| Commission           |   | Registrant,      State of Incorporation,                            |   | I.R.S.      Employer |
|----------------------|--------|---------------------------------------------------------------------|--------|----------------------|
| File Number          |   | Address of Principal Executive Offices, and      Telephone Number   |   | Identification No.   |
|                 |   |                                                                |   |                 |
| 1-3525               |   | AMERICAN      ELECTRIC POWER COMPANY, INC. (A New York Corporation) |   | 13-4922640           |
| 1-3457               |   | APPALACHIAN      POWER COMPANY (A Virginia Corporation)             |   | 54-0124790           |
| 1-2680               |   | COLUMBUS      SOUTHERN POWER COMPANY (An Ohio Corporation)          |   | 31-4154203           |
| 1-3570               |   | INDIANA      MICHIGAN POWER COMPANY (An Indiana Corporation)        |   | 35-0410455           |
| 1-6543               |   | OHIO      POWER COMPANY (An Ohio Corporation)                       |   | 31-4271000           |
| 0-343                |   | PUBLIC      SERVICE COMPANY OF OKLAHOMA (An Oklahoma Corporation)   |   | 73-0410895           |
| 1-3146               |   | SOUTHWESTERN      ELECTRIC POWER COMPANY (A Delaware Corporation)   |   | 72-0323455           |
|                 |   |                                                                |   |                 |
| All      Registrants |   | 1      Riverside Plaza, Columbus, Ohio 43215-2373                   |   |                 |
|                 |   | Telephone      (614) 716-1000                                       |   |                 |

| Indicate      by check mark whether the registrants (1) have filed all reports required      to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934      during the preceding 12 months (or for such shorter period that the      registrants were required to file such reports), and (2) have been subject      to such filing requirements for the past 90 days. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Yes    X                                                                                                                                                                                                                                                                                                                                                 | No        |

| Indicate      by check mark whether American Electric Power Company, Inc. is a large      accelerated filer, an accelerated filer, a non-accelerated filer, or a      smaller reporting company.  See the definitions of ‘large      accelerated filer,’ ‘accelerated filer’ and ‘smaller reporting company’ in      Rule 12b-2 of the Exchange Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Large      accelerated filer     X                                              Accelerated      filer  _____                          Non-accelerated      filer     _____                                    Smaller      reporting company  ______        |

| Indicate      by check mark whether Appalachian Power Company, Columbus Southern Power      Company, Indiana Michigan Power Company, Ohio Power Company, Public      Service Company of Oklahoma and Southwestern Electric Power Company are      large accelerated filers, accelerated filers, non-accelerated filers or      smaller reporting companies.  See the definitions of ‘large      accelerated filer,’ ‘accelerated filer’ and ‘smaller reporting company’ in      Rule 12b-2 of the Exchange Act.                                                                                                                                                                                                                                                                                                              |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Large      accelerated      filer   _____                                   Accelerated      filer    _______                      Non-accelerated      filer       X                                        Smaller      reporting company    _______       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Indicate      by check mark whether the registrants are shell companies (as defined in      Rule 12b-2 of the Exchange Act).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Yes      ____                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | No     X   |

----

|                                       |   |   |   Number      of shares of common stock outstanding of the registrants atJuly      31, 2008                                                             |
|--------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                       |   |   |                                                                                                                                                              |
| American      Electric Power Company, Inc. |   |   |                          402,258,849 |
|                                       |   |   | ($6.50      par value)                                                                                                                                            |
| Appalachian      Power Company             |   |   | 13,499,500                                                                                                                                                        |
|                                       |   |   | (no      par value)                                                                                                                                               |
| Columbus      Southern Power Company       |   |   | 16,410,426                                                                                                                                                        |
|                                       |   |   | (no      par value)                                                                                                                                               |
| Indiana      Michigan Power Company        |   |   | 1,400,000                                                                                                                                                         |
|                                       |   |   | (no      par value)                                                                                                                                               |
| Ohio      Power Company                    |   |   | 27,952,473                                                                                                                                                        |
|                                       |   |   | (no      par value)                                                                                                                                               |
| Public      Service Company of Oklahoma    |   |   | 9,013,000                                                                                                                                                         |
|                                       |   |   | ($15      par value)                                                                                                                                              |
| Southwestern      Electric Power Company   |   |   | 7,536,640                                                                                                                                                         |
|                                       |   |   | ($18      par value)                                                                                                                                              |

----

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

|                                                   |                                                                                            |
|--------------------------------------------------------|-------------------------------------------------------------------------------------------------|
| Ohio      Power Company Consolidated:                  |                                                                                            |
|                                                   | Management’s      Financial Discussion and Analysis                                       |   |
|                                                   | Quantitative      and Qualitative Disclosures About Risk Management    Activities               |   |
|                                                   | Condensed      Consolidated Financial Statements                                                |   |
|                                                   | Index      to Condensed Notes to Condensed Financial Statements of Registrant      Subsidiaries |   |
|                                                   |                                                                                            |   |
| Public      Service Company of Oklahoma:               |                                                                                            |
|                                                   | Management’s      Financial Discussion and Analysis                                       |   |
|                                                   | Quantitative      and Qualitative Disclosures About Risk Management    Activities               |   |
|                                                   | Condensed      Financial Statements                                                             |   |
|                                                   | Index      to Condensed Notes to Condensed Financial Statements of Registrant      Subsidiaries |   |
|                                                   |                                                                                            |   |
| Southwestern      Electric Power Company Consolidated: |                                                                                            |
|                                                   | Management’s      Financial Discussion and Analysis                                       |   |
|                                                   | Quantitative      and Qualitative Disclosures About Risk Management    Activities               |   |
|                                                   | Condensed      Consolidated Financial Statements                                                |   |
|                                                   | Index      to Condensed Notes to Condensed Financial Statements of Registrant      Subsidiaries |   |

|                                                                                     |          |                                                             |   |
|------------------------------------------------------------------------------------------|---------------|------------------------------------------------------------------|--------|
| Condensed      Notes to Condensed Financial Statements of Registrant      Subsidiaries   |          |                                                             |
|                                                                                     |          |                                                             |   |
| Combined      Management’s Discussion and Analysis of Registrant      Subsidiaries |          |                                                             |
|                                                                                     |          |                                                             |   |
| Controls      and Procedures                                                             |          |                                                             |
|                                                                                     |          |                                                             |   |   |
| Part      II.  OTHER INFORMATION                                               |          |                                                             |
|                                                                                     |          |                                                             |
|                                                                                     | Item      1.  | Legal      Proceedings                                           |   |   |
|                                                                                     | Item      1A. | Risk      Factors                                                |   |   |
|                                                                                     | Item      2.  | Unregistered      Sales of Equity Securities and Use of Proceeds |   |   |
|                                                                                     | Item      4.  | Submission      of Matters to a Vote of Security Holders         |   |   |
|                                                                                     | Item      5.  | Other      Information                                           |   |   |
|                                                                                     | Item      6.  | Exhibits:                                                        |   |   |
|                                                                                     |          |                                                             |   |   | Exhibit      3(a) (PSO, SWEPCo)  |   |   |
|                                                                                     |          |                                                             |   |   | Exhibit      3(b) (CSPCo, OPCo)  |   |   |
|                                                                                     |          |                                                             |   |   | Exhibit      12 (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo) |   |   |
|                                                                                     |          |                                                             |   |   | Exhibit      31(a) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo) |   |   |
|                                                                                     |          |                                                             |   |   | Exhibit      31(b) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo) |   |   |
|                                                                                     |          |                                                             |   |   | Exhibit      32(a) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo) |   |   |
|                                                                                     |          |                                                             |   |   | Exhibit      32(b) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo) |   |   |
|                                                                                     |          |                                                             |   |   |   |   |   |
| SIGNATURE                                                                                |          |                                                             |   |

| This      combined Form 10-Q is separately filed by American Electric Power Company,      Inc., Appalachian Power Company, Columbus Southern Power Company, Indiana      Michigan Power Company, Ohio Power Company, Public Service Company of      Oklahoma and Southwestern Electric Power Company.  Information      contained herein relating to any individual registrant is filed by such      registrant on its own behalf. Each registrant makes no representation as      to information relating to the other  registrants. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

GLOSSARY OF TERMS

| Term |   | Meaning |
|------|--------|---------|

| AEGCo                         |   | AEP      Generating Company, an AEP electric utility subsidiary.                                                                                                                                                                                                    |
|-------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| AEP      or Parent            |   | American      Electric Power Company, Inc.                                                                                                                                                                                                                          |
| AEP      Consolidated         |   | AEP      and its majority owned consolidated subsidiaries and consolidated      affiliates.                                                                                                                                                                         |
| AEP      Credit               |   | AEP      Credit, Inc., a subsidiary of AEP which factors accounts receivable and      accrued utility revenues for affiliated electric utility      companies.                                                                                                      |
| AEP      East companies       |   | APCo,      CSPCo, I&M, KPCo and OPCo.                                                                                                                                                                                                                           |
| AEPSC                         |   | American      Electric Power Service Corporation, a service subsidiary providing      management and professional services to AEP and its      subsidiaries.                                                                                                        |
| AEP      System or the System |   | American      Electric Power System, an integrated electric utility system, owned and      operated by AEP’s electric utility subsidiaries.                                                                                                                   |
| AEP      West companies       |   | PSO,      SWEPCo, TCC and TNC.                                                                                                                                                                                                                                      |
| AFUDC                         |   | Allowance      for Funds Used During Construction.                                                                                                                                                                                                                  |
| ALJ                           |   | Administrative      Law Judge.                                                                                                                                                                                                                                      |
| AOCI                          |   | Accumulated      Other Comprehensive Income.                                                                                                                                                                                                                        |
| APCo                          |   | Appalachian      Power Company, an AEP electric utility subsidiary.                                                                                                                                                                                                 |
| APSC                          |   | Arkansas      Public Service Commission.                                                                                                                                                                                                                            |
| CAA                           |   | Clean      Air Act.                                                                                                                                                                                                                                                 |
| CO2                           |   | Carbon      Dioxide.                                                                                                                                                                                                                                                |
| CSPCo                         |   | Columbus      Southern Power Company, an AEP electric utility  subsidiary.                                                                                                                                                                                          |
| CSW                           |   | Central      and South West Corporation, a subsidiary of AEP (Effective January 21,      2003, the legal name of Central and South West Corporation was changed to      AEP Utilities, Inc.).                                                                       |
| CTC                           |   | Competition      Transition Charge.                                                                                                                                                                                                                                 |
| CWIP                          |   | Construction      Work in Progress.                                                                                                                                                                                                                                 |
| DETM                          |   | Duke      Energy Trading and Marketing L.L.C., a risk management      counterparty.                                                                                                                                                                                 |
| DOE                           |   | United      States Department of Energy.                                                                                                                                                                                                                            |
| E&R                       |   | Environmental      compliance and transmission and distribution system      reliability.                                                                                                                                                                            |
| EaR                           |   | Earnings      at Risk, a method to quantify risk exposure.                                                                                                                                                                                                          |
| EITF                          |   | Financial      Accounting Standards Board’s Emerging Issues TaskForce.                                                                                                                                                                                        |
| EITF      06-10               |   | EITF      Issue No. 06-10 “Accounting for Collateral Assignment Split-Dollar Life      Insurance Arrangements.”                                                                                                                                         |
| EPS                           |   | Earnings      Per Share.                                                                                                                                                                                                                                            |
| ERCOT                         |   | Electric      Reliability Council of Texas.                                                                                                                                                                                                                         |
| FASB                          |   | Financial      Accounting Standards Board.                                                                                                                                                                                                                          |
| Federal      EPA              |   | United      States Environmental Protection Agency.                                                                                                                                                                                                                 |
| FERC                          |   | Federal      Energy Regulatory Commission.                                                                                                                                                                                                                          |
| FIN                           |   | FASB      Interpretation No.                                                                                                                                                                                                                                        |
| FIN      46R                  |   | FIN      46R, “Consolidation of Variable Interest Entities.”                                                                                                                                                                                            |
| FIN      48                   |   | FIN      48, “Accounting for Uncertainty in Income Taxes” and FASB Staff Position      FIN 48-1 “Definition of Settlement in                  FASB      Interpretation No. 48.” |
| FSP                           |   | FASB      Staff Position.                                                                                                                                                                                                                                           |
| FTR                           |   | Financial      Transmission Right.                                                                                                                                                                                                                                  |
| GAAP                          |   | Accounting      Principles Generally Accepted in the United States of    America.                                                                                                                                                                                   |
| HPL                           |   | Houston      Pipeline Company, a former AEPsubsidiary.                                                                                                                                                                                                              |

| IGCC                           |   | Integrated      Gasification Combined Cycle, technology that turns coal into a      cleaner-burning gas.                                                                                                   |
|--------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Interconnection      Agreement |   | Agreement,      dated July 6, 1951, as amended, by and among APCo, CSPCo, I&M, KPCo      and OPCo, defining the sharing of costs and benefits associated with their      respective generating plants. |
| IRS                            |   | Internal      Revenue Service.                                                                                                                                                                             |
| IURC                           |   | Indiana      Utility Regulatory Commission.                                                                                                                                                                |
| I&M                        |   | Indiana      Michigan Power Company, an AEP electric utility  subsidiary.                                                                                                                                  |
| JMG                            |   | JMG      Funding LP.                                                                                                                                                                                       |
| KPCo                           |   | Kentucky      Power Company, an AEP electric utility subsidiary.                                                                                                                                           |
| KPSC                           |   | Kentucky      Public Service Commission.                                                                                                                                                                   |
| kV                             |   | Kilovolt.                                                                                                                                                                                                  |
| KWH                            |   | Kilowatthour.                                                                                                                                                                                              |
| LPSC                           |   | Louisiana      Public Service Commission.                                                                                                                                                                  |
| MISO                           |   | Midwest      Independent Transmission System Operator.                                                                                                                                                     |
| MTM                            |   | Mark-to-Market.                                                                                                                                                                                            |
| MW                             |   | Megawatt.                                                                                                                                                                                                  |
| MWH                            |   | Megawatthour.                                                                                                                                                                                              |
| NOx                            |   | Nitrogen      oxide.                                                                                                                                                                                       |
| Nonutility      Money Pool     |   | AEP      System’s Nonutility Money Pool.                                                                                                                                                             |
| NSR                            |   | New      Source Review.                                                                                                                                                                                    |
| NYMEX                          |   | New      York Mercantile Exchange.                                                                                                                                                                         |
| OCC                            |   | Corporation      Commission of the State of Oklahoma.                                                                                                                                                      |
| OPCo                           |   | Ohio      Power Company, an AEP electric utility subsidiary.                                                                                                                                               |
| OPEB                           |   | Other      Postretirement Benefit Plans.                                                                                                                                                                   |
| OTC                            |   | Over-the-counter.                                                                                                                                                                                          |
| PJM                            |   | Pennsylvania      – New Jersey – Maryland regional transmission  organization.                                                                                                                 |
| PSO                            |   | Public      Service Company of Oklahoma, an AEP electric utility      subsidiary.                                                                                                                          |
| PUCO                           |   | Public      Utilities Commission of Ohio.                                                                                                                                                                  |
| PUCT                           |   | Public      Utility Commission of Texas.                                                                                                                                                                   |
| Registrant      Subsidiaries   |   | AEP      subsidiaries which are SEC registrants; APCo, CSPCo, I&M, OPCo, PSO      and SWEPCo.                                                                                                          |
| REP                            |   | Texas      Retail Electric Provider.                                                                                                                                                                       |
| Risk      Management Contracts |   | Trading      and nontrading derivatives, including those derivatives designated as cash      flow and fair value hedges.                                                                                   |
| Rockport      Plant            |   | A      generating plant, consisting of two 1,300 MW coal-fired generating units      near Rockport, Indiana, owned by AEGCo and I&M.                                                                   |
| RSP                            |   | Rate      Stabilization Plan.                                                                                                                                                                              |
| RTO                            |   | Regional      Transmission Organization.                                                                                                                                                                   |
| S&P                        |   | Standard      and Poor’s.                                                                                                                                                                            |
| SCR                            |   | Selective      Catalytic Reduction.                                                                                                                                                                        |
| SEC                            |   | United      States Securities and Exchange Commission.                                                                                                                                                     |
| SECA                           |   | Seams      Elimination Cost Allocation.                                                                                                                                                                    |
| SFAS                           |   | Statement      of Financial Accounting Standards issued by the Financial Accounting      Standards Board.                                                                                                  |
| SFAS      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.”                                                                                 |
|-------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SFAS      157                             |   | Statement      of Financial Accounting Standards No. 157, “Fair Value      Measurements.”                                                                                                                      |
| SIA                                       |   | System      Integration Agreement.                                                                                                                                                                                         |
| SNF                                       |   | Spent      Nuclear Fuel.                                                                                                                                                                                                   |
| SO2                                       |   | Sulfur      Dioxide.                                                                                                                                                                                                       |
| SPP                                       |   | Southwest      Power Pool.                                                                                                                                                                                                 |
| Stall      Unit                           |   | J.      Lamar Stall Unit at Arsenal Hill Plant.                                                                                                                                                                            |
| Sweeny                                    |   | Sweeny      Cogeneration Limited Partnership, owner and operator of a four unit, 480      MW gas-fired generation facility, owned 50% by AEP.  AEP’s 50%      interest in Sweeny was sold in October 2007. |
| SWEPCo                                    |   | Southwestern      Electric Power Company, an AEP electric utility  subsidiary.                                                                                                                                             |
| TCC                                       |   | AEP      Texas Central Company, an AEP electric utility  subsidiary.                                                                                                                                                       |
| TEM                                       |   | SUEZ      Energy Marketing NA, Inc. (formerly known as Tractebel Energy Marketing,      Inc.).                                                                                                                             |
| Texas      Restructuring Legislation |   | Legislation      enacted in 1999 to restructure the electric utility industry in      Texas.                                                                                                                               |
| TNC                                       |   | AEP      Texas North Company, an AEP electric utilitysubsidiary.                                                                                                                                                           |
| True-up      Proceeding                   |   | A      filing made under the Texas Restructuring Legislation to finalize the      amount of stranded costs and other true-up items and the recovery of such      amounts.                                                  |
| Turk      Plant                           |   | John      W. Turk, Jr. Plant.                                                                                                                                                                                              |
| Utility      Money Pool                   |   | AEP      System’s Utility Money Pool.                                                                                                                                                                                |
| VaR                                       |   | Value      at Risk, a method to quantify risk exposure.                                                                                                                                                                    |
| Virginia      SCC                         |   | Virginia      State Corporation Commission.                                                                                                                                                                                |
| WPCo                                      |   | Wheeling      Power Company, an AEP electric distribution subsidiary.                                                                                                                                                      |
| WVPSC                                     |   | Public      Service Commission of WestVirginia.                                                                                                                                                                            |

----

FORWARD-LOOKING INFORMATION

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

|     The      registrants expressly disclaim any obligation to update any      forward-looking information. |
|--------------------------------------------------------------------------------------------------------------------------------|

----

| OperatingCompany |   | Jurisdiction |   | Revised      Annual Rate Increase Request |   | Projected      Effective Date of Rate Increase |               |
|------------------|--------|--------------|--------|-------------------------------------------|--------|------------------------------------------------|--------------------|
|             |   |         |   | (in      millions)                        |   |                                           |               |
| APCo             |   | Virginia     |   | $                                         | 208    |                                           | November      2008 | (a) |
| PSO              |   | Oklahoma     |   |                                      | 117    | (b)                                            | February      2009 |   |
| I&M          |   | Indiana      |   |                                      | 80     |                                           | June      2009     |   |

| (a) | Subject      to refund.                                                                                                                                                      |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Net      of estimated amounts that PSO expects to recover through a generation cost      recovery rider which will terminate upon implementation of the new base      rates. |

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

| · | Barging      operations that annually transport approximately 35 million tons of coal      and dry bulk commodities primarily on the Ohio, Illinois and Lower      Mississippi Rivers.  Approximately 39% of the barging is for the      transportation of agricultural products, 30% for coal, 14% for steel and      17% for other commodities.  Effective July 30, 2008, AEP MEMCO LLC's      name was changed to AEP River Operations,LLC. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Wind      farms and marketing and risk management activities primarily in      ERCOT. |
|--------|---------------------------------------------------------------------------------------|

|                                                                              | Three      Months Ended June 30, |   | Six      Months Ended June 30, |   |
|-----------------------------------------------------------------------------------|----------------------------------|--------|--------------------------------|--------|
|                                                                              | 2008                             |   | 2007                           |   | 2008 |   | 2007 |   |
|                                                                              | (in      millions)               |   |
| Utility      Operations                                                           |                             | $      | 263                            |   |   | $ | 238 |   |   | $ | 673 |   |   | $ | 491 |   |
| MEMCO      Operations                                                             |                             |   | 3                              |   |   |   | 7 |   |   |   | 10 |   |   |   | 22 |   |
| Generation      and Marketing                                                     |                             |   | 26                             |   |   |   | 15 |   |   |   | 27 |   |   |   | 14 |   |
| All      Other (a)                                                                |                             |   | (12                            | )      |   |   | (3 | ) |   |   | 143 |   |   |   | 1 |   |
| Income      Before Discontinued Operations  and      Extraordinary Loss |                             | $      | 280                            |   |   | $ | 257 |   |   | $ | 853 |   |   | $ | 528 |   |

| (a)    | All      Other includes: |
|--------|--------------------------|
|   | ·                   | Parent’s      guarantee revenue received from affiliates, investment income, interest      income and interest expense and other nonallocated  costs. |
|   | ·                   | Forward      natural gas contracts that were not sold with our natural gas pipeline and      storage operations in 2004 and 2005.  These contracts are      financial derivatives which will gradually liquidate and completely expire      in 2011. |
|   | ·                   | The      first quarter 2008 cash settlement of a purchase power and sale agreement      with TEM related to the Plaquemine Cogeneration Facility which was sold in      the fourth quarter of 2006.  The cash settlement of $255 million      ($163 million, net of tax) is included in Net Income. |
|   | ·                   | Revenue      sharing related to the Plaquemine Cogeneration  Facility. |

|                                                                        | Three      Months EndedJune      30, |   | Six      Months EndedJune      30, |   |
|-----------------------------------------------------------------------------|--------------------------------------|--------|------------------------------------|--------|
|                                                                        | 2008                                 |   | 2007                               |   | 2008 |   | 2007 |   |
|                                                                        | (in      millions)                   |   |
| Revenues                                                                    | $                                    | 3,313  |                               | $      | 2,954 |   | $ | 6,607 |   | $ | 5,987 |   |
| Fuel      and Purchased Power                                               |                                 | 1,374  |                               |   | 1,109 |   |   | 2,587 |   |   | 2,228 |   |
| Gross      Margin                                                           |                                 | 1,939  |                               |   | 1,845 |   |   | 4,020 |   |   | 3,759 |   |
| Depreciation      and Amortization                                          |                                 | 365    |                               |   | 365 |   |   | 720 |   |   | 748 |   |
| Other      Operating Expenses                                               |                                 | 1,026  |                               |   | 957 |   |   | 1,967 |   |   | 1,948 |   |
| Operating      Income                                                       |                                 | 548    |                               |   | 523 |   |   | 1,333 |   |   | 1,063 |   |
| Other      Income, Net                                                      |                                 | 47     |                               |   | 27 |   |   | 89 |   |   | 45 |   |
| Interest      Charges and Preferred Stock Dividend Requirements             |                                 | 218    |                               |   | 207 |   |   | 428 |   |   | 386 |   |
| Income      Tax Expense                                                     |                                 | 114    |                               |   | 105 |   |   | 321 |   |   | 231 |   |
| Income      Before Discontinued Operations and Extraordinary      Loss | $                                    | 263    |                               | $      | 238 |   | $ | 673 |   | $ | 491 |   |

|                                                                                                               | Three      Months EndedJune      30, |   | Six      Months EndedJune      30, |   |
|--------------------------------------------------------------------------------------------------------------------|--------------------------------------|--------|------------------------------------|--------|
| Energy/Delivery Summary                                                                                            | 2008                                 |   | 2007                               |   | 2008 |   | 2007 |   |
|                                                                                                               | (in      millions of KWH)            |
| Energy                                                                                                             |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Retail:                                                                                                            |                                 |   |                               |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Residential                          |   | 9,829                              |   |   | 10,127 |   |   | 24,329 |   |   | 24,267 |   |
|                                                                                                               | Commercial                           |   | 9,909                              |   |   | 10,227 |   |   | 19,456 |   |   | 19,586 |   |
|                                                                                                               | Industrial                           |   | 15,060                             |   |   | 14,848 |   |   | 29,410 |   |   | 28,413 |   |
|                                                                                                               | Miscellaneous                        |   | 639                                |   |   | 632 |   |   | 1,248 |   |   | 1,245 |   |
| Total      Retail                                                                                                  |                                 | 35,437 |                               |   | 35,834 |   |   | 74,443 |   |   | 73,511 |   |
|                                                                                                               |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Wholesale                                                                                                          |                                 | 10,932 |                               |   | 9,376 |   |   | 22,597 |   |   | 18,154 |   |
|                                                                                                               |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Delivery                                                                                                           |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Texas      Wires – Energy delivered to customers served  by      AEP’s Texas Wires Companies |                                 | 7,132  |                               |   | 6,746 |   |   | 12,955 |   |   | 12,577 |   |
| Total      KWHs                                                                                                    |                                 | 53,501 |                               |   | 51,956 |   |   | 109,995 |   |   | 104,242 |   |

|                            | Three      Months EndedJune      30, |   | Six      Months EndedJune      30, |   |
|---------------------------------|--------------------------------------|--------|------------------------------------|--------|
|                            | 2008                                 |   | 2007                               |   | 2008 |   | 2007 |   |
|                            | (in      degree days)                |
| Weather      Summary            |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Eastern Region                  |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Actual      – Heating (a) |                                 | 136    |                               |   | 222 |   |   | 1,960 |   |   | 2,039 |   |
| Normal      – Heating (b) |                                 | 175    |                               |   | 174 |   |   | 1,943 |   |   | 1,966 |   |
|                            |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Actual      – Cooling (c) |                                 | 272    |                               |   | 367 |   |   | 272 |   |   | 382 |   |
| Normal      – Cooling (b) |                                 | 278    |                               |   | 275 |   |   | 281 |   |   | 278 |   |
|                            |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Western Region (d)              |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Actual      – Heating (a) |                                 | 40     |                               |   | 92 |   |   | 989 |   |   | 994 |   |
| Normal      – Heating (b) |                                 | 35     |                               |   | 33 |   |   | 966 |   |   | 991 |   |
|                            |                                 |   |                               |   |   |   |   |   |   |   |   |   |
| Actual      – Cooling (c) |                                 | 675    |                               |   | 622 |   |   | 700 |   |   | 678 |   |
| Normal      – Cooling (b) |                                 | 652    |                               |   | 656 |   |   | 672 |   |   | 674 |   |

| (a) | Eastern      region and western region heating degree days are calculated on a 55      degree temperature base. |
|-----|-----------------------------------------------------------------------------------------------------------------|
| (b) | Normal      Heating/Cooling represents the thirty-year average of degree      days.                             |
| (c) | Eastern      region and western region cooling degree days are calculated on a 65      degree temperature base. |
| (d) | Western      region statistics represent PSO/SWEPCo customer base  only.                                        |

| Second      Quarter of 2007                       |   |   |   |   |   |   |   |   |   |   | $      | 238    |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   |   |   |   |   |   |   | 47     |   |   |   |   |
| Off-system      Sales                             |   |   |   |   |   |   |   |   | 40     |   |   |   |   |
| Transmission      Revenues                        |   |   |   |   |   |   |   |   | 11     |   |   |   |   |
| Other      Revenues                               |   |   |   |   |   |   |   |   | (4     | )      |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   |   |   |   |   |   | 94     |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   |   |   |   |   |   |   | (70    | )      |   |   |   |
| Depreciation      and Amortization                |   |   |   |   |   |   |   |   | -      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   |   |   |   |   |   |   | (1     | )      |   |   |   |
| Carrying      Costs Income                        |   |   |   |   |   |   |   |   | 10     |   |   |   |   |
| Interest      Income                              |   |   |   |   |   |   |   |   | 6      |   |   |   |   |
| Other      Income, Net                            |   |   |   |   |   |   |   |   | 6      |   |   |   |   |
| Interest      and Other Charges                   |   |   |   |   |   |   |   |   | (11    | )      |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   |   |   |   |   |   | (60    | )      |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   |   |   |   |   |   | (9     | )      |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Second      Quarter of 2008                       |   |   |   |   |   |   |   |   |   |   | $      | 263    |   |

| · | Retail      Margins increased $47 million primarily due to the    following:                                                                                                                                                    |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                          | A      $39 million increase related to net rate increases implemented in our Ohio      jurisdictions, a $17 million increase related to recovery of E&R costs      in Virginia and the construction financing costs rider in West Virginia, a      $3 million increase in base rates in Texas and a $6 million increase in      base rates in Oklahoma. |
|   | ·                                                                                                                                                                                                                          | A      $38 million net increase due to adjustments recorded in the prior year      related to the 2007 Virginia base rate case which included a second      quarter 2007 provision for revenue refund. |
|   | ·                                                                                                                                                                                                                          | A      $25 million increase due to a second quarter 2007 provision related to a      SWEPCo Texas fuel reconciliation proceeding. |
|   | ·                                                                                                                                                                                                                          | A      $12 million increase related to increased usage by Ormet, an industrial      customer in Ohio.  See “Ormet” section of Note  3. |
|   | ·                                                                                                                                                                                                                          | An      $11 million increase primarily related to higher revenues under formula      rate plans at I&M. |
|   | These      increases were partially offset by:                                                                                                                                                                                  |
|   | ·                                                                                                                                                                                                                          | A      $90 million decrease related to increased fuel, consumable and PJM costs      in Ohio which included a $29 million expense resulting from a coal      contract amendment. |
|   | ·                                                                                                                                                                                                                          | A      $20 million decrease in usage related to weather primarily from a 26%      decrease in cooling degree days and a 39% decrease in heating degree days      in our eastern region. |
| · | Margins      from Off-system Sales increased $40 million primarily due to higher east      physical off-system sales margins mostly due to higher volumes and      stronger prices, partially offset by lower trading  margins. |
| · | Transmission      Revenues increased $11 million primarily due to increased usage in the SPP      and ERCOT regions and increased rates in the SPP  region.                                                                     |

| · | Other      Operation and Maintenance expenses increased $70 million primarily due to      increases in generation expenses for non-outage maintenance at Cook plant      and outage expenses at other plants, transmission reliability expenses,      recoverable PJM and customer account expenses in Ohio and administrative      and general expenses primarily related to employee    benefits. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization expense was flat primarily due to lower      commission-approved depreciation rates in Indiana, Michigan, Oklahoma and      Texas and lower Ohio regulatory asset amortization, offset by higher      depreciable property balances and prior year adjustments related to the      2007 Virginia base rate case.                                                 |
| · | Carrying      Costs Income increased $10 million primarily due to increased carrying      cost income on cost deferrals in Virginia and Oklahoma.                                                                                                                                                                                                                                                   |
| · | Interest      and Other Charges increased $11 million primarily due to additional debt      issued and higher interest rates on variable rate debt.                                                                                                                                                                                                                                                 |
| · | Income      Tax Expense increased $9 million due to an increase in pretax      income.                                                                                                                                                                                                                                                                                                              |

| Six      Months Ended June 30, 2007               |   |   |   |   |   |   |   |   |   |   | $      | 491    |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   |   |   |   |   |   |   | 162    |   |   |   |   |
| Off-system      Sales                             |   |   |   |   |   |   |   |   | 80     |   |   |   |   |
| Transmission      Revenues                        |   |   |   |   |   |   |   |   | 19     |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   |   |   |   |   |   | 261    |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   |   |   |   |   |   |   | 11     |   |   |   |   |
| Gain      on Dispositions of Assets, Net          |   |   |   |   |   |   |   |   | (19    | )      |   |   |   |
| Depreciation      and Amortization                |   |   |   |   |   |   |   |   | 28     |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   |   |   |   |   |   |   | (11    | )      |   |   |   |
| Carrying      Costs Income                        |   |   |   |   |   |   |   |   | 19     |   |   |   |   |
| Interest      Income                              |   |   |   |   |   |   |   |   | 17     |   |   |   |   |
| Other      Income, Net                            |   |   |   |   |   |   |   |   | 8      |   |   |   |   |
| Interest      and Other Charges                   |   |   |   |   |   |   |   |   | (42    | )      |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   |   |   |   |   |   | 11     |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   |   |   |   |   |   | (90    | )      |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Six      Months Ended June 30, 2008               |   |   |   |   |   |   |   |   |   |   | $      | 673    |   |

| · | Retail      Margins increased $162 million primarily due to the    following:                                                                                                                                                   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                          | An      $83 million increase related to net rate increases implemented in our Ohio      jurisdictions, a $31 million increase related to recovery of E&R costs      in Virginia and the construction financing costs rider in West Virginia, a      $12 million increase in base rates in Texas and a $14 million increase in      base rates in Oklahoma. |
|   | ·                                                                                                                                                                                                                          | A      $33 million increase related to increased usage by Ormet, an industrial      customer in Ohio.  See “Ormet” section of Note  3. |
|   | ·                                                                                                                                                                                                                          | A      $29 million increase related to coal contract amendments in      2008. |
|   | ·                                                                                                                                                                                                                          | A      $28 million increase related to increased residential and commercial usage      and customer growth. |
|   | ·                                                                                                                                                                                                                          | A      $25 million increase due to a second quarter 2007 provision related to a      SWEPCo Texas fuel reconciliation proceeding. |
|   | ·                                                                                                                                                                                                                          | A      $21 million increase related to increased sales to municipal, cooperative      and other customers primarily a result of new power supply contracts and      higher revenues under formula rate plans at I&M. |
|   | These      increases were partially offset by:                                                                                                                                                                                  |
|   | ·                                                                                                                                                                                                                          | A      $79 million decrease related to increased fuel, consumable and PJM costs      in Ohio. |
|   | ·                                                                                                                                                                                                                          | A      $23 million decrease in usage related to weather primarily from a 29%      decrease in cooling degree days in our eastern region. |
| · | Margins      from Off-system Sales increased $80 million primarily due to higher east      physical off-system sales margins mostly due to higher volumes and      stronger prices, partially offset by lower trading  margins. |
| · | Transmission      Revenues increased $19 million primarily due to increased usage in the SPP      and ERCOT regions and increased rates in the SPP  region.                                                                     |

| · | Other      Operation and Maintenance expenses decreased $11 million primarily due to      deferral of storm restoration costs, net of amortization, of $63 million      in Oklahoma as a result of a rate settlement to recover 2007 storm      restoration costs partially offset by an increase in generation expenses      at Cook plant, the write-off of unrecoverable pre-construction costs for      PSO’s canceled Red Rock Generating Facility, recoverable PJM and customer      account expenses in Ohio and increases in administrative and general      expenses primarily related to employee benefits. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Gain      on Disposition of Assets, Net decreased $19 million primarily due to the      cessation of the earnings sharing agreement with Centrica from the sale of      our Texas REPs in 2002.  In 2007, we received the final earnings      sharing payment of $20 million.                                                                                                                                                                                                                                                                                                                                     |
| · | Depreciation      and Amortization expense decreased $28 million primarily due to lower      commission-approved depreciation rates in Indiana, Michigan, Oklahoma and      Texas and lower Ohio regulatory asset amortization, partially offset by      higher depreciable property balances and prior year adjustments related to      the Virginia base rate case.                                                                                                                                                                                                                                                       |
| · | Taxes      Other Than Income Taxes increased $11 million primarily due to favorable      adjustments to property tax returns recorded in the prior      year.                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | Carrying      Costs Income increased $19 million primarily due to increased carrying      cost income on cost deferrals in Virginia and Oklahoma.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| · | Interest      Income increased $17 million primarily due to the favorable effect of      claims for refund filed with the IRS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | Interest      and Other Charges increased $42 million primarily due to additional debt      issued and higher interest rates on variable rate debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | Income      Tax Expense increased $90 million due to an increase in pretax      income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

|                                                       |   | June      30, 2008   |   | December      31, 2007 |   |
|------------------------------------------------------------|--------|----------------------|--------|------------------------|--------|
|                                                       |   | ($      in millions) |   |
| Long-term      Debt, including amounts due within one year |   | $                    | 15,753 |                   | 58.0   | % | $ | 14,994 |   | 58.1 | % |
| Short-term      Debt                                       |   |                 | 705    |                   | 2.6    |   |   | 660 |   | 2.6 |   |
| Total      Debt                                            |   |                 | 16,458 |                   | 60.6   |   |   | 15,654 |   | 60.7 |   |
| Common      Equity                                         |   |                 | 10,631 |                   | 39.2   |   |   | 10,079 |   | 39.1 |   |
| Preferred      Stock                                       |   |                 | 61     |                   | 0.2    |   |   | 61 |   | 0.2 |   |
|                                                       |   |                 |   |                   |   |   |   |   |   |   |   |
| Total      Debt and Equity Capitalization                  |   | $                    | 27,150 |                   | 100.0  | % | $ | 25,794 |   | 100.0 | % |

|                                                                          |                           |   | Amount             |   | Maturity |
|-------------------------------------------------------------------------------|--------------------------------|--------|--------------------|--------|----------|
|                                                                          |                           |   | (in      millions) |   |     |
| Commercial      Paper Backup:                                                 |                           |   |               |   |     |   |
|                                                                          | Revolving      Credit Facility |   |               | $      | 1,500    |   | March      2011 |
|                                                                          | Revolving      Credit Facility |   |               |   | 1,500    |   | April      2012 |
| Revolving      Credit Facility                                                |                           |   |               | 650    |     | April      2011 |
| Revolving      Credit Facility                                                |                           |   |               | 350    |     | April      2009 |
| Total                                                                         |                           |   |               | 4,000  |     |   |
| Cash      and Cash Equivalents                                                |                           |   |               | 218    |     |   |
| Total      Liquidity Sources                                                  |                           |   |               | 4,218  |     |   |
| Less:      AEP Commercial Paper Outstanding                                   |                           |   |               | 698    |     |   |
|               Letters of Credit Drawn |                           |   |               | 429    |     |   |
|                                                                          |                           |   |               |   |     |   |
| Net      Available Liquidity                                                  |                           |   | $                  | 3,091  |     |   |

