**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**WASHINGTON,        D.C. 20549**

**FORM        10-Q**

**September        30, 2005**

*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                  an                  accelerated filer (as defined in Rule 12b-2 of the Exchange                  Act).* |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Yes**  X  *                                                                                                                                                                                   | *No** ___     * |

| *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 accelerated filers (as defined in Rule                  12b-2                  of the Exchange Act).* |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *Yes** ___*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | *No**  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.*

----

|                                                   |   | **Number                  of Shares of Common Stock Outstanding at****October                  31, 2005** |   |
|--------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|
|                                                   |   |                                                                                                      |   |
| American                  Electric Power Company, Inc. |   | 393,684,291                                                                                               |   |
|                                                   |   |                                                                                                      |   |
| AEP                  Generating Company                |   | 1,000                                                                                                     |   |
|                                                   |   |                                                                                                      |   |
| AEP                  Texas Central Company             |   | 2,211,678                                                                                                 |   |
|                                                   |   |                                                                                                      |   |
| AEP                  Texas North Company               |   | 5,488,560                                                                                                 |   |
|                                                   |   |                                                                                                      |   |
| Appalachian                  Power Company             |   | 13,499,500                                                                                                |   |
|                                                   |   |                                                                                                      |   |
| Columbus                  Southern Power Company       |   | 16,410,426                                                                                                |   |
|                                                   |   |                                                                                                      |   |
| Indiana                  Michigan Power Company        |   | 1,400,000                                                                                                 |   |
|                                                   |   |                                                                                                      |   |
| Kentucky                  Power Company                |   | 1,009,000                                                                                                 |   |
|                                                   |   |                                                                                                      |   |
| Ohio                  Power Company                    |   | 27,952,473                                                                                                |   |
|                                                   |   |                                                                                                      |   |
| Public                  Service Company of Oklahoma    |   | 9,013,000                                                                                                 |   |
|                                                   |   |                                                                                                      |   |
| Southwestern                  Electric Power Company   |   | 7,536,640                                                                                                 |   |
|                                                   |   |                                                                                                      |   |

----

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

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

**September        30, 2005**

|   |                                           |
|--------|------------------------------------------------|
|   | 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 |   |
|   |                                           |   | Condensed                  Notes to Condensed Consolidated Financial Statements |   |
|   |                                           |   |   |
|   |                                           | **AEP                  Generating Company:** |
|   |                                           |   | Management’s                  Narrative Financial Discussion and Analysis |   |
|   |                                           |   | Condensed                  Financial Statements |   |
|   |                                           |   |   |
|   |                                           | **AEP                  Texas Central Company and Subsidiary:** |
|   |                                           |   | Management’s                  Financial Discussion and Analysis |   |
|   |                                           |   | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities |   |
|   |                                           |   | Condensed                  Consolidated Financial Statements |   |
|   |                                           |   |   |
|   |                                           | **AEP                  Texas North Company:** |
|   |                                           |   | Management’s                  Narrative Financial Discussion and Analysis |   |
|   |                                           |   | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities |   |
|   |                                           |   | Condensed                  Financial Statements |   |
|   |                                           |   |   |
|   |                                           | **Appalachian                  Power Company and Subsidiaries:** |
|   |                                           |   | Management’s                  Financial Discussion and Analysis |   |
|   |                                           |   | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities |   |
|   |                                           |   | Condensed                  Consolidated Financial Statements |   |
|   |                                           |   |   |
|   |                                           | **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 |   |
|   |                                           |   |   |
|   |                                           | **Indiana                  Michigan Power Company and Subsidiaries:** |
|   |                                           |   | Management’s                  Financial Discussion and Analysis |   |
|   |                                           |   | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities |   |
|   |                                           |   | Condensed                  Consolidated Financial Statements |   |
|   |                                           |   |   |
|   |                                           | **Kentucky                  Power Company:** |
|   |                                           |   | Management’s                  Narrative Financial Discussion and Analysis |   |
|   |                                           |   | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities |   |
|   |                                           |   | Condensed                  Financial Statements |   |
|   |                                           |   |   |
|   |                                           | **Ohio                  Power Company Consolidated:** |
|   |                                           |   | Management’s                  Financial Discussion and Analysis |   |
|   |                                           |   | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities |   |
|   |                                           |   | Condensed                  Consolidated Financial Statements |   |
|   |                                           |   |   |   |

|                                        |                     | **Public                  Service Company of Oklahoma:**                                                         |
|---------------------------------------------|--------------------------|------------------------------------------------------------------------------------------------------------------|
|                                        |                     |                                                                                                             | Management’s                  Narrative Financial Discussion and Analysis |   |
|                                        |                     |                                                                                                             | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities |   |
|                                        |                     |                                                                                                             | Condensed                  Financial Statements |   |
|                                        |                     |                                                                                                             |   |
|                                        |                     | **Southwestern                  Electric Power Company Consolidated:**                                           |
|                                        |                     |                                                                                                             | Management’s                  Financial Discussion and Analysis |   |
|                                        |                     |                                                                                                             | Quantitative                  and Qualitative Disclosures About Risk Management                  Activities |   |
|                                        |                     |                                                                                                             | Condensed                  Consolidated Financial Statements |   |
|                                        |                     |                                                                                                             |   |
|                                        |                     | Condensed                  Notes to 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                  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 electric utility subsidiary of                  AEP.                                                                                                        |
|---------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| AEP                  or Parent                                                        |   | American                  Electric Power Company, Inc.                                                                                                                                                                                                                     |
| AEP                  Consolidated                                                     |   | AEP                  and its majority owned consolidated subsidiaries and consolidated                  affiliates.                                                                                                                                                        |
| AEP                  Credit                                                           |   | AEP                  Credit, Inc., a subsidiary of AEP which factors accounts receivable                  and                  accrued utility revenues for                    affiliated domestic electric utility companies.                                        |
| 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.                                                                                                                                                                                            |
| ARO                                                                                   |   | Asset                  Retirement Obligations.                                                                                                                                                                                                                             |
| CAA                                                                                   |   | Clean                  Air Act.                                                                                                                                                                                                                                            |
| COLI                                                                                  |   | Corporate                  owned, life insurance program.                                                                                                                                                                                                                  |
| Cook                  Plant                                                           |   | The                  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.). |
| DETM                                                                                  |   |                              Duke Energy Trading and Marketing L.L.C., a risk management                  counterparty.                                                                                             |
| DOE                                                                                   |   |                              United States Department of Energy.                                                                                                                                                    |
| ECAR                                                                                  |   | East                  Central Area Reliability Council.                                                                                                                                                                                                                    |
| EITF                                                                                  |   | Financial                  Accounting Standards Board’s Emerging Issues Task                  Force.                                                                                                                                                                 |
| ERCOT                                                                                 |   | Electric                  Reliability Council of Texas.                                                                                                                                                                                                                    |
| FASB                                                                                  |   | Financial                  Accounting Standards Board.                                                                                                                                                                                                                     |
| Federal                  EPA                                                          |   |                              United States Environmental Protection Agency.                                                                                                                                         |
| FERC                                                                                  |   | Federal                  Energy Regulatory Commission.                                                                                                                                                                                                                     |
| FIN                  46                                                               |   | FASB                  Interpretation No. 46, “Consolidation of Variable Interest                  Entities.”                                                                                                                                                   |
| GAAP                                                                                  |   | Generally                  Accepted Accounting Principles.                                                                                                                                                                                                                 |
| HPL                                                                                   |   | Houston                  Pipeline Company.                                                                                                                                                                                                                                 |
| 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.                                                                                                                                                                      |
| IPP                                                                                   |   | Independent                  Power Producers.                                                                                                                                                                                                                              |
| IURC                                                                                  |   | Indiana                  Utility Regulatory Commission.                                                                                                                                                                                                                    |
| JMG                                                                                   |   | JMG                  Funding LP.                                                                                                                                                                                                                                           |
| KPCo                                                                                  |   | Kentucky                  Power Company, an AEP electric utility subsidiary.                                                                                                                                                                                               |
| KPSC                                                                                  |   | Kentucky                  Public Service Commission.                                                                                                                                                                                                                       |
| KWH                                                                                   |   | Kilowatthour.                                                                                                                                                                                                                                                              |
| LIG                                                                                   |   | Louisiana                  Intrastate Gas, a former AEP subsidiary.                                                                                                                                                                                                        |
| ME                  SWEPCo                                                            |   | Mutual                  Energy SWEPCo L.P., a Texas retail electric provider.                                                                                                                                                                                              |
| MISO                                                                                  |   | Midwest                  Independent Transmission System Operator.                                                                                                                                                                                                         |
| MLR                                                                                   |   | Member                  load ratio, the method used to allocate AEP Power Pool transactions                  to its                  members.                                                                                                                              |
| MPSC                                                                                  |   | Michigan                  Public Service Commission.                                                                                                                                                                                                                       |
| MTM                                                                                   |   | Mark-to-Market.                                                                                                                                                                                                                                                            |
| MW                                                                                    |   | Megawatt.                                                                                                                                                                                                                                                                  |
| MWH                                                                                   |   | Megawatthour.                                                                                                                                                                                                                                                              |
| NOx                                                                                   |   | Nitrogen                  oxide.                                                                                                                                                                                                                                           |
| Nonutility                  Money Pool                                                |   | AEP                  System’s Nonutility Money Pool.                                                                                                                                                                                                                 |
| 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.                                                                                                                                                                  |
| PUCO                                                                                  |   | Public                  Utilities Commission of Ohio.                                                                                                                                                                                                                      |
| PUCT                                                                                  |   | The                  Public Utility Commission of Texas.                                                                                                                                                                                                                   |
| PUHCA                                                                                 |   | Public                  Utility Holding Company Act.                                                                                                                                                                                                                       |
| 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.                                                                                                                                                                                                                                |
| SCR                                                                                   |   | Selective                  Catalytic Reduction.                                                                                                                                                                                                                            |
| SEC                                                                                   |   | United                  States Securities and Exchange Commission.                                                                                                                                                                                                         |
| SECA                                                                                  |   | Seams                  Elimination Cost Allocation.                                                                                                                                                                                                                        |
| SFAS                                                                                  |   | Statement                  of Financial Accounting Standards issued by the Financial Accounting                  Standards Board.                                                                                                                                          |
| SFAS                  109                                                             |   | Statement                  of Financial Accounting Standards No. 109, Accounting                  for Income Taxes.                                                                                                                                                        |
| SFAS                  133                                                             |   | Statement                  of Financial Accounting Standards No. 133, Accounting                  for Derivative Instruments and Hedging                    Activities.                                                                                               |
| SIA                                                                                   |   | System                  Integration Agreement.                                                                                                                                                                                                                             |
| SNF                                                                                   |   | Spent                  Nuclear Fuel.                                                                                                                                                                                                                                       |
| 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.                                                                                                                                                                                            |
| Tenor                                                                                 |   | Maturity                  of a contract.                                                                                                                                                                                                                                   |
| 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.                                      |
| TVA                                                                                   |   | Tennessee                  Valley Authority.                                                                                                                                                                                                                               |
| 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.                                                                                                                                                                                          |
| Zimmer                  Plant                                                         |   | William                  H. Zimmer Generating Station, a 1,300 MW coal-fired unit owned                  25.4% by                  CSPCo.                                                                                                                                  |

----

**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.                                                              |
| · | 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.).                                                                                                                 |
| · | Our                  ability to constrain operation and maintenance costs.                                                                                                                                                                                                                                 |
| · | Our                  ability to sell assets at acceptable prices and other acceptable                  terms,                  including rights to share in earnings derived from the assets subsequent                  to their                    sale.                                            |
| · | The                  economic climate and growth in our service territory and changes                  in market                  demand and demographic patterns.                                                                                                                                         |
| · | Inflationary                  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 and number of 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 membership in 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**

*West        Virginia *

*Kentucky        *

*Texas*

**RESULTS        OF OPERATIONS**

**Segments**

**Utility        Operations**

| · | Domestic                  generation of electricity for sale to retail and wholesale                  customers. |
|--------|------------------------------------------------------------------------------------------------------------------|
| · | Domestic                  electricity transmission and                  distribution.                            |

**Investments        - Other**

| · | Bulk                  commodity barging operations, wind farms, IPPs and other energy                  supply-related businesses. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                              |
|   | Four                  IPPs were sold during 2004.                                                                                 |

**AEP        Consolidated Results**

|                                                                               |   | **Three                  Months Ended September 30,** |   | **Nine                  Months Ended September 30,** |   |
|------------------------------------------------------------------------------------|--------|-------------------------------------------------------|--------|------------------------------------------------------|--------|
|                                                                               |   | **2005**                                              |   | **2004**                                             |   | **2005** |   | **2004** |   |
|                                                                               |   |                                                  |   |                                                 |   |    |   |   |   |   |   |    |   |    |   |   |   |
|                                                                               |   | **Earnings**                                          |   | **EPS**                                              |   | **Earnings** |   | **EPS** |   | **Earnings** |   | **EPS** |   | **Earnings** |   | **EPS** |   |
| Utility                  Operations                                                |   | $                                                     | 352    |                                                 | $      | 0.91 |   | $ | 359 |   | $ | 0.91 |   | $ | 952 |   | $ | 2.45 |   | $ | 847 |   | $ | 2.14 |   |
| Investments                  - Other                                               |   |                                                  | 28     |                                                 |   | 0.07 |   |   | 89 |   |   | 0.22 |   |   | 32 |   |   | 0.08 |   |   | 89 |   |   | 0.22 |   |
| All                  Other** **(a)                                            |   |                                                  | (5     | )                                                    |   | (0.01 | ) |   | (9 | ) |   | (0.02 | ) |   | (45 | ) |   | (0.12 | ) |   | (43 | ) |   | (0.11 | ) |
| Investments                  - Gas Operations (b)                                  |   |                                                  | (10    | )                                                    |   | (0.03 | ) |   | (27 | ) |   | (0.07 | ) |   | (2 | ) |   | - |   |   | (41 | ) |   | (0.10 | ) |
| **Income                  Before Discontinued Operations**                    |   |                                                  | 365    |                                                 |   | 0.94 |   |   | 412 |   |   | 1.04 |   |   | 937 |   |   | 2.41 |   |   | 852 |   |   | 2.15 |   |
|                                                                               |   |                                                  |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investments                  - Gas Operations                                      |   |                                                  | -      |                                                 |   | - |   |   | (3 | ) |   | - |   |   | - |   |   | - |   |   | (2 | ) |   | - |   |
| Investments                  - UK Operations                                       |   |                                                  | 2      |                                                 |   | - |   |   | 120 |   |   | 0.30 |   |   | (3 | ) |   | (0.01 | ) |   | 56 |   |   | 0.14 |   |
| Investments                  - Other                                               |   |                                                  | 20     |                                                 |   | 0.05 |   |   | 1 |   |   | - |   |   | 29 |   |   | 0.08 |   |   | 6 |   |   | 0.01 |   |
| **Discontinued                  Operations, ****Net                  of Tax** |   |                                                  | 22     |                                                 |   | 0.05 |   |   | 118 |   |   | 0.30 |   |   | 26 |   |   | 0.07 |   |   | 60 |   |   | 0.15 |   |
|                                                                               |   |                                                  |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Net                  Income**                                                    |   | $                                                     | 387    |                                                 | $      | 0.99 |   | $ | 530 |   | $ | 1.34 |   | $ | 963 |   | $ | 2.48 |   | $ | 912 |   | $ | 2.30 |   |
|                                                                               |   |                                                  |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Weighted                Average Basic Shares Outstanding**                       |   |                                                  |   |                                                 |   | 389 |   |   |   |   |   | 396 |   |   |   |   |   | 389 |   |   |   |   |   | 396 |   |

**Utility        Operations**

|                                                                             |   | **Three                  Months Ended****September                  30,** |   | **Nine                  Months Ended****September                  30,** |   |
|----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                                             |   | **2005**                                                                  |   | **2004**                                                                 |   | **2005** |   | **2004** |   |
|                                                                             |   | **(in                  millions)**                                        |   |
| Revenues                                                                         |   | $                                                                         | 3,214  |                                                                     | $      | 2,950 |   | $ | 8,496 |   | $ | 8,097 |   |
| Fuel                  and Purchased Power                                        |   |                                                                      | 1,197  |                                                                     |   | 1,032 |   |   | 3,058 |   |   | 2,631 |   |
| **Gross                  Margin**                                                |   |                                                                      | 2,017  |                                                                     |   | 1,918 |   |   | 5,438 |   |   | 5,466 |   |
| Depreciation                  and Amortization                                   |   |                                                                      | 328    |                                                                     |   | 322 |   |   | 963 |   |   | 940 |   |
| Other                  Operating Expenses                                        |   |                                                                      | 1,052  |                                                                     |   | 922 |   |   | 2,866 |   |   | 2,804 |   |
| **Operating                  Income**                                            |   |                                                                      | 637    |                                                                     |   | 674 |   |   | 1,609 |   |   | 1,722 |   |
| Other                  Income (Expense), Net                                     |   |                                                                      | 49     |                                                                     |   | 9 |   |   | 253 |   |   | 35 |   |
| Interest                  Expense and Preferred Stock Dividend Requirements |   |                                                                      | 145    |                                                                     |   | 152 |   |   | 445 |   |   | 479 |   |
| Income                  Taxes                                                    |   |                                                                      | 189    |                                                                     |   | 172 |   |   | 465 |   |   | 431 |   |
| **Income                  Before Discontinued Operations**                       |   | $                                                                         | 352    |                                                                     | $      | 359 |   | $ | 952 |   | $ | 847 |   |

**Summary        of Selected Sales Data**

**For        Utility Operations**

**For        the Three and Nine Months Ended September 30, 2005 and 2004**

|                                    |   | **Three                  Months Ended****September                  30,** |   | **Nine                  Months Ended****September                  30,** |   |
|-----------------------------------------|--------|---------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                    |   | **2005**                                                                  |   | **2004**                                                                 |   | **2005** |   | **2004** |   |
| **Energy                  Summary**     |   | **(in                  millions of KWH)**                                 |   |
| Retail:                                 |   |                                                                      |   |                                                                     |   |   |   |   |   |
| Residential                             |   |                                                                      | 14,152 |                                                                     |   | 12,002 |   |   | 37,332 |   |   | 35,169 |   |
| Commercial                              |   |                                                                      | 10,900 |                                                                     |   | 10,070 |   |   | 29,205 |   |   | 28,240 |   |
| Industrial                              |   |                                                                      | 13,380 |                                                                     |   | 13,052 |   |   | 39,633 |   |   | 38,227 |   |
| Miscellaneous                           |   |                                                                      | 683    |                                                                     |   | 857 |   |   | 1,967 |   |   | 2,406 |   |
| Total                  Retail           |   |                                                                      | 39,115 |                                                                     |   | 35,981 |   |   | 108,137 |   |   | 104,042 |   |
| Texas                  Retail and Other |   |                                                                      | 114    |                                                                     |   | 280 |   |   | 504 |   |   | 802 |   |
| **Total**                               |   |                                                                      | 39,229 |                                                                     |   | 36,261 |   |   | 108,641 |   |   | 104,844 |   |
|                                    |   |                                                                      |   |                                                                     |   |   |   |   |   |   |   |   |   |
| Wholesale                               |   |                                                                      | 14,198 |                                                                     |   | 17,629 |   |   | 38,971 |   |   | 45,124 |   |
|                                    |   |                                                                      |   |                                                                     |   |   |   |   |   |   |   |   |   |
| Texas                  Wires Delivery   |   |                                                                      | 8,093  |                                                                     |   | 7,691 |   |   | 20,348 |   |   | 19,431 |   |

|                                                     |   | **Three                  Months Ended****September                  30,** |   | **Nine                  Months Ended****September                  30,** |   |
|----------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                     |   | **2005**                                                                  |   | **2004**                                                                 |   | **2005** |   | **2004** |   |
| **Weather                  Summary**                     |   | **(in                  degree days)**                                     |   |
| Eastern                  Region                          |   |                                                                      |   |                                                                     |   |   |   |   |   |
| Actual                  - Heating                        |   |                                                                      | 1      |                                                                     |   | 1 |   |   | 1,940 |   |   | 2,033 |   |
| Normal                  - Heating** **(a)           |   |                                                                      | 7      |                                                                     |   | 7 |   |   | 1,995 |   |   | 1,993 |   |
|                                                     |   |                                                                      |   |                                                                     |   |   |   |   |   |   |   |   |   |
| Actual                  - Cooling                        |   |                                                                      | 835    |                                                                     |   | 553 |   |   | 1,122 |   |   | 869 |   |
| Normal                  - Cooling** **(a)           |   |                                                                      | 674    |                                                                     |   | 679 |   |   | 955 |   |   | 960 |   |
|                                                     |   |                                                                      |   |                                                                     |   |   |   |   |   |   |   |   |   |
| Western                  Region                  (b)     |   |                                                                      |   |                                                                     |   |   |   |   |   |   |   |   |   |
| Actual                  - Heating                        |   |                                                                      | 0      |                                                                     |   | 0 |   |   | 795 |   |   | 913 |   |
| Normal                  - Heating** **(a)           |   |                                                                      | 2      |                                                                     |   | 2 |   |   | 1,007 |   |   | 1,013 |   |
|                                                     |   |                                                                      |   |                                                                     |   |   |   |   |   |   |   |   |   |
| Actual                  - Cooling                        |   |                                                                      | 1,523  |                                                                     |   | 1,178 |   |   | 2,225 |   |   | 1,867 |   |
| Normal                  - Cooling** **(a)** ** |   |                                                                      | 1,397  |                                                                     |   | 1,398 |   |   | 2,059 |   |   | 2,058 |   |

| (a)                  Normal Heating/Cooling represents the 30-year average of degree                  days. |   |
|-------------------------------------------------------------------------------------------------------------|--------|
| (b)                  Western Region statistics represent PSO/SWEPCo customer base                  only.    |

**Reconciliation        of Third Quarter of 2004 to Third Quarter of 2005**

**Income        Before Discontinued Operations **

**(in        millions)**

| **Third                  Quarter of 2004**                        |   |   |   |   | $      | 359    |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                  Margins                                   |   |   | 120    |   |   |   |   |
| Texas                  Supply                                     |   |   | (61    | )      |   |   |   |
| Transmission                  Revenues                            |   |   | (20    | )      |   |   |   |
| Off-system                  Sales                                 |   |   | 69     |   |   |   |   |
| Other                  Revenues                                   |   |   | (9     | )      |   |   |   |
| **Total                  Change in Gross Margin**                 |   |   |   |   |   | 99     |   |
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Maintenance                  and Other Operation                  |   |   | (67    | )      |   |   |   |
| Asset                  Impairments and Other Related Charges      |   |   | (39    | )      |   |   |   |
| Depreciation                  and Amortization                    |   |   | (6     | )      |   |   |   |
| Taxes                  Other Than Income Taxes                    |   |   | (24    | )      |   |   |   |
| Other                  Income (Expense), Net                      |   |   | 40     |   |   |   |   |
| Interest                  Expense                                 |   |   | 7      |   |   |   |   |
| **Total                  Change in Operating Expenses and Other** |   |   |   |   |   | (89    | )      |
|                                                              |   |   |   |   |   |   |   |
| Income                  Taxes                                     |   |   |   |   |   | (17    | )      |
|                                                              |   |   |   |   |   |   |   |
| **Third                  Quarter of 2005**                        |   |   |   |   | $      | 352    |   |

| · | Retail                  Margins in our utility business were $120 million higher than last                  year.                  The primary driver of this increase was a 12% increase in volume                  attributable to load growth in residential and commercial classes                  as well                  as favorable weather in 2005. This retail margin increase was partially                  offset by higher delivered fuel costs of approximately $22 million,                  which                  primarily relates to our utilities in the East with inactive fuel                  clauses. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Our                  Texas Supply business had a $61 million decrease in gross margin                  as a                  result of the sale of a majority of our nonnuclear Texas generation                  assets                  in the third quarter of 2004 and STP in May 2005.                                                                                                                                                                                                                                                                                                                                       |
| · | Transmission                  Revenues decreased $20 million primarily due to the loss of through                  and                  out rates as mandated by the FERC partially offset by the addition                  of SECA                  rates.                                                                                                                                                                                                                                                                                                                                                                       |
| · | Margins                  from Off-system Sales for 2005 were $69 million higher than 2004                  primarily                  due to an increase in volume, favorable price margins and favorable                  optimization activity.                                                                                                                                                                                                                                                                                                                                                                                 |

| · | Maintenance                        and Other Operation expenses increased $67 million. Approximately                        $22                        million of the increase is due to timing of maintenance projects                        experienced in the third quarter of 2005 as compared to the                        same period in                        2004. Additionally, in 2005 we incurred $13 million of maintenance                        costs                        related to major storms. Also, $32 million of the increase                        relates to                        increased generation expense, including environmental consumables                        and                        allowances, due to strong retail and wholesale sales and                        capacity                        requirements in 2005. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Asset                        Impairments and Other Related Charges were $39 million in                        2005 due to our                        commitment to a plan in September to retire two units at                        our Conesville                        Plant. In September, we formally requested permission from                        PJM to retire                        the two units effective December 29, 2005. We received preliminary                        approval on October 21, 2005.                                                                                                                                                                                                                                                                                                                                                    |
| · | Taxes                        Other Than Income Taxes increased $24 million primarily due                        to a $15                        million increase in property taxes related to increased property                        values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $15                        million related to the recognition of carrying costs by TCC                        on its net                        stranded generation costs and its capacity auction true-up                        asset. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $10                        million related to the establishment of regulatory assets                        for carrying                        costs on environmental capital expenditures and RTO expenses                        by our Ohio                        companies related to the Rate Stabilization Plans. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | $17                        million related to increased interest income and increased                        AFUDC due to                        extensive construction activities occurring in                        2005. |

**Reconciliation        of Nine Months Ended September 30, 2004 to Nine Months Ended September 30,        2005**

**Income        Before Discontinued Operations **

**(in        millions)**

| **Nine                  Months Ended September 30, 2004**         |   |   |   |   | $      | 847    |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                  Margins                                   |   |   | 59     |   |   |   |   |
| Texas                  Supply                                     |   |   | (117   | )      |   |   |   |
| Transmission                  Revenues                            |   |   | (71    | )      |   |   |   |
| Off-system                  Sales                                 |   |   | 103    |   |   |   |   |
| Other                  Revenues                                   |   |   | (2     | )      |   |   |   |
| **Total                  Change in Gross Margin**                 |   |   |   |   |   | (28    | )      |
|                                                              |   |   |   |   |   |   |   |
| **Changes                  in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Asset                  Impairments and Other Related Charges      |   |   | (39    | )      |   |   |   |
| Depreciation                  and Amortization                    |   |   | (23    | )      |   |   |   |
| Taxes                  Other Than Income Taxes                    |   |   | (23    | )      |   |   |   |
| Other                  Income (Expense), Net                      |   |   | 218    |   |   |   |   |
| Interest                  Expense                                 |   |   | 34     |   |   |   |   |
| **Total                  Change in Operating Expenses and Other** |   |   |   |   |   | 167    |   |
|                                                              |   |   |   |   |   |   |   |
| Income                  Taxes                                     |   |   |   |   |   | (34    | )      |
|                                                              |   |   |   |   |   |   |   |
| **Nine                  Months Ended September 30, 2005**         |   |   |   |   | $      | 952    |   |

| · | Overall                  Retail Margins in our utility business were $59 million higher                  than last                  year. The primary driver of this increase was continued customer                  growth                  and usage in our residential and commercial classes. This load                  growth was                  partially offset by higher delivered fuel costs of approximately                  $119                  million, of which the majority relates to our East companies with                  inactive                  fuel clauses. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Our                  Texas Supply business had a $117 million decrease in gross margin                  due to                  the sale of a majority of our nonnuclear Texas generation assets                  in the                  third quarter of 2004 and STP in May 2005.                                                                                                                                                                                                                                                                                                         |
| · | Transmission                  Revenues decreased $71 million primarily due to the loss of through                  and                  out rates as mandated by the FERC partially offset by the addition                  of SECA                  rates.                                                                                                                                                                                                                                                                                                                                  |
| · | Margins                  from Off-system Sales for 2005 were $103 million higher than 2004                  primarily due to increased volume and favorable price                  margins.                                                                                                                                                                                                                                                                                                                                                                                                  |

| · | Asset                  Impairments and Other Related Charges increased $39 million due                  to our                  commitment to a plan in September to retire two units at our Conesville                  Plant.  In September, we formally requested permission from                  PJM to                  retire the two units effective December 29, 2005.  We received                  preliminary approval on October 21, 2005. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Other                  Income (Expense), Net increased $218 million primarily due to the                  following:                                                                                                                                                                                                                                                                                                                                              |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $112                  million resulting from the receipt of 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. Agreement was reached                  with                  Centrica in March 2005 resolving disputes on how such amounts are                  to be                  calculated. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $41                  million related to the establishment of regulatory assets for carrying                  costs on environmental capital expenditures and RTO expenses by                  our Ohio                  companies related to the Rate Stabilization Plans. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $32                  million related to increased interest income and increased AFUDC                  due to                  extensive construction activities occurring in 2005. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $30                  million related to the recognition of carrying costs by TCC on                  its net                  stranded generation costs and its capacity auction true-up                  asset. |
| · | Interest                  Expense decreased $34 million due to the refinancing of higher                  coupon debt                  and the retirement of debt in 2004 and in the first nine months                  of                  2005.                                                                                                                                                                                                                 |

**Investments        - Other**

** **

** **

**Other**

***Parent***

***Investments        - Gas Operations and UK Operations***

**Income        Taxes**

**FINANCIAL        CONDITION**

**Capitalization**
**        ($ in millions)**

|                                                                          |   | **September                  30, 2005** |   | **December                  31, 2004** |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------|--------|
| Common                  Shareholders’ Equity                            |   | $                                       | 8,985  |                                   |   | 43.2 | % | $ | 8,515 |   |   | 40.6 | % |
| Cumulative                  Preferred Stock                                   |   |                                    | 61     |                                   |   | 0.3 |   |   | 61 |   |   | 0.3 |   |
| Cumulative                  Preferred Stock (Subject to Mandatory Redemption) |   |                                    | -      |                                   |   | - |   |   | 66 |   |   | 0.3 |   |
| Long-term                  Debt, including amounts due within one year        |   |                                    | 11,742 |                                   |   | 56.4 |   |   | 12,287 |   |   | 58.7 |   |
| Short-term                  Debt                                              |   |                                    | 15     |                                   |   | 0.1 |   |   | 23 |   |   | 0.1 |   |
|                                                                          |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **Total                  Capitalization**                                     |   | $                                       | 20,803 |                                   |   | 100.0 | % | $ | 20,952 |   |   | 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                                   |   |                               | 849    |               |   |   |   |
| **Total                  Liquidity Sources**                                 |   |                               | 3,549  |               |   |   |   |
| Less:                  AEP Commercial Paper Outstanding                      |   |                               | -      | (a)                |   |   |   |
|      Letters                  of Credit Outstanding |   |                               | 150    |               |   |   |   |
|                                                                         |   |                               |   |               |   |   |   |
| **Net                  Available Liquidity at September 30, 2005**           |   | $                                  | 3,399  |               |   |   |   |

| (a) | Amount                  does not include JMG commercial paper outstanding in the amount                  of $15                  million. This commercial paper is specifically associated with                  the Gavin                  scrubber and does not reduce AEP’s available liquidity. The JMG commercial                  paper is supported by a separate letter of credit facility not                  included                  above. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Debt        Covenants and Borrowing Limitations***

***Credit        Ratings***

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

**Cash        Flow **
** **

|                                                                  |   | **Nine                  Months Ended****September                  30,** |   |
|-----------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                                  |   | **2005**                                                                 |   | **2004** |   |
|                                                                  |   | **(in                  millions)**                                       |   |
| **Cash                  and Cash Equivalents at Beginning of Period** |   | $                                                                        | 320    |   | $ | 778 |   |
| Cash                  Flows From (Used For):                          |   |                                                                     |   |   |   |   |   |
| Operating                  Activities                                 |   |                                                                     | 1,587  |   |   | 2,278 |   |
| Investing                  Activities                                 |   |                                                                     | 12     |   |   | (33 | ) |
| Financing                  Activities                                 |   |                                                                     | (1,070 | ) |   | (2,089 | ) |
| Net                  Increase in Cash and Cash Equivalents            |   |                                                                     | 529    |   |   | 156 |   |
| **Cash                  and Cash Equivalents at End of Period**       |   | $                                                                        | 849    |   | $ | 934 |   |
| **Other                  Temporary Cash Investments**                 |   | $                                                                        | 73     |   | $ | 529 |   |

***Operating        Activities***

|                                                          |   | **Nine                  Months Ended****September                  30,** |   |
|---------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                          |   | **2005**                                                                 |   | **2004** |   |
|                                                          |   | **(in                  millions)**                                       |   |
| **Net                  Income**                               |   | $                                                                        | 963    |   | $ | 912 |   |
| Plus:                  (Income) From Discontinued Operations  |   |                                                                     | (26    | ) |   | (60 | ) |
| **Income                  from Continuing Operations**        |   |                                                                     | 937    |   |   | 852 |   |
| Noncash                  Items Included in Earnings           |   |                                                                     | 1,039  |   |   | 1,267 |   |
| Changes                  in Assets and Liabilities            |   |                                                                     | (389   | ) |   | 159 |   |
| **Net                  Cash Flows From Operating Activities** |   | $                                                                        | 1,587  |   | $ | 2,278 |   |

***Investing        Activities***

|                                                                     |   | **Nine                  Months Ended****September                  30,** |   |
|--------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                                     |   | **2005**                                                                 |   | **2004** |   |
|                                                                     |   | **(in                  millions)**                                       |   |
| Construction                  Expenditures                               |   | $                                                                        | (1,610 | ) | $ | (1,047 | ) |
| Acquisition                  of Waterford Plant                          |   |                                                                     | (218   | ) |   | - |   |
| Change                  in Other Temporary Cash Investments, Net         |   |                                                                     | 99     |   |   | 28 |   |
| Investment                  in Discontinued Operations, Net              |   |                                                                     | -      |   |   | (59 | ) |
| Purchases                  of Investments                                |   |                                                                     | (3,342 | ) |   | (425 | ) |
| Proceeds                  from the Sale of Investments                   |   |                                                                     | 3,445  |   |   | 274 |   |
| Proceeds                  from Sale of Assets                            |   |                                                                     | 1,599  |   |   | 1,202 |   |
| Other                                                                    |   |                                                                     | 39     |   |   | (6 | ) |
| **Net                  Cash Flows From (Used For) Investing Activities** |   | $                                                                        | 12     |   | $ | (33 | ) |

***Financing        Activities***

|                                                              |   | **Nine                  Months Ended****September                  30,** |   |
|-------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                              |   | **2005**                                                                 |   | **2004** |   |
|                                                              |   | **(in                  millions)**                                       |   |
| Issuance                  of Common Stock                         |   | $                                                                        | 393    |   | $ | 13 |   |
| Repurchase                  of Common Stock                       |   |                                                                     | (427   | ) |   | - |   |
| Issuance/Retirement                  of Debt, net                 |   |                                                                     | (562   | ) |   | (1,683 | ) |
| Retirement                  of Preferred Stock                    |   |                                                                     | (66    | ) |   | (4 | ) |
| Dividends                  Paid on Common Stock                   |   |                                                                     | (408   | ) |   | (415 | ) |
| **Net                  Cash Flows Used For Financing Activities** |   | $                                                                        | (1,070 | ) | $ | (2,089 | ) |

**Off-balance        Sheet Arrangements**

**Summary        Obligation Information**

**SIGNIFICANT        MATTERS**

**Texas        Regulatory Activity**

***Texas        Restructuring***

**Ohio        Regulatory Activity**

***Ohio        Restructuring***

***Integrated        Gasification Combined Cycle (IGCC) Power Plant***

***Monongahela        Power Company***

**Oklahoma        Regulatory Activity**

***PSO        Rate Review***

***PSO        Fuel and Purchased Power and its Potential Impact on the AEP East        Companies***

**Virginia        and West Virginia Regulatory Activity**

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

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

**Kentucky        Regulatory Activity**

***KPCo        Rate Filing***

**FERC        Order on Regional Through and Out Rates **

**Litigation**

***New        Source Review Litigation***

***Merger        Litigation***

***Bank        of Montreal Claim***

***TEM        Litigation***

***Texas        Commercial Energy, LLP Lawsuit***

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

***Spent        Nuclear Fuel Litigation***

***Ontario        Litigation***

**Environmental        Matters **

| · | Legislative                  and regulatory proposals to adopt stringent controls on SO2,                  NOx                  and mercury emissions from coal-fired power plants, |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Clean                  Water Act rules 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 emissions to address                  concerns                  about global climate change.                 |

***Future        Reduction Requirements for SO***
***2***

***,        NO***
***x***

***and Mercury***

*Regulatory        Emissions Reductions*

| · | The                  Federal EPA proposed a Clean Air Interstate Rule (CAIR) to reduce                  SO2                  and NOx                  emissions across the Eastern United States (29 states and the District                  of                  Columbia) and make progress toward attainment of the new fine particulate                  matter and ground-level ozone national ambient air quality standards.                  These reductions could also satisfy these states’ obligations to make                  reasonable progress towards the national visibility goal under                  the                  regional haze program. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                  Federal EPA proposed to regulate mercury emissions from coal-fired                  electric generating units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

***New        Source Review (NSR) Litigation***

***Emergency        Release Reporting***

***Carbon        Dioxide Public Nuisance Claims***

**Critical        Accounting Estimates**

----

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

**Market        Risks**

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

**MTM        Risk Management Contract Net Assets**

**Nine        Months Ended September 30, 2005**

**(in        millions)**

|                                                                                                                                                                      |   | **Utility                  Operations** |   | **Investments-Gas                  Operations** |   | **Investments-UK                  Operations** |   | **Total** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------------------|--------|------------------------------------------------|--------|-----------|--------|
| **Total                  MTM Risk Management****Contract                  Net Assets****                   (Liabilities) at****December                  31, 2004**  |   | $                                       | 277    |                                            | $      | -                                              |   | $         | (12    | ) | $ | 265 |   |
| (Gain)                  Loss from Contracts Realized/Settled                  During the Period (a)                                                                       |   |                                    | (93    | )                                               |   | 18                                             |   |      | 12     |   |   | (63 | ) |
| Fair                  Value of New Contracts When Entered                  During the Period (b)                                                                          |   |                                    | 2      |                                            |   | -                                              |   |      | -      |   |   | 2 |   |
| Net                  Option Premiums Paid/(Received) (c)                                                                                                                  |   |                                    | (4     | )                                               |   | -                                              |   |      | -      |   |   | (4 | ) |
| Change                  in Fair Value Due to Valuation Methodology                  Changes                                                                               |   |                                    | -      |                                            |   | -                                              |   |      | -      |   |   | - |   |
| Changes                  in Fair Value of Risk Management                  Contracts (d)                                                                                  |   |                                    | 59     |                                            |   | 1                                              |   |      | -      |   |   | 60 |   |
| Changes                  in Fair Value of Risk Management                  Contracts Allocated to                    Regulated Jurisdictions (e)                     |   |                                    | 19     |                                            |   | -                                              |   |      | -      |   |   | 19 |   |
| **Total                  MTM Risk Management Contract****Net                  Assets****                   (Liabilities) at****September                  30, 2005** |   | $                                       | 260    |                                            | $      | 19                                             |   | $         | -      |   |   | 279 |   |
| Net                  Cash Flow and Fair Value Hedge Contracts (f)                                                                                                    |   |                                    |   |                                            |   |                                           |   |      |   |   |   | (64 | ) |
| **Ending                  Net Risk Management Assets at****September                  30, 2005**                                                                          |   |                                    |   |                                            |   |                                           |   |      |   |   | $ | 215 |   |

| (a) | “(Gain)                  Loss from Contracts Realized/Settled During the Period” includes realized                  gains from risk management contracts and related derivatives that                  settled                  during 2005 where we entered into the contract prior to                  2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                  Value of New Contracts When Entered During the Period” represents the fair                  value at inception of long-term contracts entered into with customers                  during 2005. 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. |
| (c) | “Net                  Option Premiums Paid/(Received)” reflects the net option premiums                  paid/(received) as they relate to unexercised and unexpired option                  contracts entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (d) | “Changes                  in Fair Value of Risk Management Contracts” represents the fair value                  change in the risk management portfolio due to market fluctuations                  during                  the current period. Market fluctuations are attributable to various                  factors such as supply/demand, weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (e) | “Changes                  in Fair Value of Risk Management Contracts 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 assets/liabilities                  for                  those subsidiaries that operate in regulated                  jurisdictions.                                                                                                                                                                                                                                                                                                          |
| (f) | “Net                  Cash Flow and Fair Value Hedge Contracts” (pretax) are discussed in detail                  within the following pages.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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

**As        of September 30, 2005**

**(in        millions)**

|                                                                                            |   | **Utility                  Operations** |   | **Investments-Gas                  Operations** |   | **Total** |   |
|-------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------------------|--------|-----------|--------|
| Current                  Assets                                                                 |   | $                                       | 919    |                                            | $      | 390       |   | $ | 1,309 |   |
| Noncurrent                  Assets                                                              |   |                                    | 641    |                                            |   | 274       |   |   | 915 |   |
| **Total                  Assets**                                                               |   |                                    | 1,560  |                                            |   | 664       |   |   | 2,224 |   |
|                                                                                            |   |                                    |   |                                            |   |      |   |   |   |   |
| Current                  Liabilities                                                            |   |                                    | (845   | )                                               |   | (362      | )      |   | (1,207 | ) |
| Noncurrent                  Liabilities                                                         |   |                                    | (455   | )                                               |   | (283      | )      |   | (738 | ) |
| **Total                  Liabilities**                                                          |   |                                    | (1,300 | )                                               |   | (645      | )      |   | (1,945 | ) |
|                                                                                            |   |                                    |   |                                            |   |      |   |   |   |   |
| **Total                  Net Assets (Liabilities),** **excluding                  Hedges** |   | $                                       | 260    |                                            | $      | 19        |   | $ | 279 |   |

**Reconciliation        of MTM Risk Management Contracts to**

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

**As        of September 30, 2005**

**(in        millions)**

|                                                           |   | **MTM                  Risk Management Contracts (a)** |   | **PLUS:****Hedges** |   | **Total                  (b)** |   |
|----------------------------------------------------------------|--------|--------------------------------------------------------|--------|---------------------|--------|--------------------------------|--------|
| Current                  Assets                                |   | $                                                      | 1,309  |                | $      | 9                              |   | $ | 1,318 |   |
| Noncurrent                  Assets                             |   |                                                   | 915    |                |   | 3                              |   |   | 918 |   |
| **Total                  MTM Derivative Contract Assets**      |   |                                                   | 2,224  |                |   | 12                             |   |   | 2,236 |   |
|                                                           |   |                                                   |   |                |   |                           |   |   |   |   |
| Current                  Liabilities                           |   |                                                   | (1,207 | )                   |   | (73                            | )      |   | (1,280 | ) |
| Noncurrent                  Liabilities                        |   |                                                   | (738   | )                   |   | (3                             | )      |   | (741 | ) |
| **Total                  MTM Derivative Contract Liabilities** |   |                                                   | (1,945 | )                   |   | (76                            | )      |   | (2,021 | ) |
|                                                           |   |                                                   |   |                |   |                           |   |   |   |   |
| **Total                  MTM Derivative Contract Net Assets**  |   | $                                                      | 279    |                | $      | (64                            | )      | $ | 215 |   |

| (a) | Does                  not include Cash Flow and Fair Value Hedges.                                                                                                                                                                                                                                                                     |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents                  amount of total MTM derivative contracts recorded within Risk Management                  Assets, Long-term Risk Management Assets, Risk Management Liabilities                  and                  Long-term Risk Management Liabilities on our Condensed Consolidated                  Balance Sheets. |

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

| · | The                    source of 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 September 30, 2005**

**(in        millions)**

|                                                                                                |   | **Remainder                  2005** |   | **2006**     |   | **2007**     |   | **2008**     |   | **2009**     |   | **After                  2009 (c)** |   | **Total                  (d)** |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|--------------|--------|--------------|--------|--------------|--------|--------------|--------|-------------------------------------|--------|--------------------------------|--------|
| **Utility                  Operations:**                                                            |   |                           |   |    |   |    |   |    |   |    |   |                           |   |                      |   |
| Prices                  Actively Quoted - Exchange Traded                  Contracts                |   | $                                   | (18    | )            | $      | 68           |   | $            | (4     | )            | $      | 2                                   |   | $                              | -      |   | $ | - |   | $ | 48 |   |
| Prices                  Provided by Other External Sources                  - OTC Broker Quotes (a) |   |                                | 75     |         |   | 33           |   |         | 97     |         |   | 30                                  |   |                           | 3      |   |   | - |   |   | 238 |   |
| Prices                  Based on Models and Other Valuation                  Methods (b)            |   |                                | (10    | )            |   | (57          | )      |         | (33    | )            |   | 16                                  |   |                           | 33     |   |   | 25 |   |   | (26 | ) |
| **Total**                                                                                           |   | $                                   | 47     |         | $      | 44           |   | $            | 60     |         | $      | 48                                  |   | $                              | 36     |   | $ | 25 |   | $ | 260 |   |
|                                                                                                |   |                                |   |         |   |         |   |         |   |         |   |                                |   |                           |   |   |   |   |   |   |   |   |
| **Investments                  - Gas Operations:**                                                  |   |                                |   |         |   |         |   |         |   |         |   |                                |   |                           |   |   |   |   |   |   |   |   |
| Prices                  Actively Quoted - Exchange Traded                  Contracts                |   | $                                   | 9      |         | $      | (16          | )      | $            | 10     |         | $      | -                                   |   | $                              | -      |   | $ | - |   | $ | 3 |   |
| Prices                  Provided by Other External Sources                  - OTC Broker Quotes (a) |   |                                | 30     |         |   | 6            |   |         | (7     | )            |   | -                                   |   |                           | -      |   |   | - |   |   | 29 |   |
| Prices                  Based on Models and Other Valuation                  Methods (b)            |   |                                | (3     | )            |   | (2           | )      |         | -      |         |   | (2                                  | )      |                           | (4     | ) |   | (2 | ) |   | (13 | ) |
| **Total**                                                                                           |   | $                                   | 36     |         | $      | (12          | )      | $            | 3      |         | $      | (2                                  | )      | $                              | (4     | ) | $ | (2 | ) | $ | 19 |   |
|                                                                                                |   |                                |   |         |   |         |   |         |   |         |   |                                |   |                           |   |   |   |   |   |   |   |   |
| **Total:**                                                                                          |   |                                |   |         |   |         |   |         |   |         |   |                                |   |                           |   |   |   |   |   |   |   |   |
| Prices                  Actively Quoted - Exchange Traded                  Contracts                |   | $                                   | (9     | )            | $      | 52           |   | $            | 6      |         | $      | 2                                   |   | $                              | -      |   | $ | - |   | $ | 51 |   |
| Prices                  Provided by Other External Sources                  - OTC Broker Quotes (a) |   |                                | 105    |         |   | 39           |   |         | 90     |         |   | 30                                  |   |                           | 3      |   |   | - |   |   | 267 |   |
| Prices                  Based on Models and Other Valuation                  Methods (b)            |   |                                | (13    | )            |   | (59          | )      |         | (33    | )            |   | 14                                  |   |                           | 29     |   |   | 23 |   |   | (39 | ) |
| **Total**                                                                                           |   | $                                   | 83     |         | $      | 32           |   | $            | 63     |         | $      | 46                                  |   | $                              | 32     |   | $ | 23 |   | $ | 279 |   |

| (a) | Prices                  Provided by Other External Sources - OTC Broker Quotes reflects                  information obtained from over-the-counter brokers (OTC), 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. |
| (c) | There                  is mark-to-market value in excess of 10 percent of our total                  mark-to-market value in individual periods beyond 2009. $26 million                  of                  this mark-to-market value is in 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (d) | Amounts                  exclude Cash Flow and Fair Value                  Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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

**As        of September 30, 2005**

| **Commodity**                |   | **Transaction                  Class**           |   | **Market/Region**                                          |   | **Tenor**                        |
|------------------------------|--------|--------------------------------------------------|--------|------------------------------------------------------------|--------|----------------------------------|
|                         |   |                                             |   |                                                       |   | **(in                  months)** |
| Natural                  Gas |   | Futures                                          |   | NYMEX/Henry                  Hub                           |   | 60                               |
|                         |   | Physical                  Forwards               |   | Gulf                  Coast, Texas                         |   | 27                               |
|                         |   | Swaps                                            |   | Gas                  East - Northeast, Mid-continent,      |   |                             |
|                         |   |                                             |   | Gulf                  Coast, Texas                         |   | 27                               |
|                         |   | Swaps                                            |   | Gas                  West - Rocky Mountains, West Coast    |   | 27                               |
|                         |   | Exchange                  Option Volatility      |   | NYMEX/Henry                  Hub                           |   | 12                               |
|                         |   |                                             |   |                                                       |   |                             |
| Power                        |   | Futures                                          |   | Power                  East - PJM                          |   | 39                               |
|                         |   | Physical                  Forwards               |   | Power                  East - MISO Cin Hub                 |   | 27                               |
|                         |   | Physical                  Forwards               |   | Power                  East - PJM West                     |   | 39                               |
|                         |   | Physical                  Forwards               |   | Power                  East - AEP Dayton (PJM)             |   | 15                               |
|                         |   | Physical                  Forwards               |   | Power                  East - NEPOOL                       |   | 39                               |
|                         |   | Physical                  Forwards               |   | Power                  East - NYPP                         |   | 39                               |
|                         |   | Physical                  Forwards               |   | Power                  East - ERCOT                        |   | 39                               |
|                         |   | Physical                  Forwards               |   | Power                  East - Com Ed                       |   | 9                                |
|                         |   | Physical                  Forwards               |   | Power                  East - Entergy                      |   | 15                               |
|                         |   | Physical                  Forwards               |   | Power                  West - Palo Verde, Mead             |   | 51                               |
|                         |   | Physical                  Forwards               |   | Power                  West - North Path 15, South Path 15 |   | 51                               |
|                         |   | Physical                  Forwards               |   | Power                  West - Mid Columbia                 |   | 51                               |
|                         |   | Peak                  Power Volatility (Options) |   | Cinergy,                  PJM                              |   | 12                               |
|                         |   |                                             |   |                                                       |   |                             |
| Emissions                    |   | Credits                                          |   | SO2, NOx                                              |   | 39                               |
|                         |   |                                             |   |                                                       |   |                             |
| Coal                         |   | Physical                  Forwards               |   | PRB,                  NYMEX, CSX                           |   | 27                               |

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

**Cash        Flow Hedges included in Accumulated Other Comprehensive Income        (Loss)**

**On        the Condensed Consolidated Balance Sheet as of September 30,        2005**

**(in        millions)**

|                           |   | **Accumulated                  Other Comprehensive Income****(Loss)                  After Tax (a)** |   | **After                  Tax****Portion                  Expected to be Reclassified to Earnings During the Next 12 Months                  (b)** |   |
|--------------------------------|--------|------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Power                  and Gas |   | $                                                                                                    | (42    | )                                                                                                                                                 | $      | (42 | ) |
| Interest                  Rate |   |                                                                                                 | (25    | )                                                                                                                                                 |   | (3 | ) |
|                           |   |                                                                                                 |   |                                                                                                                                              |   |   |   |
| **Total**                      |   | $                                                                                                    | (67    | )                                                                                                                                                 | $      | (45 | ) |

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

**Nine        Months Ended September 30, 2005**

**(in        millions)**

|                                                           |   | **Power                  and Gas** |   | **Interest****Rate** |   | **Total** |   |
|----------------------------------------------------------------|--------|------------------------------------|--------|----------------------|--------|-----------|--------|
| **Beginning                  Balance, December 31, 2004**      |   | $                                  | 23     |                 | $      | (23       | )      | $ | - |   |
| Changes                  in Fair Value (c)                     |   |                               | (41    | )                    |   | (5        | )      |   | (46 | ) |
| Reclassifications                  from AOCI to Net Income (d) |   |                               | (24    | )                    |   | 3         |   |   | (21 | ) |
| **Ending                  Balance, September 30, 2005**        |   | $                                  | (42    | )                    | $      | (25       | )      | $ | (67 | ) |

| (a) | “Accumulated                  Other Comprehensive Income (Loss) After Tax” - Gains/losses are net of                  related income taxes that have not yet been included in the determination                  of net income; reported as a separate component of shareholders’ equity on                  the balance sheet.                                                                                                                                                        |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “After                  Tax Portion Expected to be Reclassified to Earnings During the                  Next 12                  Months” - Amount of gains or losses (realized or unrealized) from                  derivatives used as hedging instruments that have been deferred                  and are                  expected to be reclassified into net income during the next 12                  months at                  the time the hedged transaction affects net income. |
| (c) | “Changes                  in Fair Value” - Changes in the fair value of derivatives designated as                  cash flow hedges during the reporting period that are not yet settled                  at                  September 30, 2005. Amounts are reported net of related income                  taxes.                                                                                                                                                                         |
| (d) | “Reclassifications                  from AOCI to Net Income” - Gains or losses from derivatives used as                  hedging instruments in cash flow hedges that were reclassified                  into Net                  Income during the reporting period. Amounts are reported net of                  related                  income taxes.                                                                                                                                   |

**Credit        Risk**

| **Counterparty                  Credit Quality** |   | **Exposure                  Before Credit Collateral** |   | **Credit**** Collateral** |   | **Net**** Exposure** |   | **Number                  of Counterparties >10%** |   | **Net                  Exposure of Counterparties >10%** |   |
|--------------------------------------------------|--------|--------------------------------------------------------|--------|--------------------------------|--------|---------------------------|--------|-------------------------------------------------------|--------|-------------------------------------------------------------|--------|
| Investment                  Grade                |   | $                                                      | 1,149  |                           | $      | 359                       |   | $                                                     | 790    |                                                        |   | 3 |   | $ | 342 |   |
| Split                  Rating                    |   |                                                   | 25     |                           |   | 9                         |   |                                                  | 16     |                                                        |   | 1 |   |   | 15 |   |
| Noninvestment                  Grade             |   |                                                   | 316    |                           |   | 222                       |   |                                                  | 94     |                                                        |   | 3 |   |   | 81 |   |
| No                  External Ratings:            |   |                                                   |   |                           |   |                      |   |                                                  |   |                                                        |   |   |   |   |   |   |
| Internal                  Investment Grade       |   |                                                   | 113    |                           |   | 1                         |   |                                                  | 112    |                                                        |   | 1 |   |   | 51 |   |
| Internal                  Noninvestment Grade    |   |                                                   | 48     |                           |   | 1                         |   |                                                  | 47     |                                                        |   | 2 |   |   | 35 |   |
| **Total**                                        |   | $                                                      | 1,651  |                           | $      | 592                       |   | $                                                     | 1,059  |                                                        |   | 10 |   | $ | 524 |   |

**Generation        Plant Hedging Information**

**Generation        Plant Hedging Information**

**Estimated        Next Three Years**

**As        of September 30, 2005**

|                                           | **Remainder                  2005** |   | **2006** |   | **2007** |   |
|------------------------------------------------|-------------------------------------|--------|----------|--------|----------|--------|
| Estimated                  Plant Output Hedged | 94%                                 |   | 89%      |   | 90%      |   |

**VaR        Associated with Risk Management Contracts**

**VaR        Model**

| **Nine                    Months Ended****September                    30, 2005** |   | **Twelve                    Months Ended****December                    31, 2004** |
|-----------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|
|                                                                              |
| **(in                    millions)**                                              |   | **(in                    millions)**                                               |
| **End**                                                                           |   | **High**                                                                           |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |
| $4                                                                                |   | $5                                                                                 |   | $2 |   | $1 |   | $3 |   | $19 |   | $5 |   | $1 |

**CCRO        VaR Metrics**

**(in        millions)**

|                                                                           |   | **September                  30, 2005** |   | **Average                  for****Year-to-Date                  2005** |   | **High                  for****Year-to-Date                  2005** |   | **Low                  for Year-to-Date 2005** |   |
|--------------------------------------------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|------------------------------------------------|--------|
| 95%                  Confidence Level, Ten-Day Holding                  Period |   | $                                       | 15     |                                                                   | $      | 9                                                                   |   | $                                              | 20     |   | $ | 5 |   |
| 99%                  Confidence Level, One-Day Holding                  Period |   | $                                       | 6      |                                                                   | $      | 4                                                                   |   | $                                              | 8      |   | $ | 2 |   |

----

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

**CONDENSED        CONSOLIDATED STATEMENTS OF INCOME**

**For        the Three and Nine Months Ended September 30, 2005 and        2004**

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

**(Unaudited)**

|                                                                                                  |   | **Three                  Months Ended** |   | **Nine                  Months Ended** |   |
|-------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------|--------|
|                                                                                                  |   | **2005**                                |   | **2004**                               |   | **2005** |   | **2004** |   |
| **REVENUES**                                                                                          |   |                               |   |                              |   |   |   |   |   |
| Utility                  Operations                                                                   |   | $                                       | 3,132  |                                   | $      | 2,920 |   | $ | 8,318 |   | $ | 8,009 |   |
| Gas                  Operations                                                                       |   |                                    | 73     |                                   |   | 760 |   |   | 449 |   |   | 2,191 |   |
| Other                                                                                                 |   |                                    | 95     |                                   |   | 101 |   |   | 289 |   |   | 356 |   |
| **TOTAL**                                                                                             |   |                                    | 3,300  |                                   |   | 3,781 |   |   | 9,056 |   |   | 10,556 |   |
| **EXPENSES**                                                                                          |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Fuel                  for Electric Generation                                                         |   |                                    | 1,011  |                                   |   | 782 |   |   | 2,554 |   |   | 2,210 |   |
| Purchased                  Electricity for Resale                                                     |   |                                    | 181    |                                   |   | 274 |   |   | 494 |   |   | 444 |   |
| Purchased                  Gas for Resale                                                             |   |                                    | 5      |                                   |   | 725 |   |   | 255 |   |   | 2,011 |   |
| Maintenance                  and Other Operation                                                      |   |                                    | 906    |                                   |   | 847 |   |   | 2,569 |   |   | 2,689 |   |
| Asset                  Impairments and Other Related Charges                                          |   |                                    | 39     |                                   |   | - |   |   | 39 |   |   | - |   |
| Depreciation                  and Amortization                                                        |   |                                    | 336    |                                   |   | 333 |   |   | 988 |   |   | 972 |   |
| Taxes                  Other Than Income Taxes                                                        |   |                                    | 205    |                                   |   | 181 |   |   | 566 |   |   | 555 |   |
| **TOTAL**                                                                                             |   |                                    | 2,683  |                                   |   | 3,142 |   |   | 7,465 |   |   | 8,881 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **OPERATING                  INCOME**                                                                 |   |                                    | 617    |                                   |   | 639 |   |   | 1,591 |   |   | 1,675 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Other                  Income                                                                         |   |                                    | 139    |                                   |   | 208 |   |   | 484 |   |   | 329 |   |
| Other                  Expense                                                                        |   |                                    | (24    | )                                      |   | (36 | ) |   | (130 | ) |   | (110 | ) |
| Investment                  Value Losses                                                              |   |                                    | (7     | )                                      |   | - |   |   | (7 | ) |   | (2 | ) |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **INTEREST                  AND OTHER CHARGES**                                                       |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Interest                  Expense                                                                     |   |                                    | 163    |                                   |   | 193 |   |   | 524 |   |   | 591 |   |
| Preferred                  Stock Dividend Requirements of Subsidiaries                                |   |                                    | 1      |                                   |   | 2 |   |   | 6 |   |   | 5 |   |
| **TOTAL**                                                                                             |   |                                    | 164    |                                   |   | 195 |   |   | 530 |   |   | 596 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **INCOME                  BEFORE INCOME TAXES**                                                       |   |                                    | 561    |                                   |   | 616 |   |   | 1,408 |   |   | 1,296 |   |
| Income                  Taxes                                                                         |   |                                    | 196    |                                   |   | 204 |   |   | 471 |   |   | 444 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **INCOME                  BEFORE DISCONTINUED OPERATIONS**                                            |   |                                    | 365    |                                   |   | 412 |   |   | 937 |   |   | 852 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **DISCONTINUED                  OPERATIONS, Net of Tax**                                              |   |                                    | 22     |                                   |   | 118 |   |   | 26 |   |   | 60 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **NET                  INCOME**                                                                       |   | $                                       | 387    |                                   | $      | 530 |   | $ | 963 |   | $ | 912 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **WEIGHTED                  AVERAGE NUMBER OF BASIC SHARES****                   OUTSTANDING**   |   |                                    | 389    |                                   |   | 396 |   |   | 389 |   |   | 396 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **BASIC                  EARNINGS PER SHARE**                                                         |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Income                  Before Discontinued Operations                                                |   | $                                       | 0.94   |                                   | $      | 1.04 |   | $ | 2.41 |   | $ | 2.15 |   |
| Discontinued                  Operations                                                              |   |                                    | 0.05   |                                   |   | 0.30 |   |   | 0.07 |   |   | 0.15 |   |
| **TOTAL                  BASIC EARNINGS PER SHARE**                                                   |   | $                                       | 0.99   |                                   | $      | 1.34 |   | $ | 2.48 |   | $ | 2.30 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **WEIGHTED                  AVERAGE NUMBER OF DILUTED SHARES****                   OUTSTANDING** |   |                                    | 390    |                                   |   | 397 |   |   | 390 |   |   | 396 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **DILUTED                  EARNINGS PER SHARE**                                                       |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Income                  Before Discontinued Operations                                                |   | $                                       | 0.94   |                                   | $      | 1.04 |   | $ | 2.40 |   | $ | 2.15 |   |
| Discontinued                  Operations                                                              |   |                                    | 0.05   |                                   |   | 0.30 |   |   | 0.07 |   |   | 0.15 |   |
| **TOTAL                  DILUTED EARNINGS PER SHARE**                                                 |   | $                                       | 0.99   |                                   | $      | 1.34 |   | $ | 2.47 |   | $ | 2.30 |   |
|                                                                                                  |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| **CASH                  DIVIDENDS PAID PER SHARE**                                                    |   | $                                       | 0.35   |                                   | $      | 0.35 |   | $ | 1.05 |   | $ | 1.05 |   |

*See        Condensed Notes to Condensed Consolidated Financial        Statements.*

----

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

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**September        30, 2005 and December 31, 2004**

**(in        millions)**

**(Unaudited)**

|                                                                 |   | **2005**     |   | **2004**     |   |
|----------------------------------------------------------------------|--------|--------------|--------|--------------|--------|
| **CURRENT                  ASSETS**                                  |   |    |   |    |   |
| Cash                  and Cash Equivalents                           |   | $            | 849    |         | $      | 320 |   |
| Other                  Temporary Cash Investments                    |   |         | 73     |         |   | 275 |   |
| Accounts                  Receivable:                                |   |         |   |         |   |   |   |
| Customers                                                            |   |         | 829    |         |   | 930 |   |
| Accrued                  Unbilled Revenues                           |   |         | 369    |         |   | 592 |   |
| Miscellaneous                                                        |   |         | 45     |         |   | 79 |   |
| Allowance                  for Uncollectible Accounts                |   |         | (33    | )            |   | (77 | ) |
| Total                  Accounts Receivable                           |   |         | 1,210  |         |   | 1,524 |   |
| Fuel,                  Materials and Supplies                        |   |         | 649    |         |   | 852 |   |
| Risk                  Management Assets                              |   |         | 1,318  |         |   | 737 |   |
| Margin                  Deposits                                     |   |         | 357    |         |   | 113 |   |
| Other                                                                |   |         | 214    |         |   | 200 |   |
| **TOTAL**                                                            |   |         | 4,670  |         |   | 4,021 |   |
|                                                                 |   |         |   |         |   |   |   |
| **PROPERTY,                  PLANT AND EQUIPMENT**                   |   |         |   |         |   |   |   |
| Electric:                                                            |   |         |   |         |   |   |   |
| Production                                                           |   |         | 16,487 |         |   | 15,969 |   |
| Transmission                                                         |   |         | 6,400  |         |   | 6,293 |   |
| Distribution                                                         |   |         | 10,564 |         |   | 10,280 |   |
| Other                  (including gas, coal mining and nuclear fuel) |   |         | 3,072  |         |   | 3,585 |   |
| Construction                  Work in Progress                       |   |         | 1,676  |         |   | 1,159 |   |
| **Total**                                                            |   |         | 38,199 |         |   | 37,286 |   |
| Accumulated                  Depreciation and Amortization           |   |         | 14,684 |         |   | 14,485 |   |
| **TOTAL                  - NET**                                     |   |         | 23,515 |         |   | 22,801 |   |
|                                                                 |   |         |   |         |   |   |   |
| **OTHER                  NONCURRENT ASSETS**                         |   |         |   |         |   |   |   |
| Regulatory                  Assets                                   |   |         | 3,852  |         |   | 3,601 |   |
| Securitized                  Transition Assets                       |   |         | 608    |         |   | 642 |   |
| Spent                  Nuclear Fuel and Decommissioning Trusts       |   |         | 1,120  |         |   | 1,053 |   |
| Investments                  in Power and Distribution Projects      |   |         | 105    |         |   | 154 |   |
| Goodwill                                                             |   |         | 76     |         |   | 76 |   |
| Long-term                  Risk Management Assets                    |   |         | 918    |         |   | 470 |   |
| Prepaid                  Pension Obligations                         |   |         | 382    |         |   | 386 |   |
| Other                                                                |   |         | 663    |         |   | 831 |   |
| **TOTAL**                                                            |   |         | 7,724  |         |   | 7,213 |   |
|                                                                 |   |         |   |         |   |   |   |
| **Assets                  Held for Sale**                            |   |         | 47     |         |   | 628 |   |
|                                                                 |   |         |   |         |   |   |   |
| **TOTAL                  ASSETS**                                    |   | $            | 35,956 |         | $      | 34,663 |   |

