<TABLE>
<CAPTION>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q
              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For The Quarterly Period Ended SEPTEMBER 30, 2001
              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For The Transition Period from      to

Commission              Registrant, State of Incorporation                                                    I.R. S. Employer
File Number             Address, and Telephone Number                                                         Identification No.
-----------             -----------------------------                                                         ------------------

<S>                     <C>                                                                                   <C>
1-3525                  AMERICAN ELECTRIC POWER COMPANY, INC.                                                 13-4922640
                        (A New York Corporation)
                        1 Riverside Plaza, Columbus, Ohio  43215
                        Telephone (614) 223-1000

0-18135                 AEP GENERATING COMPANY (An Ohio Corporation)                                          31-1033833
                        1 Riverside Plaza, Columbus, Ohio  43215
                        Telephone (614) 223-1000

1-3457                  APPALACHIAN POWER COMPANY (A Virginia Corporation)                                    54-0124790
                        40 Franklin Road, Roanoke, Virginia  24011
                        Telephone (540) 985-2300

0-346                   CENTRAL POWER AND LIGHT COMPANY (A Texas Corporation)                                 74-0550600
                        539 North Carancahua Street
                        Corpus Christi, Texas  78401-2802
                        Telephone (361) 881-5300

1-2680                  COLUMBUS  SOUTHERN  POWER COMPANY (An Ohio  Corporation)                              31-4154203
                        1  Riverside  Plaza,  Columbus,  Ohio  43215
                        Telephone (614) 223-1000

1-3570                  INDIANA MICHIGAN POWER COMPANY (An Indiana Corporation)                               35-0410455
                        One Summit Square
                        P.O. Box 60, Fort Wayne, Indiana  46801
                        Telephone (219) 425-2111

1-6858                  KENTUCKY POWER COMPANY (A Kentucky Corporation)                                       61-0247775
                        1701 Central Avenue, Ashland, Kentucky  41101
                        Telephone (800) 572-1141

1-6543                  OHIO POWER COMPANY (An Ohio Corporation)                                              31-4271000
                        301 Cleveland Avenue S.W., Canton, Ohio  44701
                        Telephone (330) 456-8173

0-343                   PUBLIC SERVICE COMPANY OF OKLAHOMA                                                    73-0410895
                        (An Oklahoma Corporation)
                        212 East 6th Street, Tulsa, Oklahoma  74119-1212
                        Telephone (918) 599-2000

1-3146                  SOUTHWESTERN ELECTRIC POWER COMPANY                                                   72-0323455
                        (A Delaware Corporation)
                        428 Travis Street, Shreveport, Louisiana  71156-0001
                        Telephone (318) 673-3000

0-340                   WEST  TEXAS  UTILITIES  COMPANY  (A  Texas  Corporation)                              75-0646790
                        301 Cypress Street, Abilene, Texas 79601-5820
                        Telephone (915) 674-7000
</TABLE>

AEP Generating Company, Columbus Southern Power Company, Kentucky Power Company,
Public  Service  Company of Oklahoma and West Texas  Utilities  Company 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.

Indicate  by check mark  whether  the  registrants  (1) have  filed all  reports
required to be filed by Sections 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

The number of shares outstanding of American Electric Power Company, Inc. Common
Stock, par value $6.50, at October 31, 2001 was 322,235,005.

<PAGE>
<TABLE>
<CAPTION>

                               AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES

                                                          FORM 10-Q

                                          For The Quarter Ended September 30, 2001
                                                          CONTENTS

                                                                                                                    Page
<S>                                                                                                                 <C>
        Glossary of Terms                                                                                           i - ii
        Forward-Looking Information                                                                                 iii

   Part I.  FINANCIAL INFORMATION
     Items 1 and 2 Financial Statements and Management's Discussion and
                    Analysis of Results of Operations:

                         American Electric Power Company, Inc. and Subsidiary Companies:
                              Management's Discussion and Analysis of Results of Operations                         A-1 - A-2
                              Consolidated Financial Statements                                                     A-3 - A-7

                         AEP Generating Company:
                              Management's Narrative Analysis of Results of Operations                              B-1
                              Financial Statements                                                                  B-2 - B-5

                         Appalachian Power Company, Inc. and Subsidiaries:
                              Management's Discussion and Analysis of Results of Operations                         C-1 - C-2
                              Consolidated Financial Statements                                                     C-3 - C-7

                         Central Power and Light Company and Subsidiary:
                              Management's Discussion and Analysis of Results of Operations                         D-1 - D-2
                              Consolidated Financial Statements                                                     D-3 - D-6

                         Columbus Southern Power Company and Subsidiaries:
                              Management's Narrative Analysis of Results of Operations                              E-1 - E-2
                              Consolidated Financial Statements                                                     E-3 - E-6

                         Indiana Michigan Power Company and Subsidiaries:
                              Management's Discussion and Analysis of Results of Operations                         F-1 - F-2
                              Consolidated Financial Statements                                                     F-3 - F-7

                         Kentucky Power Company
                              Management's Narrative Analysis of Results of Operations                              G-1 - G-2
                              Financial Statements                                                                  G-3 - G-7

                         Ohio Power Company and Subsidiaries:
                              Management's Discussion and Analysis of Results of Operations                         H-1 - H-2
                              Consolidated Financial Statements                                                     H-3 - H-7

                         Public Service Company of Oklahoma and Subsidiaries:
                              Management's Narrative Analysis of Results of Operations                              I-1 - I-2
                              Consolidated Financial Statements                                                     I-3 - I-6

                         Southwestern Electric Power Company and Subsidiaries:
                              Management's Discussion and Analysis of Results of Operations                         J-1 - J-2
                              Consolidated Financial Statements                                                     J-3 - J-6

                         West Texas Utilities Company:
                              Management's Narrative Analysis of Results of Operations                              K-1 - K-2
                              Financial Statements                                                                  K-3 - K-6

<PAGE>

                              Footnotes to Financial Statements                                                     L-1 - L-14

           Item 2.        Registrants' Combined Management Discussion and Analysis of
                                 Financial Condition, Contingencies  and Other Matters                              M-1 - M-7
           Item 3.        Quantitative and Qualitative Disclosures About Market Risk                                N-1 - N-2

       Part II.           OTHER INFORMATION
           Item 6.            Exhibits and Reports on Form 8-K                                                      O-1
                                     (a)  Exhibits
                                           Exhibit 12
                                     (b)  Reports on Form 8-K

SIGNATURE                                                                                                           P-1
</TABLE>

     This  combined  Form 10-Q is separately  filed by American  Electric  Power
Company, Inc., AEP Generating Company,  Appalachian Power Company, Central Power
and Light  Company,  Columbus  Southern Power  Company,  Indiana  Michigan Power
Company,  Kentucky Power Company, Ohio Power Company,  Public Service Company of
Oklahoma,  Southwestern Electric Power Company and West Texas Utilities 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.

<PAGE>
<TABLE>
<CAPTION>
                                GLOSSARY OF TERMS
         When the following terms and  abbreviations  appear in the text of this
report, they have the meanings indicated below.

               Term                                Meaning

<S>                                 <C>
2004 True-up Proceeding............ A filing to be made after January 10, 2004 under the Texas Legislation to finalize the
                                            amount of stranded costs and the recovery of such costs.
AEGCo.............................. AEP Generating Company, an electric utility subsidiary of AEP.
AEP................................ American Electric Power Company, Inc.
AEP Credit, Inc.................... AEP Credit, Inc., a subsidiary of AEP which factors accounts receivable and accrued utility
                                            revenues for affiliated and unaffiliated domestic electric utility companies.
AEP East electric operating
companies.......................... APCo, CSPCo, I&M, KPCo and OPCo.
AEP System or the System........... The American Electric Power System, an integrated electric utility system, owned and
                                            operated by AEP's electric utility subsidiaries.
AEP Power Pool..................... AEP System Power Pool. Members are APCo, CSPCo, I&M, KPCo and OPCo.  The Pool shares the
                                            generation, cost of generation and resultant wholesale system sales of the member
                                            companies.
AEP West electric operating
companies.......................... CPL, PSO, SWEPCo and WTU.
Amos Plant......................... John E. Amos Plant, a 2,900 MW generation station jointly owned and operated by APCo and
                                            OPCo.
APCo............................... Appalachian Power Company, an AEP electric utility subsidiary.
Arkansas Commission................ Arkansas Public Service Commission.
CLECO.............................. Central Louisiana Electric Company, Inc., an unaffiliated corporation.
Cook Plant......................... The Donald C. Cook Nuclear Plant, a two-unit, 2,110 MW nuclear plant owned by I&M.
CPL................................ Central Power and Light Company, an AEP electric utility subsidiary.
CSPCo.............................. Columbus Southern Power Company, an AEP electric utility subsidiary.
CSW...............................  Central and South West Corporation, a subsidiary of AEP.
D.C. Circuit Court................. The United States Court of Appeals for the District of Columbia Circuit.
DHMV............................... Dolet Hills Mining Venture.
DOE................................ United States Department of Energy.
EBIT............................... Earnings Before Interest Charges and Income Taxes.
ECOM............................... Excess Cost Over Market.
ERCOT.............................. The Electric Reliability Council of Texas.
FASB............................... Financial Accounting Standards Board.
Federal EPA........................ United States Environmental Protection Agency.
FERC............................... Federal Energy Regulatory Commission.
FMB................................ First Mortgage Bonds
GAAP............................... Generally Accepted Accounting Principles.
HPL................................ Houston Pipe Line Company.
I&M................................ Indiana Michigan Power Company, an AEP electric utility subsidiary.
KPCo............................... Kentucky Power Company, an AEP electric utility subsidiary.
KWH................................ Kilowatthour.
LIBOR.............................. London InterBank Offered Rate.
LIG................................ Louisiana Intrastate Gas.
Michigan Legislation............... The Customer Choice and Electricity Reliability Act, a Michigan law which provides for
                                            customer choice of electricity supplier.
MPSC............................... Michigan Public Service Commission.
MWH................................ Megawatthour.
Nox................................ Nitrogen oxide.
Nox Rule........................... A final rules issued by Federal EPA which requires NOx reductions in 22 eastern states
                                            including seven of the states in which AEP companies operates.
Ohio Act........................... The Ohio Electric Restructuring Act of 1999.
OPCo..............................  Ohio Power Company, an AEP electric utility subsidiary.
PSO................................ Public Service Company of Oklahoma, an AEP electric utility subsidiary.

<PAGE>

PUCO............................... The Public Utilities Commission of Ohio.
PUCT............................... The Public Utility Commission of Texas.
Registrant Subsidiaries............ AEP subsidiaries who are SEC registrants: AEGCo, APCo, CPL, CSPCo, I&M, KPCo, OPCo, PSO,
                                            SWEPCo and WTU.
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.
SFAS............................... Statement of Financial Accounting Standards issued by the Financial Accounting Standards
                                            Board.
SFAS 71............................ Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain
                                                                                        -------------------------------------
                                            Types of Regulation.
                                            -------------------
SFAS 133........................... Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
                                                                                         -------------------------------------
                                            and Hedging Activities.
                                            ----------------------
SPP................................ Southwest Power Pool.
STP................................ South Texas Project Nuclear Generating Plant, owned 25.2% by CPL.
SWEPCo............................. Southwestern Electric Power Company, an AEP electric utility subsidiary.
Texas Restructuring
Legislation........................ Legislation enacted in 1999 to restructure the electric utility industry in Texas.
VaR................................ Value at Risk, a method to quantify risk exposure.
Virginia SCC....................... Virginia State Corporation Commission.
WTU................................ West Texas Utilities Company, an AEP electric utility subsidiary.
Zimmer Plant....................... William H. Zimmer Generating Station, a 1,300 MW coal-fired unit owned 25.4% by CSPCo.
</TABLE>
<PAGE>

     FORWARD-LOOKING INFORMATION

     This  report  made  by  AEP  and  certain  of  its  subsidiaries   contains
     forward-looking  statements  within  the  meaning  of  Section  21E  of the
     Securities  Exchange Act of 1934. Although AEP and each of its subsidiaries
     believe that their  expectations are based on reasonable  assumptions,  any
     such  statements  may be  influenced  by factors  that could  cause  actual
     outcomes and results to be materially different from those projected. Among
     the factors that could cause actual results to differ materially from those
     in the forward-looking statements are:

o        Electric load and customer growth.
o        Abnormal weather conditions.
o        Available sources and costs of fuels.
o        Availability of generating capacity.
o        The  speed  and  degree  to  which  competition  is  introduced  to our
         power generation  business.
o        The structure and timing of a competitive market and its impact on
         energy prices or fixed rates.
o        The ability to recover  stranded costs in  connection  with
         possible/proposed   deregulation  of  generation.
o        New legislation and government regulations.
o        The ability of AEP to successfully control its costs.
o        The success of new business ventures.
o        International developments affecting AEP's foreign investments.
o        The economic climate and growth in AEP's service territory.
o        Inflationary trends.
o        Electricity and gas market prices.
o        Interest rates
o        Other risks and unforeseen events.

<PAGE>
         AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000
        Net  income  increased  by $62  million  or 20 cents  per  share for the
quarter and by $430 million or $1.33 per share year-to-date. The results for the
quarter  reflect  a  favorable   variance  from  an   extraordinary   loss  from
deregulation  recorded in the third quarter of 2000 and an accounting change due
to new  accounting  rules  recorded in the third quarter of 2001.  Income before
extraordinary items and cumulative effect of the accounting change was unchanged
for the quarter.  In the year-to-date  period income before  extraordinary items
and the cumulative  effect of the accounting change increased by $425 million or
$1.31 per share.  The impact on  comparative  net income from the  extraordinary
items  and  the  cumulative  effect  of the  accounting  change  was $5  million
favorable for the year-to-date period.
        Our  wholesale  business  continued  to perform  well  despite a slowing
economy that reduced both wholesale  energy margins and energy use by industrial
customers.  Our wholesale business,  which includes generation,  retail sales of
power and  wholesale  power and gas  marketing  and trading and gas pipeline and
storages  services,  continued to be a significant  contributor  to our earnings
despite lower market prices and reduced volatility. Although our power marketing
and  trading  operations  had an adverse  effect on the third  quarter,  our gas
marketing  and trading  more than offset the decline in power  trading.  For the
year-to-date  period,  earnings  from both power and gas  marketing  and trading
improved.
        Income statement line items which changed significantly were:
<TABLE>
<CAPTION>
                                                                 Increase (Decrease)
                                                   Third Quarter                     Year-to-Date
                                              (in millions)            %         (in millions)           %
                                              -------------            -         -------------           -
<S>                                                 <C>              <C>              <C>             <C>
Revenues                                            $6,777            58              $21,216           82
Fuel and Purchased Power Expense                     6,806            74               20,610          104
Maintenance and Other Operation Expense                (43)           (4)                 148            5
Writeoff of Merger-Related Costs                       (16)          (80)                (165)         (91)
Other Income, net                                       (7)          (30)                  83          141
Interest and Preferred Dividends                       (22)           (8)                 (34)          (4)
Income Taxes                                             4             2                  218           63
Extraordinary Items                                     44           N.M.                 (13)         (37)
Cumulative Effect                                       18           N.M.                  18          N.M.

N.M. = Not Meaningful
</TABLE>

         The increases in revenues were due to substantial increases in electric
and gas trading  volumes.  Wholesale  natural gas trading volume for the quarter
was 1,337 billion cubic feet, a 265 percent  increase  from  third-quarter  2000
volume of 366  billion  cubic  feet.  Electric  trading  volume for the  quarter
increased 66 percent to 148 million MWH.
The increase in gas trading volume is from:
o        continued expansion of our trading team
o        HPL acquisition on June 1, 2001
o        expansion into new markets

<PAGE>

The increase in electric trading volume is primarily from:
o        continued expansion of our trading team
o        increased liquidity in markets
While  trading  and  marketing  volumes  rose,  sales  to  industrial  customers
decreased and, in the third quarter, sales to wholesale customers also declined.
We also  experienced  lower  wholesale  prices.  The slowing economy has reduced
demand and wholesale prices.
         Our fuel and purchased power expense increased due to increased trading
volume,  particularly gas, and an increase in nuclear  generation.  Cook Plant's
two nuclear  generating  units were out of service in 2000 through June 2000 and
December 2000.
         Maintenance and other operation  expense  declined in the third quarter
due to the  return  to  service  of the Cook  Nuclear  units in 2000.  Partially
offsetting  this  decrease  were  accruals  for  severance  related to corporate
restructuring.   In  the  year-to-date  period,  additional  traders'  incentive
compensation,  costs  associated with the  construction of gas-fired  plants for
non-affiliates and the accruals for severance costs caused maintenance and other
operation  expense to rise.  The increase was offset,  in part, by not incurring
restart  costs for the Cook Plant.  Revenues  from project fees more than offset
the charges for third party construction.
         The write-off of deferred merger costs in 2000 included transaction and
transition costs not recoverable  from ratepayers  under  regulatory  commission
approved settlement agreements.
         The  completion  in  March  2001 of the  sale of  Frontera,  one of the
generating  plants  required  to  be  divested  under  FERC  -  approved  merger
settlement agreements,  produced a $73 million gain recorded in other income for
the year-to-date period.
         Lower average  outstanding  short-term  debt balances and a decrease in
average  short-term  interest rates  accounted for the reduction in interest and
preferred dividends.
        An increase in pre-tax income caused the increase in income taxes.
        In the second quarter of 2001 we recorded an  extraordinary  loss of $48
million  net of tax to  write-off  prepaid  Ohio excise  taxes  stranded by Ohio
deregulation  (see  Note  2).  The  application  of  regulatory  accounting  for
generation was  discontinued  in 2000 which resulted in after tax  extraordinary
items of:
o        a $9 million gain in June of 2000 for the Virginia and West Virginia
         jurisdictions and
o        $44 million loss in September of 2000 for the Ohio jurisdiction
        New accounting  rules that became  effective July 1, 2001 required us to
mark  to  market  certain  fuel  supply  contracts  that  qualify  as  financial
derivatives.  The effect of initially adopting the new rules at July 1, 2001 was
$18 million,  net of tax, which is reported as a cumulative effect of accounting
change on the income statement.

<PAGE>
<TABLE>
<CAPTION>
         AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
                        CONSOLIDATED STATEMENTS OF INCOME
                     (in millions, except per-share amounts)
                                   (UNAUDITED)

                                                         Three Months Ended September 30,           Nine Months Ended September 30,
                                                             2001                 2000                2001                2000
                                                             ----                 ----                ----                ----

<S>                                                          <C>                  <C>                 <C>                 <C>
REVENUES                                                     $18,385              $11,608             $47,078             $25,862
                                                             -------              -------             -------             -------

EXPENSES:
   Fuel and Purchased Power                                   16,008                9,202              40,477              19,867
   Maintenance and Other Operation                               971                1,014               2,883               2,735
   Non-recoverable Merger Costs                                    4                   20                  16                 181
   Depreciation and Amortization                                 340                  322               1,030                 947
   Taxes Other Than Income Taxes                                 200                  177                 537                 523
                                                                 ---                  ---                 ---                 ---
         TOTAL EXPENSES                                       17,523               10,735              44,943              24,253
                                                              ------               ------              ------              ------

OPERATING INCOME                                                 862                  873               2,135               1,609

OTHER INCOME, net                                                 16                   23                 142                  59
                                                                  --                   --                 ---                  --
INCOME BEFORE INTEREST, PREFERRED
  DIVIDENDS AND INCOME TAXES                                     878                  896               2,277               1,668

INTEREST AND PREFERRED DIVIDENDS                                 252                  274                 762                 796
                                                                 ---                  ---                 ---                 ---

INCOME BEFORE INCOME TAXES                                       626                  622               1,515                 872

INCOME TAXES                                                     223                  219                 566                 348
                                                                 ---                  ---                 ---                 ---

INCOME BEFORE EXTRAORDINARY ITEM
  AND CUMULATIVE EFFECT                                          403                  403                 949                 524

EXTRAORDINARY LOSS - EFFECTS
  OF DEREGULATION - net of tax (See note 2)                    -                      (44)                (48)                (35)

CUMULATIVE EFFECT OF ACCOUNTING   CHANGE - net of tax
(See note 2)                                                      18               -                       18              -
                                                                  --               ------                  --              ------

NET INCOME                                                   $   421               $  359             $   919             $   489
                                                             =======               ======             =======             =======

AVERAGE NUMBER OF SHARES   OUTSTANDING                           322                  322                 322                 322
                                                                 ===                  ===                 ===                 ===

EARNINGS PER SHARE:
   Income Before Extraordinary Item and
     Cumulative Effect                                         $1.25               $ 1.25              $ 2.94              $ 1.63
   Extraordinary Loss                                          -                    (0.14)              (0.15)              (0.11)
   Cumulative Effect                                             .06                -                     .06               -
                                                                 ---                -----                 ---               -----
   Earnings Per Share (Basic and Dilutive)                     $1.31               $ 1.11              $ 2.85              $ 1.52
                                                               =====               ======              ======              ======

CASH DIVIDENDS PAID PER SHARE                                  $0.60                 $0.60              $1.80               $1.80
                                                               =====                 =====              =====               =====

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
         AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                      September 30, 2001       December 31, 2000
                                                                                      ------------------       -----------------
                                                                                                         (in millions)
<S>                                                                                            <C>                     <C>
ASSETS
------
CURRENT ASSETS:
    Cash and Cash Equivalents                                                                  $    379                $    437
    Accounts Receivable (net)                                                                     2,824                   3,699
    Energy Trading Contracts                                                                     13,114                  16,627
    Other                                                                                         1,690                   1,268
                                                                                                  -----                   -----

       TOTAL CURRENT ASSETS                                                                      18,007                  22,031
                                                                                                 ------                  ------

PROPERTY, PLANT AND EQUIPMENT:
   Electric:
     Production                                                                                  16,533                  16,328
     Transmission                                                                                 5,824                   5,609
     Distribution                                                                                11,169                  10,843
   Other (including gas and coal mining assets and nuclear fuel)                                  4,538                   4,077
   Construction Work in Progress                                                                    949                   1,231
                                                                                                    ---                   -----
       Total Property, Plant and Equipment                                                       39,013                  38,088
   Accumulated Depreciation and Amortization                                                     15,941                  15,695
                                                                                                 ------                  ------

       NET PROPERTY, PLANT AND EQUIPMENT                                                         23,072                  22,393
                                                                                                 ------                  ------

REGULATORY ASSETS                                                                                 3,542                   3,698
                                                                                                  -----                   -----

INVESTMENTS IN POWER AND COMMUNICATIONS PROJECTS                                                    563                     782
                                                                                                    ---                     ---

GOODWILL (net of amortization)                                                                    1,360                   1,382
                                                                                                  -----                   -----

LONG-TERM ENERGY TRADING CONTRACTS                                                                3,375                   1,620
                                                                                                  -----                   -----

OTHER ASSETS                                                                                      2,900                   2,642
                                                                                                  -----                   -----

          TOTAL                                                                                 $52,819                 $54,548
                                                                                                =======                 =======

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
         AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                     September 30, 2001        December 31, 2000
                                                                                     ------------------        -----------------
                                                                                                         (in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
<S>                                                                                            <C>                      <C>
  Accounts Payable                                                                             $  1,847                 $  2,627
  Short-term Debt                                                                                 3,575                    4,333
  Long-term Debt Due Within One Year                                                              1,550                    1,152
  Energy Trading Contracts                                                                       12,542                   16,801
  Other                                                                                           2,461                    2,154
                                                                                                  -----                    -----

       TOTAL CURRENT LIABILITIES                                                                 21,975                   27,067
                                                                                                 ------                   ------

LONG-TERM DEBT                                                                                    9,925                    9,602
                                                                                                  -----                    -----

LONG-TERM ENERGY TRADING CONTRACTS                                                                3,229                    1,381
                                                                                                  -----                    -----

DEFERRED INCOME TAXES                                                                             4,930                    4,875
                                                                                                  -----                    -----

DEFERRED INVESTMENT TAX CREDITS                                                                     502                      528
                                                                                                    ---                      ---

DEFERRED CREDITS AND REGULATORY LIABILITIES                                                       1,019                      617
                                                                                                  -----                      ---

DEFERRED GAIN ON SALE AND LEASEBACK -
  ROCKPORT PLANT UNIT 2                                                                             197                      203
                                                                                                    ---                      ---

OTHER NONCURRENT LIABILITIES                                                                      1,413                    1,706
                                                                                                  -----                    -----

CONTINGENCIES (Note 8)

CERTAIN SUBSIDIARY OBLIGATED, MANDATORILY REDEEMABLE,
  PREFERRED SECURITIES OF SUBSIDIARY TRUSTS HOLDING SOLELY
  JUNIOR SUBORDINATED DEBENTURES OF SUCH SUBSIDIARIES                                               321                      334
                                                                                                    ---                      ---

MINORITY INTEREST IN SUBSIDIARIES                                                                   773                       20
                                                                                                    ---                       --

CUMULATIVE PREFERRED STOCKS OF SUBSIDIARIES                                                         156                      161
                                                                                                    ---                      ---

COMMON SHAREHOLDERS' EQUITY Common Stock-Par Value $6.50:
                                    2001            2000
                                    ----            ----
     Shares Authorized. . . . . 600,000,000     600,000,000
     Shares Issued. . . . . . . 331,202,497     331,019,146
     (8,999,992 shares were held in treasury at September 30, 2001
     and December 31, 2000)                                                                       2,153                    2,152
  Paid-in Capital                                                                                 2,916                    2,915
  Accumulated Other Comprehensive Income (Loss)                                                    (128)                    (103)
  Retained Earnings                                                                               3,438                    3,090
                                                                                                  -----                    -----

          TOTAL COMMON SHAREHOLDERS' EQUITY                                                       8,379                    8,054
                                                                                                  -----                    -----

              TOTAL                                                                             $52,819                  $54,548
                                                                                                =======                  =======

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
         AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                                                                                    Nine Months Ended September 30,
                                                                                                        2001             2000
                                                                                                        ----             ----
                                                                                                             (in millions)
<S>                                                                                                 <C>                 <C>
OPERATING ACTIVITIES:
   Net Income                                                                                       $   919             $   489
   Adjustments for Noncash Items:
    Depreciation and Amortization                                                                     1,054                 976
    Deferred Federal Income Taxes                                                                       131                  40
    Deferred Investment Tax Credits                                                                     (26)                (26)
    Amortization of Deferred Property Taxes                                                             142                 138
    Amortization of Cook Plant Restart Costs                                                             30                  30
    Deferred Costs Under Fuel Clause Mechanisms                                                         240                (276)
    Miscellaneous Accrued Expenses                                                                     (238)                191
    Extraordinary Loss - Discontinuance of SFAS 71                                                       48                  35
    Cumulative Effect of Accounting Change                                                              (18)              -
  Changes in Certain Current Assets and Liabilities:
    Accounts Receivable (net)                                                                           921                (927)
    Fuel, Materials and Supplies                                                                       (114)                 88
    Accrued Utility Revenues                                                                             (4)               (134)
    Prepayments and Other                                                                               (83)               (280)
    Accounts Payable                                                                                 (1,108)                445
    Taxes Accrued                                                                                       163                  (3)
    Revenue Refunds Accrued                                                                               2                 (15)
    Energy Trading Contracts (net)                                                                     (653)                (23)
Other (net)                                                                                            (209)               (220)
                                                                                                       ----                ----
          Net Cash Flows From Operating Activities                                                    1,197                 528
                                                                                                      -----                 ---

INVESTING ACTIVITIES:
    Construction Expenditures                                                                        (1,303)             (1,204)
    Purchase of Houston Pipe Line                                                                      (727)             -
    Sale of Yorkshire                                                                                   383              -
    Sale of Frontera                                                                                    265              -
    Other                                                                                               (54)                (29)
                                                                                                        ---                 ---
          Net Cash Flows Used For Investing Activities                                               (1,436)             (1,233)
                                                                                                     ------              ------

FINANCING ACTIVITIES:
  Issuance of Common Stock                                                                                9                  12
  Issuance of Minority Interest                                                                         750              -
  Issuance of Long-term Debt                                                                          1,766                 948
  Change in Short-term Debt (net)                                                                      (717)              1,406
  Retirement of Cumulative Preferred Stock                                                               (5)                (20)
  Retirement of Long-term Debt                                                                       (1,033)             (1,400)
  Dividends Paid on Common Stock                                                                       (580)               (612)
                                                                                                       ----                ----
            Net Cash Flows From Financing Activities                                                    190                 334
                                                                                                        ---                 ---

Effect of Exchange Rate Change on Cash                                                                   (9)                  7
                                                                                                         --                   -

Net Decrease in Cash and Cash Equivalents                                                               (58)               (364)
Cash and Cash Equivalents at Beginning of Period                                                        437                 659
                                                                                                        ---                 ---
Cash and Cash Equivalents at End of Period                                                          $   379             $   295
                                                                                                    =======             =======
</TABLE>
Supplemental Disclosure:
Cash paid for  interest  net of  capitalized  amounts was $469  million and $685
million and for income taxes was $208 million and $242 million in 2001 and 2000,
respectively. Noncash acquisitions under capital leases were $39 million and $79
million in 2001 and 2000, respectively.
See Notes to Financial Statements beginning on page L-1.
<PAGE>
<TABLE>
<CAPTION>
         AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
             CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
                                   (UNAUDITED)

                                               Common       Paid-in       Retained       Accumulated Other
                                                                                         Comprehensive
                                               Stock        Capital       Earnings       Income (Loss)          Total
                                               -----        -------       --------       -------------          -----
                                                                             (in millions)
<S>     <C>                                         <C>          <C>            <C>                <C>           <C>
JANUARY 1, 2000                                     $2,149       $2,898         $3,630             $   (4)       $8,673
Issuance of Common Stock                                 2           10                                              12
Common Stock Dividends                                                            (612)                            (612)
Other                                                                 7             (1)                               6
                                                                                                                      -
                                                                                                                  8,079
Comprehensive Income:
   Other Comprehensive Income, Net of Taxes
     Currency Translation Adjustment                                                                 (171)         (171)
     Unrealized Loss on Securities                                                                     20            20
   Net Income                                                                      489                              489
                                                                                                                    ---
     Total Comprehensive Income                                                                                     338
                                                ----------   ----------     -----------          --------           ---

SEPTEMBER 30, 2000                                  $2,151       $2,915         $3,506              $(155)       $8,417
                                                    ======       ======         =======             =====        ======



