulatory Activity***

**Critical          Accounting Estimates**

----

**QUANTITATIVE          AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT          ACTIVITIES**

**Market          Risks**

**MTM          Risk Management Contract Net Assets**

**Reconciliation          of MTM Risk Management Contracts to**

**Condensed          Balance Sheet**

**As          of March 31, 2006**

**(in          thousands)**

|                                                             |   | **MTM                    Risk Management Contracts** |    | **Cash                    Flow Hedges** |   | **Total** |   |
|------------------------------------------------------------------|--------|------------------------------------------------------|---------|-----------------------------------------|--------|-----------|--------|
| Current                    Assets                                |   | $                                                    | 10,922  |                                    | $      | 1,635     |   | $ | 12,557 |   |
| Noncurrent                    Assets                             |   |                                                 | 11,068  |                                    |   | 103       |   |   | 11,171 |   |
| **Total                    MTM Derivative Contract Assets**      |   |                                                 | 21,990  |                                    |   | 1,738     |   |   | 23,728 |   |
|                                                             |   |                                                 |    |                                    |   |      |   |   |   |   |
| Current                    Liabilities                           |   |                                                 | (9,717  | )                                       |   | (603      | )      |   | (10,320 | ) |
| Noncurrent                    Liabilities                        |   |                                                 | (7,165  | )                                       |   | (53       | )      |   | (7,218 | ) |
| **Total                    MTM Derivative Contract Liabilities** |   |                                                 | (16,882 | )                                       |   | (656      | )      |   | (17,538 | ) |
|                                                             |   |                                                 |    |                                    |   |      |   |   |   |   |
| **Total                    MTM Derivative Contract Net Assets**  |   | $                                                    | 5,108   |                                    | $      | 1,082     |   | $ | 6,190 |   |

**MTM          Risk Management Contract Net Assets**

**Three          Months Ended March 31, 2006**

**(in          thousands)**

| **Total                    MTM Risk Management Contract Net Assets at December 31,                    2005**                                                              |   | $      | 14,214 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                    Loss from Contracts Realized/Settled During the Period and Entered                    in a                    Prior Period                      |   |   | 164    |   |
| Fair                    Value of New Contracts at Inception When Entered During the Period                    (a)                                                         |   |   | -      |   |
| Net                    Option Premiums Paid/(Received) for Unexercised or Unexpired                    Option                    Contracts Entered During the Period |   |   | (196   | )      |
| Change                    in Fair Value Due to Valuation Methodology Changes on Forward                    Contracts                                                      |   |   | -      |   |
| Changes                    in Fair Value Due to Market Fluctuations During the Period                    (b)                                                              |   |   | (64    | )      |
| Changes                    in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                         |   |   | (9,010 | )      |
| **Total                    MTM Risk Management Contract Net Assets**                                                                                                      |   |   | 5,108  |   |
| Net                    Cash Flow Hedge Contracts                                                                                                                          |   |   | 1,082  |   |
| **Total                    MTM Risk Management Contract Net Assets at March 31,                    2006**                                                                 |   | $      | 6,190  |   |

| (a) | Most                    of the fair value comes from longer term fixed price contracts                    with                    customers that seek to limit their risk against fluctuating energy                    prices.                    Inception value is only recorded if observable market data can                    be obtained                    for valuation inputs for the entire contract term. The contract                    prices are                    valued against market curves associated with the delivery location                    and                    delivery term. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                    fluctuations are attributable to various factors such as supply/demand,                    weather, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (c) | “Changes                    in Fair Value Allocated to Regulated Jurisdictions” relates to the net                    gains (losses) of those contracts that are not reflected in the                    Condensed                    Statements of Operations. These net gains (losses) are recorded                    as                    regulatory liabilities/assets for those subsidiaries that operate                    in                    regulated jurisdictions.                                                                                                                   |

**Maturity          and Source of Fair Value of MTM Risk Management Contract Net          Assets**

| · | The                    method of measuring fair value used in determining the carrying                    amount of                    our total MTM asset or liability (external sources or modeled                    internally). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                    maturity, by year, of our net assets/liabilities giving an indication                    of                    when these MTM amounts will settle and generate                    cash.                       |

**Maturity          and Source of Fair Value of MTM**

**Risk          Management Contract Net Assets**

**Fair          Value of Contracts as of March 31, 2006**

**(in          thousands)**

|                                                                                                                                         |   | **Remainder                    2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **After****2010** |   | **Total** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-----------|--------|
| Prices                    Actively Quoted - Exchange Traded                    Contracts                                                |   | $                                     | 1,151  |     | $      | 277      |   | $        | 123    |     | $      | (10               | )      | $         | -      |   | $ | - |   | $ | 1,541 |   |
| Prices                    Provided by Other External Sources                    - OTC Broker                       Quotes (a) |   |                                  | 304    |     |   | 603      |   |     | 951    |     |   | 801               |   |      | -      |   |   | - |   |   | 2,659 |   |
| Prices                    Based on Models and Other Valuation                    Methods (b)                                            |   |                                  | (455   | )        |   | 39       |   |     | 46     |     |   | 205               |   |      | 673    |   |   | 400 |   |   | 908 |   |
| **Total**                                                                                                                                    |   | $                                     | 1,000  |     | $      | 919      |   | $        | 1,120  |     | $      | 996               |   | $         | 673    |   | $ | 400 |   | $ | 5,108 |   |

| (a) | “Prices                    Provided by Other External Sources - OTC Broker Quotes” reflects                    information obtained from over-the-counter brokers, industry                    services, or                    multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Prices                    Based on Models and Other Valuation Methods” is used in absence of pricing                    information from external sources. Modeled information is derived                    using                    valuation models developed by the reporting entity, reflecting                    when                    appropriate, option pricing theory, discounted cash flow concepts,                    valuation adjustments, etc. and may require projection of prices                    for                    underlying commodities beyond the period that prices are available                    from                    third-party sources. In addition, where external pricing information                    or                    market liquidity are limited, such valuations are classified                    as modeled.                    The determination of the point at which a market is no longer                    liquid for                    placing it in the modeled category varies by                    market. |

**Cash          Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)          on          the Condensed Balance Sheet**

**Total          Accumulated Other Comprehensive Income (Loss) Activity**

**Three          Months Ended March 31, 2006**

**(in          thousands)**

|                                                                                                              |   | **Power** |   | **Interest                    Rate** |   | **Total** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------------------------------------|--------|-----------|--------|
| **Beginning                    Balance in AOCI December 31, 2005**                                                |   | $         | (629   | )                                    | $      | (483      | )      | $ | (1,112 | ) |
| Changes                    in Fair Value                                                                          |   |      | 1,240  |                                 |   | -         |   |   | 1,240 |   |
| Reclassifications                    from AOCI to Net Income for Cash                    Flow Hedges Settled |   |      | 123    |                                 |   | 28        |   |   | 151 |   |
| **Ending                    Balance in AOCI March 31, 2006**                                                      |   | $         | 734    |                                 | $      | (455      | )      | $ | 279 |   |

**Credit          Risk**

**VaR          Associated with Risk Management Contracts**

| **Three                    Months Ended****March                    31, 2006** |   |     |   |        | **Twelve                    Months Ended****December                    31, 2005** |
|--------------------------------------------------------------------------------|--------|----------|--------|-------------|------------------------------------------------------------------------------------|
| **(in                    thousands)**                                          |   |     |   |        | **(in                    thousands)**                                              |
| **End**                                                                        |   | **High** |   | **Average** |                                                                               | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $93                                                                            |   | $219     |   | $118        |                                                                               | $58 |   |   |   |   | $311 |   | $517 |   | $246 |   | $89 |

**VaR          Associated with Debt Outstanding**

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

**CONDENSED          STATEMENTS OF OPERATIONS**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                  |   | **2006** |    | **2005** |   |
|-----------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **REVENUES**                                                          |   |     |    |     |   |
| Electric                    Generation, Transmission and Distribution |   | $        | 339,601 |     | $      | 250,098 |   |
| Sales                    to AEP Affiliates                            |   |     | 14,068  |     |   | 2,632 |   |
| Other                                                                 |   |     | 1,060   |     |   | 352 |   |
| **TOTAL**                                                             |   |     | 354,729 |     |   | 253,082 |   |
|                                                                  |   |     |    |     |   |   |   |
| **EXPENSES**                                                          |   |     |    |     |   |   |   |
| Fuel                    and Other Consumables for Electric Generation |   |     | 213,173 |     |   | 134,178 |   |
| Purchased                    Electricity for Resale                   |   |     | 33,217  |     |   | 14,793 |   |
| Purchased                    Electricity from AEP Affiliates          |   |     | 21,231  |     |   | 22,845 |   |
| Other                    Operation                                    |   |     | 36,867  |     |   | 30,498 |   |
| Maintenance                                                           |   |     | 20,307  |     |   | 11,359 |   |
| Depreciation                    and Amortization                      |   |     | 21,021  |     |   | 22,619 |   |
| Taxes                    Other Than Income Taxes                      |   |     | 10,076  |     |   | 9,677 |   |
| **TOTAL**                                                             |   |     | 355,892 |     |   | 245,969 |   |
|                                                                  |   |     |    |     |   |   |   |
| **OPERATING                    INCOME (LOSS)**                        |   |     | (1,163  | )        |   | 7,113 |   |
|                                                                  |   |     |    |     |   |   |   |
| **Other                    Income (Expense):**                        |   |     |    |     |   |   |   |
| Interest                    Income                                    |   |     | 569     |     |   | 165 |   |
| Interest                    Expense                                   |   |     | (9,135  | )        |   | (7,875 | ) |
|                                                                  |   |     |    |     |   |   |   |
| **LOSS                    BEFORE INCOME TAXES**                       |   |     | (9,729  | )        |   | (597 | ) |
|                                                                  |   |     |    |     |   |   |   |
| Income                    Tax Credit                                  |   |     | (4,372  | )        |   | (1,102 | ) |
|                                                                  |   |     |    |     |   |   |   |
| **NET                    INCOME (LOSS)**                              |   |     | (5,357  | )        |   | 505 |   |
|                                                                  |   |     |    |     |   |   |   |
| Preferred                    Stock Dividend Requirements              |   |     | 53      |     |   | 53 |   |
|                                                                  |   |     |    |     |   |   |   |
| **EARNINGS                    (LOSS) APPLICABLE TO COMMON STOCK**     |   | $        | (5,410  | )        | $      | 452 |   |

*The          common stock of PSO is owned by a wholly-owned subsidiary of          AEP.*