*See        Condensed Notes to Condensed Consolidated Financial        Statements.*

----

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

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

**LIABILITIES        AND SHAREHOLDERS’ EQUITY**

**September        30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                                                                                                                                                               |   | **2005**                           |        | **2004** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-------------|----------|--------|
| **CURRENT                  LIABILITIES**                                                                                                                                                           |   | **(in                  millions)** |        |
| Accounts                  Payable                                                                                                                                                                  | $      | 1,112                              |        | $        | 1,051  |   |
| Short-term                  Debt                                                                                                                                                                   |   | 15                                 |        |     | 23     |   |
| Long-term                  Debt Due Within One Year (a)                                                                                                                                            |   | 717                                |        |     | 1,279  |   |
| Cumulative                  Preferred Stocks of Subsidiaries Subject to Mandatory Redemption                                                                                                       |   | -                                  |        |     | 66     |   |
| Risk                  Management Liabilities                                                                                                                                                       |   | 1,280                              |        |     | 608    |   |
| Accrued                  Taxes                                                                                                                                                                     |   | 729                                |        |     | 611    |   |
| Accrued                  Interest                                                                                                                                                                  |   | 160                                |        |     | 180    |   |
| Customer                  Deposits                                                                                                                                                                 |   | 725                                |        |     | 414    |   |
| Other                                                                                                                                                                                              |   | 674                                |        |     | 775    |   |
| **TOTAL**                                                                                                                                                                                          |   | 5,412                              |        |     | 5,007  |   |
|                                                                                                                                                                                               |   |                               |        |     |   |   |
| **NONCURRENT                  LIABILITIES**                                                                                                                                                        |   |                               |        |     |   |   |
| Long-term                  Debt (a)                                                                                                                                                                |   | 11,025                             |        |     | 11,008 |   |
| Long-term                  Risk Management Liabilities                                                                                                                                             |   | 741                                |        |     | 329    |   |
| Deferred                  Income Taxes                                                                                                                                                             |   | 4,674                              |        |     | 4,819  |   |
| Regulatory                  Liabilities and Deferred Investment Tax Credits                                                                                                                        |   | 2,847                              |        |     | 2,540  |   |
| Asset                  Retirement Obligations                                                                                                                                                      |   | 847                                |        |     | 827    |   |
| Employee                  Benefits and Pension Obligations                                                                                                                                         |   | 461                                |        |     | 730    |   |
| Deferred                  Gain on Sale and Leaseback - Rockport Plant Unit 2                                                                                                                       |   | 159                                |        |     | 166    |   |
| Deferred                  Credits and Other                                                                                                                                                        |   | 742                                |        |     | 411    |   |
| **TOTAL**                                                                                                                                                                                          |   | 21,496                             |        |     | 20,830 |   |
|                                                                                                                                                                                               |   |                               |        |     |   |   |
| **Liabilities                  Held for Sale**                                                                                                                                                     |   | 2                                  |        |     | 250    |   |
|                                                                                                                                                                                               |   |                               |        |     |   |   |
| **TOTAL                  LIABILITIES**                                                                                                                                                             |   | 26,910                             |        |     | 26,087 |   |
|                                                                                                                                                                                               |   |                               |        |     |   |   |
| **Cumulative                  Preferred Stock Not Subject to Mandatory                  Redemption**                                                                                               |   | 61                                 |        |     | 61     |   |
|                                                                                                                                                                                               |   |                               |        |     |   |   |
| Commitments                  and Contingencies (Note 5)                                                                                                                                            |   |                               |        |     |   |   |
|                                                                                                                                                                                               |   |                               |        |     |   |   |
| **COMMON                  SHAREHOLDERS’ EQUITY**                                                                                                                                             |   |                               |        |     |   |   |
| Common                  Stock Par Value $6.50:                                                                                                                                                     |   |                               |        |     |   |   |
|                                                                                                                                                                                               |   |                               | 2005        |     |   | 2004 |   |   |   |   |   |   |   |
| Shares                  Authorized                                                                                                                                                                 |   |                               | 600,000,000 |     |   | 600,000,000 |   |   |   |   |   |   |   |
| Shares                  Issued                                                                                                                                                                     |   |                               | 414,959,884 |     |   | 404,858,145 |   |   |   |   |   |   |   |
| (21,499,992                  and 8,999,992 shares were held in treasury at September 30, 2005                  and                   December 31, 2004,                    respectively) |   | 2,697                              |        |     | 2,632  |   |
| Paid-in                  Capital                                                                                                                                                                   |   | 4,121                              |        |     | 4,203  |   |
| Retained                  Earnings                                                                                                                                                                 |   | 2,579                              |        |     | 2,024  |   |
| Accumulated                  Other Comprehensive Income (Loss)                                                                                                                                     |   | (412                               | )           |     | (344   | ) |
| **TOTAL**                                                                                                                                                                                          |   | 8,985                              |        |     | 8,515  |   |
|                                                                                                                                                                                               |   |                               |        |     |   |   |
| **TOTAL                  LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                              | $      | 35,956                             |        | $        | 34,663 |   |

*See        Condensed Notes to Condensed Consolidated Financial        Statements.*

----

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

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For        the Nine Months Ended September 30, 2005 and 2004**

**(in        millions)**

**(Unaudited)**

|                                                                                                               |   | **2005**     |   | **2004**     |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------------|--------|
| **OPERATING                  ACTIVITIES**                                                                          |   |    |   |    |   |
| **Net                  Income**                                                                                    |   | $            | 963    |         | $      | 912 |   |
| Less:                  Income from Discontinued Operations                                                         |   |         | (26    | )            |   | (60 | ) |
| **Income                  from Continuing Operations**                                                             |   |         | 937    |         |   | 852 |   |
| **Adjustments                  for Noncash Items:**                                                                |   |         |   |         |   |   |   |
| Depreciation                  and Amortization                                                                     |   |         | 988    |         |   | 972 |   |
| Accretion                  of Asset Retirement Obligations                                                         |   |         | 50     |         |   | 47 |   |
| Deferred                  Income Taxes                                                                             |   |         | (33    | )            |   | 88 |   |
| Deferred                  Investment Tax Credits                                                                   |   |         | (23    | )            |   | (21 | ) |
| Asset                  Impairments, Investment Value Losses and Other Related                  Charges             |   |         | 46     |         |   | 2 |   |
| Carrying                  Costs                                                                                    |   |         | (83    | )            |   | (2 | ) |
| Amortization                  of Deferred Property Taxes                                                           |   |         | 94     |         |   | 92 |   |
| Mark-to-Market                  of Risk Management Contracts                                                       |   |         | -      |         |   | 89 |   |
| Pension                  Contributions                                                                             |   |         | (306   | )            |   | (27 | ) |
| Over/Under                  Fuel Recovery                                                                          |   |         | (183   | )            |   | 78 |   |
| Gain                  on Sales of Assets                                                                           |   |         | (172   | )            |   | (156 | ) |
| Change                  in Other Noncurrent Assets                                                                 |   |         | (99    | )            |   | (101 | ) |
| Change                  in Other Noncurrent Liabilities                                                            |   |         | (21    | )            |   | 27 |   |
| **Changes                  in Certain Components of Working Capital:**                                             |   |         |   |         |   |   |   |
| Accounts                  Receivable, Net                                                                          |   |         | 5      |         |   | 367 |   |
| Fuel,                  Materials and Supplies                                                                      |   |         | 54     |         |   | (18 | ) |
| Accounts                  Payable                                                                                  |   |         | 204    |         |   | (289 | ) |
| Taxes                  Accrued                                                                                     |   |         | 118    |         |   | 388 |   |
| Customer                  Deposits                                                                                 |   |         | 311    |         |   | 19 |   |
| Interest                  Accrued                                                                                  |   |         | (25    | )            |   | (25 | ) |
| Other                  Current Assets                                                                              |   |         | (246   | )            |   | (107 | ) |
| Other                  Current Liabilities                                                                         |   |         | (29    | )            |   | 3 |   |
| **Net                  Cash Flows From Operating Activities**                                                      |   |         | 1,587  |         |   | 2,278 |   |
|                                                                                                               |   |         |   |         |   |   |   |
| **INVESTING                  ACTIVITIES**                                                                          |   |         |   |         |   |   |   |
| Acquisition                  of Waterford Plant                                                                    |   |         | (218   | )            |   | - |   |
| Construction                  Expenditures                                                                         |   |         | (1,610 | )            |   | (1,047 | ) |
| Change                  in Other Temporary Cash Investments, Net                                                   |   |         | 99     |         |   | 28 |   |
| Investment                  in Discontinued Operations, Net                                                        |   |         | -      |         |   | (59 | ) |
| Purchases                  of Investments                                                                          |   |         | (3,342 | )            |   | (425 | ) |
| Proceeds                  from the Sale of Investments                                                             |   |         | 3,445  |         |   | 274 |   |
| Proceeds                  from Sale of Assets                                                                      |   |         | 1,599  |         |   | 1,202 |   |
| Other                                                                                                              |   |         | 39     |         |   | (6 | ) |
| **Net                  Cash Flows From (Used For) Investing Activities**                                           |   |         | 12     |         |   | (33 | ) |
|                                                                                                               |   |         |   |         |   |   |   |
| **FINANCING                  ACTIVITIES**                                                                          |   |         |   |         |   |   |   |
| Issuance                  of Common Stock                                                                          |   |         | 393    |         |   | 13 |   |
| Repurchase                  of Common Stock                                                                        |   |         | (427   | )            |   | - |   |
| Issuance                  of Long-term Debt                                                                        |   |         | 2,045  |         |   | 416 |   |
| Change                  in Short-term Debt, Net                                                                    |   |         | (8     | )            |   | (201 | ) |
| Retirement                  of Long-term Debt                                                                      |   |         | (2,599 | )            |   | (1,898 | ) |
| Retirement                  of Preferred Stock                                                                     |   |         | (66    | )            |   | (4 | ) |
| Dividends                  Paid on Common Stock                                                                    |   |         | (408   | )            |   | (415 | ) |
| **Net                  Cash Flows Used For Financing Activities**                                                  |   |         | (1,070 | )            |   | (2,089 | ) |
|                                                                                                               |   |         |   |         |   |   |   |
| **Net                  Increase in Cash and Cash Equivalents**                                                     |   |         | 529    |         |   | 156 |   |
| **Cash                  and Cash Equivalents at Beginning of Period**                                              |   |         | 320    |         |   | 778 |   |
| **Cash                  and Cash Equivalents at End of Period**                                                    |   | $            | 849    |         | $      | 934 |   |
|                                                                                                               |   |         |   |         |   |   |   |
| **Net                  Decrease in Cash and Cash Equivalents from Discontinued                  Operations**       |   | $            | -      |         | $      | (4 | ) |
| **Cash                  and Cash Equivalents from Discontinued Operations - Beginning of                  Period** |   |         | -      |         |   | 13 |   |
| **Cash                  and Cash Equivalents from Discontinued Operations - End of                  Period**       |   | $            | -      |         | $      | 9 |   |
|  *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 Nine Months Ended September 30, 2005 and 2004**

**(in        millions)**

**(Unaudited)**

|                                                                |                                                                                                    | **Common                  Stock** |   |       |   |                                 |   | **Accumulated                  Other Comprehensive Income (Loss)** |   |   |      |
|---------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|-----------------------------------|--------|------------|--------|--------------------------------------|--------|--------------------------------------------------------------------|--------|--------|-----------|
|                                                                |                                                                                                    | **Shares**                        |   | **Amount** |   | **Paid-in                  Capital** |   | **Retained                  Earnings**                             |   |   | **Total** |   |
| **DECEMBER                  31, 2003**                              |                                                                                                    |                              | 404    |       | **$**  | 2,626                                |   | $                                                                  | 4,184  |   | $         | 1,490 |   | $ | (426 | ) | $ | 7,874 |   |
| Issuance                  of Common Stock                           |                                                                                                    |                              | 1      |       |   | 4                                    |   |                                                               | 9      |   |      |   |   |   |   |   |   | 13 |   |
| Common                  Stock Dividends                             |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      | (415 | ) |   |   |   |   | (415 | ) |
| Other                                                               |                                                                                                    |                              |   |       |   |                                 |   |                                                               | 4      |   |      |   |   |   |   |   |   | 4 |   |
| **TOTAL**                                                           |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   | 7,476 |   |
|                                                                |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                           |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   |   |   |
| **Other                  Comprehensive Income (Loss), Net of Tax:** |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   |   |   |
|                                                                | Foreign                  Currency Translation Adjustments,  Net                  of Tax of $0 |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   | (113 | ) |   | (113 | ) |
|                                                                | Cash                  Flow Hedges, Net of Tax of $4                                                     |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   | (8 | ) |   | (8 | ) |
|                                                                | Minimum                  Pension Liability, Net of Tax of $10                                           |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   | 16 |   |   | 16 |   |
| **NET                  INCOME**                                     |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      | 912 |   |   |   |   |   | 912 |   |
| **TOTAL                  COMPREHENSIVE INCOME**                     |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   | 807 |   |
| **SEPTEMBER                  30, 2004**                             |                                                                                                    |                              | 405    |       | $      | 2,630                                |   | $                                                                  | 4,197  |   | $         | 1,987 |   | $ | (531 | ) | $ | 8,283 |   |
|                                                                |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   |   |   |
| **DECEMBER                  31, 2004**                              |                                                                                                    |                              | 405    |       | $      | 2,632                                |   | $                                                                  | 4,203  |   | $         | 2,024 |   | $ | (344 | ) |   | 8,515 |   |
| Issuance                  of Common Stock                           |                                                                                                    |                              | 10     |       |   | 65                                   |   |                                                               | 328    |   |      |   |   |   |   |   |   | 393 |   |
| Common                  Stock Dividends                             |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      | (408 | ) |   |   |   |   | (408 | ) |
| Repurchase                  of Common Stock                         |                                                                                                    |                              |   |       |   |                                 |   |                                                               | (427   | )      |      |   |   |   |   |   |   | (427 | ) |
| Other                                                               |                                                                                                    |                              |   |       |   |                                 |   |                                                               | 17     |   |      |   |   |   |   |   |   | 17 |   |
| **TOTAL**                                                           |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   | 8,090 |   |
|                                                                |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   |   |   |
| **COMPREHENSIVE                  INCOME**                           |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   |   |   |
| **Other                  Comprehensive Income (Loss), Net of Tax:** |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   |   |   |
|                                                                | Foreign                  Currency Translation Adjustments,  Net                  of Tax of $0 |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   | (6 | ) |   | (6 | ) |
|                                                                | Cash                  Flow Hedges, Net of Tax of $36                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   | (67 | ) |   | (67 | ) |
|                                                                | Minimum                  Pension Liability, Net of Tax of $0                                            |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   | 4 |   |   | 4 |   |
|                                                                | Securities                  Available for Sale, Net of Tax $0                                           |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   | 1 |   |   | 1 |   |
| **NET                  INCOME**                                     |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      | 963 |   |   |   |   |   | 963 |   |
| **TOTAL                  COMPREHENSIVE INCOME**                     |                                                                                                    |                              |   |       |   |                                 |   |                                                               |   |   |      |   |   |   |   |   |   | 895 |   |
| **SEPTEMBER                  30, 2005**                             |                                                                                                    |                              | 415    |       | $      | 2,697                                |   | $                                                                  | 4,121  |   | $         | 2,579 |   | $ | (412 | ) | $ | 8,985 |   |

*See        Condensed Notes to Condensed Consolidated Financial        Statements.*

----

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

**CONDENSED        SCHEDULE OF CONSOLIDATED LONG-TERM DEBT**

**September        30, 2005 and December 31, 2004**

**(Unaudited)**

**(in        millions)**

|                                                      |   | **2005**     |   | **2004**     |   |
|-----------------------------------------------------------|--------|--------------|--------|--------------|--------|
|                                                      |   |    |   |    |   |
| First                  Mortgage Bonds                     |   | $            | 242    |         | $      | 417 |   |
| Defeased                  TCC First Mortgage Bonds (a)    |   |         | 18     |         |   | 84 |   |
| Installment                  Purchase Contracts           |   |         | 1,935  |         |   | 1,773 |   |
| Notes                  Payable                            |   |         | 919    |         |   | 939 |   |
| Senior                  Unsecured Notes                   |   |         | 7,342  |         |   | 7,717 |   |
| Securitization                  Bonds                     |   |         | 648    |         |   | 698 |   |
| Notes                  Payable to Trust                   |   |         | 113    |         |   | 113 |   |
| Equity                  Unit Senior Notes (b)             |   |         | 345    |         |   | 345 |   |
| Long-term                  DOE Obligation (c)             |   |         | 234    |         |   | 229 |   |
| Other                  Long-term Debt                     |   |         | -      |         |   | 14 |   |
| Equity                  Unit Contract Adjustment Payments |   |         | -      |         |   | 9 |   |
| Unamortized                  Discount, Net                |   |         | (54    | )            |   | (51 | ) |
|                                                      |   |         |   |         |   |   |   |
| **TOTAL                  LONG-TERM DEBT OUTSTANDING**     |   |         | 11,742 |         |   | 12,287 |   |
| Less                  Portion Due Within One Year         |   |         | 717    |         |   | 1,279 |   |
|                                                      |   |         |   |         |   |   |   |
| **TOTAL                  LONG-TERM PORTION**              |   | $            | 11,025 |         | $      | 11,008 |   |

| (a) | On                  May 7, 2004, we deposited cash and treasury securities of $125                  million                  with a trustee to defease all of TCC’s outstanding First Mortgage Bonds.                  Trust fund assets related to this obligation of $2 and $72 million                  are                  included in Other Temporary Cash Investments at September 30, 2005                  and                  December 31, 2004, respectively, and $21 and $22 million are included                  in                  Other Noncurrent Assets in the Condensed Consolidated Balance Sheets                  at                  September 30, 2005 and December 31, 2004, respectively. Trust fund                  assets                  are restricted for exclusive use in funding the interest and principal                  due                  on the First Mortgage Bonds. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | In                  June 2005, we remarketed $345 million of 5.75% Equity Unit Senior                  Notes                  originally issued in June 2002 with new notes bearing a 4.709%                  interest                  rate. See “Remarketing of Senior Notes” section of Note                  11.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (c) | 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. I&M is the only AEP subsidiary                  that generated electric power with nuclear fuel prior to that date.                  Trust                  fund assets of $265 million and $262 million related to this obligation                  are included in Spent Nuclear Fuel and Decommissioning Trusts in                  the                  Condensed Consolidated Balance Sheets at September 30, 2005 and                  December                  31, 2004, respectively.                                                            |

----

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

**INDEX        OF 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. | Acquisitions,                  Dispositions, Discontinued Operations, Asset Impairments and Assets                  Held                  for Sale |
|  8. | Benefit                  Plans                                                                                                                     |
|  9. | Business                  Segments                                                                                                                 |
| 10.      | Income                  Taxes                                                                                                                      |
| 11.      | Financing                  Activities                                                                                                              |
| 12.      | Company-wide                  Staffing and Budget Review                                                                                           |

----

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

**CONDENSED        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

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

***General***

***Other        Income and Other Expense***

|                                            |   | **Three                  Months Ended September 30,** |   | **Nine                  Months Ended****September                  30,** |   |
|-------------------------------------------------|--------|-------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                            |   | **2005**                                              |   | **2004**                                                                 |   | **2005** |   | **2004** |   |
|                                            |   | **(in                  millions)**                    |   | **(in                  millions)**                                       |   |
| **Other                  Income:**              |   |                                             |   |                                                                |   |    |   |    |   |
| Interest                  and Dividend Income   |   | $                                                     | 18     |                                                                     | $      | 7 |   | $ | 43 |   | $ | 18 |   |
| Equity                  Earnings                |   |                                                  | 3      |                                                                     |   | 5 |   |   | 10 |   |   | 15 |   |
| Nonutility                  Revenue             |   |                                                  | 16     |                                                                     |   | 27 |   |   | 108 |   |   | 85 |   |
| Gain                  on Sale of IPPs           |   |                                                  | -      |                                                                     |   | 105 |   |   | - |   |   | 105 |   |
| Gain                  on Sale of South Coast    |   |                                                  | -      |                                                                     |   | 48 |   |   | - |   |   | 48 |   |
| Gain                  on Sale of Pac Hydro (a)  |   |                                                  | 56     |                                                                     |   | - |   |   | 56 |   |   | - |   |
| Gain                  on Sale of Texas REPs (a) |   |                                                  | -      |                                                                     |   | - |   |   | 112 |   |   | - |   |
| Carrying                  Charges               |   |                                                  | 27     |                                                                     |   | 1 |   |   | 83 |   |   | 2 |   |
| Other                                           |   |                                                  | 19     |                                                                     |   | 15 |   |   | 72 |   |   | 56 |   |
| **Total                  Other Income**         |   | $                                                     | 139    |                                                                     | $      | 208 |   | $ | 484 |   | $ | 329 |   |
|                                            |   |                                                  |   |                                                                     |   |   |   |   |   |   |   |   |   |
| **Other                  Expense:**             |   |                                                  |   |                                                                     |   |   |   |   |   |   |   |   |   |
| Nonutility                  Expense             |   | $                                                     | 12     |                                                                     | $      | 24 |   | $ | 90 |   | $ | 75 |   |
| Other                                           |   |                                                  | 12     |                                                                     |   | 12 |   |   | 40 |   |   | 35 |   |
| **Total                  Other Expense**        |   | $                                                     | 24     |                                                                     | $      | 36 |   | $ | 130 |   | $ | 110 |   |

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

|                                                                  |   | **September                  30,** |   | **December                  31,** |   |
|-----------------------------------------------------------------------|--------|------------------------------------|--------|-----------------------------------|--------|
|                                                                  |   | **2005**                           |   | **2004**                          |   |
| **Components**                                                        |   | **(in                  millions)** |   |
| Foreign                  Currency Translation Adjustments, Net of tax |   | $                                  | -      |                              | $      | 6 |   |
| Securities                  Available for Sale, Net of tax            |   |                               | -      |                              |   | (1 | ) |
| Cash                  Flow Hedges, Net of tax                         |   |                               | (67    | )                                 |   | - |   |
| Minimum                  Pension Liability, Net of tax                |   |                               | (345   | )                                 |   | (349 | ) |
| **Total**                                                             |   | $                                  | (412   | )                                 | $      | (344 | ) |

***Accounting        for Asset Retirement Obligations (ARO)***

|                                                         |   | **Nuclear                    Decommissioning** |   | **Ash****Ponds**         |   | **Wind                    Mills****and                    Mining Operations** |   | **Total** |   |
|--------------------------------------------------------------|--------|------------------------------------------------|--------|--------------------------|--------|-------------------------------------------------------------------------------|--------|-----------|--------|
|                                                         |   | **(in                    millions)**           |   |
| **ARO                    at January 1, 2005, Including STP** |   | $                                              | 960    |                     | $      | 84                                                                            |   | $         | 32     |   | $ | 1,076 |   |
| Accretion                    Expense                         |   |                                           | 43     |                     |   | 5                                                                             |   |      | 2      |   |   | 50 |   |
| Liabilities                    Incurred                      |   |                                           | -      |                     |   | -                                                                             |   |      | 8      |   |   | 8 |   |
| Revisions                    in Cash Flow Estimates          |   |                                           | (27    | )                    (c) |   | -                                                                             |   |      | (1     | ) |   | (28 | ) |
| ARO                    at September 30, 2005, Including STP  |   |                                           | 976    |                     |   | 89                                                                            |   |      | 41     |   |   | 1,106 |   |
| Less                    ARO Liability for STP (a)            |   |                                           | (256   | )                        |   | -                                                                             |   |      | -      |   |   | (256 | ) |
| **ARO                    at September 30, 2005**             |   | $                                              | 720    |                     | $      | 89                                                                            |   | $         | 41     |   | $ | 850 | (b) |

| (a) | The                  ARO for TCC’s share of STP was included in Liabilities Held for Sale at                  December 31, 2004 and was subsequently transferred to the buyer                  with the                  sale in the second quarter of 2005 (see “Texas Plants-South Texas Project”                  section of Note 7). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | The                  current portion of our ARO, totaling $3 million, is included in                  Other in                  the Current Liabilities section in our Condensed Consolidated Balance                  Sheets.                                                                                                                             |
| (c) | The                  Cook Plant’s operating licenses were renewed for Cook Unit 1 until 2034                  and for Cook Unit 2 until 2037.                                                                                                                                                                                                        |

***Supplementary        Information***

|                                                 | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September                    30,** |   |
|------------------------------------------------------|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
|                                                 | **2005**                                                                      |   | **2004**                                                                     |   | **2005** |   | **2004** |   |
| **Related                    Party Transactions**    | **(in                    millions)**                                          |   |
| AEP                    Consolidated Purchased Power: |                                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |
|                                                 | Ohio                    Valley Electric Corporation (44.2% owned)             | $      | 49                                                                           |   | $ | 45 |   | $ | 140 |   | $ | 115 |   |
|                                                 | Sweeny                    Cogeneration Limited Partnership (50% owned)        |   | 38                                                                           |   |   | - |   |   | 98 |   |   | - |   |

|                                                                                                                                               |                                                     | **Nine                    Months Ended September 30,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|--------------------------------------------------------|--------|
|                                                                                                                                               |                                                     | **2005**                                               |   | **2004** |   |
| **Cash                    Flow Information**                                                                                                       |                                                     | **(in                    millions)**                   |   |
| Cash                    was paid (received) for:                                                                                                   |                                                     |                                                   |   |   |   |   |   |
|                                                                                                                                               | Interest                    (net of capitalized amounts) |                                                   | $      | 492 |   | $ | 576 |   |
|                                                                                                                                               | Income                    Taxes                          |                                                   |   | 277 |   |   | (112 | ) |
| Change                    in construction-related Accounts Payable included in                    Investing Activities - Construction Expenditures |                                                     |                                                   | 66     |   |   | (24 | ) |
| Noncash                  Investing and Financing Activities:  Acquisitions                  Under Capital Leases                              |                                                     |                                                   | 42     |   |   | 90 |   |
| (Disposition)                    of Liabilities Related to Acquisitions/Divestures, Net                                                            |                                                     |                                                   | (20    | ) |   | (67 | ) |

***Earnings        per Share***

|                                                          |   | **Three                  Months Ended September 30,** |   |
|---------------------------------------------------------------|--------|-------------------------------------------------------|--------|
|                                                          |   | **2005**                                              |   | **2004** |   |
|                                                          |   | (In                  Millions, Except Per Share Data) |   |
|                                                          |   |                                             |   | $/share |   |    |   | $/share |   |
| Earnings                  applicable to common stock          |   | $                                                     | 387    |   |   |   |   | $ | 530 |   |   |   |   |
|                                                          |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Average                  number of basic shares outstanding   |   |                                                  | 388.9  |   | $ | 0.99 |   |   | 395.7 |   | $ | 1.34 |   |
| Average                  dilutive effect of:                  |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Performance                  Share Units                      |   |                                                  | 1.0    |   |   | (0.00 | ) |   | 0.7 |   |   | (0.00 | ) |
| Stock                  Options                                |   |                                                  | 0.5    |   |   | (0.00 | ) |   | 0.3 |   |   | (0.00 | ) |
| Restricted                  Stock Units                       |   |                                                  | 0.1    |   |   | (0.00 | ) |   | - |   |   | (0.00 | ) |
| Average                  number of diluted shares outstanding |   |                                                  | 390.5  |   | $ | 0.99 |   |   | 396.7 |   | $ | 1.34 |   |

|                                                          |   |                                                  |   |
|---------------------------------------------------------------|--------|-------------------------------------------------------|--------|
|                                                          |   | **Nine                  Months Ended September 30,**  |   |
|                                                          |   | **2005**                                              |   | **2004** |   |
|                                                          |   | (In                  Millions, Except Per Share Data) |   |
|                                                          |   |                                             |   | $/share |   |    |   | $/share |   |
| Earnings                  applicable to common stock          |   | $                                                     | 963    |   |   |   |   | $ | 912 |   |   |   |   |
|                                                          |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Average                  number of basic shares outstanding   |   |                                                  | 388.7  |   | $ | 2.48 |   |   | 395.6 |   | $ | 2.30 |   |
| Average                  dilutive effect of:                  |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |
| Performance                  Share Units                      |   |                                                  | 0.9    |   |   | (0.01 | ) |   | 0.5 |   |   | (0.00 | ) |
| Stock                  Options                                |   |                                                  | 0.3    |   |   | (0.00 | ) |   | 0.3 |   |   | (0.00 | ) |
| Restricted                  Stock Units                       |   |                                                  | 0.1    |   |   | (0.00 | ) |   | - |   |   | (0.00 | ) |
| Average                  number of diluted shares outstanding |   |                                                  | 390.0  |   | $ | 2.47 |   |   | 396.4 |   | $ | 2.30 |   |

***Reclassifications***

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

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

***SFAS        154 “Accounting Changes and Error Corrections” (SFAS        154)***

***FASB        Interpretation No. 47 “Accounting for Conditional Asset Retirement Obligations”        (FIN 47)***

***EITF        Issue 03-13 “Applying the Conditions in Paragraph 42 of FASB Statement No. 144,        Accounting for the Impairment or Disposal of Long-Lived Assets, in Determining        Whether to Report Discontinued Operations”***

***Future        Accounting Changes***

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

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

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

***I&M        Indiana Settlement Agreement***

***I&M        Michigan Fuel Recovery Plan***

***KPCo        Rate Filing***

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

***PSO        Lawton Power Supply Agreement***

***PSO        Rate Review***

***SWEPCo        and TNC PUCT Staff Review of Earnings***

***SWEPCo        Texas Fuel Factor Filing***

***TCC        Rate Case***

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

***Texas        Unbundled Cost of Service (UCOS) Appeal***

***Hold        Harmless Proceeding***

***FERC        Order on Regional Through and Out Rates***

***RTO        Formation/Integration Costs***

** **

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

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

**OHIO        RESTRUCTURING **

**TEXAS        RESTRUCTURING**

***The        Components of TCC’s Recorded Net True-up Regulatory Asset (inclusive of        provisions) recorded as of September 30, 2005 and December 31, 2004 are:***

|                                                                                              |   | **TCC**                                 |   |
|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                              |   | **September                  30, 2005** |   | **December                  31, 2004** |   |
|                                                                                              |   | **(in                  millions)**      |   |
| Stranded                  Generation Plant Costs                                                  |   | $                                       | 892    |   | $ | 897 |   |
| Net                  Generation-related Regulatory Asset                                          |   |                                    | 249    |   |   | 249 |   |
| Excess                  Earnings                                                                  |   |                                    | (49    | ) |   | (10 | ) |
| **Net                  Stranded Generation Costs**                                                |   |                                    | 1,092  |   |   | 1,136 |   |
| Carrying                  Costs on Stranded Generation Plant Costs                                |   |                                    | 218    |   |   | 225 |   |
| **Net                  Stranded Generation Costs Designated for                  Securitization** |   |                                    | 1,310  |   |   | 1,361 |   |
|                                                                                              |   |                                    |   |   |   |   |   |
| Wholesale                  Capacity Auction True-up                                               |   |                                    | 483    |   |   | 483 |   |
| Carrying                  Costs on Wholesale Capacity Auction True-up                             |   |                                    | 114    |   |   | 77 |   |
| Retail                  Clawback                                                                  |   |                                    | (61    | ) |   | (61 | ) |
| Deferred                  Over-recovered Fuel Balance                                             |   |                                    | (210   | ) |   | (212 | ) |
| **Net                  Other Recoverable True-up Amounts**                                        |   |                                    | 326    |   |   | 287 |   |
| **Total                  Recorded Net True-up Regulatory Asset**                                  |   | $                                       | 1,636  |   | $ | 1,648 |   |

***The        Components of TNC’s Net True-up Regulatory Liability as of September 30, 2005        and December 31, 2004 are:***

|                                                                 |   | **TNC**                                 |   |
|----------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                 |   | **September                  30, 2005** |   | **December                  31, 2004** |   |
|                                                                 |   | **(in                  millions)**      |   |
| Retail                  Clawback                                     |   | $                                       | (14    | ) | $ | (14 | ) |
| Deferred                  Over-recovered Fuel Balance                |   |                                    | (5     | ) |   | (4 | ) |
| **Total                  Recorded Net True-up Regulatory Liability** |   | $                                       | (19    | ) | $ | (18 | ) |

***Deferred        Investment Tax Credits Included in Stranded Generation Plant        Costs***

***TCC        Fuel Reconciliation***

***TCC        Carrying Costs on Net True-up Regulatory Assets***

** **

***TCC        Excess Earnings***

***TCC        True-up Proceeding***

***TNC        True-Up Proceeding***

**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***

**Operational**

***Construction***

***TEM        Litigation***
**        (**
***Power        Generation Facility)***

***Merger        Litigation***

***Enron        Bankruptcy***
* *

***Enron        Bankruptcy - Right to use of cushion gas agreements***

***Enron        Bankruptcy -***
***Commodity        trading settlement disputes***

***Enron        Bankruptcy - Summary***

***Natural        Gas Markets Lawsuits***

***Cornerstone        Lawsuit***

***Texas        Commercial Energy, LLP Lawsuit***

***Bank        of Montreal Claim***

***Ontario        Litigation***

**6.**
**GUARANTEES**

**LETTERS        OF CREDIT**

**GUARANTEES        OF THIRD-PARTY OBLIGATIONS **

***SWEPCo***

**INDEMNIFICATIONS        AND OTHER GUARANTEES **

***Contracts***

***Master        Operating Lease***

***Railcar        Lease***

**7.****ACQUISITIONS,      DISPOSITIONS, DISCONTINUED OPERATIONS, ASSET IMPAIRMENTS AND ASSETS HELD FOR      SALE**

**ACQUISITIONS**

***Ceredo        Generating Station (Utility Operations segment)***

***Waterford        Plant (Utility Operations segment)***

***Monongahela        Power Company (Utility Operations segment)***

**DISPOSITIONS        **

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

***Pacific        Hydro Limited (Investments - Other segment)***

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

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

***Texas        Plants - South Texas Project (Utility Operations        segment)***

**DISCONTINUED        OPERATIONS **

**Three        months ended September 30, 2005 and 2004:**

|                                   |   | **SEEBOARD                  (a)**  |   | **UK                  Operations (b)** |   | **Total** |   |
|----------------------------------------|--------|------------------------------------|--------|----------------------------------------|--------|-----------|--------|
|                                   |   | **(in                  millions)** |   |
| 2005                  Revenue          |   | $                                  | -      |                                   | $      | -         |   | $ | - |   |
| 2005                  Pretax Income    |   |                               | 13     |                                   |   | -         |   |   | 13 |   |
| 2005                  Income After tax |   |                               | 20     |                                   |   | 2         |   |   | 22 |   |

|                                          |   | **Pushan                  Power Plant** |   | **LIG                  (c)** |   | **UK                  Operations** |   | **Total** |   |
|-----------------------------------------------|--------|-----------------------------------------|--------|------------------------------|--------|------------------------------------|--------|-----------|--------|
|                                          |   | **(in                  millions)**      |   |
| 2004                  Revenue                 |   | $                                       | -      |                         | $      | 1                                  |   | $         | 37     |   | $ | 38 |   |
| 2004                  Pretax Income (Loss)    |   |                                    | -      |                         |   | (13                                | )      |      | 255    |   |   | 242 |   |
| 2004                  Income (Loss) After tax |   |                                    | 1      |                         |   | (3                                 | )      |      | 120    | (d) |   | 118 |   |

**Nine        months ended September 30, 2005 and 2004:**

|                                          |   | **SEEBOARD                  (a)**  |   | **UK                  Operations (b)** |   | **Total** |   |
|-----------------------------------------------|--------|------------------------------------|--------|----------------------------------------|--------|-----------|--------|
|                                          |   | **(in                  millions)** |   |
| 2005                  Revenue                 |   | $                                  | -      |                                   | $      | -         |   | $ | - |   |
| 2005                  Pretax Income (Loss)    |   |                               | 13     |                                   |   | (8        | )      |   | 5 |   |
| 2005                  Income (Loss) After tax |   |                               | 29     |                                   |   | (3        | )      |   | 26 |   |

|                                            |   | **Pushan                    Power Plant** |   | **LIG                    (c)** |   | **UK                    Operations** |   | **Total** |   |
|-------------------------------------------------|--------|-------------------------------------------|--------|--------------------------------|--------|--------------------------------------|--------|-----------|--------|
|                                            |   | **(in                    millions)**      |   |
| 2004                    Revenue                 |   | $                                         | 10     |                           | $      | 165                                  |   | $         | 112    |   | $ | 287 |   |
| 2004                    Pretax Income (Loss)    |   |                                      | 9      |                           |   | (12                                  | )      |      | 156    |   |   | 153 |   |
| 2004                    Income (Loss) After tax |   |                                      | 6      |                           |   | (2                                   | )      |      | 56     | (e) |   | 60 |   |

**ASSET        IMPAIRMENTS**

***Conesville        Units 1 and 2 (Utility Operations segment)***

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

**ASSETS        HELD FOR SALE**

|                                                 |   | **Texas                  Plants**       |   |
|------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                 |   | **September                  30, 2005** |   | **December                  31,****2004** |   |
| **Assets:**                                          |   | **(in                  millions)**      |   |
| Other                  Current Assets                |   | $                                       | 1      |   | $ | 24 |   |
| Property,                  Plant and Equipment, Net  |   |                                    | 46     |   |   | 413 |   |
| Regulatory                  Assets                   |   |                                    | -      |   |   | 48 |   |
| Nuclear                  Decommissioning Trust Fund  |   |                                    | -      |   |   | 143 |   |
| **Total                  Assets Held for Sale**      |   | $                                       | 47     |   | $ | 628 |   |
|                                                 |   |                                    |   |   |   |   |   |
| **Liabilities:**                                     |   |                                    |   |   |   |   |   |
| Regulatory                  Liabilities              |   | $                                       | 2      |   | $ | 1 |   |
| Asset                  Retirement Obligations        |   |                                    | -      |   |   | 249 |   |
| **Total                  Liabilities Held for Sale** |   | $                                       | 2      |   | $ | 250 |   |

**8.        **
**BENEFIT        PLANS**
** **

***Components        of Net Periodic Benefit Costs***

| **Three                  Months Ended September 30, 2005****and                  2004:** |   | **Pension                  Plans** |   | **Other                  Postretirement Benefit Plans** |   |
|------------------------------------------------------------------------------------------|--------|------------------------------------|--------|---------------------------------------------------------|--------|
|                                                                                     |   | **2005**                           |   | **2004**                                                |   | **2005** |   | **2004** |   |
|                                                                                     |   | **(in                  millions)** |   |
| Service                  Cost                                                            |   | $                                  | 23     |                                                    | $      | 21 |   | $ | 10 |   | $ | 10 |   |
| Interest                  Cost                                                           |   |                               | 57     |                                                    |   | 57 |   |   | 26 |   |   | 29 |   |
| Expected                  (Return) on Plan Assets                                        |   |                               | (77    | )                                                       |   | (72 | ) |   | (23 | ) |   | (20 | ) |
| Amortization                  of Transition (Asset) Obligation                           |   |                               | (1     | )                                                       |   | - |   |   | 6 |   |   | 7 |   |
| Amortization                  of Prior Service Costs                                     |   |                               | -      |                                                    |   | (1 | ) |   | - |   |   | - |   |
| Amortization                  of Net Actuarial Loss                                      |   |                               | 13     |                                                    |   | 5 |   |   | 5 |   |   | 8 |   |
| **Net                  Periodic Benefit Cost**                                           |   | $                                  | 15     |                                                    | $      | 10 |   | $ | 24 |   | $ | 34 |   |

| **Nine                  Months Ended September 30, 2005****and                  2004:** |   | **Pension                  Plans** |   | **Other                  Postretirement Benefit Plans** |   |
|-----------------------------------------------------------------------------------------|--------|------------------------------------|--------|---------------------------------------------------------|--------|
|                                                                                    |   | **2005**                           |   | **2004**                                                |   | **2005** |   | **2004** |   |
|                                                                                    |   | **(in                  millions)** |   |
| Service                  Cost                                                           |   | $                                  | 69     |                                                    | $      | 64 |   | $ | 31 |   | $ | 30 |   |
| Interest                  Cost                                                          |   |                               | 169    |                                                    |   | 169 |   |   | 79 |   |   | 87 |   |
| Expected                  (Return) on Plan Assets                                       |   |                               | (232   | )                                                       |   | (216 | ) |   | (68 | ) |   | (60 | ) |
| Amortization                  of Transition (Asset) Obligation                          |   |                               | (1     | )                                                       |   | 1 |   |   | 20 |   |   | 21 |   |
| Amortization                  of Prior Service Costs                                    |   |                               | -      |                                                    |   | (1 | ) |   | - |   |   | - |   |
| Amortization                  of Net Actuarial Loss                                     |   |                               | 40     |                                                    |   | 13 |   |   | 19 |   |   | 26 |   |
| **Net                  Periodic Benefit Cost**                                          |   | $                                  | 45     |                                                    | $      | 30 |   | $ | 81 |   | $ | 104 |   |

**9.**
**BUSINESS        SEGMENTS**

**Utility        Operations**

| · | Domestic                  generation of electricity for sale to retail and wholesale                  customers. |
|--------|------------------------------------------------------------------------------------------------------------------|
| · | Domestic                  electricity transmission and                  distribution.                            |

**Investments        - Gas Operations **

| · | Gas                  pipeline and storage services.                                                                                                                                                                                                                                             |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Gas                  marketing and risk management activities.                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                            |
|   | Operations                  of LIG, including Jefferson Island Storage, were classified as                  Discontinued Operations during 2003 and were sold during 2004.                  We sold our                  98% interest in HPL during the first quarter of                  2005. |

**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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                              |
|   | Four                  IPPs were sold during 2004.                                                                                 |

|                                                                                       |   |                               |   | **Investments**                     |   |                          |   |    |   |                          |   |
|--------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------|--------|------------------------------------|--------|--------------|--------|------------------------------------|--------|
| **Three                  Months Ended**                                                    |   | **Utility                  Operations** |   | **Gas                  Operations** |   | **UK                  Operations** |   | **Other**    |   | **All                  Other (a)** |   | **Reconciling                  Adjustments** |   | **Consolidated** |   |
| **September                  30, 2005**                                                    |   | **(in                  millions)**      |   |
| Revenues                  from:                                                            |   |                               |   |                           |   |                          |   |    |   |                          |   |    |   |    |   |
| External                  Customers                                                        |   | $                                       | 3,132  |                                | $      | 73                                 |   | $            | -      |                               | $      | 95 |   | $ | - |   | $ | - |   | $ | 3,300 |   |
| Other                  Operating Segments                                                  |   |                                    | 82     |                                |   | (77                                | )      |         | -      |                               |   | 2 |   |   | 1 |   |   | (8 | ) |   | - |   |
| Total                  Revenues                                                            |   | $                                       | 3,214  |                                | $      | (4                                 | )      | $            | -      |                               | $      | 97 |   | $ | 1 |   | $ | (8 | ) | $ | 3,300 |   |
|                                                                                       |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (Loss) Before Discontinued                    Operations |   | $                                       | 352    |                                | $      | (10                                | )      | $            | -      |                               | $      | 28 |   | $ | (5 | ) | $ | - |   | $ | 365 |   |
| Discontinued                  Operations, Net of Tax                                       |   |                                    | -      |                                |   | -                                  |   |         | 2      |                               |   | 20 |   |   | - |   |   | - |   |   | 22 |   |
| Net                  Income (Loss)                                                         |   | $                                       | 352    |                                | $      | (10                                | )      | $            | 2      |                               | $      | 48 |   | $ | (5 | ) | $ | - |   | $ | 387 |   |
|                                                                                       |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **Three                  Months Ended****September                  30, 2004**             |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                  from:                                                            |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| External                  Customers                                                        |   | $                                       | 2,920  |                                | $      | 760                                |   | $            | -      |                               | $      | 101 |   | $ | - |   | $ | - |   | $ | 3,781 |   |
| Other                  Operating Segments                                                  |   |                                    | 30     |                                |   | (16                                | )      |         | -      |                               |   | 5 |   |   | 1 |   |   | (20 | ) |   | - |   |
| Total                  Revenues                                                            |   | $                                       | 2,950  |                                | $      | 744                                |   | $            | -      |                               | $      | 106 |   | $ | 1 |   | $ | (20 | ) | $ | 3,781 |   |
|                                                                                       |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (Loss) Before Discontinued                    Operations      |   | $                                       | 359    |                                | $      | (27                                | )      | $            | -      |                               | $      | 89 |   | $ | (9 | ) | $ | - |   | $ | 412 |   |
| Discontinued                  Operations, Net of Tax                                       |   |                                    | -      |                                |   | (3                                 | )      |         | 120    |                               |   | 1 |   |   | - |   |   | - |   |   | 118 |   |
| Net                  Income (Loss)                                                         |   | $                                       | 359    |                                | $      | (30                                | )      | $            | 120    |                               | $      | 90 |   | $ | (9 | ) | $ | - |   | $ | 530 |   |
|                                                                                       |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                                       |   |                               |   | **Investments**                     |   |                          |   |    |   |                          |   |
|--------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------|--------|------------------------------------|--------|--------------|--------|------------------------------------|--------|
| **Nine                  Months Ended**                                                     |   | **Utility                  Operations** |   | **Gas                  Operations** |   | **UK                  Operations** |   | **Other**    |   | **All                  Other (a)** |   | **Reconciling                  Adjustments** |   | **Consolidated** |   |
| **September                  30, 2005**                                                    |   | **(in                  millions)**      |   |
| Revenues                  from:                                                            |   |                               |   |                           |   |                          |   |    |   |                          |   |    |   |    |   |
| External                  Customers                                                        |   | $                                       | 8,318  |                                | $      | 449                                |   | $            | -      |                               | $      | 289 |   | $ | - |   | $ | - |   | $ | 9,056 |   |
| Other                  Operating Segments                                                  |   |                                    | 178    |                                |   | (167                               | )      |         | -      |                               |   | 8 |   |   | 2 |   |   | (21 | ) |   | - |   |
| Total                  Revenues                                                            |   | $                                       | 8,496  |                                | $      | 282                                |   | $            | -      |                               | $      | 297 |   | $ | 2 |   | $ | (21 | ) | $ | 9,056 |   |
|                                                                                       |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (Loss) Before Discontinued                    Operations |   | $                                       | 952    |                                | $      | (2                                 | )      | $            | -      |                               | $      | 32 |   | $ | (45 | ) | $ | - |   | $ | 937 |   |
| Discontinued                  Operations, Net of Tax                                       |   |                                    | -      |                                |   | -                                  |   |         | (3     | )                                  |   | 29 |   |   | - |   |   | - |   |   | 26 |   |
| Net                  Income (Loss)                                                         |   | $                                       | 952    |                                | $      | (2                                 | )      | $            | (3     | )                                  | $      | 61 |   | $ | (45 | ) | $ | - |   | $ | 963 |   |
|                                                                                       |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| **Nine                    Months Ended****September 30,                  2004**            |   |                                    |
| Revenues                  from:                                                            |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| External                  Customers                                                        |   | $                                       | 8,009  |                                | $      | 2,191                              |   | $            | -      |                               | $      | 356 |   | $ | - |   | $ | - |   | $ | 10,556 |   |
| Other                  Operating Segments                                                  |   |                                    | 88     |                                |   | 23                                 |   |         | -      |                               |   | 32 |   |   | 5 |   |   | (148 | ) |   | - |   |
| Total                  Revenues                                                            |   | $                                       | 8,097  |                                | $      | 2,214                              |   | $            | -      |                               | $      | 388 |   | $ | 5 |   | $ | (148 | ) | $ | 10,556 |   |
|                                                                                       |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (Loss) Before Discontinued                    Operations      |   | $                                       | 847    |                                | $      | (41                                | )      | $            | -      |                               | $      | 89 |   | $ | (43 | ) | $ | - |   | $ | 852 |   |
| Discontinued                  Operations, Net of Tax                                       |   |                                    | -      |                                |   | (2                                 | )      |         | 56     |                               |   | 6 |   |   | - |   |   | - |   |   | 60 |   |
| Net                  Income (Loss)                                                         |   | $                                       | 847    |                                | $      | (43                                | )      | $            | 56     |                               | $      | 95 |   | $ | (43 | ) | $ | - |   | $ | 912 |   |
|                                                                                       |   |                                    |   |                                |   |                               |   |         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                            |   |                               |   | **Investments**                     |   |                          |   |    |   |                      |   |
|-----------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------------------|--------|------------------------------------|--------|--------------|--------|--------------------------------|--------|
|                                                            |   | **Utility                  Operations** |   | **Gas                  Operations** |   | **UK                  Operations** |   | **Other**    |   | **All                  Other** |   | **Reconciling                  Adjustments****(b)** |   | **Consolidated** |   |
| **As                  of September 30, 2005**                   |   | **(in                  millions)**      |   |
| Total                  Property, Plant and Equipment            |   | $                                       | 37,361 |                                | $      | 2                                  |   | $            | -      |                           | $      | 833 |   | $ | 3 |   | $ | - |   | $ | 38,199 |   |
| Accumulated                  Depreciation and Amortization |   |                                    | 14,575 |                                |   | 1                                  |   |         | -      |                           |   | 107 |   |   | 1 |   |   | - |   |   | 14,684 |   |
| Total                  Property, Plant and Equipment - Net |   | $                                       | 22,786 |                                | $      | 1                                  |   | $            | -      |                           | $      | 726 |   | $ | 2 |   | $ | - |   | $ | 23,515 |   |
|                                                            |   |                                    |   |                                |   |                               |   |         |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Assets                                   |   | $                                       | 33,441 |                                | $      | 1,554                              |   | $            | 609    | (c)                       | $      | 488 |   | $ | 9,311 |   | $ | (9,447 | ) | $ | 35,956 |   |
| Assets                  Held for Sale                           |   |                                    | 47     |                                |   | -                                  |   |         | -      |                           |   | - |   |   | - |   |   | - |   |   | 47 |   |

| **As                    of December 31, 2004**                    |   |    |   |    |   |    |   |    |   |    |   |    |   |    |   |
|-------------------------------------------------------------------|--------|--------------|--------|--------------|--------|--------------|--------|--------------|--------|--------------|--------|--------------|--------|--------------|--------|
| Total                    Property, Plant and Equipment            |   | $            | 36,006 |         | $      | 445          |   | $            | -      |         | $      | 832          |   | $            | 3      |   | $ | - |   | $ | 37,286 |   |
| Accumulated                    Depreciation and Amortization |   |         | 14,355 |         |   | 43           |   |         | -      |         |   | 86           |   |         | 1      |   |   | - |   |   | 14,485 |   |
| Total                    Property, Plant and Equipment - Net |   | $            | 21,651 |         | $      | 402          |   | $            | -      |         | $      | 746          |   | $            | 2      |   | $ | - |   | $ | 22,801 |   |
|                                                              |   |         |   |         |   |         |   |         |   |         |   |         |   |         |   |   |   |   |   |   |   |   |
| Total                    Assets                                   |   | $            | 32,175 |         | $      | 1,789        |   | $            | 221    | (d)          | $      | 2,071        |   | $            | 8,093  |   | $ | (9,686 | ) | $ | 34,663 |   |
| Assets                    Held for Sale                           |   |         | 628    |         |   | -            |   |         | -      |         |   | -            |   |         | -      |   |   | - |   |   | 628 |   |

| (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 $609 million for the Investments-UK Operations segment                    include                    $590 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 along with                    value-added                    tax receivables. |
| (d) | Total                    Assets of $221 million for the Investments-UK Operations segment                    include                    $124 million in affiliated accounts receivable that are eliminated                    in                    consolidation. The majority of the remaining $97 million in assets                    represents cash equivalents and third party                    receivables.                                                                                  |

**10.         **
**INCOME        TAXES**

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

| **Company**                            |   | **Type                    of Debt**               |   | **Principal                    Amount** |   | **Interest                    Rate** |     | **Due                    Date** |   |
|----------------------------------------|--------|---------------------------------------------------|--------|-----------------------------------------|--------|--------------------------------------|----------|---------------------------------|--------|
|                                   |   |                                              |   | **(in                    millions)**    |   |                                 |     |                            |   |
| **Issuances:**                         |   |                                              |   |                                    |   |                                 |     |                            |   |
| AEP                                    |   | Senior                    Unsecured Notes         |   | $                                       | 345    |                                 | 4.709%   |                            | 2007   |   |
| APCo                                   |   | Senior                    Unsecured Notes         |   |                                    | 200    |                                 | 4.95%    |                            | 2015   |   |
| APCo                                   |   | Senior                    Unsecured Notes         |   |                                    | 150    |                                 | 4.40%    |                            | 2010   |   |
| APCo                                   |   | Senior                    Unsecured Notes         |   |                                    | 250    |                                 | 5.00%    |                            | 2017   |   |
| APCo                                   |   | Senior                    Unsecured Notes         |   |                                    | 250    |                                 | 5.80%    |                            | 2035   |   |
| OPCo                                   |   | Installment                    Purchase Contracts |   |                                    | 54     |                                 | Variable |                            | 2029   |   |
| OPCo                                   |   | Installment                    Purchase Contracts |   |                                    | 164    |                                 | Variable |                            | 2028   |   |
| OPCo                                   |   | Installment                    Purchase Contracts |   |                                    | 50     |                                 | Variable |                            | 2014   |   |
| OPCo                                   |   | Installment                    Purchase Contracts |   |                                    | 50     |                                 | Variable |                            | 2016   |   |
| OPCo                                   |   | Installment                    Purchase Contracts |   |                                    | 35     |                                 | Variable |                            | 2022   |   |
| PSO                                    |   | Senior                    Unsecured Notes         |   |                                    | 75     |                                 | 4.70%    |                            | 2011   |   |
| SWEPCo                                 |   | Senior                    Unsecured Notes         |   |                                    | 150    |                                 | 4.90%    |                            | 2015   |   |
| SWEPCo                                 |   | Notes                    Payable                  |   |                                    | 6      |                                 | Variable |                            | 2006   |   |
| TCC                                    |   | Installment                    Purchase Contracts |   |                                    | 162    |                                 | Variable |                            | 2030   |   |
| TCC                                    |   | Installment                    Purchase Contracts |   |                                    | 120    |                                 | Variable |                            | 2028   |   |
| **Non-Registrant:**                    |   |                                              |   |                                    |   |                                 |     |                            |   |   |
| AEP                    Subsidiary      |   | Notes                    Payable                  |   |                                    | 6      |                                 | Variable |                            | 2009   |   |
| **Total                    Issuances** |   |                                              |   | $                                       | 2,067  | (a)                                  |     |                            |   |   |

| (a) | Amount                  indicated on statement of cash flows of $2,045 million is net of                  issuance                  costs and unamortized premium or                  discount. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Company**                                                      |   | **Type                    of Debt**               |   | **Principal                    Amount** |   | **Interest                    Rate** |     | **Due                    Date** |    |
|------------------------------------------------------------------|--------|---------------------------------------------------|--------|-----------------------------------------|--------|--------------------------------------|----------|---------------------------------|---------|
|                                                             |   |                                              |   | **(in                    millions)**    |   |                                 |     |                            |    |
| **Retirements                    and  Principal Payments:** |   |                                              |   |                                    |   |                                 |     |                            |    |
| AEP                                                              |   | Senior                    Unsecured Notes         |   | $                                       | 550    |                                 | 6.125%   |                            | 2006    |   |
| AEP                                                              |   | Senior                    Unsecured Notes         |   |                                    | 345    |                                 | 5.75%    |                            | 2007    |   |
| AEP                                                              |   | Other                    Debt                     |   |                                    | 9      |                                 | Variable |                            | 2007    |   |
| AEP                    and Subsidiaries                          |   | Other                                             |   |                                    | 18     | (b)                                  | Variable |                            | Various |   |
| APCo                                                             |   | First                    Mortgage Bonds           |   |                                    | 50     |                                 | 8.00%    |                            | 2005    |   |
| APCo                                                             |   | First                    Mortgage Bonds           |   |                                    | 30     |                                 | 6.89%    |                            | 2005    |   |
| APCo                                                             |   | First                    Mortgage Bonds           |   |                                    | 45     |                                 | 8.00%    |                            | 2025    |   |
| APCo                                                             |   | Senior                    Unsecured Notes         |   |                                    | 450    |                                 | 4.80%    |                            | 2005    |   |
| OPCo                                                             |   | Installment                    Purchase Contracts |   |                                    | 102    |                                 | 6.375%   |                            | 2029    |   |
| OPCo                                                             |   | Installment                    Purchase Contracts |   |                                    | 80     |                                 | Variable |                            | 2028    |   |
| OPCo                                                             |   | Installment                    Purchase Contracts |   |                                    | 36     |                                 | Variable |                            | 2029    |   |
| OPCo                                                             |   | Installment                    Purchase Contracts |   |                                    | 50     |                                 | 5.45%    |                            | 2014    |   |
| OPCo                                                             |   | Installment                    Purchase Contracts |   |                                    | 50     |                                 | 5.45%    |                            | 2016    |   |
| OPCo                                                             |   | Installment                    Purchase Contracts |   |                                    | 35     |                                 | 5.90%    |                            | 2022    |   |
| OPCo                                                             |   | Notes                    Payable                  |   |                                    | 4      |                                 | 6.81%    |                            | 2008    |   |
| OPCo                                                             |   | Notes                    Payable                  |   |                                    | 6      |                                 | 6.27%    |                            | 2009    |   |
| PSO                                                              |   | First                    Mortgage Bonds           |   |                                    | 50     |                                 | 6.50%    |                            | 2005    |   |
| SWEPCo                                                           |   | Senior                    Unsecured Notes         |   |                                    | 200    |                                 | 4.50%    |                            | 2005    |   |
| SWEPCo                                                           |   | Notes                    Payable                  |   |                                    | 5      |                                 | 4.47%    |                            | 2011    |   |
| SWEPCo                                                           |   | Notes                    Payable                  |   |                                    | 3      |                                 | Variable |                            | 2008    |   |
| TCC                                                              |   | Senior                    Unsecured Notes         |   |                                    | 150    |                                 | 3.00%    |                            | 2005    |   |
| TCC                                                              |   | Senior                    Unsecured Notes         |   |                                    | 100    |                                 | Variable |                            | 2005    |   |
| TCC                                                              |   | First                    Mortgage Bonds           |   |                                    | 66     |                                 | 6.625%   |                            | 2005    |   |
| TCC                                                              |   | Installment                    Purchase Contracts |   |                                    | 120    |                                 | 6.00%    |                            | 2028    |   |
| TCC                                                              |   | Securitization                    Bonds           |   |                                    | 29     |                                 | 3.54%    |                            | 2005    |   |
| TCC                                                              |   | Securitization                    Bonds           |   |                                    | 21     |                                 | 5.01%    |                            | 2008    |   |
| **Non-Registrant:**                                              |   |                                              |   |                                    |   |                                 |     |                            |    |   |
| AEP                    Subsidiaries                              |   | Notes                    Payable                  |   |                                    | 12     |                                 | Variable |                            | Various |   |
| **Total                    Retirements**                         |   |                                              |   | $                                       | 2,616  | (c)                                  |     |                            |    |   |

| (b) | Amount                  reflects mark-to-market of risk management contracts related to                  long-term                  debt.                                                                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (c) | The                  cash used for retirement of long-term debt indicated on statement                  of cash                  flows of $2,599 million does not include $17 million related to                  the                  mark-to-market of risk management                  contracts. |

***Preferred        Stock Redemption***

| **Company** |   | **Series** |   | **Number                  of Shares Redeemed** |   | **Amount**                         |   |
|-------------|--------|------------|--------|------------------------------------------------|--------|------------------------------------|--------|
|        |   |       |   |                                           |   | **(in                  millions)** |   |
| I&M     |   | 5.900%     |   | 132,000                                        |   | $                                  | 13     |   |
| I&M     |   | 6.250%     |   | 192,500                                        |   |                               | 19     |   |
| I&M     |   | 6.875%     |   | 157,500                                        |   |                               | 16     |   |
| I&M     |   | 6.300%     |   | 132,450                                        |   |                               | 13     |   |
| OPCo        |   | 5.900%     |   | 50,000                                         |   |                               | 5      |   |
|        |   |       |   |                                           |   | $                                  | 66     |   |

***Common        Stock Repurchase***

***Remarketing        of Senior Notes***

***Issuance        of Common Stock***

***Subsequent        Debt Issuance***

**12.**
**COMPANY-WIDE        STAFFING AND BUDGET REVIEW**

|                                                     |   | **Amount****(in                  millions)** |   |
|----------------------------------------------------------|--------|----------------------------------------------|--------|
| Total                  Expense                           |   |                                         | 28     |   |
| Less:                  Total Payments                    |   |                                         | 12     |   |
| Remaining                  Accrual at September 30, 2005 |   | $                                            | 16     |   |

----

**AEP      GENERATING COMPANY**

----

**AEP      GENERATING COMPANY**

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

**Results      of Operations**

**Reconciliation      of Third Quarter of 2004 to Third Quarter of 2005 Net      Income**

**(in      millions)**

| **Third                Quarter of 2004 Net Income**             |   |   |   |   | $      | 2.4    |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |
| **Change                in Gross Margin:**                      |   |   |   |   |   |   |   |
| Wholesale                Sales                                  |   |   |   |   |   | (0.2   | )      |
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                  |   |   | (0.9   | )      |   |   |   |
| Taxes                Other Than Income Taxes                    |   |   | 1.0    |   |   |   |   |
| **Total                Change in Operating Expenses and Other** |   |   |   |   |   | 0.1    |   |
|                                                            |   |   |   |   |   |   |   |
| Income                Tax Expense                               |   |   |   |   |   | (0.1   | )      |
|                                                            |   |   |   |   |   |   |   |
| **Third                Quarter of 2005 Net Income**             |   |   |   |   | $      | 2.2    |   |

*Income      Taxes*

**Reconciliation        of Nine Months Ended September 30, 2004        to**

**Nine      Months Ended September 30, 2005 Net Income**

**(in      millions)**

| **Nine                Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 5.7    |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |   |
| **Change                in Gross Margin:**                         |   |   |   |   |   |   |   |
| Wholesale                Sales                                     |   |   |   |   |   | (2.1   | )      |
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                     |   |   | 3.0    |   |   |   |   |
| Depreciation                and Amortization                       |   |   | (0.4   | )      |   |   |   |
| Taxes                Other Than Income Taxes                       |   |   | 0.8    |   |   |   |   |
| Nonoperating                Income and Expenses, Net               |   |   | 0.1    |   |   |   |   |
| **Total                Change in Operating Expenses and Other**    |   |   |   |   |   | 3.5    |   |
|                                                               |   |   |   |   |   |   |   |
| Income                Tax Expense                                  |   |   |   |   |   | (0.3   | )      |
|                                                               |   |   |   |   |   |   |   |
| **Nine                Months Ended September 30, 2005 Net Income** |   |   |   |   | $      | 6.8    |   |