JANUARY 1, 2001                                     $2,152       $2,915         $3,090              $(103)       $8,054
Issuance of Common Stock                                 1            8                                               9
Common Stock Dividends                                                            (580)                            (580)
Other                                                                (7)             9                                2
                                                                                                                      -
                                                                                                                  7,485
Comprehensive Income:
  Other Comprehensive Income, Net of Taxes
      Currency Translation Adjustment                                                                 (21)          (21)
      Unrealized Gain on Hedged Derivatives                                                             2             2
      Minimum Pension Liability                                                                        (6)           (6)
   Net Income                                                                      919                              919
                                                                                                                    ---
     Total Comprehensive Income                                                                                     894
                                                ----------   ----------    -----------          ---------      --------

SEPTEMBER 30, 2001                                  $2,153       $2,916         $3,438              $(128)       $8,379
                                                    ======       ======         ======              =====        ======

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
                             AEP GENERATING COMPANY
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000
        Operating  revenues are derived  from the sale of Rockport  Plant energy
and capacity to two  affiliated  companies  pursuant to FERC approved  long-term
unit power agreements.  The unit power agreements  provide for recovery of costs
including a FERC  approved rate of return on common equity and a return on other
capital.
        The  increase  in net  income  of $0.1  million  or 4% for  the  quarter
resulted  primarily from an increase in capital on which a return is earned. Net
income for the year-to-date period was virtually unchanged.
        Income statement line items which changed significantly were:
<TABLE>
<CAPTION>
                                                                Increase (Decrease)
                                                    Third Quarter                       Year-to-Date
                                            (in millions)          %                (in millions)        %
                                            -------------          -                -------------        -
<S>                                             <C>             <C>                     <C>           <C>
Operating Revenues                              $1.8              3                     $0.7          N.M.
Fuel Expense                                     2.8             11                      0.3          N.M.
Other Operation Expense                          0.7             37                      1.0           14
Maintenance Expense                             (0.6)           (31)                    (0.4)          (5)
Taxes Other Than Federal Income Taxes           (0.5)           (43)                     1.0           30
Interest Charges                                (0.6)           (52)                    (1.0)         (34)

N.M. = Not Meaningful
</TABLE>
        The increase in operating  revenues resulted  primarily from an increase
in recoverable expenses especially fuel and other operation expense. Recoverable
expenses rose as Rockport Plant generation  increased in 2001 compared with last
year when the plant underwent scheduled maintenance outages in the third quarter
of 2000.
        Fuel expense  increased due to an increase in generation  reflecting the
length of outages  in the third  quarter  2000.
        The  increase  in other operation expense resulted from increased
employee  benefits,  insurance and regulatory  commission  costs.
        Maintenance  expense declined due to more  extensive  outages  during
the  third  quarter  2000  for  boiler maintenance  and repair.
        The decline in taxes other than federal income taxes for the quarter
resulted  from a decrease in an accrual for state taxes as a result of a revised
taxable income  estimate.  Taxes other than federal income taxes for the
year-to-date  period increased due to the accrual of state income taxes based on
an estimate of higher taxable income for 2001.
        Reductions in variable interest rates, reflecting market conditions, and
lower average short-term borrowing balances outstanding produced the decrease in
interest charges.
<PAGE>
<TABLE>
<CAPTION>
                             AEP GENERATING COMPANY
                              STATEMENTS OF INCOME
                                   (UNAUDITED)

                                                     Three Months Ended September 30,               Nine Months Ended September 30,
                                                             2001                    2000              2001                  2000
                                                             ----                    ----              ----                  ----
                                                                                        (in thousands)
<S>                                                          <C>                     <C>              <C>                   <C>
OPERATING REVENUES                                           $57,417                 $55,658          $170,141              $169,452
                                                             -------                 -------          --------              --------

OPERATING EXPENSES:
   Fuel                                                       28,143                  25,308            76,049                75,791
   Rent - Rockport Plant Unit 2                               17,071                  17,071            51,212                51,212
   Other Operation                                             2,529                   1,840             7,855                 6,894
   Maintenance                                                 1,415                   2,042             7,312                 7,723
   Depreciation                                                5,613                   5,558            16,801                16,604
   Taxes Other Than Federal Income Taxes                         662                   1,164             4,431                 3,414
   Federal Income Taxes                                          369                     466             1,177                 1,464
                                                                 ---                     ---             -----                 -----

           TOTAL OPERATING EXPENSES                           55,802                  53,449           164,837               163,102
                                                              ------                  ------           -------               -------

OPERATING INCOME                                               1,615                   2,209             5,304                 6,350

NONOPERATING INCOME                                              965                     869             2,714                 2,638
                                                                 ---                     ---             -----                 -----

INCOME BEFORE INTEREST CHARGES                                 2,580                   3,078             8,018                 8,988

INTEREST CHARGES                                                 529                   1,106             1,924                 2,918
                                                                 ---                   -----             -----                 -----

NET INCOME                                                   $ 2,051                 $ 1,972          $  6,094              $  6,070
                                                             =======                 =======          ========              ========
</TABLE>
<TABLE>
<CAPTION>
                         STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)

                                                    Three Months Ended September 30,               Nine Months Ended September 30,
                                                          2001                     2000             2001                     2000
                                                          ----                     ----             ----                     ----
                                                                                     (in thousands)

<S>                                                         <C>                     <C>             <C>                      <C>
BALANCE AT BEGINNING OF PERIOD                              $11,847                 $5,836          $ 9,722                  $3,673

NET INCOME                                                    2,051                  1,972            6,094                   6,070

CASH DIVIDENDS DECLARED                                         959                 -                 2,877                   1,935
                                                                ---                 ------            -----                   -----

BALANCE AT END OF PERIOD                                    $12,939                 $7,808          $12,939                  $7,808
                                                            =======                 ======          =======                  ======

The common stock of AEGCo is wholly owned by AEP.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             AEP GENERATING COMPANY
                                 BALANCE SHEETS
                                   (UNAUDITED)

                                                                                    September 30, 2001         December 31, 2000
                                                                                    ------------------         -----------------
                                                                                                     (in thousands)

<S>                                                                                           <C>                      <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                                 $637,433                 $635,215
   General                                                                                       2,943                    2,795
   Construction Work in Progress                                                                 3,979                    4,292
                                                                                                 -----                    -----
        Total Electric Utility Plant                                                           644,355                  642,302
   Accumulated Depreciation                                                                    331,268                  315,566
                                                                                               -------                  -------
NET ELECTRIC UTILITY PLANT                                                                     313,087                  326,736
                                                                                               -------                  -------

OTHER PROPERTY AND INVESTMENTS                                                                     119                        6
                                                                                                   ---                        -

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                       188                    2,757
   Advances to Affiliates                                                                        3,478                   -
   Accounts Receivable:
      Affiliated Companies                                                                      18,823                   21,374
      Miscellaneous                                                                                150                    2,341
   Fuel - at average cost                                                                       15,487                   11,006
   Materials and Supplies - at average cost                                                      4,093                    3,979
   Prepayments                                                                                     396                      145
                                                                                                   ---                      ---
TOTAL CURRENT ASSETS                                                                            42,615                   41,602
                                                                                                ------                   ------

REGULATORY ASSETS                                                                                5,267                    5,504
                                                                                                 -----                    -----

DEFERRED CHARGES                                                                                 3,340                      754
                                                                                                 -----                      ---

TOTAL ASSETS                                                                                  $364,428                 $374,602
                                                                                              ========                 ========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             AEP GENERATING COMPANY
                                 BALANCE SHEETS
                                   (UNAUDITED)

                                                                                    September 30, 2001         December 31, 2000
                                                                                    ------------------         -----------------
                                                                                                         (in thousands)

CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
<S>                                                                                           <C>                      <C>
   Common Stock - Par Value $1,000:
      Authorized and Outstanding - 1,000 Shares                                               $  1,000                 $  1,000
   Paid-in Capital                                                                              23,434                   23,434
   Retained Earnings                                                                            12,939                    9,722
                                                                                                ------                    -----
        Total Common Shareowner's Equity                                                        37,373                   34,156
   Long-term Debt                                                                               44,791                   -
                                                                                                ------                   -
        TOTAL CAPITALIZATION                                                                    82,164                   34,156
                                                                                                ------                   ------

OTHER NONCURRENT LIABILITIES                                                                       135                      358
                                                                                                   ---                      ---

CURRENT LIABILITIES:
   Long-term Debt Due Within One Year                                                           -                        44,808
   Advances from Affiliates                                                                     -                        28,068
   Accounts Payable:
      General                                                                                    9,033                    6,109
      Affiliated Companies                                                                       6,785                    7,724
   Taxes Accrued                                                                                12,194                    4,993
   Rent Accrued - Rockport Plant Unit 2                                                         23,427                    4,963
   Other                                                                                         2,806                    4,443
                                                                                                 -----                    -----
TOTAL CURRENT LIABILITIES                                                                       54,245                  101,108
                                                                                                ------                  -------

DEFERRED GAIN ON SALE AND LEASEBACK -
  ROCKPORT PLANT UNIT 2                                                                        118,010                  122,188
                                                                                               -------                  -------

REGULATORY LIABILITIES:
   Deferred Investment Tax Credit                                                               57,209                   59,718
   Amounts Due to Customers for Income Taxes                                                    21,994                   23,996
                                                                                                ------                   ------
        TOTAL REGULATORY LIABILITIES                                                            79,203                   83,714
                                                                                                ------                   ------

DEFERRED INCOME TAXES                                                                           30,521                   32,928
                                                                                                ------                   ------

DEFERRED CREDITS                                                                                   150                      150
                                                                                                   ---                      ---

CONTINGENCIES (Note 8)

TOTAL CAPITALIZATION AND LIABILITIES                                                          $364,428                 $374,602
                                                                                              ========                 ========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             AEP GENERATING COMPANY
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                                       Nine Months Ended September 30,
                                                                                                 2001                2000
                                                                                                 ----                ----
                                                                                                   (in thousands)
<S>                                                                                            <C>                  <C>
OPERATING ACTIVITIES:
   Net Income                                                                                  $  6,094             $  6,070
   Adjustments for Noncash Items:
     Depreciation                                                                                16,801               16,604
     Deferred Federal Income Taxes                                                               (4,409)              (4,225)
     Deferred Investment Tax Credits                                                             (2,509)              (2,511)
     Amortization of Deferred Gain on Sale and Leaseback - Rockport Plant Unit 2                 (4,178)              (4,178)
     Deferred Property Taxes                                                                       (922)                (807)
   Changes in Certain Current Assets and Liabilities:
     Accounts Receivable                                                                          4,742              (15,521)
     Fuel, Materials and Supplies                                                                (4,595)                (731)
     Accounts Payable                                                                             1,985              (15,631)
     Taxes Accrued                                                                                7,201                4,622
     Rent Accrued - Rockport Plant Unit 2                                                        18,464               18,464
   Other (net)                                                                                   (3,700)               1,056
                                                                                                 ------                -----

           Net Cash Flow From Operating Activities                                               34,974                3,212
                                                                                                 ------                -----

INVESTING ACTIVITIES - Construction Expenditures                                                 (3,120)              (3,413)
                                                                                                 ------               ------

FINANCING ACTIVITIES:
     Return of Capital to Parent Company                                                        -                     (4,866)
     Change in Short-term Debt (net)                                                            -                    (24,700)
     Change in Advances from Affiliates (net)                                                   (31,546)              31,574
     Dividends Paid                                                                              (2,877)              (1,935)
                                                                                                 ------               ------
           Net Cash Flows From (Used For) Financing Activities                                  (34,423)                  73
                                                                                                -------                   --

Net Decrease in Cash and Cash Equivalents                                                        (2,569)                (128)
Cash and Cash Equivalents at Beginning of Period                                                  2,757                  317
                                                                                                  -----                  ---
Cash and Cash Equivalents at End of Period                                                     $    188             $    189
                                                                                               ========             ========

Supplemental Disclosure:
Cash paid for interest net of capitalized  amounts was $1,489,000 and $2,671,000
and  for  income  taxes  was  $1,352,000  and  $3,101,  000 in  2001  and  2000,
respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
                   APPALACHIAN POWER COMPANY AND SUBSIDIARIES
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000

         We have two  businesses:  wholesale  which consists of the  generation,
regulated  retail power sales and wholesale  power  marketing  and trading;  and
energy delivery which consists of transmission  and  distribution  services.  We
belong to the AEP Power Pool and share in the  revenues  and costs of  wholesale
marketing and trading activities conducted on our behalf by the AEP Power Pool.
        Net  income  decreased  $5.8  million  or 16% for the  quarter  due to a
decline in wholesale  business  performance as a slowing  economy reduced demand
and lowered wholesale  electricity  prices. Net income increased $5.6 million or
5% for the year-to-date period primarily due to growth in and strong performance
by the wholesale business during the first half of 2001.
        Income statement line items which changed significantly were:
<TABLE>
<CAPTION>
                                                         Increase (Decrease)
                                            Third Quarter                    Year-to-Date
                                     (in millions)           %           (in millions)           %
                                     -------------           -           -------------           -
<S>                                          <C>         <C>                   <C>            <C>
Operating Revenues                           $479          31                  $1,820          45
Fuel Expense                                    3           3                      (8)         (3)
Purchased Power Expense                       475          40                   1,778          60
Other Operation Expense                         4           5                      16           8
Maintenance Expense                             2           8                      12          14
Depreciation and Amortization                   3           8                      14          12
Federal Income Taxes                           (2)        (13)                      1           2
Nonoperating Income                            (3)       (138)                      5          80
Interest Charges                               (3)         (9)                     (4)         (4)
Extraordinary Gain                            -           -                        (9)        N.M.

N.M. = Not Meaningful
</TABLE>
        The  significant  increase in  revenues  for the quarter is due to a 69%
increase  in trading  volume  partially  offset by lower  wholesale  electricity
prices of our wholesale business.  The significant  year-to-date period increase
is due  to a 44%  increase  in  trading  volume  and an  increase  in  wholesale
electricity  prices  due to  changes  in  market  conditions.  Expansion  of the
wholesale  business' trading operation and greater liquidity in the market place
resulted in an increase in the number of forward electricity  purchase and sales
contracts in AEP's  traditional  marketing area (up to two transmission  systems
from AEP's service territory).
        Fuel expense of the wholesale  business increased for the quarter due to
a decrease in deferred  fuel  expense as compared to the previous  quarter.  The
decrease in deferred  fuel expense is due to a lower  average unit cost of fuel.
Fuel  expense  decreased  for  the  year-to-date  period  due  to a  decline  in
generation as a result of scheduled plant maintenance.
<PAGE>
        For the quarter the increase in the wholesale  business' purchased power
expense is  attributable  to an increase in trading  volume  partly  offset by a
decrease  in  wholesale  electricity  prices.  For the  year-to-date  period the
increase  is   attributable   to  increases  in  trading  volume  and  wholesale
electricity prices.
        For the quarter other operation  expense increased as a result of energy
delivery severance accruals and power trading incentive  compensation expense of
the wholesale  business.  Year-to-date  other operation expense increased due to
wholesale power trading incentive compensation expense.
        The increase in maintenance  expense is mainly attributable to increased
generating  plant boiler  maintenance  repairs to the wholesale  business' Amos,
Glen Lyn and Mountaineer Plants.
        During  June  2000 we  discontinued  the  application  of SFAS 71 in the
Virginia and West Virginia  jurisdictions.  Consequently net  generation-related
regulatory  assets were transferred to the energy delivery  business'  regulated
distribution  business  where  the  Virginia  and  West  Virginia  jurisdictions
authorized the recovery of these assets through  regulated  rates.  Depreciation
and amortization expense increased due to the accelerated amortization beginning
in July 2000 of the transition regulatory assets.  Additional investments in the
energy delivery  business'  distribution and transmission plant also contributed
to the increase in depreciation and amortization expense.
        The  decrease  in  federal  income  taxes  for the  quarter  is due to a
decrease in pre-tax operating income.
        Nonoperating income decreased for the quarter due to a net loss from the
wholesale business' trading transactions outside of the AEP System's traditional
marketing area and speculative financial transactions (options, futures, swaps).
Due to significant  net gains in the first six months of 2001 on these wholesale
trading transactions, nonoperating income increased in the year-to-date period.
        The interest  charge decrease is due to the retirement of first mortgage
bonds in 2000.
<PAGE>
<TABLE>
<CAPTION>
                   APPALACHIAN POWER COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                                 Three Months Ended September 30,               Nine Months Ended September 30,
                                                         2001                  2000                  2001                 2000
                                                         ----                  ----                  ----                 ----
                                                                                    (in thousands)
<S>                                                    <C>                     <C>               <C>                   <C>
OPERATING REVENUES                                     $2,017,159              $1,538,340        $5,840,590            $4,020,792
                                                       ----------              ----------        ----------            ----------

OPERATING EXPENSES:
   Fuel                                                    91,594                  88,769           272,119               279,989
   Purchased Power                                      1,666,443               1,191,737         4,765,476             2,987,568
   Other Operation                                         76,197                  72,297           210,034               194,504
   Maintenance                                             31,812                  29,369            98,663                86,683
   Depreciation and Amortization                           46,177                  42,798           133,950               120,035
   Taxes Other Than Federal Income Taxes                   29,275                  30,088            91,118                89,550
   Federal Income Taxes                                    15,280                  17,532            61,335                60,259
                                                           ------                  ------            ------                ------

           TOTAL OPERATING EXPENSES                     1,956,778               1,472,590         5,632,695             3,818,588
                                                        ---------               ---------         ---------             ---------

OPERATING INCOME                                           60,381                  65,750           207,895               202,204

NONOPERATING INCOME (LOSS)                                   (918)                  2,399            11,905                 6,607
                                                             ----                   -----            ------                 -----

INCOME BEFORE INTEREST CHARGES                             59,463                  68,149           219,800               208,811

INTEREST CHARGES                                           29,146                  32,037            91,277                94,795
                                                           ------                  ------  -         ------                ------

INCOME BEFORE EXTRAORDINARY ITEM                           30,317                  36,112           128,523               114,016

EXTRAORDINARY GAIN - DISCONTINUANCE   OF SFAS 71
(INCLUSIVE OF TAX BENEFIT   OF $7,872,000)
                                                          -                       -                 -                       8,938
                                                          -------                 -------           -------                 -----

NET INCOME                                                 30,317                  36,112           128,523               122,954

PREFERRED STOCK
  DIVIDEND REQUIREMENTS                                       502                     750             1,508                 2,015
                                                              ---                     ---             -----                 -----

EARNINGS APPLICABLE TO
  COMMON STOCK                                         $   29,815              $   35,362        $  127,015            $  120,939
                                                       ==========-             ==========        ==========            ==========
</TABLE>
<TABLE>
<CAPTION>
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (UNAUDITED)

                                                    Three Months Ended September 30,               Nine Months Ended September 30,
                                                          2001                    2000              2001                     2000
                                                          ----                    ----              ----                     ----
                                                                                  (in thousands)
<S>                                                       <C>                      <C>              <C>                     <C>
NET INCOME                                                $30,317                  $36,112          $128,523                $122,954
OTHER COMPREHENSIVE INCOME
    Foreign Currency Exchange Rate Hedge                      673                  -                      44                 -
                                                              ---                  -------                --                 -

COMPREHENSIVE INCOME                                      $30,990                  $36,112          $128,567                $122,954
                                                          =======                  =======          ========                ========

The common  stock of the Company is wholly  owned by AEP. See Notes to Financial
Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                   APPALACHIAN POWER COMPANY AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)

                                                     Three Months Ended September 30,               Nine Months Ended September 30,
                                                           2001                     2000            2001                     2000
                                                           ----                     ----            ----                     ----
                                                                                      (in thousands)
<S>                                                         <C>                    <C>              <C>                     <C>
BALANCE AT BEGINNING OF PERIOD                              $152,987               $198,126         $120,584                $175,854

NET INCOME                                                    30,317                 36,112          128,523                 122,954

DEDUCTIONS:
  Cash Dividends Declared:
     Common Stock                                             32,399                 31,653           97,196                  94,959
    Cumulative Preferred Stock                                   361                    375            1,082                   1,425
  Capital Stock Expense                                          141                    375              426                     589
                                                                 ---                    ---              ---                     ---

BALANCE AT END OF PERIOD                                    $150,403               $201,835         $150,403                $201,835
                                                            ========               ========         ========                ========

The common stock of the Company is wholly owned by AEP.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                   APPALACHIAN POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                   September 30, 2001          December 31, 2000
                                                                                   ------------------          -----------------
                                                                                                       (in thousands)
<S>                                                                                       <C>                          <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                             $2,072,425                   $2,058,952
   Transmission                                                                            1,214,697                    1,177,079
   Distribution                                                                            1,862,101                    1,816,925
   General                                                                                   258,285                      254,371
   Construction Work in Progress                                                             151,705                      110,951
                                                                                             -------                      -------
        Total Electric Utility Plant                                                       5,559,213                    5,418,278
   Accumulated Depreciation and Amortization                                               2,271,949                    2,188,796
                                                                                           ---------                    ---------
NET ELECTRIC UTILITY PLANT                                                                 3,287,264                    3,229,482
                                                                                           ---------                    ---------

OTHER PROPERTY AND INVESTMENTS                                                                55,992                       56,967
                                                                                              ------                       ------

LONG-TERM ENERGY TRADING CONTRACTS                                                           370,807                      322,688
                                                                                             -------                      -------

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                  28,766                        5,847
   Advances to Affiliates                                                                    -                              8,387
   Accounts Receivable:
      Customers                                                                              132,169                      243,298
      Affiliated Companies                                                                    68,088                       63,919
      Miscellaneous                                                                           17,285                       16,179
      Allowance for Uncollectible Accounts                                                    (1,868)                      (2,588)
   Fuel - at average cost                                                                     47,862                       39,076
   Materials and Supplies - at average cost                                                   60,891                       57,515
   Accrued Utility Revenues                                                                   19,844                       66,499
   Energy Trading Contracts                                                                  918,417                    2,036,001
   Prepayments                                                                                13,364                        6,307
                                                                                              ------                        -----
TOTAL CURRENT ASSETS                                                                       1,304,818                    2,540,440
                                                                                           ---------                    ---------

REGULATORY ASSETS                                                                            439,075                      447,750
                                                                                             -------                      -------

DEFERRED CHARGES                                                                              26,940                       48,826
                                                                                              ------                       ------

TOTAL ASSETS                                                                              $5,484,896                   $6,646,153
                                                                                          ==========                   ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                   APPALACHIAN POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)


                                                                                     September 30, 2001        December 31, 2000
                                                                                     ------------------        -----------------
                                                                                                         (in thousands)
<S>                                                                                          <C>                       <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common Stock - No Par Value:
      Authorized - 30,000,000 Shares
      Outstanding - 13,499,500 Shares                                                        $  260,458                $  260,458
   Paid-in Capital                                                                              715,644                   715,218
   Accumulated Other Comprehensive Income                                                            44                   -
   Retained Earnings                                                                            150,403                   120,584
                                                                                                -------                   -------
        Total Common Shareowner's Equity                                                      1,126,549                 1,096,260
   Cumulative Preferred Stock:
      Not Subject to Mandatory Redemption                                                        17,790                    17,790
      Subject to Mandatory Redemption                                                            10,860                    10,860
   Long-term Debt                                                                             1,506,285                 1,430,812
                                                                                              ---------                 ---------

           TOTAL CAPITALIZATION                                                               2,661,484                 2,555,722
                                                                                              ---------                 ---------

OTHER NONCURRENT LIABILITIES                                                                     89,099                   105,883
                                                                                                 ------                   -------

CURRENT LIABILITIES:
   Long-term Debt Due Within One Year                                                            50,007                   175,006
   Short-term Debt                                                                              -                         191,495
   Advances from Affiliates                                                                     209,538                   -
   Accounts Payable - General                                                                   139,439                   153,422
   Accounts Payable - Affiliated Companies                                                       86,989                   107,556
   Taxes Accrued                                                                                 77,888                    63,258
   Customer Deposits                                                                             17,225                    12,612
   Interest Accrued                                                                              40,659                    21,555
   Energy Trading Contracts                                                                     863,309                 2,091,804
   Other                                                                                         80,355                    85,378
                                                                                                 ------                    ------

           TOTAL CURRENT LIABILITIES                                                          1,565,409                 2,902,086
                                                                                              ---------                 ---------

DEFERRED INCOME TAXES                                                                           720,630                   682,474
                                                                                                -------                   -------

DEFERRED INVESTMENT TAX CREDITS                                                                  39,775                    43,093
                                                                                                 ------                    ------

LONG-TERM ENERGY TRADING CONTRACTS                                                              319,544                   259,438
                                                                                                -------                   -------

REGULATORY LIABILITIES AND DEFERRED CREDITS                                                      88,955                    97,457
                                                                                                 ------                    ------

CONTINGENCIES (Note 8)

TOTAL CAPITALIZATION AND LIABILITIES                                                         $5,484,896                $6,646,153
                                                                                             ==========                ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                   APPALACHIAN POWER COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                      Nine Months Ended September 30,
                                                                        2001                    2000
                                                                        ----                    ----
                                                                                  (in thousands)
<S>                                                                  <C>                      <C>
OPERATING ACTIVITIES:
   Net Income                                                         $ 128,523                $ 122,954
   Adjustments for Noncash Items:
      Depreciation and Amortization                                     134,034                  120,119
      Deferred Federal Income Taxes                                      27,227                   14,059
      Deferred Investment Tax Credits                                    (3,318)                  (3,446)
      Deferred Power Supply Costs (net)                                     131                  (80,232)
      Amortization of Deferred Property Taxes                            13,480                   13,051
      Extraordinary Gain - Discontinuance of SFAS 71                    -                         (8,938)
   Changes in Certain Current Assets and Liabilities:
      Accounts Receivable (net)                                         105,134                  (99,426)
      Fuel, Materials and Supplies                                      (12,162)                   8,919
      Accrued Utility Revenues                                           46,655                   12,948
      Accounts Payable                                                  (34,550)                 101,571
      Taxes Accrued                                                      14,630                   14,084
      Interest Accrued                                                   19,104                   16,345
   Net Change in Energy Trading Contracts                               (98,924)                 (13,446)
   Rate Stabilization Deferral                                          -                         75,601
   Other (net)                                                          (10,782)                 (24,757)
                                                                        -------                  -------
           Net Cash Flows From Operating Activities                     329,182                  269,406
                                                                        -------                  -------

INVESTING ACTIVITIES:
      Construction Expenditures                                        (185,185)                (132,290)
      Proceeds from Sale of Property                                      1,182                      160
                                                                          -----                      ---
           Net Cash Flows Used For Investing Activities                (184,003)                (132,130)
                                                                       --------                 --------

FINANCING ACTIVITIES:
      Issuance of Long-term Debt                                        124,588                   74,788
      Change in Short-term Debt (net)                                  (191,495)                 (23,455)
      Change in Advance from Affiliates (net)                           217,925                   (8,626)
      Retirement of Cumulative Preferred Stock                          -                         (9,905)
      Retirement of Long-term Debt                                     (175,000)                (131,202)
      Dividends Paid on Common Stock                                    (97,196)                 (94,959)
      Dividends Paid on Cumulative Preferred Stock                       (1,082)                  (1,578)
                                                                         ------                   ------
           Net Cash Flows Used For Financing Activities                (122,260)                (194,937)
                                                                       --------                 --------

Net Increase (Decrease) in Cash and Cash Equivalents                     22,919                  (57,661)
Cash and Cash Equivalents at Beginning of Period                          5,847                   64,828
                                                                          -----                   ------
Cash and Cash Equivalents at End of Period                           $   28,766                $   7,167
                                                                     ==========                =========

Supplemental Disclosure:
Cash  paid  for  interest  net  of  capitalized   amounts  was  $70,286,000  and
$75,938,000  and for income taxes was  $21,521,000  and  $30,503,000 in 2001 and
2000,  respectively.  Noncash  acquisitions under capital leases were $2,576,000
and $11,312,000 in 2001 and 2000, respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
                 CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARY
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000

         We have two businesses:  wholesale which consists of generation, retail
electricity  sales,  power  marketing  and  trading of  electricity;  and energy
delivery,  which consists of transmission and distribution  services.  Since the
merger of AEP and CSW in June 2000,  we  participate  in the AEP System's  power
marketing and trading activities.
         Third quarter net income decreased $6 million or 7% while  year-to-date
net income  increased  $6 million or 3%. The lower third  quarter net income was
due to weak  performance  from  marketing and trading.  Year-to-date  net income
increased  primarily from our participation in AEP's power marketing and trading
operations  during  the first  half of 2001  compared  with 2000 when we did not
share in AEP's power marketing and trading.
<TABLE>
<CAPTION>
                                                                 Increase (Decrease)
                                                      Third Quarter                     Year-to-Date
                                                (in millions)        %           (in millions)           %
                                                -------------        -           -------------           -
<S>                                                     <C>       <C>                    <C>          <C>
Operating Revenues                                      $440       55                    $938          61
Fuel Expense                                             (60)     (33)                      9           2
Purchased Power Expense                                  526      195                     906         278
Other Operation Expense                                  (28)     (27)                     (6)         (3)
Maintenance                                                1        8                       4          10
Depreciation and Amortization                             (9)     (21)                     (8)         (6)
Taxes Other Than Federal Income Taxes                      21     107                      25          43
Federal Income Taxes                                      (3)      (7)                      4           4
Nonoperating Income                                        3      333                     -           -
</TABLE>
         The  significant  increase in revenues  for the quarter  resulted  from
increased trading volumes of the wholesale business. In the year-to-date period,
the  increase in revenues is also  attributable  to our  participation  in AEP's
power marketing and trading  operations and higher fuel related  revenues due to
increased costs of fuel and purchased power.
         Fuel expense  decreased for the quarter  primarily due to a significant
decrease  in the  average  unit  cost of fuel as a result of lower  spot  market
natural  gas  prices.  Year-to-date  fuel  expense  was up due  primarily  to an
increase  in the  average  unit cost of fuel as a result of higher  spot  market
natural gas prices in the first and second quarters.
         The  substantial  rise in purchased  power expense for both the quarter
and year-to-date  periods was  attributable to our  participation in AEP's power
marketing and trading operation.
         Other  operation  expense for the quarter  decreased due primarily to a
decrease in transmission expenses.  Additionally,  production expenses were down
due to decreased power trading incentive compensation expense.
<PAGE>
         Maintenance for the quarter  increased due to the preparatory  expenses
for an October STP Unit 1 nuclear  refueling  outage. A nuclear refueling outage
for STP  Unit 2  between  March 7 and  April 2,  2001  also  contributed  to the
increase in year-to-date maintenance expense. STP Unit 1 completed its refueling
outage and returned to service October 25, 2001.
         The decrease in depreciation and  amortization  expense for the quarter
is due primarily to lower excess earnings  provisions under Texas  Restructuring
Legislation.  Year-to-date  depreciation and amortization expense also decreased
due to accelerated ECOM depreciation on STP ceasing in July 2000.
         Taxes other than federal  income taxes  increased  due  primarily to an
increase  in  franchise  related  taxes,  including  a  settlement  of  disputed
franchise fees (see Note 8), and Texas assessment taxes, a new tax levied by the
PUCT.
         Federal  income taxes  attributable  to  operations  decreased  for the
quarter  and  increased  for  the  year-to-date  period  due to a  decrease  and
increase, respectively, in pre-tax operating income.
         Nonoperating income for the quarter increased due to interest income on
underrecovered  fuel costs and was  partially  offset by a decrease  in interest
income on the Decommissioning Trust Fund.
<PAGE>
<TABLE>
<CAPTION>
                 CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                           Three Months Ended September 30,               Nine Months Ended September 30,
                                                     2001                 2000             2001                     2000
                                                     ----                 ----             ----                     ----
                                                                            (in thousands)
<S>                                                <C>                    <C>             <C>                    <C>
OPERATING REVENUES                                 $1,235,941             $795,794        $2,487,852             $1,550,033
                                                   ----------             --------        ----------             ----------