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

|                                                      | Six      Months Ended |   |
|-----------------------------------------------------------|-----------------------|--------|
|                                                      | June      30,         |   |
|                                                      | 2008                  |   | 2007 |   |
|                                                      | (in      millions)    |   |
| Cash      and Cash Equivalents at Beginning of Period     |                  | $      | 178 |   |   | $ | 301 |   |
| Net      Cash Flows from Operating Activities             |                  |   | 1,197 |   |   |   | 969 |   |
| Net      Cash Flows Used for Investing Activities         |                  |   | (1,645 | ) |   |   | (2,127 | )  |
| Net      Cash Flows from Financing Activities             |                  |   | 488 |   |   |   | 1,029 |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents |                  |   | 40 |   |   |   | (129 | )  |
| Cash      and Cash Equivalents at End of Period           |                  | $      | 218 |   |   | $ | 172 |   |

|                                                     |   | Six      Months Ended |   |
|----------------------------------------------------------|--------|-----------------------|--------|
|                                                     |   | June      30,         |   |
|                                                     |   | 2008                  |   | 2007 |   |
|                                                     |   | (in      millions)    |   |
| Net      Income                                          |   | $                     | 854    |   | $ | 451 |   |
| Less  Discontinued      Operations, Net of Tax |   |                  | (1     | ) |   | (2 | ) |
| Income      Before Discontinued Operations               |   |                  | 853    |   |   | 449 |   |
| Depreciation      and Amortization                       |   |                  | 736    |   |   | 763 |   |
| Other                                                    |   |                  | (392   | ) |   | (243 | ) |
| Net      Cash Flows from Operating Activities            |   | $                     | 1,197  |   | $ | 969 |   |

|                                              |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Six      Months Ended |   |
|---------------------------------------------------|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------------------|--------|
|                                              |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | June      30,         |   |
|                                              |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2008                  |   | 2007 |   |
|                                              | (in      millions) |   |
| Construction      Expenditures                    | $                  | (1,608 | )      | $      | (1,823 | )      |
| Acquisition      of Darby and Lawrenceburg Plants |               | -      |   |   | (427   | )      |
| Acquisition      of Other Assets                  |               | (81    | )      |   | -      |   |
| Proceeds      from Sales of Assets                |               | 69     |   |   | 74     |   |
| Other                                             |               | (25    | )      |   | 49     |   |
| Net      Cash Flows Used for Investing Activities | $                  | (1,645 | )      | $      | (2,127 | )      |

|                                          |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Six      Months Ended |   |
|-----------------------------------------------|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------------------|--------|
|                                          |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | June      30,         |   |
|                                          |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2008                  |   | 2007 |   |
|                                          | (in      millions) |   |
| Issuance      of Common Stock                 | $                  | 72     |   | $      | 90     |   |
| Issuance/Retirement      of Debt, Net         |               | 777    |   |   | 1,294  |   |
| Dividends      Paid on Common Stock           |               | (330   | )      |   | (311   | )      |
| Other                                         |               | (31    | )      |   | (44    | )      |
| Net      Cash Flows from Financing Activities | $                  | 488    |   | $      | 1,029  |   |

|                                                      | June      30,2008  |   | December      31,2007 |   |
|-----------------------------------------------------------|--------------------|--------|-----------------------|--------|
|                                                      | (in      millions) |
| AEP      Credit Accounts Receivable Purchase Commitments  | $                  | 564    |                  | $      | 507 |   |
| Rockport      Plant Unit 2 Future Minimum Lease Payments  |               | 2,142  |                  |   | 2,216 |   |
| Railcars      Maximum Potential Loss From Lease Agreement |               | 26     |                  |   | 30 |   |

|       |   |            |   |               |   |               |   |               |   |           |   |            |   |                |    |        | Commercial |
|------------|--------|-----------------|--------|--------------------|--------|--------------------|--------|--------------------|--------|----------------|--------|-----------------|--------|---------------------|---------|-------------|------------|
|       |   |            |   |               |   | Total              |   |               |   |           |   |            |   |                | Nominal |        | Operation  |
| Operating  |   | Project         |   |               |   | Projected          |   |               |   |           |   |            |   |                | MW      |        | Date       |
| Company    |   | Name            |   | Location           |   | Cost      (a)      |   | CWIP      (b)      |   | Fuel      Type |   | Plant      Type |   | Capacity            |    | (Projected) |
|       |   |            |   |               |   | (in      millions) |   | (in      millions) |   |           |   |            |   |                |    |        |
| PSO        |   | Southwestern    | (c)    | Oklahoma           |   | $                  | 56     |               | $      | -              |   | Gas             |   | Simple-cycle        |    | 150         |       | 2008 |
| PSO        |   | Riverside       | (d)    | Oklahoma           |   |               | 58     |               |   | -              |   | Gas             |   | Simple-cycle        |    | 150         |       | 2008 |
| AEGCo      |   | Dresden         | (e)    | Ohio               |   |               | 309    | (e)                |   | 119            |   | Gas             |   | Combined-cycle      |    | 580         |       | 2010 |
| SWEPCo     |   | Stall           |   | Louisiana          |   |               | 378    |               |   | 106            |   | Gas             |   | Combined-cycle      |    | 500         |       | 2010 |
| SWEPCo     |   | Turk            | (f)    | Arkansas           |   |               | 1,522  | (f)                |   | 407            |   | Coal            |   | Ultra-supercritical |    | 600         | (f)        | 2012 |
| APCo       |   | Mountaineer     | (g)    | West      Virginia |   |               | 2,230  | (g)                |   | -              |   | Coal            |   | IGCC                |    | 629         |       | 2012(g) |
| CSPCo/OPCo |   | Great      Bend | (g)    | Ohio               |   |               | 2,700  | (g)                |   | -              |   | Coal            |   | IGCC                |    | 629         |       | 2017(g) |

| (a) | Amount      excludes AFUDC.                                                                                                                                                                                                                                                                                                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amount      includes AFUDC.  Turk’s CWIP includes joint owners’      share.                                                                                                                                                                                                                                                   |
| (c) | Southwestern      Units were placed in service on February 29, 2008.                                                                                                                                                                                                                                                                                |
| (d) | The      final Riverside Unit was placed in service on June 15,    2008.                                                                                                                                                                                                                                                                            |
| (e) | In      September 2007, AEGCo purchased the partially completed Dresden plant from      Dresden Energy LLC, a subsidiary of Dominion Resources, Inc., for $85      million, which is included in the “Total Projected Cost” section      above.                                                                                         |
| (f) | SWEPCo      plans to own approximately 73%, or 440 MW, totaling $1,110 million in      capital investment.  The increase in the cost estimate disclosed      in the 2007 Annual Report relates to cost escalations due to the delay in      receipt of permits and approvals.  See “Turk Plant” section      below. |
| (g) | Subject      to revision; construction of IGCC plants deferred pending regulatory      approval.  See “IGCC Plants” section  below.                                                                                                                                                                                           |

| · | Requirements      under CAA to reduce emissions of SO2,      NOx,      particulate matter (PM) and mercury from fossil fuel-fired power plants;      and      |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Requirements      under the Clean Water Act (CWA) to reduce the impacts of water intake      structures on aquatic species at certain of our power    plants. |

----

----

|                                                                                         | Utility      Operations |   | Generation      andMarketing |   | All      Other |   | Sub-TotalMTM      Risk Management Contracts |   | MTMof      Cash Flow and Fair Value Hedges |   |   CollateralDeposits |   | Total  |            |
|----------------------------------------------------------------------------------------------|-------------------------|--------|------------------------------|--------|----------------|--------|---------------------------------------------|--------|--------------------------------------------|--------|--------------------------------|--------|--------|-----------------|
| Current      Assets                                                                          | $                       | 653    |                         | $      | 201            |   | $                                           | 121    |                                       | $      | 975                            |   | $      | 34              |   | $ | (118 | ) | $ | 891 |   |
| Noncurrent      Assets                                                                       |                    | 309    |                         |   | 144            |   |                                        | 86     |                                       |   | 539                            |   |   | 14              |   |   | (64 | ) |   | 489 |   |
| Total      Assets                                                                            |                    | 962    |                         |   | 345            |   |                                        | 207    |                                       |   | 1,514                          |   |   | 48              |   |   | (182 | ) |   | 1,380 |   |
|                                                                                         |                    |   |                         |   |           |   |                                        |   |                                       |   |                           |   |   |            |   |   |   |   |   |   |   |
| Current      Liabilities                                                                     |                    | (660   | )                            |   | (203           | )      |                                        | (124   | )                                          |   | (987                           | )      |   | (101            | ) |   | 97 |   |   | (991 | ) |
| Noncurrent      Liabilities                                                                  |                    | (202   | )                            |   | (75            | )      |                                        | (90    | )                                          |   | (367                           | )      |   | (5              | ) |   | 24 |   |   | (348 | ) |
| Total      Liabilities                                                                       |                    | (862   | )                            |   | (278           | )      |                                        | (214   | )                                          |   | (1,354                         | )      |   | (106            | ) |   | 121 |   |   | (1,339 | ) |
|                                                                                         |                    |   |                         |   |           |   |                                        |   |                                       |   |                           |   |   |            |   |   |   |   |   |   |   |
| Total MTM Derivative   Contract      Net Assets  (Liabilities) | $                       | 100    |                         | $      | 67             |   | $                                           | (7     | )                                          | $      | 160                            |   | $      |   (58 |   ) |         $ |   (61 | ) | $ | 41 |   |

|                                                                                                                        |   | Utility      Operations |   | GenerationandMarketing |   | All      Other |   | Total  |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|------------------------|--------|----------------|--------|--------|--------|
| Total      MTM Risk Management Contract Net Assets (Liabilities)        at December 31, 2007                           |   | $                       | 156    |                   | $      | 43             |   | $      | (8     | ) | $ | 191 |   |
| (Gain)      Loss from Contracts Realized/Settled During the Period and             Entered in a Prior Period |   |                    | (36    | )                      |   | 4              |   |   | -      |   |   | (32 | ) |
| Fair      Value of New Contracts at Inception When Entered  During      the Period (a)                  |   |                    | 2      |                   |   | 16             |   |   | -      |   |   | 18 |   |
| Changes      in Fair Value Due to Valuation Methodology  Changes      on Forward Contracts (b)               |   |                    | 6      |                   |   | 3              |   |   | 1      |   |   | 10 |   |
| Changes      in Fair Value Due to Market Fluctuations During   the      Period (c)                      |   |                    | 6      |                   |   | 1              |   |   | -      |   |   | 7 |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions(d)                                                     |   |                    | (34    | )                      |   | -              |   |   | -      |   |   | (34 | ) |
| Total      MTM Risk Management Contract Net Assets       (Liabilities) at June 30, 2008                      |   | $                       | 100    |                   | $      | 67             |   | $      | (7     | ) |   | 160 |   |
| Net      Cash Flow and Fair Value Hedge Contracts                                                                      |   |                    |   |                   |   |           |   |   |   |   |   | (58 | ) |
| Collateral      Deposits                                                                                                    |   |                    |   |                   |   |           |   |   |   |   |   | (61 | ) |
| Ending      Net Risk Management Assets at June 30, 2008                                                                     |   |                    |   |                   |   |           |   |   |   |   | $ | 41 |   |

| (a) | Reflects      fair value on long-term contracts which are typically with customers that      seek fixed pricing to limit their risk against fluctuating energy      prices.  The contract prices are valued against market curves      associated with the delivery location and deliveryterm.                                                                           |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents      the impact of applying AEP’s credit risk when measuring the fair value of      derivative liabilities according to SFAS 157.                                                                                                                                                                                                                                 |
| (c) | Market      fluctuations are attributable to various factors such as supply/demand,      weather, storage, etc.                                                                                                                                                                                                                                                                    |
| (d) | “Change      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected on the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/liabilities for those subsidiaries that      operate in regulated jurisdictions. |

|                                                                                               |   | Remainder2008 |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | After2012      (f) |   |   | Total  |   |
|----------------------------------------------------------------------------------------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|
| Utility      Operations:                                                                           |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |
| Level      1 (a)                                                                                   |   | $             | (6     | )      |   | $      | 1      |   |   | $      | -      |   |   | $      | -      |   |               | $      | -      |   |   | $ | - |   |   | $ | (5 | ) |
| Level      2 (b)                                                                                   |   |          | 8      |   |   |   | 47     |   |   |   | 40     |   |   |   | 16     |   |               |   | 6      |   |   |   | - |   |   |   | 117 |   |
| Level      3 (c)                                                                                   |   |          | (29    | )      |   |   | (5     | )      |   |   | (12    | )      |   |   | (8     | )      |               |   | (4     | )      |   |   | - |   |   |   | (58 | ) |
| Total                                                                                              |   |          | (27    | )      |   |   | 43     |   |   |   | 28     |   |   |   | 8      |   |               |   | 2      |   |   |   | - |   |   |   | 54 |   |
|                                                                                               |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Generation      and Marketing:                                                                     |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Level      1 (a)                                                                                   |   |          | (36    | )      |   |   | 13     |   |   |   | (1     | )      |   |   | (1     | )      |               |   | -      |   |   |   | - |   |   |   | (25 | ) |
| Level      2 (b)                                                                                   |   |          | 31     |   |   |   | (8     | )      |   |   | 6      |   |   |   | 5      |   |               |   | 5      |   |   |   | 3 |   |   |   | 42 |   |
| Level      3 (c)                                                                                   |   |          | (2     | )      |   |   | -      |   |   |   | 8      |   |   |   | 9      |   |               |   | 9      |   |   |   | 26 |   |   |   | 50 |   |
| Total                                                                                              |   |          | (7     | )      |   |   | 5      |   |   |   | 13     |   |   |   | 13     |   |               |   | 14     |   |   |   | 29 |   |   |   | 67 |   |
|                                                                                               |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| All      Other:                                                                                    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Level      1 (a)                                                                                   |   |          | -      |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |               |   | -      |   |   |   | - |   |   |   | - |   |
| Level      2 (b)                                                                                   |   |          | (1     | )      |   |   | (4     | )      |   |   | (4     | )      |   |   | 2      |   |               |   | -      |   |   |   | - |   |   |   | (7 | ) |
| Level      3 (c)                                                                                   |   |          | -      |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |               |   | -      |   |   |   | - |   |   |   | - |   |
| Total                                                                                              |   |          | (1     | )      |   |   | (4     | )      |   |   | (4     | )      |   |   | 2      |   |               |   | -      |   |   |   | - |   |   |   | (7 | ) |
|                                                                                               |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Total:                                                                                             |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Level      1 (a)                                                                                   |   |          | (42    | )      |   |   | 14     |   |   |   | (1     | )      |   |   | (1     | )      |               |   | -      |   |   |   | - |   |   |   | (30 | ) |
| Level      2 (b)                                                                                   |   |          | 38     |   |   |   | 35     |   |   |   | 42     |   |   |   | 23     |   |               |   | 11     |   |   |   | 3 |   |   |   | 152 |   |
| Level      3 (c) (d)                                                                               |   |          | (31    | )      |   |   | (5     | )      |   |   | (4     | )      |   |   | 1      |   |               |   | 5      |   |   |   | 26 |   |   |   | (8 | ) |
| Total                                                                                              |   |          | (35    | )      |   |   | 44     |   |   |   | 37     |   |   |   | 23     |   |               |   | 16     |   |   |   | 29 |   |   |   | 114 |   |
| Dedesignated      Risk Management          Contracts (e)                       |   |          | 7      |   |   |   | 14     |   |   |   | 14     |   |   |   | 6      |   |               |   | 5      |   |   |   | - |   |   |   | 46 |   |
| Total      MTM Risk Management          Contract Net Assets (Liabilities) |   | $             | (28    | )      |   | $      | 58     |   |   | $      | 51     |   |   | $      | 29     |   |               | $      | 21     |   |   | $ | 29 |   |   | $ | 160 |   |

| (a) | Level      1 inputs are quoted prices (unadjusted) in active markets for identical      assets or liabilities that the reporting entity has the ability to access      at the measurement date.  Level 1 inputs primarily consist of      exchange traded contracts that exhibit sufficient frequency and volume to      provide pricing information on an ongoing basis.                                                                                                                                                                                                                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Level      2 inputs are inputs other than quoted prices included within Level 1 that      are observable for the asset or liability, either directly or      indirectly.  If the asset or liability has a specified      (contractual) term, a Level 2 input must be observable for substantially      the full term of the asset or liability.  Level 2 inputs      primarily consist of OTC broker quotes in moderately active or less active      markets, exchange traded contracts where there was not sufficient market      activity to warrant inclusion in Level 1, and OTC broker quotes that are      corroborated by the same or similar transactions that have occurred in the      market. |
| (c) | Level      3 inputs are unobservable inputs for the asset or      liability.  Unobservable inputs shall be used to measure fair      value to the extent that the observable inputs are not available, thereby      allowing for situations in which there is little, if any, market activity      for the asset or liability at the measurement date.  Level 3      inputs primarily consist of unobservable market data or are valued based      on models and/or assumptions.                                                                                                                                                                                                                         |
| (d) | A      significant portion of the total volumetric position within the      consolidated level 3 balance has been economically  hedged.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (e) | Dedesignated      Risk Management Contracts are contracts that were originally MTM but were      subsequently elected as normal under SFAS 133.  At the time of      the normal election the MTM value was frozen and no longer fair      valued.  This will be amortized within Utility Operations      Revenues over the remaining life of the contract.                                                                                                                                                                                                                                                                                                                                               |
| (f) | There      is mark-to-market value of $29 million in individual periods beyond      2012.  $13 million of this mark-to-market value is in 2013, $8      million is in 2014, $3 million is in 2015, $3 million is in 2016 and $2      million is in 2017.                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

| Commodity        |   | Transaction      Class               |              | Market/Region                                      |   | Tenor            |
|------------------|--------|--------------------------------------|-------------------|----------------------------------------------------|--------|------------------|
|             |   |                                 |              |                                               |   | (in      Months) |
| Natural      Gas |   | Futures                              |              | NYMEX      / Henry Hub                             |   | 60               |
|             |   | Physical      Forwards               |              | Gulf      Coast, Texas                             |   | 30               |
|             |   | Swaps                                |              | Gas      East, Mid-Continent, Gulf Coast, Texas    |   | 30               |
|             |   | Exchange      Option Volatility      |              | NYMEX      / Henry Hub                             |   | 12               |
| Power            |   | Futures                              |              | Power      East – PJM                        |   | 36               |
|             |   | Physical      Forwards               |              | Power      East – Cinergy                    |   | 54               |
|             |   | Physical      Forwards               |              | Power      East – PJM West                   |   | 54               |
|             |   | Physical      Forwards               |              | Power      East – AEP Dayton (PJM)           |   | 54               |
|             |   | Physical      Forwards               |              | Power      East – ERCOT                      |   | 42               |
|             |   | Physical      Forwards               |              | Power      East – Entergy                    |   | 30               |
|             |   | Physical      Forwards               |              | Power      West – PV, NP15, SP15, MidC, Mead |   | 42               |
|             |   | Peak      Power Volatility (Options) | Cinergy,      PJM |                                               | 12     |
| Emissions        |   | Credits                              |              | SO2,      NOx                                      |   | 42               |
| Coal             |   | Physical      Forwards               |              | PRB,      NYMEX, CSX                               |   | 42               |

|                                                                                                              |   | Power  |   |   | Interest      Rate      andForeignCurrency |   |   | Total  |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------------------------------------|--------|--------|--------|--------|
| Beginning      Balance in AOCI, December 31, 2007                                                                 |   | $      | (1     | )      |                                       | $      | (25    | )      |   | $ | (26 | ) |
| Changes      in Fair Value                                                                                        |   |   | (32    | )      |                                       |   | (4     | )      |   |   | (36 | ) |
| Reclassifications      from AOCI for Cash Flow Hedges      Settled                                           |   |   | 1      |   |                                       |   | 1      |   |   |   | 2 |   |
| Ending      Balance in AOCI, June 30, 2008                                                                        |   | $      | (32    | )      |                                       | $      | (28    | )      |   | $ | (60 | ) |
|                                                                                                              |   |   |   |   |                                       |   |   |   |   |   |   |   |
| After      Tax Portion Expected to be Reclassified to          Earnings During Next 12 Months |   | $      | (38    | )      |                                       | $      | (6     | )      |   | $ | (44 | ) |

| Counterparty      Credit Quality        |   | Exposure      Before Credit Collateral |   |   | Credit      Collateral |   |   | Net      Exposure |   |   | Number      of Counterparties >10% ofNet      Exposure |   |   | Net      Exposureof      Counterparties >10% |   |
|-----------------------------------------|--------|----------------------------------------|--------|--------|------------------------|--------|--------|-------------------|--------|--------|-----------------------------------------------------------|--------|--------|-------------------------------------------------|--------|
| Investment      Grade                   |   | $                                      | 873    |   |                   | $      | 184    |              |   | $      | 689                                                       |   |   |                                            | 2      |   |   | $ | 181 |   |
| Split      Rating                       |   |                                   | 36     |   |                   |   | 7      |              |   |   | 29                                                        |   |   |                                            | 4      |   |   |   | 27 |   |
| Noninvestment      Grade                |   |                                   | 185    |   |                   |   | 49     |              |   |   | 136                                                       |   |   |                                            | 1      |   |   |   | 112 |   |
| No      External Ratings:               |   |                                   |   |   |                   |   |   |              |   |   |                                                      |   |   |                                            |   |   |   |   |   |   |
|  Internal      Investment Grade    |   |                                   | 89     |   |                   |   | -      |              |   |   | 89                                                        |   |   |                                            | 2      |   |   |   | 63 |   |
|  Internal      Noninvestment Grade |   |                                   | 68     |   |                   |   | 1      |              |   |   | 67                                                        |   |   |                                            | 2      |   |   |   | 61 |   |
| Total      as of June 30, 2008          |   | $                                      | 1,251  |   |                   | $      | 241    |              |   | $      | 1,010                                                     |   |   |                                            | 11     |   |   | $ | 444 |   |
|                                    |   |                                   |   |   |                   |   |   |              |   |   |                                                      |   |   |                                            |   |   |   |   |   |   |
| Total      as of December 31, 2007      |   | $                                      | 673    |   |                   | $      | 42     |              |   | $      | 631                                                       |   |   |                                            | 6      |   |   | $ | 74 |   |

|                               | Remainder |   |   |   |   |
|------------------------------------|-----------|--------|--------|--------|--------|
|                               | 2008      |   | 2009   |   | 2010   |
| Estimated      Plant Output Hedged | 90%       |   | 89%    |   | 91%    |

| Six      Months EndedJune      30, 2008 |   |   |   |    | Twelve      Months EndedDecember      31, 2007 |
|-----------------------------------------|--------|--------|--------|---------|------------------------------------------------|
| (in      millions)                      |   |   |   |    | (in      millions)                             |
| End                                     |   | High   |   | Average |                                           | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $2                                      |   | $2     |   | $1      |                                           | $1 |   |   |   |   | $1 |   | $6 |   | $2 |   | $1 |

----

|                                                                                                        |   | Three      Months Ended |        |   | Six      Months Ended |   |
|-------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|--------|-----------------------|--------|
|                                                                                                        |   | 2008                    |        |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                                                                    |   |                    |        |   |                  |   |   |   |   |   |   |   |
| Utility      Operations                                                                                     |   | $                       | 3,200       |   |                  | $      | 2,818 |   |   | $ | 6,210 |   |   | $ | 5,704 |   |
| Other                                                                                                       |   |                    | 346         |   |                  |   | 328 |   |   |   | 803 |   |   |   | 611 |   |
| TOTAL                                                                                                       |   |                    | 3,546       |   |                  |   | 3,146 |   |   |   | 7,013 |   |   |   | 6,315 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                                                    |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation                                                |   |                    | 1,053       |   |                  |   | 868 |   |   |   | 2,033 |   |   |   | 1,754 |   |
| Purchased      Energy for Resale                                                                            |   |                    | 366         |   |                  |   | 291 |   |   |   | 629 |   |   |   | 537 |   |
| Other      Operation and Maintenance                                                                        |   |                    | 982         |   |                  |   | 881 |   |   |   | 1,860 |   |   |   | 1,819 |   |
| Gain      on Disposition of Assets, Net                                                                     |   |                    | (5          | )      |                  |   | (3 | ) |   |   | (8 | ) |   |   | (26 | ) |
| Asset      Impairments and Other Related Items                                                              |   |                    | -           |   |                  |   | - |   |   |   | (255 | ) |   |   | - |   |
| Depreciation      and Amortization                                                                          |   |                    | 373         |   |                  |   | 372 |   |   |   | 736 |   |   |   | 763 |   |
| Taxes      Other Than Income Taxes                                                                          |   |                    | 191         |   |                  |   | 188 |   |   |   | 389 |   |   |   | 374 |   |
| TOTAL                                                                                                       |   |                    | 2,960       |   |                  |   | 2,597 |   |   |   | 5,384 |   |   |   | 5,221 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                                                                       |   |                    | 586         |   |                  |   | 549 |   |   |   | 1,629 |   |   |   | 1,094 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest      and Investment Income                                                                         |   |                    | 15          |   |                  |   | 8 |   |   |   | 31 |   |   |   | 31 |   |
| Carrying      Costs Income                                                                                  |   |                    | 26          |   |                  |   | 16 |   |   |   | 43 |   |   |   | 24 |   |
| Allowance      for Equity Funds Used During Construction                                                    |   |                    | 11          |   |                  |   | 6 |   |   |   | 21 |   |   |   | 14 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INTEREST      AND OTHER CHARGES                                                                             |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Expense                                                                                       |   |                    | 234         |   |                  |   | 213 |   |   |   | 454 |   |   |   | 399 |   |
| Preferred      Stock Dividend Requirements of Subsidiaries                                                  |   |                    | -           |   |                  |   | - |   |   |   | 1 |   |   |   | 1 |   |
| TOTAL                                                                                                       |   |                    | 234         |   |                  |   | 213 |   |   |   | 455 |   |   |   | 400 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE, MINORITY  INTEREST      EXPENSE AND EQUITY EARNINGS (LOSS) |   |                    | 404         |   |                  |   | 366 |   |   |   | 1,269 |   |   |   | 763 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                                                                     |   |                    | 123         |   |                  |   | 108 |   |   |   | 416 |   |   |   | 238 |   |
| Minority      Interest Expense                                                                              |   |                    | 1           |   |                  |   | 1 |   |   |   | 2 |   |   |   | 2 |   |
| Equity      Earnings of Unconsolidated Subsidiaries                                                         |   |                    | -           |   |                  |   | - |   |   |   | 2 |   |   |   | 5 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE DISCONTINUED OPERATIONS AND    EXTRAORDINARY      LOSS                    |   |                    | 280         |   |                  |   | 257 |   |   |   | 853 |   |   |   | 528 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| DISCONTINUED      OPERATIONS, NET OF TAX                                                                    |   |                    | 1           |   |                  |   | 2 |   |   |   | 1 |   |   |   | 2 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE EXTRAORDINARY LOSS                                                                       |   |                    | 281         |   |                  |   | 259 |   |   |   | 854 |   |   |   | 530 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EXTRAORDINARY      LOSS, NET OF TAX                                                                         |   |                    | -           |   |                  |   | (79 | ) |   |   | - |   |   |   | (79 | ) |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                                                                             |   | $                       | 281         |   |                  | $      | 180 |   |   | $ | 854 |   |   | $ | 451 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED      AVERAGE NUMBER OF BASIC SHARES OUTSTANDING                                                    |   |                    | 401,513,958 |   |                  |   | 398,679,242 |   |   |   | 401,155,975 |   |   |   | 398,000,712 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| BASIC      EARNINGS PER SHARE                                                                               |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      Before Discontinued Operations and Extraordinary Loss                                           |   | $                       | 0.70        |   |                  | $      | 0.64 |   |   | $ | 2.13 |   |   | $ | 1.33 |   |
| Discontinued      Operations, Net of Tax                                                                    |   |                    | -           |   |                  |   | 0.01 |   |   |   | - |   |   |   | - |   |
| Income      Before Extraordinary Loss                                                                       |   |                    | 0.70        |   |                  |   | 0.65 |   |   |   | 2.13 |   |   |   | 1.33 |   |
| Extraordinary      Loss, Net of Tax                                                                         |   |                    | -           |   |                  |   | (0.20 | ) |   |   | - |   |   |   | (0.20 | ) |
| TOTAL      BASIC EARNINGS PER SHARE                                                                         |   | $                       | 0.70        |   |                  | $      | 0.45 |   |   | $ | 2.13 |   |   | $ | 1.13 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED      AVERAGE NUMBER OF DILUTED SHARES       OUTSTANDING                             |   |                    | 402,785,942 |   |                  |   | 399,868,900 |   |   |   | 402,429,019 |   |   |   | 399,214,277 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED      EARNINGS PER SHARE                                                                             |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      Before Discontinued Operations and Extraordinary Loss                                           |   | $                       | 0.70        |   |                  | $      | 0.64 |   |   | $ | 2.12 |   |   | $ | 1.32 |   |
| Discontinued      Operations, Net of Tax                                                                    |   |                    | -           |   |                  |   | 0.01 |   |   |   | - |   |   |   | 0.01 |   |
| Income      Before Extraordinary Loss                                                                       |   |                    | 0.70        |   |                  |   | 0.65 |   |   |   | 2.12 |   |   |   | 1.33 |   |
| Extraordinary      Loss, Net of Tax                                                                         |   |                    | -           |   |                  |   | (0.20 | ) |   |   | - |   |   |   | (0.20 | ) |
| TOTAL      DILUTED EARNINGS PER SHARE                                                                       |   | $                       | 0.70        |   |                  | $      | 0.45 |   |   | $ | 2.12 |   |   | $ | 1.13 |   |
|                                                                                                        |   |                    |        |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| CASH      DIVIDENDS PAID PER SHARE                                                                          |   | $                       | 0.41        |   |                  | $      | 0.39 |   |   | $ | 0.82 |   |   | $ | 0.78 |   |

----

|                                                   |   | 2008   |   |   | 2007   |   |
|--------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| CURRENT      ASSETS                                    |   |   |   |   |   |   |
| Cash      and Cash Equivalents                         |   | $      | 218    |   |   | $      | 178 |   |
| Other      Temporary Investments                       |   |   | 243    |   |   |   | 365 |   |
| Accounts      Receivable:                              |   |   |   |   |   |   |   |   |
|         Customers                            |   |   | 795    |   |   |   | 730 |   |
|         Accrued Unbilled Revenues            |   |   | 400    |   |   |   | 379 |   |
|         Miscellaneous                        |   |   | 85     |   |   |   | 60 |   |
|         Allowance for Uncollectible Accounts |   |   | (45    | )      |   |   | (52 | )  |
|         Total Accounts Receivable            |   |   | 1,235  |   |   |   | 1,117 |   |
| Fuel,      Materials and Supplies                      |   |   | 1,049  |   |   |   | 967 |   |
| Risk      Management Assets                            |   |   | 891    |   |   |   | 271 |   |
| Margin      Deposits                                   |   |   | 63     |   |   |   | 47 |   |
| Regulatory      Asset for Under-Recovered Fuel Costs   |   |   | 202    |   |   |   | 11 |   |
| Prepayments      and Other                             |   |   | 105    |   |   |   | 70 |   |
| TOTAL                                                  |   |   | 4,006  |   |   |   | 3,026 |   |
|                                                   |   |   |   |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                     |   |   |   |   |   |   |   |   |
| Electric:                                              |   |   |   |   |   |   |   |   |
|         Production                           |   |   | 20,675 |   |   |   | 20,233 |   |
|         Transmission                         |   |   | 7,651  |   |   |   | 7,392 |   |
|         Distribution                         |   |   | 12,389 |   |   |   | 12,056 |   |
| Other      (including coal mining and nuclear fuel)    |   |   | 3,479  |   |   |   | 3,445 |   |
| Construction      Work in Progress                     |   |   | 3,257  |   |   |   | 3,019 |   |
| Total                                                  |   |   | 47,451 |   |   |   | 46,145 |   |
| Accumulated      Depreciation and Amortization         |   |   | 16,447 |   |   |   | 16,275 |   |
| TOTAL      - NET                                       |   |   | 31,004 |   |   |   | 29,870 |   |
|                                                   |   |   |   |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                           |   |   |   |   |   |   |   |   |
| Regulatory      Assets                                 |   |   | 2,234  |   |   |   | 2,199 |   |
| Securitized      Transition Assets                     |   |   | 2,121  |   |   |   | 2,108 |   |
| Spent      Nuclear Fuel and Decommissioning Trusts     |   |   | 1,362  |   |   |   | 1,347 |   |
| Goodwill                                               |   |   | 76     |   |   |   | 76 |   |
| Long-term      Risk Management Assets                  |   |   | 489    |   |   |   | 319 |   |
| Employee      Benefits and Pension Assets              |   |   | 481    |   |   |   | 486 |   |
| Deferred      Charges and Other                        |   |   | 923    |   |   |   | 888 |   |
| TOTAL                                                  |   |   | 7,686  |   |   |   | 7,423 |   |
|                                                   |   |   |   |   |   |   |   |   |
| TOTAL      ASSETS                                      |   | $      | 42,696 |   |   | $      | 40,319 |   |

----

|                                                                                                                |   | 2008               |        |   | 2007   |   |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------|--------|--------|
| CURRENT      LIABILITIES                                                                                            |   | (in      millions) |        |
| Accounts      Payable                                                                                               |   | $                  | 1,414       |   |   | $      | 1,324 |   |
| Short-term      Debt                                                                                                |   |               | 705         |   |   |   | 660 |   |
| Long-term      Debt Due Within One Year                                                                             |   |               | 569         |   |   |   | 792 |   |
| Risk      Management Liabilities                                                                                    |   |               | 991         |   |   |   | 240 |   |
| Customer      Deposits                                                                                              |   |               | 319         |   |   |   | 301 |   |
| Accrued      Taxes                                                                                                  |   |               | 555         |   |   |   | 601 |   |
| Accrued      Interest                                                                                               |   |               | 256         |   |   |   | 235 |   |
| Other                                                                                                               |   |               | 817         |   |   |   | 1,008 |   |
| TOTAL                                                                                                               |   |               | 5,626       |   |   |   | 5,161 |   |
|                                                                                                                |   |               |        |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                                                                         |   |               |        |   |   |   |   |   |
| Long-term      Debt                                                                                                 |   |               | 15,184      |   |   |   | 14,202 |   |
| Long-term      Risk Management Liabilities                                                                          |   |               | 348         |   |   |   | 188 |   |
| Deferred      Income Taxes                                                                                          |   |               | 5,021       |   |   |   | 4,730 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits                                                     |   |               | 2,895       |   |   |   | 2,952 |   |
| Asset      Retirement Obligations                                                                                   |   |               | 1,081       |   |   |   | 1,075 |   |
| Employee      Benefits and Pension Obligations                                                                      |   |               | 677         |   |   |   | 712 |   |
| Deferred      Gain on Sale and Leaseback – Rockport Plant Unit 2                                              |   |               | 134         |   |   |   | 139 |   |
| Deferred      Credits and Other                                                                                     |   |               | 1,038       |   |   |   | 1,020 |   |
| TOTAL                                                                                                               |   |               | 26,378      |   |   |   | 25,018 |   |
|                                                                                                                |   |               |        |   |   |   |   |   |
| TOTAL      LIABILITIES                                                                                              |   |               | 32,004      |   |   |   | 30,179 |   |
|                                                                                                                |   |               |        |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption                                                 |   |               | 61          |   |   |   | 61 |   |
|                                                                                                                |   |               |        |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                                                                         |   |               |        |   |   |   |   |   |
|                                                                                                                |   |               |        |   |   |   |   |   |
| COMMON      SHAREHOLDERS’ EQUITY                                                                              |   |               |        |   |   |   |   |   |
| Common      Stock – $6.50 Par Value Per Share:                                                 |   |               |        |   |   |   |   |   |
|                                                                                                                |   | 2008               |        |   | 2007   |   |   |   |   |   |   |   |   |   |
| Shares      Authorized                                                                                              |   |               | 600,000,000 |   |   |   | 600,000,000 |   |   |   |   |   |   |   |   |   |
| Shares      Issued                                                                                                  |   |               | 423,634,828 |   |   |   | 421,926,696 |   |   |   |   |   |   |   |   |   |
| (21,499,992      shares were held in treasury at June 30, 2008 and December 31, 2007,       respectively) |   |               | 2,754       |   |   |   | 2,743 |   |
| Paid-in      Capital                                                                                                |   |               | 4,415       |   |   |   | 4,352 |   |
| Retained      Earnings                                                                                              |   |               | 3,651       |   |   |   | 3,138 |   |
| Accumulated      Other Comprehensive Income (Loss)                                                                  |   |               | (189        | )      |   |   | (154 | ) |
| TOTAL                                                                                                               |   |               | 10,631      |   |   |   | 10,079 |   |
|                                                                                                                |   |               |        |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY                                                               |   | $                  | 42,696      |   |   | $      | 40,319 |   |