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

**CONDENSED          STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S**

**EQUITY          AND COMPREHENSIVE INCOME (LOSS)**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                                         |   | **Common                    Stock** |    | **Paid-in                    Capital** |   | **Retained                    Earnings** |   | **Accumulated                    Other Comprehensive Income (Loss)** |    | **Total** |   |
|----------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|----------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                    31, 2004**                                                     |   | $                                   | 157,230 |                                   | $      | 230,016                                  |   | $                                                                    | 141,935 |      | $      | 75 |   | $ | 529,256 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Common                    Stock Dividends                                                    |   |                                |    |                                   |   |                                     |   |                                                                 | (8,500  | )         |   |   |   |   | (8,500 | ) |
| Preferred                    Stock Dividends                                                 |   |                                |    |                                   |   |                                     |   |                                                                 | (53     | )         |   |   |   |   | (53 | ) |
| **TOTAL**                                                                                    |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 520,703 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    LOSS**                                                    |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:**                               |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $534                                      |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   | (993 | ) |   | (993 | ) |
| **NET                    INCOME**                                                            |   |                                |    |                                   |   |                                     |   |                                                                 | 505     |      |   |   |   |   | 505 |   |
| **TOTAL                    COMPREHENSIVE LOSS**                                              |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | (488 | ) |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **MARCH                    31, 2005**                                                        |   | $                                   | 157,230 |                                   | $      | 230,016                                  |   | $                                                                    | 133,887 |      | $      | (918 | ) | $ | 520,215 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **DECEMBER                    31, 2005**                                                     |   | $                                   | 157,230 |                                   | $      | 230,016                                  |   | $                                                                    | 162,615 |      | $      | (1,264 | ) | $ | 548,597 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Preferred                    Stock Dividends                                                 |   |                                |    |                                   |   |                                     |   |                                                                 | (53     | )         |   |   |   |   | (53 | ) |
| **TOTAL**                                                                                    |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 548,544 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    LOSS**                                                    |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Income,** **Net                    of Taxes:** |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $749                                      |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   | 1,391 |   |   | 1,391 |   |
| **NET                    LOSS**                                                              |   |                                |    |                                   |   |                                     |   |                                                                 | (5,357  | )         |   |   |   |   | (5,357 | ) |
| **TOTAL                    COMPREHENSIVE LOSS**                                              |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | (3,966 | ) |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **MARCH                    31, 2006**                                                        |   | $                                   | 157,230 |                                   | $      | 230,016                                  |   | $                                                                    | 157,205 |      | $      | 127 |   | $ | 544,578 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

**CONDENSED          BALANCE SHEETS**

**ASSETS**

**March          31, 2006 and December 31, 2005**

**(in          thousands)**

**(Unaudited)**

|                                                               |   | **2006**     |      | **2005** |   |
|--------------------------------------------------------------------|--------|--------------|-----------|----------|--------|
| **CURRENT                    ASSETS**                              |   |    |      |
| Cash                    and Cash Equivalents                       |   | $            | 1,190     |     | $      | 1,520 |   |
| Accounts                    Receivable:                            |   |         |      |     |   |   |   |
| Customers                                                          |   |         | 29,004    |     |   | 37,740 |   |
| Affiliated                    Companies                            |   |         | 49,057    |     |   | 73,321 |   |
| Miscellaneous                                                      |   |         | 9,699     |     |   | 10,501 |   |
| Allowance                    for Uncollectible Accounts            |   |         | (290      | )        |   | (240 | ) |
| Total                    Accounts Receivable                       |   |         | 87,470    |     |   | 121,322 |   |
| Fuel                                                               |   |         | 14,552    |     |   | 16,431 |   |
| Materials                    and Supplies                          |   |         | 40,450    |     |   | 38,545 |   |
| Risk                    Management Assets                          |   |         | 12,557    |     |   | 40,383 |   |
| Accrued                    Tax Benefits                            |   |         | -         |     |   | 11,972 |   |
| Regulatory                    Asset for Under-Recovered Fuel Costs |   |         | 34,451    |     |   | 108,732 |   |
| Prepayments                    and Other                           |   |         | 8,195     |     |   | 14,287 |   |
| **TOTAL**                                                          |   |         | 198,865   |     |   | 353,192 |   |
|                                                               |   |         |      |     |   |   |   |
| **PROPERTY,                    PLANT AND EQUIPMENT**               |   |         |      |     |   |   |   |
| Electric:                                                          |   |         |      |     |   |   |   |
| Production                                                         |   |         | 1,086,284 |     |   | 1,072,928 |   |
| Transmission                                                       |   |         | 481,783   |     |   | 479,272 |   |
| Distribution                                                       |   |         | 1,156,783 |     |   | 1,140,535 |   |
| Other                                                              |   |         | 221,777   |     |   | 211,805 |   |
| Construction                    Work in Progress                   |   |         | 77,757    |     |   | 90,455 |   |
| **Total**                                                          |   |         | 3,024,384 |     |   | 2,994,995 |   |
| Accumulated                    Depreciation and Amortization       |   |         | 1,178,101 |     |   | 1,175,858 |   |
| **TOTAL                    - NET**                                 |   |         | 1,846,283 |     |   | 1,819,137 |   |
|                                                               |   |         |      |     |   |   |   |
| **OTHER                    NONCURRENT ASSETS**                     |   |         |      |     |   |   |   |
| Regulatory                    Assets                               |   |         | 36,159    |     |   | 50,723 |   |
| Long-term                    Risk Management Assets                |   |         | 11,171    |     |   | 33,566 |   |
| Employee                    Benefits and Pension Assets            |   |         | 81,607    |     |   | 82,559 |   |
| Deferred                    Charges and Other                      |   |         | 40,346    |     |   | 16,287 |   |
| **TOTAL**                                                          |   |         | 169,283   |     |   | 183,135 |   |
|                                                               |   |         |      |     |   |   |   |
| **TOTAL                    ASSETS**                                |   | $            | 2,214,431 |     | $      | 2,355,464 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA **

**CONDENSED          BALANCE SHEETS**

**LIABILITIES          AND SHAREHOLDERS’ EQUITY**

**March          31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                              |   | **2006**                              |      | **2005** |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------------|-----------|----------|--------|
| **CURRENT                    LIABILITIES**                                        |   | **(in                    thousands)** |      |
| Advances                    from Affiliates                                       |   | $                                     | 118,815   |     | $      | 75,883 |   |
| Accounts                    Payable:                                              |   |                                  |      |     |   |   |   |
| General                                                                           |   |                                  | 83,618    |     |   | 130,627 |   |
| Affiliated                    Companies                                           |   |                                  | 57,135    |     |   | 89,786 |   |
| Long-term                    Debt Due Within One Year - Affiliated                |   |                                  | 50,000    |     |   | 50,000 |   |
| Risk                    Management Liabilities                                    |   |                                  | 10,320    |     |   | 38,243 |   |
| Customer                    Deposits                                              |   |                                  | 40,788    |     |   | 53,844 |   |
| Accrued                    Taxes                                                  |   |                                  | 44,644    |     |   | 22,420 |   |
| Other                                                                             |   |                                  | 28,500    |     |   | 51,548 |   |
| **TOTAL**                                                                         |   |                                  | 433,820   |     |   | 512,351 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **NONCURRENT                    LIABILITIES**                                     |   |                                  |      |     |   |   |   |
| Long-term                    Debt - Nonaffiliated                                 |   |                                  | 521,086   |     |   | 521,071 |   |
| Long-term                    Risk Management Liabilities                          |   |                                  | 7,218     |     |   | 22,582 |   |
| Deferred                    Income Taxes                                          |   |                                  | 413,991   |     |   | 436,382 |   |
| Regulatory                    Liabilities and Deferred Investment Tax Credits     |   |                                  | 264,034   |     |   | 284,640 |   |
| Deferred                    Credits and Other                                     |   |                                  | 24,442    |     |   | 24,579 |   |
| **TOTAL**                                                                         |   |                                  | 1,230,771 |     |   | 1,289,254 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES**                                          |   |                                  | 1,664,591 |     |   | 1,801,605 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Cumulative                    Preferred Stock Not Subject to Mandatory Redemption |   |                                  | 5,262     |     |   | 5,262 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Commitments                    and Contingencies (Note 5)                         |   |                                  |      |     |   |   |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **COMMON                    SHAREHOLDER’S EQUITY**                          |   |                                  |      |     |   |   |   |
| Common                    Stock - $15 Par Value Per Share:                        |   |                                  |      |     |   |   |   |
| Authorized                    - 11,000,000 Shares                                 |   |                                  |      |     |   |   |   |
| Issued                    - 10,482,000 Shares                                     |   |                                  |      |     |   |   |   |
| Outstanding                    - 9,013,000 Shares                                 |   |                                  | 157,230   |     |   | 157,230 |   |
| Paid-in                    Capital                                                |   |                                  | 230,016   |     |   | 230,016 |   |
| Retained                    Earnings                                              |   |                                  | 157,205   |     |   | 162,615 |   |
| Accumulated                    Other Comprehensive Income (Loss)                  |   |                                  | 127       |     |   | (1,264 | ) |
| **TOTAL**                                                                         |   |                                  | 544,578   |     |   | 548,597 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES AND SHAREHOLDERS’ EQUITY**           |   | $                                     | 2,214,431 |     | $      | 2,355,464 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