OPERATING EXPENSES:
   Fuel                                               121,933              181,827           420,965                412,065
   Purchased Power                                    795,448              269,823         1,230,786                325,179
   Other Operation                                     73,543              101,116           224,803                230,725
   Maintenance                                         13,827               12,780            49,109                 44,676
   Depreciation and Amortization                       33,257               41,970           129,235                137,055
   Taxes Other Than Federal Income Taxes               40,735               19,717            81,934                 57,173
   Federal Income Taxes                                44,600               47,908            91,919                 88,140
                                                       ------               ------            ------                 ------

           TOTAL OPERATING EXPENSES                 1,123,343              675,141         2,228,751              1,295,013
                                                    ---------              -------         ---------              ---------

OPERATING INCOME                                      112,598              120,653           259,101                255,020

NONOPERATING INCOME (LOSS)                              3,540                  818             3,638                  3,180
                                                        -----                  ---             -----                  -----

INCOME BEFORE INTEREST CHARGES                        116,138              121,471           262,739                258,200

INTEREST CHARGES                                       32,436               31,497            91,488                 92,534
                                                       ------               ------            ------                 ------

NET INCOME                                             83,702               89,974           171,251                165,666

PREFERRED STOCK DIVIDEND   REQUIREMENTS
                                                           60                   60               181                    181
                                                           --                   --               ---                    ---

EARNINGS APPLICABLE TO COMMON STOCK                   $ 83,642            $ 89,914        $  171,070               $165,485
                                                      ========            ========        ==========               ========
</TABLE>
<TABLE>
<CAPTION>
                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)


                                   Three Months Ended September 30,               Nine Months Ended September 30,
                                             2001                 2000             2001                     2000
                                             ----                 ----             ----                     ----
                                                                    (in thousands)
<S>                                           <C>                 <C>             <C>                        <C>
BALANCE AT BEGINNING OF PERIOD                $805,619            $756,465        $792,219                   $758,894
NET INCOME                                      83,702              89,974         171,251                    165,666

DEDUCTIONS:
  Cash Dividends Declared:
     Common Stock                               37,015              39,000         111,043                    117,000
    Preferred Stock                                 60                  61             181                        182
                                                    --                  --             ---                        ---

BALANCE AT END OF PERIOD                      $852,246            $807,378        $852,246                   $807,378
                                              ========            ========        ========                   ========

The common stock of the Company is wholly owned by AEP.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                 CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                       September 30, 2001      December 31, 2000
                                                                                       ------------------      -----------------
                                                                                                     (in thousands)
<S>                                                                                           <C>                      <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                                 $3,165,533               $3,175,867
   Transmission                                                                                  646,264                  581,931
   Distribution                                                                                1,272,057                1,221,750
   General                                                                                       244,803                  237,764
   Construction Work in Progress                                                                 164,633                  138,273
   Nuclear Fuel                                                                                  245,745                  236,859
                                                                                                 -------                  -------
        Total Electric Utility Plant                                                           5,739,035                5,592,444
   Accumulated Depreciation and Amortization                                                   2,395,951                2,297,189
                                                                                               ---------                ---------
NET ELECTRIC UTILITY PLANT                                                                     3,343,084                3,295,255
                                                                                               ---------                ---------

OTHER PROPERTY AND INVESTMENTS                                                                    47,099                   44,225
                                                                                                  ------                   ------

LONG-TERM ENERGY TRADING CONTRACTS                                                                86,270                   66,231
                                                                                                  ------                   ------

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                       6,706                   14,253
   Accounts Receivable:
      Customers                                                                                   74,642                   67,787
      Affiliated Companies                                                                        13,295                   31,272
      Allowance for Uncollectible Accounts                                                          (447)                  (1,675)
   Fuel Inventory - at LIFO cost                                                                  36,111                   22,842
   Materials and Supplies - at average cost                                                       55,700                   53,108
   Under-recovered Fuel Costs                                                                     10,822                  127,295
   Energy Trading Contracts                                                                      314,177                  481,206
   Prepayments and Other Current Assets                                                            4,357                    3,014
                                                                                                   -----                    -----
TOTAL CURRENT ASSETS                                                                             515,363                  799,102
                                                                                                 -------                  -------

REGULATORY ASSETS                                                                                234,038                  202,440
                                                                                                 -------                  -------

REGULATORY ASSETS DESIGNATED FOR SECURITIZATION                                                  953,249                  953,249
                                                                                                 -------                  -------

NUCLEAR DECOMMISSIONING TRUST FUND                                                                91,859                   93,592
                                                                                                  ------                   ------

DEFERRED CHARGES                                                                                  21,367                   18,402
                                                                                                  ------                   ------

TOTAL ASSETS                                                                                  $5,292,329               $5,472,496
                                                                                              ==========               ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                 CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                     September 30, 2001        December 31, 2000
                                                                                     ------------------        -----------------
                                                                                                     (in thousands)
<S>                                                                                          <C>                       <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common Stock - $25 Par Value:
      Authorized - 12,000,000 Shares
      Outstanding - 6,755,535 Shares                                                         $  168,888                $  168,888
   Paid-in Capital                                                                              405,000                   405,000
   Retained Earnings                                                                            852,246                   792,219
                                                                                                -------                   -------
        Total Common Shareowner's Equity                                                      1,426,134                 1,366,107
   Preferred Stock                                                                                5,967                     5,967
   CPL - Obligated, Mandatorily Redeemable Preferred Securities of
     Subsidiary Trust Holding Solely Junior Subordinated Debentures of CPL                      136,250                   148,500
   Long-term Debt                                                                               942,865                 1,254,559
                                                                                                -------                 ---------

           TOTAL CAPITALIZATION                                                               2,511,216                 2,775,133
                                                                                              ---------                 ---------

CURRENT LIABILITIES:
   Long-term Debt Due Within One Year                                                           511,700                   200,000
   Advances from Affiliates                                                                      57,722                   269,712
   Accounts Payable - General                                                                   125,578                   128,957
   Accounts Payable - Affiliated Companies                                                       14,118                    40,962
   Taxes Accrued                                                                                219,657                    55,526
   Interest Accrued                                                                              23,339                    26,217
   Energy Trading Contracts                                                                     314,346                   489,888
   Other                                                                                         46,712                    40,630
                                                                                                 ------                    ------

           TOTAL CURRENT LIABILITIES                                                          1,313,172                 1,251,892
                                                                                              ---------                 ---------

DEFERRED INCOME TAXES                                                                         1,186,803                 1,242,797
                                                                                              ---------                 ---------

DEFERRED INVESTMENT TAX CREDITS                                                                 124,194                   128,100
                                                                                                -------                   -------

LONG-TERM ENERGY TRADING CONTRACTS                                                               87,095                    65,740
                                                                                                 ------                    ------

REGULATORY LIABILITIES AND DEFERRED CREDITS                                                      69,849                     8,834
                                                                                                 ------                     -----

CONTINGENCIES (Note 8)

TOTAL CAPITALIZATION AND LIABILITIES                                                         $5,292,329                $5,472,496
                                                                                             ==========                ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                 CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                                                                   Nine Months Ended September 30,
                                                                                         2001                2000
                                                                                         ----                ----
                                                                                                (in thousands)
<S>                                                                                    <C>                  <C>
OPERATING ACTIVITIES:
   Net Income                                                                          $ 171,251            $ 165,666
   Adjustments for Noncash Items:
      Depreciation and Amortization                                                      129,235              137,055
      Deferred Federal Income Taxes                                                      (50,506)              14,529
      Deferred Investment Tax Credits                                                     (3,905)              (3,905)
   Changes in Certain Current Assets and Liabilities:
      Accounts Receivable (net)                                                            9,894              (30,689)
      Fuel, Materials and Supplies                                                       (15,861)               5,829
      Fuel Recovery                                                                      116,473              (89,733)
      Accounts Payable                                                                   (30,223)              80,539
      Taxes Accrued                                                                      164,131               30,147
      Transmission Coordination Agreement Settlement                                     -                     15,519
   Deferred Property Taxes                                                                (8,063)             -
   Other (net)                                                                             4,257                3,396
                                                                                           -----                -----
           Net Cash Flows From Operating Activities                                      486,683              328,353
                                                                                         -------              -------

INVESTING ACTIVITIES:
      Construction Expenditures                                                         (158,191)            (137,053)
      Other                                                                                 (354)             -
                                                                                            ----              -------
           Net Cash Flows Used For Investing Activities                                 (158,545)            (137,053)
                                                                                        --------             --------

FINANCING ACTIVITIES:
      Issuance of Long-term Debt                                                         -                    149,413
      Retirement of Long-term Debt                                                       -                   (100,000)
      Reacquisition of Long-term Debt                                                    -                    (50,000)
      Reacquisition of Trust Preferred Securities                                        (12,471)              (1,440)
      Change in Advances from Affiliates (net)                                          (211,990)            (123,836)
      Special Deposit for Reacquisitions of Long-term Debt                               -                     50,000
      Dividends Paid on Common Stock                                                    (111,043)            (117,000)
      Dividends Paid on Cumulative Preferred Stock                                          (181)                (188)
                                                                                            ----                 ----
           Net Cash Flows Used For Financing Activities                                 (335,685)            (193,051)
                                                                                        --------             --------

Net Decrease in Cash and Cash Equivalents                                                 (7,547)              (1,751)
Cash and Cash Equivalents at Beginning of Period                                          14,253                7,995
                                                                                          ------                -----
Cash and Cash Equivalents at End of Period                                             $   6,706            $   6,244
                                                                                       =========            =========

Supplemental Disclosure:
Cash  paid  for  interest  net  of  capitalized   amounts  was  $80,612,000  and
$81,211,000  and for income taxes was  $11,939,000  and  $48,141,000 in 2001 and
2000, respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
                COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000

         We have two  businesses:  wholesale  which consists of the  generation,
marketing and trading of  electricity;  and energy  delivery  which  consists of
transmission  and  distribution  services.  We belong to the AEP Power  Pool and
share in the revenues and costs of wholesale  marketing  and trading  activities
conducted on our behalf by the AEP Power Pool.
        Net income increased $25 million or 62% in the third quarter of 2001 due
to the effect of a prior period $25 million  extraordinary  loss.  Income before
extraordinary  item for the third quarter of 2001 was flat. Net income increased
$21 million or 20% and income before extraordinary item increased $22 million or
17% for the year-to-date period, due to the strength and growth of the wholesale
business during the first half of 2001.
        Income statement line items which changed significantly were:
<TABLE>
<CAPTION>
                                                                  Increase (Decrease)
                                                      Third Quarter                    Year-to-Date
                                               (in millions)        %              (in millions)    %
                                               -------------        -              -------------    -
<S>                                                     <C>         <C>                 <C>         <C>
Operating Revenues                                      $337         35                 $1,010       40
Fuel Expense                                              (8)       (15)                    (8)      (5)
Purchased Power Expense                                  343         52                   960        55
Other Operation Expense                                  -           -                     14         9
Maintenance Expense                                       (4)       (20)                    2         4
Depreciation and Amortization                              7         29                    21        28
Taxes Other Than Federal Income Taxes                      5         17                     8         8
Nonoperating Income                                        6        N.M.                    8       N.M.
Extraordinary Loss                                       (25)       N.M.                    1         5

N.M. = Not Meaningful
</TABLE>
        The  significant  increase in revenues  for the quarter is due to an 86%
increase  in trading  volume  partially  offset by lower  wholesale  electricity
prices.  The  significant  year-to-date  increase  is due to a 41%  increase  in
wholesale trading volume and an increase in wholesale  electricity prices due to
changes in market  conditions.  Expansion  of the  wholesale  business'  trading
operation and greater  liquidity in the market place  resulted in an increase in
the number of forward  electricity  purchase and sales  contracts  made in AEP's
traditional  marketing area (up to two  transmission  systems from AEP's service
territory).
        Fuel expense of the  wholesale  business  decreased due to a decrease in
net generation partially offset by an increase in the average unit price of fuel
and the  discontinuance  of deferred fuel accounting  effective  January 1, 2001
because  of  deregulation.  In  2000  fuel  expense  included  charges  for  the
amortization of previously  deferred fuel costs. The amortization was concurrent
with recovery through fuel clause revenues.
        For the quarter the increase in the wholesale  business' purchased power
expense is attributable to an increase in trading volume offset by a decrease in
wholesale  electricity  prices.  For the  year-to-date  period the  increase was
attributable to increases in trading volume and wholesale electricity prices
<PAGE>
        Other  operation  expense  increased  year-to-date  due to  increases in
uncollectible  accounts,  factored customer accounts  receivable  expenses,  the
effect of gains in 2000 from the  disposition  of  emission  allowances,  higher
power trading  expenses and trading  incentive  compensation and energy delivery
severance accruals.
        For the quarter,  maintenance expenses decreased due to boiler overhauls
and maintenance of overhead energy delivery lines completed in the prior period.
        The commencement of the amortization of transition  regulatory assets in
connection  with the transition to customer choice and  market-based  pricing of
electricity under Ohio  deregulation  accounted for the increase in depreciation
and amortization expense.
        The  increase  in taxes  other than  income  taxes is due to a new state
excise tax which produces a larger tax than the gross receipts tax it replaced.
        The increase in nonoperating  income was due to an increase in net gains
from the wholesale  business' trading  transactions  outside of the AEP System's
traditional  marketing area and  speculative  financial  transactions  (options,
futures and swaps).
        In the second quarter of 2001 we recorded an  extraordinary  loss of $26
million  net of tax to  write-off  prepaid  Ohio excise  taxes  stranded by Ohio
deregulation  (see  Note  2).  The  application  of  regulatory  accounting  for
generation  was  discontinued  in September  2000 which resulted in an after tax
extraordinary loss of $25 million.
<PAGE>
<TABLE>
<CAPTION>
                COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                                     Three Months Ended September 30,               Nine Months Ended September 30,
                                                            2001                    2000            2001                     2000
                                                            ----                    ----            ----                     ----
                                                                                     (in thousands)
<S>                                                          <C>                  <C>              <C>                   <C>
OPERATING REVENUES                                           $1,297,704            $960,837        $3,532,372            $2,522,474
                                                             ----------            --------        ----------            ----------

OPERATING EXPENSES:
   Fuel                                                          42,702              50,452           132,100               139,781
   Purchased Power                                            1,003,135             660,438         2,720,906             1,760,551
   Other Operation                                               58,398              57,940           167,456               153,561
   Maintenance                                                   15,254              18,991            53,763                51,915
   Depreciation and Amortization                                 32,352              25,091            95,213                74,531
   Taxes Other Than Federal Income Taxes                         36,473              31,079           101,289                93,640
   Federal Income Taxes                                          32,470              33,284            69,899                70,011
                                                                 ------              ------            ------                ------

           TOTAL OPERATING EXPENSES                           1,220,784             877,275         3,340,626             2,343,990
                                                              ---------             -------         ---------             ---------

OPERATING INCOME                                                 76,920              83,562           191,746               178,484

NONOPERATING INCOME (LOSS)                                        5,269                (683)           11,753                 3,498
                                                                  -----                ----            ------                 -----

INCOME BEFORE INTEREST CHARGES                                   82,189              82,879           203,499               181,982

INTEREST CHARGES                                                 16,871              17,337            53,092                53,634
                                                                 ------              ------            ------                ------

INCOME BEFORE EXTRAORDINARY ITEM                                 65,318              65,542           150,407               128,348

EXTRAORDINARY LOSS - EFFECTS OF
  DEREGULATION - net of tax (Note 2)                            -                   (25,236)          (26,407)              (25,236)
                                                                ------              -------           -------               -------

NET INCOME                                                       65,318               40,306          124,000               103,112

PREFERRED STOCK DIVIDEND   REQUIREMENTS
                                                                    244                  416              847                 1,481
                                                                    ---                  ---              ---                 -----

EARNINGS APPLICABLE TO
  COMMON STOCK                                               $   65,074           $   39,890       $  123,153            $  101,631
                                                             ==========           ==========       ==========            ==========
</TABLE>
<TABLE>
<CAPTION>
                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)

                                                     Three Months Ended September 30,               Nine Months Ended September 30,
                                                            2001                  2000              2001                     2000
                                                            ----                  ----              ----                     ----
                                                                                    (in thousands)
<S>                                                          <C>                   <C>              <C>                     <C>
BALANCE AT BEGINNING OF PERIOD                               $115,243              $261,024         $ 99,069                $246,584
NET INCOME                                                     65,318                40,306          124,000                 103,112
DEDUCTIONS:
  Cash Dividends Declared:
     Common Stock                                              20,738               169,650           62,214                 216,950
    Cumulative Preferred Stock                                    175                   263              700                   1,138
  Capital Stock Expense                                           255                   250              762                     441
                                                                  ---                   ---              ---                     ---
BALANCE AT END OF PERIOD                                     $159,393              $131,167         $159,393                $131,167
                                                             ========              ========         ========                ========

The common  stock of the Company is wholly  owned by AEP. See Notes to Financial
Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                   September 30, 2001          December 31, 2000
                                                                                   ------------------          -----------------
                                                                                                   (in thousands)
<S>                                                                                        <C>                         <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                              $1,576,522                  $1,564,254
   Transmission                                                                               396,871                     360,302
   Distribution                                                                             1,142,740                   1,096,365
   General                                                                                    146,720                     156,534
   Construction Work in Progress                                                               78,922                      89,339
                                                                                               ------                      ------
        Total Electric Utility Plant                                                        3,341,775                   3,266,794
   Accumulated Depreciation and Amortization                                                1,358,623                   1,299,697
                                                                                            ---------                   ---------
NET ELECTRIC UTILITY PLANT                                                                  1,983,152                   1,967,097
                                                                                            ---------                   ---------

OTHER PROPERTY AND INVESTMENTS                                                                 41,944                      39,848
                                                                                               ------                      ------

LONG-TERM ENERGY TRADING CONTRACTS                                                            227,288                     172,167
                                                                                              -------                     -------

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                   23,019                      11,600
   Accounts Receivable:
      Customers                                                                                52,491                      73,711
      Affiliated Companies                                                                     77,952                      49,591
      Miscellaneous                                                                            14,920                      18,807
      Allowance for Uncollectible Accounts                                                       (659)                       (659)
   Fuel - at average cost                                                                       22,137                     13,126
   Materials and Supplies - at average cost                                                     38,063                     38,097
   Accrued Utility Revenues                                                                      4,509                      9,638
   Energy Trading Contracts                                                                    562,351                  1,085,989
   Prepayments and Other Current Assets                                                         30,919                     46,735
                                                                                                ------                     ------
TOTAL CURRENT ASSETS                                                                           825,702                  1,346,635
                                                                                               -------                  ---------

REGULATORY ASSETS                                                                              266,273                    291,553
                                                                                               -------                    -------

DEFERRED CHARGES                                                                                26,769                     77,634
                                                                                                ------                     ------

TOTAL ASSETS                                                                                $3,371,128                 $3,894,934
                                                                                            ==========                 ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                   September 30, 2001          December 31, 2000
                                                                                   ------------------          -----------------
                                                                                                    (in thousands)

CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common Stock - No Par Value:
      Authorized - 24,000,000 Shares
<S>                                                                                         <C>                       <C>
      Outstanding - 16,410,426 Shares                                                       $   41,026                $   41,026
   Paid-in Capital                                                                             574,115                   573,354
   Retained Earnings                                                                           159,393                    99,069
                                                                                               -------                    ------
        Total Common Shareowner's Equity                                                       774,534                   713,449
   Cumulative Preferred Stock - Subject to Mandatory Redemption                                 10,000                    15,000
   Long-term Debt                                                                              623,579                   899,615
                                                                                               -------                   -------

           TOTAL CAPITALIZATION                                                              1,408,113                 1,628,064
                                                                                             ---------                 ---------

OTHER NONCURRENT LIABILITIES                                                                    39,175                    47,584
                                                                                                ------                    ------

CURRENT LIABILITIES:
   Affiliated Long-term Debt Due Within One Year                                               200,000                   -
   Advances from Affiliates                                                                    140,154                    88,732
   Accounts Payable - General                                                                   85,911                    89,846
   Accounts Payable - Affiliated Companies                                                      83,276                    72,493
   Taxes Accrued                                                                               134,068                   162,904
   Interest Accrued                                                                             15,845                    13,369
   Energy Trading Contracts                                                                    529,145                 1,115,967
   Other                                                                                        45,437                    60,701
                                                                                                ------                    ------

           TOTAL CURRENT LIABILITIES                                                         1,233,836                 1,604,012
                                                                                             ---------                 ---------

DEFERRED INCOME TAXES                                                                          435,290                   422,759
                                                                                               -------                   -------

DEFERRED INVESTMENT TAX CREDITS                                                                 38,726                    41,234
                                                                                                ------                    ------

REGULATORY LIABILITIES AND DEFERRED CREDITS                                                     20,006                    12,861
                                                                                                ------                    ------

LONG-TERM ENERGY TRADING CONTRACTS                                                             195,982                   138,420
                                                                                               -------                   -------

CONTINGENCIES (Note 8)

TOTAL CAPITALIZATION AND LIABILITIES                                                        $3,371,128                $3,894,934
                                                                                            ==========                ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                                                    Nine Months Ended September 30,
                                                                                                        2001                2000
                                                                                                        ----                ----
                                                                                                            (in thousands)
<S>                                                                                                    <C>               <C>
OPERATING ACTIVITIES:
   Net Income                                                                                          $124,000           $103,112
   Adjustments for Noncash Items:
      Depreciation and Amortization                                                                      78,739             74,945
      Amortization of Transition Assets                                                                  17,455             -
      Deferred Federal Income Taxes                                                                      23,527              7,945
      Deferred Investment Tax Credits                                                                    (2,508)            (2,541)
      Amortization of Deferred Property Taxes                                                            53,168             50,130
      Extraordinary Loss                                                                                 26,407             25,236
   Changes in Certain Current Assets and Liabilities:
      Accounts Receivable (net)                                                                          (3,254)             3,511
      Fuel, Materials and Supplies                                                                       (8,977)               407
      Accrued Utility Revenues                                                                            5,129             40,080
      Prepayments and Other Current Assets                                                               15,816             (3,500)
      Accounts Payable                                                                                    6,848             87,706
      Taxes Accrued                                                                                     (28,836)           (35,879)
      Interest Accrued                                                                                    2,476             10,505
   Energy Trading Contracts (net)                                                                       (60,743)            (8,619)
   Other (net)                                                                                          (40,658)            (1,757)
                                                                                                        -------             ------
           Net Cash Flows From Operating Activities                                                     208,589            351,281
                                                                                                        -------            -------

INVESTING ACTIVITIES:
      Construction Expenditures                                                                        (110,631)           (91,122)
      Proceeds from Sale of Property                                                                     10,673                992
                                                                                                         ------                ---
           Net Cash Flows Used For Investing Activities                                                 (99,958)           (90,130)
                                                                                                        --------           -------

FINANCING ACTIVITIES:
      Proceeds from Issuance of Affiliated Long-term Debt                                               200,000            -
      Change in Advances from Affiliates (net)                                                           51,422             43,970
      Change in Short-term Debt (net)                                                                   -                  (45,500)
      Retirement of Cumulative Preferred Stock                                                           (5,000)           (10,000)
      Retirement of Long-term Debt                                                                     (280,632)           (25,274)
      Dividends Paid on Common Stock                                                                    (62,214)          (216,950)
      Dividends Paid on Cumulative Preferred Stock                                                         (788)            (1,312)
                                                                                                           ----             ------
           Net Cash Flows Used For Financing Activities                                                 (97,212)          (255,066)
                                                                                                        -------           --------

Net Increase in Cash and Cash Equivalents                                                                11,419              6,085
Cash and Cash Equivalents at Beginning of Period                                                         11,600              5,107
                                                                                                         ------              -----
Cash and Cash Equivalents at End of Period                                                             $ 23,019          $  11,192
                                                                                                       ========          =========

Supplemental Disclosure:
Cash  paid  for  interest  net  of  capitalized   amounts  was  $49,126,000  and
$40,411,000  and for income taxes was  $17,579,000  and  $42,007,000 in 2001 and
2000,  respectively.  Noncash  acquisitions under capital leases were $1,019,000
and $4,043,000 in 2001 and 2000, respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
                 INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000

                 We have two businesses: wholesale which consists of generation,
        regulated  retail power sales and wholesale  power marketing and trading
        of electricity;  and energy delivery which consists of transmission  and
        distribution  services. We belong to the AEP Power Pool and share in the
        revenues  and  costs  of  wholesale  marketing  and  trading  activities
        conducted on our behalf by the AEP Power Pool.
               Net income  increased $10 million in the quarter and $145 million
        in the  year-to-date  period  primarily  due to the return to service of
        both of I&M's Cook Plant nuclear units in June and December 2000.
               Income statement line items which changed significantly were:
<TABLE>
<CAPTION>
                                                                         Increase (Decrease)
                                                            Third Quarter                      Year-to-Date
                                                         (in millions)         %          (in millions)           %
                                                         -------------         -          -------------           -
<S>                                                              <C>        <C>                 <C>            <C>
        Operating Revenues                                       $342        32                 $1,173          42
        Fuel Expense                                                3         6                     36          24
        Purchased Power Expense                                   360        51                  1,073          56
        Other Operation Expense                                   (17)      (12)                   (94)        (22)
        Maintenance Expense                                       (22)      (40)                   (73)        (44)
        Depreciation and Amortization                               2         6                      7           6
        Taxes Other Than Federal Income Taxes                       2        14                      9          18
        Federal Income Taxes                                        3        37                     72         N.M.
        Nonoperating Income                                         2       147                      8         168
        Interest Charges                                            1         2                      5           7

        N.M. = Not Meaningful
</TABLE>
                  Operating  revenues  for the third  quarter  increased  due to
         increased wholesale sales while average wholesale prices declined.  The
         significant  increase in operating revenues in the year-to-date  period
         resulted from increased  wholesale  volumes and prices.  I&M's share of
         the AEP System's sales to and forward trades with other utility systems
         and power  marketers and sales to the AEP Power Pool rose in 2001.  The
         number  of  forward   electricity   contracts   made  in  AEP  System's
         traditional marketing area (up to two transmission systems from the AEP
         System's  service  territory)  grew due to the expansion of our trading
         operation and increased liquidity in the markets.  Changes in wholesale
         prices  reflect  market  conditions.  With the return to service of the
         nuclear units in 2000, I&M's available  generation  increased resulting
         in additional wholesale power sales to the AEP Power Pool in 2001.
                 Fuel expense  increased  primarily due to increased  generation
        reflecting  the return to service of the  nuclear  units  following  the
        extended outage.
<PAGE>
                 The increase in purchased  power expense  resulted  mainly from
        increases  in  wholesale  prices  and  sales and  trading  volume in the
        year-to-date  period.  During  the third  quarter,  a decline in average
        prices, reflecting market conditions, partly offset the volume increase.
                 Other operation and maintenance  expenses  decreased  primarily
        due to the cessation of expenses related to work for the 2000 restart of
        the Cook Plant units.
                 The increase in depreciation and amortization  charges reflects
        increased generation and distribution plant investments and amortization
        of deferred merger costs.
                 Taxes other than federal  income  taxes and federal  income tax
        expense  attributable to operations increased primarily due to increases
        in pre-tax operating income.
                 The increase in nonoperating income reflects an increase in net
        gains from trading  transactions  outside the AEP  System's  traditional
        marketing area and speculative financial transactions (options,  futures
        and swaps).
                 Interest  charges  increased  due to lower  amounts of interest
        being capitalized as part of plant construction costs.
<PAGE>
<TABLE>
<CAPTION>
                 INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                             Three Months Ended September 30,               Nine Months Ended September 30,
                                                   2001                   2000              2001                     2000
                                                   ----                   ----              ----                     ----
                                                                            (in thousands)

<S>                                                <C>                  <C>                   <C>                   <C>
OPERATING REVENUES                                 $1,402,178           $1,060,654            $3,953,590            $2,780,510
                                                   ----------           ----------            ----------            ----------

OPERATING EXPENSES:
   Fuel                                                59,535               56,338               183,999               148,042
   Purchased Power                                  1,070,889              710,605             2,978,930             1,905,531
   Other Operation                                    122,809              139,375               330,369               424,254
   Maintenance                                         31,913               53,596                91,594               164,821
   Depreciation and Amortization                       41,172               38,951               122,735               115,661
   Taxes Other Than Federal Income Taxes               19,574               17,156                60,222                51,152
   Federal Income Tax Expense (Credit)                 11,777                8,577                41,194               (31,157)
                                                       ------                -----                ------               -------

           TOTAL OPERATING EXPENSES                 1,357,669            1,024,598             3,809,043             2,778,304
                                                    ---------            ---------             ---------             ---------

OPERATING INCOME                                       44,509               36,056               144,547                 2,206

NONOPERATING INCOME                                     3,320                1,344                12,176                 4,546
                                                        -----                -----                ------                 -----

INCOME BEFORE INTEREST CHARGES                         47,829               37,400               156,723                 6,752

INTEREST CHARGES                                       22,765               22,210                71,922                67,296
                                                       ------               ------                ------                ------

NET INCOME (LOSS)                                      25,064               15,190                84,801               (60,544)

PREFERRED STOCK   DIVIDENDREQUIREMENTS
                                                        1,155                1,156                 3,466                 3,469
                                                        -----                -----                 -----                 -----