----

|                                                                                      |   | 2008   |   |   | 2007   |   |
|-------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                 |   |   |   |   |   |   |
| Net      Income                                                                           |   | $      | 854    |   |   | $      | 451 |   |
| Less:  Discontinued      Operations, Net of Tax                                 |   |   | (1     | )      |   |   | (2 | )  |
| Income      Before Discontinued Operations                                                |   |   | 853    |   |   |   | 449 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flow from Operating      Activities: |   |   |   |   |   |   |   |   |
| Depreciation      and Amortization                                                        |   |   | 736    |   |   |   | 763 |   |
| Deferred      Income Taxes                                                                |   |   | 316    |   |   |   | (24 | )  |
| Deferred      Investment Tax Credits                                                      |   |   | (10    | )      |   |   | (13 | )  |
| Extraordinary      Loss, Net of Tax                                                       |   |   | -      |   |   |   | 79 |   |
| Regulatory      Provision                                                                 |   |   | -      |   |   |   | 105 |   |
| Carrying      Costs Income                                                                |   |   | (43    | )      |   |   | (24 | )  |
| Allowance      for Equity Funds Used During Construction                                  |   |   | (21    | )      |   |   | (14 | )  |
| Mark-to-Market      of Risk Management Contracts                                          |   |   | 66     |   |   |   | 22 |   |
| Amortization      of Nuclear Fuel                                                         |   |   | 45     |   |   |   | 33 |   |
| Deferred      Property Taxes                                                              |   |   | 36     |   |   |   | 24 |   |
| Fuel      Over/Under-Recovery, Net                                                        |   |   | (245   | )      |   |   | (101 | )  |
| Gain      on Sales of Assets and Equity Investments, Net                                  |   |   | (8     | )      |   |   | (26 | )  |
| Change      in Other Noncurrent Assets                                                    |   |   | (195   | )      |   |   | (39 | )  |
| Change      in Other Noncurrent Liabilities                                               |   |   | (80    | )      |   |   | 23 |   |
| Changes      in Certain Components of Working Capital:                                    |   |   |   |   |   |   |   |   |
|          Accounts Receivable, Net                                          |   |   | (123   | )      |   |   | (81 | )  |
|          Fuel, Materials and Supplies                                      |   |   | (82    | )      |   |   | (90 | )  |
|          Margin Deposits                                                   |   |   | (16    | )      |   |   | 32 |   |
|          Accounts Payable                                                  |   |   | 188    |   |   |   | (58 | )  |
|          Customer Deposits                                                 |   |   | 18     |   |   |   | 24 |   |
|          Accrued Taxes, Net                                                |   |   | (61    | )      |   |   | 49 |   |
|          Accrued Interest                                                  |   |   | 16     |   |   |   | 67 |   |
|          Other Current Assets                                              |   |   | (13    | )      |   |   | (21 | )  |
|          Other Current Liabilities                                         |   |   | (180   | )      |   |   | (210 | )  |
| Net      Cash Flows From Operating Activities                                             |   |   | 1,197  |   |   |   | 969 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                 |   |   |   |   |   |   |   |   |
| Construction      Expenditures                                                            |   |   | (1,608 | )      |   |   | (1,823 | )  |
| Change      in Other Temporary Investments, Net                                           |   |   | 48     |   |   |   | (129 | )  |
| Purchases      of Investment Securities                                                   |   |   | (635   | )      |   |   | (6,827 | )  |
| Sales      of Investment Securities                                                       |   |   | 666    |   |   |   | 7,035 |   |
| Acquisition      of Nuclear Fuel                                                          |   |   | (99    | )      |   |   | (30 | )  |
| Acquisition      of Darby and Lawrenceburg Plants                                         |   |   | -      |   |   |   | (427 | )  |
| Acquisition      of Other Assets                                                          |   |   | (81    | )      |   |   | - |   |
| Proceeds      from Sales of Assets                                                        |   |   | 69     |   |   |   | 74 |   |
| Other                                                                                     |   |   | (5     | )      |   |   | - |   |
| Net      Cash Flows Used For Investing Activities                                         |   |   | (1,645 | )      |   |   | (2,127 | )  |
|                                                                                      |   |   |   |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                 |   |   |   |   |   |   |   |   |
| Issuance      of Common Stock                                                             |   |   | 72     |   |   |   | 90 |   |
| Change      in Short-term Debt, Net                                                       |   |   | 45     |   |   |   | 420 |   |
| Issuance      of Long-term Debt                                                           |   |   | 2,204  |   |   |   | 1,064 |   |
| Retirement      of Long-term Debt                                                         |   |   | (1,472 | )      |   |   | (190 | )  |
| Dividends      Paid on Common Stock                                                       |   |   | (330   | )      |   |   | (311 | )  |
| Other                                                                                     |   |   | (31    | )      |   |   | (44 | )  |
| Net      Cash Flows From Financing Activities                                             |   |   | 488    |   |   |   | 1,029 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                            |   |   | 40     |   |   |   | (129 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                     |   |   | 178    |   |   |   | 301 |   |
| Cash      and Cash Equivalents at End of Period                                           |   | $      | 218    |   |   | $      | 172 |   |
|                                                                                      |   |   |   |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                            |   |   |   |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                   |   | $      | 412    |   |   | $      | 304 |   |
| Net      Cash Paid for Income Taxes                                                       |   |   | 131    |   |   |   | 128 |   |
| Noncash      Acquisitions Under Capital Leases                                            |   |   | 35     |   |   |   | 23 |   |
| Noncash      Acquisition of Land/Mineral Rights                                           |   |   | 42     |   |   |   | - |   |
| Construction      Expenditures Included in Accounts Payable at June 30,                   |   |   | 328    |   |   |   | 295 |   |
| Acquisition      of Nuclear Fuel in Accounts Payable at June 30,                          |   |   | -      |   |   |   | 31 |   |
| Noncash      Assumption of Liabilities Related to Acquisitions                            |   |   | -      |   |   |   | 5 |   |

----

|                                                |                                                                                                                                  | Common      Stock |   |   |   |                 |   | Accumulated      Other Comprehensive Income (Loss) |   |   |   |
|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|-------------------|--------|--------|--------|----------------------|--------|----------------------------------------------------|--------|--------|--------|
|                                                |                                                                                                                                  | Shares            |   | Amount |   | Paid-in      Capital |   | Retained      Earnings                             |   |   | Total  |   |
| DECEMBER      31, 2006                              |                                                                                                                                  |              | 418    |   | $      | 2,718                |   | $                                                  | 4,221  |   | $      | 2,696 |   | $ | (223 | ) | $ | 9,412 |   |
| FIN      48 Adoption, Net of Tax                    |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   | (17 | ) |   |   |   |   | (17 | ) |
| Issuance      of Common Stock                       |                                                                                                                                  |              | 3      |   |   | 16                   |   |                                               | 74     |   |   |   |   |   |   |   |   | 90 |   |
| Common      Stock Dividends                         |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   | (311 | ) |   |   |   |   | (311 | ) |
| Other                                               |                                                                                                                                  |              |   |   |   |                 |   |                                               | 10     |   |   |   |   |   |   |   |   | 10 |   |
| TOTAL                                               |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   | 9,184 |   |
|                                                |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                           |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Other      Comprehensive Income (Loss), Net of Tax: |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
|                                                | Cash      Flow Hedges, Net of Tax of $8                                                                                               |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   | 15 |   |   | 15 |   |
|                                                | Securities      Available for Sale, Net of Tax of $3                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   | (5 | ) |   | (5 | ) |
|                                                | SFAS      158 Costs Established as a Regulatory Asset   for the      Reapplication of SFAS 71, Net of Tax of   $6 |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   | 11 |   |   | 11 |   |
| NET      INCOME                                     |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   | 451 |   |   |   |   |   | 451 |   |
| TOTAL      COMPREHENSIVE INCOME                     |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   | 472 |   |
| JUNE      30, 2007                                  |                                                                                                                                  |              | 421    |   | $      | 2,734                |   | $                                                  | 4,305  |   | $      | 2,819 |   | $ | (202 | ) | $ | 9,656 |   |
|                                                |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| DECEMBER      31, 2007                              |                                                                                                                                  |              | 422    |   | $      | 2,743                |   | $                                                  | 4,352  |   | $      | 3,138 |   | $ | (154 | ) | $ | 10,079 |   |
|                                                |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $6          |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   | (10 | ) |   |   |   |   | (10 | ) |
| SFAS      157 Adoption, Net of Tax of $0            |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   | (1 | ) |   |   |   |   | (1 | ) |
| Issuance      of Common Stock                       |                                                                                                                                  |              | 2      |   |   | 11                   |   |                                               | 61     |   |   |   |   |   |   |   |   | 72 |   |
| Common      Stock Dividends                         |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   | (330 | ) |   |   |   |   | (330 | ) |
| Other                                               |                                                                                                                                  |              |   |   |   |                 |   |                                               | 2      |   |   |   |   |   |   |   |   | 2 |   |
| TOTAL                                               |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   | 9,812 |   |
|                                                |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                           |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Other      Comprehensive Income, Net of Tax:        |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
|                                                | Cash      Flow Hedges, Net of Tax of $19                                                                                              |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   | (34 | ) |   | (34 | ) |
|                                                | Securities      Available for Sale, Net of Tax of $4                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   | (7 | ) |   | (7 | ) |
|                                                | Amortization      of Pension and OPEB Deferred Costs,  Net      of Tax of $3                                                |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   | 6 |   |   | 6 |   |
| NET      INCOME                                     |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   | 854 |   |   |   |   |   | 854 |   |
| TOTAL      COMPREHENSIVE INCOME                     |                                                                                                                                  |              |   |   |   |                 |   |                                               |   |   |   |   |   |   |   |   |   | 819 |   |
| JUNE      30, 2008                                  |                                                                                                                                  |              | 424    |   | $      | 2,754                |   | $                                                  | 4,415  |   | $      | 3,651 |   | $ | (189 | ) | $ | 10,631 |   |

----

|     |                                                        |
|----------|-------------------------------------------------------------|
|  1. | Significant      Accounting Matters                         |
|  2. | New      Accounting Pronouncements and Extraordinary Item   |
| 3.       | Rate      Matters                                           |
|  4. | Commitments,      Guarantees and Contingencies              |
| 5.       | Acquisitions,      Dispositions and Discontinued Operations |
| 6.       | Benefit      Plans                                          |
| 7.       | Business      Segments                                      |
| 8.       | Income      Taxes                                           |
| 9.       | Financing      Activities                                   |
| 10.      | Subsequent      Event                                       |

----

| CONDENSED      NOTES TO CONDENSED CONSOLIDATED FINANCIAL  STATEMENTS |
|----------------------------------------------------------------------|

| 1. | SIGNIFICANT ACCOUNTING      MATTERS |
|----|-------------------------------------|

|                                              |   | Three      Months Ended June 30,          |   |
|---------------------------------------------------|--------|-------------------------------------------|--------|
|                                              |   | 2008                                      |   |   | 2007 |   |
|                                              |   | (in      millions, except per share data) |   |
|                                              |   |                                      |   |   | $/share |   |   |   |   |   | $/share |   |
| Earnings      Applicable to Common Stock          |   | $                                         | 281    |   |   |   |   |   | $ | 180 |   |   |   |   |
|                                              |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      Number of Basic Shares Outstanding   |   |                                      | 401.5  |   |   | $ | 0.70 |   |   |   | 398.7 |   |   | $ | 0.45 |   |
| Average      Dilutive Effect of:                  |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performance      Share Units                      |   |                                      | 0.9    |   |   |   | - |   |   |   | 0.6 |   |   |   | - |   |
| Stock      Options                                |   |                                      | 0.2    |   |   |   | - |   |   |   | 0.4 |   |   |   | - |   |
| Restricted      Stock Units                       |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Restricted      Shares                            |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Average      Number of Diluted Shares Outstanding |   |                                      | 402.8  |   |   | $ | 0.70 |   |   |   | 399.9 |   |   | $ | 0.45 |   |

|                                              |   | Six      Months Ended June 30,            |   |
|---------------------------------------------------|--------|-------------------------------------------|--------|
|                                              |   | 2008                                      |   |   | 2007 |   |
|                                              |   | (in      millions, except per share data) |   |
|                                              |   |                                      |   |   | $/share |   |   |   |   |   | $/share |   |
| Earnings      Applicable to Common Stock          |   | $                                         | 854    |   |   |   |   |   | $ | 451 |   |   |   |   |
|                                              |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      Number of Basic Shares Outstanding   |   |                                      | 401.2  |   |   | $ | 2.13 |   |   |   | 398.0 |   |   | $ | 1.13 |   |
| Average      Dilutive Effect of:                  |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performance      Share Units                      |   |                                      | 0.8    |   |   |   | (0.01 | ) |   |   | 0.6 |   |   |   | - |   |
| Stock      Options                                |   |                                      | 0.2    |   |   |   | - |   |   |   | 0.4 |   |   |   | - |   |
| Restricted      Stock Units                       |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Restricted      Shares                            |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Average      Number of Diluted Shares Outstanding |   |                                      | 402.4  |   |   | $ | 2.12 |   |   |   | 399.2 |   |   | $ | 1.13 |   |

|                                                                                                                                          |   | Three      Months EndedJune      30, |   |   | Six      Months EndedJune      30, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|--------|------------------------------------|--------|
|                                                                                                                                          |   | 2008                                 |   |   | 2007                               |   |   | 2008 |   |   | 2007 |   |
| Related      Party Transactions                                                                                                               |   | (in      millions)                   |   |   | (in      millions)                 |   |
| AEP      Consolidated Revenues – Utility Operations:                                                                                    |   |                                 |   |   |                               |   |   |   |   |   |   |   |
| Power      Pool Purchases – Ohio Valley Electric      Corporation          (43.47% owned)                           |   | $                                    | (13    | )      |                               | $      | (4 | ) |   | $ | (25 | ) |   | $ | (4 | ) |
| AEP      Consolidated Revenues – Other:                                                                                                 |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Ohio      Valley Electric Corporation – Barging and      Other          Transportation Services (43.47% Owned) |   |                                 | 5      |   |                               |   | 8 |   |   |   | 14 |   |   |   | 17 |   |
| AEP      Consolidated Expenses – Purchased Energy for Resale:                                                                           |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Ohio      Valley Electric Corporation (43.47% Owned)                                                                                          |   |                                 | 61     |   |                               |   | 56 |   |   |   | 124 |   |   |   | 105 |   |
| Sweeny      Cogeneration Limited Partnership (a)                                                                                              |   |                                 | -      |   |                               |   | 29 |   |   |   | - |   |   |   | 59 |   |

| (a) | In      October 2007, we sold our 50% ownership in the Sweeny Cogeneration Limited      Partnership. |
|-----|------------------------------------------------------------------------------------------------------|

| 2. | NEW ACCOUNTING      PRONOUNCEMENTS AND EXTRAORDINARYITEM |
|----|----------------------------------------------------------|

| Assets      and Liabilities Measured at Fair Value on a Recurring Basis as of June 30,      2008 |   |
|--------------------------------------------------------------------------------------------------|--------|
|                                                                                             |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |   | Other |   |   | Total |   |
| Assets:                                                                                          |   | (in      millions) |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents (a)                                                               |   | $ | 167 |   |   | $ | - |   |   | $ | - |   |   | $ | 51 |   |   | $ | 218 |   |
|  Other      Temporary Investments:                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents (b)                                                               |   | $ | 188 |   |   | $ | - |   |   | $ | - |   |   | $ | 39 |   |   | $ | 227 |   |
| Equity      Securities                                                                           |   |   | 16 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 16 |   |
| TotalOther Temporary      Investments                                                            |   | $ | 204 |   |   | $ | - |   |   | $ | - |   |   | $ | 39 |   |   | $ | 243 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Assets:                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Contracts (c)                                                               |   | $ | 375 |   |   | $ | 5,660 |   |   | $ | 143 |   |   | $ | (4,892 | ) |   | $ | 1,286 |   |
| Cash      Flow and Fair Value Hedges (c)                                                         |   |   | - |   |   |   | 65 |   |   |   | - |   |   |   | (17 | ) |   |   | 48 |   |
| Dedesignated      Risk Management Contracts (d)                                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 46 |   |   |   | 46 |   |
| Total      Risk Management Assets                                                                |   | $ | 375 |   |   | $ | 5,725 |   |   | $ | 143 |   |   | $ | (4,863 | ) |   | $ | 1,380 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Spent      Nuclear Fuel and Decommissioning Trusts:                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents (e)                                                               |   | $ | - |   |   | $ | 17 |   |   | $ | - |   |   | $ | 12 |   |   | $ | 29 |   |
| Debt      Securities                                                                             |   |   | 326 |   |   |   | 508 |   |   |   | - |   |   |   | - |   |   |   | 834 |   |
| Equity      Securities                                                                           |   |   | 499 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 499 |   |
| TotalSpent Nuclear Fuel and      Decommissioning Trusts                                          |   | $ | 825 |   |   | $ | 525 |   |   | $ | - |   |   | $ | 12 |   |   | $ | 1,362 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                                                                                |   | $ | 1,571 |   |   | $ | 6,250 |   |   | $ | 143 |   |   | $ | (4,761 | ) |   | $ | 3,203 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Liabilities:                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Contracts (c)                                                               |   | $ | 405 |   |   | $ | 5,508 |   |   | $ | 151 |   |   | $ | (4,831 | ) |   | $ | 1,233 |   |
| Cash      Flow and Fair Value Hedges (c)                                                         |   |   | 8 |   |   |   | 115 |   |   |   | - |   |   |   | (17 | ) |   |   | 106 |   |
| Total      Risk Management Liabilities                                                           |   | $ | 413 |   |   | $ | 5,623 |   |   | $ | 151 |   |   | $ | (4,848 | ) |   | $ | 1,339 |   |

| (a) | Amounts      in “Other” column primarily represent cash deposits in bank accounts with      financial institutions.  Level 1 amounts primarily represent      investments in money market funds.                                                                                                                                                                     |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amounts      in “Other” column primarily represent cash deposits with third      parties.  Level 1 amounts primarily represent investments in      money market funds.                                                                                                                                                                                               |
| (c) | Amounts      in “Other” column primarily represent counterparty netting of risk      management contracts and associated cash collateral under FSP FIN      39-1.                                                                                                                                                                                                              |
| (d) | “Dedesignated      Risk Management Contracts” are contracts that were originally MTM but were      subsequently elected as normal under SFAS 133.  At the time of      the normal election the MTM value was frozen and no longer fair      valued.  This will be amortized into Utility Operations Revenues      over the remaining life of the contract. |
| (e) | Amounts      in “Other” column primarily represent accrued interest receivables to/from      financial institutions.  Level 2 amounts primarily represent      investments in money market funds.                                                                                                                                                                    |

| Three      Months Ended June 30, 2008                                                                                                                                      |   | Net      Risk Management Assets (Liabilities) |   |   | Other      Temporary Investments |   |   | Investments      in Debt Securities |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------|----------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                                                                                                       |   | (in      millions)                            |   |
| Balance      as of April 1, 2008                                                                                                                                           |   | $                                             | 49     |   |                             | $      | 22     |                                |   | $ | 17 |   |
| Realized      (Gain) Loss Included in Earnings (or Changes in Net Assets)      (a)                                                                                         |   |                                          | (2     | )      |                             |   | -      |                                |   |   | - |   |
| Unrealized      Gain (Loss) Included in Earnings (or Changes in Net      Assets)          Relating to Assets Still Held at the Reporting Date (a) |   |                                          | (1     | )      |                             |   | -      |                                |   |   | - |   |
| Realized      and Unrealized Gains (Losses) Included in Other      Comprehensive          Income                                                  |   |                                          | -      |   |                             |   | -      |                                |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                                                  |   |                                          | -      |   |                             |   | (22    | )                                   |   |   | (17 | )  |
| Transfers      in and/or out of Level 3 (b)                                                                                                                                |   |                                          | (8     | )      |                             |   | -      |                                |   |   | - |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                                        |   |                                          | (46    | )      |                             |   | -      |                                |   |   | - |   |
| Balance      as of June 30, 2008                                                                                                                                           |   | $                                             | (8     | )      |                             | $      | -      |                                |   | $ | - |   |

| Six      Months Ended June 30, 2008                                                                                                                                        |   | Net      Risk Management Assets (Liabilities) |   |   | Other      Temporary Investments |   |   | Investments      in Debt Securities |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------|----------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                                                                                                       |   | (in      millions)                            |   |
| Balance      as of January 1, 2008                                                                                                                                         |   | $                                             | 49     |   |                             | $      | -      |                                |   | $ | - |   |
| Realized      (Gain) Loss Included in Earnings (or Changes in Net Assets)      (a)                                                                                         |   |                                          | (2     | )      |                             |   | -      |                                |   |   | - |   |
| Unrealized      Gain (Loss) Included in Earnings (or Changes in Net      Assets)          Relating to Assets Still Held at the Reporting Date (a) |   |                                          | (3     | )      |                             |   | -      |                                |   |   | - |   |
| Realized      and Unrealized Gains (Losses) Included in Other      Comprehensive          Income                                                  |   |                                          | -      |   |                             |   | -      |                                |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                                                  |   |                                          | -      |   |                             |   | (118   | )                                   |   |   | (17 | )  |
| Transfers      in and/or out of Level 3 (b)                                                                                                                                |   |                                          | (1     | )      |                             |   | 118    |                                |   |   | 17 |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                                        |   |                                          | (51    | )      |                             |   | -      |                                |   |   | - |   |
| Balance      as of June 30, 2008                                                                                                                                           |   | $                                             | (8     | )      |                             | $      | -      |                                |   | $ | - |   |

| (a) | Included      in revenues on our Condensed Consolidated Statement of    Income.                                                                                                                                                                                                                                                                                                     |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Transfers      in and/or out of Level 3” represent existing assets or liabilities that      were either previously categorized as a higher level for which the inputs      to the model became unobservable or assets and liabilities that were      previously classified as level 3 for which the lowest significant input      became observable during the period. |
| (c) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected on the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/liabilities for those subsidiaries that      operate in regulated jurisdictions. |

| Balance      SheetLine      Description      |   | As      Reported forthe      December 2007 10-K |   |   | FIN      39-1Reclassification |   |   | As      Reported forthe      June 2008      10-Q |   |
|----------------------------------------------|--------|-------------------------------------------------|--------|--------|-------------------------------|--------|--------|--------------------------------------------------|--------|
| Current      Assets:                         |   | (in      millions)                              |   |
|   Risk      Management Assets      |   | $                                               | 286    |   |                          | $      | (15    | )                                                |   | $ | 271 |   |
|   Margin      Deposits             |   |                                            | 58     |   |                          |   | (11    | )                                                |   |   | 47 |   |
| Long-term      Risk Management Assets        |   |                                            | 340    |   |                          |   | (21    | )                                                |   |   | 319 |   |
|                                         |   |                                            |   |   |                          |   |   |                                             |   |   |   |   |
| Current      Liabilities:                    |   |                                            |   |   |                          |   |   |                                             |   |   |   |   |
|   Risk      Management Liabilities |   |                                            | 250    |   |                          |   | (10    | )                                                |   |   | 240 |   |
|   Customer      Deposits           |   |                                            | 337    |   |                          |   | (36    | )                                                |   |   | 301 |   |
| Long-term      Risk Management Liabilities   |   |                                            | 189    |   |                          |   | (1     | )                                                |   |   | 188 |   |

| 3. | RATE      MATTERS |
|----|-------------------|

| · | The      PUCT ruling that TCC did not comply with the Texas Restructuring      Legislation and PUCT rules regarding the required auction of 15% of its      Texas jurisdictional installed capacity, which led to a significant      disallowance of capacity auction true-up revenues.                                                                                                                                       |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The      PUCT ruling that TCC acted in a manner that was commercially unreasonable,      because TCC failed to determine a minimum price at which it would reject      bids for the sale of its nuclear generating plant and TCC bundled      out-of-the-money gas units with the sale of its coal unit, which led to      the disallowance of a significant portion of TCC’s net stranded generation      plant costs. |
| · | Two      federal matters regarding the allocation of off-system sales related to      fuel recoveries and a potential tax normalization    violation.                                                                                                                                                                                                                                                                         |

| 4. | COMMITMENTS,      GUARANTEES AND CONTINGENCIES |
|----|------------------------------------------------|

| 5. | ACQUISITIONS,      DISPOSITIONS AND DISCONTINUEDOPERATIONS |
|----|------------------------------------------------------------|

|                                |   | U.K. Generation(a) |   |
|-------------------------------------|--------|--------------------|--------|
| Three      Months Ended June 30,    |   | (in      millions) |   |
| 2008      Revenue                   |   | $                  | -      |   |
| 2008      Pretax Income             |   |               | 2      |   |
| 2008      Earnings, Net of Tax |   |               | 1      |   |
|                                |   |               |   |   |
| 2007      Revenue                   |   | $                  | -      |   |
| 2007      Pretax Income             |   |               | 3      |   |
| 2007      Earnings, Net of Tax |   |               | 2      |   |

|                                |   | U.K. Generation(a) |   |
|-------------------------------------|--------|--------------------|--------|
| Six      Months Ended June 30,      |   | (in      millions) |   |
| 2008      Revenue                   |   | $                  | -      |   |
| 2008      Pretax Income             |   |               | 2      |   |
| 2008      Earnings, Net of Tax |   |               | 1      |   |
|                                |   |               |   |   |
| 2007      Revenue                   |   | $                  | -      |   |
| 2007      Pretax Income             |   |               | 3      |   |
| 2007      Earnings, Net of Tax |   |               | 2      |   |

| (a) | The      2008 amounts relate to final proceeds received for the sale of land      related to the sale of U.K. Generation.  The 2007 amounts relate      to tax adjustments from the sale of U.K.  Generation. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                       |                             |   | Other      Postretirement        |   |
|--------------------------------------------|----------------------------------|--------|----------------------------------|--------|
|                                       | Pension      Plans               |   | Benefit      Plans               |   |
|                                       | Three      Months Ended June 30, |   | Three      Months Ended June 30, |   |
|                                       | 2008                             |   | 2007                             |   | 2008 |   | 2007 |   |
|                                       | (in      millions)               |   |
| Service      Cost                          | $                                | 25     |                             | $      | 23 |   | $ | 11 |   | $ | 11 |   |
| Interest      Cost                         |                             | 62     |                             |   | 57 |   |   | 28 |   |   | 26 |   |
| Expected      Return on Plan Assets        |                             | (84    | )                                |   | (82 | ) |   | (28 | ) |   | (26 | ) |
| Amortization      of Transition Obligation |                             | -      |                             |   | - |   |   | 7 |   |   | 7 |   |
| Amortization      of Net Actuarial Loss    |                             | 10     |                             |   | 14 |   |   | 2 |   |   | 3 |   |
| Net      Periodic Benefit Cost             | $                                | 13     |                             | $      | 12 |   | $ | 20 |   | $ | 21 |   |

|                                       |                           |   | Other      Postretirement      |   |
|--------------------------------------------|--------------------------------|--------|--------------------------------|--------|
|                                       | Pension      Plans             |   | Benefit      Plans             |   |
|                                       | Six      Months Ended June 30, |   | Six      Months Ended June 30, |   |
|                                       | 2008                           |   | 2007                           |   | 2008 |   | 2007 |   |
|                                       | (in      millions)             |   |
| Service      Cost                          | $                              | 50     |                           | $      | 47 |   | $ | 21 |   | $ | 21 |   |
| Interest      Cost                         |                           | 125    |                           |   | 116 |   |   | 56 |   |   | 52 |   |
| Expected      Return on Plan Assets        |                           | (168   | )                              |   | (167 | ) |   | (56 | ) |   | (52 | ) |
| Amortization      of Transition Obligation |                           | -      |                           |   | - |   |   | 14 |   |   | 14 |   |
| Amortization      of Net Actuarial Loss    |                           | 19     |                           |   | 29 |   |   | 5 |   |   | 6 |   |
| Net      Periodic Benefit Cost             | $                              | 26     |                           | $      | 25 |   | $ | 40 |   | $ | 41 |   |

| 7. | BUSINESS      SEGMENTS |
|----|------------------------|

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

| · | Barging      operations that annually transport approximately 35 million tons of coal      and dry bulk commodities primarily on the Ohio, Illinois and lower      Mississippi Rivers.  Approximately 39% of the barging is for      transportation of agricultural products, 30% for coal, 14% for steel and      17% for other commodities.  Effective July 30, 2008, AEP MEMCO LLC's      name was changed to AEP River Operations,LLC. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Wind      farms and marketing and risk management activities primarily in      ERCOT. |
|--------|---------------------------------------------------------------------------------------|

| · | Parent’s      guarantee revenue received from affiliates, investment income, interest      income and interest expense and other nonallocated  costs.                                                                                                    |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Forward      natural gas contracts that were not sold with our natural gas pipeline and      storage operations in 2004 and 2005.  These contracts are      financial derivatives which will gradually liquidate and completely expire      in 2011. |
| · | The      first quarter 2008 cash settlement of a purchase power and sale agreement      with TEM related to the Plaquemine Cogeneration Facility which was sold in      the fourth quarter of 2006.                                                            |
| · | Revenue      sharing related to the Plaquemine Cogeneration  Facility.                                                                                                                                                                                         |

|                                                                                           |                          |                    |   | Nonutility      Operations |   |                   |   |               |   |                         |   |
|------------------------------------------------------------------------------------------------|-------------------------------|-------------------------|--------|----------------------------|--------|------------------------|--------|--------------------|--------|------------------------------|--------|
|                                                                                           |                          | Utility      Operations |   | MEMCOOperations            |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments |   | Consolidated |   |
|                                                                                           |                          | (in      millions)      |
| Three      Months Ended June 30, 2008                                                          |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Revenues      from:                                                                            |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
|                                                                                           | External      Customers       |                    | $      | 3,200                      | (d)    | $                      | 144    |               | $      | 137                          |   | $ | 65 |   | $ | - |   | $ | 3,546 |   |
|                                                                                           | Other      Operating Segments |                    |   | 113                        | (d)    |                   | 7      |               |   | (26                          | )      |   | (57 | ) |   | (37 | ) |   | - |   |
| Total      Revenues                                                                            |                          | $                       | 3,313  |                       | $      | 151                    |   | $                  | 111    |                         | $      | 8 |   | $ | (37 | ) | $ | 3,546 |   |
|                                                                                           |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Income      (Loss) Before Discontinued   Operations and Extraordinary      Loss |                          | $                       | 263    |                       | $      | 3                      |   | $                  | 26     |                         | $      | (12 | ) | $ | - |   | $ | 280 |   |
| Discontinued      Operations, Net of Tax                                                       |                          |                    | -      |                       |   | -                      |   |               | -      |                         |   | 1 |   |   | - |   |   | 1 |   |
| Net      Income (Loss)                                                                         |                          | $                       | 263    |                       | $      | 3                      |   | $                  | 26     |                         | $      | (11 | ) | $ | - |   | $ | 281 |   |

|                                                                                           |                          |                    |   | Nonutility      Operations |   |                   |   |               |   |                         |   |
|------------------------------------------------------------------------------------------------|-------------------------------|-------------------------|--------|----------------------------|--------|------------------------|--------|--------------------|--------|------------------------------|--------|
|                                                                                           |                          | Utility      Operations |   | MEMCOOperations            |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments |   | Consolidated |   |
|                                                                                           |                          | (in      millions)      |
| Three      Months Ended June 30, 2007                                                          |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Revenues      from:                                                                            |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
|                                                                                           | External      Customers       |                    | $      | 2,818                      | (d)    | $                      | 116    |               | $      | 218                          |   | $ | (6 | ) | $ | - |   | $ | 3,146 |   |
|                                                                                           | Other      Operating Segments |                    |   | 136                        | (d)    |                   | 3      |               |   | (113                         | )      |   | 12 |   |   | (38 | ) |   | - |   |
| Total      Revenues                                                                            |                          | $                       | 2,954  |                       | $      | 119                    |   | $                  | 105    |                         | $      | 6 |   | $ | (38 | ) | $ | 3,146 |   |
|                                                                                           |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Income      (Loss) Before Discontinued   Operations and Extraordinary      Loss |                          | $                       | 238    |                       | $      | 7                      |   | $                  | 15     |                         | $      | (3 | ) | $ | - |   | $ | 257 |   |
| Discontinued      Operations, Net of Tax                                                       |                          |                    | -      |                       |   | -                      |   |               | -      |                         |   | 2 |   |   | - |   |   | 2 |   |
| Extraordinary      Loss, Net of Tax                                                            |                          |                    | (79    | )                          |   | -                      |   |               | -      |                         |   | - |   |   | - |   |   | (79 | ) |
| Net      Income (Loss)                                                                         |                          | $                       | 159    |                       | $      | 7                      |   | $                  | 15     |                         | $      | (1 | ) | $ | - |   | $ | 180 |   |

|                                                                              |                          |                    |   | Nonutility      Operations |   |                   |   |               |   |                         |   |
|-----------------------------------------------------------------------------------|-------------------------------|-------------------------|--------|----------------------------|--------|------------------------|--------|--------------------|--------|------------------------------|--------|
|                                                                              |                          | Utility      Operations |   | MEMCOOperations            |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments |   | Consolidated |   |
|                                                                              |                          | (in      millions)      |
| Six      Months Ended June 30, 2008                                               |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Revenues      from:                                                               |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
|                                                                              | External      Customers       |                    | $      | 6,210                      | (d)    | $                      | 282    |               | $      | 408                          |   | $ | 113 |   | $ | - |   | $ | 7,013 |   |
|                                                                              | Other      Operating Segments |                    |   | 397                        | (d)    |                   | 11     |               |   | (238                         | )      |   | (100 | ) |   | (70 | ) |   | - |   |
| Total      Revenues                                                               |                          | $                       | 6,607  |                       | $      | 293                    |   | $                  | 170    |                         | $      | 13 |   | $ | (70 | ) | $ | 7,013 |   |
|                                                                              |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Income      Before Discontinued Operations  and      Extraordinary Loss |                          | $                       | 673    |                       | $      | 10                     |   | $                  | 27     |                         | $      | 143 |   | $ | - |   | $ | 853 |   |
| Discontinued      Operations, Net of Tax                                          |                          |                    | -      |                       |   | -                      |   |               | -      |                         |   | 1 |   |   | - |   |   | 1 |   |
| Net      Income                                                                   |                          | $                       | 673    |                       | $      | 10                     |   | $                  | 27     |                         | $      | 144 |   | $ | - |   | $ | 854 |   |

|                                                                              |                          |                    |   | Nonutility      Operations |   |                   |   |               |   |                         |   |
|-----------------------------------------------------------------------------------|-------------------------------|-------------------------|--------|----------------------------|--------|------------------------|--------|--------------------|--------|------------------------------|--------|
|                                                                              |                          | Utility      Operations |   | MEMCOOperations            |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments |   | Consolidated |   |
|                                                                              |                          | (in      millions)      |
| Six      Months Ended June 30, 2007                                               |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Revenues      from:                                                               |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
|                                                                              | External      Customers       |                    | $      | 5,704                      | (d)    | $                      | 233    |               | $      | 333                          |   | $ | 45 |   | $ | - |   | $ | 6,315 |   |
|                                                                              | Other      Operating Segments |                    |   | 283                        | (d)    |                   | 6      |               |   | (186                         | )      |   | (33 | ) |   | (70 | ) |   | - |   |
| Total      Revenues                                                               |                          | $                       | 5,987  |                       | $      | 239                    |   | $                  | 147    |                         | $      | 12 |   | $ | (70 | ) | $ | 6,315 |   |
|                                                                              |                          |                    |   |                       |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Income      Before Discontinued Operations  and      Extraordinary Loss |                          | $                       | 491    |                       | $      | 22                     |   | $                  | 14     |                         | $      | 1 |   | $ | - |   | $ | 528 |   |
| Discontinued      Operations, Net of Tax                                          |                          |                    | -      |                       |   | -                      |   |               | -      |                         |   | 2 |   |   | - |   |   | 2 |   |
| Extraordinary      Loss, Net of Tax                                               |                          |                    | (79    | )                          |   | -                      |   |               | -      |                         |   | - |   |   | - |   |   | (79 | ) |
| Net      Income                                                                   |                          | $                       | 412    |                       | $      | 22                     |   | $                  | 14     |                         | $      | 3 |   | $ | - |   | $ | 451 |   |