**CONDENSED          STATEMENTS OF CASH FLOWS**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                        |   | **2006**     |    | **2005**     |   |
|-----------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                    ACTIVITIES**                                 |   |    |    |    |   |
| **Net                    Income (Loss)**                                    |   | $            | (5,357  | )            | $      | 505 |   |
| **Adjustments                    for Noncash Items:**                       |   |         |    |         |   |   |   |
| Depreciation                    and Amortization                            |   |         | 21,021  |         |   | 22,619 |   |
| Deferred                    Income Taxes                                    |   |         | (23,436 | )            |   | 2,126 |   |
| Mark-to-Market                    of Risk Management Contracts              |   |         | 9,106   |         |   | 10,473 |   |
| Deferred                    Property Taxes                                  |   |         | (24,295 | )            |   | (24,368 | ) |
| Change                    in Other Noncurrent Assets                        |   |         | 11,229  |         |   | (5,816 | ) |
| Change                    in Other Noncurrent Liabilities                   |   |         | (20,806 | )            |   | (9,579 | ) |
| **Changes                    in Components of Working Capital:**            |   |         |    |         |   |   |   |
| Accounts                    Receivable, Net                                 |   |         | 33,852  |         |   | 14,815 |   |
| Fuel,                    Materials and Supplies                             |   |         | (26     | )            |   | (2,871 | ) |
| Accounts                    Payable                                         |   |         | (77,217 | )            |   | (7,779 | ) |
| Accrued                    Taxes, Net                                       |   |         | 34,196  |         |   | 14,982 |   |
| Customer                    Deposits                                        |   |         | (13,056 | )            |   | 110 |   |
| Over/Under                    Fuel Recovery                                 |   |         | 74,281  |         |   | 40,895 |   |
| Other                    Current Assets                                     |   |         | 6,086   |         |   | 2,285 |   |
| Other                    Current Liabilities                                |   |         | (23,048 | )            |   | (13,262 | ) |
| **Net                    Cash Flows From Operating Activities**             |   |         | 2,530   |         |   | 45,135 |   |
|                                                                        |   |         |    |         |   |   |   |
| **INVESTING                    ACTIVITIES**                                 |   |         |    |         |   |   |   |
| Construction                    Expenditures                                |   |         | (45,539 | )            |   | (20,501 | ) |
| Change                    in Other Cash Deposits, Net                       |   |         | 6       |         |   | - |   |
| **Net                    Cash Flows Used For Investing Activities**         |   |         | (45,533 | )            |   | (20,501 | ) |
|                                                                        |   |         |    |         |   |   |   |
| **FINANCING                    ACTIVITIES**                                 |   |         |    |         |   |   |   |
| Change                    in Advances from Affiliates, Net                  |   |         | 42,932  |         |   | (15,414 | ) |
| Principal                    Payments for Capital Lease Obligations         |   |         | (206    | )            |   | (148 | ) |
| Dividends                    Paid on Common Stock                           |   |         | -       |         |   | (8,500 | ) |
| Dividends                    Paid on Cumulative Preferred Stock             |   |         | (53     | )            |   | (53 | ) |
| **Net                    Cash Flows From (Used For) Financing Activities**  |   |         | 42,673  |         |   | (24,115 | ) |
|                                                                        |   |         |    |         |   |   |   |
| **Net                    Increase (Decrease) in Cash and Cash Equivalents** |   |         | (330    | )            |   | 519 |   |
| **Cash                    and Cash Equivalents at Beginning of Period**     |   |         | 1,520   |         |   | 279 |   |
| **Cash                    and Cash Equivalents at End of Period**           |   | $            | 1,190   |         | $      | 798 |   |

| **SUPPLEMENTAL                    DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                    paid (received) for interest net of capitalized amounts was $8,681,000                    and                    $7,806,000 and for income taxes                    net of refunds was                    $575,000 and $(1,366,000) in 2006 and 2005, respectively. Noncash                    capital                    lease acquisitions were $564,000 and $551,000 in 2006 and 2005,                    respectively. Noncash Construction Expenditures included in Accounts                    Payable of $6,052,000 and $2,208,000 were outstanding as of March                    31, 2006                    and 2005, respectively. |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

**INDEX          TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT          SUBSIDIARIES**

|                                                       | **Footnote                    Reference** |
|------------------------------------------------------------|-------------------------------------------|
|                                                       |                                      |
| Significant                    Accounting Matters          | Note                    1                 |
| New                    Accounting Pronouncements           | Note                    2                 |
| Rate                    Matters                            | Note                    3                 |
| Commitments                    and Contingencies           | Note                    5                 |
| Guarantees                                                 | Note                    6                 |
| Company-wide                    Staffing and Budget Review | Note                    7                 |
| Benefit                    Plans                           | Note                    9                 |
| Business                    Segments                       | Note                    10                |
| Financing                    Activities                    | Note                    11                |

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**MANAGEMENT’S          FINANCIAL DISCUSSION AND ANALYSIS**

**Results          of Operations**

**Reconciliation          of First Quarter of 2005 to First Quarter of 2006 Net          Income**

**(in          millions)**

| **First                    Quarter of 2005**                    |   |   |   |   | $      | 12     |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                 |   |   |   |   |   |   |   |
| Retail                    and Off-system Sales Margins (a)      |   |   | 13     |   |   |   |   |
| Transmission                    Revenues                        |   |   | 3      |   |   |   |   |
| Other                                                           |   |   | 8      |   |   |   |   |
| **Total                    Change in Gross Margin**             |   |   |   |   |   | 24     |   |
|                                                            |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:** |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance              |   |   |   |   |   | (14    | )      |
|                                                            |   |   |   |   |   |   |   |
| Income                    Tax Expense                           |   |   |   |   |   | (4     | )      |
|                                                            |   |   |   |   |   |   |   |
| **First                    Quarter of 2006**                    |   |   |   |   | $      | 18     |   |

| (a) | Includes                    firm wholesale sales to municipals and                    cooperatives. |
|-----|-----------------------------------------------------------------------------------------------------|

| · | Retail                    and Off-system Sales Margins increased $13 million compared to                    2005                    primarily due to a $5 million increase related to wholesale prices                    and an                    $8 million increase in capacity revenue. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission                    Revenues increased $3 million primarily due to higher rates within                    SPP.                                                                                                                                                                   |
| · | Other                    revenues increased $8 million primarily due to the gain on sale                    of                    emission allowances.                                                                                                                                       |

| · | Other                    Operation and Maintenance expenses increased $14 million. This                    was                    primarily due to a $9 million increase in maintenance during                    scheduled                    power plant outages. In addition, Other Operation expense increased                    $2                    million due to right-of-way clearing and increased tree trimming.                    Other                    Operation expense also increased $2 million                    primarily due to customer-related expenses and factoring of accounts                    receivable. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Income          Taxes*

**Financial          Condition**

**Credit          Ratings**

|                                     | **Moody’s** |   | **S&P** |   | **Fitch** |
|------------------------------------------|-------------------|--------|-------------|--------|-----------|
|                                     |              |   |        |   |      |
| First                    Mortgage Bonds  | A3                |   | A-          |   | A         |
| Senior                    Unsecured Debt | Baa1              |   | BBB         |   | A-        |

**Cash          Flow**

|                                                                         |   |  **2006**                        |    | **2005**     |   |
|-------------------------------------------------------------------------|--------|---------------------------------------|---------|--------------|--------|
|                                                                    |   | **(in                    thousands)** |    |
|                                                                    |   |                             |    |    |   |
| **Cash                    and Cash Equivalents at Beginning of Period** |   | $                                     | 3,049   |         | $      | 3,715 |   |
| Net                    Cash Flows From (Used For):                      |   |                                  |    |         |   |  |   |
|                       Operating Activities                    |   |                                  | 41,293  |         |   | 54,957 |   |
|                       Investing Activities                    |   |                                  | (54,294 | )            |   | (34,751 | ) |
|                       Financing Activities                    |   |                                  | 12,501  |         |   | (15,329 | ) |
| Net                    Increase (Decrease) in Cash and Cash Equivalents |   |                                  | (500    | )            |   | 4,877 |   |
| **Cash                    and Cash Equivalents at End of Period**       |   | $                                     | 2,549   |         | $      | 8,592 |   |

*Operating          Activities*

*Investing          Activities*

*Financing          Activities*

**Financing          Activity**

|                                |   | **Principal****Amount** |                                  | **Interest** |     | **Due** |
|-------------------------------------|--------|-------------------------|---------------------------------------|--------------|----------|---------|
| **Type                    of Debt** |   |                    | **Rate**                              |         | **Date** |
|                                |   |                    | **(in                    thousands)** |         | **(%)**  |    |   |
|                                |   |                    |                                  |         |     |    |   |
| Notes                    Payable    |   | $                       | 1,707                                 |         | 4.47     |    | 2011 |
| Notes                    Payable    |   |                    | 750                                   |         | Variable |    | 2008 |

**Liquidity**

**Summary          Obligation Information**

**Significant          Factors**

***Litigation          and Regulatory Activity***

**Critical          Accounting Estimates**

----

**QUANTITATIVE          AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT          ACTIVITIES**

**Market          Risks**

**MTM          Risk Management Contract Net Assets**

**Reconciliation          of MTM Risk Management Contracts to**

**Condensed          Consolidated Balance Sheet**

**As          of March 31, 2006**

**(in          thousands)**

|                                                             |   | **MTM                    Risk Management Contracts** |    | **Cash                    Flow Hedges** |   | **Total** |   |
|------------------------------------------------------------------|--------|------------------------------------------------------|---------|-----------------------------------------|--------|-----------|--------|
| Current                    Assets                                |   | $                                                    | 12,790  |                                    | $      | 1,911     |   | $ | 14,701 |   |
| Noncurrent                    Assets                             |   |                                                 | 12,969  |                                    |   | 121       |   |   | 13,090 |   |
| **Total                    MTM Derivative Contract Assets**      |   |                                                 | 25,759  |                                    |   | 2,032     |   |   | 27,791 |   |
|                                                             |   |                                                 |    |                                    |   |      |   |   |   |   |
| Current                    Liabilities                           |   |                                                 | (11,410 | )                                       |   | (724      | )      |   | (12,134 | ) |
| Noncurrent                    Liabilities                        |   |                                                 | (8,430  | )                                       |   | (107      | )      |   | (8,537 | ) |
| **Total                    MTM Derivative Contract Liabilities** |   |                                                 | (19,840 | )                                       |   | (831      | )      |   | (20,671 | ) |
|                                                             |   |                                                 |    |                                    |   |      |   |   |   |   |
| **Total                    MTM Derivative Contract Net Assets**  |   | $                                                    | 5,919   |                                    | $      | 1,201     |   | $ | 7,120 |   |

**MTM          Risk Management Contract Net Assets**

**Three          Month Ended March 31, 2006**

**(in          thousands)**

| **Total                    MTM Risk Management Contract Net Assets at December 31,                    2005**                                                              |   | $      | 16,387 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                    Loss from Contracts Realized/Settled During the Period and Entered                    in a                    Prior Period                      |   |   | 30     |   |
| Fair                    Value of New Contracts at Inception When Entered During the Period                    (a)                                                         |   |   | 16     |   |
| Net                    Option Premiums Paid/(Received) for Unexercised or Unexpired                    Option                    Contracts Entered During the Period |   |   | (233   | )      |
| Change                    in Fair Value Due to Valuation Methodology Changes on Forward                    Contracts                                                      |   |   | 43     |   |
| Changes                    in Fair Value Due to Market Fluctuations During the Period                    (b)                                                              |   |   | (3,098 | )      |
| Changes                    in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                         |   |   | (7,226 | )      |
| **Total                    MTM Risk Management Contract Net Assets**                                                                                                      |   |   | 5,919  |   |
| Net                    Cash Flow Hedge Contracts                                                                                                                          |   |   | 1,201  |   |
| **Total                    MTM Risk Management Contract Net Assets at March 31,                    2006**                                                                 |   | $      | 7,120  |   |

| (a) | Most                    of the fair value comes from longer term fixed price contracts                    with                    customers that seek to limit their risk against fluctuating energy                    prices.                    Inception value is only recorded if observable market data can                    be obtained                    for valuation inputs for the entire contract term. The contract                    prices are                    valued against market curves associated with the delivery location                    and                    delivery term. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market                    fluctuations are attributable to various factors such as supply/demand,                    weather, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (c) | “Changes                    in Fair Value Allocated to Regulated Jurisdictions” relates to the net                    gains (losses) of those contracts that are not reflected in the                    Condensed                    Consolidated Statements of Income. These net gains (losses) are                    recorded                    as regulatory liabilities/assets for those subsidiaries that                    operate in                    regulated jurisdictions.                                                                                                          |