EARNINGS (LOSS) APPLICABLE TO   COMMON STOCK
                                                   $   23,909             $ 14,034            $   81,335            $  (64,013)
                                                   ==========             ========            ==========            ==========
</TABLE>
<TABLE>
<CAPTION>
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (UNAUDITED)

                                                     Three Months Ended September 30,               Nine Months Ended September 30,
                                                           2001                   2000              2001                     2000
                                                           ----                   ----              ----                     ----
                                                                                    (in thousands)
<S>                                                         <C>                    <C>               <C>                   <C>
NET INCOME (LOSS)                                           $25,064                $15,190           $84,801               $(60,544)

OTHER COMPREHENSIVE INCOME (LOSS)
    Cash Flow Interest Rate Hedge                              (878)                -                (3,700)                 -
                                                               ----                 ------           ------                  ------

COMPREHENSIVE INCOME (LOSS)                                 $24,186                $15,190          $81,101                $(60,544)
                                                            =======                =======          =======                ========

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

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                 INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)

                                           Three Months Ended September 30,               Nine Months Ended September 30,
                                                 2001                    2000             2001                     2000
                                                 ----                    ----             ----                     ----
                                                                            (in thousands)

<S>                                                 <C>                   <C>              <C>                     <C>
BALANCE AT BEGINNING OF PERIOD                      $60,869               $60,930          $ 3,443                 $166,389

NET INCOME (LOSS)                                    25,064                15,190           84,801                  (60,544)

DEDUCTIONS:
  Cash Dividends Declared:
     Common Stock                                     -                     -                -                       26,290
    Cumulative Preferred Stock                        1,121                 -                3,365                    3,368
  Capital Stock Expense                                  34                    34              101                      101
                                                         --                    --              ---                      ---

BALANCE AT END OF PERIOD                            $84,778               $76,086          $84,778                 $ 76,086
                                                    =======               =======          =======                 ========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                 INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                    September 30, 2001         December 31, 2000
                                                                                    ------------------         -----------------
                                                                                                    (in thousands)
<S>                                                                                         <C>                        <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                               $2,751,287                 $2,708,436
   Transmission                                                                                953,699                    945,709
   Distribution                                                                                888,851                    863,736
   General (including nuclear fuel)                                                            216,682                    257,152
   Construction Work in Progress                                                                83,809                     96,440
                                                                                                ------                     ------
        Total Electric Utility Plant                                                         4,894,328                  4,871,473
   Accumulated Depreciation and Amortization                                                 2,402,447                  2,280,521
                                                                                             ---------                  ---------
NET ELECTRIC UTILITY PLANT                                                                   2,491,881                  2,590,952
                                                                                             ---------                  ---------

NUCLEAR DECOMMISSIONING AND SPENT NUCLEAR FUEL DISPOSAL   TRUST FUNDS
                                                                                               816,169                    778,720
                                                                                               -------                    -------

LONG-TERM ENERGY TRADING CONTRACTS                                                             253,571                    194,947
                                                                                               -------                    -------

OTHER PROPERTY AND INVESTMENTS                                                                 130,955                    131,417
                                                                                               -------                    -------

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                    27,398                     14,835
   Accounts Receivable:
      Customers                                                                                 69,668                    106,832
      Affiliated Companies                                                                      47,711                     48,706
      Miscellaneous                                                                             30,717                     27,491
      Allowance for Uncollectible Accounts                                                        (734)                      (759)
   Fuel - at average cost                                                                       27,926                     16,532
   Materials and Supplies - at average cost                                                     89,493                     84,471
   Energy Trading Contracts                                                                    637,645                  1,230,041
   Prepayments                                                                                   7,450                      6,066
                                                                                                 -----                      -----
TOTAL CURRENT ASSETS                                                                           937,274                  1,534,215
                                                                                               -------                  ---------

REGULATORY ASSETS                                                                              466,752                    552,140
                                                                                               -------                    -------

DEFERRED CHARGES                                                                                24,298                     36,156
                                                                                                ------                     ------

TOTAL ASSETS                                                                                $5,120,900                 $5,818,547
                                                                                            ==========                 ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                 INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                    September 30, 2001         December 31, 2000
                                                                                    ------------------         -----------------
                                                                                                         (in thousands)
<S>                                                                                         <C>                        <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common Stock - No Par Value:
      Authorized - 2,500,000 Shares
      Outstanding - 1,400,000 Shares                                                        $   56,584                 $   56,584
   Paid-in Capital                                                                             733,173                    733,072
   Accumulated Other Comprehensive Income (Loss)                                                (3,700)                     -
   Retained Earnings                                                                            84,778                      3,443
                                                                                                ------                      -----
        Total Common Shareowner's Equity                                                       870,835                    793,099
   Cumulative Preferred Stock:
      Not Subject to Mandatory Redemption                                                        8,736                      8,736
      Subject to Mandatory Redemption                                                           64,945                     64,945
   Long-term Debt                                                                            1,152,513                  1,298,939
                                                                                             ---------                  ---------

           TOTAL CAPITALIZATION                                                              2,097,029                  2,165,719
                                                                                             ---------                  ---------

OTHER NONCURRENT LIABILITIES:
   Nuclear Decommissioning                                                                     587,398                    560,628
   Other                                                                                        96,523                    108,600
                                                                                                ------                    -------

TOTAL OTHER NONCURRENT LIABILITIES                                                             683,921                    669,228
                                                                                               -------                    -------

CURRENT LIABILITIES:
   Long-term Debt Due Within One Year                                                          200,000                     90,000
   Advances from Affiliates                                                                    214,420                    253,582
   Accounts Payable:
      General                                                                                   87,769                    119,472
      Affiliated Companies                                                                      45,670                     75,486
   Taxes Accrued                                                                               116,196                     68,416
   Interest Accrued                                                                             24,001                     21,639
   Rent Accrued - Rockport Plant Unit 2                                                         23,427                      4,963
   Obligations Under Capital Leases                                                              9,796                    100,848
   Energy Trading Contracts                                                                    591,679                  1,275,097
   Other                                                                                        79,827                     92,107
                                                                                                ------                     ------

           TOTAL CURRENT LIABILITIES                                                         1,392,785                  2,101,610
                                                                                             ---------                  ---------

DEFERRED INCOME TAXES                                                                          465,565                    487,945
                                                                                               -------                    -------

DEFERRED INVESTMENT TAX CREDITS                                                                108,169                    113,773
                                                                                               -------                    -------

DEFERRED GAIN ON SALE AND LEASEBACK -
  ROCKPORT PLANT UNIT 2                                                                         78,519                     81,299
                                                                                                ------                     ------

LONG-TERM ENERGY TRADING CONTRACTS                                                             214,683                    156,736
                                                                                               -------                    -------

DEFERRED CREDITS                                                                                80,229                     42,237
                                                                                                ------                     ------

CONTINGENCIES (Note 8)

                TOTAL CAPITALIZATION AND LIABILITIES                                        $5,120,900                 $5,818,547
                                                                                            ==========                 ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                 INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                                           Nine Months Ended September 30,
                                                                                            2001                    2000
                                                                                            ----                    ----
                                                                                                   (in thousands)
<S>                                                                                           <C>                 <C>
OPERATING ACTIVITIES:
   Net Income (Loss)                                                                          $  84,801           $  (60,544)
   Adjustments for Noncash Items:
      Depreciation and Amortization                                                             124,993              122,345
      Amortization (Deferral) of Incremental Nuclear Refueling Outage Expenses (net)               (224)               4,830
      Unrecovered Fuel and Purchased Power Costs                                                 28,126               28,126
      Amortization of Nuclear Outage Costs                                                       30,000               30,000
      Deferred Federal Income Taxes                                                              (6,517)             (25,619)
      Deferred Investment Tax Credits                                                            (5,604)              (5,660)
   Changes in Certain Current Assets and Liabilities:
      Accounts Receivable (net)                                                                  34,908                23,303
      Fuel, Materials and Supplies                                                              (16,416)               (6,304)
      Accrued Utility Revenues                                                                  -                      44,428
      Accounts Payable                                                                          (61,519)               47,236
      Taxes Accrued                                                                              47,780               (48,970)
      Rent Accrued - Rockport Plant Unit 2                                                       18,464                18,464
   Net Change in Energy Trading Contracts                                                       (91,699)               (4,039)
   Regulatory Liability - Trading Gains                                                          39,040               (10,143)
   Other (net)                                                                                   31,283               (29,211)
                                                                                                 ------               -------
           Net Cash Flows From Operating Activities                                             257,416               128,242
                                                                                                -------               -------

INVESTING ACTIVITIES:
      Construction Expenditures                                                                 (65,312)             (129,799)
      Buyout of Nuclear Fuel Leases                                                             (92,616)                -
      Other                                                                                         524                   587
                                                                                                    ---                   ---
           Net Cash Flows Used For Investing Activities                                        (157,404)             (129,212)
                                                                                               --------              --------

FINANCING ACTIVITIES:
      Issuance of Long-term Debt                                                                -                     199,220
      Retirement of Long-term Debt                                                              (44,922)              (48,000)
      Retirement of Cumulative Preferred Stock                                                  -                        (314)
      Change in Short-term Debt (net)                                                           -                    (224,262)
      Change in Advances from Affiliates (net)                                                  (39,162)              113,423
      Dividends Paid on Common Stock                                                            -                     (26,290)
      Dividends Paid on Cumulative Preferred Stock                                               (3,365)               (3,368)
                                                                                                 ------                ------
           Net Cash Flows From (Used For) Financing Activities                                  (87,449)               10,409
                                                                                                -------                ------

Net Increase in Cash and Cash Equivalents                                                        12,563                 9,439
Cash and Cash Equivalents at Beginning of Period                                                 14,835                 3,863
                                                                                                 ------                 -----
Cash and Cash Equivalents at End of Period                                                    $  27,398             $  13,302
                                                                                              =========             =========

Supplemental Disclosure:
Cash  paid  for  interest  net  of  capitalized   amounts  was  $67,657,000  and
$57,466,000  and for income taxes was  $13,079,000  and  $43,675,000 in 2001 and
2000,  respectively.  Noncash  acquisitions under capital leases were $1,023,000
and $19,134,000 in 2001 and 2000, respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
                             KENTUCKY POWER COMPANY
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000

         We have  two  businesses:  wholesale,  which  consists  of  generation,
regulated  retail  power  sales and  wholesale  power  marketing  and trading of
electricity;   and  energy   delivery,   which  consists  of  transmission   and
distribution services. We belong to the AEP Power Pool and share in the revenues
and costs of wholesale marketing and trading activities  conducted on our behalf
by the AEP Power Pool.
        Net  income  decreased  $1.4  million  or 21% for the  quarter  and $2.1
million or 12% year-to-date due to a decline in operating  income.  This decline
was primarily  attributable  to a slowing economy and reduced  wholesale  energy
margins. Income statement line items which changed significantly were:
<TABLE>
<CAPTION>
                                                                   Increase (Decrease)
                                                    Third Quarter                     Year-to-Date
                                                   (in millions)        %           (in millions)           %
                                                   -------------        -           -------------           -
<S>                                                      <C>        <C>                   <C>            <C>
Operating Revenues                                       $126.5       35                  $450.7          48
Fuel Expense                                               (5.8)     (25)                   (5.0)         (9)
Purchased Power Expense                                   131.9       46                   456.3          62
Other Operation Expense                                     1.3        9                     8.0          22
Maintenance Expense                                        (0.1)      (2)                   (4.3)        (21)
Depreciation and Amortization Expense                       0.3        4                     1.2           5
Taxes Other Than Federal Income Taxes                       0.4       17                     1.8          22
Federal Income Taxes                                       (0.4)     (11)                   (1.9)        (23)
Nonoperating Income                                        (0.6)    (234)                    1.5         176
Interest Charges                                           (0.3)      (4)                   (1.6)         (7)
</TABLE>
        Increases  in  operating  revenues  are a result of  increases  in power
trading  activity.  Revenues from sales to and forward trades with other utility
systems and power marketers rose by 50% and 69% for the quarter and year-to-date
periods,  respectively.  The number of forward electricity contracts grew due to
the expansion of trading  operations and increased  liquidity in the markets.  A
downward trend in wholesale prices reflected market conditions.
        Fuel  expense  decreased  as a result of credits from profits on trading
power. Under the Kentucky  commission's fuel clause mechanism,  a portion of the
profits on wholesale transactions are shared with the customers. This sharing is
recognized through credits to fuel expense thus reducing overall fuel expense.
        Purchased  power  expense for the  wholesale  business  increased due to
additional purchases to support the increased sales and trading volume.
        Increases  in other  operation  expense for the quarter were a result of
increased  trading  incentive   compensation  expense  and  charges  related  to
severance  pay for  distribution  employees.  Increases  in  year-to-date  other
operation expense are primarily attributable to trader compensation expenses and
decreases in AEP transmission  equalization  credits.  Under the AEP East Region
Transmission  Agreement,  KPCo and certain affiliates share the costs associated
with the ownership of their  transmission  system based upon each company's peak
demand and  investment.  An  increase  in KPCo's  peak  demand  relative  to its
affiliates'  peak demand was the main reason for the decline in the transmission
<PAGE>
equalization credits. Other changes contributing to increases in other operation
expense  include an  increase  in medical  insurance  rates,  and  increases  in
accounts  receivable  factoring costs stemming from nine months activity in 2001
versus three months in 2000 when the program was implemented.
        Lower maintenance expense is a result of significant planned maintenance
outages  incurred  at the Big Sandy  Plant in year  2000 for  which  there is no
comparable activity in the current year.
        Depreciation and amortization expense increased as a result of additions
to property,  plant and equipment and the resultant  increase in the depreciable
basis.
        Federal  income tax on operations  decreased due to a decline in pre-tax
income.
        The quarter to date  decrease in  nonoperating  income was due to losses
resulting from power trading  activity.  The quarterly  decrease is mitigated by
year-to-date  net gains for trading activity and other  non-regulated  financial
market investments.
        Interest  charges  declined due to lower  outstanding  debt balances and
lower interest rates in 2001.
<PAGE>
<TABLE>
<CAPTION>
                             KENTUCKY POWER COMPANY
                              STATEMENTS OF INCOME
                                   (UNAUDITED)

                                           Three Months Ended September 30,               Nine Months Ended September 30,
                                                2001                      2000                2001                   2000
                                                ----                      ----                ----                   ----
                                                                             (in thousands)

<S>                                               <C>                      <C>               <C>                     <C>
OPERATING REVENUES                                $485,820                 $359,296          $1,384,108              $933,410
                                                  --------                 --------          ----------              --------

OPERATING EXPENSES:
   Fuel                                             17,581                   23,366              52,955                58,039
   Purchased Power                                 420,402                  288,479           1,196,180               739,864
   Other Operation                                  15,430                   14,117              44,628                36,604
   Maintenance                                       5,984                    6,098              16,598                20,903
   Depreciation and Amortization                     8,163                    7,828              24,270                23,107
   Taxes Other Than Federal Income Taxes             2,802                    2,387               9,638                 7,880
   Federal Income Taxes                              2,871                    3,231               6,284                 8,210
                                                     -----                    -----               -----                 -----

           TOTAL OPERATING EXPENSES                473,233                  345,506           1,350,553               894,607
                                                   -------                  -------           ---------               -------

OPERATING INCOME                                    12,587                   13,790              33,555                38,803

NONOPERATING INCOME (LOSS)                           (326)                      243               2,392                   868
                                                     ----                       ---               -----                   ---

INCOME BEFORE INTEREST CHARGES                      12,261                   14,033              35,947                39,671

INTEREST CHARGES                                     6,949                    7,272              20,818                22,409
                                                     -----                    -----              ------                ------

NET INCOME                                        $  5,312                 $  6,761            $ 15,129              $ 17,262
                                                  ========                 ========            ========              ========
</TABLE>
<TABLE>
<CAPTION>
                       STATEMENTS OF COMPREHENSIVE INCOME
                                   (UNAUDITED)

                                                Three Months Ended September 30,               Nine Months Ended September 30,
                                                     2001                      2000                2001                   2000
                                                     ----                      ----                ----                   ----
                                                                                   (in thousands)
<S>                                                  <C>                        <C>              <C>                    <C>
NET INCOME                                           $5,312                     $6,761           $15,129                $17,262

OTHER COMPREHENSIVE INCOME (LOSS)
Cash Flow Interest Rate Hedge                          (618)                    -                 (2,040)                -
                                                       ----                    -------            ------                -------

COMPREHENSIVE INCOME                                 $4,694                     $6,761           $13,089                $17,262
                                                     ======                     ======           =======                =======

The common stock of KPCo is wholly owned by AEP.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             KENTUCKY POWER COMPANY
                         STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)

                                    Three Months Ended September 30,               Nine Months Ended September 30,
                                         2001                      2000            2001                     2000
                                         ----                      ----            ----                     ----
                                                                     (in thousands)
<S>                                        <C>                     <C>             <C>                      <C>
BALANCE AT BEGINNING OF PERIOD             $52,208                 $62,431         $57,513                  $67,110

NET INCOME                                   5,312                   6,761          15,129                   17,262

CASH DIVIDENDS DECLARED:
     Common Stock                            7,561                   7,590          22,683                   22,770
                                             -----                   -----          ------                   ------

BALANCE AT END OF PERIOD                   $49,959                 $61,602         $49,959                  $61,602
                                           =======                 =======         =======                  =======

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             KENTUCKY POWER COMPANY
                                 BALANCE SHEETS
                                   (UNAUDITED)

                                                                                    September 30, 2001         December 31, 2000
                                                                                    ------------------         -----------------
                                                                                                         (in thousands)
<S>                                                                                         <C>                        <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                               $  270,996                 $  271,107
   Transmission                                                                                370,373                    360,563
   Distribution                                                                                398,792                    387,499
   General                                                                                      65,021                     67,476
   Construction Work in Progress                                                                15,059                     16,419
                                                                                                ------                     ------
        Total Electric Utility Plant                                                         1,120,241                  1,103,064
   Accumulated Depreciation and Amortization                                                   377,938                    360,648
                                                                                               -------                    -------
NET ELECTRIC UTILITY PLANT                                                                     742,303                    742,416
                                                                                               -------                    -------

OTHER PROPERTY AND INVESTMENTS                                                                   6,894                      6,559
                                                                                                 -----                      -----

LONG-TERM ENERGY TRADING CONTRACTS                                                              92,242                     76,657
                                                                                                ------                     ------

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                     7,909                      2,270
   Accounts Receivable:
      Customers                                                                                 21,684                     34,555
      Affiliated Companies                                                                      22,008                     22,119
      Miscellaneous                                                                              4,119                      6,419
      Allowance for Uncollectible Accounts                                                        (278)                      (282)
   Fuel - at average cost                                                                        7,521                      4,760
   Materials and Supplies - at average cost                                                     15,898                     15,408
   Accrued Utility Revenues                                                                      2,215                      6,500
   Energy Trading Contracts                                                                    226,116                    483,537
   Prepayments and Other                                                                         1,047                        766
                                                                                                 -----                        ---
TOTAL CURRENT ASSETS                                                                           308,239                    576,052
                                                                                               -------                    -------

REGULATORY ASSETS                                                                               97,757                     98,515
                                                                                                ------                     ------

DEFERRED CHARGES                                                                                 9,816                     11,817
                                                                                                 -----                     ------

TOTAL ASSETS                                                                                $1,257,251                 $1,512,016
                                                                                            ==========                 ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             KENTUCKY POWER COMPANY
                                 BALANCE SHEETS
                                   (UNAUDITED)


                                                                                      September 30, 2001       December 31, 2000
                                                                                      ------------------       -----------------
                                                                                                         (in thousands)
<S>                                                                                          <C>                     <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common Stock - $50 Par Value:
      Authorized - 2,000,000 Shares
      Outstanding - 1,009,000 Shares                                                          $  50,450               $  50,450
   Paid-in Capital                                                                              158,750                 158,750
   Accumulated Other Comprehensive Income (Loss)                                                 (2,040)                 -
   Retained Earnings                                                                             49,959                  57,513
                                                                                                 ------                  ------
        Total Common Shareowner's Equity                                                        257,119                 266,713
   Long-term Debt                                                                               246,041                 270,880
   Long-term Debt - Affiliated Company                                                           75,000                 -
                                                                                                 ------                 -

           TOTAL CAPITALIZATION                                                                 578,160                 537,593
                                                                                                -------                 -------

OTHER NONCURRENT LIABILITIES                                                                     13,075                  18,348
                                                                                                 ------                  ------

CURRENT LIABILITIES:
   Long-term Debt Due Within One Year                                                            25,000                  60,000
   Advances from Affiliates                                                                      64,246                  47,636
   Accounts Payable:
      General                                                                                    31,438                  32,043
      Affiliated Companies                                                                       23,673                  37,506
   Customer Deposits                                                                              5,290                   4,389
   Taxes Accrued                                                                                  7,402                  11,885
   Interest Accrued                                                                               6,873                   5,610
   Energy Trading Contracts                                                                     216,755                 496,884
   Other                                                                                         17,514                  14,517
                                                                                                 ------                  ------

           TOTAL CURRENT LIABILITIES                                                            398,191                 710,470
                                                                                                -------                 -------

DEFERRED INCOME TAXES                                                                           174,639                 165,935
                                                                                                -------                 -------

DEFERRED INVESTMENT TAX CREDITS                                                                  10,767                  11,656
                                                                                                 ------                  ------

LONG-TERM ENERGY TRADING CONTRACTS                                                               78,802                  61,632
                                                                                                 ------                  ------

DEFERRED CREDITS                                                                                  3,617                   6,382
                                                                                                  -----                   -----

CONTINGENCIES (Note 8)

TOTAL CAPITALIZATION AND LIABILITIES                                                         $1,257,251              $1,512,016
                                                                                             ==========              ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             KENTUCKY POWER COMPANY
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                                                                                    Nine Months Ended September 30,
                                                                                                        2001                   2000
                                                                                                        ----                   ----
                                                                                                              (in thousands)
<S>                                                                                                 <C>                   <C>
OPERATING ACTIVITIES:
   Net Income                                                                                       $  15,129             $ 17,262
   Adjustments for Noncash Items:
      Depreciation and Amortization                                                                    24,270               23,112
      Deferred Federal Income Taxes                                                                     9,644                4,081
      Deferred Investment Tax Credits                                                                    (889)                (894)
      Amortization of Deferred Property Taxes                                                           4,299                4,157
      Deferred Fuel Costs (net)                                                                        (2,708)               4,430
   Changes in Certain Current Assets and Liabilities:
      Accounts Receivable (net)                                                                        15,278               (8,128)
      Fuel, Materials and Supplies                                                                     (3,251)               5,718
      Accrued Utility Revenues                                                                          4,285               13,737
      Accounts Payable                                                                                (14,438)              32,763
      Taxes Accrued                                                                                    (4,483)              (1,323)
   Net Change in Energy Trading Contracts                                                             (21,123)              (2,171)
   Other (net)                                                                                         (2,889)              (5,069)
                                                                                                       ------               ------
           Net Cash Flows From Operating Activities                                                    23,124               87,675
                                                                                                       ------               ------

INVESTING ACTIVITIES:
      Construction Expenditures                                                                       (26,628)             (23,765)
      Proceeds from Sales of Property                                                                     216                -
                                                                                                          ---                -----
           Net Cash Flow Used for Investing Activities                                                (26,412)             (23,765)
                                                                                                      -------              -------

FINANCING ACTIVITIES:
      Issuance of Long-term Debt - Affiliated Company                                                  75,000              -
      Retirement of Long-term Debt                                                                    (60,000)             (25,000)
      Change in Short-term Debt (net)                                                                 -                    (39,665)
      Change in Advances from Affiliates (net)                                                         16,610               23,863
      Dividends Paid                                                                                  (22,683)             (22,770)
                                                                                                      -------              -------
           Net Cash Flows From (Used For) Financing Activities                                          8,927              (63,572)
                                                                                                        -----              -------

Net Increase in Cash and Cash Equivalents                                                               5,639                  338
Cash and Cash Equivalents at Beginning of Period                                                        2,270                  674
                                                                                                        -----                  ---
Cash and Cash Equivalents at End of Period                                                           $  7,909             $  1,012
                                                                                                     ========             ========

Supplemental Disclosure:
Cash  paid  for  interest  net  of  capitalized   amounts  was  $18,899,000  and
$19,776,000 and for income taxes was $6,011,000 and $5,167,000 in 2001 and 2000,
respectively.  Noncash  acquisitions  under  capital  leases were  $817,000  and
$2,440,000 in 2001 and 2000, respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
                       OHIO POWER COMPANY AND SUBSIDIARIES
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000

         We have two  businesses:  wholesale  which consists of the  generation,
marketing and trading of  electricity;  and energy  delivery  which  consists of
transmission  and  distribution  services.  We belong to the AEP Power  Pool and
share in the revenues and costs of wholesale  marketing  and trading  activities
conducted on our behalf by the AEP Power Pool.
         Net income  decreased  $7 million or 12% for the third  quarter of 2001
and $47 million or 29% for the year-to-date  period.  We recorded  extraordinary
losses in the second  quarter of 2001 and third  quarter of 2000 for the effects
of deregulation.  Income before  extraordinary  item decreased by $26 million or
33% for the quarter and $45 million or 25% in the year-to-date period. A decline
in wholesale  business  performance  and the  implementation  of customer choice
account for the reduction in the  quarter's  earnings.  In  connection  with the
start of  customer  choice  on  January  1,  2001,  the  generation  portion  of
residential  rates  was  reduced  by  5%  and  the  amortization  of  transition
regulatory assets began.  Although  performance of our wholesale  business is up
for the  year-to-date  period,  the  implementation  of customer  choice  caused
earnings to decline year-to-date.
         Income statement line items which changed significantly were:
<TABLE>
<CAPTION>
                                                                 Increase (Decrease)
                                                      Third Quarter                Year-to-Date
                                                 (in millions)        %     (in millions)          %
                                                 -------------        -     -------------          -
<S>                                                       <C>       <C>             <C>           <C>
Operating Revenues                                        $335       23             $1,178         30
Fuel Expense                                               (22)     (11)               (34)        (6)
Purchased Power Expense                                    364       38              1,209         50
Other Operation                                              4        4                 18          7
Maintenance Expense                                          6       20                 16         18
Depreciation and Amortization                               20       51                 61         52
Taxes Other Than Federal Income Taxes                       10       24                 12         10
Federal Income Taxes                                       (20)     (47)               (44)       (39)
Nonoperating Income                                          4      165                 19        283
Interest Charges                                             3       13                  3          5
Extraordinary Loss                                         (19)     N.M.                 3         14

N.M. = Not Meaningful
</TABLE>
        The  significant  increase in  revenues  for the quarter is due to a 63%
increase  in trading  volume  partially  offset by lower  wholesale  electricity
prices. The significant  year-to-date  revenue increase is due to a 31% increase
in trading volume and an increase in wholesale electricity prices due to changes
in market conditions. Expansion of the wholesale business' trading operation and
greater  liquidity in the  marketplace  resulted in an increase in the number of
forward  electricity  purchase  and sales  contracts  made in AEP's  traditional
marketing area (up to two transmission systems from AEP's service territory).
        Fuel expense  decreased during both periods due to decreased  generation
and a lower average unit cost of fuel.
<PAGE>
        For the quarter the increase in purchased power expense was attributable
to the increase in the wholesale  business'  electric  trading  volume offset in
part by a decrease in wholesale  electricity prices. For the year-to-date period
the  increase  is  attributable  to  increase  in trading  volume and  wholesale
electricity prices.
        Other  operation  expense  increased  due to increases in  uncollectible
accounts  and  factored  customer  accounts  receivable  expenses  of  both  the
wholesale  business and energy  delivery  business,  the effect of gains in 2000
from  the  disposition  of  emission  allowances,  increased  trading  incentive
compensation of the wholesale business and energy delivery severance accruals.
        Maintenance  expenses  increased  due to  boiler  overhauls  at  Kammer,
Mitchell, Muskingum and Sporn plants and boiler inspections at Amos and Cardinal
plants.
        The  commencement  of amortization  of transition  regulatory  assets in
connection  with the transition to customer choice and  market-based  pricing of
electricity under Ohio  deregulation  accounted for the increase in depreciation
and amortization expense.
        The  increase in taxes other than  federal  income taxes is due to a new
State  Excise Tax which  produced a larger  tax than the gross  receipts  tax it
replaced.
        Federal  income taxes  attributable  to  operations  decreased  due to a
decrease in pre-tax operating income.
        The increase in nonoperating  income was due to an increase in net gains
from the wholesale  business' trading  transactions  outside of the AEP System's
traditional  marketing area and  speculative  financial  transactions  (options,
futures and swaps).
        Interest expense increased due to increased long-term debt outstanding.
        In the second quarter of 2001 we recorded an  extraordinary  loss of $22
million  net of tax to  write-off  prepaid  Ohio excise  taxes  stranded by Ohio
deregulation  (see  Note  2).  The  application  of  regulatory  accounting  for
generation  was  discontinued  in September  2000 which resulted in an after tax
extraordinary loss of $19 million.
<PAGE>
<TABLE>
<CAPTION>
                       OHIO POWER COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                             Three Months Ended September 30,                Nine Months Ended September 30,
                                                       2001                 2000             2001                     2000
                                                       ----                 ----             ----                     ----
                                                                              (in thousands)
<S>                                                   <C>                 <C>               <C>                     <C>
OPERATING REVENUES                                    $1,819,792          $1,484,663        $5,146,634              $3,968,830
                                                      ----------          ----------        ----------              ----------
OPERATING EXPENSES:
   Fuel                                                  167,155             188,727           547,773                 581,289
   Purchased Power                                     1,312,668             948,733         3,638,229               2,429,521
   Other Operation                                       104,081              99,930           289,110                 270,626
   Maintenance                                            33,786              28,128           105,634                  89,753
   Depreciation and Amortization                          59,267              39,121           176,992                 116,453
   Taxes Other Than Federal Income Taxes                  50,507              40,579           137,561                 125,366
   Federal Income Taxes                                   22,660              42,793            69,844                 114,089
                                                          ------              ------            ------                 -------
           TOTAL OPERATING EXPENSES                    1,750,124           1,388,011         4,965,143               3,727,097
                                                       ---------           ---------         ---------               ---------

OPERATING INCOME                                          69,668              96,652           181,491                 241,733

NONOPERATING INCOME                                        6,788               2,564            25,705                   6,714
                                                           -----               -----            ------                   -----

INCOME BEFORE INTEREST CHARGES                            76,456              99,216           207,196                 248,447