|                                                      |   |                    |   | Nonutility      Operations |   |                   |   |               |   |                            |   |
|-----------------------------------------------------------|--------|-------------------------|--------|----------------------------|--------|------------------------|--------|--------------------|--------|---------------------------------|--------|
|                                                      |   | Utility      Operations |   | MEMCOOperations            |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments(c) |   | Consolidated |   |
|                                                      |   | (in      millions)      |   |
| June      30, 2008                                        |   |                    |   |                       |   |                   |   |               |   |                            |   |   |   |   |   |   |   |   |   |
| Total      Property, Plant and Equipment                  |   | $                       | 46,776 |                       | $      | 302                    |   | $                  | 576    |                            | $      | 42 |   | $ | (245 | ) | $ | 47,451 |   |
| Accumulated      Depreciation and  Amortization |   |                    | 16,266 |                       |   | 66                     |   |               | 126    |                            |   | 7 |   |   | (18 | ) |   | 16,447 |   |
| Total      Property, Plant and Equipment – Net |   | $                       | 30,510 |                       | $      | 236                    |   | $                  | 450    |                            | $      | 35 |   | $ | (227 | ) | $ | 31,004 |   |
|                                                      |   |                    |   |                       |   |                   |   |               |   |                            |   |   |   |   |   |   |   |   |   |
| Total      Assets                                         |   | $                       | 41,519 |                       | $      | 374                    |   | $                  | 953    |                            | $      | 13,182 |   | $ | (13,332 | )(b) | $ | 42,696 |   |

|                                                      |   |                    |   | Nonutility      Operations |   |                   |   |               |   |                            |   |
|-----------------------------------------------------------|--------|-------------------------|--------|----------------------------|--------|------------------------|--------|--------------------|--------|---------------------------------|--------|
|                                                      |   | Utility      Operations |   | MEMCOOperations            |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments(c) |   | Consolidated |   |
| December      31, 2007                                    |   | (in      millions)      |   |
| Total      Property, Plant and Equipment                  |   | $                       | 45,514 |                       | $      | 263                    |   | $                  | 567    |                            | $      | 38 |   | $ | (237 | ) | $ | 46,145 |   |
| Accumulated      Depreciation and  Amortization |   |                    | 16,107 |                       |   | 61                     |   |               | 112    |                            |   | 7 |   |   | (12 | ) |   | 16,275 |   |
| Total      Property, Plant and Equipment – Net |   | $                       | 29,407 |                       | $      | 202                    |   | $                  | 455    |                            | $      | 31 |   | $ | (225 | ) | $ | 29,870 |   |
|                                                      |   |                    |   |                       |   |                   |   |               |   |                            |   |   |   |   |   |   |   |   |   |
| Total      Assets                                         |   | $                       | 39,298 |                       | $      | 340                    |   | $                  | 697    |                            | $      | 12,117 |   | $ | (12,133 | )(b) | $ | 40,319 |   |

| (a)    | All      Other includes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Parent’s      guarantee revenue received from affiliates, investment income, interest      income and interest expense and other nonallocated  costs. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Forward      natural gas contracts that were not sold with our natural gas pipeline and      storage operations in 2004 and 2005.  These contracts are      financial derivatives which will gradually liquidate and completely expire      in 2011. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | The      first quarter 2008 cash settlement of a purchase power and sale agreement      with TEM related to the Plaquemine Cogeneration Facility which was sold in      the fourth quarter of 2006.  The cash settlement of $255 million      ($163 million, net of tax) is included in Net Income. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Revenue      sharing related to the Plaquemine CogenerationFacility. |
| (b)    | Reconciling      Adjustments for Total Assets primarily include the elimination of      intercompany advances to affiliates and intercompany accounts receivable      along with the elimination of AEP’s investments in subsidiary      companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (c)    | Includes      eliminations due to an intercompany capital lease.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (d)    | PSO      and SWEPCo transferred certain existing ERCOT energy marketing contracts      to AEP Energy Partners, Inc. (AEPEP) (Generation and Marketing segment)      and entered into intercompany financial and physical purchase and sales      agreements with AEPEP.  As a result, we reported third-party net      purchases for these energy marketing contracts as a reduction of Revenues      from External Customers for the Utility Operations      segment.  This is offset by the Utility Operations segment’s      related sales to AEPEP in Revenues from Other Operating Segments of $26      million and $113 million for the three months ended June 30, 2008 and      2007, respectively, and $238 million and $186 million for the six months      ended June 30, 2008 and 2007, respectively.  The Generation and      Marketing segment reports purchases related to these contracts as a      reduction to Revenues from Other Operating  segments. |

| 8.     INCOME      TAXES |
|---------------------------------------------------|

| 9.   FINANCING      ACTIVITIES |
|-----------------------------------------------|

|                                   |   | June      30,      |   |   | December      31, |   |
|----------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
| Type      of Debt                      |   | 2008               |   |   | 2007              |   |
|                                   |   | (in      millions) |   |
| Senior      Unsecured Notes            |   | $                  | 10,940 |   |              | $      | 9,905 |   |
| Pollution      Control Bonds           |   |               | 1,747  |   |              |   | 2,190 |   |
| First      Mortgage Bonds              |   |               | -      |   |              |   | 19 |   |
| Notes      Payable                     |   |               | 258    |   |              |   | 311 |   |
| Securitization      Bonds              |   |               | 2,183  |   |              |   | 2,257 |   |
| Junior      Subordinated Debentures    |   |               | 315    |   |              |   | - |   |
| Notes      Payable To Trust            |   |               | 113    |   |              |   | 113 |   |
| Spent      Nuclear Fuel Obligation (a) |   |               | 262    |   |              |   | 259 |   |
| Other      Long-term Debt              |   |               | 3      |   |              |   | 2 |   |
| Unamortized      Discount (net)        |   |               | (68    | )      |              |   | (62 | ) |
| Total      Long-term Debt Outstanding  |   |               | 15,753 |   |              |   | 14,994 |   |
| Less      Portion Due Within One Year  |   |               | 569    |   |              |   | 792 |   |
| Long-term      Portion                 |   | $                  | 15,184 |   |              | $      | 14,202 |   |

| (a) | Pursuant      to the Nuclear Waste Policy Act of 1982, I&M (a nuclear licensee) has      an obligation to the United States Department of Energy for spent nuclear      fuel disposal.  The obligation includes a one-time fee for      nuclear fuel consumed prior to April 7, 1983.  Trust fund assets      related to this obligation of $294 million and $285 million at June 30,      2008 and December 31, 2007, respectively, are included in Spent Nuclear      Fuel and Decommissioning Trusts on our Condensed Consolidated Balance      Sheets. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Company              |   | Type      of Debt                   |   | Principal      Amount |   | Interest      Rate |     | Due      Date |   |
|----------------------|--------|-------------------------------------|--------|-----------------------|--------|--------------------|----------|---------------|--------|
|                 |   |                                |   | (in      millions)    |   | (%)                |     |          |   |
| Issuances:           |   |                                |   |                  |   |               |     |          |   |
| AEP                  |   | Junior      Subordinated Debentures |   | $                     | 315    |               | 8.75     |          | 2063   |   |
| APCo                 |   | Pollution      Control Bonds        |   |                  | 75     |               | Variable |          | 2036   |   |
| APCo                 |   | Pollution      Control Bonds        |   |                  | 50     |               | Variable |          | 2036   |   |
| APCo                 |   | Senior      Unsecured Notes         |   |                  | 500    |               | 7.00     |          | 2038   |   |
| CSPCo                |   | Senior      Unsecured Notes         |   |                  | 350    |               | 6.05     |          | 2018   |   |
| I&M              |   | Pollution      Control Bonds        |   |                  | 25     |               | Variable |          | 2019   |   |
| I&M              |   | Pollution      Control Bonds        |   |                  | 52     |               | Variable |          | 2021   |   |
| I&M              |   | Pollution      Control Bonds        |   |                  | 40     |               | 5.25     |          | 2025   |   |
| OPCo                 |   | Pollution      Control Bonds        |   |                  | 50     |               | Variable |          | 2014   |   |
| OPCo                 |   | Pollution      Control Bonds        |   |                  | 50     |               | Variable |          | 2014   |   |
| OPCo                 |   | Pollution      Control Bonds        |   |                  | 65     |               | Variable |          | 2036   |   |
| SWEPCo               |   | Senior      Unsecured Notes         |   |                  | 400    |               | 6.45     |          | 2019   |   |
|                 |   |                                |   |                  |   |               |     |          |   |   |
| Non-Registrant:      |   |                                |   |                  |   |               |     |          |   |   |
| TCC                  |   | Pollution      Control Bonds        |   |                  | 41     |               | 5.625    |          | 2017   |   |
| TCC                  |   | Pollution      Control Bonds        |   |                  | 120    |               | 5.125    |          | 2030   |   |
| TNC                  |   | Senior      Unsecured Notes         |   |                  | 30     |               | 5.89     |          | 2018   |   |
| TNC                  |   | Senior      Unsecured Notes         |   |                  | 70     |               | 6.76     |          | 2038   |   |
| Total      Issuances |   |                                |   | $                     | 2,233  | (a)                |     |          |   |   |

| (a) | Amount      indicated on statement of cash flows of $2,204 million is net of issuance      costs and premium or discount. |
|-----|---------------------------------------------------------------------------------------------------------------------------|

|  Company                                                              |   | Type      of Debt            |   | Principal      Amount Paid |   | Interest      Rate |     | Due      Date |   |
|----------------------------------------------------------------------------|--------|------------------------------|--------|----------------------------|--------|--------------------|----------|---------------|--------|
|                                                                       |   |                         |   | (in      millions)         |   | (%)                |     |          |   |
| Retirements      and        Principal Payments:                       |   |                         |   |                       |   |               |     |          |   |
| APCo                                                                       |   | Senior      Unsecured Notes  |   | $                          | 200    |               | 3.60     |          | 2008   |   |
| APCo                                                                       |   | Pollution      Control Bonds |   |                       | 40     |               | Variable |          | 2019   |   |
| APCo                                                                       |   | Pollution      Control Bonds |   |                       | 30     |               | Variable |          | 2019   |   |
| APCo                                                                       |   | Pollution      Control Bonds |   |                       | 18     |               | Variable |          | 2021   |   |
| APCo                                                                       |   | Pollution      Control Bonds |   |                       | 50     |               | Variable |          | 2036   |   |
| APCo                                                                       |   | Pollution      Control Bonds |   |                       | 75     |               | Variable |          | 2037   |   |
| CSPCo                                                                      |   | Senior      Unsecured Notes  |   |                       | 60     |               | 6.55     |          | 2008   |   |
| CSPCo                                                                      |   | Senior      Unsecured Notes  |   |                       | 52     |               | 6.51     |          | 2008   |   |
| CSPCo                                                                      |   | Pollution      Control Bonds |   |                       | 48     |               | Variable |          | 2038   |   |
| CSPCo                                                                      |   | Pollution      Control Bonds |   |                       | 44     |               | Variable |          | 2038   |   |
| I&M                                                                    |   | Pollution      Control Bonds |   |                       | 45     |               | Variable |          | 2009   |   |
| I&M                                                                    |   | Pollution      Control Bonds |   |                       | 25     |               | Variable |          | 2019   |   |
| I&M                                                                    |   | Pollution      Control Bonds |   |                       | 52     |               | Variable |          | 2021   |   |
| I&M                                                                    |   | Pollution      Control Bonds |   |                       | 50     |               | Variable |          | 2025   |   |
| I&M                                                                    |   | Pollution      Control Bonds |   |                       | 50     |               | Variable |          | 2025   |   |
| I&M                                                                    |   | Pollution      Control Bonds |   |                       | 40     |               | Variable |          | 2025   |   |
| OPCo                                                                       |   | Notes      Payable           |   |                       | 1      |               | 6.81     |          | 2008   |   |
| OPCo                                                                       |   | Notes      Payable           |   |                       | 6      |               | 6.27     |          | 2009   |   |
| OPCo                                                                       |   | Pollution      Control Bonds |   |                       | 50     |               | Variable |          | 2014   |   |
| OPCo                                                                       |   | Pollution      Control Bonds |   |                       | 50     |               | Variable |          | 2016   |   |
| OPCo                                                                       |   | Pollution      Control Bonds |   |                       | 50     |               | Variable |          | 2022   |   |
| OPCo                                                                       |   | Pollution      Control Bonds |   |                       | 35     |               | Variable |          | 2022   |   |
| OPCo                                                                       |   | Pollution      Control Bonds |   |                       | 65     |               | Variable |          | 2036   |   |
| PSO                                                                        |   | Pollution      Control Bonds |   |                       | 34     |               | Variable |          | 2014   |   |
| SWEPCo                                                                     |   | Notes      Payable           |   |                       | 2      |               | Variable |          | 2008   |   |
| SWEPCo                                                                     |   | Notes      Payable           |   |                       | 2      |               | 4.47     |          | 2011   |   |
|                                                                       |   |                         |   |                       |   |               |     |          |   |   |
| Non-Registrant:                                                            |   |                         |   |                       |   |               |     |          |   |   |
| AEP      Subsidiaries                                                      |   | Notes      Payable           |   |                       | 4      |               | 5.88     |          | 2011   |   |
| AEP      Subsidiaries                                                      |   | Notes      Payable           |   |                       | 2      |               | Variable |          | 2017   |   |
| AEGCo                                                                      |   | Senior      Unsecured Notes  |   |                       | 4      |               | 6.33     |          | 2037   |   |
| AEPSC                                                                      |   | Mortgage      Notes          |   |                       | 34     |               | 9.60     |          | 2008   |   |
| TCC                                                                        |   | First      Mortgage Bonds    |   |                       | 19     |               | 7.125    |          | 2008   |   |
| TCC                                                                        |   | Securitization      Bonds    |   |                       | 29     |               | 5.01     |          | 2008   |   |
| TCC                                                                        |   | Securitization      Bonds    |   |                       | 45     |               | 4.98     |          | 2010   |   |
| TCC                                                                        |   | Pollution      Control Bonds |   |                       | 41     |               | Variable |          | 2015   |   |
| TCC                                                                        |   | Pollution      Control Bonds |   |                       | 60     |               | Variable |          | 2028   |   |
| TCC                                                                        |   | Pollution      Control Bonds |   |                       | 60     |               | Variable |          | 2028   |   |
| Total      Retirements and          Principal Payments |   |                         | $      | 1,472                      |   |               |     |          |   |

|                                                  |   | June      30, 2008  |    |                  | December      31, 2007 |   |
|-------------------------------------------------------|--------|---------------------|---------|-----------------------|------------------------|--------|
|                                                  |   | OutstandingAmount   |    | InterestRate      (a) |                   |   | OutstandingAmount |   | InterestRate      (a) |   |
| Type      of Debt                                     |   | (in      thousands) |    |                  |                   |   |   | (in      thousands) |   |   |   |   |
| Commercial      Paper – AEP                     |   | $                   | 697,974 |                  |                   | 3.22   | % |   | $ | 659,135 |   |   | 5.54 | % |
| Commercial      Paper – JMG (b)                 |   |                | -       |                  |                   | -      |   |   |   | 701 |   |   | 5.35 | % |
| Line      of Credit – Sabine Mining Company (c) |   |                | 7,039   |                  |                   | 3.25   | % |   |   | 285 |   |   | 5.25 | % |
| Total                                                 |   | $                   | 705,013 |                  |                   |   |   |   | $ | 660,121 |   |   |   |   |

| (a) | Weighted      average rate.                                                                                                                                                                                                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | This      commercial paper is specifically associated with the Gavin Scrubber and is      backed by a separate credit facility.  This commercial paper      does not reduce available liquidity under AEP’s credit      facilities. |
| (c) | Sabine      Mining Company is consolidated under FIN 46R.  This line of      credit does not reduce available liquidity under AEP’s credit      facilities.                                                                         |

| 10.        SUBSEQUENT      EVENT |
|--------------------------------------------|

----

----

| Results of      Operations |
|----------------------------|

| Second      Quarter of 2007                       |   |   |   |   | $      | 3      |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 48     |   |   |   |   |   |
| Off-system      Sales                             |   |   | 8      |   |   |   |   |   |
| Other                                             |   |   | (1     | )      |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 55     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | 6      |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | (31    | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (1     | )      |   |   |   |   |
| Carrying      Costs Income                        |   |   | 6      |   |   |   |   |   |
| Other      Income                                 |   |   | 4      |   |   |   |   |   |
| Interest      Expense                             |   |   | (2     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (18    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (14    | ) |
|                                              |   |   |   |   |   |   |   |   |
|         Second Quarter of 2008          |   |   |   |   |   | $      | 26     |   |

| · | Retail      Margins increased $48 million primarily due to the impact of the Virginia      base rate order issued in May 2007 which included a second quarter 2007      provision for revenue refund in addition to an increase in the recovery of      E&R costs in Virginia and construction financing costs in West      Virginia.  These increases were partially offset by an increase      in sharing of off-system sales margins with customers and higher capacity      settlement expenses under the InterconnectionAgreement. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Margins      from Off-system Sales increased $8 million primarily due to higher      physical sales margins partially offset by lower trading margins.                                                                                                                                                                                                                                                                                                                                                                                                |

| · | Other      Operation and Maintenance expenses decreased $6 million primarily due to a      $3 million decrease in expenses associated with the Transmission      Equalization Agreement and a $3 million decrease in uncollectible accounts      receivable expense.                                                                                                                                                                 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization expenses increased $31 million primarily due to favorable      adjustments made in the second quarter of 2007 for the Virginia Rate Base      order of $22 million and an increase in the amortization of carrying      charges and depreciation expense of $6 million that are being collected      through the Virginia E&R surcharges.                                                     |
| · | Carrying      Costs Income increased $6 million due to an increase in Virginia E&R      deferrals.                                                                                                                                                                                                                                                                                                                               |
| · | Interest      Expense increased $2 million primarily due to an $11 million increase in      interest expense from long-term debt issuances.  This increase      was partially offset by a $4 million favorable increase in allowance for      borrowed funds used during construction and a $3 million decrease in      interest related to the Virginia provision for refund recorded in the      second quarter of 2007. |
| · | Income      Tax Expense increased $14 million primarily due to an increase in pretax      book income.                                                                                                                                                                                                                                                                                                                               |

| Six      Months Ended June 30, 2007               |   |   |   |   | $      | 74     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 29     |   |   |   |   |   |
| Off-system      Sales                             |   |   | 24     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 1      |   |   |   |   |   |
| Other                                             |   |   | (2     | )      |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 52     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (14    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (34    | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (4     | )      |   |   |   |   |
| Carrying      Costs Income                        |   |   | 13     |   |   |   |   |   |
| Other      Income                                 |   |   | 4      |   |   |   |   |   |
| Interest      Expense                             |   |   | (14    | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (49    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 5      |   |
|                                              |   |   |   |   |   |   |   |   |
|         Six Months Ended June 30, 2008  |   |   |   |   |   | $      | 82     |   |

| · | Retail      Margins increased $29 million primarily due to the impact of the Virginia      base rate order issued in May 2007 which included a second quarter 2007      provision for revenue refund in addition to an increase in the recovery of      E&R costs in Virginia and construction financing costs in West      Virginia.  These increases were partially offset by an increase      in sharing of off-system sales margins with customers and higher capacity      settlement expenses under the InterconnectionAgreement. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Margins      from Off-system Sales increased $24 million primarily due to higher      physical sales margins partially offset by lower trading margins.                                                                                                                                                                                                                                                                                                                                                                                               |

| · | Other      Operation and Maintenance expenses increased $14 million primarily due to      a $6 million increase in distribution maintenance expenses resulting from      repairs from storm damage.  In addition, steam maintenance      expenses increased $5 million due to a planned outage at the Mountaineer      Plant in March 2008.          |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization expenses increased $34 million primarily due to favorable      adjustments made in the second quarter 2007 for the Virginia base rate      order of $22 million and the amortization of carrying charges and      depreciation expense of $9 million that are being collected through the      Virginia E&R surcharges. |
| · | Taxes      Other Than Income Taxes increased $4 million primarily due to favorable      franchise tax return adjustments recorded in 2007.                                                                                                                                                                                                                     |
| · | Carrying      Costs Income increased $13 million due to an increase in Virginia E&R      deferrals.                                                                                                                                                                                                                                                        |
| · | Interest      Expense increased $14 million primarily due to a $19 million increase in      interest expense from long-term debt issuances partially offset by a $4      million decrease in interest on the Virginia provision for refund recorded      in the second quarter of 2007.                                                                        |
| · | Income      Tax Expense decreased $5 million primarily due to a decrease in state      income taxes partially offset by changes in certain book/tax differences      accounted for on a flow-throughbasis.                                                                                                                                                     |

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

|                                                  |   | 2008                |     |   | 2007   |   |
|-------------------------------------------------------|--------|---------------------|----------|--------|--------|--------|
|                                                  |   | (in      thousands) |     |
| Cash      and Cash Equivalents at Beginning of Period |   | $                   | 2,195    |   |   | $      | 2,318 |   |
| Cash      Flows from (Used for):                      |   |                |     |   |   |   |   |   |
|  Operating      Activities                       |   |                | 140,378  |   |   |   | 265,414 |   |
|  Investing      Activities                       |   |                | (296,095 | )      |   |   | (378,985 | ) |
|  Financing      Activities                       |   |                | 155,398  |   |   |   | 112,605 |   |
| Net      Decrease in Cash and Cash Equivalents        |   |                | (319     | )      |   |   | (966 | ) |
| Cash      and Cash Equivalents at End of Period       |   | $                   | 1,876    |   |   | $      | 1,352 |   |

|                         |   | PrincipalAmount     |    | Interest |     | Due    |
|------------------------------|--------|---------------------|---------|----------|----------|--------|
| Type      of Debt            |   |                | Rate    |     | Date     |
|                         |   | (in      thousands) |    | (%)      |     |   |
| Pollution      Control Bonds |   | $                   | 75,000  |     | Variable |   | 2036 |
| Pollution      Control Bonds |   |                | 50,275  |     | Variable |   | 2036 |
| Senior      Unsecured Notes  |   |                | 500,000 |     | 7.00     |   | 2038 |

|                         |   | PrincipalAmount      Paid |    | Interest |     | Due    |
|------------------------------|--------|---------------------------|---------|----------|----------|--------|
| Type      of Debt            |   |                      | Rate    |     | Date     |
|                         |   | (in      thousands)       |    | (%)      |     |   |
| Pollution      Control Bonds |   | $                         | 40,000  |     | Variable |   | 2019 |
| Pollution      Control Bonds |   |                      | 17,500  |     | Variable |   | 2021 |
| Pollution      Control Bonds |   |                      | 30,000  |     | Variable |   | 2019 |
| Pollution      Control Bonds |   |                      | 50,275  |     | Variable |   | 2036 |
| Pollution      Control Bonds |   |                      | 75,000  |     | Variable |   | 2037 |
| Senior      Unsecured Notes  |   |                      | 200,000 |     | 3.60     |   | 2008 |
| Other                        |   |                      | 7       |     | 13.718   |   | 2026 |

----

|                                                             |   |          |     |   | Cash      Flow  |   |    |       |   |   |       |   |   |   |    |
|------------------------------------------------------------------|--------|---------------|----------|--------|-----------------|--------|---------|------------|--------|--------|------------|--------|--------|--------|---------|
|                                                             |   | MTM      Risk |     |   | &           |   |    | DETM       |   |   |       |   |   |   |    |
|                                                             |   | Management    |     |   | Fair      Value |   |    | Assignment |   |   | Collateral |   |   |   |    |
|                                                             |   | Contracts     |     |   | Hedges          |   |    | (a)        |   |   | Deposits   |   |   | Total  |    |
| Current      Assets                                              |   | $             | 219,254  |   |            | $      | 3,871   |       |   | $      | -          |   |   | $      | (15,261 | ) |   | $ | 207,864 |   |
| Noncurrent      Assets                                           |   |          | 114,005  |   |            |   | 363     |       |   |   | -          |   |   |   | (8,538  | ) |   |   | 105,830 |   |
| Total      MTM Derivative Contract Assets                        |   |          | 333,259  |   |            |   | 4,234   |       |   |   | -          |   |   |   | (23,799 | ) |   |   | 313,694 |   |
|                                                             |   |          |     |   |            |   |    |       |   |   |       |   |   |   |    |   |   |   |   |   |
| Current      Liabilities                                         |   |          | (223,908 | )      |            |   | (28,732 | )          |   |   | (3,396     | )      |   |   | 17,200  |   |   |   | (238,836 | ) |
| Noncurrent      Liabilities                                      |   |          | (80,869  | )      |            |   | (1,287  | )          |   |   | (3,720     | )      |   |   | 2,519   |   |   |   | (83,357 | ) |
| Total      MTM Derivative Contract Liabilities              |   |          | (304,777 | )      |            |   | (30,019 | )          |   |   | (7,116     | )      |   |   | 19,719  |   |   |   | (322,193 | ) |
|                                                             |   |          |     |   |            |   |    |       |   |   |       |   |   |   |    |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $             | 28,482   |   |            | $      | (25,785 | )          |   | $      | (7,116     | )      |   | $      | (4,080  | ) |   | $ | (8,499 | ) |

| (a) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report. |
|-----|-----------------------------------------------------------------------------------------------------------|

| Total      MTM Risk Management Contract Net Assets at December 31,    2007                                                 |   | $      | 45,870  |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| (Gain)      Loss from Contracts Realized/Settled During the Period and Entered in a      Prior Period                      |   |   | (8,933  | )      |
| Fair      Value of New Contracts at Inception When Entered During the Period      (a)                                      |   |   | -       |   |
| Net      Option Premiums Paid/(Received) for Unexercised or Unexpired Option      Contracts Entered During the Period |   |   | -       |   |
| Change      in Fair Value Due to Valuation Methodology Changes on Forward Contracts      (b)                               |   |   | 1,151   |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                             |   |   | (408    | )      |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                        |   |   | (9,198  | )      |
| Total      MTM Risk Management Contract Net Assets                                                                         |   |   | 28,482  |   |
| Net      Cash Flow & Fair Value Hedge Contracts                                                                        |   |   | (25,785 | )      |
| DETM      Assignment (e)                                                                                                   |   |   | (7,116  | )      |
| Collateral      Deposits                                                                                                   |   |   | (4,080  | )      |
| Ending      Net Risk Management Assets at June 30, 2008                                                                    |   | $      | (8,499  | )      |

| (a) | Reflects      fair value on long-term contracts which are typically with customers that      seek fixed pricing to limit their risk against fluctuating energy      prices.  The contract prices are valued against market curves      associated with the delivery location and deliveryterm.                                                                            |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents      the impact of applying AEP’s credit risk when measuring the fair value of      derivative liabilities according to SFAS 157.                                                                                                                                                                                                                                  |
| (c) | Market      fluctuations are attributable to various factors such as supply/demand,      weather, storage, etc.                                                                                                                                                                                                                                                                     |
| (d) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected in the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/liabilities for those subsidiaries that      operate in regulated jurisdictions. |
| (e) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report.                                                                                                                                                                                                                                                                           |

|                                                                                                               |   | Remainder |   |   |   |   |   |   |   |   |   |   |   |   |   |   | After  |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                               |   | 2008      |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | 2012   |   |   | Total  |   |
| Level      1 (a)                                                                                                   |   | $         | (2,770 | )      |   | $      | 471    |   |   | $      | (21    | )      |   | $      | -      |   |   | $      | -      |   |   | $ | - |   |   | $ | (2,320 | ) |
| Level      2 (b)                                                                                                   |   |      | 2,314  |   |   |   | 12,244 |   |   |   | 12,956 |   |   |   | 5,150  |   |   |   | 1,782  |   |   |   | - |   |   |   | 34,446 |   |
| Level      3 (c)                                                                                                   |   |      | (9,305 | )      |   |   | (1,566 | )      |   |   | (3,892 | )      |   |   | (2,504 | )      |   |   | (1,293 | )      |   |   | - |   |   |   | (18,560 | ) |
| Total                                                                                                              |   |      | (9,761 | )      |   |   | 11,149 |   |   |   | 9,043  |   |   |   | 2,646  |   |   |   | 489    |   |   |   | - |   |   |   | 13,566 |   |
| Dedesignated      Risk       Management Contracts      (d)                      |   |      | 2,380  |   |   |   | 4,602  |   |   |   | 4,565  |   |   |   | 1,778  |   |   |   | 1,591  |   |   |   | - |   |   |   | 14,916 |   |
| Total MTM Risk Management        Contract Net Assets         (Liabilities) |   | $         | (7,381 | )      |   | $      | 15,751 |   |   | $      | 13,608 |   |   | $      | 4,424  |   |   | $      | 2,080  |   |   | $ | - |   |   | $ | 28,482 |   |

| (a) | Level      1 inputs are quoted prices (unadjusted) in active markets for identical      assets or liabilities that the reporting entity has the ability to access      at the measurement date.  Level 1 inputs primarily consist of      exchange traded contracts that exhibit sufficient frequency and volume to      provide pricing information on an ongoing basis.                                                                                                                                                                                                                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Level      2 inputs are inputs other than quoted prices included within Level 1 that      are observable for the asset or liability, either directly or      indirectly.  If the asset or liability has a specified      (contractual) term, a Level 2 input must be observable for substantially      the full term of the asset or liability.  Level 2 inputs      primarily consist of OTC broker quotes in moderately active or less active      markets, exchange traded contracts where there was not sufficient market      activity to warrant inclusion in Level 1, and OTC broker quotes that are      corroborated by the same or similar transactions that have occurred in the      market. |
| (c) | Level      3 inputs are unobservable inputs for the asset or      liability.  Unobservable inputs shall be used to measure fair      value to the extent that the observable inputs are not available, thereby      allowing for situations in which there is little, if any, market activity      for the asset or liability at the measurement date.  Level 3      inputs primarily consist of unobservable market data or are valued based      on models and/or assumptions.                                                                                                                                                                                                                         |
| (d) | Dedesignated      Risk Management Contracts are contracts that were originally MTM but were      subsequently elected as normal under SFAS 133.  At the time of      the normal election the MTM value was frozen and no longer fair      valued.  This will be amortized into Revenues over the remaining      life of the contract.                                                                                                                                                                                                                                                                                                                                                                    |

|                                                                    |   | Power  |    |   | InterestRate |   |   | ForeignCurrency |   |   | Total |   |
|-------------------------------------------------------------------------|--------|--------|---------|--------|--------------|--------|--------|-----------------|--------|--------|-------|--------|
| Beginning      Balance in AOCI December 31, 2007                        |   | $      | 783     |   |         | $      | (6,602 | )               |   | $      | (125  | )      |   | $ | (5,944 | ) |
| Changes      in Fair Value                                              |   |   | (15,824 | )      |         |   | (3,114 | )               |   |   | 75    |   |   |   | (18,863 | ) |
| Reclassifications      from AOCI for Cash Flow Hedges      Settled |   |   | (682    | )      |         |   | 813    |            |   |   | 3     |   |   |   | 134 |   |
| Ending      Balance in AOCI June 30, 2008                               |   | $      | (15,723 | )      |         | $      | (8,903 | )               |   | $      | (47   | )      |   | $ | (24,673 | ) |

| Six      Months EndedJune      30, 2008 |   |   | Twelve      Months EndedDecember      31, 2007 |    |
|-----------------------------------------|--------|--------|------------------------------------------------|---------|
| (in      thousands)                     |   |   | (in      thousands)                            |    |
| End                                     |   | High   |                                           | Average |   | Low |   |   | End |   | High |   | Average |   | Low |   |
| $603                                    |   |   | $1,002                                         |    |   | $391 |   |   | $161 |   |   | $455 |   |   | $2,328 |   |   | $569 |   |   | $117 |

----

|                                                                                                                               |   | Three      Months Ended |    |   | Six      Months Ended |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-----------------------|--------|
|                                                                                                                               |   | 2008                    |    |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                                                                                           |   |                    |    |   |                  |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution                                                                            |   | $                       | 566,089 |   |                  | $      | 499,189 |   |   | $ | 1,207,546 |   |   | $ | 1,100,735 |   |
| Sales      to AEP Affiliates                                                                                                       |   |                    | 97,508  |   |                  |   | 55,371 |   |   |   | 187,598 |   |   |   | 116,916 |   |
| Other                                                                                                                              |   |                    | 3,800   |   |                  |   | 2,850 |   |   |   | 7,280 |   |   |   | 5,487 |   |
| TOTAL                                                                                                                              |   |                    | 667,397 |   |                  |   | 557,410 |   |   |   | 1,402,424 |   |   |   | 1,223,138 |   |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                                                                           |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation                                                                       |   |                    | 159,237 |   |                  |   | 164,018 |   |   |   | 333,067 |   |   |   | 335,204 |   |
| Purchased      Electricity for Resale                                                                                              |   |                    | 52,931  |   |                  |   | 34,328 |   |   |   | 96,130 |   |   |   | 70,278 |   |
| Purchased      Electricity from AEP Affiliates                                                                                     |   |                    | 186,243 |   |                  |   | 144,630 |   |   |   | 375,838 |   |   |   | 272,231 |   |
| Other      Operation                                                                                                               |   |                    | 68,415  |   |                  |   | 75,125 |   |   |   | 143,946 |   |   |   | 142,754 |   |
| Maintenance                                                                                                                        |   |                    | 52,235  |   |                  |   | 51,414 |   |   |   | 110,079 |   |   |   | 97,167 |   |
| Depreciation      and Amortization                                                                                                 |   |                    | 61,592  |   |                  |   | 31,076 |   |   |   | 124,164 |   |   |   | 90,236 |   |
| Taxes      Other Than Income Taxes                                                                                                 |   |                    | 24,104  |   |                  |   | 22,975 |   |   |   | 48,095 |   |   |   | 44,250 |   |
| TOTAL                                                                                                                              |   |                    | 604,757 |   |                  |   | 523,566 |   |   |   | 1,231,319 |   |   |   | 1,052,120 |   |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                                                                                              |   |                    | 62,640  |   |                  |   | 33,844 |   |   |   | 171,105 |   |   |   | 171,018 |   |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                                                                                       |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                                                                                               |   |                    | 2,827   |   |                  |   | 390 |   |   |   | 5,596 |   |   |   | 1,029 |   |
| Carrying      Costs Income                                                                                                         |   |                    | 17,411  |   |                  |   | 10,950 |   |   |   | 26,997 |   |   |   | 14,116 |   |
| Allowance      for Equity Funds Used During Construction                                                                           |   |                    | 2,652   |   |                  |   | 1,581 |   |   |   | 4,148 |   |   |   | 4,358 |   |
| Interest      Expense                                                                                                              |   |                    | (47,119 | )      |                  |   | (44,955 | ) |   |   | (91,259 | ) |   |   | (76,778 | ) |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE (CREDIT)                                                                                     |   |                    | 38,411  |   |                  |   | 1,810 |   |   |   | 116,587 |   |   |   | 113,743 |   |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense (Credit)                                                                                                   |   |                    | 12,129  |   |                  |   | (1,471 | ) |   |   | 34,992 |   |   |   | 40,235 |   |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE EXTRAORDINARY LOSS                                                                                              |   |                    | 26,282  |   |                  |   | 3,281 |   |   |   | 81,595 |   |   |   | 73,508 |   |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Extraordinary      Loss – Reapplication of Regulatory Accounting for Generation,      Net    of Tax |   |                    | -       |   |                  |   | (78,763 | ) |   |   | - |   |   |   | (78,763 | ) |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME (LOSS)                                                                                                             |   |                    | 26,282  |   |                  |   | (75,482 | ) |   |   | 81,595 |   |   |   | (5,255 | ) |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements Including  Capital      Stock Expense                                    |   |                    | 238     |   |                  |   | 238 |   |   |   | 476 |   |   |   | 476 |   |
|                                                                                                                               |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      (LOSS) APPLICABLE TO COMMON STOCK                                                                                    |   | $                       | 26,044  |   |                  | $      | (75,720 | ) |   | $ | 81,119 |   |   | $ | (5,731 | ) |

----

|                                                                                                                                                |   | Common      Stock |    |   | Paid-in      Capital |   |      | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|-----------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
| DECEMBER      31, 2006                                                                                                                              |   | $                 | 260,458 |   |                 | $      | 1,024,994 |                   |   | $      | 805,513                                            |   |   | $      | (54,791 | ) |   | $ | 2,036,174 |   |
|                                                                                                                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                                                                                    |   |              |    |   |                 |   |      |                   |   |   | (2,685                                             | )      |   |   |    |   |   |   | (2,685 | ) |
| Common      Stock Dividends                                                                                                                         |   |              |    |   |                 |   |      |                   |   |   | (25,000                                            | )      |   |   |    |   |   |   | (25,000 | ) |
| Preferred      Stock Dividends                                                                                                                      |   |              |    |   |                 |   |      |                   |   |   | (400                                               | )      |   |   |    |   |   |   | (400 | ) |
| Capital      Stock Expense                                                                                                                          |   |              |    |   |                 |   | 76        |                   |   |   | (76                                                | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                                                                                               |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 2,008,089 |   |
|                                                                                                                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                                                           |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:                                                                                                      |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $2,482                                                                                                         |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | 4,610   |   |   |   | 4,610 |   |
| SFAS      158 Costs Established as a Regulatory  Asset      Related to the Reapplication of  SFAS      71, Net of Tax of $6,055 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | 11,245  |   |   |   | 11,245 |   |
| NET      LOSS                                                                                                                                       |   |              |    |   |                 |   |      |                   |   |   | (5,255                                             | )      |   |   |    |   |   |   | (5,255 | ) |
| TOTAL      COMPREHENSIVE INCOME                                                                                                                     |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 10,600 |   |
|                                                                                                                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2007                                                                                                                                  |   | $                 | 260,458 |   |                 | $      | 1,025,070 |                   |   | $      | 772,097                                            |   |   | $      | (38,936 | ) |   | $ | 2,018,689 |   |
|                                                                                                                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| DECEMBER      31, 2007                                                                                                                              |   | $                 | 260,458 |   |                 | $      | 1,025,149 |                   |   | $      | 831,612                                            |   |   | $      | (35,187 | ) |   | $ | 2,082,032 |   |
|                                                                                                                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $1,175                                                                                                      |   |              |    |   |                 |   |      |                   |   |   | (2,181                                             | )      |   |   |    |   |   |   | (2,181 | ) |
| SFAS      157 Adoption, Net of Tax of $154                                                                                                          |   |              |    |   |                 |   |      |                   |   |   | (286                                               | )      |   |   |    |   |   |   | (286 | ) |
| Capital      Contribution from Parent                                                                                                               |   |              |    |   |                 |   | 125,000   |                   |   |   |                                               |   |   |   |    |   |   |   | 125,000 |   |
| Preferred      Stock Dividends                                                                                                                      |   |              |    |   |                 |   |      |                   |   |   | (399                                               | )      |   |   |    |   |   |   | (399 | ) |
| Capital      Stock Expense                                                                                                                          |   |              |    |   |                 |   | 77        |                   |   |   | (77                                                | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                                                                                               |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 2,204,166 |   |
|                                                                                                                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                                                           |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss), Net of Taxes:                                                                                     |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of      $10,085                                                                                              |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | (18,729 | ) |   |   | (18,729 | ) |
| Amortization      of Pension and OPEB Deferred  Costs,      Net of Tax of $897                                                            |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | 1,666   |   |   |   | 1,666 |   |
| NET      INCOME                                                                                                                                     |   |              |    |   |                 |   |      |                   |   |   | 81,595                                             |   |   |   |    |   |   |   | 81,595 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                                                                     |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 64,532 |   |
|                                                                                                                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2008                                                                                                                                  |   | $                 | 260,458 |   |                 | $      | 1,150,226 |                   |   | $      | 910,264                                            |   |   | $      | (52,250 | ) |   | $ | 2,268,698 |   |