*Income      Taxes*

**Off-Balance      Sheet Arrangement**

**Summary      Obligation Information**

**Significant      Factors**

**Critical      Accounting Estimates**

----

**AEP      GENERATING COMPANY**

**CONDENSED      STATEMENTS OF INCOME**

**For      the Three and Nine Months Ended September 30, 2005 and      2004**

**(Unaudited)**

**(in      thousands)**

|                                          |   | **Three                Months Ended** |   | **Nine                Months Ended** |   |
|-----------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                                          |   | **2005**                              |   | **2004**                             |   | **2005** |   | **2004** |   |
|                                          |   |                             |   |                            |   |   |   |   |   |
| **OPERATING                REVENUES**         |   | $                                     | 69,640 |                                 | $      | 65,303 |   | $ | 201,268 |   | $ | 176,933 |   |
|                                          |   |                                  |   |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                EXPENSES**         |   |                                  |   |                                 |   |   |   |   |   |   |   |   |   |
| Fuel                for Electric Generation   |   |                                  | 37,403 |                                 |   | 32,857 |   |   | 105,771 |   |   | 79,291 |   |
| Rent                - Rockport Plant Unit 2   |   |                                  | 17,070 |                                 |   | 17,070 |   |   | 51,212 |   |   | 51,212 |   |
| Other                Operation                |   |                                  | 2,759  |                                 |   | 2,473 |   |   | 8,219 |   |   | 7,628 |   |
| Maintenance                                   |   |                                  | 2,421  |                                 |   | 1,835 |   |   | 6,411 |   |   | 10,025 |   |
| Depreciation                and Amortization  |   |                                  | 5,956  |                                 |   | 5,941 |   |   | 17,901 |   |   | 17,447 |   |
| Taxes                Other Than Income Taxes  |   |                                  | 1,074  |                                 |   | 2,070 |   |   | 3,149 |   |   | 3,956 |   |
| Income                Taxes                   |   |                                  | 908    |                                 |   | 843 |   |   | 2,510 |   |   | 2,240 |   |
| **TOTAL**                                     |   |                                  | 67,591 |                                 |   | 63,089 |   |   | 195,173 |   |   | 171,799 |   |
|                                          |   |                                  |   |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                INCOME**           |   |                                  | 2,049  |                                 |   | 2,214 |   |   | 6,095 |   |   | 5,134 |   |
|                                          |   |                                  |   |                                 |   |   |   |   |   |   |   |   |   |
| Nonoperating                Income            |   |                                  | -      |                                 |   | 14 |   |   | 84 |   |   | 43 |   |
| Nonoperating                Expenses          |   |                                  | 44     |                                 |   | 86 |   |   | 157 |   |   | 235 |   |
| Nonoperating                Income Tax Credit |   |                                  | 886    |                                 |   | 905 |   |   | 2,654 |   |   | 2,709 |   |
| Interest                Charges               |   |                                  | 652    |                                 |   | 643 |   |   | 1,848 |   |   | 1,914 |   |
|                                          |   |                                  |   |                                 |   |   |   |   |   |   |   |   |   |
| **NET                INCOME**                 |   | $                                     | 2,239  |                                 | $      | 2,404 |   | $ | 6,828 |   | $ | 5,737 |   |
|                                          |   |                                  |   |                                 |   |   |   |   |   |   |   |   |   |

**CONDENSED      STATEMENTS OF RETAINED EARNINGS**

**For      the Three and Nine Months Ended September 30, 2005 and      2004**

**(Unaudited)**

**(in      thousands)**

|                                              |   | **Three                Months Ended** |   | **Nine                Months Ended** |   |
|---------------------------------------------------|--------|---------------------------------------|--------|--------------------------------------|--------|
|                                              |   | **2005**                              |   | **2004**                             |   | **2005** |   | **2004** |   |
|                                              |   |                             |   |                            |   |   |   |   |   |
| **BALANCE                AT BEGINNING OF PERIOD** |   | $                                     | 26,947 |                                 | $      | 22,251 |   | $ | 24,237 |   | $ | 21,441 |   |
|                                              |   |                                  |   |                                 |   |   |   |   |   |   |   |   |   |
| Net                Income                         |   |                                  | 2,239  |                                 |   | 2,404 |   |   | 6,828 |   |   | 5,737 |   |
|                                              |   |                                  |   |                                 |   |   |   |   |   |   |   |   |   |
| Cash                Dividends Declared            |   |                                  | 3,015  |                                 |   | 1,262 |   |   | 4,894 |   |   | 3,785 |   |
|                                              |   |                                  |   |                                 |   |   |   |   |   |   |   |   |   |
| **BALANCE                AT END OF PERIOD**       |   | $                                     | 26,171 |                                 | $      | 23,393 |   | $ | 26,171 |   | $ | 23,393 |   |

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

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

----

**AEP      GENERATING COMPANY**

**CONDENSED      BALANCE SHEETS**

**ASSETS**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

**(in      thousands)**

|                                                      |   | **2005**     |    | **2004**     |   |
|-----------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **ELECTRIC                UTILITY PLANT**                 |   |    |    |    |   |
| Production                                                |   | $            | 681,097 |         | $      | 681,254 |   |
| General                                                   |   |         | 2,202   |         |   | 3,739 |   |
| Construction                Work in Progress              |   |         | 12,538  |         |   | 7,729 |   |
| **Total**                                                 |   |         | 695,837 |         |   | 692,722 |   |
| Accumulated                Depreciation and Amortization  |   |         | 378,645 |         |   | 368,484 |   |
| **TOTAL                - NET**                            |   |         | 317,192 |         |   | 324,238 |   |
|                                                      |   |         |    |         |   |   |   |
| **OTHER                PROPERTY AND INVESTMENTS**         |   |         |    |         |   |   |   |
| Nonutility                Property, Net                   |   |         | 119     |         |   | 119 |   |
|                                                      |   |         |    |         |   |   |   |
| **CURRENT                ASSETS**                         |   |         |    |         |   |   |   |
| Accounts                Receivable - Affiliated Companies |   |         | 25,547  |         |   | 23,078 |   |
| Fuel                                                      |   |         | 11,190  |         |   | 16,404 |   |
| Materials                and Supplies                     |   |         | 6,898   |         |   | 5,962 |   |
| Prepayments                                               |   |         | 17      |         |   | - |   |
| **TOTAL**                                                 |   |         | 43,652  |         |   | 45,444 |   |
|                                                      |   |         |    |         |   |   |   |
| **DEFERRED                DEBITS AND OTHER ASSETS**       |   |         |    |         |   |   |   |
| Regulatory                Assets:                         |   |         |    |         |   |   |   |
| Unamortized                Loss on Reacquired Debt        |   |         | 4,318   |         |   | 4,496 |   |
| Asset                Retirement Obligations               |   |         | 1,264   |         |   | 1,117 |   |
| Deferred                Property Taxes                    |   |         | 1,567   |         |   | 557 |   |
| Other                Deferred Charges                     |   |         | 406     |         |   | 422 |   |
| **TOTAL**                                                 |   |         | 7,555   |         |   | 6,592 |   |
|                                                      |   |         |    |         |   |   |   |
| **TOTAL                ASSETS**                           |   | $            | 368,518 |         | $      | 376,393 |   |

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

----

**AEP      GENERATING COMPANY**

**CONDENSED      BALANCE SHEETS**

**CAPITALIZATION**
**      AND LIABILITIES**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                                       |   | **2005**                          |    | **2004**     |   |
|----------------------------------------------------------------------------|--------|-----------------------------------|---------|--------------|--------|
| **CAPITALIZATION**                                                         |   | **(in                thousands)** |    |
| 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                                           |   |                              | 26,171  |         |   | 24,237 |   |
| **Total                Common Shareholder’s Equity**                 |   |                              | 50,605  |         |   | 48,671 |   |
| Long-term                Debt                                              |   |                              | -       |         |   | 44,820 |   |
| **TOTAL**                                                                  |   |                              | 50,605  |         |   | 93,491 |   |
|                                                                       |   |                              |    |         |   |   |   |
| **CURRENT                LIABILITIES**                                     |   |                              |    |         |   |   |   |
| Long-term                Debt Due Within One Year                          |   |                              | 44,826  |         |   | - |   |
| Advances                from Affiliates                                    |   |                              | 11,314  |         |   | 26,915 |   |
| Accounts                Payable:                                           |   |                              |    |         |   |   |   |
| General                                                                    |   |                              | 456     |         |   | 443 |   |
| Affiliated                Companies                                        |   |                              | 16,704  |         |   | 17,905 |   |
| Taxes                Accrued                                               |   |                              | 5,824   |         |   | 8,806 |   |
| Interest                Accrued                                            |   |                              | 456     |         |   | 911 |   |
| Obligations                Under Capital Leases                            |   |                              | 293     |         |   | 210 |   |
| Rent                Accrued - Rockport Plant Unit 2                        |   |                              | 23,427  |         |   | 4,963 |   |
| Other                                                                      |   |                              | 82      |         |   | 73 |   |
| **TOTAL**                                                                  |   |                              | 103,382 |         |   | 60,226 |   |
|                                                                       |   |                              |    |         |   |   |   |
| **DEFERRED                CREDITS AND OTHER LIABILITIES**                  |   |                              |    |         |   |   |   |
| Deferred                Income Taxes                                       |   |                              | 22,296  |         |   | 24,762 |   |
| Regulatory                Liabilities:                                     |   |                              |    |         |   |   |   |
| Asset                Removal Costs                                         |   |                              | 27,693  |         |   | 25,428 |   |
| Deferred                Investment Tax Credits                             |   |                              | 43,749  |         |   | 46,250 |   |
| SFAS                109 Regulatory Liability, Net                          |   |                              | 11,779  |         |   | 12,852 |   |
| Deferred                Gain on Sale and Leaseback - Rockport Plant Unit 2 |   |                              | 95,726  |         |   | 99,904 |   |
| Obligations                Under Capital Leases                            |   |                              | 12,000  |         |   | 12,264 |   |
| Asset                Retirement Obligations                                |   |                              | 1,288   |         |   | 1,216 |   |
| **TOTAL**                                                                  |   |                              | 214,531 |         |   | 222,676 |   |
|                                                                       |   |                              |    |         |   |   |   |
| Commitments                and Contingencies (Note 5)                      |   |                              |    |         |   |   |   |
|                                                                       |   |                              |    |         |   |   |   |
| **TOTAL                CAPITALIZATION AND LIABILITIES**                    |   | $                                 | 368,518 |         | $      | 376,393 |   |

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

----

**AEP      GENERATING COMPANY**

**CONDENSED      STATEMENTS OF CASH FLOWS**

**For      the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                                                               |   | **2005**     |    | **2004**     |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                ACTIVITIES**                                                                                            |   |    |    |    |   |
| **Net                Income**                                                                                                      |   | $            | 6,828   |         | $      | 5,737 |   |
| **Adjustments                to Reconcile Net Income to Net Cash Flows  From Operating                Activities:**           |   |         |    |         |   |   |   |
| Depreciation                and Amortization                                                                                       |   |         | 17,901  |         |   | 17,447 |   |
| Deferred                Income Taxes                                                                                               |   |         | (3,539  | )            |   | (1,987 | ) |
| Deferred                Investment Tax Credits                                                                                     |   |         | (2,501  | )            |   | (2,502 | ) |
| Deferred                Property Taxes                                                                                             |   |         | (1,010  | )            |   | (842 | ) |
| Amortization                of Deferred Gain on Sale and Leaseback - Rockport Plant                Unit                2 |   |         | (4,178  | )            |   | (4,178 | ) |
| Change                in Other Noncurrent Assets                                                                                   |   |         | (1,767  | )            |   | 2,415 |   |
| Change                in Other Noncurrent Liabilities                                                                              |   |         | 2,079   |         |   | (2,362 | ) |
| **Changes                in Components of Working Capital:**                                                                       |   |         |    |         |   |   |   |
| Accounts                Receivable                                                                                                 |   |         | (2,469  | )            |   | 2,587 |   |
| Fuel,                Materials and Supplies                                                                                        |   |         | 4,278   |         |   | 947 |   |
| Accounts                Payable                                                                                                    |   |         | (1,188  | )            |   | (2,875 | ) |
| Taxes                Accrued                                                                                                       |   |         | (2,982  | )            |   | 3,969 |   |
| Rent                Accrued - Rockport Plant Unit 2                                                                                |   |         | 18,464  |         |   | 18,464 |   |
| Other                Current Assets                                                                                                |   |         | (17     | )            |   | (11 | ) |
| Other                Current Liabilities                                                                                           |   |         | (363    | )            |   | (372 | ) |
| **Net                Cash Flows From Operating Activities**                                                                        |   |         | 29,536  |         |   | 36,437 |   |
|                                                                                                                               |   |         |    |         |   |   |   |
| **INVESTING                ACTIVITIES**                                                                                            |   |         |    |         |   |   |   |
| Construction                Expenditures                                                                                           |   |         | (9,041  | )            |   | (11,257 | ) |
| **Net                Cash Flows Used For Investing Activities**                                                                    |   |         | (9,041  | )            |   | (11,257 | ) |
|                                                                                                                               |   |         |    |         |   |   |   |
| **FINANCING                ACTIVITIES**                                                                                            |   |         |    |         |   |   |   |
| Changes                in Advances to/from Affiliates, Net                                                                         |   |         | (15,601 | )            |   | (21,395 | ) |
| Dividends                Paid                                                                                                      |   |         | (4,894  | )            |   | (3,785 | ) |
| **Net                Cash Flows Used For Financing Activities**                                                                    |   |         | (20,495 | )            |   | (25,180 | ) |
|                                                                                                                               |   |         |    |         |   |   |   |
| **Net                Increase 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 $2,104,000 and $2,170,000                and for income taxes was $11,025,000 and $87,000 in 2005 and 2004,                respectively. Noncash acquisitions under capital leases were $31,000                and                $18,000 in 2005 and 2004,                respectively. |

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

----

**AEP      GENERATING COMPANY**

**INDEX      TO CONDENSED NOTES TO 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     |
| Business                Segments                       | Note                9     |
| Financing                Activities                    | Note                11    |
| Company-wide                Staffing and Budget Review | Note                12    |

----

**AEP      TEXAS CENTRAL COMPANY AND SUBSIDIARY**

----

**AEP      TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**MANAGEMENT’S      FINANCIAL DISCUSSION AND ANALYSIS**

**Results of Operations**

**Reconciliation      of Third Quarter of 2004 to Third Quarter of 2005 Net      Income**

**(in      millions)**

| **Third                Quarter of 2004 Net Income**             |   |   |   |   | $      | 43     |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                     |   |   |   |   |   |   |   |
| Texas                Supply                                     |   |   | (48    | )      |   |   |   |
| Texas                Wires                                      |   |   | 9      |   |   |   |   |
| Off-system                Sales                                 |   |   | 3      |   |   |   |   |
| Transmission                Revenues                            |   |   | (3     | )      |   |   |   |
| Other                Revenues                                   |   |   | 9      |   |   |   |   |
| **Total                Change in Gross Margin**                 |   |   |   |   |   | (30    | )      |
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                  |   |   | 11     |   |   |   |   |
| Depreciation                and Amortization                    |   |   | (5     | )      |   |   |   |
| Taxes                Other Than Income Taxes                    |   |   | 1      |   |   |   |   |
| Carrying                Costs on Stranded Cost Recovery         |   |   | 15     |   |   |   |   |
| Nonoperating                Income and Expenses, Net            |   |   | 5      |   |   |   |   |
| Interest                Charges                                 |   |   | 4      |   |   |   |   |
| **Total                Change in Operating Expenses and Other** |   |   |   |   |   | 31     |   |
|                                                            |   |   |   |   |   |   |   |
| Income                Tax Expense                               |   |   |   |   |   | (4     | )      |
|                                                            |   |   |   |   |   |   |   |
| **Third                Quarter of 2005 Net Income**             |   |   |   |   | $      | 40     |   |

| · | Texas                Supply margins decreased $48 million primarily due to a $163 million                decrease in revenue from the expiration of the supply contract with                our                largest REP customer; lower capacity sales of $7 million due to the                sale                of certain generation plants; a $2 million decrease of ERCOT                Reliability-Must Run (RMR) sales; and decreased margins of $3 million.                These decreases were partially offset by lower fuel and purchased                power                expense of $120 million. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Texas                Wires revenues increased $9 million primarily due to an increase                in sales                volumes of 4% resulting partly from a 14% increase in cooling degree                days.                                                                                                                                                                                                                                                                                                                                                                                                 |
| · | Margins                from Off-system Sales increased $3 million primarily due to favorable                optimization activity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | Other                Revenues increased $9 million primarily due to the reclassification                of                third party construction project revenues discussed below in Other                Items.                                                                                                                                                                                                                                                                                                                                                                                                     |

| ·     | Other                Operation and Maintenance expenses decreased $11 million primarily                due to                a $14 million decrease in power plant operations and maintenance                due to                the sale of certain generation plants along with a $5 million decrease                in                administrative and general expense primarily related to employee                costs.                These decreases were partially offset by $10 million of increased                third                party construction-related expense recorded in operations as discussed                below in Other Items. |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·     | Depreciation                and Amortization expense increased $5 million primarily due to the                recovery and amortization of securitized transition assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ·     | Taxes                Other Than Income Taxes decreased $1 million primarily due to lower                property-related taxes as a result of the sale of certain generation                plants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| ·     | Carrying                Costs on Stranded Cost Recovery of $15 million were recorded in the                third                quarter of 2005. There were no carrying Costs recorded prior to December                2004. (See the “TCC Carrying Costs on Net True-up Regulatory Assets”                section of Note 4)                                                                                                                                                                                                                                                                                                                         |
| **·** | Nonoperating                Income and Expenses, Net increased $5 million primarily due to the                accrual                of interest income as a result of a Texas Appeals Court Order. (See                the                “TCC Excess Earnings” section of Note 4)                                                                                                                                                                                                                                                                                                                                                                    |
| **·** | Interest                Charges decreased $4 million primarily due to lower long-term debt                outstanding and lower rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

*Income      Taxes*

**Reconciliation      of Nine Months Ended September 30, 2004 to**

**Nine      Months Ended September 30, 2005 Net Income**

**(in      millions)**

| **Nine                Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 72     |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                        |   |   |   |   |   |   |   |
| Texas                Supply                                        |   |   | (84    | )      |   |   |   |
| Texas                Wires                                         |   |   | 21     |   |   |   |   |
| Off-system                Sales                                    |   |   | 1      |   |   |   |   |
| Transmission                Revenues                               |   |   | (4     | )      |   |   |   |
| Other                Revenues                                      |   |   | (2     | )      |   |   |   |
| **Total                Change in Gross Margin**                    |   |   |   |   |   | (68    | )      |
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                     |   |   | 41     |   |   |   |   |
| Depreciation                and Amortization                       |   |   | (12    | )      |   |   |   |
| Taxes                Other Than Income Taxes                       |   |   | 3      |   |   |   |   |
| Carrying                Costs on Stranded Cost Recovery            |   |   | 30     |   |   |   |   |
| Nonoperating                Income and Expenses, Net               |   |   | (1     | )      |   |   |   |
| Interest                Charges                                    |   |   | 10     |   |   |   |   |
| **Total                Change in Operating Expenses and Other**    |   |   |   |   |   | 71     |   |
|                                                               |   |   |   |   |   |   |   |
| Income                Tax Expense                                  |   |   |   |   |   | (5     | )      |
|                                                               |   |   |   |   |   |   |   |
| **Nine                Months ended September 30, 2005 Net Income** |   |   |   |   | $      | 70     |   |

| · | Texas                Supply margins decreased $84 million primarily due to a $395 million                decrease in revenue resulting from the expiration of the supply contract                with our largest REP customer; lower capacity sales of $24 million                due to                the sale of certain generation plants; loss of ERCOT RMR revenue                of $18                million; and decreased margins of $4 million. These decreases were                partially offset by lower fuel and purchased power expense of $284                million                and a decrease in the provision for refund of $62 million due to                the 2004                final fuel reconciliation true-up. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Texas                Wires revenue increased $21 million primarily due to an increase                in sales                volumes of 4% resulting primarily from a 12% increase in degree                days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · | Transmission                Revenues decreased $4 million primarily due to lower ERCOT                revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

| · | Other                Operation and Maintenance expenses decreased $41 million primarily                due to                a $23 million decrease in power plant operations, a $14 million decrease                in power plant maintenance both due to the sale of certain generation                plants, and a $10 million decrease in administrative and general                expense                primarily related to employee costs. These decreases were partially                offset                by $10 million of nonutility construction-related expense recorded                in                operations as discussed below in Other Items and slightly higher                distribution-related expenses.                                                                                                                                                                           |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation                and Amortization expense increased $12 million primarily related                to the                recovery and amortization of securitized transition assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | Carrying                Costs on Stranded Cost Recovery increased $30 million. Carrying Costs                on                Stranded Cost Recovery of $57 million were recorded in the first                nine                months of 2005, offset by an adjustment of $27 million for prior                years                recorded in the first quarter. The adjustment related to a nonaffiliated                utility’s securitization proceeding in which the PUCT issued an order in                March 2005 that resulted in a reduction in the nonaffiliated utility’s                carrying costs based on a methodology detailed in the order for                calculating a cost-of-money benefit related to accumulated deferred                federal income taxes on net stranded cost and other true-up items                retroactively applied to January 1, 2004. |
| · | Interest                Charges decreased $10 million primarily due to lower long-term debt                outstanding and lower rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

*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**

|                                                                |   | **2005**                          |     | **2004** |   |
|---------------------------------------------------------------------|--------|-----------------------------------|----------|----------|--------|
|                                                                |   | **(in                thousands)** |     |
| **Cash                and Cash Equivalents at Beginning of Period** |   | $                                 | -        |     | $      | 760 |   |
| Cash                Flows From (Used For):                          |   |                              |     |     |   |   |   |
| Operating                Activities                                 |   |                              | (100,333 | )        |   | 192,501 |   |
| Investing                Activities                                 |   |                              | 298,047  |     |   | 259,028 |   |
| Financing                Activities                                 |   |                              | (197,711 | )        |   | (450,529 | ) |
| Net                Increase in Cash and Cash Equivalents            |   |                              | 3        |     |   | 1,000 |   |
| **Cash                and Cash Equivalents at End of Period**       |   | $                                 | 3        |     | $      | 1,760 |   |

*Operating      Activities*

*Investing      Activities*

*Financing      Activities*

**Financing      Activity**

|  **Type                of Debt**        |                                          |  **Principal****Amount** |    |  **Interest****Rate** |   | **Due****Date** |   |
|----------------------------------------------|-----------------------------------------------|-------------------------------|---------|----------------------------|--------|-----------------|--------|
|                                         |   **(in                thousands)** |  **(%)**                 |    |                       |   |
| Installment                Purchase Contract |                                          | $                             | 161,700 |                       |   | Variable        |   |   | 2030 |   |
| Installment                Purchase Contract |                                          |                          | 120,265 |                       |   | Variable        |   |   | 2028 |   |
| Notes                Payable - Affiliated    |                                          |                          | 150,000 |                       |   | 4.58            |   |   | 2007 |   |
|                                         |

|                                          |                                          |  **Principal** |    | **Interest** |   | **Due**  |   |
|-----------------------------------------------|-----------------------------------------------|---------------------|---------|--------------|--------|----------|--------|
| **Type                of Debt**               |                                          |  **Amount**    |    | **Rate**     |   | **Date** |   |
|                                          |   **(in                thousands)** | **(%)**             |    |         |   |
| Senior                Unsecured Notes Payable |                                          | $                   | 150,000 |         |   | 3.00     |   |   | 2005 |   |
| Senior                Unsecured Notes Payable |                                          |                | 100,000 |         |   | Variable |   |   | 2005 |   |
| Securitization                Bonds           |                                          |                | 29,386  |         |   | 3.54     |   |   | 2005 |   |
| Securitization                Bonds           |                                          |                | 20,593  |         |   | 5.01     |   |   | 2008 |   |
| First                Mortgage Bonds           |                                          |                | 65,763  |         |   | 6.625    |   |   | 2005 |   |
| Installment                Purchase Contract  |                                          |                | 120,265 |         |   | 6.00     |   |   | 2028 |   |

**Liquidity**

**Summary      Obligation Information**

**Significant      Factors**

***Texas      Restructuring***

**Critical      Accounting Estimates**

----

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

**Market      Risks**

**MTM      Risk Management Contract Net Assets**

**MTM      Risk Management Contract Net Assets**

**Nine      Months Ended September 30, 2005**

**(in      thousands)**

| **Total                MTM Risk Management Contract Net Assets at December 31,                2004**                      |   | $      | 9,701  |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                Loss from Contracts Realized/Settled During the Period (a)                                          |   |   | (3,946 | )      |
| Fair                Value of New Contracts When Entered During the Period (b)                                             |   |   | 74     |   |
| Net                Option Premiums Paid/(Received) (c)                                                                    |   |   | -      |   |
| Change                in Fair Value Due to Valuation Methodology Changes                                                  |   |   | -      |   |
| Changes                in Fair Value of Risk Management Contracts (d)                                                     |   |   | 5,011  |   |
| Changes                in Fair Value of Risk Management Contracts Allocated to Regulated                Jurisdictions (e) |   |   | -      |   |
| **Total                MTM Risk Management Contract Net Assets**                                                          |   |   | 10,840 |   |
| Net                Cash Flow Hedge Contracts (f)                                                                          |   |   | (3,507 | )      |
| **Total                MTM Risk Management Contract Net Assets at September 30,                2005**                     |   | $      | 7,333  |   |

| (a) | “(Gain)                Loss from Contracts Realized/Settled During the Period” includes realized                risk management contracts and related derivatives that settled during                2005                where we entered into the contract prior to 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                Value of New Contracts When Entered During the Period” represents the fair                value at inception of long-term contracts entered into with customers                during 2005. 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. |
| (c) | “Net                Option Premiums Paid/(Received)” reflects the net option premiums                paid/(received) as they relate to unexercised and unexpired option                contracts that were entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (d) | “Changes                in Fair Value of Risk Management Contracts” represents the fair value                change in the risk management portfolio due to market fluctuations                during                the current period. Market fluctuations are attributable to various                factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                                                                                                                                    |
| (e) | “Changes                in Fair Value of Risk Management Contracts 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.                                                                                                                                                                                                                                                                           |
| (f) | “Net                Cash Flow Hedge Contracts” (pretax) are discussed below in Accumulated                Other Comprehensive Income (Loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

**Reconciliation      of MTM Risk Management Contracts to**

**Condensed      Consolidated Balance Sheets**

**As      of September 30, 2005**

**(in      thousands)**

|                                                                      |   | **MTM                Risk Management Contracts (a)** |    | **Cash                Flow Hedges** |   | **Total                (b)** |   |
|---------------------------------------------------------------------------|--------|------------------------------------------------------|---------|-------------------------------------|--------|------------------------------|--------|
| Current                Assets                                             |   | $                                                    | 32,493  |                                | $      | 92                           |   | $ | 32,585 |   |
| Noncurrent                Assets                                          |   |                                                 | 19,433  |                                |   | 101                          |   |   | 19,534 |   |
| **Total                MTM Derivative Contract Assets**                   |   |                                                 | 51,926  |                                |   | 193                          |   |   | 52,119 |   |
|                                                                      |   |                                                 |    |                                |   |                         |   |   |   |   |
| Current                Liabilities                                        |   |                                                 | (28,486 | )                                   |   | (3,592                       | )      |   | (32,078 | ) |
| Noncurrent                Liabilities                                     |   |                                                 | (12,600 | )                                   |   | (108                         | )      |   | (12,708 | ) |
| **Total                MTM Derivative Contract Liabilities**              |   |                                                 | (41,086 | )                                   |   | (3,700                       | )      |   | (44,786 | ) |
|                                                                      |   |                                                 |    |                                |   |                         |   |   |   |   |
| **Total                MTM Derivative Contract Net Assets (Liabilities)** |   | $                                                    | 10,840  |                                | $      | (3,507                       | )      | $ | 7,333 |   |

| (a) | Does                not include Cash Flow Hedges.                                                                                                                                                                                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents                amount of total MTM derivative contracts recorded within Risk Management                Assets, Long-term Risk Management Assets, Risk Management Liabilities                and                Long-term Risk Management Liabilities on our Condensed Consolidated                Balance Sheets. |

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

| · | The                source of 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 September 30, 2005**

**(in      thousands)**

|                                                                                            |   | **Remainder                of 2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **After****2009** |   | **Total                (c)** |   |
|-------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|------------------------------|--------|
| Prices                Actively Quoted - Exchange Traded                Contracts                |   | $                                    | (625   | )        | $      | 3,007    |   | $        | 253    |     | $      | 139               |   | $                            | -      |   | $ | - |   | $ | 2,774 |   |
| Prices                Provided by Other External Sources                - OTC Broker Quotes (a) |   |                                 | 4,678  |     |   | 1,641    |   |     | 3,723  |     |   | 1,389             |   |                         | -      |   |   | - |   |   | 11,431 |   |
| Prices                Based on Models and Other Valuation                Methods (b)            |   |                                 | (623   | )        |   | (3,523   | )      |     | (2,528 | )        |   | 392               |   |                         | 1,390  |   |   | 1,527 |   |   | (3,365 | ) |
| **Total**                                                                                       |   | $                                    | 3,430  |     | $      | 1,125    |   | $        | 1,448  |     | $      | 1,920             |   | $                            | 1,390  |   | $ | 1,527 |   | $ | 10,840 |   |

| (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 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 is 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. |
| (c) | Amounts                exclude Cash Flow Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

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

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

**Nine      Months Ended September 30, 2005**

**(in      thousands)**

|                                                         |   | **Power** |   |
|--------------------------------------------------------------|--------|-----------|--------|
| **Beginning                Balance December 31, 2004**       |   | $         | 657    |   |
| Changes                in Fair Value (a)                     |   |      | (2,871 | ) |
| Reclassifications                from AOCI to Net Income (b) |   |      | (150   | ) |
| **Ending                Balance September 30, 2005**         |   | $         | (2,364 | ) |

| (a) | “Changes                in Fair Value” shows changes in the fair value of derivatives designated                as cash flow hedges during the reporting period that are not yet                settled                at September 30, 2005. Amounts are reported net of related income                taxes.                           |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Reclassifications                from AOCI to Net Income” represents gains or losses from derivatives used                as hedging instruments in cash flow hedges that were reclassified                into net                income during the reporting period. Amounts are reported net of related                income taxes. |

**Credit      Risk**

**VaR      Associated with Management Contracts**

|   | **Nine                Months Ended**  |   | **Twelve                Months Ended** |   |
|--------|---------------------------------------|--------|----------------------------------------|--------|
|   | **September                30, 2005** |   | **December                31, 2004**   |   |
|   | **(in                thousands)**     |   | **(in                thousands)**      |   |
|   | **End**                               |   | **High**                               |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |   |
|   | $220                                  |   | $301                                   |   | $142 |   | $76 |   | $157 |   | $511 |   | $220 |   | $75 |   |

**VaR        Associated with Debt Outstanding**

----

**AEP      TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME**

**For      the Three and Nine Months Ended September 30, 2005 and      2004**

**(Unaudited)**

**(in      thousands)**

|                                                              |   | **Three                Months Ended** |    | **Nine                Months Ended** |   |
|-------------------------------------------------------------------|--------|---------------------------------------|---------|--------------------------------------|--------|
|                                                              |   | **2005**                              |    | **2004**                             |   | **2005** |   | **2004** |   |
| **OPERATING                REVENUES**                             |   |                             |    |                            |   |   |   |   |   |
| Electric                Generation, Transmission and Distribution |   | $                                     | 202,993 |                                 | $      | 347,013 |   | $ | 569,980 |   | $ | 872,924 |   |
| Sales                to AEP Affiliates                            |   |                                  | 2,528   |                                 |   | 7,596 |   |   | 12,794 |   |   | 38,622 |   |
| **TOTAL**                                                         |   |                                  | 205,521 |                                 |   | 354,609 |   |   | 582,774 |   |   | 911,546 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                EXPENSES**                             |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Fuel                for Electric Generation                       |   |                                  | 1,892   |                                 |   | 6,967 |   |   | 11,979 |   |   | 50,879 |   |
| Fuel                from Affiliates for Electric Generation       |   |                                  | 24      |                                 |   | 1,707 |   |   | 68 |   |   | 101,883 |   |
| Purchased                Electricity for Resale                   |   |                                  | 1,691   |                                 |   | 114,371 |   |   | 27,057 |   |   | 140,925 |   |
| Purchased                Electricity from AEP Affiliates          |   |                                  | -       |                                 |   | 54 |   |   | - |   |   | 6,065 |   |
| Other                Operation                                    |   |                                  | 66,661  |                                 |   | 74,780 |   |   | 199,870 |   |   | 228,287 |   |
| Maintenance                                                       |   |                                  | 8,782   |                                 |   | 12,215 |   |   | 38,254 |   |   | 51,328 |   |
| Depreciation                and Amortization                      |   |                                  | 40,342  |                                 |   | 34,884 |   |   | 105,062 |   |   | 92,860 |   |
| Taxes                Other Than Income Taxes                      |   |                                  | 22,828  |                                 |   | 23,814 |   |   | 66,282 |   |   | 69,028 |   |
| Income                Taxes                                       |   |                                  | 13,748  |                                 |   | 18,027 |   |   | 13,897 |   |   | 23,645 |   |
| **TOTAL**                                                         |   |                                  | 155,968 |                                 |   | 286,819 |   |   | 462,469 |   |   | 764,900 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                INCOME**                               |   |                                  | 49,553  |                                 |   | 67,790 |   |   | 120,305 |   |   | 146,646 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Carrying                Costs on Stranded Cost Recovery           |   |                                  | 15,349  |                                 |   | - |   |   | 30,146 |   |   | - |   |
| Nonoperating                Income                                |   |                                  | 6,081   |                                 |   | 6,783 |   |   | 40,637 |   |   | 30,946 |   |
| Nonoperating                Expenses (Credit)                     |   |                                  | (2,253  | )                                    |   | 3,628 |   |   | 21,871 |   |   | 11,384 |   |
| Nonoperating                Income Tax Expense (Credit)           |   |                                  | 7,386   |                                 |   | (1,336 | ) |   | 14,141 |   |   | (476 | ) |
| Interest                Charges                                   |   |                                  | 25,374  |                                 |   | 29,269 |   |   | 85,095 |   |   | 94,609 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **NET                INCOME**                                     |   |                                  | 40,476  |                                 |   | 43,012 |   |   | 69,981 |   |   | 72,075 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Preferred                Stock Dividend Requirements              |   |                                  | 60      |                                 |   | 60 |   |   | 181 |   |   | 181 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **EARNINGS                APPLICABLE TO COMMON STOCK**       |   | $                                     | 40,416  |                                 | $      | 42,952 |   | $ | 69,800 |   | $ | 71,894 |   |

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

*See      Condensed Notes to 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 Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                        |   | **Common                Stock** |   | **Paid-in                Capital** |   | **Retained                Earnings** |   | **Accumulated                Other Comprehensive Income (Loss)** |      | **Total** |   |
|---------------------------------------------------------------------------------------------|--------|---------------------------------|--------|------------------------------------|--------|--------------------------------------|--------|------------------------------------------------------------------|-----------|-----------|--------|
| **DECEMBER                31, 2003**                                                        |   | $                               | 55,292 |                               | $      | 132,606                              |   | $                                                                | 1,083,023 |      | $      | (61,872 | ) | $ | 1,209,049 |   |
|                                                                                        |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| Common                Stock Dividends                                                       |   |                            |   |                               |   |                                 |   |                                                             | (148,000  | )         |   |   |   |   | (148,000 | ) |
| Preferred                Stock Dividends                                                    |   |                            |   |                               |   |                                 |   |                                                             | (181      | )         |   |   |   |   | (181 | ) |
| **TOTAL**                                                                                   |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   | 1,060,868 |   |
|                                                                                        |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                                                     |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| **Other                Comprehensive Loss,**** Net                of Taxes:**          |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $2,762                                       |   |                            |   |                               |   |                                 |   |                                                             |      |      |   | (5,130 | ) |   | (5,130 | ) |
| Minimum                Pension Liability, Net of Tax of $0                             |   |                            |   |                               |   |                                 |   |                                                             |      |      |   | (3,471 | ) |   | (3,471 | ) |
| **NET                INCOME**                                                               |   |                            |   |                               |   |                                 |   |                                                             | 72,075    |      |   |   |   |   | 72,075 |   |
| **TOTAL                COMPREHENSIVE INCOME**                                               |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   | 63,474 |   |
|                                                                                        |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2004**                                                       |   | $                               | 55,292 |                               | $      | 132,606                              |   | $                                                                | 1,006,917 |      | $      | (70,473 | ) | $ | 1,124,342 |   |
|                                                                                        |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| **DECEMBER                31, 2004**                                                        |   | $                               | 55,292 |                               | $      | 132,606                              |   | $                                                                | 1,084,904 |      | $      | (4,159 | ) | $ | 1,268,643 |   |
|                                                                                        |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| Common                Stock Dividends                                                       |   |                            |   |                               |   |                                 |   |                                                             | (150,000  | )         |   |   |   |   | (150,000 | ) |
| Preferred                Stock Dividends                                                    |   |                            |   |                               |   |                                 |   |                                                             | (181      | )         |   |   |   |   | (181 | ) |
| **TOTAL**                                                                                   |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   | 1,118,462 |   |
|                                                                                        |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                                                     |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| **Other                Comprehensive Income (Loss),**** Net                of Taxes:** |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $1,626                                       |   |                            |   |                               |   |                                 |   |                                                             |      |      |   | (3,021 | ) |   | (3,021 | ) |
| Minimum                Pension Liability, Net of Tax of $0                                  |   |                            |   |                               |   |                                 |   |                                                             |      |      |   | 3,810 |   |   | 3,810 |   |
| **NET                INCOME**                                                               |   |                            |   |                               |   |                                 |   |                                                             | 69,981    |      |   |   |   |   | 69,981 |   |
| **TOTAL                COMPREHENSIVE INCOME**                                               |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   | 70,770 |   |
|                                                                                        |   |                            |   |                               |   |                                 |   |                                                             |      |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2005**                                                       |   | $                               | 55,292 |                               | $      | 132,606                              |   | $                                                                | 1,004,704 |      | $      | (3,370 | ) | $ | 1,189,232 |   |

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

----

**A**
**EP      TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

**(in      thousands)**

|                                                          |   | **2005**     |      | **2004**     |   |
|---------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **ELECTRIC                UTILITY PLANT**                     |   |    |      |    |   |
| Transmission                                                  |   | $            | 810,540   |         | $      | 788,371 |   |
| Distribution                                                  |   |         | 1,468,549 |         |   | 1,433,380 |   |
| General                                                       |   |         | 228,307   |         |   | 220,435 |   |
| Construction                Work in Progress                  |   |         | 84,894    |         |   | 50,612 |   |
| **Total**                                                     |   |         | 2,592,290 |         |   | 2,492,798 |   |
| Accumulated                Depreciation and Amortization      |   |         | 628,587   |         |   | 725,225 |   |
| **TOTAL                - NET**                                |   |         | 1,963,703 |         |   | 1,767,573 |   |
|                                                          |   |         |      |         |   |   |   |
| **OTHER                PROPERTY AND INVESTMENTS**             |   |         |      |         |   |   |   |
| Nonutility                Property, Net                       |   |         | 2,310     |         |   | 1,577 |   |
| Bond                Defeasance Funds                          |   |         | 21,333    |         |   | 22,110 |   |
| **TOTAL**                                                     |   |         | 23,643    |         |   | 23,687 |   |
|                                                          |   |         |      |         |   |   |   |
| **CURRENT                ASSETS**                             |   |         |      |         |   |   |   |
| Cash                and Cash Equivalents                      |   |         | 3         |         |   | - |   |
| Other                Cash Deposits                            |   |         | 41,679    |         |   | 135,132 |   |
| Accounts                Receivable:                           |   |         |      |         |   |   |   |
| Customers                                                     |   |         | 202,012   |         |   | 157,431 |   |
| Affiliated                Companies                           |   |         | 20,750    |         |   | 67,860 |   |
| Accrued                Unbilled Revenues                      |   |         | 30,095    |         |   | 21,589 |   |
| Allowance                for Uncollectible Accounts           |   |         | (558      | )            |   | (3,493 | ) |
| Materials                and Supplies                         |   |         | 14,161    |         |   | 12,288 |   |
| Risk                Management Assets                         |   |         | 32,585    |         |   | 14,048 |   |
| Margin                Deposits                                |   |         | 11,565    |         |   | 1,891 |   |
| Prepayments                and Other Current Assets           |   |         | 12,516    |         |   | 9,151 |   |
| **TOTAL**                                                     |   |         | 364,808   |         |   | 415,897 |   |
|                                                          |   |         |      |         |   |   |   |
| **DEFERRED                DEBITS AND OTHER ASSETS**           |   |         |      |         |   |   |   |
| Regulatory                Assets:                             |   |         |      |         |   |   |   |
| SFAS                109 Regulatory Asset, Net                 |   |         | 17,467    |         |   | 15,236 |   |
| Wholesale                Capacity Auction True-Up             |   |         | 596,868   |         |   | 559,973 |   |
| Unamortized                Loss on Reacquired Debt            |   |         | 11,127    |         |   | 11,842 |   |
| Designated                for Securitization                  |   |         | 1,309,811 |         |   | 1,361,299 |   |
| Deferred                Debt - Restructuring                  |   |         | 10,910    |         |   | 11,596 |   |
| Other                                                         |   |         | 139,901   |         |   | 102,032 |   |
| Securitized                Transition Assets                  |   |         | 608,178   |         |   | 642,384 |   |
| Long-term                Risk Management Assets               |   |         | 19,534    |         |   | 9,508 |   |
| Prepaid                Pension Obligations                    |   |         | 110,501   |         |   | 109,628 |   |
| Deferred                Property Taxes                        |   |         | 7,600     |         |   | - |   |
| Deferred                Charges                               |   |         | 32,800    |         |   | 36,986 |   |
| **TOTAL**                                                     |   |         | 2,864,697 |         |   | 2,860,484 |   |
|                                                          |   |         |      |         |   |   |   |
| Assets                Held for Sale - Texas Generation Plants |   |         | 47,210    |         |   | 628,149 |   |
|                                                          |   |         |      |         |   |   |   |
| **TOTAL                ASSETS**                               |   | $            | 5,264,061 |         | $      | 5,695,790 |   |

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

----

**AEP      TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**CAPITALIZATION**
**      AND LIABILITIES**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                                          |   | **2005**                          |      | **2004**     |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------------|--------|
| **CAPITALIZATION**                                                            |   | **(in                thousands)** |      |
| 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                                              |   |                              | 1,004,704 |         |   | 1,084,904 |   |
| Accumulated                Other Comprehensive Income (Loss)                  |   |                              | (3,370    | )            |   | (4,159 | ) |
| **Total                Common Shareholder’s Equity**                    |   |                              | 1,189,232 |         |   | 1,268,643 |   |
| Cumulative                Preferred Stock Not Subject to Mandatory Redemption |   |                              | 5,940     |         |   | 5,940 |   |
| **Total                Shareholders’ Equity**                           |   |                              | 1,195,172 |         |   | 1,274,583 |   |
| Long-term                Debt - Nonaffiliated                                 |   |                              | 1,651,178 |         |   | 1,541,552 |   |
| Long-term                Debt - Affiliated                                    |   |                              | 150,000   |         |   | - |   |
| **TOTAL**                                                                     |   |                              | 2,996,350 |         |   | 2,816,135 |   |
| **CURRENT                LIABILITIES**                                        |   |                              |      |         |   |   |   |
| Long-term                Debt Due Within One Year - Nonaffiliated             |   |                              | 52,265    |         |   | 365,742 |   |
| Advances                from Affiliates                                       |   |                              | 12,021    |         |   | 207 |   |
| Accounts                Payable:                                              |   |                              |      |         |   |   |   |
| General                                                                       |   |                              | 67,039    |         |   | 109,688 |   |
| Affiliated                Companies                                           |   |                              | 61,631    |         |   | 64,045 |   |
| Customer                Deposits                                              |   |                              | 18,991    |         |   | 6,147 |   |
| Taxes                Accrued                                                  |   |                              | 71,613    |         |   | 184,014 |   |
| Interest                Accrued                                               |   |                              | 16,732    |         |   | 41,227 |   |
| Risk                Management Liabilities                                    |   |                              | 32,078    |         |   | 8,394 |   |
| Obligations                Under Capital Leases                               |   |                              | 390       |         |   | 412 |   |
| Other                                                                         |   |                              | 28,139    |         |   | 20,115 |   |
| **TOTAL**                                                                     |   |                              | 360,899   |         |   | 799,991 |   |
|                                                                          |   |                              |      |         |   |   |   |
| **DEFERRED                CREDITS AND OTHER LIABILITIES**                     |   |                              |      |         |   |   |   |
| Deferred                Income Taxes                                          |   |                              | 1,194,728 |         |   | 1,247,111 |   |
| Long-term                Risk Management Liabilities                          |   |                              | 12,708    |         |   | 4,896 |   |
| Regulatory                Liabilities:                                        |   |                              |      |         |   |   |   |
| Asset                Removal Costs                                            |   |                              | 229,324   |         |   | 102,624 |   |
| Deferred                Investment Tax Credits                                |   |                              | 105,543   |         |   | 107,743 |   |
| Over-recovery                of Fuel Costs                                    |   |                              | 209,526   |         |   | 211,526 |   |
| Retail                Clawback                                                |   |                              | 61,385    |         |   | 61,384 |   |
| Other                                                                         |   |                              | 80,302    |         |   | 76,653 |   |
| Obligations                Under Capital Leases                               |   |                              | 424       |         |   | 468 |   |
| Deferred                Credits and Other                                     |   |                              | 10,885    |         |   | 17,276 |   |
| **TOTAL**                                                                     |   |                              | 1,904,825 |         |   | 1,829,681 |   |
|                                                                          |   |                              |      |         |   |   |   |
| Liabilities                Held for Sale - Texas Generation Plants            |   |                              | 1,987     |         |   | 249,983 |   |
|                                                                          |   |                              |      |         |   |   |   |
| Commitments                and Contingencies (Note 5)                         |   |                              |      |         |   |   |   |
|                                                                          |   |                              |      |         |   |   |   |
| **TOTAL                CAPITALIZATION AND LIABILITIES**                       |   | $                                 | 5,264,061 |         | $      | 5,695,790 |   |

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

----

**AEP      TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For      the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                                                      |   | **2005**     |     | **2004**     |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|
| **OPERATING                  ACTIVITIES**                                                                                 |   |    |     |    |   |
| **Net                  Income**                                                                                           |   | $            | 69,981   |         | $      | 72,075 |   |
| **Adjustments                  to Reconcile Net Income to Net Cash Flows****From                  Operating Activities:** |   |         |     |         |   |   |   |
| Depreciation                  and Amortization                                                                            |   |         | 105,062  |         |   | 92,860 |   |
| Accretion                  Expense                                                                                        |   |         | 7,549    |         |   | 12,428 |   |
| Deferred                  Income Taxes                                                                                    |   |         | (63,426  | )            |   | (121,111 | ) |
| Deferred                  Investment Tax Credits                                                                          |   |         | (2,200   | )            |   | (3,670 | ) |
| Deferred                  Property Taxes                                                                                  |   |         | (7,600   | )            |   | (5,959 | ) |
| Pension                  and Postemployment Benefit Reserves                                                              |   |         | (2,631   | )            |   | 1,252 |   |
| Mark-to-Market                  of Risk Management Contracts                                                              |   |         | (1,139   | )            |   | 3,991 |   |
| Pension                  Contributions                                                                                    |   |         | (170     | )            |   | (2,668 | ) |
| Carrying                  Costs                                                                                           |   |         | (30,146  | )            |   | - |   |
| Wholesale                  Capacity                                                                                       |   |         | 769      |         |   | - |   |
| Over/Under                  Fuel Recovery                                                                                 |   |         | (2,000   | )            |   | 60,000 |   |
| (Gain)/Loss                  on Sale of Assets                                                                            |   |         | (22      | )            |   | (112 | ) |
| Change                  in Other Noncurrent Assets                                                                        |   |         | (14,115  | )            |   | (1,511 | ) |
| Change                  in Other Noncurrent Liabilities                                                                   |   |         | 3,269    |         |   | (36,148 | ) |
| **Changes                  in Components of Working Capital:**                                                            |   |         |     |         |   |   |   |
| Accounts                  Receivable, Net                                                                                 |   |         | (4,997   | )            |   | 10,504 |   |
| Fuel,                  Materials and Supplies                                                                             |   |         | (1,763   | )            |   | (7,495 | ) |
| Accounts                  Payable                                                                                         |   |         | (28,003  | )            |   | (6,139 | ) |
| Taxes                  Accrued                                                                                            |   |         | (110,975 | )            |   | 147,251 |   |
| Customer                  Deposits                                                                                        |   |         | 12,844   |         |   | 4,772 |   |
| Interest                  Accrued                                                                                         |   |         | (24,495  | )            |   | (20,035 | ) |
| Other                  Current Assets                                                                                     |   |         | (14,715  | )            |   | (1,800 | ) |
| Other                  Current Liabilities                                                                                |   |         | 8,590    |         |   | (5,984 | ) |
| **Net                  Cash Flows From (Used For) Operating Activities**                                                  |   |         | (100,333 | )            |   | 192,501 |   |
|                                                                                                                      |   |         |     |         |   |   |   |
| **INVESTING                  ACTIVITIES**                                                                                 |   |         |     |         |   |   |   |
| Construction                  Expenditures                                                                                |   |         | (109,372 | )            |   | (71,735 | ) |
| Proceeds                  From Sale of Assets                                                                             |   |         | 313,966  |         |   | 426,566 |   |
| Change                  in Other Cash Deposits, Net                                                                       |   |         | 93,453   |         |   | (74,132 | ) |
| Change                  in Bond Defeasance Funds and Other                                                                |   |         | -        |         |   | (21,671 | ) |
| **Net                  Cash Flows From Investing Activities**                                                             |   |         | 298,047  |         |   | 259,028 |   |
|                                                                                                                      |   |         |     |         |   |   |   |
| **FINANCING                  ACTIVITIES**                                                                                 |   |         |     |         |   |   |   |
| Issuance                  of Long-term Debt- Nonaffiliated                                                                |   |         | 276,663  |         |   | - |   |
| Issuance                  of Long-term Debt - Affiliated                                                                  |   |         | 150,000  |         |   | - |   |
| Retirement                  of Long-term Debt                                                                             |   |         | (486,007 | )            |   | (190,996 | ) |
| Changes                  in Advances to/from Affiliates, Net                                                              |   |         | 11,814   |         |   | (111,352 | ) |
| Dividends                  Paid on Common Stock                                                                           |   |         | (150,000 | )            |   | (148,000 | ) |
| Dividends                  Paid on Cumulative Preferred Stock                                                             |   |         | (181     | )            |   | (181 | ) |
| **Net                  Cash Flows Used For Financing Activities**                                                         |   |         | (197,711 | )            |   | (450,529 | ) |
|                                                                                                                      |   |         |     |         |   |   |   |
| **Net                  Increase in Cash and Cash Equivalents**                                                            |   |         | 3        |         |   | 1,000 |   |
| **Cash                  and Cash Equivalents at Beginning of Period**                                                     |   |         | -        |         |   | 760 |   |
| **Cash                  and Cash Equivalents at End of Period**                                                           |   | $            | 3        |         | $      | 1,760 |   |

**SUPPLEMENTAL        DISCLOSURE:**

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

----

**AEP      TEXAS CENTRAL COMPANY AND SUBSIDIARY**

**INDEX      TO CONDENSED NOTES TO 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     |
| Acquisitions,                Dispositions, Asset Impairments and Assets Held for Sale | Note                7     |
| Benefit                Plans                                                          | Note                8     |
| Business                Segments                                                      | Note                9     |
| Income                Taxes                                                           | Note                10    |
| Financing                Activities                                                   | Note                11    |
| Company-wide                Staffing and Budget Review                                | Note                12    |

----

**AEP      TEXAS NORTH COMPANY**

----

**AEP      TEXAS NORTH COMPANY**

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

**Results      of Operations**

**Reconciliation      of Third Quarter of 2004 to Third Quarter of 2005 Net      Income**

**(in      millions)**

| **Third                Quarter of 2004 Net Income**             |   |   |   |   | $      | 17     |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                     |   |   |   |   |   |   |   |
| Texas                Supply                                     |   |   | (5     | )      |   |   |   |
| Texas                Wires                                      |   |   | 2      |   |   |   |   |
| Off-system                Sales                                 |   |   | 2      |   |   |   |   |
| Transmission                Revenues                            |   |   | (1     | )      |   |   |   |
| Other                Revenues                                   |   |   | 5      |   |   |   |   |
| **Total                Change in Gross Margin**                 |   |   |   |   |   | 3      |   |
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                  |   |   | 5      |   |   |   |   |
| Depreciation                and Amortization                    |   |   | (1     | )      |   |   |   |
| **Total                Change in Operating Expenses and Other** |   |   |   |   |   | 4      |   |
|                                                            |   |   |   |   |   |   |   |
| Income                Tax** **Expense                      |   |   |   |   |   | (2     | )      |
|                                                            |   |   |   |   |   |   |   |
| **Third                Quarter of 2005 Net Income**             |   |   |   |   | $      | 22     |   |

| · | Texas                Supply margins decreased by $5 million primarily                due to lower sales volumes of 55% due to the expiration of the supply                contract with our largest REP customer offset by an increase                in                nonaffiliated margin and capacity sales. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Texas                Wires revenue increased by $2 million primarily due to an increase                in                sales volumes of 10% resulting from a 29% increase in cooling degree                days.                                                                                                    |
| · | Margins                from Off-system Sales increased by $2 million primarily due to favorable                optimization activity.                                                                                                                                                                                 |
| · | Other                Revenue increased $5 million primarily due to an increase in ancillary                services to ERCOT.                                                                                                                                                                                         |

| · | Other                Operation and Maintenance expenses decreased $5 million. The decrease                was                primarily due to lower expenses for power plants no longer in service                and                a favorable settlement related to the Ft. Davis wind farm, which                was                impaired in 2002. A further reduction includes administrative and                general                expenses, primarily related to lower employee-related                costs. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Income      Taxes*

**Reconciliation      of Nine Months Ended September 30, 2004 to**

**Nine      Months Ended September 30, 2005 Net Income**

**(in      millions)**

| **Nine                Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 38     |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                        |   |   |   |   |   |   |   |
| Texas                Supply                                        |   |   | (5     | )      |   |   |   |
| Texas                Wires                                         |   |   | 4      |   |   |   |   |
| Off-system                Sales                                    |   |   | (1     | )      |   |   |   |
| Other                Revenues                                      |   |   | 1      |   |   |   |   |
| **Total                Change in Gross Margin**                    |   |   |   |   |   | (1     | )      |
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                     |   |   | 7      |   |   |   |   |
| Depreciation                and Amortization                       |   |   | (2     | )      |   |   |   |
| Nonoperating                Income and Expenses, Net               |   |   | (2     | )      |   |   |   |
| Interest                Charges                                    |   |   | 2      |   |   |   |   |
| **Total                Change in Operating Expenses and Other**    |   |   |   |   |   | 5      |   |
|                                                               |   |   |   |   |   |   |   |
| Income                Tax** **Expense                         |   |   |   |   |   | -      |   |
|                                                               |   |   |   |   |   |   |   |
| **Nine                Months Ended September 30, 2005 Net Income** |   |   |   |   | $      | 42     |   |

| · | Texas                Supply margins decreased by $5 million primarily due to a decrease                of $29                million due to lower sales volumes of 35% resulting from the expiration                of                the supply contract with our largest REP customer, offset by a decrease                in                the provision for refunds of $13 million for the 2004 final fuel                reconciliation true-up and increased capacity revenue of $10                million. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Texas                Wires revenue increased by $4 million primarily due to higher sales                volumes of 7% resulting from a 9% increase in degree                days.                                                                                                                                                                                                                                                                                                                                   |

| · | Other                Operation and Maintenance expenses decreased $7 million primarily                due to                decreased operations and maintenance for plants no longer in service.                Production expense was further reduced by a favorable settlement                related                to the Ft. Davis wind farm, which was impaired in 2002, offset in                part by                increased cost for the disposal of fuel oil inventory. Further decreases                were related to reduced customer expense and administrative and general                expenses including employee-related costs. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Nonoperating                Income and Expenses, Net decreased $2 million primarily due to $5                million                of income in 2004 relating to optimization contracts which                expired in                December 2004 offset by increased margins of $2 million from third                party                construction projects and increased interest income of $1                million.                                                                                                                                                                                                                     |
| · | Interest                Charges decreased $2 million primarily due to long-term debt maturities                in                2004 and interest in 2004 related to the FERC settlement with wholesale                customers.                                                                                                                                                                                                                                                                                                                                                                                                                        |

*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**

**Critical      Accounting Estimates**

----

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

**Market      Risks**

**MTM      Risk Management Contract Net Assets**

**MTM      Risk Management Contract Net Assets**

**Nine      Months Ended September 30, 2005**

**(in      thousands)**

| **Total                MTM Risk Management Contract Net Assets at December 31,                2004**                      |   | $      | 4,192  |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                Loss from Contracts Realized/Settled During the Period (a)                                          |   |   | (1,705 | )      |
| Fair                Value of New Contracts When Entered During the Period (b)                                             |   |   | 32     |   |
| Net                Option Premiums Paid/(Received) (c)                                                                    |   |   | -      |   |
| Change                in Fair Value Due to Valuation Methodology Changes                                                  |   |   | -      |   |
| Changes                in Fair Value of Risk Management Contracts (d)                                                     |   |   | 2,125  |   |
| Changes                in Fair Value of Risk Management Contracts Allocated to Regulated                Jurisdictions (e) |   |   | -      |   |
| **Total                MTM Risk Management Contract Net Assets**                                                          |   |   | 4,644  |   |
| Net                Cash Flow Hedge Contracts (f)                                                                          |   |   | (1,502 | )      |
| **Total                MTM Risk Management Contract Net Assets at September 30, 2005**                                    |   | $      | 3,142  |   |

| (a) | “(Gain)                Loss from Contracts Realized/Settled During the Period” includes realized                risk management contracts and related derivatives that settled during                2005                where we entered into the contract prior to 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                Value of New Contracts When Entered During the Period” represents the fair                value at inception of long-term contracts entered into with customers                during 2005. 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. |
| (c) | “Net                Option Premiums Paid/(Received)” reflects the net option premiums                paid/(received) as they relate to unexercised and unexpired option                contracts that were entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (d) | “Changes                in Fair Value of Risk Management Contracts” represents the fair value                change in the risk management portfolio due to market fluctuations                during                the current period. Market fluctuations are attributable to various                factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                                                                                                                                    |
| (e) | “Changes                in Fair Value of Risk Management Contracts 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 assets/liabilities for those                subsidiaries that operate in regulated jurisdictions.                                                                                                                                                                                                                                                                                                           |
| (f) | “Net                Cash Flow Hedge Contracts” (pretax) are discussed below in Accumulated                Other Comprehensive Income (Loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

**Reconciliation      of MTM Risk Management Contracts to**

**Condensed      Balance Sheets**

**As      of September 30, 2005**

**(in      thousands)**

|                                                                      |   | **MTM                Risk Management Contracts (a)** |    | **Cash                Flow Hedges** |   | **Total                (b)** |   |
|---------------------------------------------------------------------------|--------|------------------------------------------------------|---------|-------------------------------------|--------|------------------------------|--------|
| Current                Assets                                             |   | $                                                    | 13,918  |                                | $      | 39                           |   | $ | 13,957 |   |
| Noncurrent                Assets                                          |   |                                                 | 8,324   |                                |   | 43                           |   |   | 8,367 |   |
| **Total                MTM Derivative Contract Assets**                   |   |                                                 | 22,242  |                                |   | 82                           |   |   | 22,324 |   |
|                                                                      |   |                                                 |    |                                |   |                         |   |   |   |   |
| Current                Liabilities                                        |   |                                                 | (12,201 | )                                   |   | (1,538                       | )      |   | (13,739 | ) |
| Noncurrent                Liabilities                                     |   |                                                 | (5,397  | )                                   |   | (46                          | )      |   | (5,443 | ) |
| **Total                MTM Derivative Contract Liabilities**              |   |                                                 | (17,598 | )                                   |   | (1,584                       | )      |   | (19,182 | ) |
|                                                                      |   |                                                 |    |                                |   |                         |   |   |   |   |
| **Total                MTM Derivative Contract Net Assets (Liabilities)** |   | $                                                    | 4,644   |                                | $      | (1,502                       | )      | $ | 3,142 |   |

| (a) | Does                not include Cash Flow Hedges.                                                                                                                                                                                                                                                               |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents                amount of total MTM derivative contracts recorded within Risk Management                Assets, Long-term Risk Management Assets, Risk Management Liabilities                and                Long-term Risk Management Liabilities on our Condensed Balance                Sheets. |

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

|   ·   | The                source of 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 September 30, 2005**

**(in      thousands)**

|                                                                                            |   | **Remainder                of 2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **After****2009** |   | **Total                (c)** |   |
|-------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|------------------------------|--------|
| Prices                Actively Quoted - Exchange Traded                Contracts                |   | $                                    | (268   | )        | $      | 1,288    |   | $        | 108    |     | $      | 59                |   | $                            | -      |   | $ | - |   | $ | 1,187 |   |
| Prices                Provided by Other External Sources                - OTC Broker Quotes (a) |   |                                 | 2,004  |     |   | 702      |   |     | 1,595  |     |   | 595               |   |                         | -      |   |   | - |   |   | 4,896 |   |
| Prices                Based on Models and Other Valuation                Methods (b)            |   |                                 | (265   | )        |   | (1,509   | )      |     | (1,083 | )        |   | 168               |   |                         | 596    |   |   | 654 |   |   | (1,439 | ) |
| **Total**                                                                                       |   | $                                    | 1,471  |     | $      | 481      |   | $        | 620    |     | $      | 822               |   | $                            | 596    |   | $ | 654 |   | $ | 4,644 |   |

| (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 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. |
| (c) | Amounts                exclude Cash Flow Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

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

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

**Nine      Months Ended September 30, 2005**

**(in      thousands)**

|                                                         |   | **Power** |   |
|--------------------------------------------------------------|--------|-----------|--------|
| **Beginning                Balance December 31, 2004**       |   | $         | 285    |   |
| Changes                in Fair Value (a)                     |   |      | (1,232 | ) |
| Reclassifications                from AOCI to Net Income (b) |   |      | (64    | ) |
| **Ending                Balance September 30, 2005**         |   | $         | (1,011 | ) |

| (a) | “Changes                in Fair Value” shows changes in the fair value of derivatives designated                as cash flow hedges during the reporting period that are not yet                settled                at September 30, 2005. Amounts are reported net of related income                taxes.                           |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Reclassifications                from AOCI to Net Income” represents gains or losses from derivatives used                as hedging instruments in cash flow hedges that were reclassified                into net                income during the reporting period. Amounts are reported net of related                income taxes. |

**Credit      Risk**

**VaR      Associated with Risk Management Contracts**

|   | **Nine                Months Ended**  |   | **Twelve                Months Ended** |   |
|--------|---------------------------------------|--------|----------------------------------------|--------|
|   | **September                30, 2005** |   | **December                31, 2004**   |   |
|   | **(in                thousands)**     |   | **(in                thousands)**      |   |
|   | **End**                               |   | **High**                               |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |   |
|   | $94                                   |   | $129                                   |   | $61 |   | $32 |   | $68 |   | $221 |   | $95 |   | $33 |   |