INTEREST CHARGES                                          25,078              22,155            70,327                  66,937
                                                          ------              ------            ------                  ------

INCOME BEFORE EXTRAORDINARY ITEM                          51,378              77,061           136,869                 181,510

EXTRAORDINARY LOSS - EFFECTS OF
  DEREGULATION - net of tax (See note 2)                    -                (18,876)          (21,515)                (18,876)
                                                            ----             -------           -------                 --------

NET INCOME                                                51,378              58,185           115,354                 162,634

PREFERRED STOCK DIVIDEND     REQUIREMENTS
                                                             314                 315               944                     951
                                                             ---                 ---               ---                     ---

EARNINGS APPLICABLE TO COMMON   STOCK
                                                      $   51,064          $   57,870        $  114,410              $  161,683
                                                      ==========          ==========        ==========              ==========
</TABLE>
<TABLE>
<CAPTION>
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (UNAUDITED)

                                            Three Months Ended September 30,                Nine Months Ended September 30,
                                                      2001                 2000             2001                     2000
                                                      ----                 ----             ----                     ----
                                                                             (in thousands)
<S>                                                     <C>                 <C>              <C>                     <C>
NET INCOME                                              $51,378             $58,185          $115,354                $162,634

OTHER COMPREHENSIVE INCOME
    Foreign Currency Exchange Rate Hedge                    345               -                    20                   -
                                                            ---               -----                --                   -----

COMPREHENSIVE INCOME                                    $51,723             $58,185          $115,374                $162,634
                                                        =======             =======          ========                ========

The common stock of the Company is wholly owned by AEP.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                       OHIO POWER COMPANY AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)

                                      Three Months Ended September 30,                Nine Months Ended September 30,
                                                2001                 2000             2001                     2000
                                                ----                 ----             ----                     ----
                                                                       (in thousands)
<S>                                             <C>                   <C>              <C>                       <C>
BALANCE AT BEGINNING OF PERIOD                  $389,945              $615,834         $398,086                  $587,424

NET INCOME                                        51,378                58,185          115,354                   162,634

CASH DIVIDENDS DECLARED:
    Common Stock                                  35,744               158,704          107,232                   234,110
    Cumulative Preferred Stock                       315                   314              944                       947
                                                     ---                   ---              ---                       ---

BALANCE AT END OF PERIOD                        $405,264              $515,001         $405,264                  $515,001
                                                ========              ========         ========                  ========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                       OHIO POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                    September 30, 2001         December 31, 2000
                                                                                    ------------------         -----------------
                                                                                                    (in thousands)
<S>                                                                                         <C>                        <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                               $2,962,832                 $2,764,155
   Transmission                                                                                886,986                    870,033
   Distribution                                                                              1,068,738                  1,040,940
   General (including mining assets at December 31, 2000 See Note 3)                           241,683                    707,417
   Construction Work in Progress                                                               138,805                    195,086
                                                                                               -------                    -------
        Total Electric Utility Plant                                                         5,299,044                  5,577,631
   Accumulated Depreciation and Amortization                                                 2,422,866                  2,764,130
                                                                                             ---------                  ---------
NET ELECTRIC UTILITY PLANT                                                                   2,876,178                  2,813,501
                                                                                             ---------                  ---------

OTHER PROPERTY AND INVESTMENTS                                                                  65,936                    109,124
                                                                                                ------                    -------

LONG-TERM ENERGY TRADING CONTRACTS                                                             309,122                    256,455
                                                                                               -------                    -------

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                    34,212                     31,393
   Advances to Affiliates                                                                        -                         92,486
   Accounts Receivable:
      Customers                                                                                100,323                    139,732
      Affiliated Companies                                                                     135,657                    126,203
      Miscellaneous                                                                             25,846                     39,046
      Allowance for Uncollectible Accounts                                                      (1,026)                    (1,054)
   Fuel - at average cost                                                                       94,327                     82,291
   Materials and Supplies - at average cost                                                     66,406                     96,053
   Energy Trading Contracts                                                                    769,154                  1,617,660
   Prepayments and Other                                                                        24,344                     33,146
                                                                                                ------                     ------
TOTAL CURRENT ASSETS                                                                         1,249,243                  2,256,956
                                                                                             ---------                  ---------

REGULATORY ASSETS                                                                              659,631                    714,710
                                                                                               -------                    -------

DEFERRED CHARGES                                                                                38,914                    101,690
                                                                                                ------                    -------

TOTAL ASSETS                                                                                $5,199,024                 $6,252,436
                                                                                            ==========                 ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                       OHIO POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                    September 30, 2001         December 31, 2000
                                                                                    ------------------         -----------------
                                                                                                         (in thousands)
<S>                                                                                         <C>                        <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common Stock - No Par Value:
      Authorized - 40,000,000 Shares
      Outstanding - 27,952,473 Shares                                                       $  321,201                 $  321,201
   Paid-in Capital                                                                             462,483                    462,483
   Accumulated Other Comprehensive Income                                                           20                      -
   Retained Earnings                                                                           405,264                    398,086
                                                                                               -------                    -------
        Total Common Shareholder's Equity                                                    1,188,968                  1,181,770
   Cumulative Preferred Stock:
      Not Subject to Mandatory Redemption                                                       16,648                     16,648
      Subject to Mandatory Redemption                                                            8,850                      8,850
   Long-term Debt                                                                              981,380                  1,077,987
   Long-term Debt - Affiliated Company                                                         300,000                       -
                                                                                               -------                       ----

           TOTAL CAPITALIZATION                                                              2,495,846                  2,285,255
                                                                                             ---------                  ---------

OTHER NONCURRENT LIABILITIES                                                                   136,600                    542,017
                                                                                               -------                    -------

CURRENT LIABILITIES:
   Long-term Debt Due Within One Year                                                            -                        117,506
   Advances from Affiliates                                                                    360,048                      -
   Accounts Payable - General                                                                  160,717                    179,691
   Accounts Payable - Affiliated Companies                                                      70,661                    121,360
   Customer Deposits                                                                             8,993                     39,736
   Taxes Accrued                                                                                25,876                    223,101
   Interest Accrued                                                                             30,054                     20,458
   Obligations Under Capital Leases                                                             14,180                     32,716
   Energy Trading Contracts                                                                    719,697                  1,662,315
   Other                                                                                       121,306                    151,934
                                                                                               -------                    -------

           TOTAL CURRENT LIABILITIES                                                         1,511,532                  2,548,817
                                                                                             ---------                  ---------

DEFERRED INCOME TAXES                                                                          753,689                    621,941
                                                                                               -------                    -------

DEFERRED INVESTMENT TAX CREDITS                                                                 22,875                     25,214
                                                                                                ------                     ------

LONG-TERM ENERGY TRADING CONTRACTS                                                             266,545                    206,187
                                                                                               -------                    -------

REGULATORY LIABILITIES AND DEFERRED CREDITS                                                     11,937                     23,005
                                                                                                ------                     ------

CONTINGENCIES (Note 8)

TOTAL CAPITALIZATION AND LIABILITIES                                                        $5,199,024                 $6,252,436
                                                                                            ==========                 ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                       OHIO POWER COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                                       Nine Months Ended September 30,
                                                                                   2001                            2000
                                                                                   ----                            ----
                                                                                               (in thousands)
<S>                                                                                   <C>                       <C>
OPERATING ACTIVITIES:
   Net Income                                                                         $ 115,354                 $ 162,634
   Adjustments for Noncash Items:
      Depreciation                                                                      134,105                   145,125
      Amortization of Transition Assets                                                  55,029                    -
      Deferred Federal Income Taxes                                                     182,166                    (2,058)
      Deferred Fuel Costs (net)                                                           -                       (33,259)
      Amortization of Deferred Property Taxes                                            61,821                    60,297
      Extraordinary Loss - Discontinuance SFAS 71                                        21,515                    18,876
      Capital Lease Obligation- Noncurrent                                              (15,104)                  (15,489)
      Accumulated Provisions- Noncurrent                                               (390,313)                    7,268
   Changes in Certain Current Assets and Liabilities:
      Accounts Receivable (net)                                                          43,127                    60,383
      Fuel, Materials and Supplies                                                       17,611                    60,686
      Accrued Utility Revenues                                                              264                    45,575
      Prepayments and Other Current Assets                                                8,538                     3,624
      Accounts Payable                                                                  (69,673)                    7,654
      Customer Deposits                                                                 (30,743)                   (2,711)
      Taxes Accrued                                                                    (197,225)                  (21,355)
      Interest Accrued                                                                    9,596                     6,060
   Energy Trading Contract (net)                                                        (86,421)                   (7,067)
   Other (net)                                                                          (26,038)                   52,475
                                                                                        -------                    ------
           Net Cash Flows From (Used For) Operating Activities                         (166,391)                  548,718
                                                                                       --------                   -------

INVESTING ACTIVITIES:
      Construction Expenditures                                                        (242,898)                 (143,717)
      Proceeds from Sale of Property and Other                                           16,562                     4,404
      Investment in Coal Companies                                                      (32,115)                   -
                                                                                        -------                    -----
           Net Cash Flows Used For Investing Activities                                (258,451)                 (139,313)
                                                                                       --------                  --------

FINANCING ACTIVITIES:
      Issuance of Long-term Debt - Affiliated                                           300,000                    -
      Issuance of Long-term Debt                                                         -                         74,748
      Change in Advances to Affiliates (net)                                            452,534                  (149,616)
      Change in Short-term Debt (net)                                                    -                       (194,918)
      Retirement of Cumulative Preferred Stock                                           -                           (182)
      Retirement of Long-term Debt                                                     (216,697)                  (26,538)
      Dividends Paid on Common Stock                                                   (107,232)                 (234,110)
      Dividends Paid on Cumulative Preferred Stock                                         (944)                     (947)
                                                                                           ----                      ----
           Net Cash Flows From (Used For) Financing Activities                          427,661                  (531,563)
                                                                                        -------                  --------

Net Increase (Decrease) in Cash and Cash Equivalents                                      2,819                  (122,158)
Cash and Cash Equivalents at Beginning of Period                                         31,393                   157,138
                                                                                         ------                   -------
Cash and Cash Equivalents at End of Period                                            $  34,212                 $  34,980
                                                                                      =========                 =========

Supplemental Disclosure:
Cash  paid  for  interest  net  of  capitalized   amounts  was  $59,492,000  and
$59,963,000  and for income taxes was  $55,806,000  and  $56,813,000 in 2001 and
2000, respectively.  Noncash acquisitions under capital leases were $595,000 and
$12,734,000 in 2001 and 2000, respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
               PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000

              We have two  businesses:  wholesale  which consists of generation,
retail electricity sales, power marketing and trading of electricity; and energy
delivery which consists of transmission  and  distribution  services.  Since the
merger of AEP and CSW in June 2000,  we  participate  in the AEP System's  power
marketing and trading activities.
         Net income  decreased  $3.3 million or 6% in the third quarter and $8.8
million or 12% in the first nine months of 2001 due  primarily  from last year's
inclusion of a gain on the sale of a minority interest in Scientech, Inc. Income
statement line items which changed significantly were:
                                           Increase (Decrease)
                              Third Quarter                 Year-to-Date
                        (in millions)        %      (in millions)          %
                        -------------        -      -------------          -
Operating Revenues             $355          64            $739           80
Fuel Expense                     (1)         (1)            109           36
Purchased Power Expense         351         144             614          208
Other Operation Expense           1           2              17           21
Maintenance                       3          36               4           12
Federal Income Taxes             (3)         (9)             (7)         (20)
Nonoperating Income              (7)        (97)             (7)         (89)

         The  significant  increase in revenues  for the quarter  resulted  from
increased trading volumes of the wholesale business. In the year-to-date period,
the increase in revenues is primarily attributable to our participation in AEP's
power marketing and trading  operations.  Revenues for the  year-to-date  period
also  increased  as a result  of an  adjustment  in 2000  under a  FERC-approved
Transmission   Coordination  Agreement,   which  decreased  revenues  and  other
operation expenses in 2000. The Transmission Coordination Agreement provides the
means by which the AEP West  electric  operating  companies  plan,  operate  and
maintain  their  four  separate  transmission  systems  as a  single  unit.  The
agreement also established the method by which these companies allocate revenues
and costs received under open access transmission tariffs.
         Fuel  expense  increased  year-to-date  due  primarily to a rise in the
average unit fuel cost reflecting an increase in natural gas prices.
         The increase in purchased  power expense was primarily  attributable to
our participation in the AEP System's power marketing and trading activities.
         Year-to-date  other  operation  expenses  increased  due  mainly  to  a
favorable adjustment in 2000 under the FERC-approved  Transmission  Coordination
Agreement mentioned above, along with increased incentive compensation for power
trading and transmission expenses.
<PAGE>
         Maintenance expense increased year-to-date due to scheduled power plant
maintenance and additional expenses related to a January ice storm.  Maintenance
for the quarter increased due to scheduled power plant maintenance.
         Federal income tax expense  associated with  operations  decreased as a
result  of  a  decline  in  pre-tax  book   income.
         The  decrease  in nonoperating  income primarily resulted from last
year's inclusion of a gain on the sale of a minority interest in Scientech, Inc.
<PAGE>
<TABLE>
<CAPTION>
               PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                         Three Months Ended September 30,               Nine Months Ended September 30,
                                               2001                      2000               2001                 2000
                                               ----                      ----               ----                 ----
                                                                              (in thousands)
<S>                                             <C>                      <C>              <C>                      <C>
OPERATING REVENUES                              $910,428                 $555,236         $1,664,761               $925,738
                                                --------                 --------         ----------               --------

OPERATING EXPENSES:
   Fuel                                          154,177                  155,103            411,905                302,497
   Purchased Power                               593,577                  242,852            909,384                295,059
   Other Operation                                32,970                   32,235            101,859                 84,468
   Maintenance                                    10,886                    8,032             33,575                 30,027
   Depreciation and Amortization                  20,313                   19,632             59,458                 57,470
   Taxes Other Than Federal Income Taxes          12,914                   12,660             29,837                 28,718
   Federal Income Taxes                           25,677                   28,285             28,548                 35,700
                                                  ------                   -------            ------                 ------

           TOTAL OPERATING EXPENSES              850,514                  498,799          1,574,566                833,939
                                                 -------                  -------          ---------                -------

OPERATING INCOME                                  59,914                   56,437             90,195                 91,799

NONOPERATING INCOME                                  213                    7,211                908                  7,927
                                                     ---                    -----                ---                  -----

INCOME BEFORE INTEREST CHARGES                    60,127                   63,648             91,103                 99,726

INTEREST CHARGES                                   9,058                    9,319             29,674                 29,532
                                                   -----                    -----             ------                 ------

NET INCOME                                        51,069                   54,329             61,429                 70,194

PREFERRED STOCK DIVIDEND REQUIREMENTS
                                                      53                       52                159                    158
                                                      --                       --                ---                    ---

EARNINGS APPLICABLE TO COMMON STOCK             $ 51,016                 $ 54,277           $ 61,270               $ 70,036
                                                ========                 ========           ========               ========
</TABLE>
<TABLE>
<CAPTION>
                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)

                                    Three Months Ended September 30,               Nine Months Ended September 30,
                                          2001                      2000               2001                 2000
                                          ----                      ----               ----                 ----
                                                                         (in thousands)

<S>                                         <C>                      <C>               <C>                   <C>
BALANCE AT BEGINNING OF PERIOD              $121,822                 $120,995          $137,688              $139,236

NET INCOME                                    51,069                   54,329            61,429                70,194
CASH DIVIDENDS DECLARED:
     Common Stock                             13,060                   17,000            39,180                51,000
    Preferred Stock                               53                       52               159                   158
                                                  --                       --               ---                   ---

BALANCE AT END OF PERIOD                    $159,778                 $158,272          $159,778              $158,272
                                            ========                 ========          ========              ========

The common stock of PSO is wholly owned by AEP.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
               PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                     September 30, 2001        December 31, 2000
                                                                                     ------------------        -----------------
                                                                                                         (in thousands)
<S>                                                                                           <C>                      <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                                 $1,037,025                 $914,096
   Transmission                                                                                  418,793                  396,695
   Distribution                                                                                  972,827                  938,053
   General                                                                                       204,981                  206,731
   Construction Work in Progress                                                                  35,776                  149,095
                                                                                                  ------                  -------
        Total Electric Utility Plant                                                           2,669,402                2,604,670
   Accumulated Depreciation and Amortization                                                   1,175,621                1,150,253
                                                                                               ---------                ---------
NET ELECTRIC UTILITY PLANT                                                                     1,493,781                1,454,417
                                                                                               ---------                ---------

OTHER PROPERTY AND INVESTMENTS                                                                    40,384                   38,211
                                                                                                  ------                   ------

LONG-TERM ENERGY TRADING CONTRACTS                                                                72,313                   52,629
                                                                                                  ------                   ------

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                       7,569                   11,301
   Accounts Receivable:
      Customers                                                                                   22,964                   59,957
      Affiliated Companies                                                                         5,912                    3,453
   Fuel - at LIFO costs                                                                           15,320                   28,113
   Materials and Supplies - at average costs                                                      32,791                   29,642
   Under-recovered Fuel Costs                                                                     -                        43,267
   Energy Trading Contracts                                                                      259,930                  382,380
   Prepayments                                                                                     3,188                    1,559
                                                                                                   -----                    -----
TOTAL CURRENT ASSETS                                                                             347,674                  559,672
                                                                                                 -------                  -------

REGULATORY ASSETS                                                                                 29,650                   29,338
                                                                                                  ------                   ------

DEFERRED CHARGES                                                                                  17,580                    7,889
                                                                                                  ------                    -----

TOTAL ASSETS                                                                                  $2,001,382               $2,142,156
                                                                                              ==========               ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
               PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                     September 30, 2001        December 31, 2000
                                                                                     ------------------        -----------------
                                                                                                         (in thousands)
<S>                                                                                            <C>                     <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common Stock - $15 Par Value:
      Authorized Shares: 11,000,000 Shares
      Issued Shares: 10,482,000 shares and
      Outstanding Shares: 9,013,000 Shares                                                     $  157,230              $  157,230
   Paid-in Capital                                                                                180,000                 180,000
   Retained Earnings                                                                              159,778                 137,688
                                                                                                  -------                 -------
        Total Common Shareholder's Equity                                                         497,008                 474,918
   Cumulative Preferred Stock Not Subject to Mandatory Redemption                                   5,283                   5,283
   PSO-Obligated, Mandatorily Redeemable Preferred Securities of Subsidiary   Trust
   Holding Solely Junior Subordinated Debentures of PSO                                            75,000                  75,000
   Long-term Debt                                                                                 451,052                 450,822
                                                                                                  -------                 -------

           TOTAL CAPITALIZATION                                                                 1,028,343               1,006,023
                                                                                                ---------               ---------

CURRENT LIABILITIES:
   Long-term Debt Due Within One Year                                                               -                      20,000
   Advances from Affiliates                                                                        58,426                  81,120
   Accounts Payable - General                                                                      38,510                 104,379
   Accounts Payable - Affiliated Companies                                                         32,686                  64,556
   Customers Deposits                                                                              19,137                  19,294
   Over-recovered Fuel Costs                                                                       24,708                   -
   Taxes Accrued                                                                                   72,522                   1,659
   Interest Accrued                                                                                12,107                   8,336
   Energy Trading Contracts                                                                       260,800                 389,279
   Other                                                                                           13,769                  12,137
                                                                                                   ------                  ------

           TOTAL CURRENT LIABILITIES                                                              532,665                 700,760
                                                                                                  -------                 -------

DEFERRED INCOME TAXES                                                                             288,614                 312,060
                                                                                                  -------                 -------

DEFERRED INVESTMENT TAX CREDITS                                                                    34,440                  35,783
                                                                                                   ------                  ------

REGULATORY LIABILITIES AND DEFERRED CREDITS                                                        39,407                  35,292
                                                                                                   ------                  ------

LONG-TERM ENERGY TRADING CONTRACTS                                                                 77,913                  52,238
                                                                                                   ------                  ------

CONTINGENCIES (Note 8)

TOTAL CAPITALIZATION AND LIABILITIES                                                           $2,001,382              $2,142,156
                                                                                               ==========              ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
               PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                           Nine Months Ended September 30,
                                                                               2001                      2000
                                                                               ----                      ----
                                                                                       (in thousands)
<S>                                                                             <C>                      <C>
OPERATING ACTIVITIES:
   Net Income                                                                   $ 61,429                 $ 70,194
   Adjustments for Noncash Items:
      Depreciation and Amortization                                               59,458                   57,470
      Deferred Income Taxes                                                      (25,491)                  19,798
      Deferred Investment Tax Credits                                             (1,343)                  (1,343)
      Amortization of Deferred Property Taxes                                     (8,568)                  -
   Changes in Certain Current Assets and Liabilities:
      Accounts Receivable (net)                                                   34,534                  (34,933)
      Fuel, Materials and Supplies                                                 9,644                      158
      Other Deferred Credits                                                       1,997                   22,627
      Accounts Payable                                                           (97,739)                  50,079
      Taxes Accrued                                                               70,863                   12,685
   Other Property and Investments                                                 (1,814)                 (30,331)
   Fuel Recovery                                                                  67,975                  (35,340)
   Other (net)                                                                    (4,090)                  12,150
                                                                                  ------                   ------
           Net Cash Flows From Operating Activities                              166,855                  143,214
                                                                                 -------                  -------

INVESTING ACTIVITIES:
      Construction Expenditures                                                  (88,194)                (120,105)
      Other                                                                         (359)                  -
                                                                                    ----                   ------
           Net Cash Flows Used For Investing Activities                          (88,553)                (120,105)
                                                                                 -------                 --------

FINANCING ACTIVITIES:
      Retirement of Long-term Debt                                               (20,000)                 (10,000)
      Change in Advances from Affiliates (net)                                   (22,695)                  40,520
      Dividends Paid on Common Stock                                             (39,180)                 (51,000)
      Dividends Paid on Cumulative Preferred Stock                                  (159)                    (158)
                                                                                    ----                     ----
           Net Cash Flows From Financing Activities                              (82,034)                 (20,638)
                                                                                 -------                   ------

Net Increase in Cash and Cash Equivalents                                         (3,732)                   2,471
Cash and Cash Equivalents at Beginning of Period                                  11,301                    3,173
                                                                                  ------                    -----
Cash and Cash Equivalents at End of Period                                      $  7,569                 $  5,644
                                                                                ========                 ========

Supplemental Disclosure:
Cash  paid  for  interest  net  of  capitalized   amounts  was  $24,351,000  and
$24,222,000  and for income taxes was  $7,386,000  and  $13,925,000  in 2001 and
2000, respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
              SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000

            We have two  businesses:  wholesale  which  consists of  generation,
retail electricity sales, power marketing and trading of electricity; and energy
delivery which consists of transmission  and  distribution  services.  Since the
merger of AEP and CSW in June 2000,  we  participate  in the AEP System's  power
marketing and trading activities.
         Net income increased $10 million,  or 14%, for the year-to-date  period
despite a decrease  in the quarter of $1 million,  or 2%. The  increase  for the
year-to-date  period resulted from the favorable impact of our  participation in
AEP's power marketing and trading operations.  Income statement line items which
changed significantly were:
<TABLE>
<CAPTION>
                                                                Increase (Decrease)
                                                    Third Quarter                   Year-to-Date
                                           (in millions)               %    (in millions)            %
                                           -------------               -    -------------            -
<S>                                                   <C>            <C>               <C>         <C>
Operating Revenues                                    $455            79               $835          79
Fuel Expense                                           (38)          (22)                 1        -
Purchased Power Expense                                483           219                789         314
Other Operation Expense                                  7            18                  8           8
Maintenance                                              3            21                  3           7
Depreciation and Amortization                          -             N.M.                11          15
Taxes Other Than Federal Income Taxes                    1             7                  6          15
Federal Income Taxes                                    -            N.M.                 6          19

N.M. = Not Meaningful
</TABLE>
         The  significant  increase in operating  revenues and  purchased  power
expense for the quarter resulted from increased trading volumes of the wholesale
business.  In the  year-to-date  period,  the increase in revenues and purchased
power expense is also attributable to our participation in AEP's power marketing
and trading operations.
         Fuel expense of the  wholesale  business  decreased for the quarter due
primarily  to a decrease in the  average  unit cost of fuel as a result of lower
spot market natural gas prices.
         Due to the  acquisition  of Dolet Hills mining  operation in June 2001,
other operation expense increased for the quarter and year-to-date periods.
         Although tree-trimming expenses increased in the third quarter of 2001,
they were slightly lower for the year-to-date period.  Repairs to overhead lines
because  of severe  ice  storms in the first  quarter  of 2001 made  maintenance
expense increase for the year-to-date period.
         Depreciation  and  amortization  expense  increased   year-to-date  due
primarily  to  an  increase  in  excess   earnings   accruals  under  the  Texas
restructuring legislation and the acquisition of Dolet Hills mining operation.
<PAGE>
         Taxes other than federal income taxes increased  during the quarter due
to increased state income taxes  reflecting  higher state taxable income.  Taxes
other than  federal  income  taxes  increased  year-to-date  due to a  favorable
adjustment  of ad valorem  taxes  recorded in 2000 and  increased  state taxable
income.
        The increase in federal  income tax expense  attributable  to operations
was primarily due to an increase in pre-tax operating income.
<PAGE>
<TABLE>
<CAPTION>
              SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                                                    Three Months Ended September 30,               Nine Months Ended September 30,
                                                           2001                   2000              2001                   2000
                                                           ----                   ----              ----                   ----
                                                                                        (in thousands)
<S>                                                       <C>                       <C>            <C>                   <C>
OPERATING REVENUES                                        $1,028,742                $573,891       $1,889,226            $1,054,056
                                                          ----------                --------       ----------            ----------

OPERATING EXPENSES:
   Fuel                                                      134,560                 172,763          376,957               375,888
   Purchased Power                                           702,899                 220,114        1,040,427               251,064
   Other Operation                                            46,631                  39,417          119,970               111,477
   Maintenance                                                15,344                  12,644           51,011                47,856
   Depreciation and Amortization                              28,461                  27,978           89,919                78,460
   Taxes Other Than Federal Income Taxes                      18,754                  17,518           48,006                41,634
   Federal Income Taxes                                       21,899                  22,145           36,107                30,338
                                                              ------                  ------           ------                ------

           TOTAL OPERATING EXPENSES                          968,548                 512,579        1,762,397               936,717
                                                             -------                 -------        ---------               -------

OPERATING INCOME                                              60,194                  61,312          126,829               117,339

NONOPERATING INCOME                                              627                   1,008              904                 1,453
                                                                 ---                   -----              ---                 -----

INCOME BEFORE INTEREST CHARGES                                60,821                  62,320          127,733               118,792

INTEREST CHARGES                                              14,464                  14,783           43,723                44,806
                                                              ------                  ------           ------                ------

NET INCOME                                                    46,357                  47,537           84,010                73,986

PREFERRED STOCK DIVIDEND   REQUIREMENTS
                                                                  57                      58              172                   172
                                                                  --                      --              ---                   ---

EARNINGS APPLICABLE TO
  COMMON STOCK                                             $  46,300                $ 47,479         $ 83,838              $ 73,814
                                                           =========                ========         ========              ========
</TABLE>
<TABLE>
<CAPTION>
                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)


                                 Three Months Ended September 30,               Nine Months Ended September 30,
                                        2001                   2000              2001                   2000
                                        ----                   ----              ----                   ----
                                                                    (in thousands)
<S>                                        <C>                  <C>               <C>                     <C>
BALANCE AT BEGINNING OF PERIOD             $294,422             $278,881          $293,989                $283,546

    NET INCOME                               46,357               47,537            84,010                  73,986

 CASH DIVIDENDS DECLARED:
    Common Stock                             18,554               15,500            55,659                  46,500
    Preferred Stock                              57                   58               172                     172
                                                 --                   --               ---                     ---

BALANCE AT END OF PERIOD                   $322,168             $310,860          $322,168                $310,860
                                           ========             ========          ========                ========

The common stock of the Company is wholly owned by AEP.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
              SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                     September 30, 2001        December 31, 2000
                                                                                     ------------------        -----------------
                                                                                                         (in thousands)
<S>                                                                                           <C>                      <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                                 $1,432,242               $1,414,527
   Transmission                                                                                  537,835                  519,317
   Distribution                                                                                1,033,083                1,001,237
   General                                                                                       375,603                  325,948
   Construction Work in Progress                                                                  50,650                   57,995
                                                                                                  ------                   ------
        Total Electric Utility Plant                                                           3,429,413                3,319,024
   Accumulated Depreciation and Amortization                                                   1,525,936                1,457,005
                                                                                               ---------                ---------
NET ELECTRIC UTILITY PLANT                                                                     1,903,477                1,862,019
                                                                                               ---------                ---------

OTHER PROPERTY AND INVESTMENTS                                                                    42,213                   39,627
                                                                                                  ------                   ------

LONG-TERM ENERGY TRADING CONTRACTS                                                                86,306                   63,028
                                                                                                  ------                   ------

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                       4,650                    1,907
   Accounts Receivable:
      Customers                                                                                   70,192                   41,399
      Affiliated Companies                                                                         2,283                   11,419
   Fuel Inventory - at average cost                                                               36,648                   40,024
   Under-recovered Fuel                                                                           19,445                   35,469
   Materials and Supplies - at average cost                                                       31,342                   25,137
   Energy Trading Contracts                                                                      314,306                  457,936
   Prepayments                                                                                    19,729                   16,780
                                                                                                  ------                   ------
TOTAL CURRENT ASSETS                                                                             498,595                  630,071
                                                                                                 -------                  -------

REGULATORY ASSETS                                                                                 53,156                   57,082
                                                                                                  ------                   ------

DEFERRED CHARGES                                                                                  78,567                   10,707
                                                                                                  ------                   ------

TOTAL ASSETS                                                                                  $2,662,314               $2,662,534
                                                                                              ==========               ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
              SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                                      September 30, 2001       December 31, 2000
                                                                                      ------------------       -----------------
                                                                                                         (in thousands)
<S>                                                                                           <C>                      <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common Stock - $18 Par Value:
      Authorized - 7,600,000 Shares
      Outstanding - 7,536,640 Shares                                                          $  135,660               $  135,660
   Paid-in Capital                                                                               245,000                  245,000
   Retained Earnings                                                                             322,168                  293,989
                                                                                                 -------                  -------
        Total Common Shareowner's Equity                                                         702,828                  674,649