----

|                                                 |   | 2008   |      |   | 2007   |   |
|------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                  |   |   |      |   |   |   |
| Cash      and Cash Equivalents                       |   | $      | 1,876     |   |   | $      | 2,195 |   |
| Accounts      Receivable:                            |   |   |      |   |   |   |   |   |
|        Customers                                |   |   | 198,958   |   |   |   | 176,834 |   |
|        Affiliated Companies                     |   |   | 79,810    |   |   |   | 113,582 |   |
|        Accrued Unbilled Revenues                |   |   | 34,213    |   |   |   | 38,397 |   |
|        Miscellaneous                            |   |   | 592       |   |   |   | 2,823 |   |
|        Allowance for Uncollectible Accounts     |   |   | (5,835    | )      |   |   | (13,948 | )  |
|  Total      Accounts Receivable                 |   |   | 307,738   |   |   |   | 317,688 |   |
| Fuel                                                 |   |   | 84,139    |   |   |   | 82,203 |   |
| Materials      and Supplies                          |   |   | 80,244    |   |   |   | 76,685 |   |
| Risk      Management Assets                          |   |   | 207,864   |   |   |   | 62,955 |   |
| Regulatory      Asset for Under-Recovered Fuel Costs |   |   | 53,399    |   |   |   | - |   |
| Prepayments      and Other                           |   |   | 51,831    |   |   |   | 16,369 |   |
| TOTAL                                                |   |   | 787,091   |   |   |   | 558,095 |   |
|                                                 |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                   |   |   |      |   |   |   |   |   |
| Electric:                                            |   |   |      |   |   |   |   |   |
|        Production                               |   |   | 3,633,832 |   |   |   | 3,625,788 |   |
|        Transmission                             |   |   | 1,712,793 |   |   |   | 1,675,081 |   |
|        Distribution                             |   |   | 2,429,600 |   |   |   | 2,372,687 |   |
| Other                                                |   |   | 356,089   |   |   |   | 351,827 |   |
| Construction      Work in Progress                   |   |   | 856,270   |   |   |   | 713,063 |   |
| Total                                                |   |   | 8,988,584 |   |   |   | 8,738,446 |   |
| Accumulated      Depreciation and Amortization       |   |   | 2,639,155 |   |   |   | 2,591,833 |   |
| TOTAL      - NET                                     |   |   | 6,349,429 |   |   |   | 6,146,613 |   |
|                                                 |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                         |   |   |      |   |   |   |   |   |
| Regulatory      Assets                               |   |   | 683,609   |   |   |   | 652,739 |   |
| Long-term      Risk Management Assets                |   |   | 105,830   |   |   |   | 72,366 |   |
| Deferred      Charges and Other                      |   |   | 197,938   |   |   |   | 191,871 |   |
| TOTAL                                                |   |   | 987,377   |   |   |   | 916,976 |   |
|                                                 |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                    |   | $      | 8,123,897 |   |   | $      | 7,621,684 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 103,802   |   |   | $      | 275,257 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
|        General                                                 |   |                | 281,893   |   |   |   | 241,871 |   |
|        Affiliated Companies                                    |   |                | 99,692    |   |   |   | 106,852 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 150,016   |   |   |   | 239,732 |   |
| Risk      Management Liabilities                                    |   |                | 238,836   |   |   |   | 51,708 |   |
| Customer      Deposits                                              |   |                | 50,978    |   |   |   | 45,920 |   |
| Accrued      Taxes                                                  |   |                | 48,527    |   |   |   | 58,519 |   |
| Accrued      Interest                                               |   |                | 46,693    |   |   |   | 41,699 |   |
| Other                                                               |   |                | 99,752    |   |   |   | 139,476 |   |
| TOTAL                                                               |   |                | 1,120,189 |   |   |   | 1,201,034 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 2,803,466 |   |   |   | 2,507,567 |   |
| Long-term      Debt – Affiliated                              |   |                | 100,000   |   |   |   | 100,000 |   |
| Long-term      Risk Management Liabilities                          |   |                | 83,357    |   |   |   | 47,357 |   |
| Deferred      Income Taxes                                          |   |                | 1,013,394 |   |   |   | 948,891 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 490,350   |   |   |   | 505,556 |   |
| Deferred      Credits and Other                                     |   |                | 226,691   |   |   |   | 211,495 |   |
| TOTAL                                                               |   |                | 4,717,258 |   |   |   | 4,320,866 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 5,837,447 |   |   |   | 5,521,900 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 17,752    |   |   |   | 17,752 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – No Par Value:                             |   |                |      |   |   |   |   |   |
|        Authorized – 30,000,000 Shares                    |   |                |      |   |   |   |   |   |
|        Outstanding – 13,499,500 Shares                   |   |                | 260,458   |   |   |   | 260,458 |   |
| Paid-in      Capital                                                |   |                | 1,150,226 |   |   |   | 1,025,149 |   |
| Retained      Earnings                                              |   |                | 910,264   |   |   |   | 831,612 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (52,250   | )      |   |   | (35,187 | ) |
| TOTAL                                                               |   |                | 2,268,698 |   |   |   | 2,082,032 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 8,123,897 |   |   | $      | 7,621,684 |   |

----

|                                                                                              |   | 2008   |     |   | 2007   |   |
|---------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                         |   |   |     |   |   |   |
| Net      Income (Loss)                                                                            |   | $      | 81,595   |   |   | $      | (5,255 | )  |
| Adjustments      to Reconcile Net Income (Loss) to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                                |   |   | 124,164  |   |   |   | 90,236 |   |
| Deferred      Income Taxes                                                                        |   |   | 71,728   |   |   |   | (17,439 | )  |
| Extraordinary      Loss, Net of Tax                                                               |   |   | -        |   |   |   | 78,763 |   |
| Regulatory      Provision                                                                         |   |   | -        |   |   |   | 105,110 |   |
| Carrying      Costs Income                                                                        |   |   | (26,997  | )      |   |   | (14,116 | )  |
| Allowance      for Equity Funds Used During Construction                                          |   |   | (4,148   | )      |   |   | (4,358 | )  |
| Mark-to-Market      of Risk Management Contracts                                                  |   |   | 17,298   |   |   |   | 5,457 |   |
| Change      in Other Noncurrent Assets                                                            |   |   | (14,006  | )      |   |   | (7,896 | )  |
| Change      in Other Noncurrent Liabilities                                                       |   |   | (20,038  | )      |   |   | (1,239 | )  |
| Changes      in Certain Components of Working Capital:                                            |   |   |     |   |   |   |   |   |
|          Accounts Receivable, Net                                                  |   |   | 2,583    |   |   |   | 31,483 |   |
|          Fuel, Materials and Supplies                                              |   |   | (5,495   | )      |   |   | (20,654 | )  |
|          Accounts Payable                                                          |   |   | 40,905   |   |   |   | (26,786 | )  |
|          Accrued Taxes, Net                                                        |   |   | (31,213  | )      |   |   | 39,168 |   |
|          Fuel Over/Under-Recovery, Net                                             |   |   | (77,036  | )      |   |   | 15,221 |   |
|          Other Current Assets                                                      |   |   | (14,225  | )      |   |   | 3,140 |   |
|          Other Current Liabilities                                                 |   |   | (4,737   | )      |   |   | (5,421 | )  |
| Net      Cash Flows from Operating Activities                                                     |   |   | 140,378  |   |   |   | 265,414 |   |
|                                                                                              |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                         |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                                    |   |   | (311,550 | )      |   |   | (382,501 | )  |
| Change      in Other Cash Deposits, Net                                                           |   |   | (15      | )      |   |   | (2,678 | )  |
| Proceeds      from Sales of Assets                                                                |   |   | 15,470   |   |   |   | 6,194 |   |
| Net      Cash Flows Used for Investing Activities                                                 |   |   | (296,095 | )      |   |   | (378,985 | )  |
|                                                                                              |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                         |   |   |     |   |   |   |   |   |
| Capital      Contribution from Parent                                                             |   |   | 125,000  |   |   |   | - |   |
| Issuance      of Long-term Debt – Nonaffiliated                                             |   |   | 617,111  |   |   |   | 73,438 |   |
| Change      in Advances from Affiliates, Net                                                      |   |   | (171,455 | )      |   |   | 212,641 |   |
| Retirement      of Long-term Debt – Nonaffiliated                                           |   |   | (412,782 | )      |   |   | (125,006 | )  |
| Principal      Payments for Capital Lease Obligations                                             |   |   | (2,077   | )      |   |   | (2,200 | )  |
| Amortization      of Funds From Amended Coal Contract                                             |   |   | -        |   |   |   | (20,868 | )  |
| Dividends      Paid on Common Stock                                                               |   |   | -        |   |   |   | (25,000 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                                 |   |   | (399     | )      |   |   | (400 | ) |
| Net      Cash Flows from Financing Activities                                                     |   |   | 155,398  |   |   |   | 112,605 |   |
|                                                                                              |   |   |     |   |   |   |   |   |
| Net      Decrease in Cash and Cash Equivalents                                                    |   |   | (319     | )      |   |   | (966 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                             |   |   | 2,195    |   |   |   | 2,318 |   |
| Cash      and Cash Equivalents at End of Period                                                   |   | $      | 1,876    |   |   | $      | 1,352 |   |
|                                                                                              |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                                    |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                           |   | $      | 86,873   |   |   | $      | 69,823 |   |
| Net      Cash Paid (Received) for Income Taxes                                                    |   |   | (10,708  | )      |   |   | 6,197 |   |
| Noncash      Acquisitions Under Capital Leases                                                    |   |   | 1,014    |   |   |   | 1,693 |   |
| Construction      Expenditures Included in Accounts Payable at June 30,                           |   |   | 98,958   |   |   |   | 97,044 |   |

----

|                                                      | Footnote      Reference |
|-----------------------------------------------------------|-------------------------|
|                                                      |                    |
| Significant      Accounting Matters                       | Note      1             |
| New      Accounting Pronouncements and Extraordinary Item | Note      2             |
| Rate      Matters                                         | Note      3             |
| Commitments,      Guarantees and Contingencies            | Note      4             |
| Benefit      Plans                                        | Note      6             |
| Business      Segments                                    | Note      7             |
| Income      Taxes                                         | Note      8             |
| Financing      Activities                                 | Note      9             |

----

----

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES

| Results of      Operations |
|----------------------------|

| Second      Quarter of 2007                       |   |   |   |   | $      | 80     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (13    | )      |   |   |   |   |
| Off-system      Sales                             |   |   | 10     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 1      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | (2     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (30    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 2      |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (5     | )      |   |   |   |   |
| Interest      Expense                             |   |   | (1     | )      |   |   |   |   |
| Other                                             |   |   | 1      |   |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (33    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 11     |   |
|                                              |   |   |   |   |   |   |   |   |
| Second      Quarter of 2008                       |   |   |   |   |   | $      | 56     |   |

| · | Retail      Margins decreased $13 million primarily due to:                                                                               |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                    | A      $32 million decrease related to increased fuel and PJM      expenses. |
|   | ·                                                                                                                                    | A      $12 million decrease in residential and commercial revenue primarily due      to a 55% decrease in heating degree days and a 24% decrease in cooling      degree days. |
|   | These      decreases were partially offset by:                                                                                            |
|   | ·                                                                                                                                    | A      $26 million increase related to a net increase in rates      implemented. |
|   | ·                                                                                                                                    | A      $7 million decrease in capacity purchases related to CSPCo’s unit power      agreement for AEGCo’s Lawrenceburg Plant which began in May 2007 and the      April 2007 acquisition of the Darby Plant. |
|   | ·                                                                                                                                    | A      $4 million increase in industrial revenue due to increased usage by Ormet,      a major industrial customer. |
| · | Margins      from Off-system Sales increased $10 million primarily due to higher      physical sales margins and higher trading  margins. |

| · | Other      Operation and Maintenance expenses increased $30 million due      to:                                                                                                                                                                                                                                    |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                              | A      $9 million increase in recoverable PJM costs. |
|   | ·                                                                                                                                                                                                                                                                                                              | An      $8 million increase in steam plant maintenance expenses primarily related      to work performed at the Conesville Plant. |
|   | ·                                                                                                                                                                                                                                                                                                              | A      $4 million increase in boiler plant removal expenses primarily related to      work performed at the Conesville Plant. |
|   | ·                                                                                                                                                                                                                                                                                                              | A      $4 million increase in expenses related to CSPCo’s unit power agreement      for AEGCo’s Lawrenceburg Plant which began in May 2007. |
|   | ·                                                                                                                                                                                                                                                                                                              | A      $3 million increase in recoverable customer account expenses related to      the Universal Service Fund for customers who qualify for payment      assistance. |
| · | Depreciation      and Amortization decreased $2 million primarily due to the amortization of      IGCC pre-construction costs, which ended in the second quarter of      2007.  The amortization of IGCC pre-construction costs was      offset by a corresponding increase in Retail Margins in    2007. |
| · | Taxes      Other Than Income Taxes increased $5 million due to property tax      adjustments.                                                                                                                                                                                                                       |
| · | Income      Tax Expense decreased $11 million primarily due to a decrease in pretax      book income.                                                                                                                                                                                                               |

| Six      Months Ended June 30, 2007               |   |   |   |   | $      | 127    |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 40     |   |   |   |   |   |
| Off-system      Sales                             |   |   | 20     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 1      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 61     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (43    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 4      |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (9     | )      |   |   |   |   |
| Other      Income                                 |   |   | 5      |   |   |   |   |   |
| Interest      Expense                             |   |   | (5     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (48    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (7     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Six      Months Ended June 30, 2008               |   |   |   |   |   | $      | 133    |   |

| · | Retail      Margins increased $40 million primarily due to:                                                                               |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                    | A      $58 million increase related to a net increase in rates      implemented. |
|   | ·                                                                                                                                    | A      $39 million decrease in capacity settlement charges related to CSPCo’s      unit power agreement for AEGCo’s Lawrenceburg Plant which began in May      2007 and the April 2007 acquisition of the Darby Plant. |
|   | ·                                                                                                                                    | A      $15 million increase in industrial revenue due to increased usage by      Ormet, a major industrial customer. |
|   | These      increases were partially offset by:                                                                                            |
|   | ·                                                                                                                                    | A      $60 million decrease related to increased fuel and PJM      expenses. |
|   | ·                                                                                                                                    | A      $9 million decrease in residential and commercial revenue primarily due to      a 25% decrease in cooling degree days. |
| · | Margins      from Off-system Sales increased $20 million primarily due to higher      physical sales margins and higher trading  margins. |

| · | Other      Operation and Maintenance expenses increased $43 million primarily due      to:                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                              | A      $13 million increase in expenses related to CSPCo’s unit power agreement      for AEGCo’s Lawrenceburg Plant which began in May 2007. |
|   | ·                                                                                                                                                                                                                                              | A      $12 million increase in steam plant maintenance expenses primarily related      to work performed at the Conesville Plant. |
|   | ·                                                                                                                                                                                                                                              | An      $8 million increase in recoverable PJM expenses. |
|   | ·                                                                                                                                                                                                                                              | A      $5 million increase in recoverable customer account expenses related to      the Universal Service Fund for customers who qualify for payment      assistance. |
|   | ·                                                                                                                                                                                                                                              | A      $3 million increase in boiler plant removal expenses primarily related to      work performed at the Conesville Plant. |
| · | Depreciation      and Amortization decreased $4 million primarily due to a $6 million      decrease in amortization of IGCC pre-construction costs offset by a $3      million increase related to the acquisition of the Darby Plant in      2007. |
| · | Taxes      Other Than Income Taxes increased $9 million due to property tax      adjustments.                                                                                                                                                       |
| · | Interest      Expense increased $5 million due to increased long-term borrowings and an      increase in short-term borrowings from the Utility Money    Pool.                                                                                      |
| · | Income      Tax Expense increased $7 million primarily due to an increase in pretax      book income and state income taxes.                                                                                                                        |

----

----

|                                                         |   | Three      Months Ended |         |   | Six      Months Ended |   |
|--------------------------------------------------------------|--------|-------------------------|--------------|--------|-----------------------|--------|
|                                                         |   | 2008                    |         |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                     |   |                    |         |   |                  |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $                       | 500,056      |   |                  | $      | 469,648 |   |   | $ | 1,005,380 |   |   | $ | 893,114 |   |
| Sales      to AEP Affiliates                                 |   |                    | 47,413       |   |                  |   | 35,356 |   |   |   | 82,521 |   |   |   | 58,369 |   |
| Other                                                        |   |                    | 1,478        |   |                  |   | 1,018 |   |   |   | 2,695 |   |   |   | 2,451 |   |
| TOTAL                                                        |   |                    | 548,947      |   |                  |   | 506,022 |   |   |   | 1,090,596 |   |   |   | 953,934 |   |
|                                                         |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                     |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |                    | 86,253       |   |                  |   | 76,342 |   |   |   | 171,380 |   |   |   | 152,204 |   |
| Purchased      Electricity for Resale                        |   |                    | 45,010       |   |                  |   | 32,835 |   |   |   | 87,196 |   |   |   | 64,146 |   |
| Purchased      Electricity from AEP Affiliates               |   |                    | 110,578      |   |                  |   | 87,788 |   |   |   | 204,682 |   |   |   | 171,329 |   |
| Other      Operation                                         |   |                    | 84,955       |   |                  |   | 62,516 |   |   |   | 158,021 |   |   |   | 123,675 |   |
| Maintenance                                                  |   |                    | 34,435       |   |                  |   | 26,723 |   |   |   | 57,666 |   |   |   | 49,287 |   |
| Depreciation      and Amortization                           |   |                    | 47,693       |   |                  |   | 49,446 |   |   |   | 96,295 |   |   |   | 99,743 |   |
| Taxes      Other Than Income Taxes                           |   |                    | 40,989       |   |                  |   | 35,796 |   |   |   | 85,545 |   |   |   | 76,378 |   |
| TOTAL                                                        |   |                    | 449,913      |   |                  |   | 371,446 |   |   |   | 860,785 |   |   |   | 736,762 |   |
|                                                         |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                        |   |                    | 99,034       |   |                  |   | 134,576 |   |   |   | 229,811 |   |   |   | 217,172 |   |
|                                                         |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                 |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                         |   |                    | 1,603        |   |                  |   | 194 |   |   |   | 3,942 |   |   |   | 616 |   |
| Carrying      Costs Income                                   |   |                    | 1,538        |   |                  |   | 1,139 |   |   |   | 3,304 |   |   |   | 2,231 |   |
| Allowance      for Equity Funds Used During Construction     |   |                    | 565          |   |                  |   | 620 |   |   |   | 1,420 |   |   |   | 1,392 |   |
| Interest      Expense                                        |   |                    | (17,246      | )      |                  |   | (16,382 | ) |   |   | (36,485 | ) |   |   | (31,663 | ) |
|                                                         |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |                    | 85,494       |   |                  |   | 120,147 |   |   |   | 201,992 |   |   |   | 189,748 |   |
|                                                         |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                      |   |                    | 29,101       |   |                  |   | 40,125 |   |   |   | 69,446 |   |   |   | 62,745 |   |
|                                                         |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                         |   |                    | 56,393       |   |                  |   |  80,022 |   |   |   |  132,546 |   |   |   |  127,003 |   |
|                                                         |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Capital      Stock Expense                                   |   |                    | 40           |   |                  |   | 40 |   |   |   | 79 |   |   |   | 79 |   |
|                                                         |   |                    |         |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                |   | $                       |  56,353 |   |                  | $      |  79,982 |   |   | $  |  132,467 |   |   | $ |  126,924 |   |

----

|                                                                                     |   | Common      Stock |   |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
| DECEMBER      31, 2006                                                                   |   | $                 | 41,026 |   |                 | $      | 580,192 |                   |   | $      | 456,787                                            |   |   | $      | (21,988 | ) |   | $ | 1,056,017 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                         |   |              |   |   |                 |   |    |                   |   |   | (3,022                                             | )      |   |   |    |   |   |   | (3,022 | ) |
| Common      Stock Dividends                                                              |   |              |   |   |                 |   |    |                   |   |   | (40,000                                            | )      |   |   |    |   |   |   | (40,000 | ) |
| Capital      Stock Expense                                                               |   |              |   |   |                 |   | 79      |                   |   |   | (79                                                | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,012,995 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:                                           |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $360                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 669     |   |   |   | 669 |   |
| NET      INCOME                                                                          |   |              |   |   |                 |   |    |                   |   |   | 127,003                                            |   |   |   |    |   |   |   | 127,003 |   |
| TOTAL      COMPREHENSIVE INCOME                                                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 127,672 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2007                                                                       |   | $                 | 41,026 |   |                 | $      | 580,271 |                   |   | $      | 540,689                                            |   |   | $      | (21,319 | ) |   | $ | 1,140,667 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| DECEMBER      31, 2007                                                                   |   | $                 | 41,026 |   |                 | $      | 580,349 |                   |   | $      | 561,696                                            |   |   | $      | (18,794 | ) |   | $ | 1,164,277 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $589                                             |   |              |   |   |                 |   |    |                   |   |   | (1,095                                             | )      |   |   |    |   |   |   | (1,095 | ) |
| SFAS      157 Adoption, Net of Tax of $170                                               |   |              |   |   |                 |   |    |                   |   |   | (316                                               | )      |   |   |    |   |   |   | (316 | ) |
| Common      Stock Dividends                                                              |   |              |   |   |                 |   |    |                   |   |   | (62,500                                            | )      |   |   |    |   |   |   | (62,500 | ) |
| Capital      Stock Expense                                                               |   |              |   |   |                 |   | 79      |                   |   |   | (79                                                | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,100,366 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss), Net of Taxes:                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $5,090                                              |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | (9,451  | ) |   |   | (9,451 | ) |
| Amortization      of Pension and OPEB Deferred  Costs,      Net of Tax of $304 |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 564     |   |   |   | 564 |   |
| NET      INCOME                                                                          |   |              |   |   |                 |   |    |                   |   |   | 132,546                                            |   |   |   |    |   |   |   | 132,546 |   |
| TOTAL      COMPREHENSIVE INCOME                                                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 123,659 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2008                                                                       |   | $                 | 41,026 |   |                 | $      | 580,428 |                   |   | $      | 630,252                                            |   |   | $      | (27,681 | ) |   | $ | 1,224,025 |   |

----

|                                             |   | 2008   |      |   | 2007   |   |
|--------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                              |   |   |      |   |   |   |
| Cash      and Cash Equivalents                   |   | $      | 1,591     |   |   | $      | 1,389 |   |
| Other      Cash Deposits                         |   |   | 36,975    |   |   |   | 53,760 |   |
| Advances      to Affiliates                      |   |   | 25,199    |   |   |   | - |   |
| Accounts      Receivable:                        |   |   |      |   |   |   |   |   |
|        Customers                            |   |   | 78,715    |   |   |   | 57,268 |   |
|        Affiliated Companies                 |   |   | 20,346    |   |   |   | 32,852 |   |
|        Accrued Unbilled Revenues            |   |   | 18,759    |   |   |   | 14,815 |   |
|        Miscellaneous                        |   |   | 15,238    |   |   |   | 9,905 |   |
|        Allowance for Uncollectible Accounts |   |   | (2,647    | )      |   |   | (2,563 | )  |
|  Total      Accounts Receivable             |   |   | 130,411   |   |   |   | 112,277 |   |
| Fuel                                             |   |   | 37,196    |   |   |   | 35,849 |   |
| Materials      and Supplies                      |   |   | 37,191    |   |   |   | 36,626 |   |
| Emission      Allowances                         |   |   | 11,766    |   |   |   | 16,811 |   |
| Risk      Management Assets                      |   |   | 111,622   |   |   |   | 33,558 |   |
| Prepayments      and Other                       |   |   | 17,153    |   |   |   | 9,960 |   |
| TOTAL                                            |   |   | 409,104   |   |   |   | 300,230 |   |
|                                             |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT               |   |   |      |   |   |   |   |   |
| Electric:                                        |   |   |      |   |   |   |   |   |
|        Production                           |   |   | 2,135,486 |   |   |   | 2,072,564 |   |
|        Transmission                         |   |   | 563,847   |   |   |   | 510,107 |   |
|        Distribution                         |   |   | 1,577,693 |   |   |   | 1,552,999 |   |
| Other                                            |   |   | 205,097   |   |   |   | 198,476 |   |
| Construction      Work in Progress               |   |   | 464,286   |   |   |   | 415,327 |   |
| Total                                            |   |   | 4,946,409 |   |   |   | 4,749,473 |   |
| Accumulated      Depreciation and Amortization   |   |   | 1,749,038 |   |   |   | 1,697,793 |   |
| TOTAL      - NET                                 |   |   | 3,197,371 |   |   |   | 3,051,680 |   |
|                                             |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                     |   |   |      |   |   |   |   |   |
| Regulatory      Assets                           |   |   | 218,323   |   |   |   | 235,883 |   |
| Long-term      Risk Management Assets            |   |   | 61,708    |   |   |   | 41,852 |   |
| Deferred      Charges and Other                  |   |   | 146,808   |   |   |   | 181,563 |   |
| TOTAL                                            |   |   | 426,839   |   |   |   | 459,298 |   |
|                                             |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                |   | $      | 4,033,314 |   |   | $      | 3,811,208 |   |

----

|                                                            |   | 2008                |      |   | 2007   |   |
|-----------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                        |   | (in      thousands) |      |
| Advances      from Affiliates                                   |   | $                   | -         |   |   | $      | 95,199 |   |
| Accounts      Payable:                                          |   |                |      |   |   |   |   |   |
| General                                                         |   |                | 150,298   |   |   |   | 113,290 |   |
| Affiliated      Companies                                       |   |                | 57,025    |   |   |   | 65,292 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated   |   |                | -         |   |   |   | 112,000 |   |
| Risk      Management Liabilities                                |   |                | 131,260   |   |   |   | 28,237 |   |
| Customer      Deposits                                          |   |                | 45,190    |   |   |   | 43,095 |   |
| Accrued      Taxes                                              |   |                | 154,288   |   |   |   | 179,831 |   |
| Other                                                           |   |                | 85,794    |   |   |   | 96,892 |   |
| TOTAL                                                           |   |                | 623,855   |   |   |   | 733,836 |   |
|                                                            |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                     |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                       |   |                | 1,343,388 |   |   |   | 1,086,224 |   |
| Long-term      Debt – Affiliated                          |   |                | 100,000   |   |   |   | 100,000 |   |
| Long-term      Risk Management Liabilities                      |   |                | 49,103    |   |   |   | 27,419 |   |
| Deferred      Income Taxes                                      |   |                | 440,884   |   |   |   | 437,306 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits |   |                | 159,635   |   |   |   | 165,635 |   |
| Deferred      Credits and Other                                 |   |                | 92,424    |   |   |   | 96,511 |   |
| TOTAL                                                           |   |                | 2,185,434 |   |   |   | 1,913,095 |   |
|                                                            |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                          |   |                | 2,809,289 |   |   |   | 2,646,931 |   |
|                                                            |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                     |   |                |      |   |   |   |   |   |
|                                                            |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                          |   |                |      |   |   |   |   |   |
| Common      Stock – No Par Value:                         |   |                |      |   |   |   |   |   |
| Authorized      – 24,000,000 Shares                       |   |                |      |   |   |   |   |   |
| Outstanding      – 16,410,426 Shares                      |   |                | 41,026    |   |   |   | 41,026 |   |
| Paid-in      Capital                                            |   |                | 580,428   |   |   |   | 580,349 |   |
| Retained      Earnings                                          |   |                | 630,252   |   |   |   | 561,696 |   |
| Accumulated      Other Comprehensive Income (Loss)              |   |                | (27,681   | )      |   |   | (18,794 | ) |
| TOTAL                                                           |   |                | 1,224,025 |   |   |   | 1,164,277 |   |
|                                                            |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDER’S EQUITY           |   | $                   | 4,033,314 |   |   | $      | 3,811,208 |   |

----

|                                                                                       |   | 2008   |     |   | 2007   |   |     |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|----------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |     |
| Net      Income                                                                            |   | $      | 132,546  |   |   | $      | 127,003  |   |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |     |   |   |
| Depreciation      and Amortization                                                         |   |   | 96,295   |   |   |   | 99,743   |   |   |
| Deferred      Income Taxes                                                                 |   |   | 9,670    |   |   |   | (5,077   | )  |   |
| Carrying      Costs Income                                                                 |   |   | (3,304   | )      |   |   | (2,231   | )  |   |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (1,420   | )      |   |   | (1,392   | )  |   |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | 10,859   |   |   |   | 6,842    |   |   |
| Deferred      Property Taxes                                                               |   |   | 43,745   |   |   |   | 39,063   |   |   |
| Change      in Other Noncurrent Assets                                                     |   |   | (19,046  | )      |   |   | (24,593  | )  |   |
| Change      in Other Noncurrent Liabilities                                                |   |   | (2,759   | )      |   |   | (7,054   | )  |   |
| Changes      in Certain Components of Working Capital:                                     |   |   |     |   |   |   |     |   |   |
|           Accounts Receivable, Net                                     |   |   | (18,134  | )      |   |   | 7,678    |   |   |
|           Fuel, Materials and Supplies                                 |   |   | (1,912   | )      |   |   | (8,896   | )  |   |
|           Accounts Payable                                             |   |   | 8,747    |   |   |   | (10,735  | )  |   |
|           Customer Deposits                                            |   |   | 2,095    |   |   |   | 15,616   |   |   |
|           Accrued Taxes, Net                                           |   |   | (25,530  | )      |   |   | 5,493    |   |   |
|           Other Current Assets                                         |   |   | (2,160   | )      |   |   | 8,601    |   |   |
|           Other Current Liabilities                                    |   |   | (13,657  | )      |   |   | (1,952   | )  |   |
| Net      Cash Flows from Operating Activities                                              |   |   | 216,035  |   |   |   | 248,109  |   |   |
|                                                                                       |   |   |     |   |   |   |     |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |     |   |   |
| Construction      Expenditures                                                             |   |   | (191,668 | )      |   |   | (169,014 | )  |   |
| Change      in Other Cash Deposits, Net                                                    |   |   | 16,785   |   |   |   | (20      | )  |   |
| Change      in Advances to Affiliates, Net                                                 |   |   | (25,199  | )      |   |   | -        |   |   |
| Acquisition      of Darby Plant                                                            |   |   | -        |   |   |   | (102,032 | )  |   |
| Proceeds      from Sales of Assets                                                         |   |   | 700      |   |   |   | 842      |   |   |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (199,382 | )      |   |   | (270,224 | )  |   |
|                                                                                       |   |   |     |   |   |   |     |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |     |   |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 346,934  |   |   |   | -        |   |   |
| Change      in Advances from Affiliates, Net                                               |   |   | (95,199  | )      |   |   | 63,307   |   |   |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (204,245 | )      |   |   | -        |   |   |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (1,441   | )      |   |   | (1,446   | )  |   |
| Dividends      Paid on Common Stock                                                        |   |   | (62,500  | )      |   |   | (40,000  | )  |   |
| Net      Cash Flows from (Used for) Financing Activities                                   |   |   | (16,451  | )      |   |   | 21,861   |   |   |
|                                                                                       |   |   |     |   |   |   |     |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                  |   |   | 202      |   |   |   | (254     | )  |   |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 1,389    |   |   |   | 1,319    |   |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 1,591    |   |   | $      | 1,065    |   |   |
|                                                                                       |   |   |     |   |   |   |     |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |     |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 38,531   |   |   | $      | 31,557   |   |   |
| Net      Cash Paid for Income Taxes                                                        |   |   | 22,307   |   |   |   | 1,704    |   |   |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 1,228    |   |   |   | 1,347    |   |   |
| Construction      Expenditures Included in Accounts Payable at June 30,                    |   |   | 62,157   |   |   |   | 30,659   |   |   |
| Noncash      Assumption of Liabilities Related to Acquisition of Darby      Plant          |   |   | -        |   |   |   | 2,339    |   |   |

----

|                                                      | FootnoteReference |
|-----------------------------------------------------------|-------------------|
|                                                      |              |
| Significant      Accounting Matters                       | Note      1       |
| New      Accounting Pronouncements and Extraordinary Item | Note      2       |
| Rate      Matters                                         | Note      3       |
| Commitments,      Guarantees and Contingencies            | Note      4       |
| Acquisition                                               | Note      5       |
| Benefit      Plans                                        | Note      6       |
| Business      Segments                                    | Note      7       |
| Income      Taxes                                         | Note      8       |
| Financing      Activities                                 | Note      9       |

----

----

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES

| Second      Quarter of 2007                       |   |   |   |   | $      | 30     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (3     | )      |   |   |   |   |
| FERC      Municipals and Cooperatives             |   |   | 3      |   |   |   |   |   |
| Off-system      Sales                             |   |   | 5      |   |   |   |   |   |
| Other                                             |   |   | 10     |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 15     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (14    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 22     |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (1     | )      |   |   |   |   |
| Interest      Expense                             |   |   | 3      |   |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 10     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (5     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Second      Quarter of 2008                       |   |   |   |   |   | $      | 50     |   |

| · | Retail      Margins decreased $3 million primarily due to lower retail sales      reflecting weather conditions as cooling degree days decreased      significantly in both the Indiana and Michigan    jurisdictions.                                                                                                                                                                                  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | FERC      Municipals and Cooperatives margins increased $3 million due to higher      revenues under formula rate plans in 2008.                                                                                                                                                                                                                                                                        |
| · | Margins      from Off-system Sales increased $5 million primarily due to higher      physical sales margins partially offset by lower trading      margins.                                                                                                                                                                                                                                             |
| · | Other      revenues increased $10 million primarily due to increased River      Transportation Division (RTD) revenues for barging      services.  RTD’s related expenses which offset the RTD revenue      increase are included in Other Operation on the Condensed Consolidated      Statements of Income resulting in earning only a return approved under a      regulatory order. |

| · | Other      Operation and Maintenance expenses increased $14 million primarily due to      higher operation and maintenance expenses for RTD of $12 million caused by      increased barging activity and increased cost of fuel.  Nuclear      operation and maintenance expense increases were offset by lower      coal-fired plant maintenance expenses.  Scheduled outages      occurred at Cook Plant in 2008 and Rockport Plant in  2007.                                                             |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization expense decreased $22 million primarily due to reduced      depreciation rates reflecting longer estimated lives for Cook and Tanners      Creek Plants.  Depreciation rates were reduced for the Indiana      jurisdiction in June 2007 and the FERC and Michigan jurisdictions in      October 2007.  See “Indiana Depreciation Study Filing” and      “Michigan Depreciation Study Filing” sections of Note 4 in the 2007 Annual      Report. |
| · | Income      Tax Expense increased $5 million primarily due to an increase in pretax      book income and a decrease in amortization of investment tax credits      partially offset by changes in certain book/tax differences accounted for      on a flow-through basis and a decrease in state income  tax.                                                                                                                                                                                                                  |

| Six      Months Ended June 30, 2007               |   |   |   |   | $      | 59     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (2     | )      |   |   |   |   |
| FERC      Municipals and Cooperatives             |   |   | 7      |   |   |   |   |   |
| Off-system      Sales                             |   |   | 14     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | (1     | )      |   |   |   |   |
| Other                                             |   |   | 18     |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 36     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (23    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 47     |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (3     | )      |   |   |   |   |
| Other      Income                                 |   |   | 2      |   |   |   |   |   |
| Interest      Expense                             |   |   | 3      |   |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 26     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (16    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Six      Months Ended June 30, 2008               |   |   |   |   |   | $      | 105    |   |

| · | FERC      Municipals and Cooperatives margins increased $7 million due to higher      revenues under formula rate plans in 2008.                                                                                                                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Margins      from Off-system Sales increased $14 million primarily due to higher      physical sales margins partially offset by lower trading      margins.                                                                                                                                                                                                    |
| · | Other      revenues increased $18 million primarily due to increased RTD revenues for      barging services.  RTD’s related expenses which offset the RTD      revenue increase are included in Other Operation on the Condensed      Consolidated Statements of Income resulting in earning only a return      approved under regulatoryorder. |

| · | Other Operation      and Maintenance expenses increased $23 million primarily due to higher      operation and maintenance expenses for RTD of $19 million caused by      increased barging activity and increased cost of fuel.  Nuclear      operation and maintenance expense increases were offset by lower      coal-fired plant maintenance and accretion expenses.  Scheduled      outages occurred at Cook Plant in 2008 and Rockport Plant in      2007. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization expense decreased $47 million primarily due to the      reduced depreciation rates in all jurisdictions.                                                                                                                                                                                                                                                                                                                                                |
| · | Income      Tax Expense increased $16 million primarily due to an increase in pretax      book income and a decrease in amortization of investment tax credits      partially offset by changes in certain book/tax differences accounted for      on a flow-through basis.                                                                                                                                                                                                                |