**Maturity          and Source of Fair Value of MTM Risk Management Contract Net          Assets**

| · | The                    method of measuring fair value used in determining the carrying                    amount of                    our total MTM asset or liability (external sources or modeled                    internally). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                    maturity, by year, of our net assets/liabilities giving an indication                    of                    when these MTM amounts will settle and generate                    cash.                       |

**Maturity          and Source of Fair Value of MTM**

**Risk          Management Contract Net Assets**

**Fair          Value of Contracts as of March 31, 2006**

**(in          thousands)**

|                                                                                                                              |   | **Remainder                    2006** |   | **2007** |   | **2008** |   | **2009** |   | **2010** |   | **After****2010** |   | **Total** |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|-----------|--------|
| Prices                    Actively Quoted - Exchange Traded                    Contracts                                          |   | $                                     | 1,376  |     | $      | 324      |   | $        | 144    |     | $      | (11               | )      | $         | -      |   | $ | - |   | $ | 1,833 |   |
| Prices                    Provided by Other External Sources                    - OTC Broker                      Quotes (a) |   |                                  | 342    |     |   | 720      |   |     | 1,116  |     |   | 936               |   |      | -      |   |   | - |   |   | 3,114 |   |
| Prices                    Based on Models and Other Valuation                    Methods (b)                                      |   |                                  | (576   | )        |   | 17       |   |     | 38     |     |   | 240               |   |      | 786    |   |   | 467 |   |   | 972 |   |
| **Total**                                                                                                                         |   | $                                     | 1,142  |     | $      | 1,061    |   | $        | 1,298  |     | $      | 1,165             |   | $         | 786    |   | $ | 467 |   | $ | 5,919 |   |

| (a) | “Prices                    Provided by Other External Sources - OTC Broker Quotes” reflects                    information obtained from over-the-counter brokers, industry                    services, or                    multiple-party on-line platforms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Prices                    Based on Models and Other Valuation Methods” is used in absence of pricing                    information from external sources. Modeled information is derived                    using                    valuation models developed by the reporting entity, reflecting                    when                    appropriate, option pricing theory, discounted cash flow concepts,                    valuation adjustments, etc. and may require projection of prices                    for                    underlying commodities beyond the period that prices are available                    from                    third-party sources. In addition, where external pricing information                    or                    market liquidity are limited, such valuations are classified                    as modeled.                    The determination of the point at which a market is no longer                    liquid for                    placing it in the modeled category varies by                    market. |

**Cash          Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (AOCI)          on          the Condensed Consolidated Balance Sheet**

**Total          Accumulated Other Comprehensive Income (Loss) Activity**

**Three          Months Ended March 31, 2006**

**(in          thousands)**

|                                                                                                              |   | **Power** |   | **Interest                    Rate** |   | **Total** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------------------------------------|--------|-----------|--------|
| **Beginning                    Balance in AOCI December 31, 2005**                                                |   | $         | (736   | )                                    | $      | (5,116    | )      | $ | (5,852 | ) |
| Changes                    in Fair Value                                                                          |   |      | 1,449  |                                 |   | -         |   |   | 1,449 |   |
| Reclassifications                    from AOCI to Net Income for Cash                    Flow Hedges Settled |   |      | 144    |                                 |   | 135       |   |   | 279 |   |
| **Ending                    Balance in AOCI March 31, 2006**                                                      |   | $         | 857    |                                 | $      | (4,981    | )      | $ | (4,124 | ) |

**Credit          Risk**

**VaR          Associated with Risk Management Contracts**

| **Three                    Months Ended****March                    31, 2006** |   |     |   |        | **Twelve                    Months Ended****December                    31, 2005** |
|--------------------------------------------------------------------------------|--------|----------|--------|-------------|------------------------------------------------------------------------------------|
| **(in                    thousands)**                                          |   |     |   |        | **(in                    thousands)**                                              |
| **End**                                                                        |   | **High** |   | **Average** |                                                                               | **Low** |   |   |   |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $109                                                                           |   | $256     |   | $138        |                                                                               | $68 |   |   |   |   | $363 |   | $604 |   | $287 |   | $104 |

**VaR          Associated with Debt Outstanding**

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF INCOME**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                                                  |   | **2006** |    | **2005** |   |
|-------------------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **REVENUES**                                                                                          |   |     |    |     |   |
| Electric                    Generation, Transmission and Distribution                                 |   | $        | 293,993 |     | $      | 229,808 |   |
| Sales                    to AEP Affiliates                                                            |   |     | 10,765  |     |   | 17,122 |   |
| Other                                                                                                 |   |     | 374     |     |   | 281 |   |
| **TOTAL**                                                                                             |   |     | 305,132 |     |   | 247,211 |   |
|                                                                                                  |   |     |    |     |   |   |   |
| **EXPENSES**                                                                                          |   |     |    |     |   |   |   |
| Fuel                    and Other Consumables for Electric Generation                                 |   |     | 90,661  |     |   | 90,418 |   |
| Purchased                    Electricity for Resale                                                   |   |     | 29,218  |     |   | 13,380 |   |
| Purchased                    Electricity from AEP Affiliates                                          |   |     | 23,337  |     |   | 5,864 |   |
| Other                    Operation                                                                    |   |     | 49,783  |     |   | 44,615 |   |
| Maintenance                                                                                           |   |     | 24,657  |     |   | 15,715 |   |
| Depreciation                    and Amortization                                                      |   |     | 32,534  |     |   | 32,393 |   |
| Taxes                    Other Than Income Taxes                                                      |   |     | 15,982  |     |   | 15,663 |   |
| **TOTAL**                                                                                             |   |     | 266,172 |     |   | 218,048 |   |
|                                                                                                  |   |     |    |     |   |   |   |
| **OPERATING                    INCOME**                                                               |   |     | 38,960  |     |   | 29,163 |   |
|                                                                                                  |   |     |    |     |   |   |   |
| **Other                    Income (Expense):**                                                        |   |     |    |     |   |   |   |
| Interest                    Income                                                                    |   |     | 543     |     |   | 455 |   |
| Allowance                    for Equity Funds Used During Construction                                |   |     | 185     |     |   | 649 |   |
| Interest                    Expense                                                                   |   |     | (12,771 | )        |   | (12,780 | ) |
|                                                                                                  |   |     |    |     |   |   |   |
| **INCOME                    BEFORE INCOME TAXES AND MINORITY****INTEREST                    EXPENSE** |   |     | 26,917  |     |   | 17,487 |   |
|                                                                                                  |   |     |    |     |   |   |   |
| Income                    Tax Expense                                                                 |   |     | 8,823   |     |   | 4,396 |   |
| Minority                    Interest Expense                                                          |   |     | 222     |     |   | 886 |   |
|                                                                                                  |   |     |    |     |   |   |   |
| **NET                    INCOME**                                                                     |   |     | 17,872  |     |   | 12,205 |   |
|                                                                                                  |   |     |    |     |   |   |   |
| Preferred                    Stock Dividend Requirements                                              |   |     | 57      |     |   | 57 |   |
|                                                                                                  |   |     |    |     |   |   |   |
| **EARNINGS                    APPLICABLE TO COMMON STOCK**                                            |   | $        | 17,815  |     | $      | 12,148 |   |

*The          common stock of SWEPCo is owned by a wholly-owned subsidiary of          AEP.*

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S**

**EQUITY          AND COMPREHENSIVE INCOME (LOSS)**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                                         |   | **Common                    Stock** |    | **Paid-in                    Capital** |   | **Retained                    Earnings** |   | **Accumulated                    Other Comprehensive Income (Loss)** |    | **Total** |   |
|----------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|----------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                    31, 2004**                                                     |   | $                                   | 135,660 |                                   | $      | 245,003                                  |   | $                                                                    | 389,135 |      | $      | (1,180 | ) | $ | 768,618 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Common                    Stock Dividends                                                    |   |                                |    |                                   |   |                                     |   |                                                                 | (12,500 | )         |   |   |   |   | (12,500 | ) |
| Preferred                    Stock Dividends                                                 |   |                                |    |                                   |   |                                     |   |                                                                 | (57     | )         |   |   |   |   | (57 | ) |
| **TOTAL**                                                                                    |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 756,061 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                                                  |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:**                               |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $824                                      |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   | (1,529 | ) |   | (1,529 | ) |
| **NET                    INCOME**                                                            |   |                                |    |                                   |   |                                     |   |                                                                 | 12,205  |      |   |   |   |   | 12,205 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                                            |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 10,676 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **MARCH                    31, 2005**                                                        |   | $                                   | 135,660 |                                   | $      | 245,003                                  |   | $                                                                    | 388,783 |      | $      | (2,709 | ) | $ | 766,737 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **DECEMBER                    31, 2005**                                                     |   | $                                   | 135,660 |                                   | $      | 245,003                                  |   | $                                                                    | 407,844 |      | $      | (6,129 | ) | $ | 782,378 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Common                    Stock Dividends                                                    |   |                                |    |                                   |   |                                     |   |                                                                 | (10,000 | )         |   |   |   |   | (10,000 | ) |
| Preferred                    Stock Dividends                                                 |   |                                |    |                                   |   |                                     |   |                                                                 | (57     | )         |   |   |   |   | (57 | ) |
| **TOTAL**                                                                                    |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 772,321 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                                                  |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Income,** **Net                    of Taxes:** |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $930                                      |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   | 1,728 |   |   | 1,728 |   |
| **NET                    INCOME**                                                            |   |                                |    |                                   |   |                                     |   |                                                                 | 17,872  |      |   |   |   |   | 17,872 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                                            |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 19,600 |   |
|                                                                                         |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **MARCH                    31, 2006**                                                        |   | $                                   | 135,660 |                                   | $      | 245,003                                  |   | $                                                                    | 415,659 |      | $      | (4,401 | ) | $ | 791,921 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**March          31, 2006 and December 31, 2005**