Preferred Stock                                                                                    4,704                    4,704
SWEPCO-Obligated, Mandatorily Redeemable Preferred Securities
  Of Subsidiary Trust Holding Solely Junior Subordinated
  Debentures Of SWEPCO                                                                           110,000                  110,000
Long-term Debt                                                                                   494,855                  645,368
                                                                                                 -------                  -------

TOTAL CAPITALIZATION                                                                           1,312,387                1,434,721
                                                                                               ---------                ---------

OTHER NONCURRENT LIABILITIES                                                                      33,810                   11,290
                                                                                                  ------                   ------

CURRENT LIABILITIES:
   Long-term Debt Due Within One Year                                                            150,595                      595
   Advances from Affiliates                                                                       78,931                   16,823
   Accounts Payable - General                                                                     54,042                  107,747
   Accounts Payable - Affiliated Companies                                                        30,909                   36,021
   Customer Deposits                                                                              15,698                   16,433
   Taxes Accrued                                                                                  74,877                   11,224
   Interest Accrued                                                                               14,697                   13,198
   Energy Trading Contracts                                                                      314,475                  466,198
   Other                                                                                          24,767                   15,064
                                                                                                  ------                   ------

           TOTAL CURRENT LIABILITIES                                                             758,991                  683,303
                                                                                                 -------                  -------

DEFERRED INCOME TAXES                                                                            399,717                  399,204
                                                                                                 -------                  -------

DEFERRED INVESTMENT TAX CREDITS                                                                   49,846                   53,167
                                                                                                  ------                   ------

REGULATORY LIABILITIES AND DEFERRED CREDITS                                                       20,432                   18,288
                                                                                                  ------                   ------

LONG-TERM ENERGY TRADING CONTRACTS                                                                87,131                   62,561
                                                                                                  ------                   ------

CONTINGENCIES (Note 8)

TOTAL CAPITALIZATION AND LIABILITIES                                                          $2,662,314               $2,662,534
                                                                                              ==========               ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
              SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                                 Nine Months Ended September 30,
                                                                                     2001                     2000
                                                                                     ----                     ----
                                                                                             (in thousands)
<S>                                                                                  <C>                      <C>
OPERATING ACTIVITIES:
   Net Income                                                                        $  84,010                $ 73,986
   Adjustments for Noncash Items:
      Depreciation and Amortization                                                     89,919                  78,460
      Deferred Income Taxes                                                             (2,534)                 10,901
      Deferred Investment Tax Credits                                                   (3,321)                 (3,361)
      Deferred Property Taxes                                                           (9,316)                -
   Changes in Certain Current Assets and Liabilities:
      Accounts Receivable (net)                                                        (19,657)                (17,515)
      Fuel, Materials and Supplies                                                         943                   1,367
      Accounts Payable                                                                 (58,817)                 31,267
      Taxes Accrued                                                                     63,653                  23,083
      Transmission Coordination Agreement Settlement                                   -                       (24,406)
      Fuel Recovery                                                                     16,024                 (36,977)
   Other                                                                                (1,193)                 12,250
                                                                                        ------                  ------
           Net Cash Flows From Operating Activities                                    159,711                 149,055
                                                                                       -------                 -------

INVESTING ACTIVITIES:
      Construction Expenditures                                                        (76,668)                (92,147)
      Purchase of Dolet Hills Mining Operations                                        (85,716)                -
      Other                                                                               (411)                -
                                                                                          -----                -------
           Net Cash Flows Used For Investing Activities                               (162,795)                (92,147)
                                                                                      --------                 -------

FINANCING ACTIVITIES:
      Redemption of Preferred Stock                                                    -                            (1)
      Issuance of Long-term Debt                                                       -                       149,634
      Retirement of Long-term Debt                                                        (450)                (45,450)
      Change in Advances from Affiliates (net)                                          62,108                (113,950)
      Dividends Paid on Common Stock                                                   (55,659)                (46,500)
      Dividends Paid on Cumulative Preferred Stock                                        (172)                   (172)
                                                                                          ----                    ----
           Net Cash Flows From (Used For) Financing Activities                           5,827                 (56,439)
                                                                                         -----                 -------

Net Increase in Cash and Cash Equivalents                                                2,743                     469
Cash and Cash Equivalents at Beginning of Period                                         1,907                   3,043
                                                                                         -----                   -----
Cash and Cash Equivalents at End of Period                                           $   4,650                $  3,512
                                                                                     =========                ========

Supplemental Disclosure:
Cash  paid  for  interest  net  of  capitalized   amounts  was  $38,614,000  and
$42,627,000  and for income taxes was  $5,524,000  and  $16,040,000  in 2001 and
2000, respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
                          WEST TEXAS UTILITIES COMPANY
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

                    THIRD QUARTER 2001 vs. THIRD QUARTER 2000
                                       AND
                     YEAR-TO-DATE 2001 vs. YEAR-TO-DATE 2000

                  We  have  two   businesses:   wholesale   which   consists  of
       generation,  retail  electricity  sales,  power  marketing and trading of
       electricity;  and energy  delivery  which  consists of  transmission  and
       distribution  services.  Since the merger of AEP and CSW in June 2000, we
       participate in the AEP System's power marketing and trading activities.
                  Net income for the third quarter  increased  $3.4 million,  or
       32%, due to increases in operating and nonoperating income.  Year-to-date
       net income decreased $1.5 million,  or 7%, as the result of a decrease in
       operating   income  offset  by  an  increase  in   nonoperating   income.
       Nonoperating  income  increased  in both  periods  as the  result of loss
       provisions  that were  recorded in the second and third  quarters of 2000
       for the  termination of merchandise  sales and the cost of phasing out of
       the  merchandising  sales  programs.  Income  statement  line item  which
       changed significantly were:
<TABLE>
<CAPTION>
                                                                    Increase (Decrease)
                                                        Third Quarter                   Year-to-Date
                                                (in millions)              %    (in millions)            %
                                                -------------              -    -------------            -
<S>                                                      <C>             <C>             <C>           <C>
       Operating Revenues                                $180             72             $344           73
       Fuel Expense                                       (16)           (28)              15           11
       Purchased Power Expense                            204            198              329          235
       Other Operation Expense                             (6)           (20)               9           13
       Maintenance Expense                                 (1)           (12)               1            8
       Depreciation and Amortization                       (7)           (29)              (3)          (6)
       Taxes Other Than Federal Income Taxes                3             43                4           23
       Federal Income Taxes                                 2             29               (3)         (27)
       Nonoperating Income                                  2            N.M.               6          N.M.

       N.M. = Not Meaningful
</TABLE>
                  The significant  increase in revenues for the quarter resulted
       from  increased  trading  volumes  of  the  wholesale  business.  In  the
       year-to-date  period, the increase in revenues is primarily  attributable
       to our participation in AEP's power marketing and trading  operations and
       higher fuel related  revenues due to increased  fuel and purchased  power
       expense of the wholesale business.
                  Fuel expense  decreased  for the quarter and  increased in the
       year-to-date  period.  The  fluctuation in spot market natural gas prices
       resulted  in  a  decrease   for  the  quarter  and  an  increase  in  the
       year-to-date period.
                  The  increase  in  purchased   power   expense  was  primarily
       attributable  to our  participation  in AEP's power marketing and trading
       operation  and the  adverse  impact of natural  gas  prices on  wholesale
       purchased power prices.
<PAGE>
                  Other  operation   expense   decreased  for  the  quarter  due
       primarily to decreased  transmission  expenses.  Other operation  expense
       increased year-to-date due to a favorable adjustment made in January 2000
       related to a FERC-approved Transmission Coordination Agreement.
                  Maintenance  expense  increased due to the overhaul in 2001 of
       the  Oklaunion   Power  Plant  of  our   wholesale   business.
                  Depreciation  and  amortization  expense  decreased due to the
       effect of recording additional accruals in the third quarter of 2000 for
       estimated excess earnings as required by Texas Restructuring Legislation.
                  An increase in taxes other than federal  income taxes resulted
       from an increase in Texas  franchise tax  assessments  and an increase in
       the Texas PUCT benefit assessment tax, a new tax in the state of Texas.
                  Federal income taxes  attributable to operations  increased in
       the quarter and decreased  year-to-date,  reflecting the  fluctuations in
       pre-tax income in those periods.
                  The  increase  in  nonoperating  income  was  due  to  a  loss
       provision  that was recorded in the second and third quarters of 2000 for
       the  termination of merchandise  sales and the cost of phasing out of the
       merchandising sales programs.
<PAGE>
<TABLE>
<CAPTION>
                          WEST TEXAS UTILITIES COMPANY
                              STATEMENTS OF INCOME
                                   (UNAUDITED)

                                            Three Months Ended September 30,               Nine Months Ended September 30,
                                                  2001                     2000             2001                    2000
                                                  ----                     ----             ----                    ----
                                                                                 (in thousands)
<S>                                               <C>                       <C>             <C>                     <C>
OPERATING REVENUES                                 $429,623                 $249,330        $817,468                $473,407
                                                   --------                 --------        --------                --------

OPERATING EXPENSES:

   Fuel                                              41,667                   57,728         148,420                 133,515
   Purchased Power                                  306,931                  102,825         469,108                 140,173
   Other Operation                                   25,636                   32,046          76,747                  68,101
   Maintenance                                        4,379                    4,959          15,987                  14,866
   Depreciation and Amortization                     16,149                   22,717          39,449                  42,050
   Taxes Other Than Federal Income Taxes             10,136                    7,096          22,949                  18,712
   Federal Income Taxes                               6,980                    5,394           9,243                  12,706
                                                      -----                    -----           -----                  ------

           TOTAL OPERATING EXPENSES                 411,878                  232,765         781,903                 430,123
                                                    -------                  -------         -------                 -------

OPERATING INCOME                                     17,745                   16,565          35,565                  43,284

NONOPERATING INCOME (LOSS)                            1,628                     (202)          2,506                  (3,441)
                                                      -----                     ----           -----                  ------

INCOME BEFORE INTEREST CHARGES                       19,373                   16,363          38,071                  39,843

INTEREST CHARGES                                      5,306                    5,693          16,980                  17,270
                                                      -----                    -----          ------                  ------

NET INCOME                                           14,067                   10,670          21,091                  22,573

PREFERRED STOCK DIVIDEND   REQUIREMENTS
                                                         26                       26              78                      78
                                                         --                       --              --                      --

EARNINGS APPLICABLE TO COMMON   STOCK
                                                  $  14,041                 $ 10,644       $  21,013                $ 22,495
                                                 =========                 ========       =========                ========
</TABLE>
<TABLE>
<CAPTION>
                         STATEMENTS OF RETAINED EARNINGS
                                   (UNAUDITED)

                                     Three Months Ended September 30,               Nine Months Ended September 30,
                                           2001                     2000             2001                    2000
                                           ----                     ----             ----                    ----
                                                                          (in thousands)
<S>                                          <C>                     <C>                  <C>                <C>
BALANCE AT BEGINNING OF PERIOD               $115,148                $116,093             $122,588           $113,242
NET INCOME                                     14,067                  10,670               21,091             22,573

DEDUCTIONS:
   Cash Dividends Declared:
    Common Stock                                7,206                   4,500               21,618             13,500
    Preferred Stock                                26                      26                   78                 78
                                                   --                      --                   --                 --

BALANCE AT END OF PERIOD                     $121,983                $122,237             $121,983           $122,237
                                             ========                ========             ========           ========

The common stock of the Company is wholly owned by AEP.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                          WEST TEXAS UTILITIES COMPANY
                                 BALANCE SHEETS
                                   (UNAUDITED)

                                                                                     September 30, 2001        December 31, 2000
                                                                                     ------------------        -----------------
                                                                                                         (in thousands)
<S>                                                                                          <C>                       <C>
ASSETS
------
ELECTRIC UTILITY PLANT:
   Production                                                                                $  439,825                $  431,793
   Transmission                                                                                 249,976                   235,303
   Distribution                                                                                 428,473                   416,587
   General                                                                                      113,827                   110,832
   Construction Work in Progress                                                                 21,106                    34,824
                                                                                                 ------                    ------
        Total Electric Utility Plant                                                          1,253,207                 1,229,339
   Accumulated Depreciation and Amortization                                                    539,587                   515,041
                                                                                                -------                   -------
NET ELECTRIC UTILITY PLANT                                                                      713,620                   714,298
                                                                                                -------                   -------

OTHER PROPERTY AND INVESTMENTS                                                                   24,516                    23,154
                                                                                                 ------                    ------

LONG-TERM ENERGY TRADING CONTRACTS                                                               28,683                    20,944
                                                                                                 ------                    ------

CURRENT ASSETS:
   Cash and Cash Equivalents                                                                      6,328                     6,941
   Accounts Receivable:
      Customers                                                                                  20,340                    36,217
      Affiliated Companies                                                                        9,570                    16,095
      Allowance for Uncollectible Accounts                                                         (163)                     (288)
   Fuel Inventory - at average cost                                                               9,969                    12,174
   Materials and Supplies - at average cost                                                      11,314                    10,510
   Under-recovered Fuel                                                                          53,863                    68,107
   Energy Trading Contracts                                                                     104,458                   152,174
   Prepayments and Other Current Assets                                                           1,306                       851
                                                                                                  -----                       ---
TOTAL CURRENT ASSETS                                                                            216,985                   302,781
                                                                                                -------                   -------

REGULATORY ASSETS                                                                                16,849                    24,808
                                                                                                 ------                    ------

DEFERRED CHARGES                                                                                  7,128                     2,947
                                                                                                  -----                     -----

TOTAL ASSETS                                                                                 $1,007,781                $1,088,932
                                                                                             ==========                ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                          WEST TEXAS UTILITIES COMPANY
                                 BALANCE SHEETS
                                   (UNAUDITED)

                                                                                     September 30, 2001        December 31, 2000
                                                                                     ------------------        -----------------
                                                                                                         (in thousands)
<S>                                                                                           <C>                      <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common Stock - $25 Par Value:
      Authorized - 7,800,000 Shares
      Outstanding - 5,488,560 Shares                                                            $137,214               $  137,214
   Paid-in Capital                                                                                 2,236                    2,236
   Retained Earnings                                                                             121,983                  122,588
                                                                                                 -------                  -------
        Total Common Shareowner's Equity                                                         261,433                  262,038
Cumulative Preferred Stock Not Subject to Mandatory Redemption                                     2,482                    2,482
Long-term Debt                                                                                   255,936                  255,843
                                                                                                 -------                  -------

TOTAL CAPITZALIZATION                                                                            519,851                  520,363
                                                                                                 -------                  -------

CURRENT LIABILITIES:
   Advances from Affiliates                                                                       46,130                   58,578
   Accounts Payable - General                                                                     21,356                   45,562
   Accounts Payable - Affiliated Companies                                                        14,992                   42,212
   Customer Deposits                                                                               3,221                    2,659
   Taxes Accrued                                                                                  46,009                   18,901
   Interest Accrued                                                                                4,319                    3,717
   Energy Trading Contracts                                                                      104,489                  154,919
   Other                                                                                          10,614                    7,906
                                                                                                  ------                    -----

           TOTAL CURRENT LIABILITIES                                                             251,130                  334,454
                                                                                                 -------                  -------

DEFERRED INCOME TAXES                                                                            148,872                  157,038
                                                                                                 -------                  -------

DEFERRED INVESTMENT TAX CREDITS                                                                   23,099                   24,052
                                                                                                  ------                   ------

LONG-TERM ENERGY TRADING CONTRACTS                                                                28,957                   20,789
                                                                                                  ------                   ------

REGULATORY LIABILITIES AND DEFERRED CREDITS                                                       35,872                   32,236
                                                                                                  ------                   ------

CONTINGENCIES (Note 8)

TOTAL CAPITALIZATION AND LIABILITIES                                                          $1,007,781               $1,088,932
                                                                                              ==========               ==========

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                          WEST TEXAS UTILITIES COMPANY
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                                         Nine Months Ended September 30,
                                                                                          2001                     2000
                                                                                          ----                     ----
                                                                                                 (in thousands)
<S>                                                                                       <C>                    <C>
OPERATING ACTIVITIES:
   Net Income                                                                             $ 21,091               $ 22,573
   Adjustments for Noncash Items:
      Depreciation and Amortization                                                         39,449                 42,050
      Deferred Income Taxes                                                                 (8,060)                 5,586
      Deferred Investment Tax Credits                                                         (953)                  (953)
   Changes in Certain Current Assets and Liabilities:
      Accounts Receivable (net)                                                             22,277                    (89)
      Fuel, Materials and Supplies                                                           1,401                  6,469
      Accounts Payable                                                                     (51,426)                16,369
      Taxes Accrued                                                                         27,108                  1,292
   Transmission Coordination Agreement Settlement                                           -                      15,465
   Deferred Property Taxes                                                                  (4,297)                -
   Fuel Recovery                                                                            14,245                (34,310)
   Other (net)                                                                               1,634                   (588)
                                                                                             -----                   ----
           Net Cash Flows From Operating Activities                                         62,469                 73,864
                                                                                            ------                 ------

INVESTING ACTIVITIES:
      Construction Expenditures                                                            (28,811)               (43,938)
      Other                                                                                   (127)               -
                                                                                              ----                -------
           Net Cash Flows Used For Investing Activities                                    (28,938)               (43,938)
                                                                                           -------                -------

FINANCING ACTIVITIES:
      Retirement of Long-term Debt                                                         -                      (40,000)
      Change in Advances from Affiliates (net)                                             (12,448)                26,238
      Dividends Paid on Common Stock                                                       (21,618)               (13,500)
      Dividends Paid on Cumulative Preferred Stock                                             (78)                   (78)
                                                                                               ---                    ---
           Net Cash Flows Used For Financing Activities                                    (34,144)               (27,340)
                                                                                           -------                -------

Net Increase (Decrease) in Cash and Cash Equivalents                                          (613)                 2,586
Cash and Cash Equivalents at Beginning of Period                                             6,941                  6,074
                                                                                             -----                  -----
Cash and Cash Equivalents at End of Period                                                $  6,328               $  8,660
                                                                                          ========               ========

Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $11,761,000 and
$13,994,000  and for income taxes was  ($2,957,000)  and  $5,442,000 in 2001 and
2000, respectively.

See Notes to Financial Statements beginning on page L-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001
                                   (UNAUDITED)

The notes to financial  statements are a combined  presentation  for AEP and its
subsidiary registrants as follows:
<S>                                         <C>
1.           General                        AEP, AEGCo, APCo, CPL, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, WTU

2.           Extraordinary Items
               and Cumulative Effect
               of Accounting Change         AEP, CSPCo, OPCo

3.           Acquisitions and Sales
               of Assets                    AEP, OPCo, SWEPCo

4.           Rate Matters                   AEP, CPL, SWEPCo, WTU

5.           Industry Restructuring         AEP, APCo, CPL, CSPCo, I&M, OPCo, PSO, SWEPCo, WTU

6.           Business Segments              AEP, AEGCo, APCo, CPL, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, WTU

7.           Financing Activities
               and Minority Interest        AEP, APCo, CPL, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, WTU

8.           Contingencies                  AEP, AEGCo, APCo, CPL, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, WTU
</TABLE>
1.      GENERAL

               The accompanying unaudited financial statements should be read in
        conjunction  with the 2000 Annual  Report as  incorporated  in and filed
        with the Form 10-K.

               The AEP System  operating  companies  have  reclassified  certain
        settled forward energy  transactions  of their trading  operation from a
        net to a gross  basis of  presentation  in order to better  reflect  the
        scope and nature of the AEP  System's  energy sales and  purchases.  All
        financially net settled trading  transactions,  such as swaps,  futures,
        and  unexercised  options,  continue  to be  reported  on a  net  basis,
        reflecting  the financial  nature of these  transactions.  The following
        prior year amounts were  reclassified  from revenues to purchased  power
        expense to present the prior period on a comparable basis:

                          Three Months Ended                  Nine Months Ended
                          September 30, 2000                  September 30, 2000
                 Company                     (in thousands)
                 -------
                 AEP          $7,692,103                         $15,756,630
                 APCo          1,063,249                           2,660,105
                 CPL             194,425                             194,425
                 CSPCo           574,254                           1,506,671
                 I&M             637,437                           1,651,035
                 KPCo            252,596                             631,748
                 OPCo            901,960                           2,300,395
                 PSO             196,527                             196,527
                 SWEPCo          196,449                             196,449
                 WTU              48,139                              48,139

               In the opinion of management,  the unaudited financial statements
        reflect  all  normal  recurring   accruals  and  adjustments  which  are
        necessary  for a fair  presentation  of the  results of  operations  for
        interim periods.
<PAGE>
2.      EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE

        OPCo and CSPCo Recognize Extraordinary Loss from the Stranding of Ohio
        Gross Receipts Tax

               OPCo and CSPCo recognized an extraordinary loss for stranded Ohio
        Public  Utility  Excise Tax (commonly  known as the Gross Receipts Tax -
        GRT) net of allowable  Ohio coal credits  during the quarter  ended June
        30, 2001.  This loss  resulted from  regulatory  decisions in connection
        with Ohio  deregulation  which  stranded  the  recovery of the GRT.  The
        components of the extraordinary loss by company were:

                                          CSPCo           OPCo          Total
                                          -----           ----          -----
                                             (in thousands)
          Gross Receipts Tax             $42,493         $50,461       $92,954
          Less Coal Credits                7,733          17,361        25,094
                                         -------         -------       -------
          Net Liability for Ohio
           Gross Receipts Tax             34,760          33,100        67,860
          Less Income Tax Benefit          8,353          11,585        19,938
                                         -------         -------       -------

          Extraordinary Loss             $26,407         $21,515       $47,922
                                         =======         =======       =======

               As discussed in Note 7 of the 2000 Annual Report,  CSPCo and OPCo
        appealed to the Ohio  Supreme  Court a PUCO order on Ohio  restructuring
        that the companies  believe failed to provide for recovery for the final
        year of the GRT.  Effective  May 1,  2001,  the PUCO order  reduced  the
        companies'  rates  by the  annual  level  of  GRT.  Effective  with  the
        liability  affixing on May 1, 2001, the PUCO's decision to deny recovery
        in  the  final  year  of  the  GRT  resulted,  under  SFAS  101,  in  an
        extraordinary impairment of the prepaid asset due to the deregulation of
        the companies' generation business.

               CSPCo and OPCo  continue  to seek  recovery  at the Ohio  Supreme
        Court where a decision is expected in 2002.

        Cumulative Effect of Accounting Change - Affecting AEP

               Guidance   for  certain   fuel  supply   contracts   with  volume
        optionality  and  electricity  capacity  contracts  issued by the FASB's
        Derivative  Implementation  Group (DIG) regarding the  implementation of
        SFAS 133, "Accounting for Derivative Instruments and Hedging Activities"
        became  effective in the third quarter of 2001.  The guidance  concluded
        that fuel supply  contracts with volumetric  optionality  cannot qualify
        for a normal purchase or sale exclusion from  mark-to-market  accounting
        and  provided   guidance  for  determining  when  electricity   capacity
        contracts can qualify as a normal purchase or sale.

               Predominantly   all  of  AEP's   contracts  for  coal,   gas  and
        electricity,  which are recorded on a settlement  basis, do not meet the
        criteria  of a  financial  derivative  instrument,  qualify  as a normal
        purchase or sale, and are thereby exempt from the DIG guidance described
        above.  Beginning  July 1, 2001, the effective date of the DIG guidance,
        certain of AEP's fuel supply contracts with volumetric  optionality that
        qualify as financial  derivative  instruments  are marked to market with
        any gain or loss  recognized  in the  income  statement.  The  effect of
        initially  adopting  the  DIG  guidance  at July 1,  2001,  a  favorable
        earnings  mark-to-market  effect of $18 million, net of tax, is reported
        as a cumulative effect of an accounting change on the income statement.

3.      ACQUISITIONS AND SALES OF ASSETS

        Sale of Generating Assets - Affecting AEP

               As discussed in Note 3 of the 2000 Annual Report, the divestiture
        of 1,904 MW of generating capacity was required by the FERC and the PUCT
        as part of the approval of the merger.  In March 2001 AEP  completed the
        sale of Frontera,  one of the generating  plants required to be divested
        under the settlement  agreements approved by the FERC. The sale proceeds
        were $265 million and resulted in an after tax gain of $46 million.

        Acquisition of Houston Pipe Line Company - Affecting AEP

               On  June  1,  2001,  AEP,  through  a  wholly  owned  subsidiary,
        purchased  Houston Pipe Line  Company and Lodisco LLC for $727  million.
        The  acquired  assets  include  4,200 miles of gas  pipeline,  a 30-year
        sublease of a gas storage facility and certain gas marketing  contracts.
        The purchase  method of accounting  was used to record the  acquisition.
        AEP recorded  the assets  acquired and  liabilities  assumed  based upon
        their estimated fair values. The allocation of the purchase price may be
        adjusted based upon  completion of the appraisal  process.  The purchase
        method  results in the assets and  earnings of the  acquired  operations
        being  included  in AEP's  consolidated  financial  statements  from the
        purchase date.

        Acquisition of Lignite Mining Operations - Affecting AEP and SWEPCo

               On June 1, 2001,  SWEPCo assumed mining operations at its jointly
        owned lignite  reserves in  Louisiana.  To settle  litigation,  which is
        discussed  in Note 8, SWEPCo  paid $86  million to  purchase  the mining
        assets and rights of the previous  mine  operator  and assumed  existing
        mine reclamation liabilities. The lignite from the mine will continue to
        supply  SWEPCo's  jointly  owned  power  plant.  Management  expects the
        acquisition to have minimal impact on results of operations.

        Sale of Generating Assets - Affecting AEP

               In July 2001 AEP, through a wholly owned subsidiary, sold its 50%
        interest in a 120-megawatt  generating plant located in Mexico. The sale
        resulted in a third quarter after tax gain of approximately $11 million.

        Sale of Coal Mines - Affecting AEP and OPCo

               In July  2001  AEP and  OPCo  sold  coal  mines  in Ohio and West
        Virginia  and agreed to purchase  approximately  34 million tons of coal
        from the  purchaser of the mines  through  2008.  The sale had a nominal
        impact on results of operations.

        Acquisition of Coal Assets - Affecting AEP

               In  October  2001 AEP  acquired  substantially  all the assets of
        Quaker Coal Company as part of a bankruptcy proceeding  settlement.  AEP
        paid  $101  million  to  Quaker's   creditors  and  assumed   additional
        liabilities  of  approximately  $45 million.  The  acquisition  includes
        property,  coal reserves,  mining  operations  and royalty  interests in
        Colorado,  Kentucky,  Ohio,  Pennsylvania  and West  Virginia.  AEP will
        continue  to operate  the mines and  facilities  which  employ  over 800
        individuals.  The purchase  method of accounting  was used to record the
        acquisition.  AEP recorded the assets acquired and  liabilities  assumed
        based upon their  estimated fair values.  The allocation of the purchase
        price may be adjusted based upon completion of an appraisal process. The
        purchase  method  results  in the assets and  earnings  of the  acquired
        operations  being included in AEP's  consolidated  financial  statements
        from the purchase date.

        Acquisition of Barge Line - Affecting AEP

               On  November 1, 2001,  AEP,  through a wholly  owned  subsidiary,
        acquired MEMCO Barge Line. The $270 million acquisition adds 1200 hopper
        barges and 30  towboats to AEP's  existing  barging  fleet.  MEMCO's 450
        employees will continue to operate the barge line.  The purchase  method
        of  accounting  was used to record the  acquisition.  AEP  recorded  the
        assets acquired and liabilities  assumed based upon their estimated fair
        values.  The allocation of the purchase price may be adjusted based upon
        completion of an appraisal  process.  The purchase method results in the
        assets and earnings of the acquired  operations  being included in AEP's
        consolidated financial statements from the purchase date.
<PAGE>
4.      RATE MATTERS

        Texas Fuel Costs - Affecting AEP, CPL, SWEPCo and WTU

            As  discussed  in Note 5 of the  2000  Annual  Report,  AEP's  Texas
      electric operating companies  experienced natural gas fuel price increases
      which resulted in under-recoveries of fuel costs.

            Fuel recovery for Texas  utilities is a multi-step  procedure.  When
      fuel costs  change,  utilities  file with the PUCT for authority to adjust
      fuel  factors.  If a utility's  prior fuel  factors  result in an over- or
      under-recovery  of fuel, the utility will also request a surcharge  factor
      to refund or collect  that  amount.  While fuel  factors  are  intended to
      recover all  fuel-related  costs,  final  settlement of these accounts are
      subject to reconciliation and approval by the PUCT.

            Fuel  reconciliation   proceedings   determine  whether  fuel  costs
      incurred and collected  during the  reconciliation  period were reasonable
      and necessary. All fuel costs incurred since the prior reconciliation date
      are  subject  to  PUCT  review  and  approval.  If  material  amounts  are
      determined  to be  unreasonable  and ordered to be refunded to  customers,
      results of operations and cash flows would be negatively impacted.

            According to Texas Restructuring Legislation, fuel cost in the Texas
      jurisdiction  after  2001 will no longer be  subject  to PUCT  review  and
      reconciliation. During 2002 CPL will file a final fuel reconciliation with
      the PUCT to reconcile its fuel costs  through the period  ending  December
      31, 2001. The ultimate  recovery of deferred fuel balances at December 31,
      2001 will be  decided  as part of CPL's 2004  true-up  proceeding.  If the
      final  under-recovered  fuel balances or any amounts  incurred but not yet
      reconciled are  disallowed,  it would have a negative impact on results of
      operations.

            In October 2001 the PUCT delayed the start of customer choice in the
      SPP area of Texas.  Portions of SWEPCo's and WTU's service territories are
      in the SPP. The effect of the delay on fuel recovery is being  reviewed by
      the PUCT and management.  The PUCT has not announced how the delay will be
      applied to WTU whose customers are in SPP and ERCOT.

            The  following  table  lists  the  status  of  Texas  jurisdictional
      reconciliation, total fuel cost subject to reconciliation, under-recovered
      fuel balances and the remaining fuel surcharge by company:
<TABLE>
<CAPTION>
                                           Fuel cost subject to      Under-recovered
                    Reconciliation         reconciliation at         fuel balances at           Remaining authorized
      Company       completed through      September 30, 2001        September 30, 2001         fuel surcharge
      -------       -----------------      ------------------        ------------------         --------------

<S>                                        <C>                       <C>                        <C>
      CPL           June     30, 1998      $1.6 billion              $11 million                   NONE
      SWEPCo        December 31, 1999       283 million               18 million                $6 million
      WTU           June     30, 1997       641 million               51 million                 3 million
</TABLE>
            Under Texas restructuring, newly organized retail electric providers
      will make sales to  consumers  beginning  in January 1, 2002.  These sales
      will be at fixed rates during a transition  period from 2002 through 2006.
      However,  the fuel cost component of a retail  electric  providers'  fixed
      rates will be subject to  prospective  adjustment  twice a year based upon
      changes  in a natural  gas price  index.  As part of the  preparation  for
      customer choice,  CPL, SWEPCo and WTU filed their proposed fuel factors to
      be implemented as part of the fixed rates  effective  January 1, 2002. The
      filings are pending at the PUCT.