**VaR      Associated with Debt Outstanding**

----

**AEP      TEXAS NORTH COMPANY**

**CONDENSED      STATEMENTS OF INCOME**

**For      the Three and Nine Months Ended September 30, 2005 and      2004**

**(Unaudited)**

**(in      thousands)**

|                                                              |   | **Three                Months Ended** |    | **Nine                Months Ended** |   |
|-------------------------------------------------------------------|--------|---------------------------------------|---------|--------------------------------------|--------|
|                                                              |   | **2005**                              |    | **2004**                             |   | **2005** |   | **2004** |   |
| **OPERATING                REVENUES**                             |   |                             |    |                            |   |   |   |   |   |
| Electric                Generation, Transmission and Distribution |   | $                                     | 111,229 |                                 | $      | 139,904 |   | $ | 280,502 |   | $ | 318,946 |   |
| Sales                to AEP Affiliates                            |   |                                  | 13,019  |                                 |   | 12,599 |   |   | 37,189 |   |   | 39,344 |   |
| **TOTAL**                                                         |   |                                  | 124,248 |                                 |   | 152,503 |   |   | 317,691 |   |   | 358,290 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                EXPENSES**                             |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Fuel                for Electric Generation                       |   |                                  | 13,289  |                                 |   | 11,357 |   |   | 37,255 |   |   | 29,518 |   |
| Fuel                from Affiliates for Electric Generation       |   |                                  | 144     |                                 |   | 15,497 |   |   | 516 |   |   | 39,263 |   |
| Purchased                Electricity for Resale                   |   |                                  | 34,425  |                                 |   | 51,517 |   |   | 88,367 |   |   | 92,822 |   |
| Purchased                Electricity from AEP Affiliates          |   |                                  | 1       |                                 |   | 309 |   |   | 23 |   |   | 4,385 |   |
| Other                Operation                                    |   |                                  | 17,054  |                                 |   | 23,212 |   |   | 58,019 |   |   | 64,511 |   |
| Maintenance                                                       |   |                                  | 5,954   |                                 |   | 4,544 |   |   | 15,093 |   |   | 15,177 |   |
| Depreciation                and Amortization                      |   |                                  | 10,435  |                                 |   | 9,448 |   |   | 30,952 |   |   | 28,994 |   |
| Taxes                Other Than Income Taxes                      |   |                                  | 6,047   |                                 |   | 6,476 |   |   | 17,465 |   |   | 16,873 |   |
| Income                Taxes                                       |   |                                  | 10,504  |                                 |   | 8,248 |   |   | 17,183 |   |   | 16,730 |   |
| **TOTAL**                                                         |   |                                  | 97,853  |                                 |   | 130,608 |   |   | 264,873 |   |   | 308,273 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                INCOME**                               |   |                                  | 26,395  |                                 |   | 21,895 |   |   | 52,818 |   |   | 50,017 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Nonoperating                Income                                |   |                                  | 2,878   |                                 |   | 8,637 |   |   | 44,093 |   |   | 38,025 |   |
| Nonoperating                Expenses                              |   |                                  | 1,826   |                                 |   | 8,230 |   |   | 39,139 |   |   | 31,128 |   |
| Nonoperating                Income Tax Expense                    |   |                                  | 212     |                                 |   | 83 |   |   | 1,286 |   |   | 2,186 |   |
| Interest                Charges                                   |   |                                  | 4,931   |                                 |   | 5,366 |   |   | 14,784 |   |   | 17,028 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **NET                INCOME**                                     |   |                                  | 22,304  |                                 |   | 16,853 |   |   | 41,702 |   |   | 37,700 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Preferred                Stock Dividend Requirements              |   |                                  | 26      |                                 |   | 26 |   |   | 78 |   |   | 78 |   |
|                                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **EARNINGS                APPLICABLE TO COMMON STOCK**            |   | $                                     | 22,278  |                                 | $      | 16,827 |   | $ | 41,624 |   | $ | 37,622 |   |

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

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

----

**AEP      TEXAS NORTH COMPANY**

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

**EQUITY      AND COMPREHENSIVE INCOME (LOSS)**

**For      the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                       |   | **Common                Stock** |    | **Paid-in                Capital** |   | **Retained                Earnings** |   | **Accumulated                Other Comprehensive Income (Loss)** |    | **Total** |   |
|------------------------------------------------------------|--------|---------------------------------|---------|------------------------------------|--------|--------------------------------------|--------|------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                31, 2003**                       |   | $                               | 137,214 |                               | $      | 2,351                                |   | $                                                                | 125,428 |      | $      | (26,718 | ) | $ | 238,275 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Common                Stock Dividends                      |   |                            |    |                               |   |                                 |   |                                                             | (2,000  | )         |   |   |   |   | (2,000 | ) |
| Preferred                Stock Dividends                   |   |                            |    |                               |   |                                 |   |                                                             | (78     | )         |   |   |   |   | (78 | ) |
| **TOTAL**                                                  |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 236,197 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                    |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **Other                Comprehensive Loss, Net of Taxes:** |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $980        |   |                            |    |                               |   |                                 |   |                                                             |    |      |   | (1,820 | ) |   | (1,820 | ) |
| **NET                INCOME**                              |   |                            |    |                               |   |                                 |   |                                                             | 37,700  |      |   |   |   |   | 37,700 |   |
| **TOTAL                COMPREHENSIVE INCOME**              |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 35,880 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2004**                      |   | $                               | 137,214 |                               | $      | 2,351                                |   | $                                                                | 161,050 |      | $      | (28,538 | ) | $ | 272,077 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **DECEMBER                31, 2004**                       |   | $                               | 137,214 |                               | $      | 2,351                                |   | $                                                                | 170,984 |      | $      | (128 | ) | $ | 310,421 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Common                Stock Dividends                      |   |                            |    |                               |   |                                 |   |                                                             | (20,827 | )         |   |   |   |   | (20,827 | ) |
| Preferred                Stock Dividends                   |   |                            |    |                               |   |                                 |   |                                                             | (78     | )         |   |   |   |   | (78 | ) |
| **TOTAL**                                                  |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 289,516 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                    |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **Other                Comprehensive Loss, Net of Taxes:** |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $698        |   |                            |    |                               |   |                                 |   |                                                             |    |      |   | (1,296 | ) |   | (1,296 | ) |
| **NET                INCOME**                              |   |                            |    |                               |   |                                 |   |                                                             | 41,702  |      |   |   |   |   | 41,702 |   |
| **TOTAL                COMPREHENSIVE INCOME**              |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 40,406 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2005**                      |   | $                               | 137,214 |                               | $      | 2,351                                |   | $                                                                | 191,781 |      | $      | (1,424 | ) | $ | 329,922 |   |

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

----

**AEP      TEXAS NORTH COMPANY**

**CONDENSED      BALANCE SHEETS**

**ASSETS**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

**(in      thousands)**

|                                                     |   | **2005**     |      | **2004**     |   |
|----------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **ELECTRIC                UTILITY PLANT**                |   |    |      |    |   |
| Production                                               |   | $            | 288,446   |         | $      | 287,212 |   |
| Transmission                                             |   |         | 288,538   |         |   | 281,359 |   |
| Distribution                                             |   |         | 489,002   |         |   | 474,961 |   |
| General                                                  |   |         | 110,831   |         |   | 115,174 |   |
| Construction                Work in Progress             |   |         | 34,808    |         |   | 23,621 |   |
| **Total**                                                |   |         | 1,211,625 |         |   | 1,182,327 |   |
| Accumulated                Depreciation and Amortization |   |         | 417,521   |         |   | 405,933 |   |
| **TOTAL                - NET**                           |   |         | 794,104   |         |   | 776,394 |   |
|                                                     |   |         |      |         |   |   |   |
| **OTHER                PROPERTY AND INVESTMENTS**        |   |         |      |         |   |   |   |
| Nonutility                Property, Net                  |   |         | 1,177     |         |   | 1,407 |   |
|                                                     |   |         |      |         |   |   |   |
| **CURRENT                ASSETS**                        |   |         |      |         |   |   |   |
| Cash                and Cash Equivalents                 |   |         | 215       |         |   | - |   |
| Other                Cash Deposits                       |   |         | 800       |         |   | 2,308 |   |
| Advances                to Affiliates                    |   |         | 87,651    |         |   | 51,504 |   |
| Accounts                Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                |   |         | 59,400    |         |   | 90,109 |   |
| Affiliated                Companies                      |   |         | 31,564    |         |   | 21,474 |   |
| Accrued                Unbilled Revenues                 |   |         | 5,880     |         |   | 3,789 |   |
| Allowance                for Uncollectible Accounts      |   |         | (9        | )            |   | (787 | ) |
| Unbilled                Construction Costs               |   |         | 3,119     |         |   | 22,065 |   |
| Fuel                Inventory                            |   |         | 1,918     |         |   | 3,148 |   |
| Materials                and Supplies                    |   |         | 8,581     |         |   | 8,273 |   |
| Risk                Management Assets                    |   |         | 13,957    |         |   | 6,071 |   |
| Margin                Deposits                           |   |         | 4,952     |         |   | 818 |   |
| Prepayments                and Other                     |   |         | 5,159     |         |   | 1,053 |   |
| **TOTAL**                                                |   |         | 223,187   |         |   | 209,825 |   |
|                                                     |   |         |      |         |   |   |   |
| **DEFERRED                DEBITS AND OTHER ASSETS**      |   |         |      |         |   |   |   |
| Regulatory                Assets:                        |   |         |      |         |   |   |   |
| Deferred                Debt - Restructuring             |   |         | 5,727     |         |   | 6,093 |   |
| Unamortized                Loss on Reacquired Debt       |   |         | 1,122     |         |   | 2,147 |   |
| Other                                                    |   |         | 3,292     |         |   | 3,783 |   |
| Long-term                Risk Management Assets          |   |         | 8,367     |         |   | 4,110 |   |
| Prepaid                Pension Obligations               |   |         | 44,901    |         |   | 44,911 |   |
| Deferred                Property Taxes                   |   |         | 4,072     |         |   | - |   |
| Other                Deferred Charges                    |   |         | 2,232     |         |   | 2,859 |   |
| **TOTAL**                                                |   |         | 69,713    |         |   | 63,903 |   |
|                                                     |   |         |      |         |   |   |   |
| **TOTAL                ASSETS**                          |   | $            | 1,088,181 |         | $      | 1,051,529 |   |

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

----

**AEP      TEXAS NORTH COMPANY**

**CONDENSED      BALANCE SHEETS**

**CAPITALIZATION      AND LIABILITIES**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                                          |   | **2005**                          |      | **2004**     |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------------|--------|
| **CAPITALIZATION**                                                            |   | **(in                thousands)** |      |
| 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                                              |   |                              | 191,781   |         |   | 170,984 |   |
| Accumulated                Other Comprehensive Income (Loss)                  |   |                              | (1,424    | )            |   | (128 | ) |
| **Total                Common Shareholder’s Equity**                    |   |                              | 329,922   |         |   | 310,421 |   |
| Cumulative                Preferred Stock Not Subject to Mandatory Redemption |   |                              | 2,357     |         |   | 2,357 |   |
| **Total                Shareholders’ Equity**                           |   |                              | 332,279   |         |   | 312,778 |   |
| Long-term                Debt - Nonaffiliated                                 |   |                              | 276,822   |         |   | 276,748 |   |
| **TOTAL**                                                                     |   |                              | 609,101   |         |   | 589,526 |   |
| **CURRENT                LIABILITIES**                                        |   |                              |      |         |   |   |   |
| Long-term                Debt Due Within One Year - Nonaffiliated             |   |                              | 37,609    |         |   | 37,609 |   |
| Accounts                Payable:                                              |   |                              |      |         |   |   |   |
| General                                                                       |   |                              | 35,404    |         |   | 22,444 |   |
| Affiliated                Companies                                           |   |                              | 49,563    |         |   | 52,801 |   |
| Customer                Deposits                                              |   |                              | 6,491     |         |   | 1,020 |   |
| Taxes                Accrued                                                  |   |                              | 27,172    |         |   | 37,269 |   |
| Interest                Accrued                                               |   |                              | 3,378     |         |   | 5,044 |   |
| Risk                Management Liabilities                                    |   |                              | 13,739    |         |   | 3,628 |   |
| Obligations                Under Capital Leases                               |   |                              | 196       |         |   | 220 |   |
| Other                                                                         |   |                              | 10,767    |         |   | 9,628 |   |
| **TOTAL**                                                                     |   |                              | 184,319   |         |   | 169,663 |   |
|                                                                          |   |                              |      |         |   |   |   |
| **DEFERRED                CREDITS AND OTHER LIABILITIES**                     |   |                              |      |         |   |   |   |
| Deferred                Income Taxes                                          |   |                              | 141,451   |         |   | 138,465 |   |
| Long-term                Risk Management Liabilities                          |   |                              | 5,443     |         |   | 2,116 |   |
| Regulatory                Liabilities:                                        |   |                              |      |         |   |   |   |
| Asset                Removal Costs                                            |   |                              | 81,756    |         |   | 81,143 |   |
| Deferred                Investment Tax Credits                                |   |                              | 17,745    |         |   | 18,698 |   |
| Over-recovery                of Fuel Costs                                    |   |                              | 4,815     |         |   | 3,920 |   |
| Retail                Clawback                                                |   |                              | 13,924    |         |   | 13,924 |   |
| Excess                Earnings                                                |   |                              | 12,898    |         |   | 13,270 |   |
| SFAS                109 Regulatory Liability, Net                             |   |                              | 6,897     |         |   | 8,500 |   |
| Other                                                                         |   |                              | 921       |         |   | 1,319 |   |
| Obligations                Under Capital Leases                               |   |                              | 348       |         |   | 314 |   |
| Deferred                Credits and Other                                     |   |                              | 8,563     |         |   | 10,671 |   |
| **TOTAL**                                                                     |   |                              | 294,761   |         |   | 292,340 |   |
|                                                                          |   |                              |      |         |   |   |   |
| Commitments                and Contingencies (Note 5)                         |   |                              |      |         |   |   |   |
|                                                                          |   |                              |      |         |   |   |   |
| **TOTAL                CAPITALIZATION AND LIABILITIES**                       |   | $                                 | 1,088,181 |         | $      | 1,051,529 |   |

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

----

**AEP      TEXAS NORTH COMPANY**

**CONDENSED      STATEMENTS OF CASH FLOWS**

**For      the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                                                  |   | **2005**     |    | **2004**     |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                ACTIVITIES**                                                                               |   |    |    |    |   |
| **Net                Income**                                                                                         |   | $            | 41,702  |         | $      | 37,700 |   |
| **Adjustments                to Reconcile Net Income to Net Cash Flows****From                Operating Activities:** |   |         |    |         |   |   |   |
| Depreciation                and Amortization                                                                          |   |         | 30,952  |         |   | 28,994 |   |
| Deferred                Income Taxes                                                                                  |   |         | (313    | )            |   | (1,980 | ) |
| Deferred                Investment Tax Credits                                                                        |   |         | (953    | )            |   | (974 | ) |
| Pension                and Postemployment Benefit Reserves                                                            |   |         | (513    | )            |   | - |   |
| Deferred                Property Taxes                                                                                |   |         | (4,072  | )            |   | (4,023 | ) |
| Mark-to-Market                of Risk Management Contracts                                                            |   |         | (452    | )            |   | 1,318 |   |
| Over/Under                Fuel Recovery                                                                               |   |         | 895     |         |   | 13,500 |   |
| Change                in Other Noncurrent Assets                                                                      |   |         | (672    | )            |   | (9,800 | ) |
| Change                in Other Noncurrent Liabilities                                                                 |   |         | 349     |         |   | (266 | ) |
| **Changes                in Components of Working Capital:**                                                          |   |         |    |         |   |   |   |
| Accounts                Receivable, Net                                                                               |   |         | 17,750  |         |   | (7,345 | ) |
| Fuel,                Materials and Supplies                                                                           |   |         | 922     |         |   | 4,447 |   |
| Accounts                Payable                                                                                       |   |         | 8,467   |         |   | (3,267 | ) |
| Taxes                Accrued                                                                                          |   |         | (10,097 | )            |   | 16,879 |   |
| Customer                Deposits                                                                                      |   |         | 5,471   |         |   | 1,342 |   |
| Interest                Accrued                                                                                       |   |         | (1,666  | )            |   | (1,962 | ) |
| Other                Current Assets                                                                                   |   |         | 10,706  |         |   | (6,171 | ) |
| Other                Current Liabilities                                                                              |   |         | 1,115   |         |   | (2,264 | ) |
| **Net                Cash Flows From Operating Activities**                                                           |   |         | 99,591  |         |   | 66,128 |   |
|                                                                                                                  |   |         |    |         |   |   |   |
| **INVESTING                ACTIVITIES**                                                                               |   |         |    |         |   |   |   |
| Construction                Expenditures                                                                              |   |         | (44,865 | )            |   | (27,742 | ) |
| Change                in Other Cash Deposits, Net                                                                     |   |         | 1,508   |         |   | 266 |   |
| Proceeds                from Sale of Assets                                                                           |   |         | 1,033   |         |   | 510 |   |
| **Net                Cash Flows Used For Investing Activities**                                                       |   |         | (42,324 | )            |   | (26,966 | ) |
|                                                                                                                  |   |         |    |         |   |   |   |
| **FINANCING                ACTIVITIES**                                                                               |   |         |    |         |   |   |   |
| Retirement                of Long-term Debt                                                                           |   |         | -       |         |   | (24,036 | ) |
| Changes                in Advances to/from Affiliates, Net                                                            |   |         | (36,147 | )            |   | (12,902 | ) |
| Dividends                Paid on Common Stock                                                                         |   |         | (20,827 | )            |   | (2,000 | ) |
| Dividends                Paid on Cumulative Preferred Stock                                                           |   |         | (78     | )            |   | (78 | ) |
| **Net                Cash Flows Used For Financing Activities**                                                       |   |         | (57,052 | )            |   | (39,016 | ) |
|                                                                                                                  |   |         |    |         |   |   |   |
| **Net                Increase in Cash and Cash Equivalents**                                                          |   |         | 215     |         |   | 146 |   |
| **Cash                and Cash Equivalents at Beginning of Period**                                                   |   |         | -       |         |   | - |   |
| **Cash                and Cash Equivalents at End of Period**                                                         |   | $            | 215     |         | $      | 146 |   |

| **SUPPLEMENTAL                DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Cash                paid for interest net of capitalized amounts was $15,192,000 and                $17,290,000 and for income taxes was $30,486,000 and $6,905,000 in                2005                and 2004, respectively. Noncash capital lease acquisitions in 2005                and                2004 were $193,000 and $153,000, respectively. Construction Expenditures                include the change in Construction-related Accounts Payable of $1,255,000                and $(726,000) in 2005 and 2004,                respectively. |

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

----

**AEP      TEXAS NORTH COMPANY**

**INDEX      TO CONDENSED NOTES TO 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     |
| Benefit                Plans                              | Note                8     |
| Business                Segments                          | Note                9     |
| Income Taxes                                         | Note                10    |
| Financing                Activities                       | Note                11    |
| Company-wide                Staffing and Budget Review    | Note                12    |

----

**APPALACHIAN      POWER COMPANY**

**AND      SUBSIDIARIES**

----

**APPALACHIAN      POWER COMPANY AND SUBSIDIARIES**

**MANAGEMENT’S      FINANCIAL DISCUSSION AND ANALYSIS**

**Results      of Operations**

**Reconciliation      of Third Quarter of 2004 to Third Quarter of 2005 Net      Income**

**(in      millions)**

| **Third                Quarter of 2004 Net Income**             |   |   |   |   | $      | 38     |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                Margins                                   |   |   | 10     |   |   |   |   |
| Off-system                Sales                                 |   |   | 12     |   |   |   |   |
| Transmission                Revenues                            |   |   | (6     | )      |   |   |   |
| Other                Revenues                                   |   |   | 4      |   |   |   |   |
| **Total                Change in Gross Margin**                 |   |   |   |   |   | 20     |   |
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                  |   |   | (19    | )      |   |   |   |
| Depreciation                and Amortization                    |   |   | (1     | )      |   |   |   |
| Nonoperating                Income and Expenses, Net            |   |   | 4      |   |   |   |   |
| **Total                Change in Operating Expenses and Other** |   |   |   |   |   | (16    | )      |
|                                                            |   |   |   |   |   |   |   |
| Income                Tax Expense                               |   |   |   |   |   | (5     | )      |
|                                                            |   |   |   |   |   |   |   |
| **Third                Quarter of 2005 Net Income**             |   |   |   |   | $      | 37     |   |

| · | Retail                Margins increased by $10 million in comparison to 2004 primarily                due to increases                in retail sales. Cooling degree days were 35% higher than                2004.                                                                                                                                                                                                                                                          |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Off-system                sales margins for 2005 increased by $12 million compared to 2004                primarily                due to increased AEP Power Pool physical sales as well as favorable                optimization activity.                                                                                                                                                                                                                                  |
| · | Transmission                Revenues decreased $6 million primarily due to the elimination of                $11                million of revenues related to through and out rates partially offset                by                an increase of $5 million in revenues due to replacement SECA rates.                See                “FERC Order on Regional Through and Out Rates” for additional discussion                of these FERC rate changes. |

| · | Other                Operation and Maintenance expenses increased $19 million primarily                due to                $6 million of distribution right-of-way activities and maintenance,                a $4                million true-up related to the Virginia Environmental and Reliability                deferral and a $3 million increase in system dispatch costs related                to our                operation in PJM. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Nonoperating                Income and Expenses, Net increased $4 million primarily due to favorable                optimization activity coupled with the accrual of carrying costs                related                to the Virginia Environmental and Reliability                deferral.                                                                                                                                                   |

*Income      Taxes*

**Reconciliation      of Nine Months Ended September 30, 2004 to**

**Nine      Months Ended September 30, 2005 Net Income**

**(in      millions)**

| **Nine                Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 126    |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                        |   |   |   |   |   |   |   |
| Retail                Margins                                      |   |   | (56    | )      |   |   |   |
| Off-system                Sales                                    |   |   | 44     |   |   |   |   |
| Transmission                Revenues                               |   |   | (19    | )      |   |   |   |
| Other                Revenues                                      |   |   | 7      |   |   |   |   |
| **Total                Change in Gross Margin**                    |   |   |   |   |   | (24    | )      |
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                     |   |   | (17    | )      |   |   |   |
| Depreciation                and Amortization                       |   |   | (3     | )      |   |   |   |
| Taxes                Other Than Income Taxes                       |   |   | (1     | )      |   |   |   |
| Nonoperating                Income and Expenses, Net               |   |   | 7      |   |   |   |   |
| **Total                Change in Operating Expenses and Other**    |   |   |   |   |   | (14    | )      |
|                                                               |   |   |   |   |   |   |   |
| Income                Tax Expense                                  |   |   |   |   |   | 20     |   |
|                                                               |   |   |   |   |   |   |   |
| **Nine                Months Ended September 30, 2005 Net Income** |   |   |   |   | $      | 108    |   |

| · | Retail                Margins decreased by $56 million in comparison to 2004 primarily                due to our higher MLR share caused by the increase in our peak demand                established in December 2004 resulting in a $45 million increase                in                capacity settlement payments under the Interconnection Agreement.                In                addition, there was a $20 million decrease in fuel margins resulting                from                higher fuel costs. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Off-system                sales margins for 2005 increased by $44 million compared to 2004                primarily                due to increased AEP Power Pool physical sales as well as favorable                optimization activity.                                                                                                                                                                                                                                                                               |
| · | Transmission                Revenues decreased $19 million primarily due to the elimination of                $34                million of revenues related to through and out rates partially offset                by                an increase of $15 million due to replacement SECA rates. See “FERC Order                on Regional Through and Out Rates” for additional discussion of these FERC                rate changes.                                                                       |

| · | Other                Operation and Maintenance expenses increased $17 million primarily                due to                a $10 million increase in system dispatch costs related to our operation                in PJM and an increase in transmission equalization charges due to                the                increase in our MLR as a result of our new peak demand established                in                December 2004. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Nonoperating                Income and Expenses, Net increased $7 million primarily due to the                accrual                of carrying costs related to the Virginia Environmental and Reliability                deferral coupled with favorable optimization                activity.                                                                                                                                            |

*Income      Taxes*

**Financial      Condition**

**Credit      Ratings**

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

**Cash      Flow**

|                                                                |   | **2005**                          |     | **2004** |   |
|---------------------------------------------------------------------|--------|-----------------------------------|----------|----------|--------|
|                                                                |   | **(in                thousands)** |     |
| **Cash                and Cash Equivalents at Beginning of Period** |   | $                                 | 536      |     | $      | 4,561 |   |
| Cash                Flows From (Used For):                          |   |                              |     |     |   |   |   |
| Operating                Activities                                 |   |                              | 175,640  |     |   | 393,181 |   |
| Investing                Activities                                 |   |                              | (410,881 | )        |   | (256,295 | ) |
| Financing                Activities                                 |   |                              | 236,270  |     |   | (137,949 | ) |
| Net                Increase (Decrease) in Cash and Cash Equivalents |   |                              | 1,029    |     |   | (1,063 | ) |
| **Cash                and Cash Equivalents at End of Period**       |   | $                                 | 1,565    |     | $      | 3,498 |   |

*Operating      Activities*

*Investing      Activities*

** **

*Financing      Activities*

**Financing      Activity**

|                                      |                                          |  **Principal** |    | **Interest** |   | **Due**  |   |
|-------------------------------------------|-----------------------------------------------|---------------------|---------|--------------|--------|----------|--------|
| **Type                of Debt**           |                                          |  **Amount**    |    | **Rate**     |   | **Date** |   |
|                                      |   **(in                thousands)** | **(%)**             |    |         |   |
|                                      |                                          |           |    |         |   |     |   |
| Senior                Unsecured Notes     |                                          | $                   | 250,000 |         |   | 5.00     |   |   | 2017 |   |
| Senior                Unsecured Notes     |                                          |                | 250,000 |         |   | 5.80     |   |   | 2035 |   |
| Senior                Unsecured Notes     |                                          |                | 200,000 |         |   | 4.95     |   |   | 2015 |   |
| Senior                Unsecured Notes     |                                          |                | 150,000 |         |   | 4.40     |   |   | 2010 |   |
| Notes                Payable - Affiliated |                                          |                | 100,000 |         |   | 4.708    |   |   | 2010 |   |

|                                  |                                          |  **Principal** |    | **Interest** |   | **Due**  |   |
|---------------------------------------|-----------------------------------------------|---------------------|---------|--------------|--------|----------|--------|
| **Type                of Debt**       |                                          |  **Amount**    |    | **Rate**     |   | **Date** |   |
|                                  |   **(in                thousands)** | **(%)**             |    |         |   |
|                                  |                                          |           |    |         |   |     |   |
| Senior                Unsecured Notes |                                          | $                   | 450,000 |         |   | 4.80     |   |   | 2005 |   |
| First                Mortgage Bonds   |                                          |                | 50,000  |         |   | 8.00     |   |   | 2005 |   |
| First                Mortgage Bonds   |                                          |                | 45,000  |         |   | 8.00     |   |   | 2025 |   |
| First                Mortgage Bonds   |                                          |                | 30,000  |         |   | 6.89     |   |   | 2005 |   |

**Liquidity**

**Summary      Obligation Information**

**Significant      Factors**

***Ceredo      Generating Station***

***Virginia      Environmental and Reliability Costs***

***West      Virginia Rate Case***

**Critical      Accounting Estimates**

----

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

**Market      Risks**

**MTM      Risk Management Contract Net Assets**

**MTM      Risk Management Contract Net Assets**

**Nine      Months Ended September 30, 2005**

**(in      thousands)**

| **Total                MTM Risk Management Contract Net Assets at December 31,                2004**                      |   | $      | 54,124  |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| (Gain)                Loss from Contracts Realized/Settled During the Period (a)                                          |   |   | (10,775 | )      |
| Fair                Value of New Contracts When Entered During the Period (b)                                             |   |   | 682     |   |
| Net                Option Premiums Paid/(Received) (c)                                                                    |   |   | (685    | )      |
| Change                in Fair Value Due to Valuation Methodology Changes                                                  |   |   | -       |   |
| Changes                in Fair Value of Risk Management Contracts (d)                                                     |   |   | 18,118  |   |
| Changes                in Fair Value of Risk Management Contracts Allocated to Regulated                Jurisdictions (e) |   |   | 5,741   |   |
| **Total                MTM Risk Management Contract Net Assets**                                                          |   |   | 67,205  |   |
| Net                Cash Flow and                Fair Value Hedge                Contracts (f)                             |   |   | (14,929 | )      |
| DETM                Assignment (g)                                                                                        |   |   | (15,405 | )      |
| **Total                MTM Risk Management Contract Net Assets at September 30, 2005**                                    |   | $      | 36,871  |   |

| (a) | “(Gain)                Loss from Contracts Realized/Settled During the Period” includes realized                risk management contracts and related derivatives that settled during                2005                where we entered into the contract prior to 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                Value of New Contracts When Entered During the Period” represents the fair                value at inception of long-term contracts entered into with customers                during 2005. 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. |
| (c) | “Net                Option Premiums Paid/(Received)” reflects the net option premiums                paid/(received) as they relate to unexercised and unexpired option                contracts that were entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (d) | “Changes                in Fair Value of Risk Management Contracts” represents the fair value                change in the risk management portfolio due to market fluctuations                during                the current period. Market fluctuations are attributable to various                factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                                                                                                                                    |
| (e) | “Changes                in Fair Value of Risk Management Contracts 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 assets/liabilities                for                those subsidiaries that operate in regulated                jurisdictions.                                                                                                                                                                                                                                                                               |
| (f) | “Net                Cash Flow and Fair Value Hedge Contracts” (pretax) are discussed below in                Accumulated Other Comprehensive Income (Loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (g) | See                “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

**Reconciliation      of MTM Risk Management Contracts to**

**Condensed      Consolidated Balance Sheets**

**As      of September 30, 2005**

**(in      thousands)**

|                                                                                           |   | **MTM                Risk Management Contracts (a)** |     | **Hedges** |   | **DETM                Assignment (b)** |   | **Total                (c)** |    |
|------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|----------|------------|--------|----------------------------------------|--------|------------------------------|---------|
| Current                Assets                                                                  |   | $                                                    | 194,468  |       | $      | 361                                    |   | $                            | -       |   | $ | 194,829 |   |
| Noncurrent                Assets                                                               |   |                                                 | 176,644  |       |   | 397                                    |   |                         | -       |   |   | 177,041 |   |
| **Total                MTM Derivative Contract Assets**                                        |   |                                                 | 371,112  |       |   | 758                                    |   |                         | -       |   |   | 371,870 |   |
|                                                                                           |   |                                                 |     |       |   |                                   |   |                         |    |   |   |   |   |
| Current                Liabilities                                                             |   |                                                 | (170,347 | )          |   | (14,271                                | )      |                         | (3,660  | ) |   | (188,278 | ) |
| Noncurrent                Liabilities                                                          |   |                                                 | (133,560 | )          |   | (1,416                                 | )      |                         | (11,745 | ) |   | (146,721 | ) |
| **Total                MTM Derivative Contract  Liabilities**                             |   |                                                 | (303,907 | )          |   | (15,687                                | )      |                         | (15,405 | ) |   | (334,999 | ) |
|                                                                                           |   |                                                 |     |       |   |                                   |   |                         |    |   |   |   |   |
| **Total                MTM Derivative Contract Net  Assets                (Liabilities)** |   | $                                                    | 67,205   |       | $      | (14,929                                | )      | $                            | (15,405 | ) | $ | 36,871 |   |

| (a) | Does                not include Cash Flow and                Fair Value Hedges.                                                                                                                                                                                                                                              |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | See                “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                Report.                                                                                                                                                                                                |
| (c) | Represents                amount of total MTM derivative contracts recorded within Risk Management                Assets, Long-term Risk Management Assets, Risk Management Liabilities                and                Long-term Risk Management Liabilities on our Condensed Consolidated                Balance Sheets. |

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

| · | The                source of 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 September 30, 2005**

**(in      thousands)**

|                                                                                            |   | **Remainder                of 2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **After****2009                (c)** |   | **Total                (d)** |   |
|-------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|--------------------------------------|--------|------------------------------|--------|
| Prices                Actively Quoted - Exchange Traded                Contracts                |   | $                                    | (2,461 | )        | $      | 11,840   |   | $        | 996    |     | $      | 545                                  |   | $                            | -      |   | $ | - |   | $ | 10,920 |   |
| Prices                Provided by Other External Sources                - OTC Broker Quotes (a) |   |                                 | 18,934 |     |   | 13,138   |   |     | 18,121 |     |   | 7,227                                |   |                         | 1,057  |   |   | - |   |   | 58,477 |   |
| Prices                Based on Models and Other Valuation                Methods (b)            |   |                                 | (1,902 | )        |   | (10,877  | )      |     | (6,413 | )        |   | 3,788                                |   |                         | 7,926  |   |   | 5,286 |   |   | (2,192 | ) |
| **Total**                                                                                       |   | $                                    | 14,571 |     | $      | 14,101   |   | $        | 12,704 |     | $      | 11,560                               |   | $                            | 8,983  |   | $ | 5,286 |   | $ | 67,205 |   |

| (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 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. |
| (c) | There                is mark-to-market value in excess of 10 percent of our total                mark-to-market value in individual periods beyond 2009. $7.5 million                of                this mark-to-market value is in 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (d) | Amounts                exclude Cash Flow and Fair Value                Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

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

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

**Nine      Months Ended September 30, 2005**

**(in      thousands)**

|                                                                        |   | **Power** |   | **Foreign****Currency** |   | **Interest                Rate** |   | **Total** |    |
|-----------------------------------------------------------------------------|--------|-----------|--------|-------------------------|--------|----------------------------------|--------|-----------|---------|
| **Beginning                Balance December 31, 2004**                      |   | $         | 2,422  |                    | $      | (176                             | )      | $         | (11,570 | ) | $ | (9,324 | ) |
| Changes                in Fair Value (a)                                    |   |      | (7,947 | )                       |   | -                                |   |      | (4,866  | ) |   | (12,813 | ) |
| Reclassifications                from AOCI to Net Income                (b) |   |      | (3,780 | )                       |   | 3                                |   |      | 1,100   |   |   | (2,677 | ) |
| **Ending                Balance September 30, 2005**                        |   | $         | (9,305 | )                       | $      | (173                             | )      | $         | (15,336 | ) | $ | (24,814 | ) |

| (a) | “Changes                in Fair Value” shows changes in the fair value of derivatives designated                as cash flow hedges during the reporting period that are not yet                settled                at September 30, 2005. Amounts are reported net of related income                taxes.                                 |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Reclassifications                from AOCI to Net Income” represents gains or losses from derivatives used                as hedging instruments in cash flow hedges that were reclassified                into net                income during the reporting period. Amounts are reported net of related                income taxes above. |

**Credit        Risk**

**VaR      Associated with Risk Management Contracts**

|   | **Nine                Months Ended**  |   | **Twelve                Months Ended** |   |
|--------|---------------------------------------|--------|----------------------------------------|--------|
|   | **September                30, 2005** |   | **December                31, 2004**   |   |
|   | **(in                thousands)**     |   | **(in                thousands)**      |   |
|   | **End**                               |   | **High**                               |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |   |
|   | $868                                  |   | $1,183                                 |   | $558 |   | $297 |   | $577 |   | $1,883 |   | $812 |   | $277 |   |

**VaR      Associated with Debt Outstanding**

----

**APPALACHIAN      POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME**

**For      the Three and Nine Months Ended September 30, 2005 and      2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                                                                                     |   | **Three                Months Ended** |    | **Nine                Months Ended** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|--------------------------------------|--------|
|                                                                                                                                                     |   | **2005**                              |    | **2004**                             |   | **2005** |   | **2004** |   |
| **OPERATING                REVENUES**                                                                                                                    |   |                             |    |                            |   |   |   |   |   |
| Electric                Generation, Transmission and Distribution                                                                                        |   | $                                     | 497,663 |                                 | $      | 428,688 |   | $ | 1,441,352 |   | $ | 1,316,778 |   |
| Sales                to AEP Affiliates                                                                                                                   |   |                                  | 69,381  |                                 |   | 58,726 |   |   | 178,298 |   |   | 163,655 |   |
| **TOTAL**                                                                                                                                                |   |                                  | 567,044 |                                 |   | 487,414 |   |   | 1,619,650 |   |   | 1,480,433 |   |
|                                                                                                                                                     |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                EXPENSES**                                                                                                                    |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Fuel                for Electric Generation                                                                                                              |   |                                  | 155,185 |                                 |   | 117,841 |   |   | 391,583 |   |   | 327,246 |   |
| Purchased                Electricity for Resale                                                                                                          |   |                                  | 24,217  |                                 |   | 19,727 |   |   | 79,182 |   |   | 54,157 |   |
| Purchased                Electricity from AEP Affiliates                                                                                                 |   |                                  | 108,008 |                                 |   | 90,257 |   |   | 341,994 |   |   | 268,537 |   |
| Other                Operation                                                                                                                           |   |                                  | 81,156  |                                 |   | 70,724 |   |   | 229,448 |   |   | 211,524 |   |
| Maintenance                                                                                                                                              |   |                                  | 44,865  |                                 |   | 36,240 |   |   | 129,321 |   |   | 130,493 |   |
| Depreciation                and Amortization                                                                                                             |   |                                  | 50,284  |                                 |   | 48,877 |   |   | 146,734 |   |   | 144,021 |   |
| Taxes                Other Than Income Taxes                                                                                                             |   |                                  | 23,662  |                                 |   | 22,995 |   |   | 71,023 |   |   | 69,947 |   |
| Income                Taxes                                                                                                                              |   |                                  | 20,903  |                                 |   | 18,063 |   |   | 55,901 |   |   | 78,339 |   |
| **TOTAL**                                                                                                                                                |   |                                  | 508,280 |                                 |   | 424,724 |   |   | 1,445,186 |   |   | 1,284,264 |   |
|                                                                                                                                                     |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                INCOME**                                                                                                                      |   |                                  | 58,764  |                                 |   | 62,690 |   |   | 174,464 |   |   | 196,169 |   |
|                                                                                                                                                     |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Nonoperating                Income                                                                                                                       |   |                                  | 5,554   |                                 |   | 571 |   |   | 13,744 |   |   | 9,149 |   |
| Carrying                Costs Income                                                                                                                     |   |                                  | 1,255   |                                 |   | 65 |   |   | 5,320 |   |   | 187 |   |
| Nonoperating                Expenses                                                                                                                     |   |                                  | 3,291   |                                 |   | 1,497 |   |   | 10,295 |   |   | 7,239 |   |
| Nonoperating                Income Tax Credit                                                                                                            |   |                                  | 66      |                                 |   | 1,899 |   |   | 1,344 |   |   | 3,524 |   |
| Interest                Charges                                                                                                                          |   |                                  | 24,976  |                                 |   | 25,269 |   |   | 76,320 |   |   | 76,169 |   |
|                                                                                                                                                     |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **NET                INCOME**                                                                                                                            |   |                                  | 37,372  |                                 |   | 38,459 |   |   | 108,257 |   |   | 125,621 |   |
|                                                                                                                                                     |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Preferred                Stock Dividend Requirements, Including Capital Stock                                   Expense and Other Expense |   |                                  | 238     |                                 |   | 796 |   |   | 1,940 |   |   | 2,417 |   |
|                                                                                                                                                     |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **EARNINGS                APPLICABLE TO COMMON STOCK**                                                                                                   |   | $                                     | 37,134  |                                 | $      | 37,663 |   | $ | 106,317 |   | $ | 123,204 |   |

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

*See      Condensed Notes to 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 Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                       |   | **Common                Stock** |    | **Paid-in                Capital** |   | **Retained                Earnings** |   | **Accumulated                Other Comprehensive Income (Loss)** |    | **Total** |   |
|------------------------------------------------------------|--------|---------------------------------|---------|------------------------------------|--------|--------------------------------------|--------|------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                31, 2003**                       |   | $                               | 260,458 |                               | $      | 719,899                              |   | $                                                                | 408,718 |      | $      | (52,088 | ) | $ | 1,336,987 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Common                Stock Dividends                      |   |                            |    |                               |   |                                 |   |                                                             | (50,000 | )         |   |   |   |   | (50,000 | ) |
| Preferred                Stock Dividends                   |   |                            |    |                               |   |                                 |   |                                                             | (600    | )         |   |   |   |   | (600 | ) |
| Capital                Stock Expense                       |   |                            |    |                               |   | 1,817                                |   |                                                             | (1,817  | )         |   |   |   |   | - |   |
| **TOTAL**                                                  |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 1,286,387 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                    |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **Other                Comprehensive Loss, Net of Taxes:** |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $7,746      |   |                            |    |                               |   |                                 |   |                                                             |    |      |   | (14,366 | ) |   | (14,366 | ) |
| **NET                INCOME**                              |   |                            |    |                               |   |                                 |   |                                                             | 125,621 |      |   |   |   |   | 125,621 |   |
| **TOTAL                COMPREHENSIVE INCOME**              |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 111,255 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2004**                      |   | $                               | 260,458 |                               | $      | 721,716                              |   | $                                                                | 481,922 |      | $      | (66,454 | ) | $ | 1,397,642 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **DECEMBER                31, 2004**                       |   | $                               | 260,458 |                               | $      | 722,314                              |   | $                                                                | 508,618 |      | $      | (81,672 | ) | $ | 1,409,718 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Capital                Contribution from Parent            |   |                            |    |                               |   | 150,000                              |   |                                                             |    |      |   |   |   |   | 150,000 |   |
| Preferred                Stock Dividends                   |   |                            |    |                               |   |                                 |   |                                                             | (600    | )         |   |   |   |   | (600 | ) |
| Capital                Stock Expense and Other             |   |                            |    |                               |   | 2,485                                |   |                                                             | (1,340  | )         |   |   |   |   | 1,145 |   |
| **TOTAL**                                                  |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 1,560,263 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                    |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **Other                Comprehensive Loss, Net of Taxes:** |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $8,340      |   |                            |    |                               |   |                                 |   |                                                             |    |      |   | (15,490 | ) |   | (15,490 | ) |
| **NET                INCOME**                              |   |                            |    |                               |   |                                 |   |                                                             | 108,257 |      |   |   |   |   | 108,257 |   |
| **TOTAL                COMPREHENSIVE INCOME**              |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 92,767 |   |
|                                                       |   |                            |    |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2005**                      |   | $                               | 260,458 |                               | $      | 874,799                              |   | $                                                                | 614,935 |      | $      | (97,162 | ) | $ | 1,653,030 |   |

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

----

**APPALACHIAN      POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**September      30, 2005 and December 31, 2004 **

**(Unaudited)**

**(in      thousands)**

|                                                     |   | **2005**     |      | **2004**     |   |
|----------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **ELECTRIC                UTILITY PLANT**                |   |    |      |    |   |
| Production                                               |   | $            | 2,705,316 |         | $      | 2,502,273 |   |
| Transmission                                             |   |         | 1,265,837 |         |   | 1,255,390 |   |
| Distribution                                             |   |         | 2,119,502 |         |   | 2,070,377 |   |
| General                                                  |   |         | 294,533   |         |   | 302,474 |   |
| Construction                Work in Progress             |   |         | 495,661   |         |   | 399,116 |   |
| **Total**                                                |   |         | 6,880,849 |         |   | 6,529,630 |   |
| Accumulated                Depreciation and Amortization |   |         | 2,499,612 |         |   | 2,443,218 |   |
| **TOTAL                - NET**                           |   |         | 4,381,237 |         |   | 4,086,412 |   |
|                                                     |   |         |      |         |   |   |   |
| **OTHER                PROPERTY AND INVESTMENTS**        |   |         |      |         |   |   |   |
| Nonutility                Property, Net                  |   |         | 20,591    |         |   | 20,378 |   |
| Other                Investments                         |   |         | 12,898    |         |   | 18,775 |   |
| **TOTAL**                                                |   |         | 33,489    |         |   | 39,153 |   |
|                                                     |   |         |      |         |   |   |   |
| **CURRENT                ASSETS**                        |   |         |      |         |   |   |   |
| Cash                and Cash Equivalents                 |   |         | 1,565     |         |   | 536 |   |
| Other                Cash Deposits                       |   |         | 150       |         |   | 1,133 |   |
| Advances                to Affiliates                    |   |         | 67,532    |         |   | - |   |
| Accounts                Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                |   |         | 153,437   |         |   | 126,422 |   |
| Affiliated                Companies                      |   |         | 131,359   |         |   | 140,950 |   |
| Accrued                Unbilled Revenues                 |   |         | 28,824    |         |   | 51,427 |   |
| Miscellaneous                                            |   |         | 1,427     |         |   | 1,264 |   |
| Allowance                for Uncollectible Accounts      |   |         | (3,444    | )            |   | (5,561 | ) |
| Risk                Management Assets                    |   |         | 194,829   |         |   | 81,811 |   |
| Fuel                                                     |   |         | 55,537    |         |   | 45,756 |   |
| Materials                and Supplies                    |   |         | 43,330    |         |   | 45,644 |   |
| Margin                Deposits                           |   |         | 46,963    |         |   | 8,329 |   |
| Prepayments                and Other                     |   |         | 37,312    |         |   | 12,192 |   |
| **TOTAL**                                                |   |         | 758,821   |         |   | 509,903 |   |
|                                                     |   |         |      |         |   |   |   |
| **DEFERRED                DEBITS AND OTHER ASSETS**      |   |         |      |         |   |   |   |
| Regulatory                Assets:                        |   |         |      |         |   |   |   |
| SFAS                109 Regulatory Asset, Net            |   |         | 329,729   |         |   | 343,415 |   |
| Transition                Regulatory Assets              |   |         | 22,284    |         |   | 25,467 |   |
| Unamortized                Loss on Reacquired Debt       |   |         | 18,174    |         |   | 18,157 |   |
| Other                                                    |   |         | 83,747    |         |   | 36,368 |   |
| Long-term                Risk Management Assets          |   |         | 177,041   |         |   | 81,245 |   |
| Emission                Allowances                       |   |         | 49,257    |         |   | 38,931 |   |
| Deferred                Property Taxes                   |   |         | 22,489    |         |   | 37,071 |   |
| Deferred                Charges and Other                |   |         | 8,986     |         |   | 23,796 |   |
| **TOTAL**                                                |   |         | 711,707   |         |   | 604,450 |   |
|                                                     |   |         |      |         |   |   |   |
| **TOTAL                ASSETS**                          |   | $            | 5,885,254 |         | $      | 5,239,918 |   |

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

----

**APPALACHIAN      POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**CAPITALIZATION      AND LIABILITIES**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                                          |   | **2005**                          |      | **2004**     |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------------|--------|
| **CAPITALIZATION**                                                            |   | **(in                thousands)** |      |
| 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                                                |   |                              | 874,799   |         |   | 722,314 |   |
| Retained                Earnings                                              |   |                              | 614,935   |         |   | 508,618 |   |
| Accumulated                Other Comprehensive Income (Loss)                  |   |                              | (97,162   | )            |   | (81,672 | ) |
| **Total                Common Shareholder’s Equity**                    |   |                              | 1,653,030 |         |   | 1,409,718 |   |
| Cumulative                Preferred Stock Not Subject to Mandatory Redemption |   |                              | 17,784    |         |   | 17,784 |   |
| **Total                Shareholders’ Equity**                           |   |                              | 1,670,814 |         |   | 1,427,502 |   |
| Long-term                Debt:                                                |   |                              |      |         |   |   |   |
| Nonaffiliated                                                                 |   |                              | 1,951,260 |         |   | 1,254,588 |   |
| Affiliated                                                                    |   |                              | 100,000   |         |   | - |   |
| **Total                Long-term Debt**                                       |   |                              | 2,051,260 |         |   | 1,254,588 |   |
| **TOTAL**                                                                     |   |                              | 3,722,074 |         |   | 2,682,090 |   |
|                                                                          |   |                              |      |         |   |   |   |
| **CURRENT                LIABILITIES**                                        |   |                              |      |         |   |   |   |
| Long-term                Debt Due Within One Year - Nonaffiliated             |   |                              | 100,011   |         |   | 530,010 |   |
| Advances                from Affiliates                                       |   |                              | -         |         |   | 211,060 |   |
| Accounts                Payable:                                              |   |                              |      |         |   |   |   |
| General                                                                       |   |                              | 197,577   |         |   | 130,710 |   |
| Affiliated                Companies                                           |   |                              | 84,583    |         |   | 76,314 |   |
| Risk                Management Liabilities                                    |   |                              | 188,278   |         |   | 89,136 |   |
| Taxes                Accrued                                                  |   |                              | 51,382    |         |   | 90,404 |   |
| Interest                Accrued                                               |   |                              | 36,543    |         |   | 21,076 |   |
| Customer                Deposits                                              |   |                              | 95,124    |         |   | 42,822 |   |
| Obligations                Under Capital Leases                               |   |                              | 5,760     |         |   | 6,742 |   |
| Other                                                                         |   |                              | 52,353    |         |   | 56,645 |   |
| **TOTAL**                                                                     |   |                              | 811,611   |         |   | 1,254,919 |   |
|                                                                          |   |                              |      |         |   |   |   |
| **DEFERRED                CREDITS AND OTHER LIABILITIES**                     |   |                              |      |         |   |   |   |
| Deferred                Income Taxes                                          |   |                              | 855,612   |         |   | 852,536 |   |
| Regulatory                Liabilities:                                        |   |                              |      |         |   |   |   |
| Asset                Removal Costs                                            |   |                              | 92,641    |         |   | 95,763 |   |
| Over-recovery                of Fuel Cost                                     |   |                              | 52,041    |         |   | 57,843 |   |
| Deferred                Investment Tax Credits                                |   |                              | 26,981    |         |   | 30,382 |   |
| Unrealized                Gain on Forward Commitments                         |   |                              | 46,246    |         |   | 23,270 |   |
| Employee                Benefits and Pension Obligations                      |   |                              | 75,340    |         |   | 130,530 |   |
| Long-term                Risk Management Liabilities                          |   |                              | 146,721   |         |   | 57,349 |   |
| Asset                Retirement Obligations                                   |   |                              | 26,059    |         |   | 24,626 |   |
| Obligations                Under Capital Leases                               |   |                              | 9,952     |         |   | 13,136 |   |
| Deferred                Credits                                               |   |                              | 19,976    |         |   | 17,474 |   |
| **TOTAL**                                                                     |   |                              | 1,351,569 |         |   | 1,302,909 |   |
|                                                                          |   |                              |      |         |   |   |   |
| Commitments                and Contingencies (Note 5)                         |   |                              |      |         |   |   |   |
|                                                                          |   |                              |      |         |   |   |   |
| **TOTAL****CAPITALIZATION                AND LIABILITIES**                    |   | $                                 | 5,885,254 |         | $      | 5,239,918 |   |

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

----

**APPALACHIAN      POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For      the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                                                  |   | **2005**     |     | **2004**     |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|
| **OPERATING                ACTIVITIES**                                                                               |   |    |     |    |   |
| **Net                Income**                                                                                         |   | $            | 108,257  |         | $      | 125,621 |   |
| **Adjustments                to Reconcile Net Income to Net Cash Flows****From                Operating Activities:** |   |         |     |         |   |   |   |
| Depreciation                and Amortization                                                                          |   |         | 146,734  |         |   | 144,021 |   |
| Accretion                Expense                                                                                      |   |         | 1,434    |         |   | 1,298 |   |
| Deferred                Income Taxes                                                                                  |   |         | 25,103   |         |   | 31,596 |   |
| Deferred                Investment Tax Credits                                                                        |   |         | (3,401   | )            |   | 1,001 |   |
| Deferred                Property Taxes                                                                                |   |         | 14,582   |         |   | 14,574 |   |
| Pension                Contributions                                                                                  |   |         | (59,812  | )            |   | (1,047 | ) |
| Pension                and Postemployment Benefit Reserves                                                            |   |         | 4,622    |         |   | (3,869 | ) |
| Mark-to-Market                of Risk Management Contracts                                                            |   |         | (21,412  | )            |   | 18,137 |   |
| Over/Under                Fuel Recovery                                                                               |   |         | (21,001  | )            |   | (3,668 | ) |
| Carrying                Costs Income                                                                                  |   |         | (5,320   | )            |   | (187 | ) |
| Change                in Other Noncurrent Assets                                                                      |   |         | (9,584   | )            |   | (19,804 | ) |
| Change                in Other Noncurrent Liabilities                                                                 |   |         | (17,825  | )            |   | 8,608 |   |
| **Changes                in Components of Working Capital:**                                                          |   |         |     |         |   |   |   |
| Accounts                Receivable, Net                                                                               |   |         | 2,899    |         |   | 59,734 |   |
| Fuel,                Materials and Supplies                                                                           |   |         | (7,467   | )            |   | (7,810 | ) |
| Accounts                Payable                                                                                       |   |         | 58,112   |         |   | (30,112 | ) |
| Taxes                Accrued                                                                                          |   |         | (39,022  | )            |   | 30,357 |   |
| Customer                Deposits                                                                                      |   |         | 52,302   |         |   | 11,937 |   |
| Interest                Accrued                                                                                       |   |         | 15,467   |         |   | 16,707 |   |
| Other                Current Assets                                                                                   |   |         | (63,754  | )            |   | 4,629 |   |
| Other                Current Liabilities                                                                              |   |         | (5,274   | )            |   | (8,542 | ) |
| **Net                Cash Flows From Operating Activities**                                                           |   |         | 175,640  |         |   | 393,181 |   |
|                                                                                                                  |   |         |     |         |   |   |   |
| **INVESTING                ACTIVITIES**                                                                               |   |         |     |         |   |   |   |
| Construction                Expenditures                                                                              |   |         | (421,544 | )            |   | (300,068 | ) |
| Change                in Other Cash Deposits, Net                                                                     |   |         | 983      |         |   | 40,613 |   |
| Proceeds                from Sale of Assets                                                                           |   |         | 9,680    |         |   | 3,160 |   |
| **Net                Cash Flows Used For Investing Activities**                                                       |   |         | (410,881 | )            |   | (256,295 | ) |
|                                                                                                                  |   |         |     |         |   |   |   |
| **FINANCING                ACTIVITIES**                                                                               |   |         |     |         |   |   |   |
| Issuance                of Long-term Debt - Nonaffiliated                                                             |   |         | 840,469  |         |   | 125,430 |   |
| Issuance                of Long-term Debt - Affiliated                                                                |   |         | 100,000  |         |   | - |   |
| Retirement                of Long-term Debt                                                                           |   |         | (575,007 | )            |   | (106,006 | ) |
| Capital                Contribution from Parent                                                                       |   |         | 150,000  |         |   | - |   |
| Changes                in Advances to/from Affiliates, Net                                                            |   |         | (278,592 | )            |   | (106,773 | ) |
| Dividends                Paid on Cumulative Preferred Stock                                                           |   |         | (600     | )            |   | (600 | ) |
| Dividends                Paid on Common Stock                                                                         |   |         | -        |         |   | (50,000 | ) |
| **Net                Cash Flows From (Used For) Financing Activities**                                                |   |         | 236,270  |         |   | (137,949 | ) |
|                                                                                                                  |   |         |     |         |   |   |   |
| **Net                Increase (Decrease) in Cash and Cash Equivalents**                                               |   |         | 1,029    |         |   | (1,063 | ) |
| **Cash                and Cash Equivalents at Beginning of Period**                                                   |   |         | 536      |         |   | 4,561 |   |
| **Cash                and Cash Equivalents at End of Period**                                                         |   | $            | 1,565    |         | $      | 3,498 |   |

| **SUPPLEMENTAL                DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                paid (received) for interest net of capitalized amounts was $56,253,000                and $53,622,000 and for income taxes was $61,514,000 and $(831,000)                in                2005 and 2004, respectively. Noncash capital lease acquisitions in                2005                and 2004 were $1,087,000 and $2,848,000, respectively. Construction                Expenditures include the change in construction-related Accounts                Payable                of $17,024,000 and $370,000 in 2005 and 2004,                respectively. |

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

----

**APPALACHIAN      POWER COMPANY AND SUBSIDIARIES**

**INDEX      TO CONDENSED NOTES TO 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     |
| Acquisitions,                Dispositions, Asset Impairments and Assets Held for Sale | Note                7     |
| Benefit                Plans                                                          | Note                8     |
| Business                Segments                                                      | Note                9     |
| Income                Taxes                                                           | Note                10    |
| Financing                Activities                                                   | Note                11    |
| Company-wide                Staffing and Budget Review                                | Note                12    |

----

**COLUMBUS      SOUTHERN POWER COMPANY**

**AND      SUBSIDIARIES**

----

**COLUMBUS      SOUTHERN POWER COMPANY AND SUBSIDIARIES**

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

**Results      of Operations**

**Reconciliation      of Third Quarter of 2004 to Third Quarter of 2005 Net      Income**

**(in      millions)**

| **Third                Quarter of 2004 Net Income**             |   |   |   |   | $      | 53     |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                Margins                                   |   |   | 17     |   |   |   |   |
| Off-system                Sales                                 |   |   | 15     |   |   |   |   |
| Transmission                Revenues                            |   |   | (4     | )      |   |   |   |
| Other                Revenues                                   |   |   | 2      |   |   |   |   |
| **Total                Change in Gross Margin**                 |   |   |   |   |   | 30     |   |
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Asset                Impairments and Related Charges            |   |   | (39    | )      |   |   |   |
| Other                Operation and Maintenance                  |   |   | (10    | )      |   |   |   |
| Taxes                Other Than Income Taxes                    |   |   | (9     | )      |   |   |   |
| Nonoperating                Income and Expenses, Net            |   |   | 5      |   |   |   |   |
| Interest                Charges                                 |   |   | 1      |   |   |   |   |
| **Total                Change in Operating Expenses and Other** |   |   |   |   |   | (52    | )      |
|                                                            |   |   |   |   |   |   |   |
| Income                Tax Expense                               |   |   |   |   |   | 3      |   |
|                                                            |   |   |   |   |   |   |   |
| **Third                Quarter of 2005 Net Income**             |   |   |   |   | $      | 34     |   |

| · | Retail                Margins were $17 million higher than the prior period primarily due                to an                increase of 53% in cooling degree days partially offset by lower                fuel                margins.                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Off-system                Sales margins increased $15 million primarily due to increased AEP                Power                Pool physical sales and favorable optimization                activity.                                                                                                                 |
| · | Transmission                Revenues decreased $4 million primarily due to the loss of through                and out                rates, net of replacement SECA rates. See “FERC Order on Regional Through                and Out Rates” for additional discussion of these FERC rate                changes. |

| · | Asset                Impairments and Related Charges increased $39 million due to the                commitment to a plan to retire units 1 and 2 at our Conesville                Plant.  In  September, we formally requested permission                from PJM                to retire the two units effective December 29, 2005.  We received                preliminary approval on October 21, 2005.  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Other                Operation and Maintenance expenses increased $10 million due to increased                consumption of NOx                allowances, increased boiler maintenance expenses due to overhaul                work                from scheduled and forced outages, increased overhead distribution                line                expenses and increased pension costs.                                  |
| · | Taxes                Other Than Income Taxes increased $9 million due to an increase in                property tax accruals as a result of increased property values. The                increase is also a result of increased state excise taxes due to                higher                KWH sales.                                                                                                                        |
| · | Nonoperating                Income and Expenses, Net increased $5 million due to favorable                optimization activities and the establishment of a regulatory asset                for                carrying costs on environmental capital expenditures as a result                of the                rate stabilization plan order.                                                                              |

*Income      Tax*

**Reconciliation      of Nine Months Ended September 30, 2004 to**

**Nine      Months Ended September 30, 2005 Net Income**

**(in      millions)**

| **Nine                Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 128    |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                        |   |   |   |   |   |   |   |
| Retail                Margins                                      |   |   | 7      |   |   |   |   |
| Off-system                Sales                                    |   |   | 21     |   |   |   |   |
| Transmission                Revenues                               |   |   | (15    | )      |   |   |   |
| Other                Revenues                                      |   |   | 1      |   |   |   |   |
| **Total                Change in Gross Margin**                    |   |   |   |   |   | 14     |   |
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Asset                Impairments and Related Charges               |   |   | (39    | )      |   |   |   |
| Other                Operation and Maintenance                     |   |   | 1      |   |   |   |   |
| Depreciation                and Amortization                       |   |   | 8      |   |   |   |   |
| Taxes                Other Than Income Taxes                       |   |   | (10    | )      |   |   |   |
| Nonoperating                Income and Expenses, Net               |   |   | 11     |   |   |   |   |
| **Total                Change in Operating Expenses and Other**    |   |   |   |   |   | (29    | )      |
|                                                               |   |   |   |   |   |   |   |
| Income                Tax Expense                                  |   |   |   |   |   | 3      |   |
|                                                               |   |   |   |   |   |   |   |
| **Nine                Months Ended September 30, 2005 Net Income** |   |   |   |   | $      | 116    |   |

| · | Retail                Margins were $7 million higher than the prior period primarily due                to                favorable weather partially offset by lower fuel                margins.                                                                                                                             |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Off-system                Sales margins increased $21 million primarily due to increased AEP                Power                Pool physical sales and favorable optimization                activity.                                                                                                                       |
| · | Transmission                Revenues decreased $15 million primarily due to the loss of through                and                out rates, net of replacement SECA rates. See “FERC Order on Regional                Through and Out Rates” for additional discussion of these FERC rate                changes. |

| · | Asset                Impairments and Related Charges increased $39 million due to the                commitment to a plan to retire units 1 and 2 at our Conesville                Plant.  In September, we formally requested permission from                PJM to                retire two units effective December 29, 2005.  We received                preliminary approval on October 21, 2005.                                            |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation                and Amortization expense decreased $8 million primarily due to the                order                in the rate stabilization plan which resulted in a reversal of unused                shopping credits of $18 million partially offset by the establishment                of a                $7 million regulatory liability to benefit low income customers and                for                economic development. |
| · | Taxes                Other Than Income Taxes increased $10 million due to an increase                in                property tax accruals as a result of increased property values. The                increase is also a result of increased state excise taxes due to                higher                KWH sales.                                                                                                                                   |
| · | Nonoperating                Income and Expenses, Net increased $11 million due to the establishment                of                a regulatory asset for carrying costs on environmental capital                expenditures as a result of the rate stabilization plan order and                increased interest income from the corporate borrowing                program.                                                                           |

*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**

***Monongahela      Power Company***

**Critical      Accounting Estimates**

----

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

**Market      Risks**

**MTM      Risk Management Contract Net Assets**

**MTM      Risk Management Contract Net Assets**

**Nine      Months Ended September 30, 2005**

**(in      thousands**

| **Total                MTM Risk Management Contract Net Assets at December 31,                2004**                      |   | $      | 30,919 |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                Loss from Contracts Realized/Settled During the Period (a)                                          |   |   | (7,681 | )      |
| Fair                Value of New Contracts When Entered During the Period (b)                                             |   |   | 599    |   |
| Net                Option Premiums Paid/(Received) (c)                                                                    |   |   | (395   | )      |
| Change                in Fair Value Due to Valuation Methodology Changes                                                  |   |   | -      |   |
| Changes                in Fair Value of Risk Management Contracts (d)                                                     |   |   | 15,294 |   |
| Changes                in Fair Value of Risk Management Contracts Allocated to Regulated                Jurisdictions (e) |   |   | 229    |   |
| **Total                MTM Risk Management Contract Net Assets**                                                          |   |   | 38,965 |   |
| Net                Cash Flow Hedge Contracts (f)                                                                          |   |   | (8,013 | )      |
| DETM                Assignment (g)                                                                                        |   |   | (8,932 | )      |
| **Total                MTM Risk Management Contract Net Assets at September 30, 2005**                                    |   | $      | 22,020 |   |

| (a) | “(Gain)                Loss from Contracts Realized/Settled During the Period” includes realized                risk management contracts and related derivatives that settled during                2005                where we entered into the contract prior to 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                Value of New Contracts When Entered During the Period” represents the fair                value at inception of long-term contracts entered into with customers                during 2005. 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. |
| (c) | “Net                Option Premiums Paid/(Received)” reflects the net option premiums                paid/(received) as they relate to unexercised and unexpired option                contracts that were entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (d) | “Changes                in Fair Value of Risk Management Contracts” represents the fair value                change in the risk management portfolio due to market fluctuations                during                the current period. Market fluctuations are attributable to various                factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                                                                                                                                    |
| (e) | “Changes                in Fair Value of Risk Management Contracts 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 assets/liabilities                for                those subsidiaries that operate in regulated                jurisdictions.                                                                                                                                                                                                                                                                               |
| (f) | “Net                Cash Flow Hedge Contracts” (pretax) are discussed below in Accumulated                Other Comprehensive Income (Loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (g) | See                “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