----

----

|                                                         |   | Three      Months Ended |    |   | Six      Months Ended |   |
|--------------------------------------------------------------|--------|-------------------------|---------|--------|-----------------------|--------|
|                                                         |   | 2008                    |    |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                     |   |                    |    |   |                  |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $                       | 425,018 |   |                  | $      | 402,152 |   |   | $ | 856,610 |   |   | $ | 807,316 |   |
| Sales      to AEP Affiliates                                 |   |                    | 83,927  |   |                  |   | 62,962 |   |   |   | 160,439 |   |   |   | 130,391 |   |
| Other      – Affiliated                                |   |                    | 29,257  |   |                  |   | 14,571 |   |   |   | 52,476 |   |   |   | 27,238 |   |
| Other      – Nonaffiliated                             |   |                    | 4,445   |   |                  |   | 6,352 |   |   |   | 10,271 |   |   |   | 13,961 |   |
| TOTAL                                                        |   |                    | 542,647 |   |                  |   | 486,037 |   |   |   | 1,079,796 |   |   |   | 978,906 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                     |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |                    | 108,496 |   |                  |   | 90,650 |   |   |   | 209,737 |   |   |   | 186,767 |   |
| Purchased      Electricity for Resale                        |   |                    | 26,441  |   |                  |   | 19,310 |   |   |   | 47,924 |   |   |   | 37,250 |   |
| Purchased      Electricity from AEP Affiliates               |   |                    | 91,858  |   |                  |   | 75,791 |   |   |   | 184,499 |   |   |   | 153,304 |   |
| Other      Operation                                         |   |                    | 124,687 |   |                  |   | 117,311 |   |   |   | 245,053 |   |   |   | 238,044 |   |
| Maintenance                                                  |   |                    | 52,608  |   |                  |   | 45,725 |   |   |   | 103,829 |   |   |   | 88,155 |   |
| Depreciation      and Amortization                           |   |                    | 31,757  |   |                  |   | 53,890 |   |   |   | 63,479 |   |   |   | 110,197 |   |
| Taxes      Other Than Income Taxes                           |   |                    | 20,342  |   |                  |   | 19,238 |   |   |   | 40,244 |   |   |   | 37,232 |   |
| TOTAL                                                        |   |                    | 456,189 |   |                  |   | 421,915 |   |   |   | 894,765 |   |   |   | 850,949 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                        |   |                    | 86,458  |   |                  |   | 64,122 |   |   |   | 185,031 |   |   |   | 127,957 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                 |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                         |   |                    | 1,904   |   |                  |   | 707 |   |   |   | 2,733 |   |   |   | 1,295 |   |
| Allowance      for Equity Funds Used During Construction     |   |                    | 128     |   |                  |   | 727 |   |   |   | 1,008 |   |   |   | 992 |   |
| Interest      Expense                                        |   |                    | (17,146 | )      |                  |   | (19,611 | ) |   |   | (36,348 | ) |   |   | (39,432 | ) |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |                    | 71,344  |   |                  |   | 45,945 |   |   |   | 152,424 |   |   |   | 90,812 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                      |   |                    | 21,200  |   |                  |   | 15,910 |   |   |   | 47,022 |   |   |   | 31,314 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                              |   |                    | 50,144  |   |                  |   | 30,035 |   |   |   | 105,402 |   |   |   | 59,498 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                   |   |                    | 85      |   |                  |   | 85 |   |   |   | 170 |   |   |   | 170 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                     |   | $                       | 50,059  |   |                  | $      | 29,950 |   |   | $ | 105,232 |   |   | $ | 59,328 |   |

----

|                                                                                     |   | Common      Stock |   |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
| DECEMBER      31, 2006                                                                   |   | $                 | 56,584 |   |                 | $      | 861,290 |                   |   | $      | 386,616                                            |   |   | $      | (15,051 | ) |   | $ | 1,289,439 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                         |   |              |   |   |                 |   |    |                   |   |   | 327                                                |   |   |   |    |   |   |   | 327 |   |
| Common      Stock Dividends                                                              |   |              |   |   |                 |   |    |                   |   |   | (20,000                                            | )      |   |   |    |   |   |   | (20,000 | ) |
| Preferred      Stock Dividends                                                           |   |              |   |   |                 |   |    |                   |   |   | (170                                               | )      |   |   |    |   |   |   | (170 | ) |
| Gain      on Reacquired Preferred Stock                                                  |   |              |   |   |                 |   | 1       |                   |   |   |                                               |   |   |   |    |   |   |   | 1 |   |
| TOTAL                                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,269,597 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:                                           |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $649                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 1,206   |   |   |   | 1,206 |   |
| NET      INCOME                                                                          |   |              |   |   |                 |   |    |                   |   |   | 59,498                                             |   |   |   |    |   |   |   | 59,498 |   |
| TOTAL      COMPREHENSIVE INCOME                                                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 60,704 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2007                                                                       |   | $                 | 56,584 |   |                 | $      | 861,291 |                   |   | $      | 426,271                                            |   |   | $      | (13,845 | ) |   | $ | 1,330,301 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| DECEMBER      31, 2007                                                                   |   | $                 | 56,584 |   |                 | $      | 861,291 |                   |   | $      | 483,499                                            |   |   | $      | (15,675 | ) |   | $ | 1,385,699 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $753                                             |   |              |   |   |                 |   |    |                   |   |   | (1,398                                             | )      |   |   |    |   |   |   | (1,398 | ) |
| Common      Stock Dividends                                                              |   |              |   |   |                 |   |    |                   |   |   | (37,500                                            | )      |   |   |    |   |   |   | (37,500 | ) |
| Preferred      Stock Dividends                                                           |   |              |   |   |                 |   |    |                   |   |   | (170                                               | )      |   |   |    |   |   |   | (170 | ) |
| TOTAL                                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,346,631 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss), Net of Taxes:                               |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $4,618                                              |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | (8,577  | ) |   |   | (8,577 | ) |
| Amortization      of Pension and OPEB Deferred  Costs,      Net of Tax of $118 |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 220     |   |   |   | 220 |   |
| NET      INCOME                                                                          |   |              |   |   |                 |   |    |                   |   |   | 105,402                                            |   |   |   |    |   |   |   | 105,402 |   |
| TOTAL      COMPREHENSIVE INCOME                                                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 97,045 |   |
|                                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2008                                                                       |   | $                 | 56,584 |   |                 | $      | 861,291 |                   |   | $      | 549,833                                            |   |   | $      | (24,032 | ) |   | $ | 1,443,676 |   |

----

|                                                      |   | 2008   |      |   | 2007   |   |
|-----------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                       |   |   |      |   |   |   |
| Cash      and Cash Equivalents                            |   | $      | 982       |   |   | $      | 1,139 |   |
| Accounts      Receivable:                                 |   |   |      |   |   |   |   |   |
|        Customers                                     |   |   | 97,676    |   |   |   | 70,995 |   |
|        Affiliated Companies                          |   |   | 62,238    |   |   |   | 92,018 |   |
|        Accrued Unbilled Revenues                     |   |   | 13,432    |   |   |   | 16,207 |   |
|        Miscellaneous                                 |   |   | 1,080     |   |   |   | 1,335 |   |
|        Allowance for Uncollectible Accounts          |   |   | (2,776    | )      |   |   | (2,711 | )  |
| Total      Accounts Receivable                            |   |   | 171,650   |   |   |   | 177,844 |   |
| Fuel                                                      |   |   | 56,541    |   |   |   | 61,342 |   |
| Materials      and Supplies                               |   |   | 145,091   |   |   |   | 141,384 |   |
| Risk      Management Assets                               |   |   | 105,164   |   |   |   | 32,365 |   |
| Accrued      Tax Benefits                                 |   |   | 10,619    |   |   |   | 4,438 |   |
| Prepayments      and Other                                |   |   | 22,870    |   |   |   | 11,091 |   |
| TOTAL                                                     |   |   | 512,917   |   |   |   | 429,603 |   |
|                                                      |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                        |   |   |      |   |   |   |   |   |
| Electric:                                                 |   |   |      |   |   |   |   |   |
|        Production                                    |   |   | 3,507,581 |   |   |   | 3,529,524 |   |
|        Transmission                                  |   |   | 1,094,164 |   |   |   | 1,078,575 |   |
|        Distribution                                  |   |   | 1,242,898 |   |   |   | 1,196,397 |   |
| Other      (including nuclear fuel and coal mining)       |   |   | 608,205   |   |   |   | 626,390 |   |
| Construction      Work in Progress                        |   |   | 135,723   |   |   |   | 122,296 |   |
| Total                                                     |   |   | 6,588,571 |   |   |   | 6,553,182 |   |
| Accumulated      Depreciation, Depletion and Amortization |   |   | 2,988,253 |   |   |   | 2,998,416 |   |
| TOTAL      - NET                                          |   |   | 3,600,318 |   |   |   | 3,554,766 |   |
|                                                      |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                              |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                    |   |   | 263,951   |   |   |   | 246,435 |   |
| Spent      Nuclear Fuel and Decommissioning Trusts        |   |   | 1,361,927 |   |   |   | 1,346,798 |   |
| Long-term      Risk Management Assets                     |   |   | 58,516    |   |   |   | 40,227 |   |
| Deferred      Charges and Other                           |   |   | 134,693   |   |   |   | 128,623 |   |
| TOTAL                                                     |   |   | 1,819,087 |   |   |   | 1,762,083 |   |
|                                                      |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                         |   | $      | 5,932,322 |   |   | $      | 5,746,452 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 272,707   |   |   | $      | 45,064 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
| General                                                             |   |                | 107,120   |   |   |   | 184,435 |   |
| Affiliated      Companies                                           |   |                | 47,603    |   |   |   | 61,749 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 50,000    |   |   |   | 145,000 |   |
| Risk      Management Liabilities                                    |   |                | 124,092   |   |   |   | 27,271 |   |
| Customer      Deposits                                              |   |                | 27,341    |   |   |   | 26,445 |   |
| Accrued      Taxes                                                  |   |                | 73,783    |   |   |   | 60,995 |   |
| Obligations      Under Capital Leases                               |   |                | 44,388    |   |   |   | 43,382 |   |
| Other                                                               |   |                | 108,766   |   |   |   | 130,232 |   |
| TOTAL                                                               |   |                | 855,800   |   |   |   | 724,573 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 1,375,757 |   |   |   | 1,422,427 |   |
| Long-term      Risk Management Liabilities                          |   |                | 46,777    |   |   |   | 26,348 |   |
| Deferred      Income Taxes                                          |   |                | 370,242   |   |   |   | 321,716 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 767,385   |   |   |   | 789,346 |   |
| Asset      Retirement Obligations                                   |   |                | 874,941   |   |   |   | 852,646 |   |
| Deferred      Credits and Other                                     |   |                | 189,664   |   |   |   | 215,617 |   |
| TOTAL                                                               |   |                | 3,624,766 |   |   |   | 3,628,100 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 4,480,566 |   |   |   | 4,352,673 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 8,080     |   |   |   | 8,080 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – No Par Value:                             |   |                |      |   |   |   |   |   |
| Authorized      – 2,500,000 Shares                            |   |                |      |   |   |   |   |   |
| Outstanding      – 1,400,000 Shares                           |   |                | 56,584    |   |   |   | 56,584 |   |
| Paid-in      Capital                                                |   |                | 861,291   |   |   |   | 861,291 |   |
| Retained      Earnings                                              |   |                | 549,833   |   |   |   | 483,499 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (24,032   | )      |   |   | (15,675 | ) |
| TOTAL                                                               |   |                | 1,443,676 |   |   |   | 1,385,699 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 5,932,322 |   |   | $      | 5,746,452 |   |

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 105,402  |   |   | $      | 59,498 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                         |   |   | 63,479   |   |   |   | 110,197 |   |
| Deferred      Income Taxes                                                                 |   |   | 41,362   |   |   |   | (9,547 | )  |
| Amortization      (Deferral) of Incremental Nuclear Refueling Outage Expenses,      Net    |   |   | (8,576   | )      |   |   | 23,099 |   |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (1,008   | )      |   |   | (992 | )  |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | 10,862   |   |   |   | 6,903 |   |
| Amortization      of Nuclear Fuel                                                          |   |   | 45,312   |   |   |   | 33,003 |   |
| Change      in Other Noncurrent Assets                                                     |   |   | (9,103   | )      |   |   | (11,316 | )  |
| Change      in Other Noncurrent Liabilities                                                |   |   | 19,847   |   |   |   | 19,425 |   |
| Changes      in Certain Components of Working Capital:                                     |   |   |     |   |   |   |   |   |
|             Accounts Receivable, Net                         |   |   | 6,194    |   |   |   | 36,805 |   |
|             Fuel, Materials and Supplies                     |   |   | 1,094    |   |   |   | 9,911 |   |
|             Accounts Payable                                 |   |   | 449      |   |   |   | (46,049 | )  |
|             Accrued Taxes, Net                               |   |   | 6,607    |   |   |   | 72,977 |   |
|             Other Current Assets                             |   |   | (11,777  | )      |   |   | 3,373 |   |
|             Other Current Liabilities                        |   |   | (23,583  | )      |   |   | (16,388 | )  |
| Net      Cash Flows from Operating Activities                                              |   |   | 246,561  |   |   |   | 290,899 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (140,537 | )      |   |   | (124,252 | )  |
| Purchases      of Investment Securities                                                    |   |   | (276,031 | )      |   |   | (409,163 | )  |
| Sales      of Investment Securities                                                        |   |   | 241,079  |   |   |   | 370,986 |   |
| Acquisitions      of Nuclear Fuel                                                          |   |   | (98,732  | )      |   |   | (30,498 | )  |
| Proceeds      from Sales of Assets and Other                                               |   |   | 2,912    |   |   |   | 292 |   |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (271,309 | )      |   |   | (192,635 | )  |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 115,553  |   |   |   | - |   |
| Change      in Advances from Affiliates, Net                                               |   |   | 227,643  |   |   |   | (76,232 | )  |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (262,000 | )      |   |   | - |   |
| Retirement      of Cumulative Preferred Stock                                              |   |   | -        |   |   |   | (2 | )  |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (18,935  | )      |   |   | (2,622 | )  |
| Dividends      Paid on Common Stock                                                        |   |   | (37,500  | )      |   |   | (20,000 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (170     | )      |   |   | (170 | )  |
| Net      Cash Flows from (Used for) Financing Activities                                   |   |   | 24,591   |   |   |   | (99,026 | )  |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Decrease in Cash and Cash Equivalents                                             |   |   | (157     | )      |   |   | (762 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 1,139    |   |   |   | 1,369 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 982      |   |   | $      | 607 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 38,706   |   |   | $      | 32,082 |   |
| Net      Cash Paid (Received) for Income Taxes                                             |   |   | 13,827   |   |   |   | (20,001 | )  |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 2,911    |   |   |   | 1,160 |   |
| Construction      Expenditures Included in Accounts Payable at June 30,                    |   |   | 20,650   |   |   |   | 24,145 |   |
| Acquisition      of Nuclear Fuel Included in Accounts Payable at June 30,                  |   |   | -        |   |   |   | 30,867 |   |

----

|                                                      | FootnoteReference |
|-----------------------------------------------------------|-------------------|
|                                                      |              |
| Significant      Accounting Matters                       | Note      1       |
| New      Accounting Pronouncements and Extraordinary Item | Note      2       |
| Rate      Matters                                         | Note      3       |
| Commitments,      Guarantees and Contingencies            | Note      4       |
| Benefit      Plans                                        | Note      6       |
| Business      Segments                                    | Note      7       |
| Income      Taxes                                         | Note      8       |
| Financing      Activities                                 | Note      9       |

----

----

OHIO POWER COMPANY CONSOLIDATED

| Second      Quarter of 2007                       |   |   |   |   | $      | 74     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (46    | )      |   |   |   |   |
| Off-system      Sales                             |   |   | 9      |   |   |   |   |   |
| Other                                             |   |   | 2      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | (35    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (13    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 14     |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | 4      |   |   |   |   |   |
| Other      Income                                 |   |   | 2      |   |   |   |   |   |
| Interest      Expense                             |   |   | (8     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (1     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 15     |   |
|                                              |   |   |   |   |   |   |   |   |
| Second      Quarter of 2008                       |   |   |   |   |   | $      | 53     |   |

| · | Retail      Margins decreased $46 million primarily due to the    following:                                                                  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                        | A      $29 million decrease related to a coal contract amendment in the second      quarter of 2008. |
|   | ·                                                                                                                                        | A      $29 million decrease related to increased fuel, consumable, allowance and      PJM expenses. |
|   | ·                                                                                                                                        | A      $6 million decrease in residential revenue primarily due to a 27% decrease      in cooling degree days and a 30% decrease in heating degree      days. |
|   | These      decreases were partially offset by:                                                                                                |
|   | ·                                                                                                                                        | A      $14 million increase related to a net increase in rates      implemented. |
| · | Margins      from Off-system Sales increased $9 million due to higher physical sales      margins partially offset by lower trading  margins. |

| · | Other      Operation and Maintenance expenses increased $13 million primarily due      to:                                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                              | A      $10 million increase in recoverable PJM expenses. |
|   | ·                                                                                                                                                                                                                                                              | A      $10 million increase in steam plant maintenance  expenses. |
|   | ·                                                                                                                                                                                                                                                              | A      $3 million increase in recoverable customer account expenses related to      the Universal Service Fund for customers who qualify for payment      assistance. |
|   | These      increases were partially offset by:                                                                                                                                                                                                                      |
|   | ·                                                                                                                                                                                                                                                              | A      $4 million decrease in overhead line maintenance  expenses. |
|   | ·                                                                                                                                                                                                                                                              | A      $3 million decrease in removal expenses due to work performed at the      Cardinal, Mitchell and Gavin Plants in 2007. |
| · | Depreciation      and Amortization decreased $14 million primarily dueto:                                                                                                                                                                                           |
|   | ·                                                                                                                                                                                                                                                              | A      $17 million decrease in amortization as a result of completion of      amortization of regulatory assets in December 2007. |
|   | ·                                                                                                                                                                                                                                                              | A      $3 million decrease due to the amortization of IGCC pre-construction      costs, which ended in the second quarter of 2007.  The      amortization of IGCC pre-construction costs was offset by a corresponding      increase in Retail Margins in 2007. |
|   | These      decreases were partially offset by:                                                                                                                                                                                                                      |
|   | ·                                                                                                                                                                                                                                                              | A      $6 million increase in depreciation related to environmental improvements      placed in service at the Cardinal Plant in 2008 and the Mitchell Plant in      July 2007. |
| · | Taxes      Other Than Income Taxes decreased $4 million primarily due to property tax      adjustments.                                                                                                                                                             |
| · | Interest      Expense increased $8 million primarily due to a decrease in the debt      component of AFUDC as a result of Mitchell Plant and Cardinal Plant      environmental improvements placed in service and higher interest rates on      variable rate debt. |
| · | Income      Tax Expense decreased $15 million primarily due to a decrease in pretax      book income.                                                                                                                                                               |

| Six      Months Ended June 30, 2007               |   |   |   |   | $      | 154    |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (6     | )      |   |   |   |   |
| Off-system      Sales                             |   |   | 23     |   |   |   |   |   |
| Other                                             |   |   | 9      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 26     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | 10     |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | 29     |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | 1      |   |   |   |   |   |
| Other      Income                                 |   |   | 5      |   |   |   |   |   |
| Interest      Expense                             |   |   | (16    | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 29     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (18    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Six      Months Ended June 30, 2008               |   |   |   |   |   | $      | 191    |   |

| · | Retail      Margins decreased $6 million primarily due to the    following:                                                    |
|--------|--------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                         | A      $76 million decrease related to increased fuel, consumable and PJM      expenses. |
|   | ·                                                                                                                         | A      $5 million decrease in residential and commercial revenues primarily due      to a 28% decrease in cooling degree days. |
|   | These      decreases were partially offset by:                                                                                 |
|   | ·                                                                                                                         | A      $29 million increase related to coal contract amendments in      2008. |
|   | ·                                                                                                                         | A      $25 million increase related to a net increase in rates      implemented. |
|   | ·                                                                                                                         | A      $15 million increase related to increased usage by Ormet, an industrial      customer.  See “Ormet” section of Note 3. |
|   | ·                                                                                                                         | A      $7 million increase in capacity settlements under the Interconnection      Agreement related to an increase in an affiliate’speak. |
| · | Margins      from Off-system Sales increased $23 million due to higher physical sales      margins and higher trading margins. |
| · | Other      revenues increased $9 million primarily due to increased gains on sales of      emission allowances.                |

| · | Other      Operation and Maintenance expenses decreased $10 million primarily due      to:                                                                                                                                                                                                                           |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                               | A      $21 million decrease in removal expenses. |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $9 million decrease in overhead line maintenance  expenses. |
|   | These      decreases were partially offset by:                                                                                                                                                                                                                                                                       |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $7 million increase in recoverable customer account expenses related to      the Universal Service Fund for customers who qualify for payment      assistance. |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $7 million increase in recoverable PJM expenses. |
| · | Depreciation      and Amortization decreased $29 million primarily dueto:                                                                                                                                                                                                                                            |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $35 million decrease in amortization as a result of completion of      amortization of regulatory assets in December 2007. |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $6 million decrease due to the amortization of IGCC pre-construction      costs, which ended in the second quarter of 2007.  The      amortization of IGCC pre-construction costs was offset by a corresponding      increase in Retail Margins in 2007. |
|   | These      decreases were partially offset by:                                                                                                                                                                                                                                                                       |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $14 million increase in depreciation related to environmental improvements      placed in service at the Cardinal Plant in 2008 and the Mitchell Plant      during 2007. |
| · | Interest      Expense increased $16 million primarily due to a decrease in the debt      component of AFUDC as a result of Mitchell Plant and Cardinal Plant      environmental improvements placed in service, the issuance of additional      long-term debt and higher interest rates on variable rate      debt. |
| · | Income      Tax Expense increased $18 million primarily due to an increase in pretax      book income.                                                                                                                                                                                                               |

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

|                                                  |   | 2008                |     |   | 2007   |   |
|-------------------------------------------------------|--------|---------------------|----------|--------|--------|--------|
|                                                  |   | (in      thousands) |     |
| Cash      and Cash Equivalents at Beginning of Period |   | $                   | 6,666    |   |   | $      | 1,625 |   |
| Cash      Flows from (Used for):                      |   |                |     |   |   |   |   |   |
| Operating      Activities                             |   |                | 289,944  |   |   |   | 279,029 |   |
| Investing      Activities                             |   |                | (271,527 | )      |   |   | (560,262 | ) |
| Financing      Activities                             |   |                | (14,985  | )      |   |   | 282,607 |   |
| Net      Increase in Cash and Cash Equivalents        |   |                | 3,432    |   |   |   | 1,374 |   |
| Cash      and Cash Equivalents at End of Period       |   | $                   | 10,098   |   |   | $      | 2,999 |   |

|                         |   | PrincipalAmount |                | Interest |     | Due    |
|------------------------------|--------|-----------------|---------------------|----------|----------|--------|
| Type      of Debt            |   |            | Rate                |     | Date     |
|                         |   |            | (in      thousands) |     | (%)      |   |   |
| Pollution      Control Bonds |   | $               | 50,000              |     | Variable |   | 2014 |
| Pollution      Control Bonds |   |            | 50,000              |     | Variable |   | 2014 |
| Pollution      Control Bonds |   |            | 65,000              |     | Variable |   | 2036 |

|                                     |   | PrincipalAmount      Paid |                | Interest |     | Due    |
|------------------------------------------|--------|---------------------------|---------------------|----------|----------|--------|
| Type      of Debt                        |   |                      | Rate                |     | Date     |
|                                     |   |                      | (in      thousands) |     | (%)      |   |   |
| Notes      Payable – Nonaffiliated |   | $                         | 1,463               |     | 6.81     |   | 2008 |
| Notes      Payable – Nonaffiliated |   |                      | 6,000               |     | 6.27     |   | 2009 |
| Pollution      Control Bonds             |   |                      | 50,000              |     | Variable |   | 2014 |
| Pollution      Control Bonds             |   |                      | 50,000              |     | Variable |   | 2016 |
| Pollution      Control Bonds             |   |                      | 50,000              |     | Variable |   | 2022 |
| Pollution      Control Bonds             |   |                      | 35,000              |     | Variable |   | 2022 |
| Pollution      Control Bonds             |   |                      | 65,000              |     | Variable |   | 2036 |

----

|                                                             |   | MTM      Risk Management Contracts |     |   | Cash      Flow &Fair      Value Hedges |   |    | DETM      Assignment (a) |   |   |  CollateralDeposits |   |   | Total  |    |
|------------------------------------------------------------------|--------|------------------------------------|----------|--------|-------------------------------------------------|--------|---------|--------------------------|--------|--------|--------------------------|--------|--------|--------|---------|
| Current      Assets                                              |   | $                                  | 183,037  |   |                                            | $      | 1,530   |                     |   | $      | -                        |   |   | $      | (10,714 | ) |   | $ | 173,853 |   |
| Noncurrent      Assets                                           |   |                               | 93,550   |   |                                            |   | 254     |                     |   |   | -                        |   |   |   | (5,974  | ) |   |   | 87,830 |   |
| Total      MTM Derivative Contract Assets                        |   |                               | 276,587  |   |                                            |   | 1,784   |                     |   |   | -                        |   |   |   | (16,688 | ) |   |   | 261,683 |   |
|                                                             |   |                               |     |   |                                            |   |    |                     |   |   |                     |   |   |   |    |   |   |   |   |   |
| Current      Liabilities                                         |   |                               | (189,390 | )      |                                            |   | (22,777 | )                        |   |   | (2,376                   | )      |   |   | 17,082  |   |   |   | (197,461 | ) |
| Noncurrent      Liabilities                                      |   |                               | (66,264  | )      |                                            |   | (901    | )                        |   |   | (2,603                   | )      |   |   | 4,305   |   |   |   | (65,463 | ) |
| Total      MTM Derivative Contract Liabilities              |   |                               | (255,654 | )      |                                            |   | (23,678 | )                        |   |   | (4,979                   | )      |   |   | 21,387  |   |   |   | (262,924 | ) |
|                                                             |   |                               |     |   |                                            |   |    |                     |   |   |                     |   |   |   |    |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $                                  | 20,933   |   |                                            | $      | (21,894 | )                        |   | $      | (4,979                   | )      |   | $      | 4,699   |   |   | $ | (1,241 | ) |

| (a) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report. |
|-----|-----------------------------------------------------------------------------------------------------------|

| Total      MTM Risk Management Contract Net Assets at December 31,    2007                                                 |   | $      | 30,248  |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| (Gain)      Loss from Contracts Realized/Settled During the Period and Entered in a      Prior Period                      |   |   | (5,931  | )      |
| Fair      Value of New Contracts at Inception When Entered During the Period      (a)                                      |   |   | 866     |   |
| Net      Option Premiums Paid/(Received) for Unexercised or Unexpired Option      Contracts Entered During the Period |   |   | (64     | )      |
| Change      in Fair Value Due to Valuation Methodology Changes on Forward Contracts      (b)                               |   |   | 2,158   |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                             |   |   | 4,368   |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                        |   |   | (10,712 | )      |
| Total      MTM Risk Management Contract Net Assets                                                                         |   |   | 20,933  |   |
| Net      Cash Flow & Fair Value Hedge Contracts                                                                        |   |   | (21,894 | )      |
| DETM      Assignment (e)                                                                                                   |   |   | (4,979  | )      |
| Collateral      Deposits                                                                                                   |   |   | 4,699   |   |
| Ending      Net Risk Management Assets at June 30, 2008                                                                    |   | $      | (1,241  | )      |

| (a) | Reflects      fair value on long-term contracts which are typically with customers that      seek fixed pricing to limit their risk against fluctuating energy      prices.  The contract prices are valued against market curves      associated with the delivery location and deliveryterm.                                                                            |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents      the impact of applying AEP’s credit risk when measuring the fair value of      derivative liabilities according to SFAS 157.                                                                                                                                                                                                                                  |
| (c) | Market      fluctuations are attributable to various factors such as supply/demand,      weather, storage, etc.                                                                                                                                                                                                                                                                     |
| (d) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected in the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/liabilities for those subsidiaries that      operate in regulated jurisdictions. |
| (e) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report.                                                                                                                                                                                                                                                                           |

|                                                                                                                        |   | Remainder2008 |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | After2012 |   |   | Total  |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
| Level      1 (a)                                                                                                            |   | $             | (1,938 | )      |   | $      | 330    |   |   | $      | (14    | )      |   | $      | -      |   |      | $      | -      |   |   | $ | - |   |   | $ | (1,622 | ) |
| Level      2 (b)                                                                                                            |   |          | (1,281 | )      |   |   | 13,609 |   |   |   | 8,184  |   |   |   | 3,604  |   |      |   | 1,247  |   |   |   | - |   |   |   | 25,363 |   |
| Level      3 (c)                                                                                                            |   |          | (6,774 | )      |   |   | (1,096 | )      |   |   | (2,719 | )      |   |   | (1,752 | )      |      |   | (904   | )      |   |   | - |   |   |   | (13,245 | ) |
| Total                                                                                                                       |   |          | (9,993 | )      |   |   | 12,843 |   |   |   | 5,451  |   |   |   | 1,852  |   |      |   | 343    |   |   |   | - |   |   |   | 10,496 |   |
| Dedesignated      Risk     Management Contracts (d)                                                |   |          | 1,666  |   |   |   | 3,220  |   |   |   | 3,194  |   |   |   | 1,244  |   |      |   | 1,113  |   |   |   | - |   |   |   | 10,437 |   |
| Total      MTM Risk     Management Contract      Net      Assets (Liabilities) |   | $             | (8,327 | )      |   | $      | 16,063 |   |   | $      | 8,645  |   |   | $      | 3,096  |   |      | $      | 1,456  |   |   | $ | - |   |   | $ | 20,933 |   |

| (a) | Level      1 inputs are quoted prices (unadjusted) in active markets for identical      assets or liabilities that the reporting entity has the ability to access      at the measurement date.  Level 1 inputs primarily consist of      exchange traded contracts that exhibit sufficient frequency and volume to      provide pricing information on an ongoing basis.                                                                                                                                                                                                                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Level      2 inputs are inputs other than quoted prices included within Level 1 that      are observable for the asset or liability, either directly or      indirectly.  If the asset or liability has a specified      (contractual) term, a Level 2 input must be observable for substantially      the full term of the asset or liability.  Level 2 inputs      primarily consist of OTC broker quotes in moderately active or less active      markets, exchange traded contracts where there was not sufficient market      activity to warrant inclusion in Level 1, and OTC broker quotes that are      corroborated by the same or similar transactions that have occurred in the      market. |
| (c) | Level      3 inputs are unobservable inputs for the asset or      liability.  Unobservable inputs shall be used to measure fair      value to the extent that the observable inputs are not available, thereby      allowing for situations in which there is little, if any, market activity      for the asset or liability at the measurement date.  Level 3      inputs primarily consist of unobservable market data or are valued based      on models and/or assumptions.                                                                                                                                                                                                                         |
| (d) | Dedesignated      Risk Management Contracts are contracts that were originally MTM but were      subsequently elected as normal under SFAS 133.  At the time of      the normal election the MTM value was frozen and no longer fair      valued.  This will be amortized into Revenues over the remaining      life of the contract.                                                                                                                                                                                                                                                                                                                                                                    |

|                                                               |   | Power  |    |   | Interest      Rate |   |   | ForeignCurrency |   |   | Total |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------------------|--------|--------|-----------------|--------|--------|-------|--------|
| Beginning      Balance in AOCI December 31, 2007                   |   | $      | (756    | )      |               | $      | 2,167  |            |   | $      | (254  | )      |   | $ | 1,157 |   |
| Changes      in Fair Value                                         |   |   | (11,404 | )      |               |   | (899   | )               |   |   | 205   |   |   |   | (12,098 | ) |
| Reclassifications      from AOCI for Cash Flow Hedges      Settled |   |   | 101     |   |               |   | (382   | )               |   |   | (123  | )      |   |   | (404 | ) |
| Ending      Balance in AOCI June 30, 2008                          |   | $      | (12,059 | )      |               | $      | 886    |            |   | $      | (172  | )      |   | $ | (11,345 | ) |

| Six      Months Ended |   |   | Twelve      Months Ended |
|-----------------------|--------|--------|--------------------------|
| June      30, 2008    |   |   | December      31, 2007   |
| (in      thousands)   |   |   | (in      thousands)      |
| End                   |   | High   |                     | Average |   | Low |   |   | End |   | High |   | Average |   | Low |
| $585                  |   | $1,048 |                     | $385 |   | $132 |   |   | $325 |   | $2,054 |   | $490 |   | $90 |

----

|                                                         |   | Three      Months Ended |    |   | Six      Months Ended |   |
|--------------------------------------------------------------|--------|-------------------------|---------|--------|-----------------------|--------|
|                                                         |   | 2008                    |    |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                     |   |                    |    |   |                  |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $                       | 515,884 |   |                  | $      | 480,445 |   |   | $ | 1,071,362 |   |   | $ | 972,979 |   |
| Sales      to AEP Affiliates                                 |   |                    | 256,399 |   |                  |   | 180,205 |   |   |   | 493,247 |   |   |   | 359,099 |   |
| Other      - Affiliated                                      |   |                    | 6,487   |   |                  |   | 6,817 |   |   |   | 11,786 |   |   |   | 10,855 |   |
| Other      - Nonaffiliated                                   |   |                    | 3,591   |   |                  |   | 3,466 |   |   |   | 8,154 |   |   |   | 7,441 |   |
| TOTAL                                                        |   |                    | 782,361 |   |                  |   | 670,933 |   |   |   | 1,584,549 |   |   |   | 1,350,374 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                     |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |                    | 330,190 |   |                  |   | 201,338 |   |   |   | 569,124 |   |   |   | 399,631 |   |
| Purchased      Electricity for Resale                        |   |                    | 39,155  |   |                  |   | 27,868 |   |   |   | 73,732 |   |   |   | 52,722 |   |
| Purchased      Electricity from AEP Affiliates               |   |                    | 35,157  |   |                  |   | 28,745 |   |   |   | 67,673 |   |   |   | 49,711 |   |
| Other      Operation                                         |   |                    | 91,959  |   |                  |   | 86,972 |   |   |   | 181,841 |   |   |   | 189,959 |   |
| Maintenance                                                  |   |                    | 59,218  |   |                  |   | 50,617 |   |   |   | 107,915 |   |   |   | 109,765 |   |
| Depreciation      and Amortization                           |   |                    | 71,173  |   |                  |   | 84,779 |   |   |   | 139,739 |   |   |   | 169,055 |   |
| Taxes      Other Than Income Taxes                           |   |                    | 45,937  |   |                  |   | 50,320 |   |   |   | 97,515 |   |   |   | 98,705 |   |
| TOTAL                                                        |   |                    | 672,789 |   |                  |   | 530,639 |   |   |   | 1,237,539 |   |   |   | 1,069,548 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                        |   |                    | 109,572 |   |                  |   | 140,294 |   |   |   | 347,010 |   |   |   | 280,826 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                 |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                         |   |                    | 1,750   |   |                  |   | 472 |   |   |   | 4,658 |   |   |   | 884 |   |
| Carrying      Costs Income                                   |   |                    | 3,994   |   |                  |   | 3,594 |   |   |   | 8,223 |   |   |   | 7,135 |   |
| Allowance      for Equity Funds Used During Construction     |   |                    | 702     |   |                  |   | 446 |   |   |   | 1,246 |   |   |   | 1,017 |   |
| Interest      Expense                                        |   |                    | (41,853 | )      |                  |   | (33,734 | ) |   |   | (76,235 | ) |   |   | (59,665 | ) |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |                    | 74,165  |   |                  |   | 111,072 |   |   |   | 284,902 |   |   |   | 230,197 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                      |   |                    | 21,271  |   |                  |   | 36,732 |   |   |   | 94,181 |   |   |   | 76,596 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                              |   |                    | 52,894  |   |                  |   | 74,340 |   |   |   | 190,721 |   |   |   | 153,601 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                   |   |                    | 183     |   |                  |   | 183 |   |   |   | 366 |   |   |   | 366 |   |
|                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                     |   | $                       | 52,711  |   |                  | $      | 74,157 |   |   | $ | 190,355 |   |   | $ | 153,235 |   |