      Status of Rate Filings
      Central Power and Light

            In January 2001 CPL filed an application  with the PUCT to implement
      a $175.9  million  increase in fuel factors over the ten months March 2001
      through December 2001. In addition,  to collect its  under-recovered  fuel
      costs,  CPL  proposed to  implement  an interim  fuel  surcharge  of $51.8
      million,  which includes  accumulated interest on unrecovered amounts. The
      PUCT  approved  in April  2001  the  implementation  of a  $170.5  million
      increase in fixed fuel factors.  The PUCT voted to defer implementation of
      the requested fuel surcharge  until the final fuel  reconciliation,  which
      occurs as part of the 2004 true-up proceeding.
<PAGE>
      Southwestern Electric Power Company

            In  November  2000 SWEPCo  filed with the PUCT to increase  its fuel
      factors effective January 2001 and to collect  previously  under-recovered
      fuel  costs  over a  six-month  period  through a  proposed  interim  fuel
      surcharge,  which includes  accumulated  interest on previous  unrecovered
      fuel costs.  The PUCT approved an increase in SWEPCo's fuel factors of $12
      million and the  implementation  of a fuel surcharge of $11.8 million from
      February to July 2001.

            In May 2001 SWEPCo filed an application to increase its fuel factors
      by $4.3 million.  The application  also proposed a fuel surcharge of $18.3
      million,  which includes accumulated interest on previous unrecovered fuel
      costs. The PUCT approved in August 2001 a unanimous stipulation, requiring
      SWEPCo to withdraw its fuel  factors  request and to implement a surcharge
      of $10.7  million for  unrecovered  fuel.  The PUCT deferred the remaining
      $6.8 million balance of unrecovered fuel until a later proceeding.

      West Texas Utilities

            In April 2001 the PUCT  approved new fuel factors for WTU to collect
      $43.4 million of increased  fuel costs from March through  December  2001.
      WTU  implemented  the  increase in its fuel factors in March 2001 after an
      Administrative Law Judge approved a settlement of WTU's application. WTU's
      original  application,  in January  2001,  had  requested a $46.5  million
      increase in its fuel factors.

            In March 2001 WTU filed with the PUCT to implement a fuel  surcharge
      for  under-recovered  fuel costs of $59.5  million  including  interest on
      previous  unrecovered  fuel costs.  WTU  requested  that the  surcharge be
      effective  May  2001  through  December  2001.  In  October  2001 the PUCT
      deferred  consideration  of WTU's  fuel  recovery  until the 2004  true-up
      proceeding.

      Texas Transmission Rates - Affecting AEP, CPL and WTU

            On June  28,  2001,  the  Supreme  Court  of  Texas  ruled  that the
      transmission  pricing  mechanism  created by the PUCT in 1996 was invalid.
      The court upheld an appeal filed by unaffiliated  Texas utilities that the
      PUCT  exceeded  its  statutory  authority to set such rates for the period
      January 1, 1997 through August 31, 1999.  Effective September 1, 1999, the
      legislature  granted  this  authority  to the  PUCT.  CPL and WTU were not
      parties  to the  case.  However,  the  companies'  transmission  sales and
      purchases were priced using the invalid  rates.  It is unclear what action
      the PUCT will take to respond to the court's  ruling.  If the PUCT changes
      rates retroactively, the result could have a material impact on results of
      operations and cash flows for CPL and WTU.

      FERC Transmission Rates - Affecting AEP, CPL, PSO, SWEPCo and WTU

            In November 2001 FERC issued an order requiring CPL, PSO, SWEPCo and
      WTU to submit revised open access transmission  tariffs, and calculate and
      issue refunds for  overcharges  from January 1, 1997.  The order  resulted
      from a remand by an  appeals  court of a tariff  compliance  filing  order
      issued in November 1998 that had been appealed by certain  customers.  The
      companies are evaluating the order and its impact on results of operations
      and cash flows.

      Excess Earnings - Affecting AEP, CPL, SWEPCo and WTU

            In March  2001 CPL,  SWEPCo  and WTU filed  their  Annual  Report of
      Excess  Earnings  for  2000  with the  PUCT.  In July  2001 the  companies
      received  notice  that the  Staff of the PUCT  and the  Office  of  Public
      Utility Counsel (OPC)  disagreed with the reports as filed.  The Staff and
      OPC took exception to certain adjustments made by the companies.  OPC also
      took  exception to the  application  of certain  sections of the law as it
      pertains to the calculation of revenue within the report.
<PAGE>
            The PUCT issued a final order in  September  2001 and the  companies
      recorded adjustments to match estimated provisions with final amounts.

            The companies  requested a rehearing on the proper  determination of
      excess earnings which the PUCT denied. In October 2001 the companies filed
      in district court seeking  judicial review of the PUCT's  determination of
      excess earnings. A decision from the court is not expected until 2002.

5.    INDUSTRY RESTRUCTURING
      ----------------------

            As discussed in the 2000 Annual  Report,  restructuring  legislation
      has  been  enacted  in  seven  of  AEP's  eleven  state  retail   electric
      jurisdictions.  The legislation  provides for a transition from cost-based
      regulation  of  bundled  electric  service to  customer  choice and market
      pricing for the generation of electricity.

      Ohio Restructuring - Affecting AEP, CSPCo and OPCo

            Effective January 1, 2001,  customer choice of electricity  supplier
      began under the Ohio Act. The PUCO approved alternative suppliers (many of
      whom  remain  inactive)  to compete  for  CSPCo's  and  OPCo's  customers.
      Virtually all customers continue to be served by CSPCo and OPCo.

            In accordance  with the Ohio Act,  CSPCo and OPCo  implemented  rate
      reductions of 5% for the generation portion of residential rates effective
      January 1, 2001. The generation  portion of retail rates,  including fuel,
      will remain frozen until December 31, 2005 or the PUCO  determines  that a
      competitive market exists.

            On January 16, 2001, Shell Energy Services Company filed a Notice of
      Appeal with the Ohio  Supreme  Court  challenging  PUCO's  approval of our
      transition  settlement  agreement including recovery of regulatory assets.
      Shell  withdrew as an  alternative  retail  supplier for Ohio.  The PUCO's
      motion to dismiss Shell's appeal is pending before the Ohio Supreme Court.
      Management  is unable to  predict  the  outcome  of this  litigation.  The
      resolution  of this  matter  could  negatively  impact  future  results of
      operations and cash flows.

      Virginia Restructuring - Affecting AEP and APCo

            In accordance with its restructuring law, the Virginia  jurisdiction
      will  begin a  transition  to choice of  electricity  supplier  for retail
      customers  on January 1, 2002.  The  Virginia  restructuring  law requires
      filings to be made that outline the  functional  separation  of generation
      from  transmission and distribution and a rate unbundling plan. APCo filed
      its  separation  plan and rate  unbundling  plan  with the  Virginia  SCC.
      Hearings were held in October 2001.  Settlement  agreements  that resolved
      most issues except the assignment of the  generation - related  regulatory
      assets among functionally  separated generation and delivery organizations
      are  pending  before  the  Virginia  SCC.  Presently,   capped  rates  are
      sufficient to recover generation - related  regulatory assets.  Management
      is unable to predict the outcome of the hearings.

      Arkansas Restructuring - Affecting AEP and SWEPCo

            In 1999 Arkansas  enacted  legislation to  restructure  its electric
      utility  industry.  In February 2001 the Arkansas  General Assembly passed
      legislation   that  was  signed   into  law  by  the   Governor  to  delay
      restructuring.  The legislation  extended the date for the start of retail
      electric  competition  to  October  1,  2003  and  provided  the  Arkansas
      Commission  with the authority to delay that date for up to two additional
      years.
<PAGE>
      Texas Restructuring - Affecting AEP, CPL, SWEPCo and WTU

            Texas  Restructuring  Legislation gives customers the opportunity to
      choose   their   electric   provider  and   eliminates   the  fuel  clause
      reconciliation   process   beginning  January  1,  2002.  A  2004  true-up
      proceeding will determine the amount of stranded costs including the final
      fuel recovery, net regulatory asset recovery,  excess earnings offsets and
      other issues.

            As discussed in the 2000 Annual Report, the method used to determine
      initial  stranded  costs to be  recovered  beginning on January 1, 2002 is
      still  subject to  challenge.  In March 2000 CPL  submitted a $1.1 billion
      estimate of stranded  costs.  After hearings on the  submission,  the PUCT
      issued in February 2001 an interim decision  determining an initial amount
      of stranded costs for CPL of negative $580 million. In April 2001 the PUCT
      ruled that its current  estimate of CPL's stranded costs was negative $615
      million. CPL disagrees with the ruling and has requested a rehearing.

            In April  2001 the PUCT  issued  an order  requiring  CPL to  reduce
      distribution  rates by $54.8  million  over a five-year  period  beginning
      January 1, 2002 in order to return  estimated  excess  earnings  for 1999,
      2000 and 2001. The Texas  Restructuring  Legislation  intended that excess
      earnings  reduce  stranded  costs.  Final  stranded  cost  amounts and the
      treatment  of  excess  earnings  will be  determined  in the 2004  true-up
      proceeding.  Currently the PUCT  estimates  that CPL will have no stranded
      costs  and has  ordered  the rate  reduction  to return  excess  earnings.
      Management  believes that CPL will have stranded  costs in 2004,  and that
      the current  treatment  of excess  earnings  will be amended at that time.
      Since CPL expensed  excess  earnings  amounts in 1999,  2000 and 2001, the
      April order has no additional effect on reported net income. The amount to
      be refunded is recorded as a regulatory liability.

            As  discussed  in  Note  7 of  the  2000  Annual  Report,  the  PUCT
      authorized  the  issuance  of up to $797  million  of bonds to  securitize
      certain of CPL's regulatory  assets.  The PUCT's order that authorized the
      securization  was appealed to the Supreme Court of Texas. On June 6, 2001,
      the  Supreme  Court  upheld the  PUCT's  securitization  order.  The Court
      dismissed the  plaintiffs'  request for a rehearing.  Management  plans to
      issue the securitization bonds prior to January 1, 2002.

            On August 3, 2001, the Staff of the PUCT filed a Petition  seeking a
      determination  of  whether  electric  operations  in the SPP are ready for
      competition.  This  Petition  affects  parts of SWEPCo and WTU.  Under the
      Texas  Restructuring  Legislation,   the  PUCT  can  delay  the  start  of
      competition  if the  market  and its  participants  are not  prepared  for
      competition.  Under  the law,  certain  situations  indicate  this lack of
      preparedness, and in Staff's opinion, those indicators are present for the
      SPP area.  In October 2001 the PUCT ordered a delay in the start of retail
      competition  in the SPP area of Texas and  continued  the pilot project in
      the SPP area.  Management is evaluating the ramifications of this delay in
      the January 1, 2002 start date of competition for SWEPCo's and WTU's Texas
      operations in the SPP.

            A Texas  settlement  agreement  in  connection  with the AEP and CSW
      merger permits CPL to apply up to $20 million of previously identified STP
      ECOM plant  assets a year in 2000 and 2001 to reduce any excess  earnings.
      STP ECOM plant assets will be  depreciated  in accordance  with GAAP, on a
      systematic and rational  basis.  To the extent excess  earnings exceed $20
      million in 2001, CPL will establish a regulatory  liability by a charge to
      earnings.

            In the event CPL, SWEPCo,  and WTU are unable after the 2004 true-up
      proceeding  to  recover  their   generation-related   regulatory   assets,
      unrecovered fuel balances,  stranded costs and other restructuring related
      costs,  it could  result  in an  extraordinary  loss  which  could  have a
      material adverse effect on results of operations,  cash flows and possibly
      financial condition.
<PAGE>
      Michigan Restructuring - Affecting AEP and I&M

            As discussed  in the 2000 Annual  Report,  the Michigan  Legislation
      gave the MPSC broad powers to implement  customer  choice.  In  compliance
      with MPSC orders, on June 5, 2001, I&M filed its proposed unbundled rates,
      open access  tariffs and terms of service.  On October 11, 2001,  the MPSC
      issued an "Order Approving Settlement  Agreement" which generally approved
      I&M's  June 5, 2001  filing  except  for  agreed  upon  modifications.  In
      accordance  with the  settlement  agreement,  I&M agreed that  recovery of
      implementation  costs and regulatory  assets would be determined in future
      proceedings.  The  settlement  agreement  did not modify the procedure for
      review of  decommissioning  cost recoveries.  Customer choice commences on
      January 1, 2002.

            Management  does not expect  that I&M will incur  material  tangible
      asset impairments or regulatory asset write-offs.  If I&M is not permitted
      to recover all or a portion of its  generation-related  regulatory assets,
      unrecorded   decommissioning   obligation,   stranded   costs   or   other
      implementation  costs  in  future  proceedings,  it  could  result  in  an
      extraordinary loss that could have a material adverse effect on results of
      operations, cash flows and possibly financial condition.

      Oklahoma Restructuring - Affecting AEP and PSO

            In June  2001 the  Oklahoma  Governor  signed  into law a bill  that
      delayed  retail  electric  competition   indefinitely.   Under  previously
      approved legislation, the start date for Oklahoma customer choice had been
      July 1, 2002.

6.       BUSINESS SEGMENTS

             AEP's  three  principal  business  segments  and  their  respective
activities are:

o Wholesale
   o  Generation  of  electricity  for sale to retail and  wholesale  customers
   o  Marketing  and trading of  electricity  and gas  worldwide,
   o  Gas  pipeline and storage services and other energy supply related
      businesses.
o Energy Delivery
   o  Domestic electric transmission,
   o  Domestic electric distribution.
o Other Investments
   o  Foreign electricity  generation  investments,
   o  Foreign electric distribution and supply investments,
   o  Telecommunication services.

             Amounts  reported  below for the three  business  segments  include
certain estimates and allocations where necessary.
<TABLE>
<CAPTION>
                                                                          Energy    Other        Reconciling
                                                              Wholesale   Delivery  Investments  Adjustments   Consolidated
<S>                                                             <C>        <C>          <C>         <C>            <C>
        Nine months ended September 30, 2001 (in millions) Revenues from:
         External customers                                     $36,219    $ 2,599      $5,041      $ 3,219        $47,078
         Transactions with other operating segments               1,771         14         789       (2,574)         -
        Segment EBIT                                              1,387        810         201         (121)         2,277
        Total assets at September 30, 2001                       32,632     13,321       8,008       (1,142)        52,819

        Nine months ended September 30, 2000 Revenues from:
         External customers                                      21,908      2,428       1,550          (24)        25,862
         Transactions with other operating segments               1,214          1         503       (1,718)         -
        Segment EBIT                                                779        872         261         (244)         1,668
        Total assets at September 30, 2000                       23,574     11,918       5,306         (105)        40,693
</TABLE>
<PAGE>
             All of the registrant subsidiaries, except AEGCo, have two business
         segments.  The  segment  results  for  each of these  subsidiaries  are
         reported  in the  table  below.  AEGCo  has one  segment,  a  wholesale
         generation  business.  AEGCo's  results of  operations  are reported in
         AEGCo's financial statements.
<TABLE>
<CAPTION>
                                      Nine Months Ended        September 30, 2001    Nine Months Ended
                                      September 30, 2001                             September 30, 2000   September 30, 2000
                                      ------------------                             ------------------   ------------------
                                  Revenues                                          Revenues
                                  From                                              From
                                  External          Segment                         External     Segment
                                  Customers         EBIT       Total Assets         Customers    EBIT          Total Assets
                                  ---------         ----                            ---------    ----
                                                   (in thousands)                                   (in thousands)
<S>                                  <C>            <C>          <C>                 <C>            <C>            <C>
        Wholesale Segment
        APCo                         $5,385,003     $135,288     $3,066,057          $3,595,000     $ 119,458      $2,658,933
        CPL                           2,103,562      245,947      3,080,135           1,169,787       216,115       2,887,340
        CSPCo                         3,173,388      197,304      2,157,522           2,222,019       186,255       1,840,981
        I&M                           3,712,009      121,130      3,528,300           2,548,819     (124,079)       3,258,113
        KPCo                          1,282,741        4,516        638,684             841,129        10,171         540,291
        OPCo                          4,741,282      198,107      3,337,773           3,622,605       248,336       3,088,916
        PSO                           1,455,850       51,063        946,654             729,999        59,411         856,661
        SWEPCo                        1,626,283       73,034      1,304,534             782,780        33,247       1,130,548
        WTU                             682,956       12,410        432,338             332,458         8,548         393,230

        Energy Delivery Segment
        APCo                           $455,587     $165,744     $2,418,839            $425,792      $155,580      $2,097,656
        CPL                             384,290      120,376      2,212,194             380,246       129,952       2,073,726
        CSPCo                           358,984       81,452      1,213,606             300,455        69,692       1,035,552
        I&M                             241,581       91,305      1,592,600             231,691       103,294       1,470,643
        KPCo                            101,367       42,748        618,567              92,281        40,484         523,274
        OPCo                            405,352       78,516      1,861,251             346,225       109,428       1,722,479
        PSO                             208,911       75,360      1,054,728             195,739        80,581         954,461
        SWEPCo                          262,943       97,149      1,357,780             271,276       118,874       1,176,692
        WTU                             134,512       38,174        575,443             137,949        41,765         523,391

        Registrant Subsidiaries
        Company Total
        APCo                         $5,840,590      $301,032    $5,484,896          $4,020,792      $275,038      $4,756,589
        CPL                           2,487,852       366,323     5,292,329           1,550,033       346,067       4,961,066
        CSPCo                         3,532,372       278,756     3,371,128           2,522,474       255,947       2,876,533
        I&M                           3,953,590       212,435     5,120,900           2,780,510      (20,785)       4,728,756
        KPCo                          1,384,108        47,264     1,257,251             933,410        50,655       1,063,565
        OPCo                          5,146,634       276,623     5,199,024           3,968,830       357,764       4,811,395
        PSO                           1,664,761       126,423     2,001,382             925,738       139,992       1,811,122
        SWEPCo                        1,889,226       170,183     2,662,314           1,054,056       152,121       2,307,240
        WTU                             817,468        50,584     1,007,781             470,407        50,313         916,621
</TABLE>
                  Management's  intention is to  structurally  and  functionally
         separate  operations into regulated and non-regulated  businesses.  The
         vertically integrated  generation-transmission-distribution  operations
         of the utility  companies in Ohio and Texas (CSPCo,  OPCo, CPL and WTU)
         will  be  structurally  separated  into  non-regulated   wholesale  and
         regulated   energy   delivery   businesses.   The   remaining   utility
         subsidiaries  will  to  be  grouped  with  AEP's  regulated   business.
         Management  is  currently  in the process of  obtaining  the  necessary
         regulatory approvals to implement this new business structure.
<PAGE>
7.      FINANCING ACTIVITIES AND MINORITY INTEREST

               Long-term  debt and other  securities  issuances and  retirements
during the first nine months of 2001 were:
<TABLE>
<CAPTION>
                            Type                    Principal    Interest
        Company           of Debt                     Amount       Rate       Due Date
        -------           -------                   ---------    --------     --------
        Issuances                                 (in millions)    (%)
        ---------
<S>                                                   <C>         <C>           <C>
        AEP               Senior Unsecured Notes      $  250      5.50(a)       2003
        AEP               Senior Unsecured Notes       1,000      6.125(a)      2006
        APCo              Senior Unsecured Notes         125       (b)          2003
        Non-Registrant
         AEP Subs.        Various                        171      Various       2001-2004
                                                      ------
        Total AEP System                              $1,546
                                                      ======

        Retirements
        APCo              First Mortgage Bonds         $  100     6-3/8         2001
        APCo              Senior Unsecured Notes           75     4.00-6.00     2001
        CPL               Trust Preferred Securities       12     8.00          2037
        CSP               First Mortgage Bonds             42     7.25          2002
        CSP               First Mortgage Bonds             14     7.15          2002
        CSP               First Mortgage Bonds             32     6.80          2003
        CSP               First Mortgage Bonds             15     6.60          2003
        CSP               First Mortgage Bonds             15     6.10          2003
        CSP               First Mortgage Bonds             24     6.55          2004
        CSP               First Mortgage Bonds             24     6.75          2004
        CSP               First Mortgage Bonds             33     8.70          2022
        CSP               First Mortgage Bonds             23     8.40          2022
        CSP               First Mortgage Bonds             20     7.45          2024
        CSP               First Mortgage Bonds             21     7.60          2024
        CSP               Junior Debentures                 2     8-3/8         2025
        CSP               Senior Unsecured Notes           12     6.85          2005
        I&M               First Mortgage Bonds             40     7.63          2001
        I&M               First Mortgage Bonds              5     7.35          2023
        KPCo              First Mortgage Bonds             20     8.95          2001
        KPCo              First Mortgage Bonds             40     8.90          2001
        OPCo              Senior Unsecured Notes           75     4.00-6.00     2001
        OPCo              Notes Payable                    30     6.20          2001
        OPCo              Finance Obligation               13     6.98          2001
        OPCo              First Mortgage Bonds             13     6.00          2003
        OPCo              First Mortgage Bonds             30     6.15          2003
        OPCo              First Mortgage Bonds             45     8.80          2022
        OPCo              First Mortgage Bonds             10     7.75          2023
        PSO               First Mortgage Bonds              6     5.91          2001
        PSO               First Mortgage Bonds              5     6.02          2001
        PSO               First Mortgage Bonds              9     6.02          2001
        Non-Registrant
         AEP Subs.        Various                         230     Various       2001
                                                       ------
        Total AEP System                               $1,035
                                                       ======
</TABLE>
<PAGE>
               In addition to the transactions  reported in the table above, the
        following table lists  intercompany  issuances of debt and retirements
        of debt due to AEP Co., Inc.
<TABLE>
<CAPTION>
                                                                    Interest
        Company               Type of Debt       Principal Amount     Rate         Due Date
        -------               ------------       ----------------     ----         --------
        Issuances                                  (in millions)      (%)
        ---------
<S>                                                    <C>          <C>            <C>
        CSP                   Notes Payable            $  200          (c)              2002
        KPCo                  Notes Payable                60         6.501             2006
        KPCo                  Notes Payable                15         4.336             2003
        OPCo                  Notes Payable               240         6.501             2006
        OPCo                  Notes Payable                60         4.336             2003
        Non-Registrant
         AEP Subsidiaries     Notes Payable               575       4.336-6.501    2001-2006
                                                       ------
        Total AEP System                               $1,150
                                                       ======

        Retirements
        -----------
        Non-Registrant
         AEP Subsidiaries     Notes Payable               $50       4.336-6.501    2001-2006
                                                          ===
</TABLE>
        (a)    In May 2001,  AEP issued $1.25  billion of debt  consisting of $1
               billion of senior  notes and $250  million  of  putable  callable
               notes.  The  interest  rate on  senior  notes  (due May  2006) is
               6.125%. Additionally,  AEP entered into an interest rate swap for
               a portion of the proceeds,  which effectively  converts a portion
               of this  interest  rate into LIBOR based  floating  rate  through
               2006.  The putable  callable  notes (Series B notes) have a fixed
               interest  rate of 5.5% until May 2003.  At that date the Series B
               notes may be subject to call by a third  party for  purchase  and
               remarketing,  in which case the  maturity  would extend until may
               2013. If the Series B notes are not called for remarketing,  they
               will be redeemed.
        (b)    A floating interest rate is determined quarterly.  The rate on
               September 30, 2001 was 3.29%.
        (c)    A floating interest rate is determined quarterly.  The rate on
               September 30, 2001 was 3.265%.

        Other Financing Activities

               On May 24, 2001,  AEP renewed its existing  $2.5 billion  364-day
        revolving  credit facility.  AEP renews this facility  annually and uses
        it, together with an existing $1 billion 5-year  revolving  credit which
        matures  May 30,  2005 as an  alternative  means of  funding  for  AEP's
        commercial paper program.

               On May 30, 2001, AEP Credit ceased to issue  commercial paper and
        allowed its $2 billion unsecured  revolving credit facility to mature. A
        $1.5 billion  364-day note purchase  agreement,  which closed on May 30,
        2001,  replaced  Credit's funding needs.  Bank-sponsored  financings are
        funding this facility.

        Minority Interest in Subsidiaries

        AEP's  minority  interests  at  September  30, 2001 and 2000 include the
        following:
                                                      2001              2000
                                                      ----              ----
                                                          (in millions)
                  Funding Subsidiary                  $750               $ -
                  Nanyang General Light Electric Co.    20                17
                  Other                                  3                 3
                                                      ----               ---
                                                      $773               $20
                                                      ====               ===

                  In August  2001 AEP formed a funding  subsidiary  as a limited
         liability  company and sold a  non-controlling,  preferred  interest in
         such limited liability  company to a third party for $750 million.  The
         preferred  interest  receives a preferred  return  equal to an adjusted
         floating  reference rate. The $750 million  received  replaces  interim
         funding used to acquire Houston Pipe Line Company in June 2001(see Note
         3). The  preferred  interest is supported  by pipeline  assets and $325
         million of a  preferred  stock  interest in an AEP  affiliate  which is
         convertible,  under  certain  circumstances,  into $325  million of AEP
         common stock. AEP could elect not to have the transaction  supported by
         the preferred  stock of its  affiliate if the  preferred  interest were
         reduced by $225  million.  The  results of  operations,  cash flows and
         financial  position of the limited  liability  company are consolidated
<PAGE>
         with  AEP.  The  non-controlling  preferred  interest  in  the  limited
         liability company is included on AEP's consolidated  balance sheet line
         "Minority Interest in Subsidiaries."

8.      CONTINGENCIES

        Litigation

        Shareholders' Litigation - Affecting AEP

               In  2000  five   complaints   were  filed   against  AEP  seeking
        unspecified  compensatory  damages  for  alleged  violations  of federal
        securities  laws. A court order  consolidated  the cases.  However,  the
        court has not determined if the plaintiffs  represent a class consisting
        of all persons and entities  who acquired AEP common stock  between July
        25,  1997 and June 25,  1999.  On March 5,  2001,  AEP filed a motion to
        dismiss the cases. All parties  presented oral arguments on AEP's motion
        to  dismiss  on June 7,  2001.  Management  believes  these  shareholder
        complaints are without merit and intends to continue to oppose them. The
        outcome of this litigation or its impact on results of operations,  cash
        flows or financial condition cannot be predicted.

        Municipal Franchise Fee Litigation - Affecting AEP and CPL

               CPL has been involved in litigation regarding municipal franchise
        fees in Texas as a result of a class  action  suit  filed by the City of
        San  Juan,  Texas in 1996.  The City of San Juan  claims  CPL  underpaid
        municipal  franchise  fees and seeks  damages of up to $300 million plus
        attorney's  fees. CPL filed a counterclaim  for overpayment of franchise
        fees.

               The litigation moved procedurally  through the Texas Court System
        and was sent to  mediation  without  resolution.  CPL notified the other
        cities it serves of the pending  class action  suit.  CPL has pledged to
        extend any final decision which  determines an underpayment of franchise
        fees to cities who declined to  participate in the suit. The court ruled
        that the class of plaintiffs  would consist of  approximately  30 cities
        and set a trial date.

               During  the third  quarter of 2001 the  cities  who  declined  to
        participate in the class action lawsuit reached an agreement with CPL to
        settle their claims. The agreement with approximately 95 cities requires
        CPL to pay a total of $8  million  and  releases  CPL  from any  further
        liability. CPL recorded the liability in August 2001.

               In  October  2001 CPL  settled  with the city of San Juan and the
        remaining class action cities for  approximately $3 million.  Management
        believes the court will  approve the  settlements  and payments  will be
        made before year-end.

        Texas Base Rate Litigation - Affecting AEP and CPL

               As discussed in the 2000 Annual Report,  CPL has been involved in
        litigation concerning a 1997 PUCT base rate order.

               The primary issues were:
               o    Classification of $800 million of invested capital at STP as
                    excess cost over market  (ECOM)  earning a lower return than
                    other generating property; and
               o    Disallowance of $18 million of affiliated service billings.

               In October  2001 the Texas  Supreme  Court  denied our request to
        review this case.  At this time,  management  is  reviewing  its options
        which includes seeking a rehearing.  Management is unable to predict the
        final  resolution  of  this  litigation  or its  impact  on  results  of
        operations or cash flows.
<PAGE>
        Lignite Mining Agreement Litigation - Affecting AEP and SWEPCo

               In May 2001 SWEPCo settled ongoing litigation  concerning lignite
        mining in Louisiana.  As discussed in Note 8 of the 2000 Annual  Report,
        SWEPCo has been involved in litigation  concerning the mining of lignite
        from jointly owned lignite  reserves.  SWEPCo and CLECO are joint owners
        of Dolet Hills  Power  Station  Unit 1 and own  lignite  reserves in the
        Dolet  Hills area of  northwestern  Louisiana.  In 1982 SWEPCo and CLECO
        entered into a lignite mining agreement with DHMV, a partnership for the
        mining and  delivery of lignite from these  reserves.  Since 1997 SWEPCo
        and CLECO have been involved in  litigation  with DHMV and its partners.
        In 2000 the  parties  agreed to settle  the  litigation.  As part of the
        settlement,  SWEPCo  purchased  DHMV's interest in the mining assets and
        mining  rights for $86 million and assumed the related  obligations  for
        mine reclamation (See Note 3). The settlement  agreement gives CLECO the
        option to acquire up to a 50% interest in the mining assets.

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

               As discussed in the 2000 Annual Report,  Federal EPA and a number
        of states alleged that AEP, APCo,  CSPCo,  I&M and OPCo modified certain
        generating  units in  violation  of the Clean Air Act.  The  Federal EPA
        filed  complaints  against the companies in U.S.  District Court for the
        Southern  District  of Ohio in 1999.  A separate  lawsuit  initiated  by
        certain special  interest groups was  consolidated  with the Federal EPA
        case. The alleged  modification of the generating  units occurred over a
        20 year period.