**Reconciliation      of MTM Risk Management Contracts to**

**Condensed      Consolidated Balance Sheets**

**As      of September 30, 2005**

**(in      thousands)**

|                                                                                           |   | **MTM                Risk Management Contracts (a)** |     | **Cash                Flow Hedges** |   | **DETM                Assignment (b)** |   | **Total                (c)** |   |
|------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|----------|-------------------------------------|--------|----------------------------------------|--------|------------------------------|--------|
| Current                Assets                                                                  |   | $                                                    | 112,753  |                                | $      | 209                                    |   | $                            | -      |   | $ | 112,962 |   |
| Noncurrent                Assets                                                               |   |                                                 | 102,413  |                                |   | 230                                    |   |                         | -      |   |   | 102,643 |   |
| **Total                MTM Derivative Contract Assets**                                        |   |                                                 | 215,166  |                                |   | 439                                    |   |                         | -      |   |   | 215,605 |   |
|                                                                                           |   |                                                 |     |                                |   |                                   |   |                         |   |   |   |   |   |
| Current                Liabilities                                                             |   |                                                 | (98,767  | )                                   |   | (8,204                                 | )      |                         | (2,122 | ) |   | (109,093 | ) |
| Noncurrent                Liabilities                                                          |   |                                                 | (77,434  | )                                   |   | (248                                   | )      |                         | (6,810 | ) |   | (84,492 | ) |
| **Total                MTM Derivative Contract  Liabilities**                             |   |                                                 | (176,201 | )                                   |   | (8,452                                 | )      |                         | (8,932 | ) |   | (193,585 | ) |
|                                                                                           |   |                                                 |     |                                |   |                                   |   |                         |   |   |   |   |   |
| **Total                MTM Derivative Contract Net  Assets                (Liabilities)** |   | $                                                    | 38,965   |                                | $      | (8,013                                 | )      | $                            | (8,932 | ) | $ | 22,020 |   |

| (a) | Does                not include Cash Flow Hedges.                                                                                                                                                                                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | See                “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                Report.                                                                                                                                                                                                |
| (c) | Represents                amount of total MTM derivative contracts recorded within Risk Management                Assets, Long-term Risk Management Assets, Risk Management Liabilities                and                Long-term Risk Management Liabilities on our Condensed Consolidated                Balance Sheets. |

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

| · | The                source of 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 September 30, 2005**

**(in      thousands)**

|                                                                                            |   | **Remainder                of 2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **After****2009                (c)** |   | **Total                (d)** |   |
|-------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|--------------------------------------|--------|------------------------------|--------|
| Prices                Actively Quoted - Exchange Traded                Contracts                |   | $                                    | (1,427 | )        | $      | 6,865    |   | $        | 577    |     | $      | 316                                  |   | $                            | -      |   | $ | - |   | $ | 6,331 |   |
| Prices                Provided by Other External Sources                - OTC Broker Quotes (a) |   |                                 | 10,978 |     |   | 7,619    |   |     | 10,503 |     |   | 4,190                                |   |                         | 613    |   |   | - |   |   | 33,903 |   |
| Prices                Based on Models and Other Valuation                Methods (b)            |   |                                 | (1,104 | )        |   | (6,305   | )      |     | (3,717 | )        |   | 2,197                                |   |                         | 4,595  |   |   | 3,065 |   |   | (1,269 | ) |
| **Total**                                                                                       |   | $                                    | 8,447  |     | $      | 8,179    |   | $        | 7,363  |     | $      | 6,703                                |   | $                            | 5,208  |   | $ | 3,065 |   | $ | 38,965 |   |

| (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 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. |
| (c) | There                is mark-to-market value in excess of 10 percent of our total                mark-to-market value in individual periods beyond 2009. $4.4 million                of                this mark-to-market value is in 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (d) | Amounts                exclude Cash Flow Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

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

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

**Nine      Months Ended September 30, 2005**

**(in      thousands)**

|                                                         |   | **Power** |   |
|--------------------------------------------------------------|--------|-----------|--------|
| **Beginning                Balance December 31, 2004**       |   | $         | 1,393  |   |
| Changes                in Fair Value (a)                     |   |      | (4,871 | ) |
| Reclassifications                from AOCI to Net Income (b) |   |      | (1,918 | ) |
| **Ending                Balance September 30, 2005**         |   | $         | (5,396 | ) |

| (a) | “Changes                in Fair Value” shows changes in the fair value of derivatives designated                as cash flow hedges during the reporting period that are not yet                settled                at September 30, 2005. Amounts are reported net of related income                taxes.                           |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Reclassifications                from AOCI to Net Income” represents gains or losses from derivatives used                as hedging instruments in cash flow hedges that were reclassified                into net                income during the reporting period. Amounts are reported net of related                income taxes. |

**Credit      Risk**

**VaR        Associated with Risk Management Contracts**

|   | **Nine                Months Ended**  |   | **Twelve                Months Ended** |   |
|--------|---------------------------------------|--------|----------------------------------------|--------|
|   | **September                30, 2005** |   | **December                31, 2004**   |   |
|   | **(in                thousands)**     |   | **(in                thousands)**      |   |
|   | **End**                               |   | **High**                               |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |   |
|   | $503                                  |   | $686                                   |   | $323 |   | $172 |   | $332 |   | $1,083 |   | $467 |   | $160 |   |

**VaR      Associated with Debt Outstanding**

----

**COLUMBUS      SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME**

**For      the Three and Nine Months Ended September 30, 2005 and      2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                                                         |   | **Three                Months Ended** |    | **Nine                Months Ended** |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|--------------------------------------|--------|
|                                                                                                                         |   | **2005**                              |    | **2004**                             |   | **2005** |   | **2004** |   |
| **OPERATING                REVENUES**                                                                                        |   |                             |    |                            |   |   |   |   |   |
| Electric                Generation, Transmission and Distribution                                                            |   | $                                     | 425,738 |                                 | $      | 369,329 |   | $ | 1,105,863 |   | $ | 1,050,794 |   |
| Sales                to AEP Affiliates                                                                                       |   |                                  | 25,440  |                                 |   | 21,796 |   |   | 70,451 |   |   | 61,748 |   |
| **TOTAL**                                                                                                                    |   |                                  | 451,178 |                                 |   | 391,125 |   |   | 1,176,314 |   |   | 1,112,542 |   |
|                                                                                                                         |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                EXPENSES**                                                                                        |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Fuel                for Electric Generation                                                                                  |   |                                  | 62,470  |                                 |   | 49,732 |   |   | 170,380 |   |   | 142,528 |   |
| Fuel                from Affiliates for Electric Generation                                                                  |   |                                  | -       |                                 |   | - |   |   | - |   |   | 10,603 |   |
| Purchased                Electricity for Resale                                                                              |   |                                  | 9,016   |                                 |   | 5,389 |   |   | 26,922 |   |   | 14,839 |   |
| Purchased                Electricity from AEP Affiliates                                                                     |   |                                  | 109,274 |                                 |   | 96,193 |   |   | 284,221 |   |   | 263,614 |   |
| Other                Operation                                                                                               |   |                                  | 66,217  |                                 |   | 60,657 |   |   | 173,287 |   |   | 177,920 |   |
| Maintenance                                                                                                                  |   |                                  | 21,863  |                                 |   | 17,417 |   |   | 63,947 |   |   | 60,187 |   |
| Asset                Impairments and Other Related Charges                                                                   |   |                                  | 39,109  |                                 |   | - |   |   | 39,109 |   |   | - |   |
| Depreciation                and Amortization                                                                                 |   |                                  | 37,454  |                                 |   | 37,933 |   |   | 102,985 |   |   | 111,196 |   |
| Taxes                Other Than Income Taxes                                                                                 |   |                                  | 43,342  |                                 |   | 34,017 |   |   | 112,417 |   |   | 102,069 |   |
| Income                Taxes                                                                                                  |   |                                  | 19,432  |                                 |   | 24,525 |   |   | 57,901 |   |   | 65,187 |   |
| **TOTAL**                                                                                                                    |   |                                  | 408,177 |                                 |   | 325,863 |   |   | 1,031,169 |   |   | 948,143 |   |
|                                                                                                                         |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                INCOME**                                                                                          |   |                                  | 43,001  |                                 |   | 65,262 |   |   | 145,145 |   |   | 164,399 |   |
|                                                                                                                         |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Nonoperating                Income                                                                                           |   |                                  | 4,865   |                                 |   | 1,681 |   |   | 10,653 |   |   | 7,298 |   |
| Carrying                Costs Income                                                                                         |   |                                  | 1,800   |                                 |   | 127 |   |   | 8,716 |   |   | 358 |   |
| Nonoperating                Expenses                                                                                         |   |                                  | 427     |                                 |   | 444 |   |   | 2,169 |   |   | 2,037 |   |
| Nonoperating                Income Tax Expense (Credit)                                                                      |   |                                  | 1,506   |                                 |   | (383 | ) |   | 3,913 |   |   | (92 | ) |
| Interest                Charges                                                                                              |   |                                  | 13,508  |                                 |   | 14,439 |   |   | 42,088 |   |   | 41,666 |   |
|                                                                                                                         |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **NET                INCOME**                                                                                                |   |                                  | 34,225  |                                 |   | 52,570 |   |   | 116,344 |   |   | 128,444 |   |
|                                                                                                                         |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Preferred                Stock Dividend Requirements including Capital Stock                  Expense and Other Expense |   |                                  | 254     |                                 |   | 254 |   |   | 2,366 |   |   | 762 |   |
|                                                                                                                         |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **EARNINGS                APPLICABLE TO COMMON STOCK**                                                                       |   | $                                     | 33,971  |                                 | $      | 52,316 |   | $ | 113,978 |   | $ | 127,682 |   |

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

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

----

**COLUMBUS      SOUTHERN POWER COMPANY AND SUBSIDIARIES**

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

**EQUITY      AND COMPREHENSIVE INCOME (LOSS)**

**For      the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                       |   | **Common                Stock** |   | **Paid-in                Capital** |   | **Retained                Earnings** |   | **Accumulated                Other Comprehensive Income (Loss)** |    | **Total** |   |
|------------------------------------------------------------|--------|---------------------------------|--------|------------------------------------|--------|--------------------------------------|--------|------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                31, 2003**                       |   | $                               | 41,026 |                               | $      | 576,400                              |   | $                                                                | 326,782 |      | $      | (46,327 | ) | $ | 897,881 |   |
|                                                       |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Common                Stock Dividends                      |   |                            |   |                               |   |                                 |   |                                                             | (93,750 | )         |   |   |   |   | (93,750 | ) |
| Capital                Stock Expense                       |   |                            |   |                               |   | 762                                  |   |                                                             | (762    | )         |   |   |   |   | - |   |
| **TOTAL**                                                  |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 804,131 |   |
|                                                       |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                    |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **Other                Comprehensive Loss, Net of Taxes:** |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $1,248      |   |                            |   |                               |   |                                 |   |                                                             |    |      |   | (2,317 | ) |   | (2,317 | ) |
| **NET                INCOME**                              |   |                            |   |                               |   |                                 |   |                                                             | 128,444 |      |   |   |   |   | 128,444 |   |
| **TOTAL                COMPREHENSIVE INCOME**              |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 126,127 |   |
|                                                       |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2004**                      |   | $                               | 41,026 |                               | $      | 577,162                              |   | $                                                                | 360,714 |      | $      | (48,644 | ) | $ | 930,258 |   |
|                                                       |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **DECEMBER                31, 2004**                       |   | $                               | 41,026 |                               | $      | 577,415                              |   | $                                                                | 341,025 |      | $      | (60,816 | ) | $ | 898,650 |   |
|                                                       |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Common                Stock Dividends                      |   |                            |   |                               |   |                                 |   |                                                             | (85,500 | )         |   |   |   |   | (85,500 | ) |
| Capital                Stock Expense and Other             |   |                            |   |                               |   | 2,366                                |   |                                                             | (2,366  | )         |   |   |   |   | - |   |
| **TOTAL**                                                  |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 813,150 |   |
|                                                       |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                    |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **Other                Comprehensive Loss, Net of Taxes:** |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $3,655      |   |                            |   |                               |   |                                 |   |                                                             |    |      |   | (6,789 | ) |   | (6,789 | ) |
| **NET                INCOME**                              |   |                            |   |                               |   |                                 |   |                                                             | 116,344 |      |   |   |   |   | 116,344 |   |
| **TOTAL                COMPREHENSIVE INCOME**              |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 109,555 |   |
|                                                       |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2005**                      |   | $                               | 41,026 |                               | $      | 579,781                              |   | $                                                                | 369,503 |      | $      | (67,605 | ) | $ | 922,705 |   |

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

----

**COLUMBUS      SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

**(in      thousands)**

|                                                     |   | **2005**     |      | **2004**     |   |
|----------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **ELECTRIC                UTILITY PLANT**                |   |    |      |    |   |
| Production                                               |   | $            | 1,849,869 |         | $      | 1,658,552 |   |
| Transmission                                             |   |         | 446,356   |         |   | 432,714 |   |
| Distribution                                             |   |         | 1,325,806 |         |   | 1,300,252 |   |
| General                                                  |   |         | 161,915   |         |   | 167,985 |   |
| Construction                Work in Progress             |   |         | 120,624   |         |   | 131,743 |   |
| **Total**                                                |   |         | 3,904,570 |         |   | 3,691,246 |   |
| Accumulated                Depreciation and Amortization |   |         | 1,479,077 |         |   | 1,471,950 |   |
| **TOTAL                - NET**                           |   |         | 2,425,493 |         |   | 2,219,296 |   |
|                                                     |   |         |      |         |   |   |   |
| **OTHER                PROPERTY AND INVESTMENTS**        |   |         |      |         |   |   |   |
| Nonutility                Property, Net                  |   |         | 21,780    |         |   | 22,322 |   |
| Other                Investments                         |   |         | 4,094     |         |   | 5,147 |   |
| **TOTAL**                                                |   |         | 25,874    |         |   | 27,469 |   |
|                                                     |   |         |      |         |   |   |   |
| **CURRENT                ASSETS**                        |   |         |      |         |   |   |   |
| Cash                and Cash Equivalents                 |   |         | 1,068     |         |   | 25 |   |
| Other                Cash Deposits                       |   |         | -         |         |   | 33 |   |
| Advances                to Affiliates                    |   |         | -         |         |   | 141,550 |   |
| Accounts                Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                |   |         | 46,411    |         |   | 41,130 |   |
| Affiliated                Companies                      |   |         | 73,450    |         |   | 72,854 |   |
| Accrued                Unbilled Revenues                 |   |         | 19,987    |         |   | 19,580 |   |
| Miscellaneous                                            |   |         | 2,432     |         |   | 1,145 |   |
| Allowance                for Uncollectible Accounts      |   |         | (498      | )            |   | (674 | ) |
| Fuel                                                     |   |         | 29,054    |         |   | 34,026 |   |
| Materials                and Supplies                    |   |         | 25,861    |         |   | 37,137 |   |
| Risk                Management Assets                    |   |         | 112,962   |         |   | 46,631 |   |
| Margin                Deposits                           |   |         | 27,230    |         |   | 4,848 |   |
| Prepayments                and Other                     |   |         | 17,501    |         |   | 11,499 |   |
| **TOTAL**                                                |   |         | 355,458   |         |   | 409,784 |   |
|                                                     |   |         |      |         |   |   |   |
| **DEFERRED                DEBITS AND OTHER ASSETS**      |   |         |      |         |   |   |   |
| Regulatory                Assets:                        |   |         |      |         |   |   |   |
| SFAS                109 Regulatory Asset, Net            |   |         | 18,131    |         |   | 16,481 |   |
| Transition                Regulatory Assets              |   |         | 151,851   |         |   | 156,676 |   |
| Unamortized                Loss on Reacquired Debt       |   |         | 12,581    |         |   | 13,155 |   |
| Other                                                    |   |         | 42,223    |         |   | 25,691 |   |
| Long-term                Risk Management Assets          |   |         | 102,643   |         |   | 46,735 |   |
| Deferred                Property Taxes                   |   |         | 17,711    |         |   | 64,754 |   |
| Deferred                Charges and Other                |   |         | 50,807    |         |   | 49,855 |   |
| **TOTAL**                                                |   |         | 395,947   |         |   | 373,347 |   |
|                                                     |   |         |      |         |   |   |   |
| **TOTAL                ASSETS**                          |   | $            | 3,202,772 |         | $      | 3,029,896 |   |

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

----

**COLUMBUS      SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**CAPITALIZATION**
**      AND LIABILITIES**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                              |   | **2005**                          |      | **2004**     |   |
|-------------------------------------------------------------------|--------|-----------------------------------|-----------|--------------|--------|
| **CAPITALIZATION**                                                |   | **(in                thousands)** |      |
| Common                Shareholder’s Equity:                 |   |                         |      |    |   |
| Common                Stock - No par value:                       |   |                              |      |         |   |   |   |
|  Authorized                - 24,000,000 shares               |   |                              |      |         |   |   |   |
|  Outstanding                - 16,410,426 shares              |   | $                                 | 41,026    |         | $      | 41,026 |   |
| Paid-in                Capital                                    |   |                              | 579,781   |         |   | 577,415 |   |
| Retained                Earnings                                  |   |                              | 369,503   |         |   | 341,025 |   |
| Accumulated                Other Comprehensive Income (Loss)      |   |                              | (67,605   | )            |   | (60,816 | ) |
| **Total                Common Shareholder’s Equity**        |   |                              | 922,705   |         |   | 898,650 |   |
| Preferred                Stock - No Shares Outstanding            |   |                              | -         |         |   | - |   |
| Authorized                - 2,500,000 shares at $100 par value    |   |                              |      |         |   |   |   |
| Authorized                - 7,000,000 shares at $25 par value     |   |                              |      |         |   |   |   |
| **Total                Shareholder’s Equity**               |   |                              | 922,705   |         |   | 898,650 |   |
| Long-term                Debt:                                    |   |                              |      |         |   |   |   |
| Nonaffiliated                                                     |   |                              | 851,822   |         |   | 851,626 |   |
| Affiliated                                                        |   |                              | 100,000   |         |   | 100,000 |   |
| **Total                Long-term Debt**                           |   |                              | 951,822   |         |   | 951,626 |   |
| **TOTAL**                                                         |   |                              | 1,874,527 |         |   | 1,850,276 |   |
|                                                              |   |                              |      |         |   |   |   |
| **CURRENT                LIABILITIES**                            |   |                              |      |         |   |   |   |
| Long-term                Debt Due Within One Year - Nonaffiliated |   |                              | 36,000    |         |   | 36,000 |   |
| Advances                from Affiliates                           |   |                              | 138,541   |         |   | - |   |
| Accounts                Payable:                                  |   |                              |      |         |   |   |   |
| General                                                           |   |                              | 57,904    |         |   | 63,606 |   |
| Affiliated                Companies                               |   |                              | 53,489    |         |   | 45,745 |   |
| Customer                Deposits                                  |   |                              | 55,651    |         |   | 24,890 |   |
| Taxes                Accrued                                      |   |                              | 102,791   |         |   | 195,284 |   |
| Interest                Accrued                                   |   |                              | 8,300     |         |   | 16,320 |   |
| Risk                Management Liabilities                        |   |                              | 109,093   |         |   | 42,172 |   |
| Obligations                Under Capital Leases                   |   |                              | 3,057     |         |   | 3,854 |   |
| Other                                                             |   |                              | 22,875    |         |   | 24,338 |   |
| **TOTAL**                                                         |   |                              | 587,701   |         |   | 452,209 |   |
|                                                              |   |                              |      |         |   |   |   |
| **DEFERRED                CREDITS AND OTHER LIABILITIES**         |   |                              |      |         |   |   |   |
| Deferred                Income Taxes                              |   |                              | 437,994   |         |   | 464,545 |   |
| Regulatory                Liabilities:                            |   |                              |      |         |   |   |   |
| Asset                Removal Costs                                |   |                              | 108,265   |         |   | 103,104 |   |
| Deferred                Investment Tax Credits                    |   |                              | 25,953    |         |   | 27,933 |   |
| Other                                                             |   |                              | 24,009    |         |   | - |   |
| Employee                Benefits and Pension Obligations          |   |                              | 25,321    |         |   | 62,778 |   |
| Long-term                Risk Management Liabilities              |   |                              | 84,492    |         |   | 32,731 |   |
| Obligations                Under Capital Leases                   |   |                              | 6,873     |         |   | 8,660 |   |
| Asset                Retirement Obligations                       |   |                              | 12,222    |         |   | 11,585 |   |
| Deferred                Credits and Other                         |   |                              | 15,415    |         |   | 16,075 |   |
| **TOTAL**                                                         |   |                              | 740,544   |         |   | 727,411 |   |
|                                                              |   |                              |      |         |   |   |   |
| Commitments                and Contingencies (Note 5)             |   |                              |      |         |   |   |   |
|                                                              |   |                              |      |         |   |   |   |
| **TOTAL                CAPITALIZATION****AND LIABILITIES**        |   | $                                 | 3,202,772 |         | $      | 3,029,896 |   |
|                                                              |   |                              |      |         |   |   |   |

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

----

**COLUMBUS      SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For      the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                                                  |   | **2005**     |     | **2004**     |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|
| **OPERATING                ACTIVITIES**                                                                               |   |    |     |    |   |
| **Net                Income**                                                                                         |   | $            | 116,344  |         | $      | 128,444 |   |
| **Adjustments                to Reconcile Net Income to Net Cash Flows****From                Operating Activities:** |   |         |     |         |   |   |   |
| Depreciation                and Amortization                                                                          |   |         | 102,985  |         |   | 111,196 |   |
| Deferred                Income Taxes                                                                                  |   |         | (9,441   | )            |   | 10,210 |   |
| Deferred                Investment Tax Credits                                                                        |   |         | (1,980   | )            |   | (2,133 | ) |
| Impairment                of Long-Lived Assets                                                                        |   |         | 39,109   |         |   | - |   |
| Pension                and Postemployment Benefit Reserves                                                            |   |         | 374      |         |   | (1,894 | ) |
| Deferred                Property Taxes                                                                                |   |         | 47,640   |         |   | 46,512 |   |
| Mark-to-Market                of Risk Management Contracts                                                            |   |         | (12,768  | )            |   | 10,130 |   |
| Carrying                Costs Income                                                                                  |   |         | (8,716   | )            |   | (358 | ) |
| Pension                Contributions                                                                                  |   |         | (37,831  | )            |   | (24 | ) |
| Gain                on Sale of Assets                                                                                 |   |         | (1,560   | )            |   | (2,315 | ) |
| Change                in Other Noncurrent Assets                                                                      |   |         | (20,439  | )            |   | (33,811 | ) |
| Change                in Other Noncurrent Liabilities                                                                 |   |         | 13,710   |         |   | 7,362 |   |
| **Changes                in Components of Working Capital:**                                                          |   |         |     |         |   |   |   |
| Accounts                Receivable, Net                                                                               |   |         | (7,747   | )            |   | 24,242 |   |
| Fuel,                Materials and Supplies                                                                           |   |         | 19,345   |         |   | (13,545 | ) |
| Accounts                Payable                                                                                       |   |         | 3,023    |         |   | (13,269 | ) |
| Taxes                Accrued                                                                                          |   |         | (94,788  | )            |   | 2,115 |   |
| Customer                Deposits                                                                                      |   |         | 30,761   |         |   | 6,684 |   |
| Interest                Accrued                                                                                       |   |         | (8,020   | )            |   | (8,640 | ) |
| Other                Current Assets                                                                                   |   |         | (28,384  | )            |   | 2,958 |   |
| Other                Current Liabilities                                                                              |   |         | (3,259   | )            |   | (2,903 | ) |
| **Net                Cash Flows From Operating Activities**                                                           |   |         | 138,358  |         |   | 270,961 |   |
|                                                                                                                  |   |         |     |         |   |   |   |
| **INVESTING                ACTIVITIES**                                                                               |   |         |     |         |   |   |   |
| Construction                Expenditures                                                                              |   |         | (118,222 | )            |   | (103,257 | ) |
| Change                in Other Cash Deposits, Net                                                                     |   |         | 33       |         |   | 666 |   |
| Purchase                of Waterford Plant                                                                            |   |         | (218,356 | )            |   | - |   |
| Proceeds                from Sale of Assets                                                                           |   |         | 4,639    |         |   | 3,392 |   |
| **Net                Cash Flows Used For Investing Activities**                                                       |   |         | (331,906 | )            |   | (99,199 | ) |
|                                                                                                                  |   |         |     |         |   |   |   |
| **FINANCING                ACTIVITIES**                                                                               |   |         |     |         |   |   |   |
| Changes                in Advances to/from Affiliates, Net                                                            |   |         | 280,091  |         |   | (164,888 | ) |
| Dividends                Paid on Common Stock                                                                         |   |         | (85,500  | )            |   | (93,750 | ) |
| Issuance                of Long-term Debt - Nonaffiliated                                                             |   |         | -        |         |   | 90,057 |   |
| Issuance                of Long-term Debt - Affiliated                                                                |   |         | -        |         |   | 100,000 |   |
| Retirement                of Long-term Debt                                                                           |   |         | -        |         |   | (103,245 | ) |
| **Net                Cash Flows From (Used For) Financing Activities**                                                |   |         | 194,591  |         |   | (171,826 | ) |
|                                                                                                                  |   |         |     |         |   |   |   |
| **Net                Increase (Decrease) in Cash and Cash Equivalents**                                               |   |         | 1,043    |         |   | (64 | ) |
| **Cash                and Cash Equivalents at Beginning of Period**                                                   |   |         | 25       |         |   | 3,377 |   |
| **Cash                and Cash Equivalents at End of Period**                                                         |   | $            | 1,068    |         | $      | 3,313 |   |

| **SUPPLEMENTAL                DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                paid (received) for interest net of capitalized amounts was $50,095,000                and $46,034,000 and for income taxes was $109,382,000 and $(5,282,000)                in                2005 and 2004, respectively. Noncash capital lease acquisitions were                $520,000 and $731,000 in 2005 and 2004, respectively. Construction                Expenditures include the change in construction-related Accounts                Payable                of $(981,000) and $(2,266,000) in 2005 and 2004, respectively. In                connection with the acquisition of the Waterford Plant in September                2005,                we assumed $2,295,000 of                liabilities. |

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

----

**COLUMBUS      SOUTHERN POWER COMPANY AND SUBSIDIARIES**

**INDEX      TO CONDENSED NOTES TO 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     |
| Acquisitions,                Dispositions, Asset Impairments and Assets Held for Sale | Note                7     |
| Benefit                Plans                                                          | Note                8     |
| Business                Segments                                                      | Note                9     |
| Income                Taxes                                                           | Note                10    |
| Financing                Activities                                                   | Note                11    |
| Company-wide                Staffing and Budget Review                                | Note                12    |

----

**INDIANA      MICHIGAN POWER COMPANY**

**AND      SUBSIDIARIES**

----

**INDIANA      MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**MANAGEMENT’S      FINANCIAL DISCUSSION AND ANALYSIS**

**Results      of Operations**

**Reconciliation      of Third Quarter of 2004 to Third Quarter of 2005 Net      Income**

**(in      millions)**

| **Third                Quarter of 2004 Net Income**             |   |   |   |   | $      | 52     |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                Margins                                   |   |   | 32     |   |   |   |   |
| Transmission                Revenues                            |   |   | (6     | )      |   |   |   |
| **Total                Change in Gross Margin**                 |   |   |   |   |   | 26     |   |
|                                                            |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                  |   |   | (17    | )      |   |   |   |
| Taxes                Other Than Income Taxes                    |   |   | (7     | )      |   |   |   |
| Nonoperating                Income and Expenses, Net            |   |   | 4      |   |   |   |   |
| **Total                Change in Operating Expenses and Other** |   |   |   |   |   | (20    | )      |
|                                                            |   |   |   |   |   |   |   |
| Income                Tax Expense                               |   |   |   |   |   | (5     | )      |
|                                                            |   |   |   |   |   |   |   |
| **Third                Quarter of 2005 Net Income**             |   |   |   |   | $      | 53     |   |

| · | Retail                Margins increased $32 million primarily due to increases in retail                sales                to residential and commercial customers and capacity settlement payments                received under the Interconnection Agreement related to the increase                in an                affiliate’s peak load. Increased retail sales primarily reflect warmer                summer weather. Cooling degree days were 17% higher than normal and                67%                higher than 2004. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission                Revenues decreased $6 million primarily due to the loss of through                and out                rates, net of replacement SECA rates. See “FERC Order on Regional Through                and Out Rates” for additional discussion of these FERC rate                changes.                                                                                                                                                                                                                     |

| · | Other                Operation and Maintenance expenses increased $17 million primarily                due to                a $9 million increase related to higher costs of labor and allowances                for                power generation and a $4 million increase in distribution maintenance                expense for overhead power lines. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Taxes                Other Than Income Taxes increased due to a $5 million increase in                real                & personal property taxes and a $2 million increase in payroll-related                taxes related to higher labor costs.                                                                                                     |
| · | Nonoperating                Income and Expenses, Net increased due to $3 million of favorable                results                from favorable optimization                activities.                                                                                                                                                              |

*Income      Tax*

**Reconciliation      of Nine Months Ended September 30, 2004 to**

**Nine      Months Ended September 30, 2005 Net Income**

**(in      millions)**

| **Nine                Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 122    |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Gross Margin:**                        |   |   |   |   |   |   |   |
| Retail                Margins                                      |   |   | 48     |   |   |   |   |
| Transmission                Revenues                               |   |   | (17    | )      |   |   |   |
| Off-system                Sales and Other Revenues                 |   |   | 2      |   |   |   |   |
| **Total                Change in Gross Margin**                    |   |   |   |   |   | 33     |   |
|                                                               |   |   |   |   |   |   |   |
| **Changes                in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Other                Operation and Maintenance                     |   |   | (20    | )      |   |   |   |
| Taxes                Other Than Income Taxes                       |   |   | (9     | )      |   |   |   |
| Interest                Charges                                    |   |   | 4      |   |   |   |   |
| **Total                Change in Operating Expenses and Other**    |   |   |   |   |   | (25    | )      |
|                                                               |   |   |   |   |   |   |   |
| Income                Tax Expense                                  |   |   |   |   |   | (2     | )      |
|                                                               |   |   |   |   |   |   |   |
| **Nine                Months Ended September 30, 2005 Net Income** |   |   |   |   | $      | 128    |   |

| · | Retail                Margins increased $48 million primarily due to a $33 million increase                in                capacity settlement payments received under the Interconnection Agreement                related to the increase in an affiliate’s peak load and higher                residential revenue of $20 million reflecting warm summer weather                partially offset by an increase in unrecovered fuel costs due to                fuel caps                in our Indiana jurisdiction. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission                Revenues decreased $17 million primarily due to the loss of through                and                out rates, net of replacement SECA rates. See “FERC Order on Regional                Through and Out Rates” for additional discussion of these FERC rate                change                                                                                                                                                                                                          |

| · | Other                Operation and Maintenance expenses increased $20 million primarily                due to                a $9 million increase in distribution maintenance mainly related                to                January 2005 storm damage, a $5 million increase in system dispatch                costs                related to our operation in PJM and $4 million of accruals for employee                severance costs partially offset by the settlement and cancellation                of                COLI policies in February 2005. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Taxes                Other Than Income Taxes increased $9 million primarily due to a $6                million                increase in real and personal property taxes and a $3 million increase                in                payroll-related taxes.                                                                                                                                                                                                                                                                                                       |
| · | Interest                Charges decreased $4 million primarily due to lower long-term debt                outstanding and lower interest                rates.                                                                                                                                                                                                                                                                                                                                                                                                     |

*Income      Tax*

**Financial      Condition**

**Credit      Ratings**

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

**Cash      Flow**

|                                                                |   | **2005**                          |     | **2004** |   |
|---------------------------------------------------------------------|--------|-----------------------------------|----------|----------|--------|
|                                                                |   | **(in                thousands)** |     |
| **Cash                and Cash Equivalents at Beginning of Period** |   | $                                 | 465      |     | $      | 3,899 |   |
| Cash                Flows From (Used For):                          |   |                              |     |     |   |   |   |
| Operating                Activities                                 |   |                              | 204,343  |     |   | 414,654 |   |
| Investing                Activities                                 |   |                              | (176,571 | )        |   | (129,398 | ) |
| Financing                Activities                                 |   |                              | (27,506  | )        |   | (286,774 | ) |
| Net                Increase (Decrease) in Cash and Cash Equivalents |   |                              | 266      |     |   | (1,518 | ) |
| **Cash                and Cash Equivalents at End of Period**       |   | $                                 | 731      |     | $      | 2,381 |   |

*Operating      Activities*

*Investing      Activities*

*Financing      Activities*

**Liquidity**

**Off-Balance      Sheet Arrangements**

**Summary      Obligation Information**

**Significant      Factors**

***Nuclear      Licenses***

***Spent      Nuclear Fuel Litigation***

***Indiana      Settlement Agreement***

**Critical      Accounting Estimates**

----

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

**Market      Risks**

**MTM      Risk Management Contract Net Assets**

**MTM      Risk Management Contract Net Assets**

**Nine      Months Ended September 30, 2005**

**(in      thousands)**

| **Total                MTM Risk Management Contract Net Assets at December 31,                2004**                      |   | $      | 34,573 |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                Loss from Contracts Realized/Settled During the Period (a)                                          |   |   | 216    |   |
| Fair                Value of New Contracts When Entered During the Period (b)                                             |   |   | -      |   |
| Net                Option Premiums Paid/(Received) (c)                                                                    |   |   | (648   | )      |
| Change                in Fair Value Due to Valuation Methodology Changes                                                  |   |   | -      |   |
| Changes                in Fair Value of Risk Management Contracts (d)                                                     |   |   | 1,330  |   |
| Changes                in Fair Value of Risk Management Contracts Allocated to Regulated                Jurisdictions (e) |   |   | 4,234  |   |
| **Total                MTM Risk Management Contract Net Assets**                                                     |   |   | 39,705 |   |
| Net                Cash Flow and                Fair Value Hedge                Contracts (f)                             |   |   | (6,813 | )      |
| DETM                Assignment (g)                                                                                        |   |   | (9,123 | )      |
| **Total                MTM Risk Management Contract Net Assets at September 30, 2005**                                    |   | $      | 23,769 |   |

| (a) | “(Gain)                Loss from Contracts Realized/Settled During the Period” includes realized                risk management contracts and related derivatives that settled during                2005                where                we entered into the contract prior                to 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                Value of New Contracts When Entered During the Period” represents the fair                value at inception of long-term contracts entered into with customers                during 2005. 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. |
| (c) | “Net                Option Premiums Paid/(Received)” reflects the net option premiums                paid/(received) as they relate to unexercised and unexpired option                contracts that were entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (d) | “Changes                in Fair Value of Risk Management Contracts” represents the fair value                change in the risk management portfolio due to market fluctuations                during                the current period. Market fluctuations are attributable to various                factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                                                                                                                                    |
| (e) | “Changes                in Fair Value of Risk Management Contracts 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 assets/liabilities                for                those subsidiaries that operate in regulated                jurisdictions.                                                                                                                                                                                                                                                                               |
| (f) | “Net                Cash Flow and                Fair Value Hedge                Contracts” (pretax) are discussed below in Accumulated Other Comprehensive                Income (Loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (g) | See                “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

**Reconciliation      of MTM Risk Management Contracts to**

**Condensed      Consolidated Balance Sheets**

**As      of September 30, 2005**

**(in      thousands)**

|                                                                      |   | **MTM                Risk Management Contracts (a)** |     | **Hedges** |   | **DETM                Assignment (b)** |   | **Total                (c)** |   |
|---------------------------------------------------------------------------|--------|------------------------------------------------------|----------|------------|--------|----------------------------------------|--------|------------------------------|--------|
| Current                Assets                                             |   | $                                                    | 115,223  |       | $      | 2,146                                  |   | $                            | -      |   | $ | 117,369 |   |
| Noncurrent                Assets                                          |   |                                                 | 105,169  |       |   | 235                                    |   |                         | -      |   |   | 105,404 |   |
| **Total                MTM Derivative Contract Assets**                   |   |                                                 | 220,392  |       |   | 2,381                                  |   |                         | -      |   |   | 222,773 |   |
|                                                                      |   |                                                 |     |       |   |                                   |   |                         |   |   |   |   |   |
| Current                Liabilities                                        |   |                                                 | (101,169 | )          |   | (8,697                                 | )      |                         | (2,167 | ) |   | (112,033 | ) |
| Noncurrent                Liabilities                                     |   |                                                 | (79,518  | )          |   | (497                                   | )      |                         | (6,956 | ) |   | (86,971 | ) |
| **Total                MTM Derivative Contract Liabilities**              |   |                                                 | (180,687 | )          |   | (9,194                                 | )      |                         | (9,123 | ) |   | (199,004 | ) |
|                                                                      |   |                                                 |     |       |   |                                   |   |                         |   |   |   |   |   |
| **Total                MTM Derivative Contract Net Assets (Liabilities)** |   | $                                                    | 39,705   |       | $      | (6,813                                 | )      | $                            | (9,123 | ) | $ | 23,769 |   |

| (a) | Does                not include Cash Flow and Fair Value Hedges.                                                                                                                                                                                                                                                             |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | See                “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                Report.                                                                                                                                                                                                |
| (c) | Represents                amount of total MTM derivative contracts recorded within Risk Management                Assets, Long-term Risk Management Assets, Risk Management Liabilities                and                Long-term Risk Management Liabilities on our Condensed Consolidated                Balance Sheets. |

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

| · | The                source of 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 September 30, 2005**

**(in      thousands)**

|                                                                                            |   | **Remainder                of 2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **After****2009                (c)** |   | **Total                (d)** |   |
|-------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|--------------------------------------|--------|------------------------------|--------|
| Prices                Actively Quoted - Exchange Traded                Contracts                |   | $                                    | (1,458 | )        | $      | 7,012    |   | $        | 590    |     | $      | 323                                  |   | $                            | -      |   | $ | - |   | $ | 6,467 |   |
| Prices                Provided by Other External Sources                - OTC Broker Quotes (a) |   |                                 | 11,152 |     |   | 7,712    |   |     | 11,045 |     |   | 4,280                                |   |                         | 626    |   |   | - |   |   | 34,815 |   |
| Prices                Based on Models and Other Valuation                Methods (b)            |   |                                 | (1,129 | )        |   | (6,605   | )      |     | (3,856 | )        |   | 2,189                                |   |                         | 4,694  |   |   | 3,130 |   |   | (1,577 | ) |
| **Total**                                                                                       |   | $                                    | 8,565  |     | $      | 8,119    |   | $        | 7,779  |     | $      | 6,792                                |   | $                            | 5,320  |   | $ | 3,130 |   | $ | 39,705 |   |

| (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 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. |
| (c) | There                is mark-to-market value in excess of 10 percent of our total                mark-to-market value in individual periods beyond 2009. $4.4 million                of                this mark-to-market value is in 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (d) | Amounts                exclude Cash Flow and Fair Value                Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

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

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

**Nine      Months Ended September 30, 2005**

**(in      thousands)**

|                                                                             |   | **Power** |   | **Interest                Rate** |   | **Total** |   |
|----------------------------------------------------------------------------------|--------|-----------|--------|----------------------------------|--------|-----------|--------|
| **Beginning                Balance December 31, 2004**                           |   | $         | 1,558  |                             | $      | (5,634    | )      | $ | (4,076 | ) |
| Changes                in Fair Value (a)                                         |   |      | (4,907 | )                                |   | 1,256     |   |   | (3,651 | ) |
| Reclassifications                from AOCI to Net Income                (b) |   |      | (2,162 | )                                |   | 428       |   |   | (1,734 | ) |
| **Ending                Balance September 30, 2005**                             |   | $         | (5,511 | )                                | $      | (3,950    | )      | $ | (9,461 | ) |

| (a) | “Changes                in Fair Value” shows changes in the fair value of derivatives designated                as cash flow hedges during the reporting period that are not yet                settled                at September 30, 2005. Amounts are reported net of related income                taxes.                           |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Reclassifications                from AOCI to Net Income” represents gains or losses from derivatives used                as hedging instruments in cash flow hedges that were reclassified                into net                income during the reporting period. Amounts are reported net of related                income taxes. |

**Credit      Risk**

**VaR        Associated with Risk Management Contracts**

|   | **Nine                Months Ended**  |   | **Twelve                Months Ended** |   |
|--------|---------------------------------------|--------|----------------------------------------|--------|
|   | **September                30, 2005** |   | **December                31, 2004**   |   |
|   | **(in                thousands)**     |   | **(in                thousands)**      |   |
|   | **End**                               |   | **High**                               |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |   |
|   | $514                                  |   | $701                                   |   | $330 |   | $176 |   | $371 |   | $1,211 |   | $522 |   | $178 |   |

**VaR      Associated with Debt Outstanding**

----

**INDIANA      MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME**

**For      the Three and Nine Months Ended September 30, 2005 and      2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                                       |   | **Three                Months Ended** |    | **Nine                Months Ended** |   |
|------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|--------------------------------------|--------|
|                                                                                                       |   | **2005**                              |    | **2004**                             |   | **2005** |   | **2004** |   |
| **OPERATING                REVENUES**                                                                      |   |                             |    |                            |   |   |   |   |   |
| Electric                Generation, Transmission and Distribution                                          |   | $                                     | 409,282 |                                 | $      | 372,556 |   | $ | 1,128,374 |   | $ | 1,067,144 |   |
| Sales                to AEP Affiliates                                                                     |   |                                  | 84,207  |                                 |   | 70,378 |   |   | 244,616 |   |   | 193,048 |   |
| **TOTAL**                                                                                                  |   |                                  | 493,489 |                                 |   | 442,934 |   |   | 1,372,990 |   |   | 1,260,192 |   |
|                                                                                                       |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                EXPENSES**                                                                      |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Fuel                for Electric Generation                                                                |   |                                  | 89,334  |                                 |   | 75,086 |   |   | 245,500 |   |   | 204,709 |   |
| Purchased                Electricity for Resale                                                            |   |                                  | 11,784  |                                 |   | 10,063 |   |   | 35,786 |   |   | 22,617 |   |
| Purchased                Electricity from AEP Affiliates                                                   |   |                                  | 82,763  |                                 |   | 74,498 |   |   | 228,756 |   |   | 203,291 |   |
| Other                Operation                                                                             |   |                                  | 109,210 |                                 |   | 100,535 |   |   | 300,212 |   |   | 307,501 |   |
| Maintenance                                                                                                |   |                                  | 42,300  |                                 |   | 33,737 |   |   | 144,988 |   |   | 118,055 |   |
| Depreciation                and Amortization                                                               |   |                                  | 42,726  |                                 |   | 43,170 |   |   | 127,695 |   |   | 128,581 |   |
| Taxes                Other Than Income Taxes                                                               |   |                                  | 17,007  |                                 |   | 10,291 |   |   | 49,624 |   |   | 40,979 |   |
| Income                Taxes                                                                                |   |                                  | 31,403  |                                 |   | 28,072 |   |   | 69,663 |   |   | 67,169 |   |
| **TOTAL**                                                                                                  |   |                                  | 426,527 |                                 |   | 375,452 |   |   | 1,202,224 |   |   | 1,092,902 |   |
|                                                                                                       |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **OPERATING                INCOME**                                                                        |   |                                  | 66,962  |                                 |   | 67,482 |   |   | 170,766 |   |   | 167,290 |   |
|                                                                                                       |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Nonoperating                Income                                                                         |   |                                  | 22,793  |                                 |   | 20,304 |   |   | 61,999 |   |   | 60,758 |   |
| Nonoperating                Expenses                                                                       |   |                                  | 19,255  |                                 |   | 20,810 |   |   | 54,506 |   |   | 52,837 |   |
| Nonoperating                Income Tax Expense (Credit)                                                    |   |                                  | 1,145   |                                 |   | (953 | ) |   | 1,558 |   |   | 1,538 |   |
| Interest                Charges                                                                            |   |                                  | 16,343  |                                 |   | 16,381 |   |   | 48,427 |   |   | 52,087 |   |
|                                                                                                       |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **NET                INCOME**                                                                              |   |                                  | 53,012  |                                 |   | 51,548 |   |   | 128,274 |   |   | 121,586 |   |
|                                                                                                       |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Preferred                Stock Dividend Requirements including Capital Stock                  Expense |   |                                  | 86      |                                 |   | 119 |   |   | 311 |   |   | 356 |   |
|                                                                                                       |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| **EARNINGS                APPLICABLE TO COMMON STOCK**                                                     |   | $                                     | 52,926  |                                 | $      | 51,429 |   | $ | 127,963 |   | $ | 121,230 |   |

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

*See      Condensed Notes to 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 Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                                               |   | **Common                Stock** |   | **Paid-in                Capital** |   | **Retained                Earnings** |   | **Accumulated                Other Comprehensive Income (Loss)** |    | **Total** |   |
|------------------------------------------------------------------------------------|--------|---------------------------------|--------|------------------------------------|--------|--------------------------------------|--------|------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                31, 2003**                                               |   | $                               | 56,584 |                               | $      | 858,694                              |   | $                                                                | 187,875 |      | $      | (25,106 | ) | $ | 1,078,047 |   |
|                                                                               |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Common                Stock Dividends                                              |   |                            |   |                               |   |                                 |   |                                                             | (79,293 | )         |   |   |   |   | (79,293 | ) |
| Preferred                Stock Dividends                                           |   |                            |   |                               |   |                                 |   |                                                             | (255    | )         |   |   |   |   | (255 | ) |
| Capital                Stock Expense                                               |   |                            |   |                               |   | 107                                  |   |                                                             | (101    | )         |   |   |   |   | 6 |   |
| **TOTAL**                                                                          |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 998,505 |   |
|                                                                               |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                                            |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **Other                Comprehensive Loss,**** Net                of Taxes:** |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $4,720                              |   |                            |   |                               |   |                                 |   |                                                             |    |      |   | (8,765 | ) |   | (8,765 | ) |
| **NET                INCOME**                                                      |   |                            |   |                               |   |                                 |   |                                                             | 121,586 |      |   |   |   |   | 121,586 |   |
| **TOTAL                COMPREHENSIVE INCOME**                                      |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 112,821 |   |
|                                                                               |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2004**                                              |   | $                               | 56,584 |                               | $      | 858,801                              |   | $                                                                | 229,812 |      | $      | (33,871 | ) | $ | 1,111,326 |   |
|                                                                               |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **DECEMBER                31, 2004**                                               |   | $                               | 56,584 |                               | $      | 858,835                              |   | $                                                                | 221,330 |      | $      | (45,251 | ) | $ | 1,091,498 |   |
|                                                                               |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Common                Stock Dividends                                              |   |                            |   |                               |   |                                 |   |                                                             | (52,000 | )         |   |   |   |   | (52,000 | ) |
| Preferred                Stock Dividends                                           |   |                            |   |                               |   |                                 |   |                                                             | (255    | )         |   |   |   |   | (255 | ) |
| Capital                Stock Expense and Other                                     |   |                            |   |                               |   | 2,455                                |   |                                                             | (56     | )         |   |   |   |   | 2,399 |   |
| **TOTAL**                                                                          |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 1,041,642 |   |
|                                                                               |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                                            |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **Other                Comprehensive Loss,**** Net                of Taxes:** |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| Cash                Flow Hedges, Net of Tax of $2,900                              |   |                            |   |                               |   |                                 |   |                                                             |    |      |   | (5,385 | ) |   | (5,385 | ) |
| **NET                INCOME**                                                      |   |                            |   |                               |   |                                 |   |                                                             | 128,274 |      |   |   |   |   | 128,274 |   |
| **TOTAL                COMPREHENSIVE INCOME**                                      |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   | 122,889 |   |
|                                                                               |   |                            |   |                               |   |                                 |   |                                                             |    |      |   |   |   |   |   |   |
| **SEPTEMBER                30, 2005**                                              |   | $                               | 56,584 |                               | $      | 861,290                              |   | $                                                                | 297,293 |      | $      | (50,636 | ) | $ | 1,164,531 |   |

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

----

**INDIANA      MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                              |   | **2005**     |      | **2004**     |   |
|---------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **ELECTRIC                UTILITY PLANT**                                                         |   |    |      |    |   |
| Production                                                                                        |   | $            | 3,111,119 |         | $      | 3,122,883 |   |
| Transmission                                                                                      |   |         | 1,024,558 |         |   | 1,009,551 |   |
| Distribution                                                                                      |   |         | 1,016,092 |         |   | 990,826 |   |
| General                (including nuclear fuel)                                                   |   |         | 259,800   |         |   | 275,622 |   |
| Construction                Work in Progress                                                      |   |         | 264,049   |         |   | 163,515 |   |
| **Total**                                                                                         |   |         | 5,675,618 |         |   | 5,562,397 |   |
| Accumulated                Depreciation and Amortization                                          |   |         | 2,698,727 |         |   | 2,603,479 |   |
| **TOTAL                - NET**                                                                    |   |         | 2,976,891 |         |   | 2,958,918 |   |
|                                                                                              |   |         |      |         |   |   |   |
| **OTHER                PROPERTY AND INVESTMENTS**                                                 |   |         |      |         |   |   |   |
| Nuclear                Decommissioning and Spent Nuclear Fuel Disposal Trust                Funds |   |         | 1,120,190 |         |   | 1,053,439 |   |
| Nonutility                Property, Net                                                           |   |         | 49,035    |         |   | 50,440 |   |
| Other                Investments                                                                  |   |         | 13,262    |         |   | 21,848 |   |
| **TOTAL**                                                                                         |   |         | 1,182,487 |         |   | 1,125,727 |   |
|                                                                                              |   |         |      |         |   |   |   |
| **CURRENT                ASSETS**                                                                 |   |         |      |         |   |   |   |
| Cash                and Cash Equivalents                                                          |   |         | 731       |         |   | 465 |   |
| Other                Cash Deposits                                                                |   |         | -         |         |   | 46 |   |
| Advances                to Affiliates                                                             |   |         | -         |         |   | 5,093 |   |
| Accounts                Receivable:                                                               |   |         |      |         |   |   |   |
| Customers                                                                                         |   |         | 66,701    |         |   | 62,608 |   |
| Affiliated                Companies                                                               |   |         | 106,996   |         |   | 124,134 |   |
| Miscellaneous                                                                                     |   |         | 2,772     |         |   | 4,339 |   |
| Allowance                for Uncollectible Accounts                                               |   |         | (16       | )            |   | (187 | ) |
| Fuel                                                                                              |   |         | 20,892    |         |   | 27,218 |   |
| Materials                and Supplies                                                             |   |         | 105,365   |         |   | 103,342 |   |
| Risk                Management Assets                                                             |   |         | 117,369   |         |   | 52,141 |   |
| Margin                Deposits                                                                    |   |         | 27,812    |         |   | 5,400 |   |
| Prepayments                and Other                                                              |   |         | 27,607    |         |   | 10,541 |   |
| **TOTAL**                                                                                         |   |         | 476,229   |         |   | 395,140 |   |
|                                                                                              |   |         |      |         |   |   |   |
| **DEFERRED                DEBITS AND OTHER ASSETS**                                               |   |         |      |         |   |   |   |
| Regulatory                Assets:                                                                 |   |         |      |         |   |   |   |
| SFAS                109 Regulatory Asset, Net                                                     |   |         | 124,979   |         |   | 147,167 |   |
| Incremental                Nuclear Refueling Outage Expenses, Net                                 |   |         | 33,738    |         |   | 44,244 |   |
| Unrealized                Loss on Forward Commitments                                             |   |         | 33,285    |         |   | 7,366 |   |
| Unamortized                Loss on Reacquired Debt                                                |   |         | 22,231    |         |   | 21,039 |   |
| DOE                Decontamination Fund                                                           |   |         | 10,353    |         |   | 14,215 |   |
| Other                                                                                             |   |         | 34,042    |         |   | 23,649 |   |
| Long-term                Risk Management Assets                                                   |   |         | 105,404   |         |   | 52,256 |   |
| Emission                Allowances                                                                |   |         | 31,301    |         |   | 27,093 |   |
| Deferred                Property Taxes                                                            |   |         | 12,558    |         |   | 22,372 |   |
| Deferred                Charges and Other Assets                                                  |   |         | 15,912    |         |   | 28,955 |   |
| **TOTAL**                                                                                         |   |         | 423,803   |         |   | 388,356 |   |
|                                                                                              |   |         |      |         |   |   |   |
| **TOTAL                ASSETS**                                                                   |   | $            | 5,059,410 |         | $      | 4,868,141 |   |

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

----

**INDIANA      MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**CAPITALIZATION**
**      AND LIABILITIES**

**September      30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                                          |   | **2005**                          |      | **2004**     |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------------|--------|
| **CAPITALIZATION**                                                            |   | **(in                thousands)** |      |
| 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   |         |   | 858,835 |   |
| Retained                Earnings                                              |   |                              | 297,293   |         |   | 221,330 |   |
| Accumulated                Other Comprehensive Income (Loss)                  |   |                              | (50,636   | )            |   | (45,251 | ) |
| **Total                Common Shareholder’s Equity**                    |   |                              | 1,164,531 |         |   | 1,091,498 |   |
| Cumulative                Preferred Stock Not Subject to Mandatory Redemption |   |                              | 8,084     |         |   | 8,084 |   |
| **Total                Shareholders’ Equity**                           |   |                              | 1,172,615 |         |   | 1,099,582 |   |
| Long-term                Debt                                                 |   |                              | 1,317,825 |         |   | 1,312,843 |   |
| **TOTAL**                                                                     |   |                              | 2,490,440 |         |   | 2,412,425 |   |
|                                                                          |   |                              |      |         |   |   |   |
| **CURRENT                LIABILITIES**                                        |   |                              |      |         |   |   |   |
| Cumulative                Preferred Stock Due Within One Year                 |   |                              | -         |         |   | 61,445 |   |
| Advances                from Affiliates                                       |   |                              | 81,101    |         |   | - |   |
| Accounts                Payable:                                              |   |                              |      |         |   |   |   |
| General                                                                       |   |                              | 98,153    |         |   | 91,472 |   |
| Affiliated                Companies                                           |   |                              | 58,374    |         |   | 51,066 |   |
| Customer                Deposits                                              |   |                              | 57,599    |         |   | 29,366 |   |
| Taxes                Accrued                                                  |   |                              | 37,409    |         |   | 123,159 |   |
| Interest                Accrued                                               |   |                              | 22,823    |         |   | 12,465 |   |
| Risk                Management Liabilities                                    |   |                              | 112,033   |         |   | 47,174 |   |
| Obligations                Under Capital Leases                               |   |                              | 5,501     |         |   | 6,124 |   |
| Other                                                                         |   |                              | 87,654    |         |   | 70,237 |   |
| **TOTAL**                                                                     |   |                              | 560,647   |         |   | 492,508 |   |
|                                                                          |   |                              |      |         |   |   |   |
| **DEFERRED                CREDITS AND OTHER LIABILITIES**                     |   |                              |      |         |   |   |   |
| Deferred                Income Taxes                                          |   |                              | 292,912   |         |   | 315,730 |   |
| Regulatory                Liabilities:                                        |   |                              |      |         |   |   |   |
| Asset                Removal Costs                                            |   |                              | 289,405   |         |   | 280,054 |   |
| Deferred                Investment Tax Credits                                |   |                              | 77,306    |         |   | 82,802 |   |
| Excess                ARO for Nuclear Decommissioning                         |   |                              | 269,406   |         |   | 245,175 |   |
| Unrealized                Gain on Forward Commitments                         |   |                              | 65,687    |         |   | 35,534 |   |
| Other                                                                         |   |                              | 33,816    |         |   | 33,695 |   |
| Deferred                Gain on Sale and Leaseback - Rockport Plant Unit 2    |   |                              | 63,692    |         |   | 66,472 |   |
| Long-term                Risk Management Liabilities                          |   |                              | 86,971    |         |   | 36,815 |   |
| Obligations                Under Capital Leases                               |   |                              | 38,152    |         |   | 44,608 |   |
| Asset                Retirement Obligations                                   |   |                              | 720,532   |         |   | 711,769 |   |
| Employee                Benefits and Pension Obligations                      |   |                              | 31,388    |         |   | 70,027 |   |
| Deferred                Credits and Other                                     |   |                              | 39,056    |         |   | 40,527 |   |
| **TOTAL**                                                                     |   |                              | 2,008,323 |         |   | 1,963,208 |   |
|                                                                          |   |                              |      |         |   |   |   |
| Commitments                and Contingencies (Note 5)                         |   |                              |      |         |   |   |   |
|                                                                          |   |                              |      |         |   |   |   |
| **TOTAL                CAPITALIZATION AND LIABILITIES**                       |   | $                                 | 5,059,410 |         | $      | 4,868,141 |   |

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

----

**INDIANA      MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For      the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in      thousands)**

|                                                                                                                        |   | **2005**     |     | **2004**     |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|
| **OPERATING                ACTIVITIES**                                                                                     |   |    |     |    |   |
| **Net                Income**                                                                                               |   | $            | 128,274  |         | $      | 121,586 |   |
| **Adjustments                to Reconcile Net Income to Net Cash Flows**** From                Operating Activities:** |   |         |     |         |   |   |   |
| Depreciation                and Amortization                                                                                |   |         | 127,695  |         |   | 128,581 |   |
| Accretion                Expense                                                                                            |   |         | 35,742   |         |   | 29,608 |   |
| Amortization,                Net of Deferrals of Incremental Nuclear Refueling Outage                Expenses               |   |         | 10,506   |         |   | 31,195 |   |
| Deferred                Income Taxes                                                                                        |   |         | 2,269    |         |   | 2,772 |   |
| Deferred                Investment Tax Credits                                                                              |   |         | (5,496   | )            |   | (5,496 | ) |
| Deferred                Property Taxes                                                                                      |   |         | 9,814    |         |   | 10,020 |   |
| Pension                Contributions                                                                                        |   |         | (46,051  | )            |   | (2,916 | ) |
| Mark-to-Market                of Risk Management Contracts                                                                  |   |         | (11,275  | )            |   | 10,760 |   |
| Change                in Other Noncurrent Assets                                                                            |   |         | 4,873    |         |   | (21,135 | ) |
| Change                in Other Noncurrent Liabilities                                                                       |   |         | (6,420   | )            |   | (4,050 | ) |
| **Changes                in Components of Working Capital:**                                                                |   |         |     |         |   |   |   |
| Accounts                Receivable, Net                                                                                     |   |         | 14,441   |         |   | 41,624 |   |
| Fuel,                Materials and Supplies                                                                                 |   |         | 4,303    |         |   | (9,391 | ) |
| Accounts                Payable                                                                                             |   |         | 5,511    |         |   | (13,238 | ) |
| Taxes                Accrued                                                                                                |   |         | (85,750  | )            |   | 55,077 |   |
| Customer                Deposits                                                                                            |   |         | 28,233   |         |   | 9,115 |   |
| Interest                Accrued                                                                                             |   |         | 10,358   |         |   | 2,742 |   |
| Rent                Accrued - Rockport Plant Unit 2                                                                         |   |         | 18,464   |         |   | 18,464 |   |
| Other                Current Assets                                                                                         |   |         | (39,478  | )            |   | 5,230 |   |
| Other                Current Liabilities                                                                                    |   |         | (1,670   | )            |   | 4,106 |   |
| **Net                Cash Flows From Operating Activities**                                                                 |   |         | 204,343  |         |   | 414,654 |   |
|                                                                                                                        |   |         |     |         |   |   |   |
| **INVESTING                ACTIVITIES**                                                                                     |   |         |     |         |   |   |   |
| Construction                Expenditures                                                                                    |   |         | (190,171 | )            |   | (130,241 | ) |
| Change                in Other Cash Deposits, Net                                                                           |   |         | 46       |         |   | (31 | ) |
| Proceeds                from Sale of Assets                                                                                 |   |         | 13,554   |         |   | 874 |   |
| **Net                Cash Flows Used For Investing Activities**                                                             |   |         | (176,571 | )            |   | (129,398 | ) |
|                                                                                                                        |   |         |     |         |   |   |   |
| **FINANCING                ACTIVITIES**                                                                                     |   |         |     |         |   |   |   |
| Retirement                of Cumulative Preferred Stock                                                                     |   |         | (61,445  | )            |   | (2,011 | ) |
| Retirement                of Long-term Debt                                                                                 |   |         | -        |         |   | (205,155 | ) |
| Changes                in Advances to/from Affiliates, Net                                                                  |   |         | 86,194   |         |   | (60 | ) |
| Dividends                Paid on Common Stock                                                                               |   |         | (52,000  | )            |   | (79,293 | ) |
| Dividends                Paid on Cumulative Preferred Stock                                                                 |   |         | (255     | )            |   | (255 | ) |
| **Net                Cash Flows Used For Financing Activities**                                                             |   |         | (27,506  | )            |   | (286,774 | ) |
|                                                                                                                        |   |         |     |         |   |   |   |
| **Net                Increase (Decrease) in Cash and Cash Equivalents**                                                     |   |         | 266      |         |   | (1,518 | ) |
| **Cash                and Cash Equivalents at Beginning of Period**                                                         |   |         | 465      |         |   | 3,899 |   |
| **Cash                and Cash Equivalents at End of Period**                                                               |   | $            | 731      |         | $      | 2,381 |   |

| **SUPPLEMENTAL                DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                paid (received) for interest net of capitalized amounts was $34,999,000                and $46,694,000 and for income taxes was $149,058,000 and $(4,725,000)                in                2005 and 2004, respectively. Noncash acquisitions under capital leases                were $1,465,000 and $10,092,000 in 2005 and 2004, respectively.                Construction Expenditures include the change in construction-related                Accounts Payable of $8,478,000 and $(10,646,000) in 2005 and 2004,                respectively. |

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

----

**INDIANA        MICHIGAN POWER COMPANY AND SUBSIDIARIES**

**INDEX        TO CONDENSED NOTES TO 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   |
| Benefit                  Plans                           | Note                  8   |
| Business                  Segments                       | Note                  9   |
| Income Taxes                                             | Note                  10  |
| Financing                  Activities                    | Note                  11  |
| Company-wide                  Staffing and Budget Review | Note                  12  |

----

**KENTUCKY          POWER COMPANY**

----

**KENTUCKY          POWER COMPANY**

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

**Results          of Operations**

**Reconciliation          of Third Quarter of 2004 to Third Quarter of 2005 Net          Income**

**(in          millions)**

| **Third                    Quarter of 2004 Net Income**              |   |   |   |   | $      | 6      |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                 |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                      |   |   |   |   |   |   |   |
| Retail                    Margins                                    |   |   | 8      |   |   |   |   |
| Off-system                    Sales                                  |   |   | 1      |   |   |   |   |
| Transmission                    Revenues                             |   |   | (1     | )      |   |   |   |
| **Total                    Change in Gross Margin**                  |   |   |   |   |   | 8      |   |
|                                                                 |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**      |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                   |   |   | (4     | )      |   |   |   |
| Nonoperating                    Income and Expenses, Net             |   |   | 1      |   |   |   |   |
| **Total                    Change in Operating Expenses and Other:** |   |   |   |   |   | (3     | )      |
|                                                                 |   |   |   |   |   |   |   |
| Income                    Tax Expense                                |   |   |   |   |   | (3     | )      |
|                                                                 |   |   |   |   |   |   |   |
| **Third                    Quarter of 2005 Net Income**              |   |   |   |   | $      | 8      |   |
|                                                                 |   |   |   |   |   |   |   |

| · | Retail                    Margins increased by $8 million in comparison to 2004 primarily                    due to                    increases in retail sales to residential customers and the recording                    of a                    liability for the over-collection of fuel costs in the third                    quarter of                    2004 that lowered retail margins in the prior year. The increase                    in retail                    sales to residential customers was primarily due to a 63% increase                    in                    cooling degree days in comparison to 2004. The increase in Retail                    Margins                    was partially offset by an increase in capacity settlement payments                    under                    the Interconnection Agreement. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Off-system                    Sales margins for 2005 increased by $1 million compared to 2004                    primarily                    due to increased AEP Power Pool physical sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · | Transmission                    Revenues decreased $1 million primarily due to the elimination                    of revenues                    related to through and out rates, net of replacement SECA rates.                    See “FERC                    Order on Regional Through and Out Rates” for additional discussion of                    these FERC rate changes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

| · | Other                    Operation and Maintenance expenses increased $4 million primarily                    due to                    distribution line maintenance and system dispatch costs related                    to our                    operation in PJM. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Nonoperating                    Income and Expenses, Net increased $1 million due to favorable                    optimization activities.                                                                                                                             |