----

|                                                                                     |   | Common      Stock |    |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
| DECEMBER      31, 2006                                                                   |   | $                 | 321,201 |   |                 | $      | 536,639 |                   |   | $      | 1,207,265                                          |   |   | $      | (56,763 | ) |   | $ | 2,008,342 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                         |   |              |    |   |                 |   |    |                   |   |   | (5,380                                             | )      |   |   |    |   |   |   | (5,380 | ) |
| Preferred      Stock Dividends                                                           |   |              |    |   |                 |   |    |                   |   |   | (366                                               | )      |   |   |    |   |   |   | (366 | ) |
| TOTAL                                                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 2,002,596 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:                                           |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $523                                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 971     |   |   |   | 971 |   |
| NET      INCOME                                                                          |   |              |    |   |                 |   |    |                   |   |   | 153,601                                            |   |   |   |    |   |   |   | 153,601 |   |
| TOTAL      COMPREHENSIVE INCOME                                                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 154,572 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2007                                                                       |   | $                 | 321,201 |   |                 | $      | 536,639 |                   |   | $      | 1,355,120                                          |   |   | $      | (55,792 | ) |   | $ | 2,157,168 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| DECEMBER      31, 2007                                                                   |   | $                 | 321,201 |   |                 | $      | 536,640 |                   |   | $      | 1,469,717                                          |   |   | $      | (36,541 | ) |   | $ | 2,291,017 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $1,004                                           |   |              |    |   |                 |   |    |                   |   |   | (1,864                                             | )      |   |   |    |   |   |   | (1,864 | ) |
| SFAS      157 Adoption, Net of Tax of $152                                               |   |              |    |   |                 |   |    |                   |   |   | (282                                               | )      |   |   |    |   |   |   | (282 | ) |
| Preferred      Stock Dividends                                                           |   |              |    |   |                 |   |    |                   |   |   | (366                                               | )      |   |   |    |   |   |   | (366 | ) |
| TOTAL                                                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 2,288,505 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss), Net of Taxes:                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $6,732                                              |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | (12,502 | ) |   |   | (12,502 | ) |
| Amortization      of Pension and OPEB Deferred  Costs,      Net of Tax of $758 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 1,406   |   |   |   | 1,406 |   |
| NET      INCOME                                                                          |   |              |    |   |                 |   |    |                   |   |   | 190,721                                            |   |   |   |    |   |   |   | 190,721 |   |
| TOTAL      COMPREHENSIVE INCOME                                                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 179,625 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2008                                                                       |   | $                 | 321,201 |   |                 | $      | 536,640 |                   |   | $      | 1,657,926                                          |   |   | $      | (47,637 | ) |   | $ | 2,468,130 |   |

----

|                                                   |   | 2008   |      |   | 2007   |   |
|--------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                    |   |   |      |   |   |   |
| Cash      and Cash Equivalents                         |   | $      | 10,098    |   |   | $      | 6,666 |   |
| Accounts      Receivable:                              |   |   |      |   |   |   |   |   |
|         Customers                            |   |   | 117,920   |   |   |   | 104,783 |   |
|         Affiliated Companies                 |   |   | 125,613   |   |   |   | 119,560 |   |
|         Accrued Unbilled Revenues            |   |   | 26,903    |   |   |   | 26,819 |   |
|         Miscellaneous                        |   |   | 20,689    |   |   |   | 1,578 |   |
|         Allowance for Uncollectible Accounts |   |   | (3,502    | )      |   |   | (3,396 | )  |
|        Total Accounts Receivable                  |   |   | 287,623   |   |   |   | 249,344 |   |
| Fuel                                                   |   |   | 125,844   |   |   |   | 92,874 |   |
| Materials      and Supplies                            |   |   | 116,097   |   |   |   | 108,447 |   |
| Risk      Management Assets                            |   |   | 173,853   |   |   |   | 44,236 |   |
| Prepayments      and Other                             |   |   | 33,256    |   |   |   | 18,300 |   |
| TOTAL                                                  |   |   | 746,771   |   |   |   | 519,867 |   |
|                                                   |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                     |   |   |      |   |   |   |   |   |
| Electric:                                              |   |   |      |   |   |   |   |   |
|         Production                           |   |   | 5,906,996 |   |   |   | 5,641,537 |   |
|         Transmission                         |   |   | 1,092,630 |   |   |   | 1,068,387 |   |
|         Distribution                         |   |   | 1,424,744 |   |   |   | 1,394,988 |   |
| Other                                                  |   |   | 371,427   |   |   |   | 318,805 |   |
| Construction      Work in Progress                     |   |   | 586,892   |   |   |   | 716,640 |   |
| Total                                                  |   |   | 9,382,689 |   |   |   | 9,140,357 |   |
| Accumulated      Depreciation and Amortization         |   |   | 3,032,379 |   |   |   | 2,967,285 |   |
| TOTAL      - NET                                       |   |   | 6,350,310 |   |   |   | 6,173,072 |   |
|                                                   |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                           |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                 |   |   | 327,764   |   |   |   | 323,105 |   |
| Long-term      Risk Management Assets                  |   |   | 87,830    |   |   |   | 49,586 |   |
| Deferred      Charges and Other                        |   |   | 230,925   |   |   |   | 272,799 |   |
| TOTAL                                                  |   |   | 646,519   |   |   |   | 645,490 |   |
|                                                   |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                      |   | $      | 7,743,600 |   |   | $      | 7,338,429 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 173,833   |   |   | $      | 101,548 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
|         General                                           |   |                | 209,084   |   |   |   | 141,196 |   |
|         Affiliated Companies                              |   |                | 104,468   |   |   |   | 137,389 |   |
| Short-term      Debt – Nonaffiliated                          |   |                | -         |   |   |   | 701 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 125,225   |   |   |   | 55,188 |   |
| Risk      Management Liabilities                                    |   |                | 197,461   |   |   |   | 40,548 |   |
| Customer      Deposits                                              |   |                | 32,031    |   |   |   | 30,613 |   |
| Accrued      Taxes                                                  |   |                | 180,760   |   |   |   | 185,011 |   |
| Accrued      Interest                                               |   |                | 39,687    |   |   |   | 41,880 |   |
| Other                                                               |   |                | 143,465   |   |   |   | 149,658 |   |
| TOTAL                                                               |   |                | 1,206,014 |   |   |   | 883,732 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 2,432,266 |   |   |   | 2,594,410 |   |
| Long-term      Debt – Affiliated                              |   |                | 200,000   |   |   |   | 200,000 |   |
| Long-term      Risk Management Liabilities                          |   |                | 65,463    |   |   |   | 32,194 |   |
| Deferred      Income Taxes                                          |   |                | 926,957   |   |   |   | 914,170 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 154,258   |   |   |   | 160,721 |   |
| Deferred      Credits and Other                                     |   |                | 256,438   |   |   |   | 229,635 |   |
| TOTAL                                                               |   |                | 4,035,382 |   |   |   | 4,131,130 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 5,241,396 |   |   |   | 5,014,862 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Minority      Interest                                              |   |                | 17,447    |   |   |   | 15,923 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 16,627    |   |   |   | 16,627 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – No Par Value:                             |   |                |      |   |   |   |   |   |
|         Authorized – 40,000,000 Shares              |   |                |      |   |   |   |   |   |
|         Outstanding – 27,952,473 Shares             |   |                | 321,201   |   |   |   | 321,201 |   |
| Paid-in      Capital                                                |   |                | 536,640   |   |   |   | 536,640 |   |
| Retained      Earnings                                              |   |                | 1,657,926 |   |   |   | 1,469,717 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (47,637   | )      |   |   | (36,541 | )  |
| TOTAL                                                               |   |                | 2,468,130 |   |   |   | 2,291,017 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 7,743,600 |   |   | $      | 7,338,429 |   |

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 190,721  |   |   | $      | 153,601 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                         |   |   | 139,739  |   |   |   | 169,055 |   |
| Deferred      Income Taxes                                                                 |   |   | 27,984   |   |   |   | 550 |   |
| Carrying      Costs Income                                                                 |   |   | (8,223   | )      |   |   | (7,135 | )  |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (1,246   | )      |   |   | (1,017 | )  |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | 2,018    |   |   |   | 2,876 |   |
| Deferred      Property Taxes                                                               |   |   | 42,089   |   |   |   | 34,629 |   |
| Change      in Other Noncurrent Assets                                                     |   |   | (59,294  | )      |   |   | (17,321 | )  |
| Change      in Other Noncurrent Liabilities                                                |   |   | 13,265   |   |   |   | 272 |   |
| Changes      in Certain Components of Working Capital:                                     |   |   |     |   |   |   |   |   |
|           Accounts Receivable, Net                                     |   |   | (38,279  | )      |   |   | (18,273 | )  |
|           Fuel, Materials and Supplies                                 |   |   | (40,620  | )      |   |   | (42,452 | )  |
|           Accounts Payable                                             |   |   | 47,035   |   |   |   | (46,758 | )  |
|           Accrued Taxes, Net                                           |   |   | (5,865   | )      |   |   | 46,587 |   |
|           Other Current Assets                                         |   |   | (9,620   | )      |   |   | 162 |   |
|           Other Current Liabilities                                    |   |   | (9,760   | )      |   |   | 4,253 |   |
| Net      Cash Flows from Operating Activities                                              |   |   | 289,944  |   |   |   | 279,029 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (276,911 | )      |   |   | (565,832 | )  |
| Proceeds      from Sales of Assets                                                         |   |   | 5,889    |   |   |   | 5,594 |   |
| Other                                                                                      |   |   | (505     | )      |   |   | (24 | )  |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (271,527 | )      |   |   | (560,262 | )  |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 164,474  |   |   |   | 461,324 |   |
| Change      in Short-term Debt, Net – Nonaffiliated                                  |   |   | (701     | )      |   |   | (1,203 | )  |
| Change      in Advances from Affiliates, Net                                               |   |   | 72,285   |   |   |   | (164,698 | )  |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (257,463 | )      |   |   | (8,927 | )  |
| Retirement      of Cumulative Preferred Stock                                              |   |   | -        |   |   |   | (2 | )  |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (3,214   | )      |   |   | (3,521 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (366     | )      |   |   | (366 | )  |
| Other                                                                                      |   |   | 10,000   |   |   |   | - |   |
| Net      Cash Flows from (Used for) Financing Activities                                   |   |   | (14,985  | )      |   |   | 282,607 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Increase in Cash and Cash Equivalents                                             |   |   | 3,432    |   |   |   | 1,374 |   |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 6,666    |   |   |   | 1,625 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 10,098   |   |   | $      | 2,999 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 72,685   |   |   | $      | 51,991 |   |
| Net      Cash Paid (Received) for Income Taxes                                             |   |   | 32,569   |   |   |   | (9,193 | )  |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 1,673    |   |   |   | 1,036 |   |
| Construction      Expenditures Included in Accounts Payable at June 30,                    |   |   | 27,610   |   |   |   | 65,936 |   |

----

|                                                      | FootnoteReference |
|-----------------------------------------------------------|-------------------|
|                                                      |              |
| Significant      Accounting Matters                       | Note      1       |
| New      Accounting Pronouncements and Extraordinary Item | Note      2       |
| Rate      Matters                                         | Note      3       |
| Commitments,      Guarantees and Contingencies            | Note      4       |
| Benefit      Plans                                        | Note      6       |
| Business      Segments                                    | Note      7       |
| Income      Taxes                                         | Note      8       |
| Financing      Activities                                 | Note      9       |

----

----

PUBLIC SERVICE COMPANY OF OKLAHOMA

| Second      Quarter of 2007                       |   |   |   |   | $      | 6      |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins          |   |   | 8      |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 3      |   |   |   |   |   |
| Other                                             |   |   | 1      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 12     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (6     | )      |   |   |   |   |
| Deferral      of Ice Storm Costs                  |   |   | (8     | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (2     | )      |   |   |   |   |
| Other      Income                                 |   |   | 3      |   |   |   |   |   |
| Interest      Expense                             |   |   | (2     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (15    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 1      |   |
|                                              |   |   |   |   |   |   |   |   |
| Second      Quarter of 2008                       |   |   |   |   |   | $      | 4      |   |

| · | Retail      and Off-system Sales Margins increased $8 million primarily due      to:           |
|--------|------------------------------------------------------------------------------------------------|
|   | ·                                                                                         | A      $7 million increase in retail sales margins mainly due to base rate      adjustments and a slight increase in KWH sales. |
|   | ·                                                                                         | A      $1 million net increase in off-system margins retained primarily due to      higher physical sales margins, partially offset by lower trading      margins. |
| · | Transmission      Revenues increased $3 million primarily due to higher rates within      SPP. |

| · | Other      Operation and Maintenance expenses increased $6 million primarily due      to:                                                                                                                                                                                  |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                     | A      $7 million increase due to a credit in 2007 to adjust the expenses of the      January 2007 ice storm. |
|   | ·                                                                                                                                                                                                                                                                     | A      $4 million increase in transmission expense primarily due to an increase      in transmission services from other utilities. |
|   | ·                                                                                                                                                                                                                                                                     | A      $3 million increase in administrative and general expenses, primarily      associated with maintenance, outside services and employee-related      expenses. |
|   | ·                                                                                                                                                                                                                                                                     | A      $2 million increase in expense for the June 2008storms. |
|   | ·                                                                                                                                                                                                                                                                     | A      $2 million increase due to amortization of the deferred ice storm      costs. |
|   | These      increases were partially offset by:                                                                                                                                                                                                                             |
|   | ·                                                                                                                                                                                                                                                                     | A      $10 million decrease primarily to true-up actual December ice storm costs      to the 2007 estimated accrual and is offset in the Deferral      below.  See “Deferral of Ice Storm Costs”  below. |
| · | Deferral      of Ice Storm Costs increased $8 million due to 2008 costs and true-up      entries as discussed above.  See “Oklahoma 2007 Ice Storms”      section of Note 3.                                                                         |
| · | Depreciation      and Amortization expenses increased $2 million primarily due to a $3      million increase in the amortization of the Lawton Settlement regulatory      asset offset by a $1 million decrease in depreciation primarily resulting      from lower rates. |
| · | Other      Income increased $3 million primarily due to an increase in carrying      charges related to the new peaking units and to deferred ice storms      costs.  See “Oklahoma 2007 Ice Storms” section of Note      3.                         |
| · | Interest      Expense increased $2 million primarily due to a $4 million increase in      interest expense from long-term borrowings offset by a $1 million decrease      in interest expense from short-termborrowings.                                                   |

| Six      Months Ended June 30, 2007               |   |   |   |   | $      | (14    | )      |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins          |   |   | 22     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 4      |   |   |   |   |   |
| Other                                             |   |   | 11     |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 37     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (13    | )      |   |   |   |   |
| Deferral      of Ice Storm Costs                  |   |   | 72     |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | (5     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (1     | )      |   |   |   |   |
| Other      Income                                 |   |   | 6      |   |   |   |   |   |
| Interest      Expense                             |   |   | (5     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 54     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (35    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Six      Months Ended June 30, 2008               |   |   |   |   |   | $      | 42     |   |

| · | Retail      and Off-system Sales Margins increased $22 million primarily due to an      increase in retail sales margins resulting from base rate adjustments and      a slight increase in KWH sales.                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission      Revenues increased $4 million primarily due to higher rates within      SPP.                                                                                                                                      |
| · | Other      revenues increased $11 million primarily due to a $10 million increase      related to the recognition of the sale of SO2      allowances.  See “Oklahoma 2007 Ice Storms” section of Note      3. |

| · | Other      Operation and Maintenance expenses increased $13 million primarily due      to:                                                                                                                                                                                                                    |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                        | A      $10 million increase in production expenses primarily due to a write-off      of pre-construction costs related to the canceled Red Rock Generating      Facility.  See “Red Rock Generating Facility” section of Note      3. |
|   | ·                                                                                                                                                                                                                                                                                                        | A      $9 million increase due to amortization of the deferred 2007 ice storm      costs. |
|   | ·                                                                                                                                                                                                                                                                                                        | An      $8 million increase in transmission expense primarily due to an increase      in transmission services from other utilities. |
|   | ·                                                                                                                                                                                                                                                                                                        | A      $4 million increase in administrative and general expenses, primarily      associated with maintenance, outside services and employee-related      expenses. |
|   | ·                                                                                                                                                                                                                                                                                                        | A      $2 million increase in expense for the June 2008storms. |
|   | ·                                                                                                                                                                                                                                                                                                        | A      $1 million increase in distribution maintenance expense due to increased      vegetation management activities. |
|   | These      increases were partially offset by:                                                                                                                                                                                                                                                                |
|   | ·                                                                                                                                                                                                                                                                                                        | A      $14 million decrease for the costs of the January 2007 ice      storm. |
|   | ·                                                                                                                                                                                                                                                                                                        | A      $10 million decrease primarily to true-up actual December ice storm costs      to the 2007 estimated accrual. |
| · | Deferral      of Ice Storm Costs in 2008 of $72 million results from an OCC order      approving recovery of ice storm costs related to ice storms in January and      December 2007.  See “Oklahoma 2007 Ice Storms” section of Note      3.                                           |
| · | Depreciation      and Amortization expenses increased $5 million primarily due to a $7      million increase related to the amortization of the Lawton Settlement      regulatory asset offset by a $2 million decrease in depreciation primarily      resulting from lower rates.                            |
| · | Other      Income increased $6 million primarily due to a $3 million increase in      carrying charges related to the new peaking units and to deferred ice      storms costs (see “Oklahoma 2007 Ice Storms” section of Note 3) and a $1      million increase in the equity component of AFUDC. |
| · | Interest      Expense increased $5 million primarily due to an $8 million increase in      interest expense from long-term borrowings offset by a $2 million decrease      in interest expense from short-term borrowings.                                                                                    |
| · | Income      Tax Expense increased $35 million primarily due to an increase in pretax      book income.                                                                                                                                                                                                        |

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

|                                                      |   | 2008                |    |   | 2007   |   |
|-----------------------------------------------------------|--------|---------------------|---------|--------|--------|--------|
|                                                      |   | (in      thousands) |    |
| Cash      and Cash Equivalents at Beginning of Period     |   | $                   | 1,370   |   |   | $      | 1,651 |   |
| Cash      Flows from (Used for):                          |   |                |    |   |   |   |   |   |
| Operating      Activities                                 |   |                | (6,309  | )      |   |   | (30,543 | ) |
| Investing      Activities                                 |   |                | (99,942 | )      |   |   | (161,760 | ) |
| Financing      Activities                                 |   |                | 106,405 |   |   |   | 191,560 |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents |   |                | 154     |   |   |   | (743 | ) |
| Cash      and Cash Equivalents at End of Period           |   | $                   | 1,524   |   |   | $      | 908 |   |

| Type      of Debt            |   |  PrincipalAmount      Paid |   | Interest      Rate |     | Due      Date |
|------------------------------|--------|---------------------------------|--------|--------------------|----------|---------------|
|                         |   | (in      thousands)             |   | (%)                |     |          |
| Pollution      Control Bonds |   | $                               | 33,700 |               | Variable |          | 2014 |

| Contractual      Cash Obligations                                         |   | Less      Than 1      year |   |   | 2-3      years |   |   | 4-5      years |   |   | After5      years |   |   | Total  |    |
|---------------------------------------------------------------------------|--------|----------------------------|--------|--------|----------------|--------|--------|----------------|--------|--------|-------------------|--------|--------|--------|---------|
| Interest      on Fixed Rate Portion of Long-term  Debt      (a) |   | $                          | 51.7   |   |           | $      | 99.5   |           |   | $      | 78.5              |   |   | $      | 695.2   |   |   | $ | 924.9 |   |
| Fixed      Rate Portion of Long-term Debt (b)                             |   |                       | -      |   |           |   | 200.0  |           |   |   | 75.0              |   |   |   | 612.7   |   |   |   | 887.7 |   |
| Variable      Rate Portion of Long-term Debt (c)                          |   |                       | -      |   |           |   | -      |           |   |   | -                 |   |   |   | 33.7    |   |   |   | 33.7 |   |
| Capital      Lease Obligations (d)                                        |   |                       | 1.7    |   |           |   | 2.2    |           |   |   | 0.5               |   |   |   | -       |   |   |   | 4.4 |   |
| Noncancelable      Operating Leases (d)                                   |   |                       | 6.7    |   |           |   | 10.7   |           |   |   | 5.7               |   |   |   | 5.6     |   |   |   | 28.7 |   |
| Fuel      Purchase Contracts (e)                                          |   |                       | 295.6  |   |           |   | 130.1  |           |   |   | 85.3              |   |   |   | -       |   |   |   | 511.0 |   |
| Energy      and Capacity Purchase Contracts (f)                           |   |                       | 6.9    |   |           |   | 6.4    |           |   |   | -                 |   |   |   | -       |   |   |   | 13.3 |   |
| Construction      Contracts for Capital Assets (g)                        |   |                       | 55.2   |   |           |   | 128.4  |           |   |   | 143.5             |   |   |   | 10.0    |   |   |   | 337.1 |   |
| Total                                                                     |   | $                          | 417.8  |   |           | $      | 577.3  |           |   | $      | 388.5             |   |   | $      | 1,357.2 |   |   | $ | 2,740.8 |   |

| (a) | Interest      payments are estimated based on final maturity dates of debt securities      outstanding at December 31, 2007 and do not reflect anticipated future      refinancing, early redemptions or debt issuances. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | See      Note 15 of the 2007 Annual Report.  Represents principal only      excluding interest.                                                                                                                |
| (c) | See      Note 15 of the 2007 Annual Report.  Represents principal only      excluding interest.  Variable rate debt had a 3.75% interest      rate at December 31, 2007.                             |
| (d) | See      Note 14 of the 2007 Annual Report.                                                                                                                                                                              |
| (e) | Represents      contractual obligations to purchase coal, natural gas and other consumable      as fuel for electric generation along with related transportation of the      fuel.                                      |
| (f) | Represents      contractual cash flows of energy and capacity purchase      contracts.                                                                                                                                   |
| (g) | Represents      only capital assets that are contractual  obligations.                                                                                                                                                   |

----

|                                                             |   |          |    |   |       |   |   |       |   |   |   |   |
|------------------------------------------------------------------|--------|---------------|---------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
|                                                             |   | MTM      Risk |    |   | DETM       |   |   |       |   |   |   |   |
|                                                             |   | Management    |    |   | Assignment |   |   | Collateral |   |   |   |   |
|                                                             |   | Contracts     |    |   | (a)        |   |   | Deposits   |   |   | Total  |   |
| Current      Assets                                              |   | $             | 88,788  |   |       | $      | -      |       |   | $      | (1,705 | )      |   | $ | 87,083 |   |
| Noncurrent      Assets                                           |   |          | 12,321  |   |       |   | -      |       |   |   | (39    | )      |   |   | 12,282 |   |
| Total      MTM Derivative Contract Assets                        |   |          | 101,109 |   |       |   | -      |       |   |   | (1,744 | )      |   |   | 99,365 |   |
|                                                             |   |          |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Current      Liabilities                                         |   |          | (86,621 | )      |       |   | (93    | )          |   |   | 2,249  |   |   |   | (84,465 | ) |
| Noncurrent      Liabilities                                      |   |          | (11,098 | )      |       |   | (102   | )          |   |   | 852    |   |   |   | (10,348 | ) |
| Total      MTM Derivative Contract Liabilities              |   |          | (97,719 | )      |       |   | (195   | )          |   |   | 3,101  |   |   |   | (94,813 | ) |
|                                                             |   |          |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $             | 3,390   |   |       | $      | (195   | )          |   | $      | 1,357  |   |   | $ | 4,552 |   |

| (a) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report. |
|-----|-----------------------------------------------------------------------------------------------------------|

| Total      MTM Risk Management Contract Net Assets at December 31,    2007                                                 |   | $      | 6,981  |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)      Loss from Contracts Realized/Settled During the Period and Entered in a      Prior Period                      |   |   | (4,066 | )      |
| Fair      Value of New Contracts at Inception When Entered During the Period      (a)                                      |   |   | -      |   |
| Net      Option Premiums Paid/(Received) for Unexercised or Unexpired Option      Contracts Entered During the Period |   |   | -      |   |
| Change      in Fair Value Due to Valuation Methodology Changes on Forward Contracts      (b)                               |   |   | 32     |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                             |   |   | (146   | )      |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                        |   |   | 589    |   |
| Total      MTM Risk Management Contract Net Assets                                                                         |   |   | 3,390  |   |
| DETM      Assignment (e)                                                                                                   |   |   | (195   | )      |
| Collateral      Deposits                                                                                                   |   |   | 1,357  |   |
| Ending      Net Risk Management Assets at June 30, 2008                                                                    |   | $      | 4,552  |   |

| (a) | Reflects      fair value on long-term contracts which are typically with customers that      seek fixed pricing to limit their risk against fluctuating energy      prices.  The contract prices are valued against market curves      associated with the delivery location and deliveryterm.                                                                            |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents      the impact of applying AEP’s credit risk when measuring the fair value of      derivative liabilities according to SFAS 157.                                                                                                                                                                                                                                  |
| (c) | Market      fluctuations are attributable to various factors such as supply/demand,      weather, storage, etc.                                                                                                                                                                                                                                                                     |
| (d) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected in the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/liabilities for those subsidiaries that      operate in regulated jurisdictions. |
| (e) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report.                                                                                                                                                                                                                                                                           |

|             |   | Remainder2008 |   |   | 2009   |   |   | 2010   |   |   | 2011 |   |   | 2012   |   |   | After2012 |   |   | Total  |   |
|------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
| Level      1 (a) |   | $             | 1,167  |   |   | $      | (235   | )      |   | $      | -    |   |   | $      | -      |   |      | $      | -      |   |   | $ | - |   |   | $ | 932 |   |
| Level      2 (b) |   |          | 434    |   |   |   | 2,189  |   |   |   | (128 | )      |   |   | (14    | )      |      |   | -      |   |   |   | - |   |   |   | 2,481 |   |
| Level      3 (c) |   |          | (24    | )      |   |   | -      |   |   |   | 1    |   |   |   | -      |   |      |   | -      |   |   |   | - |   |   |   | (23 | ) |
| Total            |   | $             | 1,577  |   |   | $      | 1,954  |   |   | $      | (127 | )      |   | $      | (14    | )      |      | $      | -      |   |   | $ | - |   |   | $ | 3,390 |   |

| (a) | Level      1 inputs are quoted prices (unadjusted) in active markets for identical      assets or liabilities that the reporting entity has the ability to access      at the measurement date.  Level 1 inputs primarily consist of      exchange traded contracts that exhibit sufficient frequency and volume to      provide pricing information on an ongoing basis.                                                                                                                                                                                                                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Level      2 inputs are inputs other than quoted prices included within Level 1 that      are observable for the asset or liability, either directly or      indirectly.  If the asset or liability has a specified      (contractual) term, a Level 2 input must be observable for substantially      the full term of the asset or liability.  Level 2 inputs      primarily consist of OTC broker quotes in moderately active or less active      markets, exchange traded contracts where there was not sufficient market      activity to warrant inclusion in Level 1, and OTC broker quotes that are      corroborated by the same or similar transactions that have occurred in the      market. |
| (c) | Level      3 inputs are unobservable inputs for the asset or      liability.  Unobservable inputs shall be used to measure fair      value to the extent that the observable inputs are not available, thereby      allowing for situations in which there is little, if any, market activity      for the asset or liability at the measurement date.  Level 3      inputs primarily consist of unobservable market data or are valued based      on models and/or assumptions.                                                                                                                                                                                                                         |

|                                                                    |   | Interest      Rate |   |
|-------------------------------------------------------------------------|--------|--------------------|--------|
| Beginning      Balance in AOCI December 31, 2007                        |   | $                  | (887   | ) |
| Changes      in Fair Value                                              |   |               | -      |   |
| Reclassifications      from AOCI for Cash Flow Hedges      Settled |   |               | 91     |   |
| Ending      Balance in AOCI June 30, 2008                               |   | $                  | (796   | ) |

| Six      Months Ended June 30, 2008 |   |   | Twelve      Months Ended December 31, 2007 |
|-------------------------------------|--------|--------|--------------------------------------------|
| (in      thousands)                 |   |   | (in      thousands)                        |
| End                                 |   | High   |                                       | Average |   | Low |   |   | End |   | High |   | Average |   | Low |
| $39                                 |   | $109   |                                       | $37 |   | $8 |   |   | $13 |   | $189 |   | $53 |   | $5 |

----

|                                                             |   | Three      Months Ended |    |   | Six      Months Ended |   |
|------------------------------------------------------------------|--------|-------------------------|---------|--------|-----------------------|--------|
|                                                             |   | 2008                    |    |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution          |   | $                       | 357,675 |   |                  | $      | 304,820 |   |   | $ | 676,555 |   |   | $ | 594,900 |   |
| Sales      to AEP Affiliates                                     |   |                    | 41,767  |   |                  |   | 16,275 |   |   |   | 57,702 |   |   |   | 40,868 |   |
| Other                                                            |   |                    | 892     |   |                  |   | 544 |   |   |   | 2,077 |   |   |   | 1,184 |   |
| TOTAL                                                            |   |                    | 400,334 |   |                  |   | 321,639 |   |   |   | 736,334 |   |   |   | 636,952 |   |
|                                                             |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                         |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation     |   |                    | 143,537 |   |                  |   | 113,633 |   |   |   | 296,742 |   |   |   | 256,148 |   |
| Purchased      Electricity for Resale                            |   |                    | 104,016 |   |                  |   | 70,145 |   |   |   | 152,598 |   |   |   | 137,554 |   |
| Purchased      Electricity from AEP Affiliates                   |   |                    | 21,506  |   |                  |   | 18,979 |   |   |   | 38,775 |   |   |   | 32,463 |   |
| Other      Operation                                             |   |                    | 45,186  |   |                  |   | 42,345 |   |   |   | 101,185 |   |   |   | 83,352 |   |
| Maintenance                                                      |   |                    | 25,655  |   |                  |   | 22,177 |   |   |   | 60,242 |   |   |   | 65,262 |   |
| Deferral      of Ice Storm Costs                                 |   |                    | 8,223   |   |                  |   | - |   |   |   | (71,679 | ) |   |   | - |   |
| Depreciation      and Amortization                               |   |                    | 24,720  |   |                  |   | 22,992 |   |   |   | 50,887 |   |   |   | 45,698 |   |
| Taxes      Other Than Income Taxes                               |   |                    | 10,474  |   |                  |   | 9,890 |   |   |   | 21,426 |   |   |   | 20,184 |   |
| TOTAL                                                            |   |                    | 383,317 |   |                  |   | 300,161 |   |   |   | 650,176 |   |   |   | 640,661 |   |
|                                                             |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME (LOSS)                                     |   |                    | 17,017  |   |                  |   | 21,478 |   |   |   | 86,158 |   |   |   | (3,709 | ) |
|                                                             |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                     |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                             |   |                    | 967     |   |                  |   | 518 |   |   |   | 2,095 |   |   |   | 518 |   |
| Carrying      Costs Income                                       |   |                    | 2,128   |   |                  |   | - |   |   |   | 3,762 |   |   |   | - |   |
| Allowance      for Equity Funds Used During Construction         |   |                    | 516     |   |                  |   | 44 |   |   |   | 1,875 |   |   |   | 690 |   |
| Interest      Expense                                            |   |                    | (14,525 | )      |                  |   | (12,785 | ) |   |   | (29,466 | ) |   |   | (24,168 | ) |
|                                                             |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      (LOSS) BEFORE INCOME TAX EXPENSE  (CREDIT) |   |                    | 6,103   |   |                  |   | 9,255 |   |   |   | 64,424 |   |   |   | (26,669 | ) |
|                                                             |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense (Credit)                                 |   |                    | 1,976   |   |                  |   | 2,960 |   |   |   | 22,898 |   |   |   | (12,538 | ) |
|                                                             |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME (LOSS)                                           |   |                    | 4,127   |   |                  |   | 6,295 |   |   |   | 41,526 |   |   |   | (14,131 | ) |
|                                                             |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                       |   |                    | 53      |   |                  |   | 53 |   |   |   | 106 |   |   |   | 106 |   |
|                                                             |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      (LOSS) APPLICABLE TO COMMON   STOCK      |   | $                       | 4,074   |   |                  | $      | 6,242 |   |   | $ | 41,420 |   |   | $ | (14,237 | ) |

----

|                                                     |   | Common      Stock |    |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |   |
|----------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|--------|
| DECEMBER      31, 2006                                   |   | $                 | 157,230 |   |                 | $      | 230,016 |                   |   | $      | 199,262                                            |   |   | $      | (1,070 | ) |   | $ | 585,438 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                         |   |              |    |   |                 |   |    |                   |   |   | (386                                               | )      |   |   |   |   |   |   | (386 | ) |
| Capital      Contribution from Parent                    |   |              |    |   |                 |   | 40,000  |                   |   |   |                                               |   |   |   |   |   |   |   | 40,000 |   |
| Preferred      Stock Dividends                           |   |              |    |   |                 |   |    |                   |   |   | (106                                               | )      |   |   |   |   |   |   | (106 | ) |
| TOTAL                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 624,946 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      LOSS                                  |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:           |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $49                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 91     |   |   |   | 91 |   |
| NET      LOSS                                            |   |              |    |   |                 |   |    |                   |   |   | (14,131                                            | )      |   |   |   |   |   |   | (14,131 | ) |
| TOTAL      COMPREHENSIVE LOSS                            |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | (14,040 | ) |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| JUNE      30, 2007                                       |   | $                 | 157,230 |   |                 | $      | 270,016 |                   |   | $      | 184,639                                            |   |   | $      | (979   | ) |   | $ | 610,906 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| DECEMBER      31, 2007                                   |   | $                 | 157,230 |   |                 | $      | 310,016 |                   |   | $      | 174,539                                            |   |   | $      | (887   | ) |   | $ | 640,898 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $596             |   |              |    |   |                 |   |    |                   |   |   | (1,107                                             | )      |   |   |   |   |   |   | (1,107 | ) |
| Capital      Contribution from Parent                    |   |              |    |   |                 |   | 30,000  |                   |   |   |                                               |   |   |   |   |   |   |   | 30,000 |   |
| Preferred      Stock Dividends                           |   |              |    |   |                 |   |    |                   |   |   | (106                                               | )      |   |   |   |   |   |   | (106 | ) |
| TOTAL                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 669,685 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Other Comprehensive      Income, Net      of Taxes: |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $49                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 91     |   |   |   | 91 |   |
| NET      INCOME                                          |   |              |    |   |                 |   |    |                   |   |   | 41,526                                             |   |   |   |   |   |   |   | 41,526 |   |
| TOTAL      COMPREHENSIVE INCOME                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 41,617 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| JUNE      30, 2008                                       |   | $                 | 157,230 |   |                 | $      | 340,016 |                   |   | $      | 214,852                                            |   |   | $      | (796   | ) |   | $ | 711,302 |   |

----

|                                                   |   | 2008   |      |   | 2007   |   |
|--------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                    |   |   |      |
| Cash      and Cash Equivalents                         |   | $      | 1,524     |   |   | $      | 1,370 |   |
| Advances      to Affiliates                            |   |   | -         |   |   |   | 51,202 |   |
| Accounts      Receivable:                              |   |   |      |   |   |   |   |   |
|         Customers                            |   |   | 54,815    |   |   |   | 74,330 |   |
|         Affiliated Companies                 |   |   | 79,370    |   |   |   | 59,835 |   |
|         Miscellaneous                        |   |   | 10,748    |   |   |   | 10,315 |   |
|         Allowance for Uncollectible Accounts |   |   | (18       | )      |   |   | - |   |
|  Total      Accounts Receivable                   |   |   | 144,915   |   |   |   | 144,480 |   |
| Fuel                                                   |   |   | 27,124    |   |   |   | 19,394 |   |
| Materials      and Supplies                            |   |   | 47,925    |   |   |   | 47,691 |   |
| Risk      Management Assets                            |   |   | 87,083    |   |   |   | 33,308 |   |
| Accrued      Tax Benefits                              |   |   | 52,082    |   |   |   | 31,756 |   |
| Regulatory      Asset for Under-Recovered Fuel Costs   |   |   | 61,876    |   |   |   | - |   |
| Margin      Deposits                                   |   |   | 992       |   |   |   | 8,980 |   |
| Prepayments      and Other                             |   |   | 14,559    |   |   |   | 18,137 |   |
| TOTAL                                                  |   |   | 438,080   |   |   |   | 356,318 |   |
|                                                   |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                     |   |   |      |   |   |   |   |   |
| Electric:                                              |   |   |      |   |   |   |   |   |
|         Production                           |   |   | 1,234,217 |   |   |   | 1,110,657 |   |
|         Transmission                         |   |   | 598,361   |   |   |   | 569,746 |   |
|         Distribution                         |   |   | 1,402,521 |   |   |   | 1,337,038 |   |
| Other                                                  |   |   | 249,073   |   |   |   | 241,722 |   |
| Construction      Work in Progress                     |   |   | 94,615    |   |   |   | 200,018 |   |
| Total                                                  |   |   | 3,578,787 |   |   |   | 3,459,181 |   |
| Accumulated      Depreciation and Amortization         |   |   | 1,191,109 |   |   |   | 1,182,171 |   |
| TOTAL      - NET                                       |   |   | 2,387,678 |   |   |   | 2,277,010 |   |
|                                                   |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                           |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                 |   |   | 186,807   |   |   |   | 158,731 |   |
| Long-term      Risk Management Assets                  |   |   | 12,282    |   |   |   | 3,358 |   |
| Deferred      Charges and Other                        |   |   | 67,944    |   |   |   | 48,454 |   |
| TOTAL                                                  |   |   | 267,033   |   |   |   | 210,543 |   |
|                                                   |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                      |   | $      | 3,092,791 |   |   | $      | 2,843,871 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 110,981   |   |   | $      | - |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
|  General                                                       |   |                | 164,652   |   |   |   | 189,032 |   |
|  Affiliated      Companies                                     |   |                | 107,254   |   |   |   | 80,316 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 50,000    |   |   |   | - |   |
| Risk      Management Liabilities                                    |   |                | 84,465    |   |   |   | 27,118 |   |
| Customer      Deposits                                              |   |                | 40,409    |   |   |   | 41,477 |   |
| Accrued      Taxes                                                  |   |                | 36,383    |   |   |   | 18,374 |   |
| Regulatory      Liability for Over-Recovered Fuel Costs             |   |                | -         |   |   |   | 11,697 |   |
| Other                                                               |   |                | 42,588    |   |   |   | 57,708 |   |
| TOTAL                                                               |   |                | 636,732   |   |   |   | 425,722 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 834,737   |   |   |   | 918,316 |   |
| Long-term      Risk Management Liabilities                          |   |                | 10,348    |   |   |   | 2,808 |   |
| Deferred      Income Taxes                                          |   |                | 526,319   |   |   |   | 456,497 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 316,575   |   |   |   | 338,788 |   |
| Deferred      Credits and Other                                     |   |                | 51,516    |   |   |   | 55,580 |   |
| TOTAL                                                               |   |                | 1,739,495 |   |   |   | 1,771,989 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 2,376,227 |   |   |   | 2,197,711 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 5,262     |   |   |   | 5,262 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – $15 Par Value Per Share:                  |   |                |      |   |   |   |   |   |
|         Authorized – 11,000,000 Shares              |   |                |      |   |   |   |   |   |
|         Issued – 10,482,000 Shares                  |   |                |      |   |   |   |   |   |
|         Outstanding – 9,013,000 Shares              |   |                | 157,230   |   |   |   | 157,230 |   |
| Paid-in      Capital                                                |   |                | 340,016   |   |   |   | 310,016 |   |
| Retained      Earnings                                              |   |                | 214,852   |   |   |   | 174,539 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (796      | )      |   |   | (887 | )  |
| TOTAL                                                               |   |                | 711,302   |   |   |   | 640,898 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 3,092,791 |   |   | $      | 2,843,871 |   |