**(in          thousands)**

**(Unaudited)**

|                                                               |   | **2006**     |      | **2005**     |   |
|--------------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **CURRENT                    ASSETS**                              |   |    |      |    |   |
| Cash                    and Cash Equivalents                       |   | $            | 2,549     |         | $      | 3,049 |   |
| Accounts                    Receivable:                            |   |         |      |         |   |   |   |
| Customers                                                          |   |         | 44,030    |         |   | 47,515 |   |
| Affiliated                    Companies                            |   |         | 27,060    |         |   | 49,226 |   |
| Miscellaneous                                                      |   |         | 6,721     |         |   | 7,984 |   |
| Allowance                    for Uncollectible Accounts            |   |         | (482      | )            |   | (548 | ) |
| Total                    Accounts Receivable                       |   |         | 77,329    |         |   | 104,177 |   |
| Fuel                                                               |   |         | 55,627    |         |   | 40,333 |   |
| Materials                    and Supplies                          |   |         | 37,048    |         |   | 34,821 |   |
| Risk                    Management Assets                          |   |         | 14,701    |         |   | 47,319 |   |
| Regulatory                    Asset for Under-Recovered Fuel Costs |   |         | 32,990    |         |   | 51,387 |   |
| Prepayments                    and Other                           |   |         | 23,330    |         |   | 34,010 |   |
| **TOTAL**                                                          |   |         | 243,574   |         |   | 315,096 |   |
|                                                               |   |         |      |         |   |   |   |
| **PROPERTY,                    PLANT AND EQUIPMENT**               |   |         |      |         |   |   |   |
| Electric:                                                          |   |         |      |         |   |   |   |
| Production                                                         |   |         | 1,660,255 |         |   | 1,660,392 |   |
| Transmission                                                       |   |         | 649,066   |         |   | 645,297 |   |
| Distribution                                                       |   |         | 1,167,991 |         |   | 1,153,026 |   |
| Other                                                              |   |         | 445,320   |         |   | 443,749 |   |
| Construction                    Work in Progress                   |   |         | 119,090   |         |   | 104,175 |   |
| **Total**                                                          |   |         | 4,041,722 |         |   | 4,006,639 |   |
| Accumulated                    Depreciation and Amortization       |   |         | 1,782,450 |         |   | 1,776,216 |   |
| **TOTAL                    - NET**                                 |   |         | 2,259,272 |         |   | 2,230,423 |   |
|                                                               |   |         |      |         |   |   |   |
| **OTHER                    NONCURRENT ASSETS**                     |   |         |      |         |   |   |   |
| Regulatory                    Assets                               |   |         | 72,372    |         |   | 81,776 |   |
| Long-term                    Risk Management Assets                |   |         | 13,090    |         |   | 39,796 |   |
| Employee                    Benefits and Pension Assets            |   |         | 82,165    |         |   | 83,330 |   |
| Deferred                    Charges and Other                      |   |         | 74,933    |         |   | 46,926 |   |
| **TOTAL**                                                          |   |         | 242,560   |         |   | 251,828 |   |
|                                                               |   |         |      |         |   |   |   |
| **TOTAL                    ASSETS**                                |   | $            | 2,745,406 |         | $      | 2,797,347 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**LIABILITIES          AND SHAREHOLDERS’ EQUITY**

**March          31, 2006 and December 31, 2005**

**(Unaudited)**

|                                                                              |   |  **2006**                        |      | **2005** |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------------|-----------|----------|--------|
| **CURRENT                    LIABILITIES**                                        |   | **(in                    thousands)** |      |
| Advances                    from Affiliates                                       |   | $                                     | 49,198    |     | $      | 28,210 |   |
| Accounts                    Payable:                                              |   |                                  |      |     |   |   |   |
| General                                                                           |   |                                  | 59,922    |     |   | 71,138 |   |
| Affiliated                    Companies                                           |   |                                  | 51,510    |     |   | 53,019 |   |
| Short-term                    Debt - Nonaffiliated                                |   |                                  | 5,788     |     |   | 1,394 |   |
| Long-term                    Debt Due Within One Year - Nonaffiliated             |   |                                  | 19,693    |     |   | 15,755 |   |
| Risk                    Management Liabilities                                    |   |                                  | 12,134    |     |   | 45,098 |   |
| Customer                    Deposits                                              |   |                                  | 34,987    |     |   | 50,848 |   |
| Accrued                    Taxes                                                  |   |                                  | 88,037    |     |   | 42,799 |   |
| Other                                                                             |   |                                  | 58,000    |     |   | 82,699 |   |
| **TOTAL**                                                                         |   |                                  | 379,269   |     |   | 390,960 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **NONCURRENT                    LIABILITIES**                                     |   |                                  |      |     |   |   |   |
| Long-term                    Debt - Nonaffiliated                                 |   |                                  | 672,476   |     |   | 678,886 |   |
| Long-term                    Debt - Affiliated                                    |   |                                  | 50,000    |     |   | 50,000 |   |
| Long-term                    Risk Management Liabilities                          |   |                                  | 8,537     |     |   | 27,083 |   |
| Deferred                    Income Taxes                                          |   |                                  | 402,767   |     |   | 409,513 |   |
| Regulatory                    Liabilities and Deferred Investment Tax Credits     |   |                                  | 306,120   |     |   | 320,066 |   |
| Deferred                    Credits and Other                                     |   |                                  | 128,101   |     |   | 131,477 |   |
| **TOTAL**                                                                         |   |                                  | 1,568,001 |     |   | 1,617,025 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES**                                          |   |                                  | 1,947,270 |     |   | 2,007,985 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Minority                    Interest                                              |   |                                  | 1,515     |     |   | 2,284 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Cumulative                    Preferred Stock Not Subject to Mandatory Redemption |   |                                  | 4,700     |     |   | 4,700 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| Commitments                    and Contingencies (Note 5)                         |   |                                  |      |     |   |   |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **COMMON                    SHAREHOLDER’S EQUITY**                          |   |                                  |      |     |   |   |   |
| Common                    Stock - $18 Par Value Per Share:                        |   |                                  |      |     |   |   |   |
| Authorized                    - 7,600,000 Shares                                  |   |                                  |      |     |   |   |   |
| Outstanding                    - 7,536,640 Shares                                 |   |                                  | 135,660   |     |   | 135,660 |   |
| Paid-in                    Capital                                                |   |                                  | 245,003   |     |   | 245,003 |   |
| Retained                    Earnings                                              |   |                                  | 415,659   |     |   | 407,844 |   |
| Accumulated                    Other Comprehensive Income (Loss)                  |   |                                  | (4,401    | )        |   | (6,129 | ) |
| **TOTAL**                                                                         |   |                                  | 791,921   |     |   | 782,378 |   |
|                                                                              |   |                                  |      |     |   |   |   |
| **TOTAL                    LIABILITIES AND SHAREHOLDERS’ EQUITY**           |   | $                                     | 2,745,406 |     | $      | 2,797,347 |   |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For          the Three Months Ended March 31, 2006 and 2005**

**(in          thousands)**

**(Unaudited)**

|                                                                        |   | **2006**     |    | **2005**     |   |
|-----------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                    ACTIVITIES**                                 |   |    |    |    |   |
| **Net                    Income**                                           |   | $            | 17,872  |         | $      | 12,205 |   |
| **Adjustments                    for Noncash Items:**                       |   |         |    |         |   |   |   |
| Depreciation                    and Amortization                            |   |         | 32,534  |         |   | 32,393 |   |
| Deferred                    Income Taxes                                    |   |         | (9,101  | )            |   | (4,312 | ) |
| Mark-to-Market                    of Risk Management Contracts              |   |         | 10,468  |         |   | 12,419 |   |
| Deferred                    Property Taxes                                  |   |         | (28,997 | )            |   | (28,570 | ) |
| Change                    in Other Noncurrent Assets                        |   |         | 9,541   |         |   | 3,552 |   |
| Change                    in Other Noncurrent Liabilities                   |   |         | (19,121 | )            |   | (10,308 | ) |
| **Changes                    in Components of Working Capital:**            |   |         |    |         |   |   |   |
| Accounts                    Receivable, Net                                 |   |         | 26,848  |         |   | 14,582 |   |
| Fuel,                    Materials and Supplies                             |   |         | (17,521 | )            |   | 2,427 |   |
| Accounts                    Payable                                         |   |         | (15,304 | )            |   | (6,021 | ) |
| Accrued                    Taxes, Net                                       |   |         | 45,238  |         |   | 16,116 |   |
| Customer                    Deposits                                        |   |         | (15,861 | )            |   | (866 | ) |
| Over/Under                    Fuel Recovery, Net                            |   |         | 15,216  |         |   | 8,451 |   |
| Other                    Current Assets                                     |   |         | 10,736  |         |   | 4,849 |   |
| Other                    Current Liabilities                                |   |         | (21,255 | )            |   | (1,960 | ) |
| **Net                    Cash Flows From Operating Activities**             |   |         | 41,293  |         |   | 54,957 |   |
|                                                                        |   |         |    |         |   |   |   |
| **INVESTING                    ACTIVITIES**                                 |   |         |    |         |   |   |   |
| Construction                    Expenditures                                |   |         | (54,238 | )            |   | (33,931 | ) |
| Change                    in Advances to Affiliates, Net                    |   |         | -       |         |   | (928 | ) |
| Other                                                                       |   |         | (56     | )            |   | 108 |   |
| **Net                    Cash Flows Used For Investing Activities**         |   |         | (54,294 | )            |   | (34,751 | ) |
|                                                                        |   |         |    |         |   |   |   |
| **FINANCING                    ACTIVITIES**                                 |   |         |    |         |   |   |   |
| Change                    in Short-term Debt, Net - Nonaffiliated           |   |         | 4,394   |         |   | - |   |
| Retirement                    of Long-term Debt - Nonaffiliated             |   |         | (2,457  | )            |   | (2,457 | ) |
| Change                    in Advances from Affiliates, Net                  |   |         | 20,988  |         |   | - |   |
| Principal                    Payments for Capital Lease Obligations         |   |         | (367    | )            |   | (315 | ) |
| Dividends                    Paid on Common Stock                           |   |         | (10,000 | )            |   | (12,500 | ) |
| Dividends                    Paid on Cumulative Preferred Stock             |   |         | (57     | )            |   | (57 | ) |
| **Net                    Cash Flows From (Used For) Financing Activities**  |   |         | 12,501  |         |   | (15,329 | ) |
|                                                                        |   |         |    |         |   |   |   |
| **Net                    Increase (Decrease) in Cash and Cash Equivalents** |   |         | (500    | )            |   | 4,877 |   |
| **Cash                    and Cash Equivalents at Beginning of Period**     |   |         | 3,049   |         |   | 3,715 |   |
| **Cash                    and Cash Equivalents at End of Period**           |   | $            | 2,549   |         | $      | 8,592 |   |

| **SUPPLEMENTAL                    DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                    paid for interest net of capitalized amounts was $11,892,000                    and                    $12,304,000 and for income taxes                    net of refunds was                     $1,282,000 and $22,257,000 in 2006 and 2005, respectively. Noncash                    capital                    lease acquisitions were $3,412,000 and $1,329,000 in 2006 and                    2005,                    respectively. Noncash Construction Expenditures included in Accounts                    Payable of $12,800,000 and $4,700,000 were outstanding as of                    March 31,                    2006 and 2005, respectively. |