*Income          Taxes*

**Reconciliation          of Nine Months Ended September 30, 2004 to**

**Nine          Months Ended September 30, 2005 Net Income**

**(in          millions)**

| **Nine                    Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 22     |   |
|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                   |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                        |   |   |   |   |   |   |   |
| Retail                    Margins                                      |   |   | (3     | )      |   |   |   |
| Off-system                    Sales                                    |   |   | 8      |   |   |   |   |
| Transmission                    Revenues                               |   |   | (4     | )      |   |   |   |
| Other                    Revenues                                      |   |   | (1     | )      |   |   |   |
| **Total                    Change in Gross Margin**                    |   |   |   |   |   | -      |   |
|                                                                   |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                     |   |   | (4     | )      |   |   |   |
| Nonoperating                    Income and Expenses, Net               |   |   | 2      |   |   |   |   |
| **Total                    Change in Operating Expenses and Other**    |   |   |   |   |   | (2     | )      |
|                                                                   |   |   |   |   |   |   |   |
| **Nine                    Months Ended September 30, 2005 Net Income** |   |   |   |   | $      | 20     |   |

| · | Retail                    Margins decreased by $3 million in comparison to 2004 primarily                    due to an                    increase in capacity settlement payments under the Interconnection                    Agreement resulting from our higher MLR share caused by the increase                    in                    our peak load established in January 2005.        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Off-system                    Sales margins for 2005 increased by $8 million compared to 2004                    primarily                    due to increased AEP Power Pool physical sales.                                                                                                                                                                                                   |
| · | Transmission                    Revenues decreased $4 million primarily due to the elimination                    of revenues                    related to through and out rates, net of replacement SECA rates.                    See “FERC                    Order on Regional Through and Out Rates” for additional discussion of                    these FERC rate changes. |

| · | Other                    Operation and Maintenance expenses increased $4 million primarily                    due to                    increased transmission charges under the Transmission Equalization                    Agreement resulting from our higher MLR as well as system dispatch                    costs                    related to our operation in PJM. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Nonoperating                    Income and Expenses, Net increased $2 million due to favorable                    optimization activities.                                                                                                                                                                                                                                    |

*Income          Taxes*

**Financial          Condition**

**Credit          Ratings**

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

**Financing          Activity**

|                                        |   | **Principal**                         |   | **Interest** |   | **Due**  |   |
|---------------------------------------------|--------|---------------------------------------|--------|--------------|--------|----------|--------|
| **Type                    of Debt**         |   | **Amount**                            |   | **Rate**     |   | **Date** |   |
|                                        |   | **(in                    thousands)** |   | **(%)**      |   |     |   |
|                                        |   |                                  |   |         |   |     |   |
| Notes                    Payable-Affiliated |   | $                                     | 20,000 |         |   | 6.501    |   |   | 2006 |   |

**Liquidity**

**Summary          Obligation Information**

**Significant          Factors**

***Rate          Filing***

**Critical          Accounting Estimates**

----

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

**Market          Risks**

**MTM          Risk Management Contract Net Assets**

**MTM          Risk Management Contract Net Assets**

**Nine          Months Ended September 30, 2005**

**(in          thousands)**

| **Total                    MTM Risk Management Contract Net Assets at December 31,                    2004**                      |   | $      | 12,691 |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                    Loss from Contracts Realized/Settled During the Period (a)                                              |   |   | 36     |   |
| Fair                    Value of New Contracts When Entered During the Period (b)                                                 |   |   | -      |   |
| Net                    Option Premiums Paid/(Received) (c)                                                                        |   |   | (171   | )      |
| Change                    in Fair Value Due to Valuation Methodology Changes                                                      |   |   | -      |   |
| Changes                    in Fair Value of Risk Management Contracts (d)                                                         |   |   | 820    |   |
| Changes                    in Fair Value of Risk Management Contracts Allocated to Regulated                    Jurisdictions (e) |   |   | 2,615  |   |
| **Total                    MTM Risk Management Contract Net Assets**                                                              |   |   | 15,991 |   |
| Net                    Cash Flow and                    Fair Value Hedge                    Contracts (f)                         |   |   | (4,399 | )      |
| DETM                    Assignment (g)                                                                                            |   |   | (3,666 | )      |
| **Total                    MTM Risk Management Contract Net Assets at September 30, 2005**                                        |   | $      | 7,926  |   |

| (a) | “(Gain)                    Loss from Contracts Realized/Settled During the Period” includes realized                    risk management contracts and related derivatives that settled                    during 2005                    where                    we entered into the contract prior                    to 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                    Value of New Contracts When Entered During the Period” represents the fair                    value at inception of long-term contracts entered into with customers                    during 2005. 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. |
| (c) | “Net                    Option Premiums Paid/(Received)” reflects the net option premiums                    paid/(received) as they relate to unexercised and unexpired option                    contracts that were entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (d) | “Changes                    in Fair Value of Risk Management Contracts” represents the fair value                    change in the risk management portfolio due to market fluctuations                    during                    the current period. Market fluctuations are attributable to various                    factors such as supply/demand, weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (e) | “Changes                    in Fair Value of Risk Management Contracts 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 assets/liabilities                    for                    those subsidiaries that operate in regulated                    jurisdictions.                                                                                                                                                                                                                                                                                                                |
| (f) | “Net                    Cash Flow and                    Fair Value Hedge                    Contracts” (pretax) are discussed below in Accumulated Other Comprehensive                    Income (Loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (g) | See                    “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                    Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

**Reconciliation          of MTM Risk Management Contracts to**

**Condensed          Balance Sheets**

**As          of September 30, 2005**

**(in          thousands)**

|                                                                          |   | **MTM                    Risk Management Contracts (a)** |    | **Hedges** |   | **DETM                    Assignment (b)** |   | **Total                    (c)** |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------------------|---------|------------|--------|--------------------------------------------|--------|----------------------------------|--------|
| Current                    Assets                                             |   | $                                                        | 46,287  |       | $      | 86                                         |   | $                                | -      |   | $ | 46,373 |   |
| Noncurrent                    Assets                                          |   |                                                     | 42,060  |       |   | 95                                         |   |                             | -      |   |   | 42,155 |   |
| **Total                    MTM Derivative Contract Assets**                   |   |                                                     | 88,347  |       |   | 181                                        |   |                             | -      |   |   | 88,528 |   |
|                                                                          |   |                                                     |    |       |   |                                       |   |                             |   |   |   |   |   |
| Current                    Liabilities                                        |   |                                                     | (40,554 | )          |   | (3,489                                     | )      |                             | (871   | ) |   | (44,914 | ) |
| Noncurrent                    Liabilities                                     |   |                                                     | (31,802 | )          |   | (1,091                                     | )      |                             | (2,795 | ) |   | (35,688 | ) |
| **Total                    MTM Derivative Contract Liabilities**              |   |                                                     | (72,356 | )          |   | (4,580                                     | )      |                             | (3,666 | ) |   | (80,602 | ) |
|                                                                          |   |                                                     |    |       |   |                                       |   |                             |   |   |   |   |   |
| **Total                    MTM Derivative Contract Net Assets (Liabilities)** |   | $                                                        | 15,991  |       | $      | (4,399                                     | )      | $                                | (3,666 | ) | $ | 7,926 |   |

| (a) | Does                    not include Cash Flow and Fair Value Hedges.                                                                                                                                                                                                                                                                                   |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | See                    “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                    Report.                                                                                                                                                                                                                  |
| (c) | Represents                    amount of total MTM derivative contracts recorded within Risk                    Management                    Assets, Long-term Risk Management Assets, Risk Management Liabilities                    and                    Long-term Risk Management Liabilities on our Condensed Balance                    Sheets. |

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

| · | The                    source of 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 September 30, 2005**

**(in          thousands)**

|                                                                                                    |   | **Remainder                    of 2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **After****2009                    (c)** |   | **Total                    (d)** |   |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|------------------------------------------|--------|----------------------------------|--------|
| Prices                    Actively Quoted - Exchange Traded                    Contracts                |   | $                                        | (586   | )        | $      | 2,818    |   | $        | 237    |     | $      | 130                                      |   | $                                | -      |   | $ | - |   | $ | 2,599 |   |
| Prices                    Provided by Other External Sources                    - OTC Broker Quotes (a) |   |                                     | 4,504  |     |   | 3,125    |   |     | 4,323  |     |   | 1,720                                    |   |                             | 251    |   |   | - |   |   | 13,923 |   |
| Prices                    Based on Models and Other Valuation                    Methods (b)            |   |                                     | (454   | )        |   | (2,594   | )      |     | (1,528 | )        |   | 900                                      |   |                             | 1,887  |   |   | 1,258 |   |   | (531 | ) |
| **Total**                                                                                               |   | $                                        | 3,464  |     | $      | 3,349    |   | $        | 3,032  |     | $      | 2,750                                    |   | $                                | 2,138  |   | $ | 1,258 |   | $ | 15,991 |   |

| (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 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. |
| (c) | There                    is mark-to-market value in excess of 10 percent of our total                    mark-to-market value in individual periods beyond 2009. $1.8                    million of                    this mark-to-market value is in 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (d) | Amounts                    exclude Cash Flow and Fair Value                    Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

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

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

**Nine          Months Ended September 30, 2005**

**(in          thousands)**

|                                                                                |   | **Power** |   | **Interest                    Rate** |   | **Total** |   |
|-------------------------------------------------------------------------------------|--------|-----------|--------|--------------------------------------|--------|-----------|--------|
| **Beginning                    Balance December 31, 2004**                          |   | $         | 569    |                                 | $      | 244       |   | $ | 813 |   |
| Changes                    in Fair Value (a)                                        |   |      | (1,889 | )                                    |   | -         |   |   | (1,889 | ) |
| Reclassifications                    from AOCI to Net Income                    (b) |   |      | (895   | )                                    |   | (64       | )      |   | (959 | ) |
| **Ending                    Balance September 30, 2005**                            |   | $         | (2,215 | )                                    | $      | 180       |   | $ | (2,035 | ) |

| (a) | “Changes                    in Fair Value” shows changes in the fair value of derivatives designated                    as cash flow hedges during the reporting period that are not                    yet settled                    at September 30, 2005. Amounts are reported net of related income                    taxes.                                              |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Reclassifications                    from AOCI to Net Income” represents gains or losses from derivatives used                    as hedging instruments in cash flow hedges that were reclassified                    into net                    income during the reporting period. Amounts are reported net                    of related                    income taxes. |

**Credit          Risk**

**VaR          Associated with Risk Management Contracts**

|   | **Nine                    Months Ended**  |   | **Twelve                    Months Ended** |   |
|--------|-------------------------------------------|--------|--------------------------------------------|--------|
|   | **September                    30, 2005** |   | **December                    31, 2004**   |   |
|   | **(in                    thousands)**     |   | **(in                    thousands)**      |   |
|   | **End**                                   |   | **High**                                   |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |   |
|   | $207                                      |   | $282                                       |   | $133 |   | $71 |   | $135 |   | $442 |   | $191 |   | $65 |   |

**VaR          Associated with Debt Outstanding**

----

**KENTUCKY          POWER COMPANY**

**CONDENSED          STATEMENTS OF INCOME**

**For          the Three and Nine Months Ended September 30, 2005 and          2004**

**(Unaudited)**

**(in          thousands)**

|                                                                  |   | **Three                    Months Ended** |    | **Nine                    Months Ended** |   |
|-----------------------------------------------------------------------|--------|-------------------------------------------|---------|------------------------------------------|--------|
|                                                                  |   | **2005**                                  |    | **2004**                                 |   | **2005** |   | **2004** |   |
| **OPERATING                    REVENUES**                             |   |                                 |    |                                |   |   |   |   |   |
| Electric                    Generation, Transmission and Distribution |   | $                                         | 127,129 |                                     | $      | 100,950 |   | $ | 352,083 |   | $ | 302,376 |   |
| Sales                    to AEP Affiliates                            |   |                                      | 16,160  |                                     |   | 13,111 |   |   | 41,356 |   |   | 32,096 |   |
| **TOTAL**                                                             |   |                                      | 143,289 |                                     |   | 114,061 |   |   | 393,439 |   |   | 334,472 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **OPERATING                    EXPENSES**                             |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Fuel                    for Electric Generation                       |   |                                      | 41,907  |                                     |   | 29,380 |   |   | 100,491 |   |   | 75,498 |   |
| Purchased                    Electricity for Resale                   |   |                                      | 1,563   |                                     |   | 359 |   |   | 5,473 |   |   | 1,118 |   |
| Purchased                    Electricity from AEP Affiliates          |   |                                      | 45,300  |                                     |   | 37,366 |   |   | 131,049 |   |   | 101,730 |   |
| Other                    Operation                                    |   |                                      | 15,992  |                                     |   | 13,405 |   |   | 45,969 |   |   | 40,176 |   |
| Maintenance                                                           |   |                                      | 7,180   |                                     |   | 5,925 |   |   | 21,578 |   |   | 23,464 |   |
| Depreciation                    and Amortization                      |   |                                      | 11,318  |                                     |   | 11,004 |   |   | 33,695 |   |   | 32,768 |   |
| Taxes                    Other Than Income Taxes                      |   |                                      | 2,457   |                                     |   | 2,208 |   |   | 7,101 |   |   | 6,931 |   |
| Income                    Taxes                                       |   |                                      | 3,212   |                                     |   | 935 |   |   | 7,499 |   |   | 8,489 |   |
| **TOTAL**                                                             |   |                                      | 128,929 |                                     |   | 100,582 |   |   | 352,855 |   |   | 290,174 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **OPERATING                    INCOME**                               |   |                                      | 14,360  |                                     |   | 13,479 |   |   | 40,584 |   |   | 44,298 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Nonoperating                    Income                                |   |                                      | 966     |                                     |   | (137 | ) |   | 2,032 |   |   | 1,297 |   |
| Nonoperating                    Expenses                              |   |                                      | 89      |                                     |   | 168 |   |   | 401 |   |   | 1,755 |   |
| Nonoperating                    Income Tax Expense (Credit)           |   |                                      | 283     |                                     |   | (144 | ) |   | 492 |   |   | (238 | ) |
| Interest                    Charges                                   |   |                                      | 7,227   |                                     |   | 7,158 |   |   | 21,665 |   |   | 22,239 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **NET                    INCOME**                                     |   | $                                         | 7,727   |                                     | $      | 6,160 |   | $ | 20,058 |   | $ | 21,839 |   |

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

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

----

**KENTUCKY          POWER COMPANY**

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

**EQUITY          AND COMPREHENSIVE INCOME (LOSS)**

**For          the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in          thousands)**

|                                                           |   | **Common                    Stock** |   | **Paid-in                    Capital** |   | **Retained                    Earnings** |   | **Accumulated                    Other Comprehensive Income (Loss)** |    | **Total** |   |
|----------------------------------------------------------------|--------|-------------------------------------|--------|----------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                    31, 2003**                       |   | $                                   | 50,450 |                                   | $      | 208,750                                  |   | $                                                                    | 64,151  |      | $      | (6,213 | ) | $ | 317,138 |   |
|                                                           |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Common                    Stock Dividends                      |   |                                |   |                                   |   |                                     |   |                                                                 | (16,000 | )         |   |   |   |   | (16,000 | ) |
| **TOTAL**                                                      |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 301,138 |   |
|                                                           |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                    |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:** |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $542        |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   | (1,005 | ) |   | (1,005 | ) |
| **NET                    INCOME**                              |   |                                |   |                                   |   |                                     |   |                                                                 | 21,839  |      |   |   |   |   | 21,839 |   |
| **TOTAL                    COMPREHENSIVE INCOME**              |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 20,834 |   |
|                                                           |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **SEPTEMBER                    30, 2004**                      |   | $                                   | 50,450 |                                   | $      | 208,750                                  |   | $                                                                    | 69,990  |      | $      | (7,218 | ) | $ | 321,972 |   |
|                                                           |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **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 $1,534      |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   | (2,848 | ) |   | (2,848 | ) |
| **NET                    INCOME**                              |   |                                |   |                                   |   |                                     |   |                                                                 | 20,058  |      |   |   |   |   | 20,058 |   |
| **TOTAL                    COMPREHENSIVE INCOME**              |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 17,210 |   |
|                                                           |   |                                |   |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **SEPTEMBER                    30, 2005**                      |   | $                                   | 50,450 |                                   | $      | 208,750                                  |   | $                                                                    | 90,613  |      | $      | (11,623 | ) | $ | 338,190 |   |

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

----

**KENTUCKY          POWER COMPANY**

**CONDENSED          BALANCE SHEETS**

**ASSETS**

**September          30, 2005 and December 31, 2004**

**(Unaudited)**

**(in          thousands)**

|                                                         |   | **2005**     |      | **2004**     |   |
|--------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **ELECTRIC                    UTILITY PLANT**                |   |    |      |    |   |
| Production                                                   |   | $            | 470,873   |         | $      | 462,641 |   |
| Transmission                                                 |   |         | 386,461   |         |   | 385,667 |   |
| Distribution                                                 |   |         | 451,199   |         |   | 438,766 |   |
| General                                                      |   |         | 59,718    |         |   | 57,929 |   |
| Construction                    Work in Progress             |   |         | 23,068    |         |   | 16,544 |   |
| **Total**                                                    |   |         | 1,391,319 |         |   | 1,361,547 |   |
| Accumulated                    Depreciation and Amortization |   |         | 421,738   |         |   | 398,455 |   |
| **TOTAL                    - NET**                           |   |         | 969,581   |         |   | 963,092 |   |
|                                                         |   |         |      |         |   |   |   |
| **OTHER                    PROPERTY AND INVESTMENTS**        |   |         |      |         |   |   |   |
| Nonutility                    Property, Net                  |   |         | 5,433     |         |   | 5,438 |   |
| Other                    Investments                         |   |         | 350       |         |   | 422 |   |
| **TOTAL**                                                    |   |         | 5,783     |         |   | 5,860 |   |
|                                                         |   |         |      |         |   |   |   |
| **CURRENT                    ASSETS**                        |   |         |      |         |   |   |   |
| Cash                    and Cash Equivalents                 |   |         | 347       |         |   | 127 |   |
| Other                    Cash Deposits                       |   |         | 8         |         |   | 5 |   |
| Advances                    to Affiliates                    |   |         | 9,641     |         |   | 16,127 |   |
| Accounts                    Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                    |   |         | 25,239    |         |   | 22,130 |   |
| Affiliated                    Companies                      |   |         | 23,279    |         |   | 23,046 |   |
| Accrued                    Unbilled Revenues                 |   |         | 5,933     |         |   | 7,340 |   |
| Miscellaneous                                                |   |         | 717       |         |   | 94 |   |
| Allowance                    for Uncollectible Accounts      |   |         | -         |         |   | (34 | ) |
| Fuel                                                         |   |         | 12,851    |         |   | 6,551 |   |
| Materials                    and Supplies                    |   |         | 7,285     |         |   | 9,385 |   |
| Risk                    Management Assets                    |   |         | 46,373    |         |   | 19,845 |   |
| Margin                    Deposits                           |   |         | 11,180    |         |   | 1,960 |   |
| Prepayments                    and Other                     |   |         | 6,793     |         |   | 1,782 |   |
| **TOTAL**                                                    |   |         | 149,646   |         |   | 108,358 |   |
|                                                         |   |         |      |         |   |   |   |
| **DEFERRED                    DEBITS AND OTHER ASSETS**      |   |         |      |         |   |   |   |
| Regulatory                    Assets:                        |   |         |      |         |   |   |   |
| SFAS                    109 Regulatory Asset, Net            |   |         | 98,737    |         |   | 103,849 |   |
| Other                                                        |   |         | 26,256    |         |   | 14,558 |   |
| Long-term                    Risk Management Assets          |   |         | 42,155    |         |   | 19,067 |   |
| Emission                    Allowances                       |   |         | 12,077    |         |   | 9,666 |   |
| Deferred                    Property Taxes                   |   |         | 1,803     |         |   | 7,036 |   |
| Deferred                    Charges and Other                |   |         | 7,498     |         |   | 11,761 |   |
| **TOTAL**                                                    |   |         | 188,526   |         |   | 165,937 |   |
|                                                         |   |         |      |         |   |   |   |
| **TOTAL                    ASSETS**                          |   | $            | 1,313,536 |         | $      | 1,243,247 |   |

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

----

**KENTUCKY          POWER COMPANY**

**CONDENSED          BALANCE SHEETS**

**CAPITALIZATION**
**          AND LIABILITIES**

**September          30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                               |   | **2005**                              |      | **2004**     |   |
|--------------------------------------------------------------------|--------|---------------------------------------|-----------|--------------|--------|
| **CAPITALIZATION**                                                 |   | **(in                    thousands)** |      |
| 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                               |   |                                  | 90,613    |         |   | 70,555 |   |
| Accumulated                    Other Comprehensive Income (Loss)   |   |                                  | (11,623   | )            |   | (8,775 | ) |
| **Total                    Common Shareholder’s Equity**     |   |                                  | 338,190   |         |   | 320,980 |   |
| Long-term                    Debt:                                 |   |                                  |      |         |   |   |   |
| Nonaffiliated                                                      |   |                                  | 426,657   |         |   | 428,310 |   |
| Affiliated                                                         |   |                                  | 20,000    |         |   | 80,000 |   |
| **Total                    Long-term Debt**                        |   |                                  | 446,657   |         |   | 508,310 |   |
| **TOTAL**                                                          |   |                                  | 784,847   |         |   | 829,290 |   |
|                                                               |   |                                  |      |         |   |   |   |
| **CURRENT                    LIABILITIES**                         |   |                                  |      |         |   |   |   |
| Long-term                    Debt Due Within One Year - Affiliated |   |                                  | 40,000    |         |   | - |   |
| Accounts                    Payable:                               |   |                                  |      |         |   |   |   |
| General                                                            |   |                                  | 29,759    |         |   | 20,080 |   |
| Affiliated                    Companies                            |   |                                  | 26,546    |         |   | 24,899 |   |
| Risk                    Management Liabilities                     |   |                                  | 44,914    |         |   | 17,205 |   |
| Taxes                    Accrued                                   |   |                                  | 8,695     |         |   | 9,248 |   |
| Interest                    Accrued                                |   |                                  | 9,507     |         |   | 6,754 |   |
| Customer                    Deposits                               |   |                                  | 25,085    |         |   | 12,309 |   |
| Obligations                    Under Capital Leases                |   |                                  | 1,294     |         |   | 1,561 |   |
| Other                                                              |   |                                  | 8,849     |         |   | 9,038 |   |
| **TOTAL**                                                          |   |                                  | 194,649   |         |   | 101,094 |   |
|                                                               |   |                                  |      |         |   |   |   |
| **DEFERRED                    CREDITS AND OTHER LIABILITIES**      |   |                                  |      |         |   |   |   |
| Deferred                    Income Taxes                           |   |                                  | 222,727   |         |   | 227,536 |   |
| Regulatory                    Liabilities:                         |   |                                  |      |         |   |   |   |
| Asset                    Removal Costs                             |   |                                  | 30,247    |         |   | 28,232 |   |
| Deferred                    Investment Tax Credits                 |   |                                  | 5,845     |         |   | 6,722 |   |
| Other                    Regulatory Liabilities                    |   |                                  | 26,772    |         |   | 15,622 |   |
| Employee                    Benefits and Pension Obligations       |   |                                  | 9,980     |         |   | 17,729 |   |
| Long-term                    Risk Management Liabilities           |   |                                  | 35,688    |         |   | 13,484 |   |
| Obligations                    Under Capital Leases                |   |                                  | 2,123     |         |   | 2,802 |   |
| Deferred                    Credits                                |   |                                  | 658       |         |   | 736 |   |
| **TOTAL**                                                          |   |                                  | 334,040   |         |   | 312,863 |   |
|                                                               |   |                                  |      |         |   |   |   |
| Commitments                    and Contingencies (Note 5)          |   |                                  |      |         |   |   |   |
|                                                               |   |                                  |      |         |   |   |   |
| **TOTAL                    CAPITALIZATION****AND LIABILITIES**     |   | $                                     | 1,313,536 |         | $      | 1,243,247 |   |

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

----

**KENTUCKY          POWER COMPANY**

**CONDENSED          STATEMENTS OF CASH FLOWS**

**For          the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in          thousands)**

|                                                                                                                                |   | **2005**     |    | **2004**     |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                    ACTIVITIES**                                                                                         |   |    |    |    |   |
| **Net                    Income**                                                                                                   |   | $            | 20,058  |         | $      | 21,839 |   |
| **Adjustments                    to Reconcile Net Income to Net Cash Flows**** From                    Operating Activities:** |   |         |    |         |   |   |   |
| Depreciation                    and Amortization                                                                                    |   |         | 33,695  |         |   | 32,768 |   |
| Deferred                    Income Taxes                                                                                            |   |         | 1,836   |         |   | 6,536 |   |
| Deferred                    Investment Tax Credits                                                                                  |   |         | (877    | )            |   | (877 | ) |
| Deferred                    Property Taxes                                                                                          |   |         | 5,233   |         |   | 5,091 |   |
| Pension                    Contributions                                                                                            |   |         | (9,137  | )            |   | (338 | ) |
| Pension                    and Postemployment Benefit Reserves                                                                      |   |         | 1,388   |         |   | (610 | ) |
| Mark-to-Market                    of Risk Management Contracts                                                                      |   |         | (5,204  | )            |   | 3,994 |   |
| Over/Under                    Fuel Recovery                                                                                         |   |         | (4,453  | )            |   | 1,886 |   |
| (Gain)/Loss                    on Sale of Assets                                                                                    |   |         | (41     | )            |   | 1,062 |   |
| Change                    in Other Noncurrent Assets                                                                                |   |         | (5,196  | )            |   | (10,558 | ) |
| Change                    in Other Noncurrent Liabilities                                                                           |   |         | 8,700   |         |   | 7,112 |   |
| **Changes                    in Components of Working Capital:**                                                                    |   |         |    |         |   |   |   |
| Accounts                    Receivable, Net                                                                                         |   |         | (2,592  | )            |   | 9,817 |   |
| Fuel,                    Materials and Supplies                                                                                     |   |         | (4,200  | )            |   | 3,106 |   |
| Accounts                    Payable                                                                                                 |   |         | 12,876  |         |   | 7,788 |   |
| Taxes                    Accrued                                                                                                    |   |         | (553    | )            |   | 4,012 |   |
| Customer                    Deposits                                                                                                |   |         | 12,776  |         |   | 2,828 |   |
| Interest                    Accrued                                                                                                 |   |         | 2,753   |         |   | 2,159 |   |
| Other                    Current Assets                                                                                             |   |         | (14,231 | )            |   | 817 |   |
| Other                    Current Liabilities                                                                                        |   |         | (456    | )            |   | (530 | ) |
| **Net                    Cash Flows From Operating Activities**                                                                     |   |         | 52,375  |         |   | 97,902 |   |
|                                                                                                                                |   |         |    |         |   |   |   |
| **INVESTING                    ACTIVITIES**                                                                                         |   |         |    |         |   |   |   |
| Construction                    Expenditures                                                                                        |   |         | (38,837 | )            |   | (27,797 | ) |
| Change                    in Other Cash Deposits, Net                                                                               |   |         | (3      | )            |   | 11 |   |
| Proceeds                    from Sale of Assets                                                                                     |   |         | 199     |         |   | 1,538 |   |
| **Net                    Cash Flows Used For Investing Activities**                                                                 |   |         | (38,641 | )            |   | (26,248 | ) |
|                                                                                                                                |   |         |    |         |   |   |   |
| **FINANCING                    ACTIVITIES**                                                                                         |   |         |    |         |   |   |   |
| Issuance                    of Long-term Debt - Affiliated                                                                          |   |         | -       |         |   | 20,000 |   |
| Retirement                    of Long-term Debt-Affiliated                                                                          |   |         | (20,000 | )            |   | - |   |
| Changes                    in Advances to/from Affiliates, Net                                                                      |   |         | 6,486   |         |   | (75,875 | ) |
| Dividends                    Paid on Common Stock                                                                                   |   |         | -       |         |   | (16,000 | ) |
| **Net                    Cash Flows Used For Financing Activities**                                                                 |   |         | (13,514 | )            |   | (71,875 | ) |
|                                                                                                                                |   |         |    |         |   |   |   |
| **Net                    Increase (Decrease) in Cash and Cash Equivalents**                                                         |   |         | 220     |         |   | (221 | ) |
| **Cash                    and Cash Equivalents at Beginning of Period**                                                             |   |         | 127     |         |   | 863 |   |
| **Cash                    and Cash Equivalents at End of Period**                                                                   |   | $            | 347     |         | $      | 642 |   |

| **SUPPLEMENTAL                    DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                    paid (received) for interest net of capitalized amounts was $17,250,000                    and $19,198,000 and for income taxes was $7,466,000 and $(3,233,000)                    in                    2005 and 2004, respectively. Noncash capital lease acquisitions                    in 2005                    and 2004 were $273,000 and $697,000, respectively. Construction                    Expenditures include the change in construction-related Accounts                    Payable                    of $(1,550,000) and $(1,127,000) in 2005 and 2004,                    respectively. |

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

----

**KENTUCKY          POWER COMPANY**

**INDEX          TO CONDENSED NOTES TO 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  |
| Benefit                    Plans                           | Note                    8  |
| Business                    Segments                       | Note                    9  |
| Income Taxes                                               | Note                    10 |
| Financing                    Activities                    | Note                    11 |
| Company-wide                    Staffing and Budget Review | Note                    12 |

----

**OHIO          POWER COMPANY CONSOLIDATED**

----

**OHIO          POWER COMPANY CONSOLIDATED**

**MANAGEMENT’S          FINANCIAL DISCUSSION AND ANALYSIS**

**Results          of Operations**

**Reconciliation          of Third Quarter of 2004 to Third Quarter of 2005 Net          Income**

**(in          millions)**

| **Third                    Quarter of 2004 Net Income**             |   |   |   |   | $      | 51     |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                    Margins                                   |   |   | 12     |   |   |   |   |
| Off-system                    Sales                                 |   |   | 14     |   |   |   |   |
| Transmission                    Revenues                            |   |   | (5     | )      |   |   |   |
| Other                    Revenues                                   |   |   | (2     | )      |   |   |   |
| **Total                    Change in Gross Margin**                 |   |   |   |   |   | 19     |   |
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                  |   |   | (20    | )      |   |   |   |
| Depreciation                    and Amortization                    |   |   | (2     | )      |   |   |   |
| Taxes                    Other Than Income Taxes                    |   |   | (9     | )      |   |   |   |
| Nonoperating                    Income and Expenses, Net            |   |   | 19     |   |   |   |   |
| **Total                    Change in Operating Expenses and Other** |   |   |   |   |   | (12    | )      |
|                                                                |   |   |   |   |   |   |   |
| Income                    Tax Expense                               |   |   |   |   |   | (2     | )      |
|                                                                |   |   |   |   |   |   |   |
| **Third                    Quarter of 2005 Net Income**             |   |   |   |   | $      | 56     |   |

| · | Retail                    Margins were $12 million higher than the prior period primarily                    due                    to:                                                                                                                                                                                                           |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | -                                                                                                                                                                                                                                                                                                                                                 | increased                    retail sales of $25 million due to increased industrial, residential                    and                    commercial sales from higher usage and favorable weather                    conditions, |
|   | -                                                                                                                                                                                                                                                                                                                                                 | partially                    offset by decreased fuel margins of $15 million, of which $9                    million is                    related to an amendment to the PJM Services and Cost Allocation                    Agreement                    and the Buckeye Station Agreement. |
| · | Margins                    from Off-system Sales increased $14 million primarily due to                    increased AEP                    Power Pool physical sales and favorable optimization activity.                                                                                                                                        |
| · | Transmission                    Revenues decreased $5 million primarily due to the loss of through                    and out                    rates, net of replacement SECA rates. See “FERC Order on Regional Through                    and Out Rates” for additional discussion of these FERC rate                    changes. |

| · | Other                    Operation and Maintenance expenses increased $20 million primarily                    due to                    $11 million of increased consumption expenses associated with                    SO2                    and                    NOx                    allowances,                    $4 million from increased boiler maintenance expenses due to                    overhaul work                    from scheduled and forced outages and $3 million from increased                    maintenance of overhead lines due to storm repair, increased                    tree trimming                    expenses and greater expenses for transmission inspection programs. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Taxes                    Other Than Income Taxes increased $9 million primarily due to                    an increase                    in property tax accruals as a result of increased property values.                    The                    increase is also a result of increased state excise taxes due                    to higher                    KWH sales.                                                                                                                                                                                                                                                                                                                                         |
| · | Nonoperating                    Income and Expenses, Net increased $19 million primarily due                    to the                    establishment of a regulatory asset for carrying costs on environmental                    capital expenditures as a result of the rate stabilization plan                    order and                    favorable optimization activities.                                                                                                                                                                                                                                                                                                                                |

*Income          Tax *

**Reconciliation          of Nine Months Ended September 30, 2004 to**

**Nine          Months Ended September 30, 2005 Net Income**

**(in          millions)**

| **Nine                    Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 170    |   |
|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                   |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                        |   |   |   |   |   |   |   |
| Retail                    Margins                                      |   |   | 41     |   |   |   |   |
| Off-system                    Sales                                    |   |   | 26     |   |   |   |   |
| Transmission                    Revenues                               |   |   | (19    | )      |   |   |   |
| **Total                    Change in Gross Margin**                    |   |   |   |   |   | 48     |   |
|                                                                   |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                     |   |   | (6     | )      |   |   |   |
| Depreciation                    and Amortization                       |   |   | (13    | )      |   |   |   |
| Taxes                    Other Than Income Taxes                       |   |   | (9     | )      |   |   |   |
| Nonoperating                    Income and Expenses, Net               |   |   | 48     |   |   |   |   |
| Interest                    Charges                                    |   |   | 11     |   |   |   |   |
| **Total                    Change in Operating Expenses and Other**    |   |   |   |   |   | 31     |   |
|                                                                   |   |   |   |   |   |   |   |
| Income                    Tax Expense                                  |   |   |   |   |   | (22    | )      |
|                                                                   |   |   |   |   |   |   |   |
| **Nine                    Months Ended September 30, 2005 Net Income** |   |   |   |   | $      | 227    |   |

| · | Retail                    Margins were $41 million higher than the prior period primarily                    due                    to:                                                                                                                                                                                                            |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | -                                                                                                                                                                                                                                                                                                                                                  | increased                      retail sales of $39 million due to increased residential, commercial                      and                      industrial sales from higher usage and favorable weather                      conditions, |
|   | -                                                                                                                                                                                                                                                                                                                                                  | a                    favorable variance of $18 million from the receipt of SO2                    allowances from Buckeye Power, Inc. under the Cardinal Station                    Allowance                    Agreement, |
|   | -                                                                                                                                                                                                                                                                                                                                                  | and                    an increase of $8 million from capacity settlements under the                    Interconnection Agreement related to an increase in an affiliate’s peak                    load, |
|   | -                                                                                                                                                                                                                                                                                                                                                  | partially                    offset by decreased fuel margins of $31 million which includes                    an                    amendment to the PJM Services and Cost Allocation Agreement and                    the                    Buckeye Station Agreement of $9 million. |
| · | Margins                    from Off-system Sales increased $26 million primarily due to                    increased AEP                    Power Pool physical sales and favorable optimization                    activity.                                                                                                                      |
| · | Transmission                    Revenues decreased $19 million primarily due to the loss of through                    and                    out rates, net of replacement SECA rates. See “FERC Order on Regional                    Through and Out Rates” for additional discussion of these FERC rate                    changes. |

| · | Other                    Operation and Maintenance expenses increased $6 million primarily                    due to                    increased consumption expenses associated with SO2                    and                    NOx                    allowances                    and increased maintenance of overhead lines due to storm repair,                    increased                    tree trimming expenses and greater expenses for transmission                    inspection                    programs offset by the settlement and cancellation of the COLI                    policy in                    February 2005 and decreased administrative expenses related to                    the Gavin                    scrubber. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation                    and Amortization expense increased $13 million due to the establishment                    of                    a $7 million regulatory liability to benefit low income customers                    and for                    economic development, as ordered in the rate stabilization plan.                    The                    increase is also attributable to a higher depreciation base in                    electric                    utility plants.                                                                                                                                                                                                                                                        |
| · | Taxes                    Other Than Income Taxes increased $9 million primarily due to                    an increase                    in property tax accruals as a result of increased property values.                    The                    increase is also a result of increased state excise taxes due                    to higher                    KWH sales.                                                                                                                                                                                                                                                                                                                                                                                   |
| · | Nonoperating                    Income and Expenses, Net increased $48 million primarily due                    to the                    establishment of a $37 million regulatory asset for carrying                    costs on                    environmental capital expenditures as a result of the rate stabilization                    plan order and favorable optimization activities slightly offset                    by                    decreased pension costs in 2004 as a result of a settlement related                    to the                    sale of the coal companies prior to 2003.                                                                                                                                           |
| · | Interest                    Charges decreased by $11 million primarily due to capitalized                    interest                    related to construction of the Mitchell Plant and Cardinal Plant                    scrubbers                    and the Mitchell Plant SCR project that began after June 2004.                    Interest                    Charges also decreased due to refinancing debt maturities and                    optional                    redemptions with lower cost debt.                                                                                                                                                                                                                                           |

*Income          Tax*

**Financial          Condition**

**Credit          Ratings**

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

**Cash          Flow**

|                                                                    |   | **2005**                              |     | **2004** |   |
|-------------------------------------------------------------------------|--------|---------------------------------------|----------|----------|--------|
|                                                                    |   | **(in                    thousands)** |     |
| **Cash                    and Cash Equivalents at Beginning of Period** |   | $                                     | 9,300    |     | $      | 7,233 |   |
| Cash                    Flows From (Used For):                          |   |                                  |     |     |   |   |   |
| Operating                    Activities                                 |   |                                  | 313,784  |     |   | 448,099 |   |
| Investing                    Activities                                 |   |                                  | (451,347 | )        |   | (151,912 | ) |
| Financing                    Activities                                 |   |                                  | 129,645  |     |   | (299,977 | ) |
| Net                    Decrease in Cash and Cash Equivalents            |   |                                  | (7,918   | )        |   | (3,790 | ) |
| **Cash                    and Cash Equivalents at End of Period**       |   | $                                     | 1,382    |     | $      | 3,443 |   |

*Operating          Activities*

*Investing          Activities*

*Financing          Activities*

**Financing          Activity**

|                                              |   | **Principal**                         |    | **Interest** |   | **Due**  |   |
|---------------------------------------------------|--------|---------------------------------------|---------|--------------|--------|----------|--------|
| **Type                    of Debt**               |   | **Amount**                            |    | **Rate**     |   | **Date** |   |
|                                              |   | **(in                    thousands)** |    | **(%)**      |   |     |   |
| Installment                    Purchase Contracts |   | $                                     | 54,500  |         |   | Variable |   |   | 2029 |   |
| Installment                    Purchase Contracts |   |                                  | 163,500 |         |   | Variable |   |   | 2028 |   |
| Installment                    Purchase Contracts |   |                                  | 50,000  |         |   | Variable |   |   | 2016 |   |
| Installment                    Purchase Contracts |   |                                  | 50,000  |         |   | Variable |   |   | 2014 |   |
| Installment                    Purchase Contracts |   |                                  | 35,000  |         |   | Variable |   |   | 2022 |   |

|                                              |   | **Principal**                         |    | **Interest** |   | **Due**  |   |
|---------------------------------------------------|--------|---------------------------------------|---------|--------------|--------|----------|--------|
| **Type                    of Debt**               |   | **Amount**                            |    | **Rate**     |   | **Date** |   |
|                                              |   | **(in                    thousands)** |    | **(%)**      |   |     |   |
| Installment                    Purchase Contracts |   | $                                     | 102,000 |         |   | 6.375    |   |   | 2029 |   |
| Installment                    Purchase Contracts |   |                                  | 80,000  |         |   | Variable |   |   | 2028 |   |
| Installment                    Purchase Contracts |   |                                  | 36,000  |         |   | Variable |   |   | 2029 |   |
| Installment                    Purchase Contracts |   |                                  | 50,000  |         |   | 5.45     |   |   | 2014 |   |
| Installment                    Purchase Contracts |   |                                  | 50,000  |         |   | 5.45     |   |   | 2016 |   |
| Installment                    Purchase Contracts |   |                                  | 35,000  |         |   | 5.90     |   |   | 2022 |   |
| Notes                    Payable                  |   |                                  | 4,390   |         |   | 6.81     |   |   | 2008 |   |
| Notes                    Payable                  |   |                                  | 6,500   |         |   | 6.27     |   |   | 2009 |   |

**Liquidity**

**Summary          Obligation Information**

**Significant          Factors**

**Critical          Accounting Estimates**

----

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

**Market          Risks**

**Roll-Forward          of MTM Risk Management Contract Net Assets**

**MTM          Risk Management Contract Net Assets**

**Nine          Months Ended September 30, 2005**

**(in          thousands)**

| **Total                    MTM Risk Management Contract Net Assets at December 31,                    2004**                      |   | $      | 47,777  |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| (Gain)                    Loss from Contracts Realized/Settled During the Period (a)                                              |   |   | (13,828 | )      |
| Fair                    Value of New Contracts When Entered During the Period (b)                                                 |   |   | 835     |   |
| Net                    Option Premiums Paid/(Received) (c)                                                                        |   |   | (1,372  | )      |
| Change                    in Fair Value Due to Valuation Methodology Changes                                                      |   |   | -       |   |
| Changes                    in Fair Value of Risk Management Contracts (d)                                                         |   |   | 18,093  |   |
| Changes                    in Fair Value of Risk Management Contracts Allocated to Regulated                    Jurisdictions (e) |   |   | 314     |   |
| **Total                    MTM Risk Management Contract Net Assets**                                                              |   |   | 51,819  |   |
| Net                    Cash Flow Hedge Contracts (f)                                                                              |   |   | (10,778 | )      |
| DETM                    Assignment (g)                                                                                            |   |   | (12,267 | )      |
| **Total                    MTM Risk Management Contract Net Assets at September 30, 2005**                                        |   | $      | 28,774  |   |

| (a) | “(Gain)                    Loss from Contracts Realized/Settled During the Period” includes realized                    risk management contracts and related derivatives that settled                    during 2005                    where                    we entered into the contract prior                    to 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                    Value of New Contracts When Entered During the Period” represents the fair                    value at inception of long-term contracts entered into with customers                    during 2005. 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. |
| (c) | “Net                    Option Premiums Paid/(Received)” reflects the net option premiums                    paid/(received) as they relate to unexercised and unexpired option                    contracts that were entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (d) | “Changes                    in Fair Value of Risk Management Contracts” represents the fair value                    change in the risk management portfolio due to market fluctuations                    during                    the current period. Market fluctuations are attributable to various                    factors such as supply/demand, weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (e) | “Changes                    in Fair Value of Risk Management Contracts 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 assets/liabilities                    for                    those subsidiaries that operate in regulated                    jurisdictions.                                                                                                                                                                                                                                                                                                   |
| (f) | “Net                    Cash Flow Hedge Contracts” (pretax) are discussed below in Accumulated                    Other Comprehensive Income (Loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (g) | See                    “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                    Report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

**Reconciliation          of MTM Risk Management Contracts to**

**Condensed          Consolidated Balance Sheets**

**As          of September 30, 2005**

**(in          thousands)**

|                                                                                        |   | **MTM                    Risk Management Contracts (a)** |     | **Cash                    Flow****Hedges** |   | **DETM****Assignment****(b)** |   | **Total                    (c)** |    |
|---------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|----------|--------------------------------------------|--------|-------------------------------|--------|----------------------------------|---------|
| Current                    Assets                                                           |   | $                                                        | 157,786  |                                       | $      | 5,007                         |   | $                                | -       |   | $ | 162,793 |   |
| Noncurrent                    Assets                                                        |   |                                                     | 143,373  |                                       |   | 316                           |   |                             | -       |   |   | 143,689 |   |
| **Total                    MTM Derivative Contract Assets**                                 |   |                                                     | 301,159  |                                       |   | 5,323                         |   |                             | -       |   |   | 306,482 |   |
|                                                                                        |   |                                                     |     |                                       |   |                          |   |                             |    |   |   |   |   |
| Current                    Liabilities                                                      |   |                                                     | (140,353 | )                                          |   | (15,761                       | )      |                             | (2,914  | ) |   | (159,028 | ) |
| Noncurrent                    Liabilities                                                   |   |                                                     | (108,987 | )                                          |   | (340                          | )      |                             | (9,353  | ) |   | (118,680 | ) |
| ****Total                  MTM Derivative Contract**Liabilities**                           |   |                                                     | (249,340 | )                                          |   | (16,101                       | )      |                             | (12,267 | ) |   | (277,708 | ) |
|                                                                                        |   |                                                     |     |                                       |   |                          |   |                             |    |   |   |   |   |
| **Total                  MTM Derivative Contract Net Asset                  (Liabilities)** |   | $                                                        | 51,819   |                                       | $      | (10,778                       | )      | $                                | (12,267 | ) | $ | 28,774 |   |

| (a) | Does                    not include Cash Flow Hedges.                                                                                                                                                                                                                                                                                                               |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | See                    “Natural Gas Contracts with DETM” section in Note 17 of the 2004 Annual                    Report.                                                                                                                                                                                                                               |
| (c) | Represents                    amount of total MTM derivative contracts recorded within Risk                    Management                    Assets, Long-term Risk Management Assets, Risk Management Liabilities                    and                    Long-term Risk Management Liabilities on our Condensed Consolidated                    Balance Sheets. |

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

| · | The                    source of 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 September 30, 2005**

**(in          thousands)**

|                                                                                                    |   | **Remainder                    of 2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **After****2009                    (c)** |   | **Total                    (d)** |   |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|------------------------------------------|--------|----------------------------------|--------|
| Prices                    Actively Quoted - Exchange Traded                    Contracts                |   | $                                        | (1,960 | )        | $      | 9,429    |   | $        | 793    |     | $      | 434                                      |   | $                                | -      |   | $ | - |   | $ | 8,696 |   |
| Prices                    Provided by Other External Sources                    - OTC Broker Quotes (a) |   |                                     | 15,336 |     |   | 8,420    |   |     | 15,527 |     |   | 5,755                                    |   |                             | 841    |   |   | - |   |   | 45,879 |   |
| Prices                    Based on Models and Other Valuation                    Methods (b)            |   |                                     | (1,544 | )        |   | (9,259   | )      |     | (5,306 | )        |   | 2,832                                    |   |                             | 6,312  |   |   | 4,209 |   |   | (2,756 | ) |
| **Total**                                                                                               |   | $                                        | 11,832 |     | $      | 8,590    |   | $        | 11,014 |     | $      | 9,021                                    |   | $                                | 7,153  |   | $ | 4,209 |   | $ | 51,819 |   |

| (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 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. |
| (c) | There                    is mark-to-market value in excess of 10 percent of our total                    mark-to-market value in individual periods beyond 2009. $6 million                    of this                    mark-to-market value is in 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (d) | Amounts                    exclude Cash Flow Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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

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

**Nine          Months Ended September 30, 2005**

**(in          thousands)**

|                                                                                |   |  **Power  ** |   | **Interest****                     Rate  ** |   | **Foreign**** Currency  ** |   | ** Total ** |   |
|-------------------------------------------------------------------------------------|--------|-----------------------------|--------|------------------------------------------------------------|--------|-------------------------------------------|--------|-----------------------|--------|
| **Beginning                    Balance December 31, 2004**                          |   | $                           | 1,599  |                                                       | $      | -                                         |   | $                     | (358   | ) | $ | 1,241 |   |
| Changes                    in Fair Value (a)                                        |   |                        | (7,540 | )                                                          |   | 1,047                                     |   |                  | -      |   |   | (6,493 | ) |
| Reclassifications                    from AOCI to Net Income                    (b) |   |                        | (2,319 | )                                                          |   | -                                         |   |                  | 10     |   |   | (2,309 | ) |
| **Ending                    Balance September 30, 2005**                            |   | $                           | (8,260 | )                                                          | $      | 1,047                                     |   | $                     | (348   | ) | $ | (7,561 | ) |

| (a) | “Changes                    in Fair Value” shows changes in the fair value of derivatives designated                    as cash flow hedges during the reporting period that are not                    yet settled                    at September 30, 2005. Amounts are reported net of related income                    taxes.                                                    |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Reclassifications                    from AOCI to Net Income” represents gains or losses from derivatives used                    as hedging instruments in cash flow hedges that were reclassified                    into net                    income during the reporting period. Amounts are reported net                    of related                    income taxes above. |

**Credit          Risk**

**VaR          Associated with Risk Management Contracts**

|   | **Nine                    Months Ended**  |   | **Twelve                    Months Ended** |   |
|--------|-------------------------------------------|--------|--------------------------------------------|--------|
|   | **September                    30, 2005** |   | **December                    31, 2004**   |   |
|   | **(in                    thousands)**     |   | **(in                    thousands)**      |   |
|   | **End**                                   |   | **High**                                   |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |   |
|   | $691                                      |   | $942                                       |   | $444 |   | $237 |   | $464 |   | $1,513 |   | $652 |   | $223 |   |

**VaR          Associated with Debt Outstanding**

----

**OHIO          POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF INCOME**

**For          the Three and Nine Months Ended September 30, 2005 and          2004**

**(Unaudited)**

**(in          thousands)**

|                                                                                    |   | **Three                    Months Ended** |    | **Nine                    Months Ended** |   |
|-----------------------------------------------------------------------------------------|--------|-------------------------------------------|---------|------------------------------------------|--------|
|                                                                                    |   | **2005**                                  |    | **2004**                                 |   | **2005** |   | **2004** |   |
| **OPERATING                    REVENUES**                                               |   |                                 |    |                                |   |   |   |   |   |
| Electric                    Generation, Transmission and Distribution                   |   | $                                         | 471,175 |                                     | $      | 417,176 |   | $ | 1,377,528 |   | $ | 1,260,440 |   |
| Sales                    to AEP Affiliates                                              |   |                                      | 164,341 |                                     |   | 147,602 |   |   | 472,787 |   |   | 429,503 |   |
| **TOTAL**                                                                               |   |                                      | 635,516 |                                     |   | 564,778 |   |   | 1,850,315 |   |   | 1,689,943 |   |
|                                                                                    |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **OPERATING                    EXPENSES**                                               |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Fuel                    for Electric Generation                                         |   |                                      | 199,965 |                                     |   | 164,353 |   |   | 548,919 |   |   | 476,127 |   |
| Purchased                    Electricity for Resale                                     |   |                                      | 20,247  |                                     |   | 14,456 |   |   | 61,432 |   |   | 40,794 |   |
| Purchased                    Electricity from AEP Affiliates                            |   |                                      | 36,012  |                                     |   | 26,007 |   |   | 86,723 |   |   | 68,479 |   |
| Other                    Operation                                                      |   |                                      | 110,666 |                                     |   | 94,643 |   |   | 277,399 |   |   | 281,963 |   |
| Maintenance                                                                             |   |                                      | 44,990  |                                     |   | 41,047 |   |   | 142,100 |   |   | 131,831 |   |
| Depreciation                    and Amortization                                        |   |                                      | 73,799  |                                     |   | 71,857 |   |   | 227,687 |   |   | 214,027 |   |
| Taxes                    Other Than Income Taxes                                        |   |                                      | 53,374  |                                     |   | 44,681 |   |   | 144,202 |   |   | 135,517 |   |
| Income                    Taxes                                                         |   |                                      | 21,684  |                                     |   | 26,897 |   |   | 92,319 |   |   | 89,099 |   |
| **TOTAL**                                                                               |   |                                      | 560,737 |                                     |   | 483,941 |   |   | 1,580,781 |   |   | 1,437,837 |   |
|                                                                                    |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **OPERATING                    INCOME**                                                 |   |                                      | 74,779  |                                     |   | 80,837 |   |   | 269,534 |   |   | 252,106 |   |
|                                                                                    |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Nonoperating                    Income                                                  |   |                                      | 59,107  |                                     |   | 46,180 |   |   | 164,310 |   |   | 115,635 |   |
| Carrying                    Costs Income                                                |   |                                      | 8,882   |                                     |   | 182 |   |   | 38,430 |   |   | 539 |   |
| Nonoperating                    Expenses                                                |   |                                      | 53,251  |                                     |   | 50,809 |   |   | 146,305 |   |   | 108,109 |   |
| Nonoperating                    Income Tax Expense (Credit)                             |   |                                      | 4,693   |                                     |   | (2,660 | ) |   | 18,180 |   |   | (693 | ) |
| Interest                    Charges                                                     |   |                                      | 28,416  |                                     |   | 28,365 |   |   | 80,417 |   |   | 91,232 |   |
|                                                                                    |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **NET                    INCOME**                                                       |   |                                      | 56,408  |                                     |   | 50,685 |   |   | 227,372 |   |   | 169,632 |   |
|                                                                                    |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Preferred                    Stock Dividend Requirements (Including Other Expense) |   |                                      | 183     |                                     |   | 184 |   |   | 723 |   |   | 550 |   |
|                                                                                    |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **EARNINGS                    APPLICABLE TO COMMON STOCK**                              |   | $                                         | 56,225  |                                     | $      | 50,501 |   | $ | 226,649 |   | $ | 169,082 |   |

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

*See          Condensed Notes to 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 Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in          thousands)**

|                                                               |   | **Common                    Stock** |    | **Paid-in                    Capital** |   | **Retained                    Earnings** |   | **Accumulated                    Other Comprehensive Income (Loss)** |     | **Total** |   |
|--------------------------------------------------------------------|--------|-------------------------------------|---------|----------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------|----------|-----------|--------|
| **DECEMBER                    31, 2003**                           |   | $                                   | 321,201 |                                   | $      | 462,484                                  |   | $                                                                    | 729,147  |      | $      | (48,807 | ) | $ | 1,464,025 |   |
|                                                               |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| Common                    Stock Dividends                          |   |                                |    |                                   |   |                                     |   |                                                                 | (144,114 | )         |   |   |   |   | (144,114 | ) |
| Preferred                    Stock Dividends                       |   |                                |    |                                   |   |                                     |   |                                                                 | (550     | )         |   |   |   |   | (550 | ) |
| **TOTAL**                                                          |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   | 1,319,361 |   |
|                                                               |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                        |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:**     |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $1,820          |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   | (3,380 | ) |   | (3,380 | ) |
| Minimum                    Pension Liability, Net of Tax of $2,123 |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   | (3,942 | ) |   | (3,942 | ) |
| **NET                    INCOME**                                  |   |                                |    |                                   |   |                                     |   |                                                                 | 169,632  |      |   |   |   |   | 169,632 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                  |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   | 162,310 |   |
|                                                               |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| **SEPTEMBER                    30, 2004**                          |   | $                                   | 321,201 |                                   | $      | 462,484                                  |   | $                                                                    | 754,115  |      | $      | (56,129 | ) | $ | 1,481,671 |   |
|                                                               |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| **DECEMBER                    31, 2004**                           |   | $                                   | 321,201 |                                   | $      | 462,485                                  |   | $                                                                    | 764,416  |      | $      | (74,264 | ) | $ | 1,473,838 |   |
|                                                               |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| Common                    Stock Dividends                          |   |                                |    |                                   |   |                                     |   |                                                                 | (22,499  | )         |   |   |   |   | (22,499 | ) |
| Preferred                    Stock Dividends                       |   |                                |    |                                   |   |                                     |   |                                                                 | (549     | )         |   |   |   |   | (549 | ) |
| Other                                                              |   |                                |    |                                   |   | 4,151                                    |   |                                                                 | (174     | )         |   |   |   |   | 3,977 |   |
| **TOTAL**                                                          |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   | 1,454,767 |   |
|                                                               |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                        |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:**     |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $4,739          |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   | (8,802 | ) |   | (8,802 | ) |
| **NET                    INCOME**                                  |   |                                |    |                                   |   |                                     |   |                                                                 | 227,372  |      |   |   |   |   | 227,372 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                  |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   | 218,570 |   |
|                                                               |   |                                |    |                                   |   |                                     |   |                                                                 |     |      |   |   |   |   |   |   |
| **SEPTEMBER                    30, 2005**                          |   | $                                   | 321,201 |                                   | $      | 466,636                                  |   | $                                                                    | 968,566  |      | $      | (83,066 | ) | $ | 1,673,337 |   |

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

----

**OHIO          POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**September          30, 2005 and December 31, 2004**

**(Unaudited)**

**(in          thousands)**

|                                                         |   | **2005**     |      | **2004**     |   |
|--------------------------------------------------------------|--------|--------------|-----------|--------------|--------|
| **ELECTRIC                    UTILITY PLANT**                |   |    |      |    |   |
| Production                                                   |   | $            | 4,251,784 |         | $      | 4,127,284 |   |
| Transmission                                                 |   |         | 999,475   |         |   | 978,492 |   |
| Distribution                                                 |   |         | 1,245,883 |         |   | 1,202,550 |   |
| General                                                      |   |         | 236,900   |         |   | 248,749 |   |
| Construction                    Work in Progress             |   |         | 491,411   |         |   | 240,957 |   |
| **Total**                                                    |   |         | 7,225,453 |         |   | 6,798,032 |   |
| Accumulated                    Depreciation and Amortization |   |         | 2,689,961 |         |   | 2,617,238 |   |
| **TOTAL                    - NET**                           |   |         | 4,535,492 |         |   | 4,180,794 |   |
|                                                         |   |         |      |         |   |   |   |
| **OTHER                    PROPERTY AND INVESTMENTS**        |   |         |      |         |   |   |   |
| Nonutility                    Property, Net                  |   |         | 44,690    |         |   | 44,774 |   |
| Other                                                        |   |         | 8,836     |         |   | 13,409 |   |
| **TOTAL**                                                    |   |         | 53,526    |         |   | 58,183 |   |
|                                                         |   |         |      |         |   |   |   |
| **CURRENT                    ASSETS**                        |   |         |      |         |   |   |   |
| Cash                    and Cash Equivalents                 |   |         | 1,382     |         |   | 9,300 |   |
| Other                    Cash Deposits                       |   |         | 28        |         |   | 37 |   |
| Advances                    to Affiliates                    |   |         | -         |         |   | 125,971 |   |
| Accounts                    Receivable:                      |   |         |      |         |   |   |   |
| Customers                                                    |   |         | 118,233   |         |   | 98,951 |   |
| Affiliated                    Companies                      |   |         | 175,843   |         |   | 144,175 |   |
| Accrued                    Unbilled Revenues                 |   |         | 15,144    |         |   | 10,641 |   |
| Miscellaneous                                                |   |         | 7,490     |         |   | 7,626 |   |
| Allowance                    for Uncollectible Accounts      |   |         | (991      | )            |   | (93 | ) |
| Fuel                                                         |   |         | 93,008    |         |   | 70,309 |   |
| Materials                    and Supplies                    |   |         | 58,710    |         |   | 55,569 |   |
| Emissions                    Allowances                      |   |         | 34,072    |         |   | 95,303 |   |
| Risk                    Management Assets                    |   |         | 162,793   |         |   | 79,541 |   |
| Margin                    Deposits                           |   |         | 37,899    |         |   | 7,056 |   |
| Prepayments                    and Other                     |   |         | 16,328    |         |   | 10,492 |   |
| **TOTAL**                                                    |   |         | 719,939   |         |   | 714,878 |   |
|                                                         |   |         |      |         |   |   |   |
| **DEFERRED                    DEBITS AND OTHER ASSETS**      |   |         |      |         |   |   |   |
| Regulatory                    Assets:                        |   |         |      |         |   |   |   |
| SFAS                    109 Regulatory Asset, Net            |   |         | 174,821   |         |   | 169,866 |   |
| Transition                    Regulatory Assets              |   |         | 161,050   |         |   | 225,273 |   |
| Unamortized                    Loss on Reacquired Debt       |   |         | 13,866    |         |   | 11,046 |   |
| Other                                                        |   |         | 72,795    |         |   | 22,189 |   |
| Long-term                    Risk Management Assets          |   |         | 143,689   |         |   | 66,727 |   |
| Deferred                    Property Taxes                   |   |         | 22,412    |         |   | 70,214 |   |
| Deferred                    Charges and Other Assets         |   |         | 62,341    |         |   | 74,095 |   |
| **TOTAL**                                                    |   |         | 650,974   |         |   | 639,410 |   |
|                                                         |   |         |      |         |   |   |   |
| **TOTAL                    ASSETS**                          |   | $            | 5,959,931 |         | $      | 5,593,265 |   |

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

----

**OHIO          POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**CAPITALIZATION**
**          AND LIABILITIES**

**September          30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                                              |   | **2005**                              |      | **2004**     |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------------|-----------|--------------|--------|
| **CAPITALIZATION**                                                                |   | **(in                    thousands)** |      |
| Common                    Shareholder’s Equity                              |   |                             |      |    |   |
| Common                    Stock - No par value:                                   |   |                                  |      |         |   |   |   |
|  Authorized                    - 40,000,000 shares                           |   |                                  |      |         |   |   |   |
|  Outstanding                    - 27,952,473 shares                          |   | $                                     | 321,201   |         | $      | 321,201 |   |
| Paid-in                    Capital                                                |   |                                  | 466,636   |         |   | 462,485 |   |
| Retained                    Earnings                                              |   |                                  | 968,566   |         |   | 764,416 |   |
| Accumulated                    Other Comprehensive Income (Loss)                  |   |                                  | (83,066   | )            |   | (74,264 | ) |
| **Total                    Common Shareholder’s Equity**                    |   |                                  | 1,673,337 |         |   | 1,473,838 |   |
| Cumulative                    Preferred Stock Not Subject to Mandatory Redemption |   |                                  | 16,641    |         |   | 16,641 |   |
| **Total                    Shareholders’ Equity**                           |   |                                  | 1,689,978 |         |   | 1,490,479 |   |
| Long-term                    Debt:                                                |   |                                  |      |         |   |   |   |
| Nonaffiliated                                                                     |   |                                  | 1,589,860 |         |   | 1,598,706 |   |
| Affiliated                                                                        |   |                                  | 200,000   |         |   | 400,000 |   |
| **Total                    Long-term Debt**                                       |   |                                  | 1,789,860 |         |   | 1,998,706 |   |
| **TOTAL**                                                                         |   |                                  | 3,479,838 |         |   | 3,489,185 |   |
|                                                                              |   |                                  |      |         |   |   |   |
| Minority                    Interest                                              |   |                                  | 12,289    |         |   | 14,083 |   |
|                                                                              |   |                                  |      |         |   |   |   |
| **CURRENT                    LIABILITIES**                                        |   |                                  |      |         |   |   |   |
| Short-term                    Debt - Nonaffiliated                                |   |                                  | 15,365    |         |   | 23,498 |   |
| Long-term                    Debt Due Within One Year - Affiliated                |   |                                  | 200,000   |         |   | - |   |
| Long-term                    Debt Due Within One Year - Nonaffiliated             |   |                                  | 12,354    |         |   | 12,354 |   |
| Cumulative                    Preferred Stock Subject to Mandatory Redemption     |   |                                  | -         |         |   | 5,000 |   |
| Advances                    from Affiliates                                       |   |                                  | 55,508    |         |   | - |   |
| Accounts                    Payable:                                              |   |                                  |      |         |   |   |   |
| General                                                                           |   |                                  | 219,079   |         |   | 143,247 |   |
| Affiliated                    Companies                                           |   |                                  | 139,432   |         |   | 116,615 |   |
| Customer                    Deposits                                              |   |                                  | 63,684    |         |   | 22,620 |   |
| Taxes                    Accrued                                                  |   |                                  | 118,028   |         |   | 233,026 |   |
| Interest                    Accrued                                               |   |                                  | 20,912    |         |   | 39,254 |   |
| Risk                    Management Liabilities                                    |   |                                  | 159,028   |         |   | 70,311 |   |
| Obligations                    Under Capital Leases                               |   |                                  | 8,951     |         |   | 9,081 |   |
| Other                                                                             |   |                                  | 79,608    |         |   | 74,977 |   |
| **TOTAL**                                                                         |   |                                  | 1,091,949 |         |   | 749,983 |   |
|                                                                              |   |                                  |      |         |   |   |   |
| **DEFERRED                    CREDITS AND OTHER LIABILITIES**                     |   |                                  |      |         |   |   |   |
| Deferred                    Income Taxes                                          |   |                                  | 913,308   |         |   | 943,465 |   |
| Regulatory                    Liabilities:                                        |   |                                  |      |         |   |   |   |
| Asset                    Removal Costs                                            |   |                                  | 111,376   |         |   | 102,875 |   |
| Deferred                    Investment Tax Credits                                |   |                                  | 10,255    |         |   | 12,539 |   |
| Other                                                                             |   |                                  | 51,215    |         |   | - |   |
| Long-term                    Risk Management Liabilities                          |   |                                  | 118,680   |         |   | 46,261 |   |
| Deferred                    Credits                                               |   |                                  | 17,358    |         |   | 24,377 |   |
| Employee                    Benefits and Pension Obligations                      |   |                                  | 68,615    |         |   | 126,825 |   |
| Obligations                    Under Capital Leases                               |   |                                  | 31,375    |         |   | 31,652 |   |
| Asset                    Retirement Obligations                                   |   |                                  | 48,328    |         |   | 45,606 |   |
| Other                                                                             |   |                                  | 5,345     |         |   | 6,414 |   |
| **TOTAL**                                                                         |   |                                  | 1,375,855 |         |   | 1,340,014 |   |
| Commitments                    and Contingencies (Note 5)                         |   |                                  |      |         |   |   |   |
| **TOTAL                    CAPITALIZATION AND LIABILITIES**                       |   | $                                     | 5,959,931 |         | $      | 5,593,265 |   |