               Under  the  Clean  Air  Act,  if  a  plant   undertakes  a  major
        modification that directly results in an emissions increase,  permitting
        requirements might be triggered and the plant may be required to install
        additional pollution control technology. This requirement does not apply
        to  activities  such as routine  maintenance,  replacement  of  degraded
        equipment  or  failed  components,  or  other  repairs  needed  for  the
        reliable,  safe and efficient  operation of the plant. The Clean Air Act
        authorizes  civil  penalties  of up to $27,500 per day per  violation at
        each generating unit ($25,000 per day prior to January 30, 1997).

               In March 2001 the District Court ruled claims for civil penalties
        based on activities that occurred more than five years before the filing
        date of the  complaints  cannot be  imposed.  There is no time  limit on
        claims for injunctive relief.

               In  February  2001 the  plaintiffs  filed a motion  requesting  a
        determination that four projects undertaken on units at Sporn,  Cardinal
        and Clinch River plants do not constitute "routine  maintenance,  repair
        and  replacement"  as used in the Clean Air Act.  The Court  denied  the
        plaintiffs'  motion as premature.  Management  believes its maintenance,
        repair and replacement  activities were in conformity with the Clean Air
        Act and intends to vigorously pursue its defense.

               In the event the AEP System companies do not prevail, any capital
        and operating costs of additional  pollution  control equipment that may
        be required as well as any  penalties  imposed  would  adversely  affect
        future  results  of  operations,   cash  flows  and  possibly  financial
        condition.

               In December 2000 Cinergy Corp.,  an unaffiliated  utility,  which
        operates  certain plants  jointly owned with CSPCo,  reached a tentative
        agreement to settle  litigation  regarding  generating  plant  emissions
        under the Clean Air Act.  Negotiations  are  continuing in an attempt to
        reach final  settlement  terms.  Cinergy's  settlement  could impact the
        operation of Zimmer Plant and W.C.  Beckjord  Generating  Station Unit 6
        (owned  25.4%  and  12.5%,  respectively,   by  CSPCo).  Until  a  final
        settlement   is  reached,   CSPCo  will  be  unable  to  determine   the
        settlement's  impact on its  jointly  owned  facilities  and its  future
        results of operations and cash flows.

        NOx Reductions - Affecting AEP, AEGCo, APCo, CPL, CSPCo, I&M, KPCo, OPCo
        and SWEPCo

               Federal  EPA issued a rule (the NOx Rule)  requiring  substantial
        reductions  in NOx  emissions in a number of eastern  states,  including
        states in which the AEP System's generating plants are located.  The NOx
        Rule has been upheld on appeal.  The compliance date for the NOx Rule is
        May 31, 2004.
<PAGE>
               The NOx Rule  requires  states to submit plans to comply with its
        provisions.  Federal EPA ruled that eleven states,  including  states in
        which AEGCo's,  APCo's,  CSPCo's,  I&M's,  KPCo's and OPCo's  generating
        units are located,  failed to submit approvable  compliance plans. Those
        states could face stringent  sanctions  including limits on construction
        of new sources of air  emissions,  loss of federal  highway  funding and
        possible Federal EPA takeover of state air quality management  programs.
        AEP and other  utilities  requested  that the D.C.  Circuit Court review
        this ruling.

               Federal EPA also  adopted a revised  rule (the  Section 126 Rule)
        granting petitions filed by certain  northeastern states under the Clean
        Air Act. The rule imposes emissions reduction requirements comparable to
        the NOx  Rule  beginning  May 1,  2003,  for  most of  AEP's  coal-fired
        generating  units.  After  review,  the D.C.  Circuit  Court  upheld the
        Section 126 Rule.

               The D.C. Circuit Court instructed  Federal EPA to justify methods
        used to allocate allowances and project growth for both the NOx Rule and
        the Section 126 Rule.  AEP and other  utilities  requested that the D.C.
        Circuit  Court  vacate  the  Section  126 Rule or  suspend  its May 2003
        compliance  date. On August 24, 2001,  the D.C.  Circuit Court issued an
        order tolling the compliance  schedule until Federal EPA responds to the
        Court's remand.

               The Texas Natural Resource Conservation  Commission adopted rules
        requiring significant  reductions in NOx emissions from utility sources,
        including those owned by CPL and SWEPCo. The compliance date is May 2003
        for CPL and May 2005 for SWEPCo.

               In May 2001 selective  catalytic  reduction  (SCR)  technology to
        reduce NOx emissions on OPCo's Gavin Plant began operation. Construction
        of SCR  technology  on Amos Plant Unit 3, which is jointly owned by OPCo
        and APCo,  and  APCo's  Mountaineer  Plant  began in 2001.  The Amos and
        Mountaineer projects (expected to be completed in 2002) are estimated to
        cost a total of $230 million  ($145 million for APCo and $85 million for
        OPCo).  Construction  of SCR technology on KPCo's Big Sandy Plant Unit 2
        is scheduled  for  completion  in May 2003 at an estimated  cost of $107
        million.

               Preliminary estimates indicate that compliance for the AEP System
        with the NOx Rule, the Texas Natural  Resource  Conservation  Commission
        rule  and  the  Section  126  Rule  could  result  in  required  capital
        expenditures totaling  approximately $1.6 billion.  Estimated compliance
        costs by registrant subsidiaries are as follows:

                                       (in millions)
               AEGCo                       $125
               APCo                         365
               CPL                           57
               CSPCo                        106
               I&M                          202
               KPCo                         140
               OPCo                         606
               SWEPCo                        28

               Since  compliance  costs cannot be estimated with certainty,  the
        actual  cost  to  comply  could  be  significantly  different  than  the
        preliminary   estimates  depending  upon  the  compliance   alternatives
        selected to achieve reductions in NOx emissions.  Unless any capital and
        operating costs for additional pollution control equipment are recovered
        from  customers,  they will have an adverse  effect on future results of
        operations, cash flows and possibly financial condition.

        Other

               AEP and its  subsidiary  registrants  continue  to be involved in
        certain other matters discussed in the 2000 Annual Report.
<PAGE>
           REGISTRANTS' COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS
             OF FINANCIAL CONDITION, CONTINGENCIES AND OTHER MATTERS

        This  is  our  combined  presentation  of  management's  discussion  and
analysis of financial condition,  contingencies and other matters related to AEP
and our subsidiary registrants.  Management's discussion and analysis of results
of operations  for the three and nine month periods ended  September 30, 2001 is
presented  with  each  registrants'   financial  statements  elsewhere  in  this
document.

FINANCIAL CONDITION
        Cash from operations and short-term  borrowings  provide working capital
and meet other short-term cash needs. We generally use short-term  borrowings to
fund property  acquisitions and construction  until long-term funding mechanisms
are arranged.  Sources of long-term  funding  include  issuance of common stock,
minority interest or long-term debt and sale-leaseback or leasing agreements. We
operate a money pool and sell accounts  receivables to provide liquidity for the
domestic  electric  subsidiaries.  Short-term  borrowings  are  supported  by  a
bank-sponsored  note purchase agreement and two revolving credit agreements.  At
September 30, 2001,  approximately  $1.4 billion was  available  for  short-term
borrowings.  To  facilitate  corporate  separation,  AEP issued $1.25 billion of
global  notes in May 2001 (with  intermediate  maturities).  The proceeds may be
loaned to certain  subsidiaries,  primarily in Ohio and Texas,  to allow them to
reacquire  debt with  covenants  that limit asset  transfer  or sale.  Corporate
separation will require the transfer of assets between legal entities.
        During  the first  nine  months of 2001  cash  from  operations  of $1.2
billion,  the proceeds of the $1.25 billion  global notes  issuance and proceeds
from the sale of a UK  distribution  company and two generating  plants provided
cash to purchase HPL until permanent  funding was arranged,  fund  construction,
retire debt and pay dividends.  Major construction expenditures included amounts
for  a  wind  generation  plant  and  emission  control  technology  on  several
coal-fired generating units (see discussion in Note 8). During the third quarter
of 2001,  HPL's  permanent  financing was completed by an issuance of a minority
interest which provided $735 million net of expenses.  HPL's permanent financing
will increase funds available for other corporate purposes.
        During the fourth  quarter,  Quaker Coal Co. and MEMCO Barge Line,  Inc.
were acquired using  short-term  borrowings and available cash. In October 2001,
we announced our intent to acquire two coal-fired  generating  plants in the UK.
The  transaction  is expected to be completed by the end of the year.  Long-term
financing  for these  three  acquisitions  will be  arranged  and  announced  as
completed.  Long-term  funding  arrangements  are often  complex  and can not be
completed immediately.
        Total consolidated plant and property additions including capital leases
for the  year-to-date  period were $1.3 billion.  The following  table shows the
additions by certain subsidiary registrants:

        Company                     Amount
        -------                     ------
                                (in millions)
        APCo                         $188
        CPL                           159
        I&M                            66
        OPCo                          244
        SWEPCo                         77
<PAGE>
Corporate Separation
        On July  24,  2001,  we filed an  application  with the FERC  requesting
approval of transactions  necessary to complete a restructuring of our regulated
and unregulated  operations.  These transactions will enable us to implement our
plans for corporate  separation and allow us to meet the  requirements  of Texas
and Ohio  restructuring  legislation.  As part of the filed plan, AEP intends to
transfer the generation assets from the integrated  electric operating companies
in Ohio  and  Texas  (CSPCo,  OPCo,  CPL  and  WTU)  to  unregulated  generation
companies.  The  filed  plan  also  proposes  amendments  of the  power  pooling
agreements  for all operating  companies.  Only those  operating  companies that
continue to exist as integrated utilities would be included in the amended power
pooling  agreements,  which would govern energy  exchanges among members and off
system  purchases  and sales.  In order to execute  this  separation,  we may be
required to retire various debt securities of CSPCo, OPCo, CPL and WTU.
         In September  2001 CSPCo  reacquired  $263 million first mortgage bonds
and OPCo  reacquired  $97.5  million  of  first  mortgage  bonds in open  market
transactions.  CSPCo and OPCo used  funds  borrowed  from AEP to  reacquire  the
bonds.  First  mortgage  bond  retirements  will lower the amount of debt funded
under mortgage  indenture  covenants.  The lower mortgage debt should facilitate
transfer of assets from one subsidiary to another.

RTO Formation
         As discussed in Note 3 of the 2000 Annual  Report,  FERC Order No. 2000
and many of the settlement  agreements with the state regulatory  commissions to
approve the AEP-CSW Merger required the transfer of control of our  transmission
system to an RTO. Certain AEP subsidiaries are participating in the formation of
the  Alliance  RTO,  other   subsidiaries  are  member  of  ERCOT  or  the  SPP.
Subsidiaries  who are members of the SPP are  evaluating  their  options for RTO
membership  following the SPP's  announcement of its intention to merge with the
MISO.
         In 2001 the  Alliance  companies  and MISO  entered  into a  settlement
addressing  transmission  pricing and other "seams" issues between the two RTOs.
The FERC also has expressed its opinion that four large RTO regions  serving the
continental  US will better  support  competition  and  reliability  of electric
service.  FERC is re-evaluating  the functions that should be exercised by RTOs,
as expressed in Order No. 2000, and has formed  federal/state  panels to examine
the issue. It has extended the December 15, 2001 deadline set forth in Order No.
2000 for RTOs to become  operational,  and has stated that it will  substitute a
new timeline.  Certain state regulatory  commissions have taken exception to the
FERC's actions. Louisiana's commission ordered utilities it regulates, including
SWEPCo, to file to show the advantage of large RTOs to their customers.
         Management  is unable to predict  the outcome of these  activities  and
proceedings  or their impact on the timing and  operation of RTOs or our results
of operations and cash flows.

OTHER MATTERS
Industry Restructuring
         As discussed in Note 5 and our 2000 Annual Report,  seven of our eleven
state retail jurisdictions  enacted restructuring  legislation.  The legislation
<PAGE>
provides for a transition from cost-based regulation of bundled electric service
to unbundled  generation and energy delivery  functions with customer choice and
market pricing for the supply of  electricity.

Ohio  Restructuring  - Affecting AEP, CSPCo and OPCo
           Effective  January 1, 2001,  customer choice of electricity  supplier
began under the Ohio Act. The PUCO approved alternative  suppliers (many of whom
remain  inactive)  to compete for CSPCo's and OPCo's  customers.  CSPCo and OPCo
continue to serve virtually all customers.
           In  accordance  with the Ohio Act,  CSPCo and OPCo  implemented  rate
reductions  of 5% for the  generation  portion of  residential  rates  effective
January 1, 2001. Retail rates, including fuel, will remain frozen until December
31, 2005 or the PUCO determines that a competitive market exists.
         An alternative supplier (who has since withdrawn from Ohio competition)
filed a Notice of Appeal with the Ohio Supreme Court challenging PUCO's approval
of our transition  settlement agreement including recovery of regulatory assets.
A PUCO motion to dismiss this appeal is pending  before the Ohio Supreme  Court.
Management is unable to predict the outcome of this  litigation.  The resolution
of this matter could negatively impact our future results of operations and cash
flows. Virginia Restructuring - Affecting AEP and APCo
           In accordance with its restructuring  law, the Virginia  jurisdiction
will begin a transition to choice of electricity  supplier for retail  customers
on January 1, 2002. The Virginia  restructuring  law requires filings to be made
that outline the  functional  separation of  generation  from  transmission  and
distribution and a rate unbundling plan. APCo filed its separation plan and rate
unbundling  plan with the  Virginia  SCC.  Hearings  were held in October  2001.
Settlement  agreements  that resolved  most issues except the  assignment of the
generation - related regulatory assets among functionally  separated  generation
and  delivery  organizations  are pending  before the Virginia  SCC.  Presently,
capped rates are sufficient to recover  generation - related  regulatory assets.
We are unable to predict the outcome of the hearings.
Arkansas Restructuring - Affecting AEP and SWEPCo
         In 1999  Arkansas  enacted  legislation  to  restructure  its  electric
utility  industry.  In 2001 legislation which extended the date for the start of
retail  electric  competition  to  October  1, 2003 and  provided  the  Arkansas
Commission with the authority to delay that date for up to two additional  years
became law.

Texas Restructuring - Affecting AEP, CPL, SWEPCo and WTU
        Texas  Restructuring  Legislation  gives  customers the  opportunity  to
choose their electric  provider and  eliminates  the fuel clause  reconciliation
process beginning January 1, 2002. A 2004 true-up  proceeding will determine the
amount of stranded costs including the final fuel recovery, net regulatory asset
recovery, excess earnings offsets and other issues.
         As  discussed in our 2000 Annual  Report,  the method used to determine
initial  stranded  costs to be  recovered  beginning on January 1, 2002 is still
subject to  challenge.  In March 2000 CPL  submitted a $1.1 billion  estimate of
stranded costs.  After hearings on the  submission,  the PUCT issued in February
2001 an interim decision determining an initial amount of stranded costs for CPL
<PAGE>
of negative $580 million. In April 2001 the PUCT ruled that its current estimate
of CPL's stranded  costs was negative $615 million.  We disagree with the ruling
and have requested a rehearing.
         In April  2001 the PUCT  issued an order  requiring  CPL to reduce  its
distribution rates by $54.8 million for five-years  beginning in January 2002 in
order to return  estimated  excess  earnings for 1999,  2000 and 2001. The Texas
Restructuring  Legislation  intended that excess earnings reduce stranded costs.
Final  stranded  cost  amounts  and the  treatment  of excess  earnings  will be
determined in the 2004 true-up proceeding. Currently the PUCT estimates that CPL
will have no stranded  costs and has ordered the rate reduction to return excess
earnings.  We believe that CPL will have  stranded  costs in 2004,  and that the
current  treatment of excess  earnings  will be amended at that time.  Since CPL
expensed excess earnings  amounts in 1999, 2000 and 2001, the April order had no
additional effect on reported net income.  The amount to be refunded is recorded
as a regulatory liability.
         As discussed in Note 7 of our 2000 Annual Report,  the PUCT  authorized
the  issuance  of up to $797  million  of bonds to  securitize  certain of CPL's
regulatory  assets.  The  PUCT's  order that  authorized  the  securization  was
appealed  to the Supreme  Court of Texas.  On June 6, 2001,  the  Supreme  Court
upheld the PUCT's  securitization  order.  The Court  dismissed the  plaintiffs'
request for a rehearing.  We plan to issue the securitization  bonds in the near
term.
         In October 2001,  the PUCT delayed the start of retail  competition  in
the SPP area of Texas (see Note 5). We are evaluating the  ramifications of this
delay in the  January 1, 2002 start date of  competition  for our SWEPCo and WTU
Texas operations in the SPP.
         A Texas  settlement  agreement in  connection  with our merger with CSW
permits CPL to apply up to $20 million of previously  identified  STP ECOM plant
assets a year in 2000 and 2001 to reduce  any  excess  earnings.  STP ECOM plant
assets will be depreciated in accordance with GAAP, on a systematic and rational
basis.  To the  extent  excess  earnings  exceed $20  million in 2001,  CPL will
establish a regulatory liability by a charge to earnings.
         In the event CPL,  SWEPCo,  and WTU are unable,  after the 2004 true-up
proceeding, to recover their generation-related  regulatory assets,  unrecovered
fuel balances,  stranded costs and other  restructuring  related costs, it could
have a material adverse effect on results of operations, cash flows and possibly
financial condition.

Michigan Restructuring - Affecting AEP and I&M
         The  Michigan  Legislation  gave the MPSC  broad  powers  to  implement
customer  choice.  We filed proposed  unbundled  rates,  open access tariffs and
terms of service in June 2001.  In October  2001 the MPSC  approved a settlement
agreement related to our filing to implement customer choice on January 1, 2002.
We agreed that recovery of  implementation  costs and regulatory assets would be
determined in future proceedings and recovery of nuclear  decommissioning  costs
would continue to be reviewed separately.
<PAGE>
         We do not  expect  to incur  material  tangible  asset  impairments  or
regulatory asset write-offs. If we are not permitted to recover all or a portion
of  our  generation-related   regulatory  assets,   unrecorded   decommissioning
obligation,  stranded costs or other implementation costs in future proceedings,
it could have a material adverse effect on our results of operations, cash flows
and possibly financial condition.

Oklahoma Restructuring - Affecting AEP and PSO
        In June 2001 the Oklahoma  Governor  signed into law a bill that delayed
retail electric  competition  indefinitely  from its previously  scheduled start
date of July 1, 2002.

Litigation
----------
Shareholders' Litigation - Affecting AEP
        In 2000 five  complaints  were  filed  against  us  seeking  unspecified
compensatory damages for alleged violations of federal securities laws (see Note
8). We believe  these  shareholder  complaints  are without  merit and intend to
continue to oppose  them.  The outcome of this  litigation  or its impact on our
results of operations, cash flows or financial condition cannot be predicted.

Municipal Franchise Fee Litigation - Affecting AEP and CPL
        In August and  October  2001 CPL  reached  agreement  to settle  ongoing
litigation  related to municipal  franchise  fees with 125 cities in its service
territory.  The agreements  require CPL to pay  approximately  $11 million.  The
agreements  are subject to approval  by the court  which  management  expects to
occur before year-end.

Lignite Mining Agreement Litigation - Affecting AEP and SWEPCo
        In May 2001 SWEPCo settled ongoing  litigation  concerning the mining of
lignite  from  reserves  jointly  owned with CLECO.  As part of the  settlement,
SWEPCo purchased the mine operator's interest in mining assets and mining rights
for $86 million and assumed the related  obligations for mine  reclamation  (see
Note 3). The settlement  agreement gives CLECO the option to acquire up to a 50%
interest in the mining assets.

Federal EPA Complaint and Notice of Violation - Affecting AEP, APCo, I&M,
   and OPCo
        As discussed in our 2000 Annual Report and Note 8, Federal EPA, a number
of states and certain  special  interest  groups alleged that AEP, APCo,  CSPCo,
I&M,  and OPCo  modified  certain  generating  units  over a 20 year  period  in
violation of the Clean Air Act.
        Under the Clean Air Act, if a plant undertakes a major modification that
directly  results in an emissions  increase,  permitting  requirements  might be
triggered and the plant may be required to install additional  pollution control
technology.  This  requirement  does not  apply to  activities  such as  routine
maintenance,  replacement of degraded equipment or failed  components,  or other
repairs needed for the reliable,  safe and efficient  operation of the plant. We
believe our  maintenance,  repair and replacement  activities were in conformity
with the Clean Air Act and intend to vigorously pursue our defense.
        The Clean Air Act  authorizes  civil  penalties of up to $27,500 per day
per  violation  at each  generating  unit  ($25,000 per day prior to January 30,
1997).  In March 2001 the District Court ruled claims for civil  penalties based
on  activities  that occurred more than five years before the filing date of the
complaints,  cannot be imposed.  There is no time limit on claims for injunctive
relief.
<PAGE>
        If we do not  prevail,  any capital and  operating  costs of  additional
pollution  control  equipment  that  may be  required  as well as any  penalties
imposed would  adversely  affect future  results of  operations,  cash flows and
possibly financial condition.
        An unaffiliated  utility which operates  certain plants jointly owned by
CSPCo,  reached a tentative agreement to settle litigation  regarding generating
plant emissions under the Clean Air Act. Negotiations are continuing and a final
settlement  could  impact  the  operation  of  Zimmer  Plant  and W.C.  Beckjord
Generating Station Unit 6 (owned 25.4% and 12.5%, respectively, by CSPCo). Until
a  final  settlement  is  reached,   CSPCo  will  be  unable  to  determine  the
settlement's  impact on its  jointly  owned  facilities  and  future  results of
operations and cash flows.

NOx Reductions - Affecting AEP, APCo, CPL, I&M, OPCo and SWEPCo
        Federal EPA issued a rule (the NOx Rule) and granted  petitions filed by
certain  northeastern  states  (the  Section  126  Rule)  requiring  substantial
reductions in NOx  emissions in a number of eastern  states,  including  certain
states in which the AEP System's generating plants are located (see Note 8). The
compliance date for the NOx Rule is May 31, 2004.
        Federal EPA ruled that eleven states,  including states in which APCo's,
I&M's and OPCo's generating units are located, failed to submit approvable plans
to comply with the NOx Rule.  This  ruling  means that those  states  could face
stringent  sanctions  including  limits on  construction  of new  sources of air
emissions,  loss of federal highway funding and possible Federal EPA takeover of
state air quality management  programs. A request for the D.C. Circuit to review
this ruling is pending.
        The D.C. Circuit Court instructed Federal EPA to justify methods used to
allocate allowances and project growth for both the NOx Rule and the Section 126
Rule. In response to AEP and other utilities  request for the D.C. Circuit Court
to  suspend  the May 2003  compliance  date of the  Section  126 Rule,  the D.C.
Circuit Court issued an order tolling the compliance  schedule until Federal EPA
responds to the Court's remand.
        The  Texas  Natural  Resource  Conservation   Commission  adopted  rules
requiring  significant   reductions  in  NOx  emissions  from  utility  sources,
including those owned by CPL and SWEPCo. The compliance date is May 2003 for CPL
and May 2005 for SWEPCo.
        In May 2001 selective catalytic reduction (SCR) technology to reduce NOx
emissions on OPCo's Gavin Plant began operation.  Construction of SCR technology
on Amos  Plant  Unit 3,  which is  jointly  owned by OPCo and APCo,  and  APCo's
Mountaineer Plant began in 2001. The Amos and Mountaineer  projects (expected to
be  completed  in 2002)  are  estimated  to cost a total of $230  million  ($145
million for APCo and $85 million for OPCo).  Construction  of SCR  technology on
KPCo's Big Sandy  Plant Unit 2 is  scheduled  for  completion  in May 2003 at an
estimated cost of $107 million.
        Preliminary  estimates  indicate that our compliance  with the NOx Rule,
the Texas Natural Resource Conservation Commission rule and the Section 126 Rule
could  result in  required  capital  expenditures  totaling  approximately  $1.6
billion.
<PAGE>
        The following  table shows the estimated  compliance cost for certain of
AEP's subsidiary registrants.
        Company               Amount
        -------               ------
                     (in millions)

        APCo              $365
        CPL                 57
        I&M                202
        OPCo               606
        SWEPCo              28
        Since  compliance  costs cannot be estimated with certainty,  the actual
cost to comply could be significantly  different than the preliminary  estimates
depending upon the compliance alternatives selected to achieve reductions in NOx
emissions.  Unless  any  capital or  operating  costs for  additional  pollution
control equipment are recovered from customers, they will have an adverse effect
on future results of operations, cash flows and possibly financial condition.

New Accounting Standards
        The FASB recently issued SFAS 141, "Business Combinations" and SFAS 142,
"Goodwill  And Other  Intangible  Assets."  SFAS 141 requires  that the purchase
method of  accounting be used to account for all business  combinations  entered
into after June 30, 2001.  SFAS 142 requires that goodwill and other  intangible
assets  with   indefinite   lives  be  tested  for  impairment   upon  SFAS  142
implementation  and  annually  thereafter.  Amortization  of goodwill  and other
intangible  assets with indefinite lives will cease with our  implementation  of
SFAS 142 beginning January 1, 2002. The amortization of goodwill reduced our net
income $35 million for the nine months ended  September  30,  2001.  We have not
determined the impact of adopting the other provision of these standards.
        SFAS 143,  "Accounting for Asset  Retirement  Obligations,"  will become
effective for us beginning January 1, 2003. SFAS 143 establishes  accounting and
reporting for obligations  associated with the retirement of tangible long-lived
assets and the related asset retirement  costs. We are currently  evaluating the
provisions of the standard and  determining its impact on results of operations,
financial condition and cash flows.
        In August 2001 the FASB issued SFAS 144,  "Accounting for the Impairment
or Disposal of Long-lived  Assets" which sets forth the  accounting to recognize
and measure an impairment  loss. This standard  replaces the previous  standard,
SFAS 121,  "Accounting for the Long-lived Assets and for Long-lived Assets to be
Disposed  Of." SFAS 144 will apply to us in January  2002.  We do not expect the
implementation  of SFAS 144 to materially  affect  results of operations or cash
flows.
<PAGE>
                QUALITATIVE AND QUANTITATIVE DISCLOSURES ON RISK

RISK MANAGEMENT
        AEP and its registrant subsidiaries are subject to risks in their day to
day operations. The risks and correlating strategies are:
<TABLE>
<CAPTION>
Risk                                 Description                                        Strategy
----                                 -----------                                        --------
<S>                                  <C>                                                <C>
Market Risk                          Volatility in commodity prices                     Trading and hedging
Interest Rate Risk                   Changes in Interest rates                          Hedging
Foreign Exchange Risk                Fluctuations in foreign currency rates             Hedging
Credit Risk                          Non-performance on contracts with                  Guarantees, Collateral
                                     counter parties
</TABLE>
        AEP's  strategies  of trading,  hedging and credit  risk  management  to
mitigate various risks have not materially changed since
December 31, 2000.

Commodity Price Risk
        We employ physical forward purchase and sale contracts, exchange futures
and options,  over-the-counter options, swaps, and other derivative contracts to
offset market risk. AEP's internationally based electric distribution  utilities
hedge market risk through forward commodity contracts.

Interest Rate Risk
        Fair value and cash flow hedge  contracts  mitigate  changes in interest
rates on short and long-term debt of AEP, KPCo, and I&M. CitiPower uses interest
rate swaps for the same purpose.

Foreign Exchange Risk
        AEP, KPCo, and OPCo employ cash flow forward hedge  contracts to lock-in
prices on purchased  assets  denominated  in foreign  currencies.  International
subsidiaries use currency swaps to hedge fluctuations in debt  transactions.  We
do not hedge all foreign currency exposure.

Credit Risk
        AEP limits credit risk by accepting  primarily  investment grade counter
parties.  We also  require  cash  deposits,  letters  of  credit  and  affiliate
guarantees as collateral  from certain counter parties in case of adverse market
conditions.
        We trade  electricity and gas contracts with numerous  counter  parties.
Since our energy trading  contracts are based on changes in market prices of the
related  commodities,  our exposures can change.  We believe that our credit and
market exposures with any one counter party is not material.

QUANTITATIVE MARKET RISK
        We employ policies and procedures to identify,  assess and manage market
risk exposure.  One procedure is the risk measurement model Value at Risk (VaR).
VaR is used daily to measure  and  monitor  trading  risk.  VaR  operates on the
variance - covariance method using historical prices to estimate  volatility and
correlation and assumes a 95% confidence level and a one-day holding period.
<PAGE>
        The following table represents the high,  average and low VaRs for AEP's
electric  and gas trading  activities  and electric  trading for its  registrant
subsidiaries. VaR for AEP and Registrant Subsidiaries:

                 Nine Months Ended       Year Ending
                    September 30,        December 31,
                        2001                  2000
                        ----                  ----
                 High Average Low      High Average Low
                   (in millions)         (in millions)

AEP              $28   $14    $5       $32   $10    $1
APCo               2     1     1         6     2     -
CPL                1     1     -         4     1     -
CSPCo              1     1     -         3     1     -
I&M                1     1     -         4     1     -
KPCo               -     -     -         1     -     -
OPCo               2     1     -         5     2     -
PSO                1     1     -         3     1     -
SWEPCo             1     1     -         4     1     -
WTU                -     -     -         1     -     -

        Near term  changes in commodity  prices are not  expected to  materially
affect our results of operations, cash flows and financial conditions.
<PAGE>
                           PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K.

        (a)    Exhibits:

        AEP, APCo, CPL, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo and WTU

               Exhibit 12 - Computation of Consolidated Ratio of Earnings to
                            Fixed Charges.

        (b)    Reports on Form 8-K:

        AEP, AEGCo, APCo, CPL, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo and WTU

        No reports on Form 8-K were filed during the quarter ended September 30,
2001.
<PAGE>
                                    Signature




        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
each  registrant  has duly  caused this report to be signed on its behalf by the
undersigned  thereunto duly  authorized.  The  signatures  for each  undersigned
company  shall be deemed to relate  only to  matters  having  reference  to such
company and any subsidiaries thereof.

                      AMERICAN ELECTRIC POWER COMPANY, INC.
                             AEP GENERATING COMPANY
                            APPALACHIAN POWER COMPANY
                         CENTRAL POWER AND LIGHT COMPANY
                         COLUMBUS SOUTHERN POWER COMPANY
                         INDIANA MICHIGAN POWER COMPANY
                             KENTUCKY POWER COMPANY
                               OHIO POWER COMPANY
                       PUBLIC SERVICE COMPANY OF OKLAHOMA
                       SOUTHWESTERN ELECTRIC POWER COMPANY
                          WEST TEXAS UTILITIES COMPANY



  By: /s/ Armando A. Pena       By: /s/ Joseph M. Buonaiuto
      -----------------------       -----------------------------------------
          Armando A. Pena               Joseph M. Buonaiuto
          Treasurer                     Controller and Chief Accounting Officer



Date: November 12, 2001