*See          Condensed Notes to Condensed Financial Statements of Registrant          Subsidiaries.*

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**INDEX          TO CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT          SUBSIDIARIES**

|                                                       | **Footnote                    Reference** |
|------------------------------------------------------------|-------------------------------------------|
|                                                       |                                      |
| Significant                    Accounting Matters          | Note                    1                 |
| New                    Accounting Pronouncements           | Note                    2                 |
| Rate                    Matters                            | Note                    3                 |
| Commitments                    and Contingencies           | Note                    5                 |
| Guarantees                                                 | Note                    6                 |
| Company-wide                    Staffing and Budget Review | Note                    7                 |
| Benefit                    Plans                           | Note                    9                 |
| Business                    Segments                       | Note                    10                |
| Financing                    Activities                    | Note                    11                |

----

**CONDENSED        NOTES TO CONDENSED FINANCIAL STATEMENTS OF REGISTRANT        SUBSIDIARIES**

| The                  condensed notes to condensed financial statements that follow are                  a                  combined presentation for the Registrant Subsidiaries. The following                  list                  indicates the registrants to which the footnotes apply: |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                           |   |   |
| 1.                                                                                                                                                                                                                                                                                             | Significant                  Accounting Matters | AEGCo,                  APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 2.                                                                                                                                                                                                                                                                                             | New                  Accounting Pronouncements | AEGCo,                  APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 3.                                                                                                                                                                                                                                                                                             | Rate                  Matters | APCo,                  CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 4.                                                                                                                                                                                                                                                                                             | Customer                  Choice and Industry                  Restructuring | CSPCo,                  OPCo, TCC, TNC |
| 5.                                                                                                                                                                                                                                                                                             | Commitments                  and Contingencies | AEGCo,                  APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 6.                                                                                                                                                                                                                                                                                             | Guarantees | AEGCo,                  APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 7.                                                                                                                                                                                                                                                                                             | Company-wide                  Staffing and Budget Review | AEGCo,                  APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 8.                                                                                                                                                                                                                                                                                             | Assets                  Held for Sale | TCC |
| 9.                                                                                                                                                                                                                                                                                             | Benefit                  Plans | APCo,                  CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 10.                                                                                                                                                                                                                                                                                            | Business                  Segments | AEGCo,                  APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 11.                                                                                                                                                                                                                                                                                            | Financing                  Activities | AEGCo,                  APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC,                  TNC |

----

**                1.**
**SIGNIFICANT        ACCOUNTING MATTERS**

***General***

***Components        of Accumulated Other Comprehensive Income (Loss)***

|                                            |   | **March                  31,**      |   | **December                  31,** |   |
|-------------------------------------------------|--------|-------------------------------------|--------|-----------------------------------|--------|
|                                            |   | **2006**                            |   | **2005**                          |   |
|                                            |   | **(in                  thousands)** |   |
| **Components**                                  |   |                           |   |                         |   |
| **Cash                  Flow Hedges:**          |   |                           |   |                         |   |
| APCo                                            |   | $                                   | (3,153 | )                                 | $      | (16,421 | ) |
| CSPCo                                           |   |                                | 3,182  |                              |   | (859 | ) |
| I&M                                         |   |                                | 740    |                              |   | (3,467 | ) |
| KPCo                                            |   |                                | 1,427  |                              |   | (194 | ) |
| OPCo                                            |   |                                | 6,931  |                              |   | 755 |   |
| PSO                                             |   |                                | 279    |                              |   | (1,112 | ) |
| SWEPCo                                          |   |                                | (4,124 | )                                 |   | (5,852 | ) |
| TCC                                             |   |                                | 38     |                              |   | (224 | ) |
| TNC                                             |   |                                | 78     |                              |   | (111 | ) |
|                                            |   |                                |   |                              |   |   |   |
| **Minimum                  Pension Liability:** |   |                                |   |                              |   |   |   |
| APCo                                            |   | $                                   | (189   | )                                 | $      | (189 | ) |
| CSPCo                                           |   |                                | (21    | )                                 |   | (21 | ) |
| I&M                                         |   |                                | (102   | )                                 |   | (102 | ) |
| KPCo                                            |   |                                | (29    | )                                 |   | (29 | ) |
| PSO                                             |   |                                | (152   | )                                 |   | (152 | ) |
| SWEPCo                                          |   |                                | (277   | )                                 |   | (277 | ) |
| TCC                                             |   |                                | (928   | )                                 |   | (928 | ) |
| TNC                                             |   |                                | (393   | )                                 |   | (393 | ) |

***Related        Party Transactions***

|        |   | **Three                  Months Ended****March                  31,** |   |
|-------------|--------|-----------------------------------------------------------------------|--------|
| **Company** |   | **2006**                                                              |   | **2005** |   |
|        |   | **(in                  thousands)**                                   |   |
|        |   |                                                             |   |    |   |
| APCo        |   | $                                                                     | 21,974 |   | $ | 16,952 |   |
| CSPCo       |   |                                                                  | 5,665  |   |   | 4,594 |   |
| I&M     |   |                                                                  | 8,552  |   |   | 6,113 |   |
| OPCo        |   |                                                                  | 18,630 |   |   | 14,963 |   |

|        |   | **Three                  Months Ended****March                  31,** |   |
|-------------|--------|-----------------------------------------------------------------------|--------|
| **Company** |   | **2006**                                                              |   | **2005** |   |
|        |   | **(in                  thousands)**                                   |   |
|        |   |                                                             |   |    |   |
| PSO         |   | $                                                                     | 11,693 |   | $ | 13,297 |   |
| SWEPCo      |   |                                                                  | 17,547 |   |   | 7,494 |   |
| TCC         |   |                                                                  | 582    |   |   | 2,072 |   |
| TNC         |   |                                                                  | 3,831  |   |   | 5,652 |   |

***Reclassifications***

**                2.**
**NEW        ACCOUNTING PRONOUNCEMENTS**

***SFAS        123 (revised 2004) “Share-Based Payment” (SFAS 123R)***

***SFAS        156 “Accounting for Servicing of Financial Assets - An Amendment of FASB        Statement No. 140” (SFAS 156)***

***Future        Accounting Changes***

**                3.**
**RATE        MATTERS**

***APCo        Virginia Environmental and Reliability Costs - Affecting APCo***

***APCo        Virginia Base Rate Case - Affecting APCo***

***APCo        West Virginia Rate Case - Affecting APCo***

| · | An                  Expanded Net Energy Cost (ENEC) increase of $50 million for fuel                  and                  purchased power expenses;                                                                                                                                                                                  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | A                  $21 million special construction surcharge providing recovery of                  the costs                  of the Wyoming-Jacksons Ferry 765 kV line and scrubbers to                  date;                                                                                                                     |
| · | A                  general base rate reduction of $16 million of which a portion relates                  to a                  reduction in depreciation expense which affects cash flows but                  not                  earnings; and                                                                                    |
| · | A                  $15 million credit for prior over-recoveries of ENEC costs, currently                  recorded in regulatory liabilities on the Condensed Consolidated                  Balance                  Sheets. Therefore, this item impacts cash flows but has no effect                  on                  earnings. |

***I&M        Depreciation Study Filing- Affecting I&M***

***KPCo        Rate Filing - Affecting KPCo***

***PSO        Fuel and Purchased Power and its Possible Impact on AEP East companies and        AEP        West Companies***

***SWEPCo        Louisiana Fuel Inquiry - Affecting SWEPCo***

***SWEPCo        PUCT Staff Review of Earnings - Affecting SWEPCo***

***ERCOT        Price-to-Beat (PTB) Fuel Factor Appeal - Affecting TCC and        TNC***

***RTO        Formation/Integration - Affecting APCo, CSPCo, I&M, KPCo and        OPCo***

|    |   | **March                  31, 2006**               |   | **December                  31, 2005**                           |   |
|---------|--------|---------------------------------------------------|--------|------------------------------------------------------------------|--------|
|    |   | **PJM-Billed                  Integration Costs** |   | **Non-PJM                  Billed Formation/ Integration Costs** |   | **PJM-Billed                  Integration Costs** |   | **Non-PJM                  Billed Formation/ Integration Costs** |   |
|    |   |  **(in                  millions)**          |   |
| APCo    |   | $                                                 | 4.0    |                                                             | $      | 4.8 |   | $ | 4.1 |   | $ | 4.9 |   |
| CSPCo   |   |                                              | 1.6    |                                                             |   | 1.9 |   |   | 1.7 |   |   | 1.9 |   |
| I&M |   |                                              | 3.1    |                                                             |   | 3.5 |   |   | 3.2 |   |   | 3.7 |   |
| KPCo    |   |                                              | 1.0    |                                                             |   | 1.1 |   |   | 1.0 |   |   | 1.1 |   |
| OPCo    |   |                                              | 4.5    |                                                             |   | 5.0 |   |   | 4.7 |   |   | 5.1 |   |

***Transmission        Rate Proceedings at the FERC - Affecting APCo, CSPCo, I&M, KPCo and        OPCo***

*SECA        Revenue*

|    |   |  **Three                  Months Ended****March                  31,** |   | **Total                  Net SECA Revenues****Through** |   |
|---------|--------|-----------------------------------------------------------------------------|--------|---------------------------------------------------------|--------|
|    |   | **2006**                                                                    |   | **2005**                                                |   | **March                  2006** |   |
|    |   | **(in                  millions)**                                          |   |
| APCo    |   | $                                                                           | 11.0   |                                                    | $      | 8.6 |   | $ | 55.5 |   |
| CSPCo   |   |                                                                        | 6.5    |                                                    |   | 4.4 |   |   | 30.8 |   |
| I&M |   |                                                                        | 6.7    |                                                    |   | 4.9 |   |   | 32.7 |   |
| KPCo    |   |                                                                        | 2.7    |                                                    |   | 2.0 |   |   | 13.2 |   |
| OPCo    |   |                                                                        | 8.6    |                                                    |   | 6.1 |   |   | 42.2 |   |