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

----

**OHIO          POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For          the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in          thousands)**

|                                                                                                                          |   | **2005**     |     | **2004**     |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|
| **OPERATING                    ACTIVITIES**                                                                                   |   |    |     |    |   |
| **Net Income**                                                                                                                |   | $            | 227,372  |         | $      | 169,632 |   |
| **Adjustments                    to Reconcile Net Income to Net Cash Flows****From                    Operating Activities:** |   |         |     |         |   |   |   |
| Depreciation                    and Amortization                                                                              |   |         | 227,687  |         |   | 214,027 |   |
| Accretion                    Expense                                                                                          |   |         | 2,722    |         |   | 2,548 |   |
| Deferred                    Income Taxes                                                                                      |   |         | 11,492   |         |   | 2,080 |   |
| Deferred                    Investment Tax Credits                                                                            |   |         | (2,284   | )            |   | (2,283 | ) |
| Deferred                    Property Taxes                                                                                    |   |         | 47,802   |         |   | 46,804 |   |
| Pension                    and Postemployment Benefit Reserves                                                                |   |         | 1,810    |         |   | 1,903 |   |
| Mark-to-Market                    of Risk Management Contracts                                                                |   |         | (10,840  | )            |   | 11,632 |   |
| Pension                    Contributions                                                                                      |   |         | (60,020  | )            |   | (574 | ) |
| Carrying                    Costs Income                                                                                      |   |         | (38,430  | )            |   | (539 | ) |
| Change                    in Other Noncurrent Assets                                                                          |   |         | (8,972   | )            |   | (22,471 | ) |
| Change                    in Other Noncurrent Liabilities                                                                     |   |         | (1,296   | )            |   | (4,719 | ) |
| **Changes                    in Components of Working Capital:**                                                              |   |         |     |         |   |   |   |
| Accounts                    Receivable, Net                                                                                   |   |         | (54,419  | )            |   | 17,891 |   |
| Fuel,                    Materials and Supplies                                                                               |   |         | (25,840  | )            |   | (6,930 | ) |
| Accounts                    Payable                                                                                           |   |         | 60,224   |         |   | 4,378 |   |
| Taxes                    Accrued                                                                                              |   |         | (114,998 | )            |   | 51,710 |   |
| Customer                    Deposits                                                                                          |   |         | 41,064   |         |   | 10,600 |   |
| Interest                    Accrued                                                                                           |   |         | (18,342  | )            |   | (19,340 | ) |
| Other                    Current Assets                                                                                       |   |         | 24,551   |         |   | (27,550 | ) |
| Other                    Current Liabilities                                                                                  |   |         | 4,501    |         |   | (700 | ) |
| **Net                    Cash Flows From Operating Activities**                                                               |   |         | 313,784  |         |   | 448,099 |   |
|                                                                                                                          |   |         |     |         |   |   |   |
| **INVESTING                    ACTIVITIES**                                                                                   |   |         |     |         |   |   |   |
| Construction                    Expenditures                                                                                  |   |         | (460,282 | )            |   | (205,799 | ) |
| Change                    in Other Cash Deposits, Net                                                                         |   |         | 9        |         |   | 50,967 |   |
| Proceeds                    from Sale of Assets                                                                               |   |         | 8,926    |         |   | 2,920 |   |
| **Net                    Cash Flows Used For Investing Activities**                                                           |   |         | (451,347 | )            |   | (151,912 | ) |
|                                                                                                                          |   |         |     |         |   |   |   |
| **FINANCING                    ACTIVITIES**                                                                                   |   |         |     |         |   |   |   |
| Change                    in Short-term Debt, Net                                                                             |   |         | (8,133   | )            |   | (6,379 | ) |
| Issuance                    of Long-term Debt - Nonaffiliated                                                                 |   |         | 348,237  |         |   | - |   |
| Issuance                    of Long-term Debt - Affiliated                                                                    |   |         | -        |         |   | 400,000 |   |
| Retirement                    of Long-term Debt - Nonaffiliated                                                               |   |         | (363,890 | )            |   | (382,390 | ) |
| Retirement                    of Cumulative Preferred Stock                                                                   |   |         | (5,000   | )            |   | (2,250 | ) |
| Changes                    in Advances to/from Affiliates, Net                                                                |   |         | 181,479  |         |   | (164,294 | ) |
| Dividends                    Paid on Common Stock                                                                             |   |         | (22,499  | )            |   | (144,114 | ) |
| Dividends                    Paid on Cumulative Preferred Stock                                                               |   |         | (549     | )            |   | (550 | ) |
| **Net                    Cash Flows From (Used For) Financing Activities**                                                    |   |         | 129,645  |         |   | (299,977 | ) |
|                                                                                                                          |   |         |     |         |   |   |   |
| **Net                    Decrease in Cash and Cash Equivalents**                                                              |   |         | (7,918   | )            |   | (3,790 | ) |
| **Cash                    and Cash Equivalents at Beginning of Period**                                                       |   |         | 9,300    |         |   | 7,233 |   |
| **Cash                    and Cash Equivalents at End of Period**                                                             |   | $            | 1,382    |         | $      | 3,443 |   |

**SUPPLEMENTAL              DISCLOSURE:**

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

----

**OHIO          POWER COMPANY CONSOLIDATED**

**INDEX          TO CONDENSED NOTES TO 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  |
| Benefit                    Plans                              | Note                    8  |
| Business                    Segments                          | Note                    9  |
| Income                    Taxes                               | Note                    10 |
| Financing                    Activities                       | Note                    11 |
| Company-wide                    Staffing and Budget Review    | Note                    12 |

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

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

**Results          of Operations**

**Reconciliation          of Third Quarter of 2004 to Third Quarter of 2005 Net          Income**

**(in          millions)**

| **Third                    Quarter of 2004 Net Income**             |   |   |   |   | $      | 39     |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                    and Off-system Sales Margins              |   |   | 19     |   |   |   |   |
| Transmission                    Revenues                            |   |   | 2      |   |   |   |   |
| **Total                    Change in Gross Margin**                 |   |   |   |   |   | 21     |   |
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                  |   |   | (9     | )      |   |   |   |
| Depreciation                    and Amortization                    |   |   | 2      |   |   |   |   |
| Nonoperating                    Income and Expenses, Net            |   |   | 1      |   |   |   |   |
| **Total                    Change in Operating Expenses and Other** |   |   |   |   |   | (6     | )      |
|                                                                |   |   |   |   |   |   |   |
| Income                    Tax Expense                               |   |   |   |   |   | (5     | )      |
|                                                                |   |   |   |   |   |   |   |
| **Third                    Quarter of 2005 Net Income**             |   |   |   |   | $      | 49     |   |

| · | Retail                    and Off-system Sales Margins increased $19 million primarily                    due to an increase in base margins for higher sales volumes resulting                    from                    a 27% increase in cooling degree days. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Other                    Operation and Maintenance expense increased $9 million primarily                    due to $4                    million of plant operation and maintenance and $3 million of                    overhead line                    maintenance. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Income          Taxes*

**Reconciliation          of Nine Months Ended September 30, 2004 to**

**Nine          Months Ended September 30, 2005 Net Income**

**(in          millions)**

| **Nine                    Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 37     |   |
|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                   |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                        |   |   |   |   |   |   |   |
| Retail                    and Off-system Sales Margins                 |   |   | 19     |   |   |   |   |
| Transmission                    Revenues                               |   |   | 2      |   |   |   |   |
| **Total                    Change in Gross Margin**                    |   |   |   |   |   | 21     |   |
|                                                                   |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                     |   |   | 16     |   |   |   |   |
| Depreciation                    and Amortization                       |   |   | 1      |   |   |   |   |
| Taxes                    Other Than Income Taxes                       |   |   | 4      |   |   |   |   |
| Interest                    Charges                                    |   |   | 3      |   |   |   |   |
| Nonoperating                    Income and Expenses, Net               |   |   | 2      |   |   |   |   |
| **Total                    Change in Operating Expenses and Other**    |   |   |   |   |   | 26     |   |
|                                                                   |   |   |   |   |   |   |   |
| Income                    Tax Expense                                  |   |   |   |   |   | (16    | )      |
|                                                                   |   |   |   |   |   |   |   |
| **Nine                    Months Ended September 30, 2005 Net Income** |   |   |   |   | $      | 68     |   |

| · | Retail                    and Off-system Sales Margins increased $19 million primarily                    due to an increase in base margins for higher volumes resulting                    from an 8%                    increase in degree days. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Other                    Operation and Maintenance expenses decreased $16 million.                    Transmission-related expenses decreased $5 million primarily                    due to                    adjustments in 2004 for affiliated OATT and ancillary services                    resulting                    from revised ERCOT data for the years 2001 through 2003. Distribution                    expenses decreased $4 million resulting primarily from a 2004                    labor                    settlement. Administrative and general expenses decreased approximately                    $10 million due to lower outside services and employee-related                    expenses,                    offset in part by increased customer-related expense of $5 million.                    Plant                    operation expense increased $3 million. Maintenance decreased                    $4 million                    primarily due to the higher cost of scheduled power plant maintenance                    and                    overhead line maintenance, both in 2004. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Taxes                    Other Than Income Taxes decreased $4 million primarily due to                    an                    adjustment for property related-taxes recorded in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| · | Interest                    Charges decreased $3 million primarily due to the retirement                    of higher                    rate First Mortgage Bonds and Trust Preferred Securities in 2004                    which                    were replaced by lower rate Senior Unsecured Notes and affiliated                    notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

*Income          Taxes*

**Financial          Condition**

**Credit          Ratings**

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

**Financing          Activity**

|                                      |   | **Principal**                         |   |  **Interest** |   | **Due**  |   |
|-------------------------------------------|--------|---------------------------------------|--------|--------------------|--------|----------|--------|
| **Type                    of Debt**       |   | **Amount**                            |   |  **Rate**     |   | **Date** |   |
|                                      |   | **(in                    thousands)** |   |  **(%)**      |   |     |   |
| Senior                    Unsecured Notes |   | $                                     | 75,000 |               |   | 4.70     |   |   | 2011 |   |

|                                    |   | **Principal**                         |   |  **Interest** |   | **Due**  |   |
|-----------------------------------------|--------|---------------------------------------|--------|--------------------|--------|----------|--------|
| **Type                    of Debt**     |   | **Amount**                            |   |  **Rate**     |   | **Date** |   |
|                                    |   | **(in                    thousands)** |   |  **(%)**      |   |     |   |
| First                    Mortgage Bonds |   | $                                     | 50,000 |               |   | 6.50     |   |   | 2005 |   |

**Liquidity**

**Summary          Obligation Information**

**Significant          Factors **

**Oklahoma          Regulatory Activity**

***Rate          Review***

***Fuel          and Purchased Power***

***Generation***

**Critical          Accounting Estimates**

----

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

**Market          Risks**

**MTM          Risk Management Contract Net Assets**

**MTM          Risk Management Contract Net Assets**

**Nine          Months Ended September 30, 2005**

**(in          thousands)**

| **Total                    MTM Risk Management Contract Net Assets at December 31,                    2004**                      |   | $      | 14,771 |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                    Loss from Contracts Realized/Settled During the Period (a)                                              |   |   | (98    | )      |
| Fair                    Value of New Contracts When Entered During the Period (b)                                                 |   |   | -      |   |
| Net                    Option Premiums Paid/(Received) (c)                                                                        |   |   | (222   | )      |
| Change                    in Fair Value Due to Valuation Methodology Changes                                                      |   |   | -      |   |
| Changes                    in Fair Value of Risk Management Contracts (d)                                                         |   |   | -      |   |
| Changes                    in Fair Value of Risk Management Contracts Allocated to Regulated                    Jurisdictions (e) |   |   | 3,274  |   |
| **Total                    MTM Risk Management Contract Net Assets**                                                              |   |   | 17,725 |   |
| Net                    Cash Flow Hedge Contracts (f)                                                                              |   |   | (5,764 | )      |
| **Total                    MTM Risk Management Contract Net Assets at September 30, 2005**                                        |   | $      | 11,961 |   |

| (a) | “(Gain)                      Loss from Contracts Realized/Settled During the Period” includes realized                      risk management contracts and related derivatives that settled                      during 2005                      where                      we entered into the contract prior                      to 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                      Value of New Contracts When Entered During the Period” represents the fair                      value at inception of long-term contracts entered into with                      customers                      during 2005. 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. |
| (c) | “Net                      Option Premiums Paid/(Received)” reflects the net option premiums                      paid/(received) as they relate to unexercised and unexpired                      option                      contracts that were entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (d) | “Changes                      in Fair Value of Risk Management Contracts” represents the fair value                      change in the risk management portfolio due to market fluctuations                      during                      the current period. Market fluctuations are attributable to                      various                      factors such as supply/demand, weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (e) | “Changes                      in Fair Value of Risk Management Contracts 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 assets/liabilities                      for                      those subsidiaries that operate in regulated                      jurisdictions.                                                                                                                                                                                                                                                                                                                                           |
| (f) | “Net                      Cash Flow Hedge Contracts” (pretax) are discussed below in Accumulated                      Other Comprehensive Income                      (Loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

**Reconciliation          of MTM Risk Management Contracts to**

**Condensed          Balance Sheets**

**As          of September 30, 2005**

**(in          thousands)**

|                                                                          |   | **MTM                    Risk Management Contracts (a)** |    | **Cash                    Flow Hedges** |   | **Total                    (b)** |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------------------|---------|-----------------------------------------|--------|----------------------------------|--------|
| Current                    Assets                                             |   | $                                                        | 53,434  |                                    | $      | 150                              |   | $ | 53,584 |   |
| Noncurrent                    Assets                                          |   |                                                     | 32,440  |                                    |   | 166                              |   |   | 32,606 |   |
| **Total                    MTM Derivative Contract Assets**                   |   |                                                     | 85,874  |                                    |   | 316                              |   |   | 86,190 |   |
|                                                                          |   |                                                     |    |                                    |   |                             |   |   |   |   |
| Current                    Liabilities                                        |   |                                                     | (47,060 | )                                       |   | (5,902                           | )      |   | (52,962 | ) |
| Noncurrent                    Liabilities                                     |   |                                                     | (21,089 | )                                       |   | (178                             | )      |   | (21,267 | ) |
| **Total                    MTM Derivative Contract Liabilities**              |   |                                                     | (68,149 | )                                       |   | (6,080                           | )      |   | (74,229 | ) |
|                                                                          |   |                                                     |    |                                    |   |                             |   |   |   |   |
| **Total                    MTM Derivative Contract Net Assets (Liabilities)** |   | $                                                        | 17,725  |                                    | $      | (5,764                           | )      | $ | 11,961 |   |

| (a) | Does                    not include Cash Flow Hedges.                                                                                                                                                                                                                                                                                                  |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents                    amount of total MTM derivative contracts recorded within Risk                    Management                    Assets, Long-term Risk Management Assets, Risk Management Liabilities                    and                    Long-term Risk Management Liabilities on our Condensed Balance                    Sheets. |

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

| · | The                    source of 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 September 30, 2005**

**(in          thousands)**

|                                                                                                        |   | **Remainder                      of 2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **After****2009** |   | **Total                      (c)** |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|------------------------------------|--------|
| Prices                      Actively Quoted - Exchange Traded                      Contracts                |   | $                                          | (1,027 | )        | $      | 4,942    |   | $        | 416    |     | $      | 228               |   | $                                  | -      |   | $ | - |   | $ | 4,559 |   |
| Prices                      Provided by Other External Sources                      - OTC Broker Quotes (a) |   |                                       | 7,629  |     |   | 2,634    |   |     | 6,404  |     |   | 2,282             |   |                               | -      |   |   | - |   |   | 18,949 |   |
| Prices                      Based on Models and Other Valuation                      Methods (b)            |   |                                       | (1,027 | )        |   | (5,938   | )      |     | (4,207 | )        |   | 596               |   |                               | 2,284  |   |   | 2,509 |   |   | (5,783 | ) |
| **Total**                                                                                                   |   | $                                          | 5,575  |     | $      | 1,638    |   | $        | 2,613  |     | $      | 3,106             |   | $                                  | 2,284  |   | $ | 2,509 |   | $ | 17,725 |   |

| (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 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. |
| (c) | Amounts                    exclude Cash Flow Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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

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

**Nine          Months Ended September 30, 2005**

**(in          thousands)**

|                                                                                |   | **Power** |   | **Interest                    Rate** |   | **Total** |   |
|-------------------------------------------------------------------------------------|--------|-----------|--------|--------------------------------------|--------|-----------|--------|
| **Beginning                    Balance December 31, 2004**                          |   | $         | 1,000  |                                 | $      | (600      | )      | $ | 400 |   |
| Changes                    in Fair Value (a)                                        |   |      | (4,656 | )                                    |   | 48        |   |   | (4,608 | ) |
| Reclassifications                    from AOCI to Net Income                    (b) |   |      | (227   | )                                    |   | 41        |   |   | (186 | ) |
| **Ending                    Balance September 30, 2005**                            |   | $         | (3,883 | )                                    | $      | (511      | )      | $ | (4,394 | ) |

| (a) | “Changes                    in Fair Value” shows changes in the fair value of derivatives designated                    as cash flow hedges during the reporting period that are not                    yet settled                    at September 30, 2005. Amounts are reported net of related income                    taxes.                                              |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Reclassifications                    from AOCI to Net Income” represents gains or losses from derivatives used                    as hedging instruments in cash flow hedges that were reclassified                    into net                    income during the reporting period. Amounts are reported net                    of related                    income taxes. |

**Credit          Risk**

**VaR          Associated with Risk Management Contracts**

|   | **Nine                    Months Ended**  |   | **Twelve                    Months Ended** |   |
|--------|-------------------------------------------|--------|--------------------------------------------|--------|
|   | **September                    30, 2005** |   | **December                    31, 2004**   |   |
|   | **(in                    thousands)**     |   | **(in                    thousands)**      |   |
|   | **End**                                   |   | **High**                                   |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |   |
|   | $362                                      |   | $494                                       |   | $233 |   | $124 |   | $238 |   | $778 |   | $335 |   | $115 |   |

**VaR          Associated with Debt Outstanding**

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

**CONDENSED          STATEMENTS OF INCOME**

**For          the Three and Nine Months Ended September 30, 2005 and          2004**

**(Unaudited)**

**(in          thousands)**

|                                                                  |   | **Three                    Months Ended** |    | **Nine                    Months Ended** |   |
|-----------------------------------------------------------------------|--------|-------------------------------------------|---------|------------------------------------------|--------|
|                                                                  |   | **2005**                                  |    | **2004**                                 |   | **2005** |   | **2004** |   |
| **OPERATING                    REVENUES**                             |   |                                 |    |                                |   |   |   |   |   |
| Electric                    Generation, Transmission and Distribution |   | $                                         | 416,005 |                                     | $      | 355,260 |   | $ | 939,066 |   | $ | 788,167 |   |
| Sales                    to AEP Affiliates                            |   |                                      | 16,032  |                                     |   | 1,371 |   |   | 32,314 |   |   | 7,467 |   |
| **TOTAL**                                                             |   |                                      | 432,037 |                                     |   | 356,631 |   |   | 971,380 |   |   | 795,634 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **OPERATING                    EXPENSES**                             |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Fuel                    for Electric Generation                       |   |                                      | 192,955 |                                     |   | 139,693 |   |   | 456,662 |   |   | 315,773 |   |
| Fuel                    from Affiliates for Electric Generation       |   |                                      | -       |                                     |   | 19 |   |   | - |   |   | 30 |   |
| Purchased                    Energy for Resale                        |   |                                      | 39,186  |                                     |   | 41,059 |   |   | 84,111 |   |   | 55,810 |   |
| Purchased                    Electricity from AEP Affiliates          |   |                                      | 26,643  |                                     |   | 24,083 |   |   | 64,877 |   |   | 79,182 |   |
| Other                    Operation                                    |   |                                      | 39,630  |                                     |   | 36,882 |   |   | 106,102 |   |   | 117,256 |   |
| Maintenance                                                           |   |                                      | 17,809  |                                     |   | 11,777 |   |   | 43,321 |   |   | 47,774 |   |
| Depreciation                    and Amortization                      |   |                                      | 20,842  |                                     |   | 22,762 |   |   | 65,708 |   |   | 67,097 |   |
| Taxes                    Other Than Income Taxes                      |   |                                      | 9,769   |                                     |   | 9,483 |   |   | 25,507 |   |   | 29,027 |   |
| Income                    Taxes                                       |   |                                      | 28,793  |                                     |   | 23,671 |   |   | 33,598 |   |   | 18,767 |   |
| **TOTAL**                                                             |   |                                      | 375,627 |                                     |   | 309,429 |   |   | 879,886 |   |   | 730,716 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **OPERATING                    INCOME**                               |   |                                      | 56,410  |                                     |   | 47,202 |   |   | 91,494 |   |   | 64,918 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Nonoperating                    Income                                |   |                                      | 1,460   |                                     |   | 640 |   |   | 2,462 |   |   | 1,011 |   |
| Nonoperating                    Expenses                              |   |                                      | 412     |                                     |   | 356 |   |   | 1,348 |   |   | 1,660 |   |
| Nonoperating                    Income Tax Expense (Credit)           |   |                                      | 127     |                                     |   | (162 | ) |   | (294 | ) |   | (1,021 | ) |
| Interest                    Charges                                   |   |                                      | 8,677   |                                     |   | 8,668 |   |   | 25,173 |   |   | 27,922 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **NET                    INCOME**                                     |   |                                      | 48,654  |                                     |   | 38,980 |   |   | 67,729 |   |   | 37,368 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Preferred                    Stock Dividend Requirements              |   |                                      | 53      |                                     |   | 53 |   |   | 159 |   |   | 159 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **EARNINGS                    APPLICABLE TO COMMON  STOCK**      |   | $                                         | 48,601  |                                     | $      | 38,927 |   | $ | 67,570 |   | $ | 37,209 |   |

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

*See          Condensed Notes to 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 Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in          thousands)**

|                                                           |   | **Common                    Stock** |    | **Paid-in                    Capital** |   | **Retained                    Earnings** |   | **Accumulated                    Other Comprehensive Income (Loss)** |    | **Total** |   |
|----------------------------------------------------------------|--------|-------------------------------------|---------|----------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                    31, 2003**                       |   | $                                   | 157,230 |                                   | $      | 230,016                                  |   | $                                                                    | 139,604 |      | $      | (43,842 | ) | $ | 483,008 |   |
|                                                           |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Gain                    on Reacquired Preferred Stock          |   |                                |    |                                   |   |                                     |   |                                                                 | 2       |      |   |   |   |   | 2 |   |
| Common                    Stock Dividends                      |   |                                |    |                                   |   |                                     |   |                                                                 | (26,250 | )         |   |   |   |   | (26,250 | ) |
| Preferred                    Stock Dividends                   |   |                                |    |                                   |   |                                     |   |                                                                 | (159    | )         |   |   |   |   | (159 | ) |
| **TOTAL**                                                      |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 456,601 |   |
|                                                           |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                    |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:** |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $1,335      |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   | (2,479 | ) |   | (2,479 | ) |
| **NET                    INCOME**                              |   |                                |    |                                   |   |                                     |   |                                                                 | 37,368  |      |   |   |   |   | 37,368 |   |
| **TOTAL                    COMPREHENSIVE INCOME**              |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 34,889 |   |
|                                                           |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **SEPTEMBER                    30, 2004**                      |   | $                                   | 157,230 |                                   | $      | 230,016                                  |   | $                                                                    | 150,565 |      | $      | (46,321 | ) | $ | 491,490 |   |
|                                                           |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **DECEMBER                    31, 2004**                       |   | $                                   | 157,230 |                                   | $      | 230,016                                  |   | $                                                                    | 141,935 |      | $      | 75 |   | $ | 529,256 |   |
|                                                           |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Common                    Stock Dividends                      |   |                                |    |                                   |   |                                     |   |                                                                 | (27,000 | )         |   |   |   |   | (27,000 | ) |
| Preferred                    Stock Dividends                   |   |                                |    |                                   |   |                                     |   |                                                                 | (159    | )         |   |   |   |   | (159 | ) |
| **TOTAL**                                                      |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 502,097 |   |
|                                                           |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                    |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:** |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $2,581      |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   | (4,794 | ) |   | (4,794 | ) |
| **NET                    INCOME**                              |   |                                |    |                                   |   |                                     |   |                                                                 | 67,729  |      |   |   |   |   | 67,729 |   |
| **TOTAL                    COMPREHENSIVE INCOME**              |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 62,935 |   |
|                                                           |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **SEPTEMBER                    30, 2005**                      |   | $                                   | 157,230 |                                   | $      | 230,016                                  |   | $                                                                    | 182,505 |      | $      | (4,719 | ) | $ | 565,032 |   |

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

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

**CONDENSED          BALANCE SHEETS**

**ASSETS**

**September          30, 2005 and December 31, 2004 **

**(Unaudited)**

**(in          thousands)**

|                                                               |   | **2005** |      | **2004** |   |
|--------------------------------------------------------------------|--------|----------|-----------|----------|--------|
| **ELECTRIC                    UTILITY PLANT**                      |   |     |      |
| Production                                                         |   | $        | 1,069,327 |     | $      | 1,072,022 |   |
| Transmission                                                       |   |     | 477,425   |     |   | 468,735 |   |
| Distribution                                                       |   |     | 1,132,326 |     |   | 1,089,187 |   |
| General                                                            |   |     | 200,740   |     |   | 200,044 |   |
| Construction                    Work in Progress                   |   |     | 61,112    |     |   | 41,028 |   |
| **Total**                                                          |   |     | 2,940,930 |     |   | 2,871,016 |   |
| Accumulated                    Depreciation and Amortization       |   |     | 1,163,806 |     |   | 1,117,113 |   |
| **TOTAL                    - NET**                                 |   |     | 1,777,124 |     |   | 1,753,903 |   |
|                                                               |   |     |      |     |   |   |   |
| **OTHER                    PROPERTY AND INVESTMENTS**              |   |     |      |     |   |   |   |
| Nonutility                    Property, Net                        |   |     | 4,594     |     |   | 4,401 |   |
| Other                    Investments                               |   |     | -         |     |   | 81 |   |
| **TOTAL**                                                          |   |     | 4,594     |     |   | 4,482 |   |
|                                                               |   |     |      |     |   |   |   |
| **CURRENT                    ASSETS**                              |   |     |      |     |   |   |   |
| Cash                    and Cash Equivalents                       |   |     | 1,911     |     |   | 91 |   |
| Other                    Cash Deposits                             |   |     | 6         |     |   | 188 |   |
| Accounts                    Receivable:                            |   |     |      |     |   |   |   |
| Customers                                                          |   |     | 21,078    |     |   | 34,002 |   |
| Affiliated                    Companies                            |   |     | 58,524    |     |   | 46,399 |   |
| Miscellaneous                                                      |   |     | 7,759     |     |   | 6,984 |   |
| Allowance                    for Uncollectible Accounts            |   |     | (12       | )        |   | (76 | ) |
| Fuel                                                               |   |     | 13,306    |     |   | 14,268 |   |
| Materials                    and Supplies                          |   |     | 40,320    |     |   | 35,485 |   |
| Risk                    Management Assets                          |   |     | 53,584    |     |   | 21,388 |   |
| Regulatory                    Asset for Under-Recovered Fuel Costs |   |     | 82,174    |     |   | 366 |   |
| Margin                    Deposits                                 |   |     | 19,002    |     |   | 2,881 |   |
| Prepayments                    and Other                           |   |     | 10,576    |     |   | 1,378 |   |
| **TOTAL**                                                          |   |     | 308,228   |     |   | 163,354 |   |
|                                                               |   |     |      |     |   |   |   |
| **DEFERRED                    DEBITS AND OTHER ASSETS**            |   |     |      |     |   |   |   |
| Regulatory                    Assets:                              |   |     |      |     |   |   |   |
| Unamortized                    Loss on Reacquired Debt             |   |     | 13,018    |     |   | 14,705 |   |
| Other                                                              |   |     | 40,703    |     |   | 17,246 |   |
| Long-term                    Risk Management Assets                |   |     | 32,606    |     |   | 14,477 |   |
| Prepaid                    Pension Obligations                     |   |     | 82,356    |     |   | 82,419 |   |
| Deferred                    Property Taxes                         |   |     | 8,123     |     |   | - |   |
| Deferred                    Charges and Other Assets               |   |     | 16,267    |     |   | 18,232 |   |
| **TOTAL**                                                          |   |     | 193,073   |     |   | 147,079 |   |
|                                                               |   |     |      |     |   |   |   |
| **TOTAL                    ASSETS**                                |   | $        | 2,283,019 |     | $      | 2,068,818 |   |

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

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA **

**CONDENSED          BALANCE SHEETS**

**CAPITALIZATION**
**          AND LIABILITIES**

**September          30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                                              |   | **2005**                              |      | **2004**     |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------------|-----------|--------------|--------|
| **CAPITALIZATION**                                                                |   | **(in                    thousands)** |      |
| 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                                              |   |                                  | 182,505   |         |   | 141,935 |   |
| Accumulated                    Other Comprehensive Income (Loss)                  |   |                                  | (4,719    | )            |   | 75 |   |
| **Total                    Common Shareholder’s Equity**                    |   |                                  | 565,032   |         |   | 529,256 |   |
| Cumulative                    Preferred Stock Not Subject to Mandatory Redemption |   |                                  | 5,262     |         |   | 5,262 |   |
| **Total                    Shareholders’ Equity**                           |   |                                  | 570,294   |         |   | 534,518 |   |
| Long-term                    Debt:                                                |   |                                  |      |         |   |   |   |
| Nonaffiliated                                                                     |   |                                  | 521,056   |         |   | 446,092 |   |
| Affiliated                                                                        |   |                                  | -         |         |   | 50,000 |   |
| **Total                    Long-term Debt**                                       |   |                                  | 521,056   |         |   | 496,092 |   |
| **TOTAL**                                                                         |   |                                  | 1,091,350 |         |   | 1,030,610 |   |
| **CURRENT                    LIABILITIES**                                        |   |                                  |      |         |   |   |   |
| Long-term                    Debt Due Within One Year - Nonaffiliated             |   |                                  | -         |         |   | 50,000 |   |
| Long-term                    Debt Due Within One Year - Affiliated                |   |                                  | 50,000    |         |   | - |   |
| Advances                    from Affiliates                                       |   |                                  | 22,601    |         |   | 55,002 |   |
| Accounts                    Payable:                                              |   |                                  |      |         |   |   |   |
| General                                                                           |   |                                  | 140,811   |         |   | 71,442 |   |
| Affiliated                    Companies                                           |   |                                  | 58,069    |         |   | 58,632 |   |
| Customer                    Deposits                                              |   |                                  | 58,161    |         |   | 33,757 |   |
| Taxes                    Accrued                                                  |   |                                  | 19,315    |         |   | 18,835 |   |
| Interest                    Accrued                                               |   |                                  | 3,498     |         |   | 4,023 |   |
| Risk                    Management Liabilities                                    |   |                                  | 52,962    |         |   | 13,705 |   |
| Obligations                    Under Capital Leases                               |   |                                  | 581       |         |   | 537 |   |
| Other                                                                             |   |                                  | 24,859    |         |   | 30,477 |   |
| **TOTAL**                                                                         |   |                                  | 430,857   |         |   | 336,410 |   |
|                                                                              |   |                                  |      |         |   |   |   |
| **DEFERRED                    CREDITS AND OTHER LIABILITIES**                     |   |                                  |      |         |   |   |   |
| Deferred                    Income Taxes                                          |   |                                  | 415,897   |         |   | 384,090 |   |
| Long-term                    Risk Management Liabilities                          |   |                                  | 21,267    |         |   | 7,455 |   |
| Regulatory                    Liabilities:                                        |   |                                  |      |         |   |   |   |
| Asset                    Removal Costs                                            |   |                                  | 215,325   |         |   | 220,298 |   |
| Deferred                    Investment Tax Credits                                |   |                                  | 27,530    |         |   | 28,620 |   |
| SFAS                    109 Regulatory Liability, Net                             |   |                                  | 20,236    |         |   | 21,963 |   |
| Unrealized                    Gain on Forward Commitments                         |   |                                  | 41,820    |         |   | 19,676 |   |
| Obligations                    Under Capital Leases                               |   |                                  | 1,021     |         |   | 747 |   |
| Deferred                    Credits and Other                                     |   |                                  | 17,716    |         |   | 18,949 |   |
| **TOTAL**                                                                         |   |                                  | 760,812   |         |   | 701,798 |   |
|                                                                              |   |                                  |      |         |   |   |   |
| Commitments                    and Contingencies (Note 5)                         |   |                                  |      |         |   |   |   |
|                                                                              |   |                                  |      |         |   |   |   |
| **TOTAL                    CAPITALIZATION AND LIABILITIES**                       |   | $                                     | 2,283,019 |         | $      | 2,068,818 |   |

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

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA **

**CONDENSED          STATEMENTS OF CASH FLOWS**

**For          the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in          thousands)**

|                                                                                                                          |   | **2005**     |    | **2004**     |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--------------|---------|--------------|--------|
| **OPERATING                    ACTIVITIES**                                                                                   |   |    |    |    |   |
| **Net                    Income**                                                                                             |   | $            | 67,729  |         | $      | 37,368 |   |
| **Adjustments                    to Reconcile Net Income to Net Cash Flows****From                    Operating Activities:** |   |         |    |         |   |   |   |
| Depreciation                    and Amortization                                                                              |   |         | 65,708  |         |   | 67,097 |   |
| Deferred                    Property Taxes                                                                                    |   |         | (8,123  | )            |   | (8,648 | ) |
| Deferred                    Income Taxes                                                                                      |   |         | 32,661  |         |   | 10,519 |   |
| Deferred                    Investment Tax Credits                                                                            |   |         | (1,090  | )            |   | (1,343 | ) |
| Pension                    and Postemployment Benefit Reserves                                                                |   |         | (777    | )            |   | 2,142 |   |
| Mark-to-Market                    of Risk Management Contracts                                                                |   |         | (2,954  | )            |   | 4,034 |   |
| Pension                    Contributions                                                                                      |   |         | (198    | )            |   | (2,630 | ) |
| Change                    in Other Noncurrent Assets                                                                          |   |         | (32,286 | )            |   | (15,667 | ) |
| Change                    in Other Noncurrent Liabilities                                                                     |   |         | 28,380  |         |   | 10,035 |   |
| **Changes                    in Components of Working Capital:**                                                              |   |         |    |         |   |   |   |
| Accounts                    Receivable, Net                                                                                   |   |         | (40     | )            |   | (6,754 | ) |
| Fuel,                    Materials and Supplies                                                                               |   |         | (3,873  | )            |   | (249 | ) |
| Fuel                    Recovery                                                                                              |   |         | (81,808 | )            |   | (1,874 | ) |
| Accounts                    Payable                                                                                           |   |         | 67,802  |         |   | (4,132 | ) |
| Customer                    Deposits                                                                                          |   |         | 24,404  |         |   | 7,929 |   |
| Taxes                    Accrued                                                                                              |   |         | 480     |         |   | 27,363 |   |
| Interest                    Accrued                                                                                           |   |         | (525    | )            |   | (73 | ) |
| Other                    Current Assets                                                                                       |   |         | (25,319 | )            |   | 3,194 |   |
| Other                    Current Liabilities                                                                                  |   |         | (5,574  | )            |   | (12,955 | ) |
| **Net                    Cash Flows From Operating Activities**                                                               |   |         | 124,597 |         |   | 115,356 |   |
|                                                                                                                          |   |         |    |         |   |   |   |
| **INVESTING                    ACTIVITIES**                                                                                   |   |         |    |         |   |   |   |
| Construction                    Expenditures                                                                                  |   |         | (87,804 | )            |   | (57,654 | ) |
| Change                    in Other Cash Deposits, Net                                                                         |   |         | 182     |         |   | 10,520 |   |
| Proceeds                    from Sale of Assets                                                                               |   |         | -       |         |   | 458 |   |
| **Net                    Cash Flows Used For Investing Activities**                                                           |   |         | (87,622 | )            |   | (46,676 | ) |
|                                                                                                                          |   |         |    |         |   |   |   |
| **FINANCING                    ACTIVITIES**                                                                                   |   |         |    |         |   |   |   |
| Issuance                    of Long-term Debt                                                                                 |   |         | 74,405  |         |   | 83,129 |   |
| Retirement                    of Long-term Debt                                                                               |   |         | (50,000 | )            |   | (112,020 | ) |
| Reacquired                    Preferred Stock                                                                                 |   |         | -       |         |   | (3 | ) |
| Changes                    in Advances to/from Affiliates, Net                                                                |   |         | (32,401 | )            |   | (13,605 | ) |
| Dividends                    Paid on Common Stock                                                                             |   |         | (27,000 | )            |   | (26,250 | ) |
| Dividends                    Paid on Cumulative Preferred Stock                                                               |   |         | (159    | )            |   | (159 | ) |
| **Net                    Cash Flows Used For Financing Activities**                                                           |   |         | (35,155 | )            |   | (68,908 | ) |
|                                                                                                                          |   |         |    |         |   |   |   |
| **Net                    Increase (Decrease) in Cash and Cash Equivalents**                                                   |   |         | 1,820   |         |   | (228 | ) |
| **Cash                    and Cash Equivalents at Beginning of Period**                                                       |   |         | 91      |         |   | 3,738 |   |
| **Cash                    and Cash Equivalents at End of Period**                                                             |   | $            | 1,911   |         | $      | 3,510 |   |

| **SUPPLEMENTAL                    DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                    paid for interest net of capitalized amounts was $21,954,000                    and                    $24,518,000 and for income taxes was $14,241,000 and $2,387,000                    in 2005                    and 2004, respectively. Noncash capital lease acquisitions were                    $798,000                    and $448,000 in 2005 and 2004, respectively. Construction Expenditures                    include the change in construction-related Accounts Payable of                    $1,004,000                    and $(1,842,000) in 2005 and 2004,                    respectively. |

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

----

**PUBLIC          SERVICE COMPANY OF OKLAHOMA**

**INDEX          TO CONDENSED NOTES TO 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  |
| Benefit                    Plans                           | Note                    8  |
| Business                    Segments                       | Note                    9  |
| Income                    Taxes                            | Note                    10 |
| Financing                    Activities                    | Note                    11 |
| Company-wide                    Staffing and Budget Review | Note                    12 |

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**MANAGEMENT’S          FINANCIAL DISCUSSION AND ANALYSIS**

**Results          of Operations**

**Reconciliation          of Third Quarter of 2004 to Third Quarter of 2005 Net          Income**

**(in          millions)**

| **Third                    Quarter of 2004 Net Income**             |   |   |   |   | $      | 47     |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                     |   |   |   |   |   |   |   |
| Retail                    and Off-system Sales Margins (a)          |   |   | 19     |   |   |   |   |
| Transmission                    Revenues                            |   |   | 4      |   |   |   |   |
| Other                    Revenues                                   |   |   | 2      |   |   |   |   |
| **Total                    Change in Gross Margin**                 |   |   |   |   |   | 25     |   |
|                                                                |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**     |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                  |   |   | (20    | )      |   |   |   |
| Depreciation                    and Amortization                    |   |   | 1      |   |   |   |   |
| Taxes                    Other Than Income Taxes                    |   |   | (2     | )      |   |   |   |
| Nonoperating                    Income and Expenses, Net            |   |   | 1      |   |   |   |   |
| Interest                    Charges                                 |   |   | 1      |   |   |   |   |
| **Total                    Change in Operating Expenses and Other** |   |   |   |   |   | (19    | )      |
|                                                                |   |   |   |   |   |   |   |
| Income                    Tax Expense                               |   |   |   |   |   | (3     | )      |
|                                                                |   |   |   |   |   |   |   |
| **Third                    Quarter of 2005 Net Income**             |   |   |   |   | $      | 50     |   |

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

| · | Retail                    and Off-system Sales Margins increased $19 million primarily                    due to an increase in both retail base margins and wholesale                    base margins                    due to higher volumes resulting primarily from a 32% increase                    in cooling                    degree days. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission                    Revenues increased $4 million due to increased SPP                    revenue.                                                                                                                                                                                                                                        |

| · | Other                    Operation and Maintenance expense increased $20 million primarily                    due to                    increased power plant operation and maintenance expense of $8                    million                    resulting from extended planned power plant outages and higher                    transmission-related expense from SPP. Distribution maintenance                    expense                    increased $6 million primarily due to $4 million of storm damage                    related                    to Hurricane Rita and higher overhead line expense. Customer-related                    expenses and administrative and general expenses increased $6                    million,                    offset in part by lower employee-related                    expenses. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Income          Taxes*

**Reconciliation          of Nine Months Ended September 30, 2004 to**

**Nine          Months Ended September 30, 2005 Net Income**

**(in          millions)**

| **Nine                    Months Ended September 30, 2004 Net Income** |   |   |   |   | $      | 80     |   |
|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                   |   |   |   |   |   |   |   |
| **Changes                    in Gross Margin:**                        |   |   |   |   |   |   |   |
| Retail                    and Off-system Sales Margins (a)             |   |   | 11     |   |   |   |   |
| Transmission                    Revenues                               |   |   | 4      |   |   |   |   |
| Other                    Revenues                                      |   |   | 4      |   |   |   |   |
| **Total                    Change in Gross Margin**                    |   |   |   |   |   | 19     |   |
|                                                                   |   |   |   |   |   |   |   |
| **Changes                    in Operating Expenses and Other:**        |   |   |   |   |   |   |   |
| Other                    Operation and Maintenance                     |   |   | (21    | )      |   |   |   |
| Depreciation                    and Amortization                       |   |   | (2     | )      |   |   |   |
| Interest                    Charges                                    |   |   | 4      |   |   |   |   |
| **Total                    Change in Operating Expenses and Other**    |   |   |   |   |   | (19    | )      |
|                                                                   |   |   |   |   |   |   |   |
| Income                    Tax Expense                                  |   |   |   |   |   | 1      |   |
|                                                                   |   |   |   |   |   |   |   |
| **Nine                    Months Ended September 30, 2005 Net Income** |   |   |   |   | $      | 81     |   |

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

| · | Retail                    and Off-system Sales Margins increased $11 million primarily                    due to an increase in both retail base margins and wholesale                    base margins                    due to higher volumes resulting primarily from a 10% increase                    in degree                    days. These margins were offset in part by unfavorable optimization                    activity and increased purchased capacity. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission                    Revenues increased $4 million primarily due to increased SPP                    revenues.                                                                                                                                                                                                                                                                                                                                                      |

| · | Other                    Operation and Maintenance expense increased $21 million primarily                    due to                    increased power plant operation and maintenance expense of $13                    million                    resulting from extended planned power plant outages in 2005.                    This increase                    was partially offset by a $5 million adjustment in 2004 for affiliated                    OATT and ancillary services resulting from revised ERCOT data                    for the                    years 2001 through 2003. Distribution maintenance and customer                    expense                    increased $12 million primarily due to $4 million of storm damage                    related                    to Hurricane Rita and higher overhead line expense, offset in                    part by                    lower administrative and general and employee-related expenses. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Interest                    Charges decreased $4 million primarily due to decreased long-term                    debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

*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**

|                                                                    |   | **2005**                              |     | **2004** |   |
|-------------------------------------------------------------------------|--------|---------------------------------------|----------|----------|--------|
|                                                                    |   | **(in                    thousands)** |     |
| **Cash                    and Cash Equivalents at Beginning of Period** |   | $                                     | 2,308    |     | $      | 5,676 |   |
| Cash                    Flows From (Used For):                          |   |                                  |     |     |   |   |   |
| Operating                    Activities                                 |   |                                  | 160,994  |     |   | 214,921 |   |
| Investing                    Activities                                 |   |                                  | (105,557 | )        |   | (63,535 | ) |
| Financing                    Activities                                 |   |                                  | (53,941  | )        |   | (153,738 | ) |
| Net                    Increase (Decrease) in Cash and Cash Equivalents |   |                                  | 1,496    |     |   | (2,352 | ) |
| **Cash                    and Cash Equivalents at End of Period**       |   | $                                     | 3,804    |     | $      | 3,324 |   |

*Operating          Activities*

*Investing          Activities*

*Financing          Activities*

**Financing          Activity**

|                                      |   |  **Principal**                         |    | **Interest** |   | **Due**  |   |
|-------------------------------------------|--------|---------------------------------------------|---------|--------------|--------|----------|--------|
| **Type                    of Debt**       |   |  **Amount**                            |    | **Rate**     |   | **Date** |   |
|                                      |   |  **(in                    thousands)** |    | **(%)**      |   |     |   |
| Senior                    Unsecured Notes |   | $                                           | 150,000 |         |   | 4.90     |   |   | 2015 |   |
| Notes                    Payable          |   |                                        | 5,771   |         |   | Variable |   |   | 2006 |   |

|                                      |   |  **Principal**                         |    | **Interest** |   | **Due**  |   |
|-------------------------------------------|--------|---------------------------------------------|---------|--------------|--------|----------|--------|
| **Type                    of Debt**       |   |  **Amount**                            |    | **Rate**     |   | **Date** |   |
|                                      |   |  **(in                    thousands)** |    | **(%)**      |   |     |   |
| Notes                    Payable          |   | $                                           | 5,122   |         |   | 4.47     |   |   | 2011 |   |
| Notes                    Payable          |   |                                        | 3,000   |         |   | Variable |   |   | 2008 |   |
| Senior                    Unsecured Notes |   |                                        | 200,000 |         |   | 4.50     |   |   | 2005 |   |

**Liquidity**

**Summary          Obligation Information**

**Significant          Factors**

***Generation***

**Critical          Accounting Estimates**

----

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

**Market          Risks**

**MTM          Risk Management Contract Net Assets**

**MTM          Risk Management Contract Net Assets**

**Nine          Months Ended September 30, 2005**

**(in          thousands)**

| **Total                    MTM Risk Management Contract Net Assets at December 31,                    2004**                      |   | $      | 17,527 |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)                    Loss from Contracts Realized/Settled During the Period (a)                                              |   |   | (3,653 | )      |
| Fair                    Value of New Contracts When Entered During the Period (b)                                                 |   |   | 47     |   |
| Net                    Option Premiums Paid/(Received) (c)                                                                        |   |   | (326   | )      |
| Change                    in Fair Value Due to Valuation Methodology Changes                                                      |   |   | -      |   |
| Changes                    in Fair Value of Risk Management Contracts (d)                                                         |   |   | 4,510  |   |
| Changes                    in Fair Value of Risk Management Contracts Allocated to Regulated                    Jurisdictions (e) |   |   | 2,563  |   |
| **Total                    MTM Risk Management Contract Net Assets**                                                              |   |   | 20,668 |   |
| Net                    Cash Flow Hedge Contracts (f)                                                                              |   |   | (6,921 | )      |
| **Total                    MTM Risk Management Contract Net Assets at September 30, 2005**                                        |   | $      | 13,747 |   |

| (a) | “(Gain)                    Loss from Contracts Realized/Settled During the Period” includes realized                    risk management contracts and related derivatives that settled                    during 2005                    where                    we entered into the contract prior                    to 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Fair                    Value of New Contracts When Entered During the Period” represents the fair                    value at inception of long-term contracts entered into with customers                    during 2005. 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. |
| (c) | “Net                    Option Premiums Paid/(Received)” reflects the net option premiums                    paid/(received) as they relate to unexercised and unexpired option                    contracts that were entered in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (d) | “Changes                    in Fair Value of Risk Management Contracts” represents the fair value                    change in the risk management portfolio due to market fluctuations                    during                    the current period. Market fluctuations are attributable to various                    factors such as supply/demand, weather, storage, etc.                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (e) | “Changes                    in Fair Value of Risk Management Contracts 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 assets/liabilities                    for                    those subsidiaries that operate in regulated                    jurisdictions.                                                                                                                                                                                                                                                                                                   |
| (f) | “Net                    Cash Flow Hedge Contracts” (pretax) are discussed below in Accumulated                    Other Comprehensive Income (Loss).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

**Reconciliation          of MTM Risk Management Contracts to**

**Condensed          Consolidated Balance Sheets**

**As          of September 30, 2005**

**(in          thousands)**

|                                                                          |   | **MTM                    Risk Management Contracts (a)** |    | **Cash                    Flow Hedges** |   | **Total                    (b)** |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------------------|---------|-----------------------------------------|--------|----------------------------------|--------|
| Current                    Assets                                             |   | $                                                        | 62,400  |                                    | $      | 176                              |   | $ | 62,576 |   |
| Noncurrent                    Assets                                          |   |                                                     | 38,031  |                                    |   | 194                              |   |   | 38,225 |   |
| **Total                    MTM Derivative Contract Assets**                   |   |                                                     | 100,431 |                                    |   | 370                              |   |   | 100,801 |   |
|                                                                          |   |                                                     |    |                                    |   |                             |   |   |   |   |
| Current                    Liabilities                                        |   |                                                     | (55,023 | )                                       |   | (6,975                           | )      |   | (61,998 | ) |
| Noncurrent                    Liabilities                                     |   |                                                     | (24,740 | )                                       |   | (316                             | )      |   | (25,056 | ) |
| **Total                    MTM Derivative Contract Liabilities**              |   |                                                     | (79,763 | )                                       |   | (7,291                           | )      |   | (87,054 | ) |
|                                                                          |   |                                                     |    |                                    |   |                             |   |   |   |   |
| **Total                    MTM Derivative Contract Net Assets (Liabilities)** |   | $                                                        | 20,668  |                                    | $      | (6,921                           | )      | $ | 13,747 |   |

| (a) | Does                    not include Cash Flow Hedges.                                                                                                                                                                                                                                                                                                               |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents                    amount of total MTM derivative contracts recorded within Risk                    Management                    Assets, Long-term Risk Management Assets, Risk Management Liabilities                    and                    Long-term Risk Management Liabilities on our Condensed Consolidated                    Balance Sheets. |

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

| · | The                    source of 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 September 30, 2005**

**(in          thousands)**

|                                                                                                    |   | **Remainder                    of 2005** |   | **2006** |   | **2007** |   | **2008** |   | **2009** |   | **After****2009** |   | **Total                    (c)** |   |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|-------------------|--------|----------------------------------|--------|
| Prices                    Actively Quoted - Exchange Traded                    Contracts                |   | $                                        | (1,199 | )        | $      | 5,769    |   | $        | 485    |     | $      | 266               |   | $                                | -      |   | $ | - |   | $ | 5,321 |   |
| Prices                    Provided by Other External Sources                    - OTC Broker Quotes (a) |   |                                     | 8,890  |     |   | 3,056    |   |     | 7,564  |     |   | 2,665             |   |                             | -      |   |   | - |   |   | 22,175 |   |
| Prices                    Based on Models and Other Valuation                    Methods (b)            |   |                                     | (1,198 | )        |   | (6,978   | )      |     | (4,928 | )        |   | 680               |   |                             | 2,667  |   |   | 2,929 |   |   | (6,828 | ) |
| **Total**                                                                                               |   | $                                        | 6,493  |     | $      | 1,847    |   | $        | 3,121  |     | $      | 3,611             |   | $                                | 2,667  |   | $ | 2,929 |   | $ | 20,668 |   |

| (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 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. |
| (c) | Amounts                    exclude Cash Flow Hedges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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

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

**Nine          Months Ended September 30, 2005**

**(in          thousands)**

|                                                                                |   | **Power** |   | **Interest                    Rate** |   | **Total** |   |
|-------------------------------------------------------------------------------------|--------|-----------|--------|--------------------------------------|--------|-----------|--------|
| **Beginning                    Balance December 31, 2004**                          |   | $         | 1,188  |                                 | $      | (2,008    | )      | $ | (820 | ) |
| Changes                    in Fair Value (a)                                        |   |      | (5,452 | )                                    |   | (3,378    | )      |   | (8,830 | ) |
| Reclassifications                    from AOCI to Net Income                    (b) |   |      | (270   | )                                    |   | 135       |   |   | (135 | ) |
| **Ending                    Balance September 30, 2005**                            |   | $         | (4,534 | )                                    | $      | (5,251    | )      | $ | (9,785 | ) |

| (a) | “Changes                    in Fair Value” shows changes in the fair value of derivatives designated                    as cash flow hedges during the reporting period that are not                    yet settled                    at September 30, 2005. Amounts are reported net of related income                    taxes.                                                    |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Reclassifications                    from AOCI to Net Income” represents gains or losses from derivatives used                    as hedging instruments in cash flow hedges that were reclassified                    into net                    income during the reporting period. Amounts are reported net                    of related                    income taxes above. |

**Credit          Risk**

**VaR          Associated with Risk Management Contracts**

|   | **Nine                    Months Ended**  |   | **Twelve                    Months Ended** |   |
|--------|-------------------------------------------|--------|--------------------------------------------|--------|
|   | **September                    30, 2005** |   | **December                    31, 2004**   |   |
|   | **(in                    thousands)**     |   | **(in                    thousands)**      |   |
|   | **End**                                   |   | **High**                                   |   | **Average** |   | **Low** |   | **End** |   | **High** |   | **Average** |   | **Low** |   |
|   | $423                                      |   | $577                                       |   | $272 |   | $145 |   | $283 |   | $923 |   | $398 |   | $136 |   |

**VaR          Associated with Debt Outstanding**

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF INCOME**

**For          the Three and Nine Months Ended September 30, 2005 and          2004**

**(Unaudited)**

**(in          thousands)**

|                                                                  |   | **Three                    Months Ended** |    | **Nine                    Months Ended** |   |
|-----------------------------------------------------------------------|--------|-------------------------------------------|---------|------------------------------------------|--------|
|                                                                  |   | **2005**                                  |    | **2004**                                 |   | **2005** |   | **2004** |   |
| **OPERATING                    REVENUES**                             |   |                                 |    |                                |   |   |   |   |   |
| Electric                    Generation, Transmission and Distribution |   | $                                         | 459,083 |                                     | $      | 316,679 |   | $ | 1,015,132 |   | $ | 782,179 |   |
| Sales                    to AEP Affiliates                            |   |                                      | 14,614  |                                     |   | 14,888 |   |   | 38,573 |   |   | 54,597 |   |
| **TOTAL**                                                             |   |                                      | 473,697 |                                     |   | 331,567 |   |   | 1,053,705 |   |   | 836,776 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **OPERATING                    EXPENSES**                             |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Fuel                    for Electric Generation                       |   |                                      | 179,598 |                                     |   | 109,468 |   |   | 385,875 |   |   | 292,536 |   |
| Purchased                    Electricity for Resale                   |   |                                      | 45,194  |                                     |   | 18,958 |   |   | 91,377 |   |   | 20,884 |   |
| Purchased                    Electricity from AEP Affiliates          |   |                                      | 27,363  |                                     |   | 6,685 |   |   | 55,230 |   |   | 21,105 |   |
| Other                    Operation                                    |   |                                      | 59,966  |                                     |   | 46,825 |   |   | 151,530 |   |   | 141,686 |   |
| Maintenance                                                           |   |                                      | 22,353  |                                     |   | 15,350 |   |   | 65,713 |   |   | 55,009 |   |
| Depreciation                    and Amortization                      |   |                                      | 32,930  |                                     |   | 33,676 |   |   | 98,580 |   |   | 96,940 |   |
| Taxes                    Other Than Income Taxes                      |   |                                      | 18,175  |                                     |   | 16,544 |   |   | 49,725 |   |   | 48,259 |   |
| Income                    Taxes                                       |   |                                      | 25,896  |                                     |   | 23,443 |   |   | 36,353 |   |   | 38,013 |   |
| **TOTAL**                                                             |   |                                      | 411,475 |                                     |   | 270,949 |   |   | 934,383 |   |   | 714,432 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **OPERATING                    INCOME**                               |   |                                      | 62,222  |                                     |   | 60,618 |   |   | 119,322 |   |   | 122,344 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Nonoperating                    Income                                |   |                                      | 1,256   |                                     |   | 704 |   |   | 3,566 |   |   | 2,899 |   |
| Nonoperating                    Expenses                              |   |                                      | 473     |                                     |   | 669 |   |   | 1,564 |   |   | 2,003 |   |
| Nonoperating                    Income Tax Credit                     |   |                                      | 107     |                                     |   | 398 |   |   | 678 |   |   | 1,295 |   |
| Interest                    Charges                                   |   |                                      | 12,346  |                                     |   | 12,944 |   |   | 38,027 |   |   | 41,766 |   |
| Minority                    Interest                                  |   |                                      | (1,035  | )                                        |   | (898 | ) |   | (2,735 | ) |   | (2,592 | ) |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **NET                    INCOME**                                     |   |                                      | 49,731  |                                     |   | 47,209 |   |   | 81,240 |   |   | 80,177 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| Preferred                    Stock Dividend Requirements              |   |                                      | 57      |                                     |   | 57 |   |   | 172 |   |   | 172 |   |
|                                                                  |   |                                      |    |                                     |   |   |   |   |   |   |   |   |   |
| **EARNINGS                    APPLICABLE TO COMMON STOCK**            |   | $                                         | 49,674  |                                     | $      | 47,152 |   | $ | 81,068 |   | $ | 80,005 |   |

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

*See          Condensed Notes to 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 Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in          thousands)**

|                                                                          |   | **Common                    Stock** |    | **Paid-in                    Capital** |   | **Retained                    Earnings** |   | **Accumulated                    Other Comprehensive Income (Loss)** |    | **Total** |   |
|-------------------------------------------------------------------------------|--------|-------------------------------------|---------|----------------------------------------|--------|------------------------------------------|--------|----------------------------------------------------------------------|---------|-----------|--------|
| **DECEMBER                    31, 2003**                                      |   | $                                   | 135,660 |                                   | $      | 245,003                                  |   | $                                                                    | 359,907 |      | $      | (43,910 | ) | $ | 696,660 |   |
|                                                                          |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Common                    Stock Dividends                                     |   |                                |    |                                   |   |                                     |   |                                                                 | (45,000 | )         |   |   |   |   | (45,000 | ) |
| Preferred                    Stock Dividends                                  |   |                                |    |                                   |   |                                     |   |                                                                 | (172    | )         |   |   |   |   | (172 | ) |
| **TOTAL**                                                                     |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 651,488 |   |
|                                                                          |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                                   |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Income (Loss), Net  of Taxes:** |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $2,189                     |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   | (4,064 | ) |   | (4,064 | ) |
| Minimum                    Pension Liability, Net of Tax of $12,420           |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   | 23,066 |   |   | 23,066 |   |
| **NET                    INCOME**                                             |   |                                |    |                                   |   |                                     |   |                                                                 | 80,177  |      |   |   |   |   | 80,177 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                             |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 99,179 |   |
|                                                                          |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **SEPTEMBER                    30, 2004**                                     |   | $                                   | 135,660 |                                   | $      | 245,003                                  |   | $                                                                    | 394,912 |      | $      | (24,908 | ) | $ | 750,667 |   |
|                                                                          |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **DECEMBER                    31, 2004**                                      |   | $                                   | 135,660 |                                   | $      | 245,003                                  |   | $                                                                    | 389,135 |      | $      | (1,180 | ) | $ | 768,618 |   |
|                                                                          |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Common                    Stock Dividends                                     |   |                                |    |                                   |   |                                     |   |                                                                 | (40,000 | )         |   |   |   |   | (40,000 | ) |
| Preferred                    Stock Dividends                                  |   |                                |    |                                   |   |                                     |   |                                                                 | (172    | )         |   |   |   |   | (172 | ) |
| **TOTAL**                                                                     |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 728,446 |   |
|                                                                          |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **COMPREHENSIVE                    INCOME**                                   |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **Other                    Comprehensive Loss, Net of Taxes:**                |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| Cash                    Flow Hedges, Net of Tax of $4,827                     |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   | (8,965 | ) |   | (8,965 | ) |
| **NET                    INCOME**                                             |   |                                |    |                                   |   |                                     |   |                                                                 | 81,240  |      |   |   |   |   | 81,240 |   |
| **TOTAL                    COMPREHENSIVE INCOME**                             |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   | 72,275 |   |
|                                                                          |   |                                |    |                                   |   |                                     |   |                                                                 |    |      |   |   |   |   |   |   |
| **SEPTEMBER                    30, 2005**                                     |   | $                                   | 135,660 |                                   | $      | 245,003                                  |   | $                                                                    | 430,203 |      | $      | (10,145 | ) | $ | 800,721 |   |

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

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**ASSETS**

**September          30, 2005 and December 31, 2004**

**(Unaudited)**

**(in          thousands)**

|                                                               |   | **2005** |      | **2004** |   |
|--------------------------------------------------------------------|--------|----------|-----------|----------|--------|
| **ELECTRIC                    UTILITY PLANT**                      |   |     |      |
| Production                                                         |   | $        | 1,664,614 |     | $      | 1,663,161 |   |
| Transmission                                                       |   |     | 641,282   |     |   | 632,964 |   |
| Distribution                                                       |   |     | 1,144,445 |     |   | 1,114,480 |   |
| General                                                            |   |     | 435,727   |     |   | 427,910 |   |
| Construction                    Work in Progress                   |   |     | 75,491    |     |   | 48,852 |   |
| **Total**                                                          |   |     | 3,961,559 |     |   | 3,887,367 |   |
| Accumulated                    Depreciation and Amortization       |   |     | 1,762,337 |     |   | 1,709,758 |   |
| **TOTAL                    - NET**                                 |   |     | 2,199,222 |     |   | 2,177,609 |   |
|                                                               |   |     |      |     |   |   |   |
| **OTHER                    PROPERTY AND INVESTMENTS**              |   |     |      |     |   |   |   |
| Nonutility                    Property, Net                        |   |     | 4,047     |     |   | 4,049 |   |
| Other                    Investments                               |   |     | 4,611     |     |   | 4,628 |   |
| **TOTAL**                                                          |   |     | 8,658     |     |   | 8,677 |   |
|                                                               |   |     |      |     |   |   |   |
| **CURRENT                    ASSETS**                              |   |     |      |     |   |   |   |
| Cash                    and Cash Equivalents                       |   |     | 3,804     |     |   | 2,308 |   |
| Other                    Cash Deposits                             |   |     | 1,748     |     |   | 6,292 |   |
| Advances                    to Affiliates                          |   |     | -         |     |   | 39,106 |   |
| Accounts                    Receivable:                            |   |     |      |     |   |   |   |
| Customers                                                          |   |     | 35,940    |     |   | 39,042 |   |
| Affiliated                    Companies                            |   |     | 36,050    |     |   | 28,817 |   |
| Miscellaneous                                                      |   |     | 6,329     |     |   | 5,856 |   |
| Allowance                    for Uncollectible Accounts            |   |     | (383      | )        |   | (45 | ) |
| Fuel                    Inventory                                  |   |     | 38,883    |     |   | 45,793 |   |
| Materials                    and Supplies                          |   |     | 36,707    |     |   | 36,051 |   |
| Risk                    Management Assets                          |   |     | 62,576    |     |   | 25,379 |   |
| Regulatory                    Asset for Under-Recovered Fuel Costs |   |     | 62,738    |     |   | 4,687 |   |
| Margin                    Deposits                                 |   |     | 22,185    |     |   | 3,419 |   |
| Prepayments                    and Other                           |   |     | 24,577    |     |   | 18,331 |   |
| **TOTAL**                                                          |   |     | 331,154   |     |   | 255,036 |   |
|                                                               |   |     |      |     |   |   |   |
|                                                               |   |     |      |     |   |   |   |
| **DEFERRED                    DEBITS AND OTHER ASSETS**            |   |     |      |     |   |   |   |
| Regulatory                    Assets:                              |   |     |      |     |   |   |   |
| SFAS                    109 Regulatory Asset, Net                  |   |     | 22,826    |     |   | 18,000 |   |
| Unamortized                    Loss on Reacquired Debt             |   |     | 18,671    |     |   | 20,765 |   |
| Other                                                              |   |     | 28,528    |     |   | 16,350 |   |
| Long-term                    Risk Management Assets                |   |     | 38,225    |     |   | 17,179 |   |
| Prepaid                    Pension Obligations                     |   |     | 80,255    |     |   | 81,132 |   |
| Deferred                    Property Taxes                         |   |     | 9,579     |     |   | - |   |
| Deferred                    Charges and Other                      |   |     | 44,919    |     |   | 51,561 |   |
| **TOTAL**                                                          |   |     | 243,003   |     |   | 204,987 |   |
|                                                               |   |     |      |     |   |   |   |
| **TOTAL                    ASSETS**                                |   | $        | 2,782,037 |     | $      | 2,646,309 |   |