*AEP        East Transmission Revenue Requirement and Rates*

*PJM        Regional Transmission Rate Proceeding*

| · | In                  Kentucky, KPCo settled a rate case, which provides for the recovery                  of the                  transmission revenue shortfall.                                         |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | APCo                  filed a settlement agreement in West Virginia, which included recovery                  of                  the lost T&O/SECA transmission revenues.                           |
| · | A                  pending rate request filed in February 2006 in Ohio addresses the                  significant reduction in FERC transmission revenues.                                               |
| · | In                  Virginia, APCo filed a request for revised rates,                  which includes recovery of the lost T&O/SECA                  transmission revenues. |
| · | In                  Indiana, I&M is precluded by a rate cap from raising its rates until                  July 1, 2007.                                                                              |

***Allocation        Agreement between AEP East companies and AEP West companies - Affecting the        AEP        East companies and AEP West companies***

**                4.**
**CUSTOMER        CHOICE AND INDUSTRY RESTRUCTURING**

**TEXAS        RESTRUCTURING - Affecting TCC, TNC and SWEPCo**

***TCC        Securitization Proceeding***

|                                                                                                           |   | **(in                  millions)** |   |
|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
| Stranded                  Generation Plant Costs                                                               |   | $                                  | 969    |   |
| Net                  Generation-related Regulatory Asset                                                       |   |                               | 249    |   |
| Excess                  Earnings                                                                               |   |                               | (49    | ) |
| **Recorded                  Securitizable Net Stranded Generation Plant Costs**                                |   |                               | 1,169  |   |
| Recorded                  Debt Carrying Costs on Recorded Net Stranded Generation Plant                  Costs |   |                               | 284    |   |
| **Recorded                  Securitizable True-up Regulatory Asset**                                           |   |                               | 1,453  |   |
| Unrecorded                  But Recoverable Equity Carrying Costs                                              |   |                               | 212    |   |
| Unrecorded                  Estimated April 2006 - August 2006 Debt Carrying Costs                             |   |                               | 40     |   |
| Unrecorded                  Securitization Issuance Costs                                                      |   |                               | 24     |   |
| Unrecorded                  Excess Earnings, Related Return and Other                                          |   |                               | 75     |   |
| **Securitization                  Request**                                                                    |   | $                                  | 1,804  |   |

***Deferred        Investment Tax Credits and Excess Deferred Federal Income        Taxes***

***CTC        Proceeding for Other True-up Items***

|                                                                           |   | **(in                  millions)** |   |
|--------------------------------------------------------------------------------|--------|------------------------------------|--------|
| Wholesale                  Capacity Auction True-up                            |   | $                                  | 61     |   |
| Carrying                  Costs on Wholesale Capacity Auction True-up          |   |                               | 17     |   |
| Retail                  Clawback                                               |   |                               | (61    | ) |
| Deferred                  Over-recovered Fuel Balance                          |   |                               | (177   | ) |
| **Recorded                  Net Regulatory Liabilities - Other True-up Items** |   |                               | (160   | ) |
| ADFIT                  Benefit                                                 |   |                               | (328   | ) |
| Unrecorded                  Carrying Costs and Other                           |   |                               | (3     | ) |
| **Estimated                  CTC Request**                                     |   | $                                  | (491   | ) |

***Fuel        Balance Recoveries***

***Carrying        Costs on Net True-up Regulatory Assets Impacting Securitization and CTC        Proceedings***

***Summary***

***Texas        Restructuring - SPP***

**OHIO        RESTRUCTURING - Affecting CSPCo and OPCo**

***Rate        Stabilization Plans***

***IGCC        Plant***

***Transmission        Rate Filing***

***Storm        Cost Recovery Filing***

***PUCO        Staff Report on Service Reliability***

***Customer        Choice Deferrals***

**                5.**
**COMMITMENTS        AND CONTINGENCIES**

**ENVIRONMENTAL**

***Federal        EPA Complaint and Notice of Violation - Affecting APCo, CSPCo, I&M, and        OPCo***

***Notice        of Enforcement and Notice of Citizen Suit - Affecting        SWEPCo***

***Carbon        Dioxide Public Nuisance Claims - Affecting AEP East Companies and West        Companies***

***Ontario        Litigation - Affecting CSPCo and OPCo***

**OPERATIONAL**

***Power        Generation Facility and TEM Litigation - Affecting        OPCo***

***FERC        Long-term Contracts - Affecting AEP East Companies and AEP West        Companies***

**                6.**
**GUARANTEES**

***Letters        of Credit***

***SWEPCo***

***Indemnifications        and Other Guarantees***

**Contracts**

**Master        Operating Lease**

| **Maximum                  Potential Loss** |   |
|---------------------------------------------|--------|
| **Subsidiary**                              |   | **(in                  millions)** |   |
| APCo                                        |   | $ | 7 |   |
| CSPCo                                       |   |   | 3 |   |
| I&M                                     |   |   | 4 |   |
| KPCo                                        |   |   | 2 |   |
| OPCo                                        |   |   | 6 |   |
| PSO                                         |   |   | 5 |   |
| SWEPCo                                      |   |   | 5 |   |
| TCC                                         |   |   | 6 |   |
| TNC                                         |   |   | 3 |   |

**             7.**
**COMPANY-WIDE        STAFFING AND BUDGET REVIEW**

**                8.**
**ASSETS        HELD FOR SALE**

***Texas        Plants - Oklaunion Power Station - Affecting TCC***

| **Texas                  Plants (TCC)**                                   |   | **March                  31, 2006** |   | **December                  31, 2005** |   |
|---------------------------------------------------------------------------|--------|-------------------------------------|--------|----------------------------------------|--------|
| **Assets:**                                                               |   | **(in                  millions)**  |   |
| Other                  Current Assets                                     |   | $                                   | 1      |                                   | $      | 1 |   |
| Property,                  Plant and Equipment, Net                       |   |                                | 43     |                                   |   | 43 |   |
| **Total                  Assets Held for Sale - Texas Generation Plants** |   | $                                   | 44     |                                   | $      | 44 |   |
|                                                                      |   |                                |   |                                   |   |   |   |

**                9.**
**BENEFIT        PLANS**

|                                                   |   | **Pension                  Plans** |   | **Other                  Postretirement****Benefit                  Plans** |   |
|--------------------------------------------------------|--------|------------------------------------|--------|-----------------------------------------------------------------------------|--------|
|                                                   |   | **2006**                           |   | **2005**                                                                    |   | **2006** |   | **2005** |   |
|                                                   |   | **(in                  millions)** |   |
| Service                  Cost                          |   | $                                  | 24     |                                                                        | $      | 23 |   | $ | 10 |   | $ | 11 |   |
| Interest                  Cost                         |   |                               | 57     |                                                                        |   | 56 |   |   | 25 |   |   | 27 |   |
| Expected                  Return on Plan Assets        |   |                               | (83    | )                                                                           |   | (77 | ) |   | (23 | ) |   | (23 | ) |
| Amortization                  of Transition Obligation |   |                               | -      |                                                                        |   | - |   |   | 7 |   |   | 7 |   |
| Amortization                  of Net Actuarial Loss    |   |                               | 20     |                                                                        |   | 13 |   |   | 5 |   |   | 7 |   |
| **Net                  Periodic Benefit Cost**         |   | $                                  | 18     |                                                                        | $      | 15 |   | $ | 24 |   | $ | 29 |   |

|    |   | **Pension                  Plans**  |   | **Other                  Postretirement****Benefit                  Plans** |   |
|---------|--------|-------------------------------------|--------|-----------------------------------------------------------------------------|--------|
|    |   | **2006**                            |   | **2005**                                                                    |   | **2006** |   | **2005** |   |
|    |   | **(in                  thousands)** |   |
| APCo    |   | $                                   | 1,468  |                                                                        | $      | 1,848 |   | $ | 4,489 |   | $ | 5,345 |   |
| CSPCo   |   |                                | 205    |                                                                        |   | 534 |   |   | 1,805 |   |   | 2,222 |   |
| I&M |   |                                | 2,331  |                                                                        |   | 2,365 |   |   | 2,953 |   |   | 3,631 |   |
| KPCo    |   |                                | 358    |                                                                        |   | 376 |   |   | 513 |   |   | 603 |   |
| OPCo    |   |                                | 826    |                                                                        |   | 1,206 |   |   | 3,396 |   |   | 3,827 |   |
| PSO     |   |                                | 977    |                                                                        |   | 72 |   |   | 1,588 |   |   | 1,869 |   |
| SWEPCo  |   |                                | 1,225  |                                                                        |   | 364 |   |   | 1,578 |   |   | 1,837 |   |
| TCC     |   |                                | 773    |                                                                        |   | (219 | ) |   | 1,696 |   |   | 2,008 |   |
| TNC     |   |                                | 325    |                                                                        |   | 41 |   |   | 715 |   |   | 877 |   |

**                10.**
**BUSINESS        SEGMENTS**

**                11.**
**FINANCING        ACTIVITIES**

***Long-term        Debt***

| **Company**    |   | **Type                  of Debt**        |   | **Principal                  Amount** |   | **Interest                  Rate** |     | **Due                  Date** |
|----------------|--------|------------------------------------------|--------|---------------------------------------|--------|------------------------------------|----------|-------------------------------|
|           |   |                                     |   | **(in                  thousands)**   |   | **(%)**                            |     |                          |
| **Issuances:** |   |                                     |   |                                  |   |                               |     |                          |   |
| APCo           |   | Pollution                  Control Bonds |   | $                                     | 50,275 |                               | Variable |                          | 2036 |

| **Company**                                                    |   | **Type                  of Debt**     |   | **Principal                  Amount** |    | **Interest                  Rate** |     | **Due                  Date** |
|----------------------------------------------------------------|--------|---------------------------------------|--------|---------------------------------------|---------|------------------------------------|----------|-------------------------------|
|                                                           |   |                                  |   | **(in                  thousands)**   |    | **(%)**                            |     |                          |
| **Retirements                  and  Principal Payments:** |   |                                  |   |                                  |    |                               |     |                          |   |
| APCo                                                           |   | First                  Mortgage Bonds |   | $                                     | 100,000 |                               | 6.80     |                          | 2006 |
| APCo                                                           |   | Other                  Debt           |   |                                  | 3       |                               | 13.718   |                          | 2026 |
| OPCo                                                           |   | Notes                  Payable        |   |                                  | 1,463   |                               | 6.81     |                          | 2008 |
| OPCo                                                           |   | Notes                  Payable        |   |                                  | 3,250   |                               | 6.27     |                          | 2009 |
| SWEPCo                                                         |   | Notes                  Payable        |   |                                  | 1,707   |                               | 4.47     |                          | 2011 |
| SWEPCo                                                         |   | Notes                  Payable        |   |                                  | 750     |                               | Variable |                          | 2008 |
| TCC                                                            |   | Securitization                  Bonds |   |                                  | 30,641  |                               | 5.01     |                          | 2010 |

| **Company**      |   | **Type                  of Debt** |   | **Principal                  Amount** |    | **Interest                  Rate** |   | **Due                  Date** |
|------------------|--------|-----------------------------------|--------|---------------------------------------|---------|------------------------------------|--------|-------------------------------|
|             |   |                              |   | **(in                  thousands)**   |    | **(%)**                            |   |                          |
| **Issuances:**   |   |                              |   |                                  |    |                               |   |                          |   |
| TCC              |   | Notes                  Payable    |   | $                                     | 125,000 |                               | 5.14   |                          | 2007 |
|             |   |                              |   |                                  |    |                               |   |                          |   |
| **Retirements:** |   |                              |   |                                  |    |                               |   |                          |   |
| NONE             |   |                              |   |                                  |    |                               |   |                          |   |

***Lines        of Credit - AEP System***

**Three        Months Ended March 31, 2006:**

| **Company** |   | **Maximum                  Borrowings from Utility Money Pool** |    | **Maximum                  Loans to Utility Money Pool** |   | **Average                  Borrowings from Utility Money Pool** |   | **Average                  Loans to Utility Money Pool** |    | **Loans                  (Borrowings) to/from Utility Money Pool as of March 31,                  2006** |   | **Authorized                  Short-Term Borrowing Limit** |   |
|-------------|--------|-----------------------------------------------------------------|---------|----------------------------------------------------------|--------|-----------------------------------------------------------------|--------|----------------------------------------------------------|---------|----------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|--------|
|        |   | **(in                  thousands)**                             |    |
| AEGCo       |   | $                                                               | 58,209  |                                                     | $      | -                                                               |   | $                                                        | 23,516  |                                                                                                     | $      | -                                                          |   | $ | (13,317 | ) | $ | 125,000 |   |
| APCo        |   |                                                            | 283,872 |                                                     |   | -                                                               |   |                                                     | 201,590 |                                                                                                     |   | -                                                          |   |   | (164,192 | ) |   | 600,000 |   |
| CSPCo       |   |                                                            | 48,337  |                                                     |   | 24,779                                                          |   |                                                     | 18,021  |                                                                                                     |   | 14,168                                                     |   |   | 6,867 |   |   | 350,000 |   |
| I&M     |   |                                                            | 128,071 |                                                     |   | -                                                               |   |                                                     | 92,774  |                                                                                                     |   | -                                                          |   |   | (49,137 | ) |   | 500,000 |   |
| KPCo        |   |                                                            | 20,659  |                                                     |   | 5,923                                                           |   |                                                     | 9,175   |                                                                                                     |   | 1,583                                                      |   |   | 5,923 |   |   | 200,000 |   |
| OPCo        |   |                                                            | 181,450 |                                                     |   | -                                                               |   |                                                     | 104,183 |                                                                                                     |   | -                                                          |   |   | (81,043 | ) |   | 600,000 |   |
| PSO         |   |                                                            | 118,815 |                                                     |   | -                                                               |   |                                                     | 66,273  |                                                                                                     |   | -                                                          |   |   | (118,815 | ) |   | 300,000 |   |
| SWEPCo      |   |                                                            | 58,124  |                                                     |   | -                                                               |   |                                                     | 37,848  |                                                                                                     |   | -                                                          |   |   | (49,198 | ) |   | 350,000 |   |
| TCC         |   |                                                            | 117,429 |                                                     |   | 49,193                                                          |   |                                                     | 87,094  |                                                                                                     |   | 32,347                                                     |   |   | 32,101 |   |   | 600,000 |   |
| TNC         |   |                                                            | 14,513  |                                                     |   | 34,574                                                          |   |                                                     | 5,000   |                                                                                                     |   | 13,339                                                     |   |   | 3,046 |   |   | 250,000 |   |

| **Company** |   |   | **Average                  Interest Rate****for                  Funds Borrowed from the Utility Money Pool****for                  Three Months Ended March 31, 2006** |   | **Average                  Interest****Rate****for                  Funds****Borrowed                  from****the****Utility                  Money Pool****f****or****Three                  Months****Ended****March                  31,****2005** |   | **Average                  Interest Rate****for                  Funds Loaned to****the                  Utility Money Pool****for                  Three Months Ended March 31, 2006** |   | **Average                  Interest Rate****for                  Funds Loaned to****the                  Utility Money Pool****for                  Three Months Ended March 31, 2005** |   |
|-------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|        |   |   | **(in                  percentage)**                                                                                                                                    |   |
| AEGCo       |   |   | 4.57                                                                                                                                                                    |   | 2.00                                                                                                                                                                                                                                                   |   | -                                                                                                                                                                                       |   | -                                                                                                                                                                                       |   |
| APCo        |   |   | 4.60                                                                                                                                                                    |   | 1.96                                                                                                                                                                                                                                                   |   | -                                                                                                                                                                                       |   | 2.15                                                                                                                                                                                    |   |
| CSPCo       |   |   | 4.58                                                                                                                                                                    |   | -                                                                                                                                                                                                                                                      |   | 4.66                                                                                                                                                                                    |   | 2.10                                                                                                                                                                                    |   |
| I&M     |   |   | 4.59                                                                                                                                                                    |   | 2.14                                                                                                                                                                                                                                                   |   | -                                                                                                                                                                                       |   | 2.12                                                                                                                                                                                    |   |
| KPCo        |   |   | 4.54                                                                                                                                                                    |   | -                                                                                                                                                                                                                                                      |   | 4.75                                                                                                                                                                                    |   | 2.15                                                                                                                                                                                    |   |
| OPCo        |   |   | 4.60                                                                                                                                                                    |   | -                                                                                                                                                                                                                                                      |   | -                                                                                                                                                                                       |   | 2.14                                                                                                                                                                                    |   |
| PSO         |   |   | 4.63                                                                                                                                                                    |   | 2.11                                                                                                                                                                                                                                                   |   | -                                                                                                                                                                                       |   | -                                                                                                                                                                                       |   |
| SWEPCo      |   |   | 4.60                                                                                                                                                                    |   | -                                                                                                                                                                                                                                                      |   | -                                                                                                                                                                                       |   | 2.13                                                                                                                                                                                    |   |
| TCC         |   |   | 4.47                                                                                                                                                                    |   | 2.27                                                                                                                                                                                                                                                   |   | 4.68                                                                                                                                                                                    |   | 2.12                                                                                                                                                                                    |   |
| TNC         |   |   | 4.57                                                                                                                                                                    |   | -                                                                                                                                                                                                                                                      |   | 4.54                                                                                                                                                                                    |   | 2.14                                                                                                                                                                                    |   |

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**COMBINED        MANAGEMENT’S DISCUSSION AND ANALYSIS OF REGISTRANT        SUBSIDIARIES**

**Environmental        Matters**

| · | Requirements                  under the Clean Air Act (CAA) to reduce emissions of sulfur dioxide                  (SO2),                  nitrogen oxide (NOx),                  particulate matter (PM), and mercury from fossil fuel-fired power                  plants; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Requirements                  under the Clean Water Act (CWA) to reduce the impacts of water                  intake                  structures on aquatic species at certain power plants;                  and                                                            |
| · | Possible                  future requirements to reduce carbon dioxide (CO2)                  emissions to address concerns about global climate                  change.                                                                                                    |

***Clean        Air Act Requirements***

***Estimated        Air Quality Environmental Investments***

***Potential        Regulation of CO***
***2***

***Emissions***

***Environmental        Litigation***

***Other        Environmental Concerns***

**Adoption        of New Accounting Pronouncements**

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**CONTROLS        AND PROCEDURES**

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**PART        II. OTHER INFORMATION**

**Item        1. **
**Legal        Proceedings**

*Commitments        and Contingencies, *

**Item        1A. **
**Risk        Factors**

**General        Risks of Our Regulated Operations**

**Our        request for rate recovery of additional costs may not be approved in        Virginia.**
*(Applies        to AEP and APCo.)*

**Our        request for rate recovery of additional costs may not be approved in West        Virginia.**
*(Applies        to AEP and APCo.)*

**Our        request for rate recovery of additional costs may not be approved in        Kentucky.**
*        (Applies to AEP and KPCo.)*

**Risks        Related to Owning and Operating Generating Assets and Selling        Power**

**The        amount we charge third parties for using our transmission facilities may        be        reduced and not recovered.**
* *
*(Applies        to AEP and *
*AEP’s        East zone public utility subsidiaries*
*.)*

**We        are contractually required to operate a power generation facility that may        indirectly force us to sell the facility’s excess energy at a        loss.**
*        (Applies to AEP.)*

* *

**Item        2. **
**Unregistered        Sales of Equity Securities and Use of Proceeds**

| **Period**                           |   | **Total                  Number****of                  Shares****Purchased                  (a)** |   | **Average                  Price****Paid                  per Share** |   | **Total                  Number of Shares Purchased as Part of Publicly Announced Plans                  or                  Programs** |   | **Maximum                  Number (or Approximate Dollar Value) of Shares that May Yet Be                  Purchased                  Under the Plans or Programs** |   |
|--------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 01/01/06                  - 01/31/06 |   |                                                                                              | -      |                                                                  | $      | -                                                                                                                                       |   |                                                                                                                                                                | -      |   | $ | - |   |
| 02/01/06                  - 02/28/06 |   |                                                                                              | -      |                                                                  |   | -                                                                                                                                       |   |                                                                                                                                                                | -      |   |   | - |   |
| 03/01/06                  - 03/31/06 |   |                                                                                              | 80     |                                                                  |   | 78.00                                                                                                                                   |   |                                                                                                                                                                | -      |   |   | - |   |
| **Total**                            |   |                                                                                              | 80     |                                                                  | $      | 78.00                                                                                                                                   |   |                                                                                                                                                                | -      |   | $ | - |   |

| (a) | TNC                  repurchased 80 shares of its 4.40% cumulative preferred stock,                  in a                  privately-negotiated transaction outside of an announced                  program. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item        5. **
**Other        Information**

**Item        6. **
**Exhibits**

*AEP,        PSO, SWEPCo*

*AEP,        APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC and TNC*

*AEP*

*AEGCo,        APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC and TNC*

*AEP,        AEGCo, APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC and        TNC*

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**SIGNATURE**

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