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

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED BALANCE SHEETS**

**CAPITALIZATION**
**          AND LIABILITIES**

**September          30, 2005 and December 31, 2004**

**(Unaudited)**

|                                                                              |   | **2005**                              |      | **2004**     |   |
|-----------------------------------------------------------------------------------|--------|---------------------------------------|-----------|--------------|--------|
| **CAPITALIZATION**                                                                |   | **(in                    thousands)** |      |
| 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                                              |   |                                  | 430,203   |         |   | 389,135 |   |
| Accumulated                    Other Comprehensive Income (Loss)                  |   |                                  | (10,145   | )            |   | (1,180 | ) |
| **Total                    Common Shareholder’s Equity**                    |   |                                  | 800,721   |         |   | 768,618 |   |
| Cumulative                    Preferred Stock Not Subject to Mandatory Redemption |   |                                  | 4,700     |         |   | 4,700 |   |
| **Total                    Shareholders’ Equity**                           |   |                                  | 805,421   |         |   | 773,318 |   |
| Long-term                    Debt:                                                |   |                                  |      |         |   |   |   |
| Nonaffiliated                                                                     |   |                                  | 687,376   |         |   | 545,395 |   |
| Affiliated                                                                        |   |                                  | 50,000    |         |   | 50,000 |   |
| **Total                    Long-term Debt**                                       |   |                                  | 737,376   |         |   | 595,395 |   |
| **TOTAL**                                                                         |   |                                  | 1,542,797 |         |   | 1,368,713 |   |
|                                                                              |   |                                  |      |         |   |   |   |
| Minority                    Interest                                              |   |                                  | 1,607     |         |   | 1,125 |   |
|                                                                              |   |                                  |      |         |   |   |   |
| **CURRENT                    LIABILITIES**                                        |   |                                  |      |         |   |   |   |
| Long-term                    Debt Due Within One Year - Nonaffiliated             |   |                                  | 15,663    |         |   | 209,974 |   |
| Advances                    from Affiliates                                       |   |                                  | 605       |         |   | - |   |
| Accounts                    Payable:                                              |   |                                  |      |         |   |   |   |
| General                                                                           |   |                                  | 87,889    |         |   | 40,001 |   |
| Affiliated                    Companies                                           |   |                                  | 27,155    |         |   | 33,285 |   |
| Customer                    Deposits                                              |   |                                  | 57,121    |         |   | 30,550 |   |
| Taxes                    Accrued                                                  |   |                                  | 50,129    |         |   | 45,474 |   |
| Interest                    Accrued                                               |   |                                  | 11,851    |         |   | 12,509 |   |
| Risk                    Management Liabilities                                    |   |                                  | 61,998    |         |   | 18,607 |   |
| Obligations                    Under Capital Leases                               |   |                                  | 5,021     |         |   | 3,692 |   |
| Regulatory                    Liability for Over-Recovered Fuel Costs             |   |                                  | 1,769     |         |   | 9,891 |   |
| Other                                                                             |   |                                  | 36,792    |         |   | 33,417 |   |
| **TOTAL**                                                                         |   |                                  | 355,993   |         |   | 437,400 |   |
|                                                                              |   |                                  |      |         |   |   |   |
| **DEFERRED                    CREDITS AND OTHER LIABILITIES**                     |   |                                  |      |         |   |   |   |
| Deferred                    Income Taxes                                          |   |                                  | 411,467   |         |   | 399,756 |   |
| Long-term                    Risk Management Liabilities                          |   |                                  | 25,056    |         |   | 9,128 |   |
| Reclamation                    Reserve                                            |   |                                  | -         |         |   | 7,624 |   |
| Regulatory                    Liabilities:                                        |   |                                  |      |         |   |   |   |
| Asset                    Removal Costs                                            |   |                                  | 257,573   |         |   | 249,892 |   |
| Deferred                    Investment Tax Credits                                |   |                                  | 32,319    |         |   | 35,539 |   |
| Excess                    Earnings                                                |   |                                  | 3,167     |         |   | 3,167 |   |
| Other                                                                             |   |                                  | 33,809    |         |   | 21,320 |   |
| Asset                    Retirement Obligations                                   |   |                                  | 33,743    |         |   | 27,361 |   |
| Obligations                    Under Capital Leases                               |   |                                  | 34,250    |         |   | 30,854 |   |
| Deferred                    Credits and Other                                     |   |                                  | 50,256    |         |   | 54,430 |   |
| **TOTAL**                                                                         |   |                                  | 881,640   |         |   | 839,071 |   |
|                                                                              |   |                                  |      |         |   |   |   |
| Commitments                    and Contingencies (Note 5)                         |   |                                  |      |         |   |   |   |
|                                                                              |   |                                  |      |         |   |   |   |
| **TOTAL                    CAPITALIZATION AND LIABILITIES**                       |   | $                                     | 2,782,037 |         | $      | 2,646,309 |   |

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

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**CONDENSED          CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For          the Nine Months Ended September 30, 2005 and 2004**

**(Unaudited)**

**(in          thousands)**

|                                                                                                                                |   | **2005**     |     | **2004**     |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------------|--------|
| **OPERATING                    ACTIVITIES**                                                                                         |   |    |     |    |   |
| **Net                    Income**                                                                                                   |   | $            | 81,240   |         | $      | 80,177 |   |
| **Adjustments                    to Reconcile Net Income to Net Cash Flows**** From                    Operating Activities:** |   |         |     |         |   |   |   |
| Depreciation                    and Amortization                                                                                    |   |         | 98,580   |         |   | 96,940 |   |
| Deferred                    Property Taxes                                                                                          |   |         | (9,579   | )            |   | (9,687 | ) |
| Deferred                    Income Taxes                                                                                            |   |         | 11,552   |         |   | (7,303 | ) |
| Deferred                    Investment Tax Credits                                                                                  |   |         | (3,220   | )            |   | (3,244 | ) |
| Pension                    and Postemployment Benefit Reserves                                                                      |   |         | (116     | )            |   | 3,103 |   |
| Mark-to-Market                    of Risk Management Contracts                                                                      |   |         | (3,141   | )            |   | 4,712 |   |
| Pension                    Contributions                                                                                            |   |         | (231     | )            |   | (3,463 | ) |
| Change                    in Other Noncurrent Assets                                                                                |   |         | (13,329  | )            |   | (7,485 | ) |
| Change                    in Other Noncurrent Liabilities                                                                           |   |         | 11,005   |         |   | 10,425 |   |
| **Changes                    in Components of Working Capital:**                                                                    |   |         |     |         |   |   |   |
| Accounts                    Receivable, Net                                                                                         |   |         | (4,266   | )            |   | (9,812 | ) |
| Fuel,                    Materials and Supplies                                                                                     |   |         | 6,254    |         |   | 14,525 |   |
|    Over/Under                  Fuel                  Recovery                                                             |   |         | (66,173  | )       |   | 12,304 |   |
| Accounts                    Payable                                                                                                 |   |         | 42,158   |         |   | (20,066 | ) |
| Taxes                    Accrued                                                                                                    |   |         | 4,655    |         |   | 63,540 |   |
| Customer                    Deposits                                                                                                |   |         | 26,571   |         |   | 7,873 |   |
| Interest                    Accrued                                                                                                 |   |         | (658     | )            |   | (4,885 | ) |
| Other                    Current Assets                                                                                             |   |         | (25,012  | )            |   | 2,940 |   |
| Other                    Current Liabilities                                                                                        |   |         | 4,704    |         |   | (15,673 | ) |
| **Net                    Cash Flows From Operating Activities**                                                                     |   |         | 160,994  |         |   | 214,921 |   |
|                                                                                                                                |   |         |     |         |   |   |   |
| **INVESTING                    ACTIVITIES**                                                                                         |   |         |     |         |   |   |   |
| Construction                    Expenditures                                                                                        |   |         | (110,209 | )            |   | (68,216 | ) |
| Change                    in Other Cash Deposits, Net                                                                               |   |         | 4,544    |         |   | 805 |   |
| Proceeds                    from Sale of Assets                                                                                     |   |         | 108      |         |   | 3,876 |   |
| **Net                    Cash Flows Used For Investing Activities**                                                                 |   |         | (105,557 | )            |   | (63,535 | ) |
|                                                                                                                                |   |         |     |         |   |   |   |
| **FINANCING                    ACTIVITIES**                                                                                         |   |         |     |         |   |   |   |
| Issuance                    of Long-term Debt-Nonaffiliated                                                                         |   |         | 154,642  |         |   | 92,441 |   |
| Issuance                    of Long-term Debt-Affiliated                                                                            |   |         | -        |         |   | 50,000 |   |
| Retirement                    of Long-term Debt                                                                                     |   |         | (208,122 | )            |   | (222,457 | ) |
| Changes                    in Advances to/from Affiliates, Net                                                                      |   |         | 39,711   |         |   | (28,550 | ) |
| Dividends                    Paid on Common Stock                                                                                   |   |         | (40,000  | )            |   | (45,000 | ) |
| Dividends                    Paid on Cumulative Preferred Stock                                                                     |   |         | (172     | )            |   | (172 | ) |
| **Net                    Cash Flows Used For Financing Activities**                                                                 |   |         | (53,941  | )            |   | (153,738 | ) |
|                                                                                                                                |   |         |     |         |   |   |   |
| **Net                    Increase (Decrease) in Cash and Cash Equivalents**                                                         |   |         | 1,496    |         |   | (2,352 | ) |
| **Cash                    and Cash Equivalents at Beginning of Period**                                                             |   |         | 2,308    |         |   | 5,676 |   |
| **Cash                    and Cash Equivalents at End of Period**                                                                   |   | $            | 3,804    |         | $      | 3,324 |   |

| **SUPPLEMENTAL                    DISCLOSURE:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash                    paid for interest net of capitalized amounts was $33,748,000                    and                    $40,136,000 and for income taxes was $49,176,000 and $11,326,000                    in 2005                    and 2004, respectively. Noncash capital lease acquisitions were                    $4,414,000                    and $18,018,000 in 2005 and 2004, respectively. Construction                    Expenditures                    include the change in construction-related Accounts Payable of                    $(400,000)                    and $(321,000) in 2005 and 2004,                    respectively. |

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

----

**SOUTHWESTERN          ELECTRIC POWER COMPANY CONSOLIDATED**

**INDEX          TO CONDENSED NOTES TO 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  |
| Benefit                    Plans                             | Note                    8  |
| Business                    Segments                         | Note                    9  |
| Income Taxes         | Note                    10 |
| Financing                    Activities                      | Note                    11 |
| Company-wide                    Staffing and Budget Review   | Note                    12 |

----

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

| The                    condensed notes to financial statements that follow are a combined                    presentation for AEP’s 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.                                                                                                                                                                                                                                                         | Acquisitions,                    Dispositions, Asset Impairments and Assets Held for Sale | APCo,                    CSPCo, TCC |
|  8.                                                                                                                                                                                                                                                         | Benefit                    Plans | APCo,                    CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
|  9.                                                                                                                                                                                                                                                         | Business                    Segments | AEGCo,                    APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 10.                                                                                                                                                                                                                                                              | Income                    Taxes | APCo,                    CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 11.                                                                                                                                                                                                                                                              | Financing                    Activities | AEGCo,                    APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC |
| 12.                                                                                                                                                                                                                                                              | Company-wide                    Staffing and Budget Review | AEGCo,                    APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC,                    TNC |

----

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

***General***

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

|                                              |   | **September                    30,**  |    | **December                    31,** |   |
|---------------------------------------------------|--------|---------------------------------------|---------|-------------------------------------|--------|
|                                              |   | **2005**                              |    | **2004**                            |   |
|                                              |   | **(in                    thousands)** |    |
| **Components**                                    |   |                             |    |                           |   |
| **Cash                    Flow Hedges:**          |   |                             |    |                           |   |
| APCo                                              |   | $                                     | (24,814 | )                                   | $      | (9,324 | ) |
| CSPCo                                             |   |                                  | (5,396  | )                                   |   | 1,393 |   |
| I&M                                           |   |                                  | (9,461  | )                                   |   | (4,076 | ) |
| KPCo                                              |   |                                  | (2,035  | )                                   |   | 813 |   |
| OPCo                                              |   |                                  | (7,561  | )                                   |   | 1,241 |   |
| PSO                                               |   |                                  | (4,394  | )                                   |   | 400 |   |
| SWEPCo                                            |   |                                  | (9,785  | )                                   |   | (820 | ) |
| TCC                                               |   |                                  | (2,364  | )                                   |   | 657 |   |
| TNC                                               |   |                                  | (1,011  | )                                   |   | 285 |   |
|                                              |   |                                  |    |                                |   |   |   |
| **Minimum                    Pension Liability:** |   |                                  |    |                                |   |   |   |
| APCo                                              |   | $                                     | (72,348 | )                                   | $      | (72,348 | ) |
| CSPCo                                             |   |                                  | (62,209 | )                                   |   | (62,209 | ) |
| I&M                                           |   |                                  | (41,175 | )                                   |   | (41,175 | ) |
| KPCo                                              |   |                                  | (9,588  | )                                   |   | (9,588 | ) |
| OPCo                                              |   |                                  | (75,505 | )                                   |   | (75,505 | ) |
| PSO                                               |   |                                  | (325    | )                                   |   | (325 | ) |
| SWEPCo                                            |   |                                  | (360    | )                                   |   | (360 | ) |
| TCC                                               |   |                                  | (1,006  | )                                   |   | (4,816 | ) |
| TNC                                               |   |                                  | (413    | )                                   |   | (413 | ) |

***Accounting          for Asset Retirement Obligations (ARO)***

|                           |   | **Balance                    at January 1, 2005** |   | **Accretion** |   | **Liabilities                    Incurred** |   | **Liabilities                    Settled** |   | **Revisions                    in Cash Flow Estimates** |   | **Balance                    at September 30, 2005** |   |
|--------------------------------|--------|---------------------------------------------------|--------|---------------|--------|---------------------------------------------|--------|--------------------------------------------|--------|---------------------------------------------------------|--------|------------------------------------------------------|--------|
|                           |   | **(in                    millions)**              |   |
| AEGCo                    (a)   |   | $                                                 | 1.2    |          | $      | 0.1                                         |   | $                                          | -      |                                                    | $      | -                                                    |   | $ | - |   | $ | 1.3 |   |
| APCo                    (a)    |   |                                              | 24.6   |          |   | 1.4                                         |   |                                       | -      |                                                    |   | -                                                    |   |   | - |   |   | 26.0 |   |
| CSPCo                    (a)   |   |                                              | 11.6   |          |   | 0.6                                         |   |                                       | -      |                                                    |   | -                                                    |   |   | - |   |   | 12.2 |   |
| I&M                    (b) |   |                                              | 711.8  |          |   | 35.7                                        |   |                                       | -      |                                                    |   | -                                                    |   |   | (27.0 | ) |   | 720.5 |   |
| OPCo                    (a)    |   |                                              | 45.6   |          |   | 2.7                                         |   |                                       | -      |                                                    |   | -                                                    |   |   | - |   |   | 48.3 |   |
| SWEPCo                    (c)  |   |                                              | 27.4   |          |   | 1.1                                         |   |                                       | 8.8    |                                                    |   | (0.1                                                 | )      |   | (0.8 | ) |   | 36.4 |   |
| TCC                    (d)     |   |                                              | 248.9  |          |   | 7.5                                         |   |                                       | -      |                                                    |   | (256.4                                               | )      |   | - |   |   | - |   |

| (a) | Consists                    of ARO related to ash ponds.                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Consists                    of ARO related to ash ponds ($1.3 million at September 30, 2005)                    and                    nuclear decommissioning costs for the Cook Plant ($719.2 million                    at                    September 30, 2005). The Cook Plant’s operating licenses were renewed for                    Cook Unit 1 until 2034 and for Cook Unit 2 until 2037.                                                     |
| (c) | Consists                    of ARO related to Sabine Mining Company and Dolet Hills Lignite                    Company,                    LLC (Dolet Hills). The current portion of Dolet Hills ARO, totaling                    $2.6                    million, is included in Other in the Current Liabilities section                    of                    SWEPCo’s September 30, 2005 Condensed Consolidated Balance                    Sheet. |
| (d) | The                    ARO for TCC’s share of STP was included in Liabilities Held for Sale -                    Texas Generation Plants in TCC’s Consolidated Balance Sheet at December                    31, 2004 and was subsequently transferred to the buyer with the                    sale in                    the second quarter of 2005 (see “Texas Plants - South Texas Project”                    section of Note 7).  |

***Related          Party Transactions***

|        |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September                    30,** |   |
|-------------|--------|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
| **Company** |   | **2005**                                                                      |   | **2004**                                                                     |   | **2005** |   | **2004** |   |
|        |   | **(in                    thousands)**                                         |   |
|        |   |                                                                     |   |                                                                    |   |    |   |    |   |
| APCo        |   | $                                                                             | 19,501 |                                                                         | $      | 16,647 |   | $ | 54,763 |   | $ | 44,276 |   |
| CSPCo       |   |                                                                          | 5,103  |                                                                         |   | 4,468 |   |   | 14,752 |   |   | 11,956 |   |
| I&M     |   |                                                                          | 7,920  |                                                                         |   | 9,042 |   |   | 22,704 |   |   | 19,438 |   |
| OPCo        |   |                                                                          | 16,703 |                                                                         |   | 14,938 |   |   | 47,757 |   |   | 39,501 |   |

|        |   | **Three                    Months Ended****September                    30,** |   | **Nine                    Months Ended****September                    30,** |   |
|-------------|--------|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
| **Company** |   | **2005**                                                                      |   | **2004**                                                                     |   | **2005** |   | **2004** |   |
|        |   | **(in                    thousands)**                                         |   |
|        |   |                                                                     |   |                                                                    |   |    |   |    |   |
| PSO         |   | $                                                                             | 11,051 |                                                                         | $      | - |   | $ | 31,160 |   | $ | - |   |
| SWEPCo      |   |                                                                          | 13,189 |                                                                         |   | - |   |   | 27,570 |   |   | - |   |
| TCC         |   |                                                                          | 5,548  |                                                                         |   | - |   |   | 20,120 |   |   | - |   |
| TNC         |   |                                                                          | 8,559  |                                                                         |   | - |   |   | 19,638 |   |   | - |   |

***Reclassification***

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

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

***SFAS          154 “Accounting Changes and Error Corrections” (SFAS          154)***

***FASB          Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations”          (FIN 47)***

***Future          Accounting Changes***

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

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

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

***I&M          Indiana Settlement Agreement - Affecting I&M***

***I&M          Michigan Fuel Recovery Plan - Affecting I&M***

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

***PSO          Fuel and Purchased Power - Affecting PSO***

***PSO          Lawton Power Supply Agreement - Affecting PSO***

***PSO          Rate Review - Affecting PSO***

***SWEPCo          Texas Fuel Factor Filing - Affecting SWEPCo***

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

***SWEPCo          Louisiana Fuel Audit - Affecting SWEPCo***

***TCC          Rate Case - Affecting TCC***

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

***Texas          Unbundled Cost of Service (UCOS) Appeal - Affecting          TCC***

***Hold          Harmless Proceeding - Affecting APCo, CSPCo, I&M, KPCo and OPCo***

***FERC          Order on Regional Through and Out Rates - Affecting APCo, CSPCo, I&M, KPCo          and OPCo***

|   **Company** |   | **Three                      Months Ended****September                      30, 2005** |   | **Nine                      Months****Ended****September                      30, 2005** |   |   **December                      2004** |   |
|-------------------------|--------|----------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|
|                    |   | **(in                      millions)**                                                 |   |
| APCo                    |   | $                                                                                      | 11.3   |                                                                                     | $      | 30.3                                               |   | $ | 3.5 |   |
| CSPCo                   |   |                                                                                   | 6.4    |                                                                                     |   | 16.1                                               |   |   | 2.0 |   |
| I&M                 |   |                                                                                   | 6.6    |                                                                                     |   | 17.4                                               |   |   | 2.3 |   |
| KPCo                    |   |                                                                                   | 2.7    |                                                                                     |   | 7.2                                                |   |   | 0.8 |   |
| OPCo                    |   |                                                                                   | 8.8    |                                                                                     |   | 22.3                                               |   |   | 2.8 |   |

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

|   **Company** |   | **PJM-Billed                    Integration Costs** |   | **Non-PJM                    Billed Formation/****Integration                    Costs** |   |
|-------------------------|--------|-----------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
|                    |   | **(in                    millions)**                |   |
| APCo                    |   | $                                                   | 4.8    |                                                                                     | $      | 5.1 |   |
| CSPCo                   |   |                                                | 2.0    |                                                                                     |   | 2.2 |   |
| I&M                 |   |                                                | 3.8    |                                                                                     |   | 3.8 |   |
| KPCo                    |   |                                                | 1.1    |                                                                                     |   | 1.1 |   |
| OPCo                    |   |                                                | 5.5    |                                                                                     |   | 5.7 |   |

|   **Company** |   | **PJM-Billed                    Integration Costs** |   | **Non-PJM                    Billed Formation/****Integration                    Costs** |   |
|-------------------------|--------|-----------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
|                    |   | **(in                    millions)**                |   |
| APCo                    |   | $                                                   | 4.9    |                                                                                     | $      | 4.8 |   |
| CSPCo                   |   |                                                | 2.0    |                                                                                     |   | 2.0 |   |
| I&M                 |   |                                                | 3.8    |                                                                                     |   | 3.5 |   |
| KPCo                    |   |                                                | 1.2    |                                                                                     |   | 1.1 |   |
| OPCo                    |   |                                                | 5.6    |                                                                                     |   | 5.3 |   |

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

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

**OHIO          RESTRUCTURING - Affecting CSPCo and OPCo**

**TEXAS          RESTRUCTURING - Affecting TCC and TNC**

***The          Components of TCC’s Recorded Net True-up Regulatory Asset (inclusive of          provisions) recorded as of September 30, 2005 and December 31, 2004 are:***

|                                                                                                  |   | **TCC**                                   |   |
|-------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                  |   | **September                    30, 2005** |   | **December                    31, 2004** |   |
|                                                                                                  |   | **(in                    millions)**      |   |
| Stranded                    Generation Plant Costs                                                    |   | $                                         | 892    |   | $ | 897 |   |
| Net                    Generation-related Regulatory Asset                                            |   |                                      | 249    |   |   | 249 |   |
| Excess                    Earnings                                                                    |   |                                      | (49    | ) |   | (10 | ) |
| **Net                    Stranded Generation Costs**                                                  |   |                                      | 1,092  |   |   | 1,136 |   |
| Carrying                    Costs on Stranded Generation Plant Costs                                  |   |                                      | 218    |   |   | 225 |   |
| **Net                    Stranded Generation Costs Designated for                    Securitization** |   |                                      | 1,310  |   |   | 1,361 |   |
|                                                                                                  |   |                                      |   |   |   |   |   |
| Wholesale                    Capacity Auction True-up                                                 |   |                                      | 483    |   |   | 483 |   |
| Carrying                    Costs on Wholesale Capacity Auction True-up                               |   |                                      | 114    |   |   | 77 |   |
| Retail                    Clawback                                                                    |   |                                      | (61    | ) |   | (61 | ) |
| Deferred                    Over-recovered Fuel Balance                                               |   |                                      | (210   | ) |   | (212 | ) |
| **Net                    Other Recoverable True-up Amounts**                                          |   |                                      | 326    |   |   | 287 |   |
| **Total                    Recorded Net True-up Regulatory Asset**                                    |   | $                                         | 1,636  |   | $ | 1,648 |   |

***The          Components of TNC’s Net True-up Regulatory Liability as of September 30, 2005          and December 31, 2004 are:***

|                                                                   |   | **TNC**                                   |   |
|------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                   |   | **September                    30, 2005** |   | **December                    31, 2004** |   |
|                                                                   |   | **(in                    millions)**      |   |
| Retail                    Clawback                                     |   | $                                         | (14    | ) | $ | (14 | ) |
| Deferred                    Over-recovered Fuel Balance                |   |                                      | (5     | ) |   | (4 | ) |
| **Total                    Recorded Net True-up Regulatory Liability** |   | $                                         | (19    | ) | $ | (18 | ) |

***Deferred          Investment Tax Credits Included in Stranded Generation Plant          Costs***

***TCC          Fuel Reconciliation***

***TCC          Carrying Costs on Net True-up Regulatory Assets***

** **

***TCC          Excess Earnings***

***TCC          True-up Proceeding***

***TNC          True-Up Proceeding***

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

**ENVIRONMENTAL**

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

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

***Carbon          Dioxide Public Nuisance Claims -- Affecting AEP          System***

**OPERATIONAL**

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

|    |   | **(in                    millions)** |   |
|---------|--------|--------------------------------------|--------|
| AEGCo   |   | $                                    | 16     |   |
| APCo    |   |                                 | 794    |   |
| CSPCo   |   |                                 | 275    |   |
| I&M |   |                                 | 252    |   |
| KPCo    |   |                                 | 88     |   |
| OPCo    |   |                                 | 1,057  |   |
| PSO     |   |                                 | 222    |   |
| SWEPCo  |   |                                 | 260    |   |
| TCC     |   |                                 | 235    |   |
| TNC     |   |                                 | 76     |   |

***TEM          Litigation (Power Generation Facility) - Affecting          OPCo***

***Merger          Litigation-Affecting AEGCo, APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC          and TNC***

***Enron          Bankruptcy -Affecting APCo, CSPCo, I&M, KPCo and          OPCo***

***Enron          Bankruptcy - Commodity trading settlement disputes***

***Enron          Bankruptcy - Summary***

***Texas          Commercial Energy, LLP Lawsuit - Affecting TCC and          TNC***

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

***Coal          Transportation Dispute - Affecting PSO, TCC and TNC***

**6.**
**GUARANTEES**

***Letters          of Credit***

***SWEPCo***

***Indemnifications          and Other Guarantees***

***Contracts***

***Master          Operating Lease***

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

**7.**
**ACQUISITIONS,          DISPOSITIONS, ASSET IMPAIRMENTS AND ASSETS HELD FOR          SALE**

**ACQUISITIONS**

***Ceredo          Generating Station - Affecting APCo***

***Waterford          Plant - Affecting CSPCo***

***Monongahela          Power Company - Affecting CSPCo***

**DISPOSITIONS          **

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

***Texas          Plants - South Texas Project - Affecting TCC***

**ASSET          IMPAIRMENTS**

***Conesville          Units 1 and 2 - Affecting CSPCo***

**ASSETS          HELD FOR SALE**

|                                                                                                    |   | **Texas                      Plants**       |   |
|---------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                                                                    |   | **September                      30, 2005** |   | **December                      31, 2004** |   |
| **Assets:**                                                                                             |   | **(in                      millions)**      |   |
| Other                      Current Assets                                                               |   | $                                           | 1      |   | $ | 24 |   |
| Property,                      Plant and Equipment, Net                                                 |   |                                        | 46     |   |   | 413 |   |
| Regulatory                      Assets                                                                  |   |                                        | -      |   |   | 48 |   |
| Nuclear                      Decommissioning Trust Fund                                                 |   |                                        | -      |   |   | 143 |   |
| **Total                      Assets Held for Sale - Texas Generation Plants**                           |   | $                                           | 47     |   | $ | 628 |   |
|                                                                                                    |   |                                        |   |   |   |   |   |
| **Liabilities:**                                                                                        |   |                                        |   |   |   |   |   |
| Regulatory                      Liabilities                                                             |   | $                                           | 2      |   | $ | 1 |   |
| Asset                      Retirement Obligations                                                       |   |                                        | -      |   |   | 249 |   |
| **Total                      Liabilities Held for Sale - Texas Generation                      Plants** |   | $                                           | 2      |   | $ | 250 |   |

**8.**
**BENEFIT          PLANS**

| **Three                    Months Ended September 30, 2005 and 2004** |   | **Pension                    Plans** |   | **Other                    Postretirement****Benefit                    Plans** |   |
|-----------------------------------------------------------------------|--------|--------------------------------------|--------|---------------------------------------------------------------------------------|--------|
|                                                                  |   | **2005**                             |   | **2004**                                                                        |   | **2005** |   | **2004** |   |
|                                                                  |   | **(in                    millions)** |   |
| Service                    Cost                                       |   | $                                    | 23     |                                                                            | $      | 21 |   | $ | 10 |   | $ | 10 |   |
| Interest                    Cost                                      |   |                                 | 57     |                                                                            |   | 57 |   |   | 26 |   |   | 29 |   |
| Expected                    (Return) on Plan Assets                   |   |                                 | (77    | )                                                                               |   | (72 | ) |   | (23 | ) |   | (20 | ) |
| Amortization                    of Transition (Asset) Obligation      |   |                                 | (1     | )                                                                               |   | - |   |   | 6 |   |   | 7 |   |
| Amortization                    of Prior Service Cost                 |   |                                 | -      |                                                                            |   | (1 | ) |   | - |   |   | - |   |
| Amortization                    of Net Actuarial Loss                 |   |                                 | 13     |                                                                            |   | 5 |   |   | 5 |   |   | 8 |   |
| **Net                    Periodic Benefit Cost**                      |   | $                                    | 15     |                                                                            | $      | 10 |   | $ | 24 |   | $ | 34 |   |

| **Nine                    Months Ended September 30, 2005 and 2004** |   | **Pension                    Plans** |   | **Other                    Postretirement****Benefit                    Plans** |   |
|----------------------------------------------------------------------|--------|--------------------------------------|--------|---------------------------------------------------------------------------------|--------|
|                                                                 |   | **2005**                             |   | **2004**                                                                        |   | **2005** |   | **2004** |   |
|                                                                 |   | **(in                    millions)** |   |
| Service                    Cost                                      |   | $                                    | 69     |                                                                            | $      | 64 |   | $ | 31 |   | $ | 30 |   |
| Interest                    Cost                                     |   |                                 | 169    |                                                                            |   | 169 |   |   | 79 |   |   | 87 |   |
| Expected                    (Return) on Plan Assets                  |   |                                 | (232   | )                                                                               |   | (216 | ) |   | (68 | ) |   | (60 | ) |
| Amortization                    of Transition (Asset) Obligation     |   |                                 | (1     | )                                                                               |   | 1 |   |   | 20 |   |   | 21 |   |
| Amortization                    of Prior Service Cost                |   |                                 | -      |                                                                            |   | (1 | ) |   | - |   |   | - |   |
| Amortization                    of Net Actuarial Loss                |   |                                 | 40     |                                                                            |   | 13 |   |   | 19 |   |   | 26 |   |
| **Net                    Periodic Benefit Cost**                     |   | $                                    | 45     |                                                                            | $      | 30 |   | $ | 81 |   | $ | 104 |   |

| **Three                    Months Ended September 30, 2005 and 2004** |   | **Pension                    Plans**  |   | **Other                    Postretirement****Benefit                    Plans** |   |
|-----------------------------------------------------------------------|--------|---------------------------------------|--------|---------------------------------------------------------------------------------|--------|
|                                                                  |   | **2005**                              |   | **2004**                                                                        |   | **2005** |   | **2004** |   |
|                                                                  |   | **(in                    thousands)** |   |
| APCo                                                                  |   | $                                     | 1,848  |                                                                            | $      | 318 |   | $ | 4,756 |   | $ | 6,462 |   |
| CSPCo                                                                 |   |                                  | 534    |                                                                            |   | (405 | ) |   | 1,928 |   |   | 2,765 |   |
| I&M                                                               |   |                                  | 2,365  |                                                                            |   | 1,117 |   |   | 3,134 |   |   | 4,313 |   |
| KPCo                                                                  |   |                                  | 376    |                                                                            |   | 142 |   |   | 515 |   |   | 742 |   |
| OPCo                                                                  |   |                                  | 1,206  |                                                                            |   | (98 | ) |   | 3,353 |   |   | 4,801 |   |
| PSO                                                                   |   |                                  | 72     |                                                                            |   | 696 |   |   | 1,661 |   |   | 2,110 |   |
| SWEPCo                                                                |   |                                  | 364    |                                                                            |   | 901 |   |   | 1,642 |   |   | 2,101 |   |
| TCC                                                                   |   |                                  | (219   | )                                                                               |   | 749 |   |   | 1,789 |   |   | 2,535 |   |
| TNC                                                                   |   |                                  | 41     |                                                                            |   | 338 |   |   | 784 |   |   | 1,073 |   |

| **Nine                    Months Ended September 30, 2005 and 2004** |   | **Pension                    Plans**  |   | **Other                    Postretirement****Benefit                    Plans** |   |
|----------------------------------------------------------------------|--------|---------------------------------------|--------|---------------------------------------------------------------------------------|--------|
|                                                                 |   | **2005**                              |   | **2004**                                                                        |   | **2005** |   | **2004** |   |
|                                                                 |   | **(in                    thousands)** |   |
| APCo                                                                 |   | $                                     | 5,544  |                                                                            | $      | 954 |   | $ | 15,248 |   | $ | 19,386 |   |
| CSPCo                                                                |   |                                  | 1,602  |                                                                            |   | (1,219 | ) |   | 6,273 |   |   | 8,295 |   |
| I&M                                                              |   |                                  | 7,095  |                                                                            |   | 3,345 |   |   | 10,229 |   |   | 12,939 |   |
| KPCo                                                                 |   |                                  | 1,128  |                                                                            |   | 430 |   |   | 1,689 |   |   | 2,226 |   |
| OPCo                                                                 |   |                                  | 3,618  |                                                                            |   | (308 | ) |   | 10,812 |   |   | 14,403 |   |
| PSO                                                                  |   |                                  | 216    |                                                                            |   | 2,096 |   |   | 5,329 |   |   | 6,330 |   |
| SWEPCo                                                               |   |                                  | 1,092  |                                                                            |   | 2,703 |   |   | 5,244 |   |   | 6,303 |   |
| TCC                                                                  |   |                                  | (657   | )                                                                               |   | 2,241 |   |   | 5,732 |   |   | 7,605 |   |
| TNC                                                                  |   |                                  | 123    |                                                                            |   | 1,014 |   |   | 2,507 |   |   | 3,219 |   |

**9.**
**BUSINESS          SEGMENTS**

**10.**
**INCOME          TAXES**

| **Company** |   |  **Other                    Regulatory Liabilities (a)** |   |  **SFAS                    109 Regulatory Asset, Net (b)** |   |   **State                    Income Tax Expense (c)** |   |  **Deferred                    State Income Tax Liabilities (d)** |   |
|-------------|--------|---------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|
| APCo        |   | $                                                             | -      |                                                            | $      | 10,945                                                          |   | $                                                                      | 2,769  |   | $ | 13,714 |   |
| CSPCo       |   |                                                          | 15,104 |                                                            |   | -                                                               |   |                                                                   | -      |   |   | 15,104 |   |
| I&M     |   |                                                          | -      |                                                            |   | 5,195                                                           |   |                                                                   | -      |   |   | 5,195 |   |
| KPCo        |   |                                                          | -      |                                                            |   | 3,648                                                           |   |                                                                   | -      |   |   | 3,648 |   |
| OPCo        |   |                                                          | 41,864 |                                                            |   | -                                                               |   |                                                                   | -      |   |   | 41,864 |   |
| PSO         |   |                                                          | -      |                                                            |   | -                                                               |   |                                                                   | 706    |   |   | 706 |   |
| SWEPCo      |   |                                                          | -      |                                                            |   | 582                                                             |   |                                                                   | 119    |   |   | 701 |   |
| TCC         |   |                                                          | -      |                                                            |   | 1,156                                                           |   |                                                                   | 365    |   |   | 1,521 |   |
| TNC         |   |                                                          | -      |                                                            |   | 120                                                             |   |                                                                   | 75     |   |   | 195 |   |

| (a)       | The                    reversal of deferred state income taxes for the Ohio companies                    was                    recorded as a regulatory liability pending rate-making treatment                    in Ohio. |
|-----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)                        | Deferred                    state income tax adjustments related to those companies in which                    state                    income taxes flow through for rate-making purposes reduced the                    regulatory                    asset associated with the deferred state income tax liabilities. |
|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                    (c)       | These                    amounts were recorded as a reduction to Income                    Taxes. |
|------------------------------------------------------------|---------------------------------------------------------------------------------------------------|

|                    (d)       | Total                    deferred state income tax liabilities that reversed during 2005                    related to                    Ohio law change. |
|------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| **Company**    |   | **Type                    of Debt** |                                              | **Principal                    Amount** |   | **Interest                    Rate** |   | **Due                    Date** |     |
|----------------|--------|-------------------------------------|---------------------------------------------------|-----------------------------------------|--------|--------------------------------------|--------|---------------------------------|----------|
|           |   |                                |                                              | **(in                    thousands)**   |   | **(%)**                              |   |                            |     |
| **Issuances:** |   |                                |                                              |                               |   |                                 |   |                            |     |
| APCo           |   |                                | Senior                    Unsecured Notes         |                                    | $      | 200,000                              |   |                            | 4.95     |   |   | 2015 |   |
| APCo           |   |                                | Senior                    Unsecured Notes         |                                    |   | 150,000                              |   |                            | 4.40     |   |   | 2010 |   |
| APCo           |   |                                | Senior                    Unsecured Notes         |                                    |   | 250,000                              |   |                            | 5.00     |   |   | 2017 |   |
| APCo           |   |                                | Senior                    Unsecured Notes         |                                    |   | 250,000                              |   |                            | 5.80     |   |   | 2035 |   |
| OPCo           |   |                                | Installment                    Purchase Contracts |                                    |   | 54,500                               |   |                            | Variable |   |   | 2029 |   |
| OPCo           |   |                                | Installment                    Purchase Contracts |                                    |   | 163,500                              |   |                            | Variable |   |   | 2028 |   |
| OPCo           |   |                                | Installment                    Purchase Contracts |                                    |   | 50,000                               |   |                            | Variable |   |   | 2014 |   |
| OPCo           |   |                                | Installment                    Purchase Contracts |                                    |   | 50,000                               |   |                            | Variable |   |   | 2016 |   |
| OPCo           |   |                                | Installment                    Purchase Contracts |                                    |   | 35,000                               |   |                            | Variable |   |   | 2022 |   |
| PSO            |   |                                | Senior                    Unsecured Notes         |                                    |   | 75,000                               |   |                            | 4.70     |   |   | 2011 |   |
| SWEPCo         |   |                                | Senior                    Unsecured Notes         |                                    |   | 150,000                              |   |                            | 4.90     |   |   | 2015 |   |
| SWEPCo         |   |                                | Notes                    Payable                  |                                    |   | 5,771                                |   |                            | Variable |   |   | 2006 |   |
| TCC            |   |                                | Installment                    Purchase Contracts |                                    |   | 161,700                              |   |                            | Variable |   |   | 2030 |   |
| TCC            |   |                                | Installment                    Purchase Contracts |                                    |   | 120,265                              |   |                            | Variable |   |   | 2028 |   |

| **Company**                                                      |   | **Type                    of Debt** |                                              | **Principal                    Amount** |   | **Interest                    Rate** |   | **Due                    Date** |     |
|------------------------------------------------------------------|--------|-------------------------------------|---------------------------------------------------|-----------------------------------------|--------|--------------------------------------|--------|---------------------------------|----------|
|                                                             |   |                                |                                              | **(in                    thousands)**   |   | **(%)**                              |   |                            |     |
| **Retirements                    and  Principal Payments:** |   |                                |                                              |                               |   |                                 |   |                            |     |
| APCo                                                             |   |                                | Other                    Debt                     |                                    | $      | 7                                    |   |                            | 13.718   |   |   | 2026 |   |
| APCo                                                             |   |                                | First                    Mortgage Bonds           |                                    |   | 50,000                               |   |                            | 8.00     |   |   | 2005 |   |
| APCo                                                             |   |                                | First                    Mortgage Bonds           |                                    |   | 30,000                               |   |                            | 6.89     |   |   | 2005 |   |
| APCo                                                             |   |                                | First                    Mortgage Bonds           |                                    |   | 45,000                               |   |                            | 8.00     |   |   | 2025 |   |
| APCo                                                             |   |                                | Senior                    Unsecured Notes         |                                    |   | 450,000                              |   |                            | 4.80     |   |   | 2005 |   |
| OPCo                                                             |   |                                | Installment                    Purchase Contracts |                                    |   | 102,000                              |   |                            | 6.375    |   |   | 2029 |   |
| OPCo                                                             |   |                                | Installment                    Purchase Contracts |                                    |   | 80,000                               |   |                            | Variable |   |   | 2028 |   |
| OPCo                                                             |   |                                | Installment                    Purchase Contracts |                                    |   | 36,000                               |   |                            | Variable |  |   | 2029 |   |
| OPCo                                                             |   |                                | Installment                    Purchase Contracts |                                    |   | 50,000                               |   |                            | 5.45     |   |   | 2014 |   |
| OPCo                                                             |   |                                | Installment                    Purchase Contracts |                                    |   | 50,000                               |   |                            | 5.45     |   |   | 2016 |   |
| OPCo                                                             |   |                                | Installment                    Purchase Contracts |                                    |   | 35,000                               |   |                            | 5.90     |   |   | 2022 |   |
| OPCo                                                             |   |                                | Notes                    Payable                  |                                    |   | 4,390                                |   |                            | 6.81     |   |   | 2008 |   |
| OPCo                                                             |   |                                | Notes                    Payable                  |                                    |   | 6,500                                |   |                            | 6.27     |   |   | 2009 |   |
| PSO                                                              |   |                                | First                    Mortgage Bonds           |                                    |   | 50,000                               |   |                            | 6.50     |   |   | 2005 |   |
| SWEPCo                                                           |   |                                | Senior                    Unsecured Notes         |                                    |   | 200,000                              |   |                            | 4.50     |   |   | 2005 |   |
| SWEPCo                                                           |   |                                | Notes                    Payable                  |                                    |   | 5,122                                |   |                            | 4.47     |   |   | 2011 |   |
| SWEPCo                                                           |   |                                | Notes                    Payable                  |                                    |   | 3,000                                |   |                            | Variable |   |   | 2008 |   |
| TCC                                                              |   |                                | Senior                    Unsecured Notes         |                                    |   | 150,000                              |   |                            | 3.00     |   |   | 2005 |   |
| TCC                                                              |   |                                | Senior                    Unsecured Notes         |                                    |   | 100,000                              |   |                            | Variable |   |   | 2005 |   |
| TCC                                                              |   |                                | First                    Mortgage Bonds           |                                    |   | 65,763                               |   |                            | 6.625    |   |   | 2005 |   |
| TCC                                                              |   |                                | Installment                    Purchase Contracts |                                    |   | 120,265                              |   |                            | 6.00     |   |   | 2028 |   |
| TCC                                                              |   |                                | Securitization                    Bonds           |                                    |   | 29,386                               |   |                            | 3.54     |   |   | 2005 |   |
| TCC                                                              |   |                                | Securitization                    Bonds           |                                    |   | 20,593                               |   |                            | 5.01     |   |   | 2008 |   |

| **Company**      |   | **Type                    of Debt** |                             | **Principal                    Amount** |   | **Interest                    Rate** |   | **Due                    Date** |   |
|------------------|--------|-------------------------------------|----------------------------------|-----------------------------------------|--------|--------------------------------------|--------|---------------------------------|--------|
|             |   |                                |                             | **(in                    thousands)**   |   | **(%)**                              |   |                            |   |
| **Issuances:**   |   |                                |                             |                               |   |                                 |   |                            |   |
| APCo             |   |                                | Notes                    Payable |                                    | $      | 100,000                              |   |                            | 4.708  |   |   | 2010 |   |
| TCC              |   |                                | Notes                    Payable |                                    |   | 150,000                              |   |                            | 4.58   |   |   | 2007 |   |
| **Retirements:** |   |                                |                             |                                    |   |                                 |   |                            |   |   |   |   |   |
| KPCo             |   |                                | Notes                    Payable |                                    | $      | 20,000                               |   |                            | 6.501  |   |   | 2006 |   |

***Other          Matters***

| **Company** |   | **Series** |   | **Number                    of Shares Redeemed** |   | **Amount**                           |   |
|-------------|--------|------------|--------|--------------------------------------------------|--------|--------------------------------------|--------|
|        |   |       |   |                                             |   | **(in                    millions)** |   |
| I&M     |   |       | 5.900% |                                             |   | 132,000                              |   | $ | 13 |   |
| I&M     |   |       | 6.250% |                                             |   | 192,500                              |   |   | 19 |   |
| I&M     |   |       | 6.875% |                                             |   | 157,500                              |   |   | 16 |   |
| I&M     |   |       | 6.300% |                                             |   | 132,450                              |   |   | 13 |   |
| OPCo        |   |       | 5.900% |                                             |   | 50,000                               |   |   | 5 |   |
|        |   |       |   |                                             |   |                                 |   | $ | 66 |   |

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

|        |   |                                  |    |                              |   |                                |   |                                 |    | **Loans**                               |   |           |   |
|-------------|--------|---------------------------------------|---------|-----------------------------------|--------|-------------------------------------|--------|--------------------------------------|---------|-----------------------------------------|--------|----------------|--------|
|        |   |                                  |    |                              |   |                                |   |                                 |    | **(Borrowings)**                        |   | **SEC**        |   |
|        |   | **Maximum**                           |    | **Maximum**                       |   | **Average**                         |   | **Average**                          |    | **to/from                    Utility**  |   | **Authorized** |   |
|        |   | **Borrowings**                        |    | **Loans                    to**   |   | **Borrowings**                      |   | **Loans                    to**      |    | **Money                    Pool as of** |   | **Short-Term** |   |
|        |   | **from                    Utility**   |    | **Utility**                       |   | **from                    Utility** |   | **Utility                    Money** |    | **September                    30,**    |   | **Borrowing**  |   |
| **Company** |   | **Money                    Pool**     |    | **Money                    Pool** |   | **Money                    Pool**   |   | **Pool**                             |    | **2005**                                |   | **Limit**      |   |
|        |   | **(in                    thousands)** |    |
| AEGCo       |   | $                                     | 45,694  |                              | $      | 9,305                               |   | $                                    | 15,921  |                                    | $      | 4,803          |   | $ | (11,314 | ) | $ | 125,000 |   |
| APCo        |   |                                  | 242,718 |                              |   | 321,977                             |   |                                 | 145,700 |                                    |   | 47,285         |   |   | 67,532 |   |   | 600,000 |   |
| CSPCo       |   |                                  | 159,959 |                              |   | 181,238                             |   |                                 | 152,178 |                                    |   | 95,714         |   |   | (138,541 | ) |   | 350,000 |   |
| I&M     |   |                                  | 203,248 |                              |   | 11,768                              |   |                                 | 92,108  |                                    |   | 5,797          |   |   | (81,101 | ) |   | 500,000 |   |
| KPCo        |   |                                  | 8,342   |                              |   | 35,779                              |   |                                 | 3,019   |                                    |   | 15,044         |   |   | 9,641 |   |   | 200,000 |   |
| OPCo        |   |                                  | 123,508 |                              |   | 182,495                             |   |                                 | 50,134  |                                    |   | 79,120         |   |   | (55,508 | ) |   | 600,000 |   |
| PSO         |   |                                  | 55,009  |                              |   | 66,159                              |   |                                 | 22,377  |                                    |   | 35,074         |   |   | (22,601 | ) |   | 300,000 |   |
| SWEPCo      |   |                                  | 28,421  |                              |   | 188,215                             |   |                                 | 9,738   |                                    |   | 35,617         |   |   | (605 | ) |   | 350,000 |   |
| TCC         |   |                                  | 320,508 |                              |   | 120,937                             |   |                                 | 134,094 |                                    |   | 39,060         |   |   | (12,021 | ) |   | 600,000 |   |
| TNC         |   |                                  | -       |                              |   | 119,569                             |   |                                 | -       |                                    |   | 62,415         |   |   | 87,651 |   |   | 250,000 |   |

| **Company** |   | **Average                    Interest Rate for Funds Borrowed from the Utility Money                    Pool** |   | **Average                    Interest Rate for Funds Loaned to the Utility Money                    Pool** |   |
|-------------|--------|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------|--------|
|        |   | **(in                    percentages)**                                                                        |   |
| AEGCo       |   | 2.91                                                                                                           |   | 3.14                                                                                                       |   |
| APCo        |   | 3.30                                                                                                           |   | 2.72                                                                                                       |   |
| CSPCo       |   | 3.92                                                                                                           |   | 2.76                                                                                                       |   |
| I&M     |   | 3.25                                                                                                           |   | 2.12                                                                                                       |   |
| KPCo        |   | 3.52                                                                                                           |   | 2.54                                                                                                       |   |
| OPCo        |   | 3.67                                                                                                           |   | 2.40                                                                                                       |   |
| PSO         |   | 2.62                                                                                                           |   | 3.52                                                                                                       |   |
| SWEPCo      |   | 3.64                                                                                                           |   | 2.60                                                                                                       |   |
| TCC         |   | 3.07                                                                                                           |   | 2.43                                                                                                       |   |
| TNC         |   | -                                                                                                              |   | 3.13                                                                                                       |   |

**12.**
**COMPANY-WIDE          STAFFING AND BUDGET REVIEW**

|        |   |  **Three                    Months Ended June 30, 2005** |   |  **Three                    Months Ended Sept. 30, 2005** |   |  **Nine                    Months Ended Sept. 30, 2005** |   |
|-------------|--------|---------------------------------------------------------------|--------|----------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
| **Company** |   |  **(in                    millions)**                    |   |
| AEGCo       |   | $                                                             | 0.2    |                                                           | $      | 0.1                                                           |   | $ | 0.3 |   |
| APCo        |   |                                                          | 3.9    |                                                           |   | 0.6                                                           |   |   | 4.5 |   |
| CSPCo       |   |                                                          | 2.3    |                                                           |   | 0.3                                                           |   |   | 2.6 |   |
| I&M     |   |                                                          | 4.0    |                                                           |   | 0.7                                                           |   |   | 4.7 |   |
| KPCo        |   |                                                          | 0.7    |                                                           |   | 0.4                                                           |   |   | 1.1 |   |
| OPCo        |   |                                                          | 3.4    |                                                           |   | 0.5                                                           |   |   | 3.9 |   |
| PSO         |   |                                                          | 1.2    |                                                           |   | 0.2                                                           |   |   | 1.4 |   |
| SWEPCo      |   |                                                          | 1.6    |                                                           |   | 0.2                                                           |   |   | 1.8 |   |
| TCC         |   |                                                          | 3.8    |                                                           |   | 0.5                                                           |   |   | 4.3 |   |
| TNC         |   |                                                          | 1.1    |                                                           |   | 0.2                                                           |   |   | 1.3 |   |

----

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

**Budgeted          Construction Expenditures**

|        |   | **Projected****Construction                    Expenditures** |   |
|-------------|--------|---------------------------------------------------------------|--------|
| **Company** |   | **(in                    millions)**                          |   |
| AEGCo       |   | $                                                             | 16     |   |
| APCo        |   |                                                          | 794    |   |
| CSPCo       |   |                                                          | 275    |   |
| I&M     |   |                                                          | 252    |   |
| KPCo        |   |                                                          | 88     |   |
| OPCo        |   |                                                          | 1,057  |   |
| PSO         |   |                                                          | 222    |   |
| SWEPCo      |   |                                                          | 260    |   |
| TCC         |   |                                                          | 235    |   |
| TNC         |   |                                                          | 76     |   |

**Significant          Factors**

**FERC          Order on Regional Through and Out Rates**

|    **Company** |   | **Three                    Months Ended****September                    30, 2005** |   | **Nine                    Months****Ended****September                    30, 2005** |   |    **December                    2004** |   |
|-------------------------------|--------|------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|
|                          |   | **(in                    millions)**                                               |   |
| APCo                          |   | $                                                                                  | 11.3   |                                                                                 | $      | 30.3                                                   |   | $ | 3.5 |   |
| CSPCo                         |   |                                                                               | 6.4    |                                                                                 |   | 16.1                                                   |   |   | 2.0 |   |
| I&M                       |   |                                                                               | 6.6    |                                                                                 |   | 17.4                                                   |   |   | 2.3 |   |
| KPCo                          |   |                                                                               | 2.7    |                                                                                 |   | 7.2                                                    |   |   | 0.8 |   |
| OPCo                          |   |                                                                               | 8.8    |                                                                                 |   | 22.3                                                   |   |   | 2.8 |   |

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

***AEP          Power Pool - Capacity***

***CSW          Operating Agreement***

**Ohio          Regulatory Activity**

***Ohio          Restructuring***

***Integrated          Gasification Combined Cycle (IGCC) Power Plant***

**Litigation**

***New          Source Review Litigation***

***Merger          Litigation***

***Texas          Commercial Energy, LLP Lawsuit***

**Ontario          Litigation**

**Environmental          Matters**

| · | Legislative                    and regulatory proposals to adopt stringent controls on SO2,                    NOx                    and mercury emissions from coal-fired power plants, |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Clean                    Water Act rules 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 emissions to address                    concerns                    about global climatic change.                |

***Future          Reduction Requirements for SO***
***2***

***,          NO***
**x**

***,          and Mercury***

*Regulatory          Emissions Reductions*

| · | The                    Federal EPA proposed a Clean Air Interstate Rule (CAIR) to reduce                    SO2                    and NOx                    emissions across the Eastern United States (29 states and the                    District of                    Columbia) and make progress toward attainment of the new fine                    particulate                    matter and ground-level ozone national ambient air quality standards.                    These reductions could also satisfy these states’ obligations to make                    reasonable progress towards the national visibility goal under                    the                    regional haze program. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The                    Federal EPA proposed to regulate mercury emissions from coal-fired                    electric generating units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

***New          Source Review (NSR) Litigation***

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

***Emergency          Release Reporting***

***Carbon          Dioxide Public Nuisance Claims***

----

**CONTROLS          AND PROCEDURES**

----

**PART          II. OTHER INFORMATION**

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

*Commitments          and Contingencies, *

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

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

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

*AEP*

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

*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*

----

**SIGNATURE**

----

| 1.   | I                    have reviewed this report on Form 10-Q of American Electric Power                    Company,                    Inc.; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Based                    on my knowledge, this report does not contain any untrue statement                    of a                    material fact or omit to state a material fact necessary to make                    the                    statements made, in light of the circumstances under which such                    statements                    were made, not misleading with respect to the period covered                    by this                    report; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Based                    on my knowledge, the financial statements, and other financial                    information                    included in this report, fairly present in all material respects                    the                    financial condition, results of operations and cash flows of                    the                    registrant as of, and for, the periods presented in this                    report; |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | The                    registrant’s other certifying officer and I are responsible for                    establishing and maintaining disclosure controls and procedures                    (as                    defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal                    control                    over financial reporting (as defined in Exchange Act Rules 13a-15(f)                    and                    15d-15(f)), for the registrant and                    have: |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | Designed                    such disclosure controls and procedures, or caused such disclosure                    controls and procedures to be designed under our supervision,                    to ensure                    that material information relating to the registrant, including                    its                    consolidated subsidiaries, is made known to us by others within                    those                    entities, particularly during the period in which this report                    is being                    prepared; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Designed                    such internal control over financial reporting, or caused such                    internal                    control over financial reporting to be designed under our supervision,                    to                    provide reasonable assurance regarding the reliability of financial                    reporting and the preparation of financial statements for external                    purposes in accordance with generally accepted accounting                    principles; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Evaluated                    the effectiveness of the registrant’s disclosure controls and procedures                    and presented in this report our conclusions about the effectiveness                    of                    the disclosure controls and procedures, as of the end of the                    period                    covered by this report based on such evaluation;                    and |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Disclosed                    in this report any change in the registrant’s internal control over                    financial reporting that occurred during the registrant’s most recent                    fiscal quarter (the registrant’s fourth fiscal quarter in the case of an                    annual report) that has materially affected, or is reasonably                    likely to                    materially affect, the registrant’s internal control over financial                    reporting; and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | The                    registrant’s other certifying officer and I have disclosed, based on our                    most recent evaluation of internal control over financial reporting,                    to                    the registrant’s auditors and the audit committee of the registrant’s                    board of directors (or persons performing the equivalent                    functions): |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | All                    significant deficiencies and material weaknesses in the design                    or                    operation of internal control over financial reporting which                    are                    reasonably likely to adversely affect the registrant’s ability to record,                    process, summarize and report financial information;                    and |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Any                    fraud, whether or not material, that involves management or other                    employees who have a significant role in the registrant’s internal control                    over financial reporting. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 1.   | I                    have reviewed this report on Form 10-Q                    of: |
|----------------|------------------------------------------------------------------------------------|

| 2.   | Based                    on my knowledge, this report does not contain any untrue statement                    of a                    material fact or omit to state a material fact necessary to make                    the                    statements made, in light of the circumstances under which such                    statements                    were made, not misleading with respect to the period covered                    by this                    report; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Based                    on my knowledge, the financial statements, and other financial                    information                    included in this report, fairly present in all material respects                    the                    financial condition, results of operations and cash flows of                    each                    registrant as of, and for, the periods presented in this                    report; |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Each                    registrant’s other certifying officer and I are responsible for                    establishing and maintaining disclosure controls and procedures                    (as                    defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the                    registrant                    and have: |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | Designed                    such disclosure controls and procedures, or caused such disclosure                    controls and procedures to be designed under our supervision,                    to ensure                    that material information relating to the registrant, including                    its                    consolidated subsidiaries, is made known to us by others within                    those                    entities, particularly during the period in which this report                    is being                    prepared; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Evaluated                    the effectiveness of the registrant’s disclosure controls and procedures                    and presented in this report our conclusions about the effectiveness                    of                    the disclosure controls and procedures, as of the end of the                    period                    covered by this report based on such evaluation;                    and |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Disclosed                    in this report any change in the registrant’s internal control over                    financial reporting that occurred during the registrant’s most recent                    fiscal quarter (the registrant’s fourth fiscal quarter in the case of an                    annual report) that has materially affected, or is reasonably                    likely to                    materially affect, the registrant’s internal control over financial                    reporting; and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | Each                    registrant’s other certifying officer and I have disclosed, based on our                    most recent evaluation of internal control over financial reporting,                    to                    the registrant’s auditors and the audit committee of the registrant’s                    board of directors (or persons performing the equivalent                    functions): |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | All                    significant deficiencies and material weaknesses in the design                    or                    operation of internal control over financial reporting which                    are                    reasonably likely to adversely affect the registrant’s ability to record,                    process, summarize and report financial information;                    and |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Any                    fraud, whether or not material, that involves management or other                    employees who have a significant role in the registrant’s internal control                    over financial reporting. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 1.   | I                    have reviewed this report on Form 10-Q of American Electric Power                    Company,                    Inc.; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Based                    on my knowledge, this report does not contain any untrue statement                    of a                    material fact or omit to state a material fact necessary to make                    the                    statements made, in light of the circumstances under which such                    statements                    were made, not misleading with respect to the period covered                    by this                    report; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Based                    on my knowledge, the financial statements, and other financial                    information                    included in this report, fairly present in all material respects                    the                    financial condition, results of operations and cash flows of                    the                    registrant as of, and for, the periods presented in this                    report; |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | The                    registrant’s other certifying officer and I are responsible for                    establishing and maintaining disclosure controls and procedures                    (as                    defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal                    control                    over financial reporting (as defined in Exchange Act Rules 13a-15(f)                    and                    15d-15(f)), for the registrant and                    have: |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | Designed                    such disclosure controls and procedures, or caused such disclosure                    controls and procedures to be designed under our supervision,                    to ensure                    that material information relating to the registrant, including                    its                    consolidated subsidiaries, is made known to us by others within                    those                    entities, particularly during the period in which this report                    is being                    prepared; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Designed                    such internal control over financial reporting, or caused such                    internal                    control over financial reporting to be designed under our supervision,                    to                    provide reasonable assurance regarding the reliability of financial                    reporting and the preparation of financial statements for external                    purposes in accordance with generally accepted accounting                    principles; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Evaluated                    the effectiveness of the registrant’s disclosure controls and procedures                    and presented in this report our conclusions about the effectiveness                    of                    the disclosure controls and procedures, as of the end of the                    period                    covered by this report based on such evaluation;                    and |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Disclosed                    in this report any change in the registrant’s internal control over                    financial reporting that occurred during the registrant’s most recent                    fiscal quarter (the registrant’s fourth fiscal quarter in the case of an                    annual report) that has materially affected, or is reasonably                    likely to                    materially affect, the registrant’s internal control over financial                    reporting; and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | The                    registrant’s other certifying officer and I have disclosed, based on our                    most recent evaluation of internal control over financial reporting,                    to                    the registrant’s auditors and the audit committee of the registrant’s                    board of directors (or persons performing the equivalent                    functions): |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | All                    significant deficiencies and material weaknesses in the design                    or                    operation of internal control over financial reporting which                    are                    reasonably likely to adversely affect the registrant’s ability to record,                    process, summarize and report financial information;                    and |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Any                    fraud, whether or not material, that involves management or other                    employees who have a significant role in the registrant’s internal control                    over financial reporting. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 1.   | I                    have reviewed this report on Form 10-Q                    of: |
|----------------|------------------------------------------------------------------------------------|

| 2.   | Based                    on my knowledge, this report does not contain any untrue statement                    of a                    material fact or omit to state a material fact necessary to make                    the                    statements made, in light of the circumstances under which such                    statements                    were made, not misleading with respect to the period covered                    by this                    report; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Based                    on my knowledge, the financial statements, and other financial                    information                    included in this report, fairly present in all material respects                    the                    financial condition, results of operations and cash flows of                    each                    registrant as of, and for, the periods presented in this                    report; |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Each                    registrant’s other certifying officer and I are responsible for                    establishing and maintaining disclosure controls and procedures                    (as                    defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the                    registrant                    and have: |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | Designed                    such disclosure controls and procedures, or caused such disclosure                    controls and procedures to be designed under our supervision,                    to ensure                    that material information relating to the registrant, including                    its                    consolidated subsidiaries, is made known to us by others within                    those                    entities, particularly during the period in which this report                    is being                    prepared; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Evaluated                    the effectiveness of the registrant’s disclosure controls and procedures                    and presented in this report our conclusions about the effectiveness                    of                    the disclosure controls and procedures, as of the end of the                    period                    covered by this report based on such evaluation;                    and |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Disclosed                    in this report any change in the registrant’s internal control over                    financial reporting that occurred during the registrant’s most recent                    fiscal quarter (the registrant’s fourth fiscal quarter in the case of an                    annual report) that has materially affected, or is reasonably                    likely to                    materially affect, the registrant’s internal control over financial                    reporting; and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | Each                    registrant’s other certifying officer and I have disclosed, based on our                    most recent evaluation of internal control over financial reporting,                    to                    the registrant’s auditors and the audit committee of the registrant’s                    board of directors (or persons performing the equivalent                    functions): |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | All                    significant deficiencies and material weaknesses in the design                    or                    operation of internal control over financial reporting which                    are                    reasonably likely to adversely affect the registrant’s ability to record,                    process, summarize and report financial information;                    and |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Any                    fraud, whether or not material, that involves management or other                    employees who have a significant role in the registrant’s internal control                    over financial reporting. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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