----

|                                                                                                       |   | 2008   |     |   | 2007   |   |
|------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                                  |   |   |     |   |   |   |
| Net      Income (Loss)                                                                                     |   | $      | 41,526   |   |   | $      | (14,131 | )  |
| Adjustments      to Reconcile Net Income (Loss) to Net Cash Flows Used for      Operating Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                                         |   |   | 50,887   |   |   |   | 45,698 |   |
| Deferred      Income Taxes                                                                                 |   |   | 70,618   |   |   |   | 11,059 |   |
| Deferral      of Ice Storm Costs                                                                           |   |   | (71,679  | )      |   |   | - |   |
| Allowance      for Equity Funds Used During Construction                                                   |   |   | (1,875   | )      |   |   | (690 | )  |
| Mark-to-Market      of Risk Management Contracts                                                           |   |   | 2,216    |   |   |   | 4,832 |   |
| Deferred      Property Taxes                                                                               |   |   | (17,796  | )      |   |   | (16,539 | )  |
| Change      in Other Noncurrent Assets                                                                     |   |   | 25,981   |   |   |   | (25,601 | )  |
| Change      in Other Noncurrent Liabilities                                                                |   |   | (33,384  | )      |   |   | (22,811 | )  |
| Changes      in Certain Components of Working Capital:                                                     |   |   |     |   |   |   |   |   |
|             Accounts Receivable, Net                                         |   |   | 1,270    |   |   |   | 19,413 |   |
|             Fuel, Materials and Supplies                                     |   |   | (7,964   | )      |   |   | (8,414 | )  |
|             Margin Deposits                                                  |   |   | 7,988    |   |   |   | 10,216 |   |
|             Accounts Payable                                                 |   |   | 18,238   |   |   |   | 11,810 |   |
|             Customer Deposits                                                |   |   | (1,068   | )      |   |   | (3,354 | )  |
|             Accrued Taxes, Net                                               |   |   | (2,317   | )      |   |   | (6,888 | )  |
|          Fuel Over/Under-Recovery, Net                                                      |   |   | (73,573  | )      |   |   | (13,512 | )  |
|             Other Current Assets                                             |   |   | 820      |   |   |   | 597 |   |
|             Other Current Liabilities                                        |   |   | (16,197  | )      |   |   | (22,228 | )  |
| Net      Cash Flows Used for Operating Activities                                                          |   |   | (6,309   | )      |   |   | (30,543 | )  |
|                                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                                             |   |   | (151,711 | )      |   |   | (151,973 | )  |
| Change      in Other Cash Deposits, Net                                                                    |   |   | -        |   |   |   | (12,896 | )  |
| Change      in Advances to Affiliates, Net                                                                 |   |   | 51,202   |   |   |   | - |   |
| Proceeds      from Sales of Assets                                                                         |   |   | 567      |   |   |   | 3,109 |   |
| Net      Cash Flows Used for Investing Activities                                                          |   |   | (99,942  | )      |   |   | (161,760 | )  |
|                                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                                  |   |   |     |   |   |   |   |   |
| Capital      Contribution from Parent                                                                      |   |   | 30,000   |   |   |   | 40,000 |   |
| Issuance      of Long-term Debt – Nonaffiliated                                                      |   |   | -        |   |   |   | 12,495 |   |
| Change      in Advances from Affiliates, Net                                                               |   |   | 110,981  |   |   |   | 139,916 |   |
| Retirement      of Long-term Debt – Nonaffiliated                                                    |   |   | (33,700  | )      |   |   | - |   |
| Principal      Payments for Capital Lease Obligations                                                      |   |   | (770     | )      |   |   | (745 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                                          |   |   | (106     | )      |   |   | (106 | )  |
| Net      Cash Flows from Financing Activities                                                              |   |   | 106,405  |   |   |   | 191,560 |   |
|                                                                                                       |   |   |     |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                                  |   |   | 154      |   |   |   | (743 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                                      |   |   | 1,370    |   |   |   | 1,651 |   |
| Cash      and Cash Equivalents at End of Period                                                            |   | $      | 1,524    |   |   | $      | 908 |   |
|                                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                                    |   | $      | 27,774   |   |   | $      | 21,339 |   |
| Net      Cash Received for Income Taxes                                                                    |   |   | 19,529   |   |   |   | 2,353 |   |
| Noncash      Acquisitions Under Capital Leases                                                             |   |   | 253      |   |   |   | 434 |   |
| Construction      Expenditures Included in Accounts Payable at June 30,                                    |   |   | 11,731   |   |   |   | 21,261 |   |

----

|                                                      | Footnote Reference |
|-----------------------------------------------------------|-------------------------|
|                                                      |                    |
| Significant      Accounting Matters                       | Note      1             |
| New      Accounting Pronouncements and Extraordinary Item | Note      2             |
| Rate      Matters                                         | Note      3             |
| Commitments,      Guarantees and Contingencies            | Note      4             |
| Benefit      Plans                                        | Note      6             |
| Business      Segments                                    | Note      7             |
| Income      Taxes                                         | Note      8             |
| Financing      Activities                                 | Note      9             |

----

----

SOUTHWESTERN ELECTRIC POWER COMPANYCONSOLIDATED

| Second      Quarter of 2007                       |   |   |   |   | $      | 2      |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins (a)      |   |   | 23     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 2      |   |   |   |   |   |
| Other                                             |   |   | (2     | )      |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 23     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (7     | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (2     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | 2      |   |   |   |   |   |
| Other      Income                                 |   |   | 1      |   |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (6     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (5     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Second      Quarter of 2008                       |   |   |   |   |   | $      | 14     |   |

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

| · | Retail      and Off-system Sales Margins increased $23 million primarily due to a $25      million refund provision booked in 2007 pursuant to an unfavorable ALJ      ruling in the Texas Fuel Reconciliation proceeding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission      Revenues increased $2 million due to higher rates in the SPP      region.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| · | Other      revenues decreased $2 million primarily due to a $6 million decrease in      gains on sales of emission allowances offset by a $4 million increase in      revenues from coal deliveries from SWEPCo’s mining subsidiary, Dolet Hills      Lignite Company, LLC, to Cleco Corporation, a nonaffiliated      entity.  The increase in coal deliveries was the result of      planned and forced outages during 2007 at the Dolet Hills Generating      Station, which is jointly-owned by SWEPCo and Cleco      Corporation.  The increased revenue from coal deliveries was      offset by a corresponding increase in Other Operation and Maintenance      expenses from mining operations as discussed  below. |

| · | Other      Operation and Maintenance expenses increased $7 million primarily due to a      $5 million increase in expenses for coal deliveries from SWEPCo’s mining      subsidiary, Dolet Hills Lignite Company, LLC.  The increased      expenses for coal deliveries were partially offset by a corresponding      increase in revenues from mining operations as discussed      above. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization increased $2 million primarily due to higher depreciable      asset balances.                                                                                                                                                                                                                                                                                           |
| · | Taxes      Other Than Income Taxes decreased $2 million primarily due to a decrease      in franchise taxes.                                                                                                                                                                                                                                                                                               |
| · | Income      Tax Expense increased $5 million primarily due to an increase in pretax      book income.                                                                                                                                                                                                                                                                                                      |

| Six      Months Ended June 30, 2007               |   |   |   |   | $      | 11     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins (a)      |   |   | 28     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 3      |   |   |   |   |   |
| Other                                             |   |   | (3     | )      |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 28     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (17    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (4     | )      |   |   |   |   |
| Other      Income                                 |   |   | 3      |   |   |   |   |   |
| Interest      Expense                             |   |   | (2     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (20    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Six      Months Ended June 30, 2008               |   |   |   |   |   | $      | 19     |   |

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

| · | Retail      and Off-system Sales Margins increased $28 million primarily due to a $25      million refund provision booked in 2007 pursuant to an unfavorable ALJ      ruling in the Texas Fuel Reconciliation proceeding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission      Revenues increased $3 million due to higher rates in the SPP      region.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| · | Other      revenues decreased $3 million primarily due to a $12 million decrease in      gains on sales of emission allowances offset by a $9 million increase in      revenue from coal deliveries from SWEPCo’s mining subsidiary, Dolet Hills      Lignite Company, LLC, to Cleco Corporation, a nonaffiliated      entity.  The increase in coal deliveries was the result of      planned and forced outages during 2007 at the Dolet Hills Generating      Station, which is jointly-owned by SWEPCo and Cleco      Corporation.  The increased revenue from coal deliveries was      offset by a corresponding increase in Other Operation and Maintenance      expenses from mining operations as discussed  below. |

| · | Other      Operation and Maintenance expenses increased $17 million primarily due to      the following:                                                                                                                                                                                                                                                                    |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                      | An      $11 million increase in expenses for coal deliveries from SWEPCo’s mining      subsidiary, Dolet Hills Lignite Company, LLC.  The increased      expenses for coal deliveries were partially offset by a corresponding      increase in revenues from mining operations as discussed      above. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                      | A      $3 million increase in transmission expenses related to increased usage      and rates in the SPP region. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                      | A      $3 million increase in administrative and general expenses, primarily      associated with outside services and employee-related      expenses. |
| · | Depreciation      and Amortization increased $4 million primarily due to higher depreciable      asset balances.                                                                                                                                                                                                                                                            |
| · | Other      Income increased $3 million primarily due to an increase in the equity      component of AFUDC as a result of new generation  projects.                                                                                                                                                                                                                          |
| · | Interest      Expense increased $2 million primarily due to higher interest of $8      million related to higher long-term debt partially offset by a $4 million      increase in the debt component of AFUDC due to new generation projects and      a $3 million decrease in other interest expense partially related to      decreased interest expense on fuelrecovery. |

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

|                                                      |   | 2008                |     |   | 2007   |   |
|-----------------------------------------------------------|--------|---------------------|----------|--------|--------|--------|
|                                                      |   | (in      thousands) |     |
| Cash      and Cash Equivalents at Beginning of Period     |   | $                   | 1,742    |   |   | $      | 2,618 |   |
| Cash      Flows from (Used for):                          |   |                |     |   |   |   |   |   |
|  Operating      Activities                           |   |                | 74,622   |   |   |   | 120,597 |   |
|  Investing      Activities                           |   |                | (569,109 | )      |   |   | (253,267 | ) |
|  Financing      Activities                           |   |                | 494,987  |   |   |   | 131,610 |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents |   |                | 500      |   |   |   | (1,060 | ) |
| Cash      and Cash Equivalents at End of Period           |   | $                   | 2,242    |   |   | $      | 1,558 |   |

|                        |   | PrincipalAmount |                | Interest |   | Due    |
|-----------------------------|--------|-----------------|---------------------|----------|--------|--------|
| Type      of Debt           |   |            | Rate                |     | Date   |
|                        |   |            | (in      thousands) |     | (%)    |   |   |
| Senior      Unsecured Notes |   | $               | 400,000             |     | 6.45   |   | 2019 |

|                                     |   | PrincipalAmount      Paid |                | Interest |     | Due    |
|------------------------------------------|--------|---------------------------|---------------------|----------|----------|--------|
| Type      of Debt                        |   |                      | Rate                |     | Date     |
|                                     |   |                      | (in      thousands) |     | (%)      |   |   |
| Notes      Payable – Nonaffiliated |   | $                         | 2,203               |     | 4.47     |   | 2011 |
| Notes      Payable – Nonaffiliated |   |                      | 1,500               |     | Variable |   | 2008 |

----

|                                                             |   | MTM      Risk Management Contracts |     |   | Cash      Flow &Fair      Value Hedges |   |   | DETM      Assignment (a) |   |   |  CollateralDeposits |   |   | Total  |   |
|------------------------------------------------------------------|--------|------------------------------------|----------|--------|--------------------------------------------|--------|--------|--------------------------|--------|--------|--------------------------|--------|--------|--------|--------|
| Current      Assets                                              |   | $                                  | 108,564  |   |                                       | $      | -      |                     |   | $      | -                        |   |   | $      | (2,014 | ) |   | $ | 106,550 |   |
| Noncurrent      Assets                                           |   |                               | 15,872   |   |                                       |   | 71     |                     |   |   | -                        |   |   |   | (46    | ) |   |   | 15,897 |   |
| Total      MTM Derivative Contract Assets                        |   |                               | 124,436  |   |                                       |   | 71     |                     |   |   | -                        |   |   |   | (2,060 | ) |   |   | 122,447 |   |
|                                                             |   |                               |     |   |                                       |   |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Current      Liabilities                                         |   |                               | (106,167 | )      |                                       |   | (4     | )                        |   |   | (110                     | )      |   |   | 3,144  |   |   |   | (103,137 | ) |
| Noncurrent      Liabilities                                      |   |                               | (14,030  | )      |                                       |   | -      |                     |   |   | (120                     | )      |   |   | 1,252  |   |   |   | (12,898 | ) |
| Total      MTM Derivative Contract Liabilities              |   |                               | (120,197 | )      |                                       |   | (4     | )                        |   |   | (230                     | )      |   |   | 4,396  |   |   |   | (116,035 | ) |
|                                                             |   |                               |     |   |                                       |   |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $                                  | 4,239    |   |                                       | $      | 67     |                     |   | $      | (230                     | )      |   | $      | 2,336  |   |   | $ | 6,412 |   |

| (a) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report. |
|-----|-----------------------------------------------------------------------------------------------------------|

| Total      MTM Risk Management Contract Net Assets at December 31,    2007                                                 |   | $      | 8,131  |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)      Loss from Contracts Realized/Settled During the Period and Entered in a      Prior Period                      |   |   | (4,779 | )      |
| Fair      Value of New Contracts at Inception When Entered During the Period      (a)                                      |   |   | -      |   |
| Net      Option Premiums Paid/(Received) for Unexercised or Unexpired Option      Contracts Entered During the Period |   |   | -      |   |
| Change      in Fair Value Due to Valuation Methodology Changes on Forward Contracts      (b)                               |   |   | 418    |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                             |   |   | (258   | )      |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                        |   |   | 727    |   |
| Total      MTM Risk Management Contract Net Assets                                                                         |   |   | 4,239  |   |
| Net      Cash Flow & Fair Value Hedge Contracts                                                                        |   |   | 67     |   |
| DETM      Assignment (e)                                                                                                   |   |   | (230   | )      |
| Collateral      Deposits                                                                                                   |   |   | 2,336  |   |
| Ending      Net Risk Management Assets at June 30, 2008                                                                    |   | $      | 6,412  |   |

| (a) | Reflects      fair value on long-term contracts which are typically with customers that      seek fixed pricing to limit their risk against fluctuating energy      prices.  The contract prices are valued against market curves      associated with the delivery location and deliveryterm.                                                                            |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents      the impact of applying AEP’s credit risk when measuring the fair value of      derivative liabilities according to SFAS 157.                                                                                                                                                                                                                                  |
| (c) | Market      fluctuations are attributable to various factors such as supply/demand,      weather, storage, etc.                                                                                                                                                                                                                                                                     |
| (d) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected in the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/liabilities for those subsidiaries that      operate in regulated jurisdictions. |
| (e) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report.                                                                                                                                                                                                                                                                           |

|             |   | Remainder2008 |   |   | 2009   |   |   | 2010   |   |   | 2011 |   |   | 2012   |   |   | After2012 |   |   | Total  |   |
|------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
| Level      1 (a) |   | $             | 1,376  |   |   | $      | (277   | )      |   | $      | -    |   |   | $      | -      |   |      | $      | -      |   |   | $ | - |   |   | $ | 1,099 |   |
| Level      2 (b) |   |          | 366    |   |   |   | 3,072  |   |   |   | (237 | )      |   |   | (16    | )      |      |   | -      |   |   |   | - |   |   |   | 3,185 |   |
| Level      3 (c) |   |          | (47    | )      |   |   | -      |   |   |   | 2    |   |   |   | -      |   |      |   | -      |   |   |   | - |   |   |   | (45 | ) |
| Total            |   | $             | 1,695  |   |   | $      | 2,795  |   |   | $      | (235 | )      |   | $      | (16    | )      |      | $      | -      |   |   | $ | - |   |   | $ | 4,239 |   |

| (a) | Level      1 inputs are quoted prices (unadjusted) in active markets for identical      assets or liabilities that the reporting entity has the ability to access      at the measurement date.  Level 1 inputs primarily consist of      exchange traded contracts that exhibit sufficient frequency and volume to      provide pricing information on an ongoing basis.                                                                                                                                                                                                                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Level      2 inputs are inputs other than quoted prices included within Level 1 that      are observable for the asset or liability, either directly or      indirectly.  If the asset or liability has a specified      (contractual) term, a Level 2 input must be observable for substantially      the full term of the asset or liability.  Level 2 inputs      primarily consist of OTC broker quotes in moderately active or less active      markets, exchange traded contracts where there was not sufficient market      activity to warrant inclusion in Level 1, and OTC broker quotes that are      corroborated by the same or similar transactions that have occurred in the      market. |
| (c) | Level      3 inputs are unobservable inputs for the asset or      liability.  Unobservable inputs shall be used to measure fair      value to the extent that the observable inputs are not available, thereby      allowing for situations in which there is little, if any, market activity      for the asset or liability at the measurement date.  Level 3      inputs primarily consist of unobservable market data or are valued based      on models and/or assumptions.                                                                                                                                                                                                                         |

|                                                                         |   | Interest      Rate |   |   | ForeignCurrency |   |   | Total  |   |
|------------------------------------------------------------------------------|--------|--------------------|--------|--------|-----------------|--------|--------|--------|--------|
| Beginning      Balance in AOCI December 31, 2007                             |   | $                  | (6,650 | )      |            | $      | 629    |   |   | $ | (6,021 | ) |
| Changes      in Fair Value                                                   |   |               | -      |   |            |   | 120    |   |   |   | 120 |   |
| Reclassifications      from AOCI for Cash      Flow Hedges Settled |   |               | 413    |   |            |   | (705   | )      |   |   | (292 | ) |
| Ending      Balance in AOCI June 30, 2008                                    |   | $                  | (6,237 | )      |            | $      | 44     |   |   | $ | (6,193 | ) |

| Six      Months EndedJune      30, 2008 |   |   | Twelve      Months EndedDecember      31, 2007 |
|-----------------------------------------|--------|--------|------------------------------------------------|
| (in      thousands)                     |   |   | (in      thousands)                            |
| End                                     |   | High   |                                           | Average |   | Low |   |   | End |   | High |   | Average |   | Low |
| $62                                     |   | $163   |                                           | $54 |   | $11 |   |   | $17 |   | $245 |   | $75 |   | $7 |

----

|                                                                                                                |   | Three      Months Ended |    |   | Six      Months Ended |   |
|---------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-----------------------|--------|
|                                                                                                                |   | 2008                    |    |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                                                                            |   |                    |    |   |                  |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution                                                             |   | $                       | 405,632 |   |                  | $      | 329,250 |   |   | $ | 731,533 |   |   | $ | 656,534 |   |
| Sales      to AEP Affiliates                                                                                        |   |                    | 17,592  |   |                  |   | 16,237 |   |   |   | 31,184 |   |   |   | 32,652 |   |
| Other                                                                                                               |   |                    | 393     |   |                  |   | 535 |   |   |   | 693 |   |   |   | 935 |   |
| TOTAL                                                                                                               |   |                    | 423,617 |   |                  |   | 346,022 |   |   |   | 763,410 |   |   |   | 690,121 |   |
|                                                                                                                |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                                                            |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation                                                        |   |                    | 147,147 |   |                  |   | 125,994 |   |   |   | 264,808 |   |   |   | 237,981 |   |
| Purchased      Electricity for Resale                                                                               |   |                    | 54,378  |   |                  |   | 56,870 |   |   |   | 94,648 |   |   |   | 109,368 |   |
| Purchased      Electricity from AEP Affiliates                                                                      |   |                    | 51,932  |   |                  |   | 16,085 |   |   |   | 72,372 |   |   |   | 39,002 |   |
| Other      Operation                                                                                                |   |                    | 58,757  |   |                  |   | 50,204 |   |   |   | 122,336 |   |   |   | 103,987 |   |
| Maintenance                                                                                                         |   |                    | 27,692  |   |                  |   | 29,721 |   |   |   | 55,160 |   |   |   | 56,060 |   |
| Depreciation      and Amortization                                                                                  |   |                    | 36,897  |   |                  |   | 34,668 |   |   |   | 73,033 |   |   |   | 68,790 |   |
| Taxes      Other Than Income Taxes                                                                                  |   |                    | 15,705  |   |                  |   | 17,540 |   |   |   | 33,124 |   |   |   | 33,531 |   |
| TOTAL                                                                                                               |   |                    | 392,508 |   |                  |   | 331,082 |   |   |   | 715,481 |   |   |   | 648,719 |   |
|                                                                                                                |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                                                                               |   |                    | 31,109  |   |                  |   | 14,940 |   |   |   | 47,929 |   |   |   | 41,402 |   |
|                                                                                                                |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                                                                        |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                                                                                |   |                    | 1,540   |   |                  |   | 776 |   |   |   | 2,417 |   |   |   | 1,481 |   |
| Allowance      for Equity Funds Used During Construction                                                            |   |                    | 2,952   |   |                  |   | 2,562 |   |   |   | 6,015 |   |   |   | 3,953 |   |
| Interest      Expense                                                                                               |   |                    | (17,270 | )      |                  |   | (17,235 | ) |   |   | (34,412 | ) |   |   | (32,725 | ) |
|                                                                                                                |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE (CREDIT)          AND MINORITY INTEREST EXPENSE |   |                    | 18,331  |   |                  |   | 1,043 |   |   |   | 21,949 |   |   |   | 14,111 |   |
|                                                                                                                |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense (Credit)                                                                                    |   |                    | 3,351   |   |                  |   | (1,553 | ) |   |   | 1,364 |   |   |   | 1,068 |   |
| Minority      Interest Expense                                                                                      |   |                    | 899     |   |                  |   | 972 |   |   |   | 1,894 |   |   |   | 1,814 |   |
|                                                                                                                |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                                                                                     |   |                    | 14,081  |   |                  |   | 1,624 |   |   |   | 18,691 |   |   |   | 11,229 |   |
|                                                                                                                |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                                                                          |   |                    | 57      |   |                  |   | 57 |   |   |   | 114 |   |   |   | 114 |   |
|                                                                                                                |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                                                                            |   | $                       | 14,024  |   |                  | $      | 1,567 |   |   | $ | 18,577 |   |   | $ | 11,115 |   |

----

|                                                                                     |   | Common      Stock |    |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
| DECEMBER      31, 2006                                                                   |   | $                 | 135,660 |   |                 | $      | 245,003 |                   |   | $      | 459,338                                            |   |   | $      | (18,799 | ) |   | $ | 821,202 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                         |   |              |    |   |                 |   |    |                   |   |   | (1,642                                             | )      |   |   |    |   |   |   | (1,642 | ) |
| Capital      Contribution from Parent                                                    |   |              |    |   |                 |   | 25,000  |                   |   |   |                                               |   |   |   |    |   |   |   | 25,000 |   |
| Preferred      Stock Dividends                                                           |   |              |    |   |                 |   |    |                   |   |   | (114                                               | )      |   |   |    |   |   |   | (114 | ) |
| TOTAL                                                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 844,446 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Loss, Net of Taxes:                                             |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $172                                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | (79     | ) |   |   | (79 | ) |
| NET      INCOME                                                                          |   |              |    |   |                 |   |    |                   |   |   | 11,229                                             |   |   |   |    |   |   |   | 11,229 |   |
| TOTAL      COMPREHENSIVE INCOME                                                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 11,150 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2007                                                                       |   | $                 | 135,660 |   |                 | $      | 270,003 |                   |   | $      | 468,811                                            |   |   | $      | (18,878 | ) |   | $ | 855,596 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| DECEMBER      31, 2007                                                                   |   | $                 | 135,660 |   |                 | $      | 330,003 |                   |   | $      | 523,731                                            |   |   | $      | (16,439 | ) |   | $ | 972,955 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $622                                             |   |              |    |   |                 |   |    |                   |   |   | (1,156                                             | )      |   |   |    |   |   |   | (1,156 | ) |
| SFAS      157 Adoption, Net of Tax of $6                                                 |   |              |    |   |                 |   |    |                   |   |   | 10                                                 |   |   |   |    |   |   |   | 10 |   |
| Capital      Contribution from Parent                                                    |   |              |    |   |                 |   | 100,000 |                   |   |   |                                               |   |   |   |    |   |   |   | 100,000 |   |
| Preferred      Stock Dividends                                                           |   |              |    |   |                 |   |    |                   |   |   | (114                                               | )      |   |   |    |   |   |   | (114 | ) |
| TOTAL                                                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,071,695 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other Comprehensive Income      (Loss), Net      of Taxes:                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $92                                                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | (172    | ) |   |   | (172 | ) |
| Amortization      of Pension and OPEB Deferred  Costs,      Net of Tax of $253 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 471     |   |   |   | 471 |   |
| NET      INCOME                                                                          |   |              |    |   |                 |   |    |                   |   |   | 18,691                                             |   |   |   |    |   |   |   | 18,691 |   |
| TOTAL      COMPREHENSIVE INCOME                                                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 18,990 |   |
|                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| JUNE      30, 2008                                                                       |   | $                 | 135,660 |   |                 | $      | 430,003 |                   |   | $      | 541,162                                            |   |   | $      | (16,140 | ) |   | $ | 1,090,685 |   |

----

|                                                   |   | 2008   |      |   | 2007   |   |
|--------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                    |   |   |      |   |   |   |
| Cash      and Cash Equivalents                         |   | $      | 2,242     |   |   | $      | 1,742 |   |
| Advances      to Affiliates                            |   |   | 300,525   |   |   |   | - |   |
| Accounts      Receivable:                              |   |   |      |   |   |   |   |   |
|         Customers                            |   |   | 64,754    |   |   |   | 91,379 |   |
|         Affiliated Companies                 |   |   | 25,663    |   |   |   | 33,196 |   |
|         Miscellaneous                        |   |   | 12,723    |   |   |   | 10,544 |   |
|         Allowance for Uncollectible Accounts |   |   | (139      | )      |   |   | (143 | )  |
|        Total Accounts Receivable                  |   |   | 103,001   |   |   |   | 134,976 |   |
| Fuel                                                   |   |   | 87,705    |   |   |   | 75,662 |   |
| Materials      and Supplies                            |   |   | 51,581    |   |   |   | 48,673 |   |
| Risk      Management Assets                            |   |   | 106,550   |   |   |   | 39,850 |   |
| Regulatory      Asset for Under-Recovered Fuel Costs   |   |   | 67,186    |   |   |   | 5,859 |   |
| Margin      Deposits                                   |   |   | 1,319     |   |   |   | 10,650 |   |
| Prepayments      and Other                             |   |   | 70,233    |   |   |   | 28,147 |   |
| TOTAL                                                  |   |   | 790,342   |   |   |   | 345,559 |   |
|                                                   |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                     |   |   |      |   |   |   |   |   |
| Electric:                                              |   |   |      |   |   |   |   |   |
|         Production                           |   |   | 1,751,081 |   |   |   | 1,743,198 |   |
|         Transmission                         |   |   | 770,560   |   |   |   | 737,975 |   |
|         Distribution                         |   |   | 1,351,982 |   |   |   | 1,312,746 |   |
| Other                                                  |   |   | 642,255   |   |   |   | 631,765 |   |
| Construction      Work in Progress                     |   |   | 632,514   |   |   |   | 451,228 |   |
| Total                                                  |   |   | 5,148,392 |   |   |   | 4,876,912 |   |
| Accumulated      Depreciation and Amortization         |   |   | 1,964,954 |   |   |   | 1,939,044 |   |
| TOTAL      - NET                                       |   |   | 3,183,438 |   |   |   | 2,937,868 |   |
|                                                   |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                           |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                 |   |   | 118,139   |   |   |   | 133,617 |   |
| Long-term      Risk Management Assets                  |   |   | 15,897    |   |   |   | 4,073 |   |
| Deferred      Charges and Other                        |   |   | 107,440   |   |   |   | 67,269 |   |
| TOTAL                                                  |   |   | 241,476   |   |   |   | 204,959 |   |
|                                                   |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                      |   | $      | 4,215,256 |   |   | $      | 3,488,386 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | -         |   |   | $      | 1,565 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
| General                                                             |   |                | 183,533   |   |   |   | 152,305 |   |
| Affiliated      Companies                                           |   |                | 89,863    |   |   |   | 51,767 |   |
| Short-term      Debt – Nonaffiliated                          |   |                | 7,039     |   |   |   | 285 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 4,406     |   |   |   | 5,906 |   |
| Risk      Management Liabilities                                    |   |                | 103,137   |   |   |   | 32,629 |   |
| Customer      Deposits                                              |   |                | 36,729    |   |   |   | 37,473 |   |
| Accrued      Taxes                                                  |   |                | 49,529    |   |   |   | 26,494 |   |
| Regulatory      Liability for Over-Recovered Fuel Costs             |   |                | -         |   |   |   | 22,879 |   |
| Other                                                               |   |                | 91,895    |   |   |   | 76,554 |   |
| TOTAL                                                               |   |                | 566,131   |   |   |   | 407,857 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 1,538,795 |   |   |   | 1,141,311 |   |
| Long-term      Debt – Affiliated                              |   |                | 50,000    |   |   |   | 50,000 |   |
| Long-term      Risk Management Liabilities                          |   |                | 12,898    |   |   |   | 3,334 |   |
| Deferred      Income Taxes                                          |   |                | 397,158   |   |   |   | 361,806 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 340,563   |   |   |   | 334,014 |   |
| Deferred      Credits and Other                                     |   |                | 212,656   |   |   |   | 210,725 |   |
| TOTAL                                                               |   |                | 2,552,070 |   |   |   | 2,101,190 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 3,118,201 |   |   |   | 2,509,047 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Minority      Interest                                              |   |                | 1,673     |   |   |   | 1,687 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 4,697     |   |   |   | 4,697 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – Par Value – $18 Per Share:          |   |                |      |   |   |   |   |   |
| Authorized      – 7,600,000 Shares                            |   |                |      |   |   |   |   |   |
| Outstanding      – 7,536,640 Shares                           |   |                | 135,660   |   |   |   | 135,660 |   |
| Paid-in      Capital                                                |   |                | 430,003   |   |   |   | 330,003 |   |
| Retained      Earnings                                              |   |                | 541,162   |   |   |   | 523,731 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (16,140   | )      |   |   | (16,439 | ) |
| TOTAL                                                               |   |                | 1,090,685 |   |   |   | 972,955 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 4,215,256 |   |   | $      | 3,488,386 |   |

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 18,691   |   |   | $      | 11,229 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
|  Depreciation      and Amortization                                                   |   |   | 73,033   |   |   |   | 68,790 |   |
|  Deferred      Income Taxes                                                           |   |   | 28,256   |   |   |   | (21,658 | )  |
|  Provision      for Fuel Disallowance                                                 |   |   | -        |   |   |   | 24,500 |   |
|  Allowance      for Equity Funds Used During Construction                             |   |   | (6,015   | )      |   |   | (3,953 | )  |
|  Mark-to-Market      of Risk Management Contracts                                     |   |   | 1,541    |   |   |   | 5,190 |   |
|  Deferred      Property Taxes                                                         |   |   | (19,866  | )      |   |   | (19,210 | )  |
|  Change      in Other Noncurrent Assets                                               |   |   | 3,434    |   |   |   | 3,846 |   |
|  Change      in Other Noncurrent Liabilities                                          |   |   | (17,106  | )      |   |   | (7,932 | )  |
|  Changes      in Certain Components of Working Capital:                               |   |   |     |   |   |   |   |   |
|           Accounts Receivable, Net                                     |   |   | 31,975   |   |   |   | 26,897 |   |
|           Fuel, Materials and Supplies                                 |   |   | (14,978  | )      |   |   | (11,126 | )  |
|           Accounts Payable                                             |   |   | 60,552   |   |   |   | 8,388 |   |
|           Accrued Taxes, Net                                           |   |   | (12,503  | )      |   |   | 36,445 |   |
|        Fuel Over/Under-Recovery, Net                                                  |   |   | (84,206  | )      |   |   | 1,293 |   |
|           Other Current Assets                                         |   |   | 7,296    |   |   |   | 12,928 |   |
|           Other Current Liabilities                                    |   |   | 4,518    |   |   |   | (15,030 | )  |
| Net      Cash Flows from Operating Activities                                              |   |   | 74,622   |   |   |   | 120,597 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (266,145 | )      |   |   | (250,409 | )  |
| Change      in Advances to Affiliates, Net                                                 |   |   | (300,525 | )      |   |   | - |   |
| Other                                                                                      |   |   | (2,439   | )      |   |   | (2,858 | )  |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (569,109 | )      |   |   | (253,267 | )  |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Capital      Contribution from Parent                                                      |   |   | 100,000  |   |   |   | 25,000 |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 396,446  |   |   |   | 247,496 |   |
| Change      in Short-term Debt, Net – Nonaffiliated                                  |   |   | 6,754    |   |   |   | 5,230 |   |
| Change      in Advances from Affiliates, Net                                               |   |   | (1,565   | )      |   |   | (135,010 | )  |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (3,703   | )      |   |   | (8,609 | )  |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (2,831   | )      |   |   | (2,383 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (114     | )      |   |   | (114 | )  |
| Net      Cash Flows from Financing Activities                                              |   |   | 494,987  |   |   |   | 131,610 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                  |   |   | 500      |   |   |   | (1,060 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 1,742    |   |   |   | 2,618 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 2,242    |   |   | $      | 1,558 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 19,848   |   |   | $      | 25,876 |   |
| Net      Cash Paid for Income Taxes                                                        |   |   | 10,276   |   |   |   | 10,617 |   |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 17,236   |   |   |   | 6,511 |   |
| Construction      Expenditures Included in Accounts Payable at June 30,                    |   |   | 68,670   |   |   |   | 38,630 |   |

----

|                                                      | Footnote      Reference |
|-----------------------------------------------------------|-------------------------|
|                                                      |                    |
| Significant      Accounting Matters                       | Note      1             |
| New      Accounting Pronouncements and Extraordinary Item | Note      2             |
| Rate      Matters                                         | Note      3             |
| Commitments,      Guarantees and Contingencies            | Note      4             |
| Benefit      Plans                                        | Note      6             |
| Business      Segments                                    | Note      7             |
| Income      Taxes                                         | Note      8             |
| Financing      Activities                                 | Note      9             |

----

| The      condensed notes to condensed financial statements that follow are a      combined presentation for the Registrant Subsidiaries.  The      following list indicates the registrants to which the footnotes      apply: |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                     |   |   |
| 1.                                                                                                                                                                                                                                       | Significant      Accounting Matters | APCo,      CSPCo, I&M, OPCo, PSO, SWEPCo |
| 2.                                                                                                                                                                                                                                       | New      Accounting Pronouncements and Extraordinary Item | APCo,      CSPCo, I&M, OPCo, PSO, SWEPCo |
| 3.                                                                                                                                                                                                                                       | Rate      Matters | APCo,      CSPCo, I&M, OPCo, PSO, SWEPCo |
| 4.                                                                                                                                                                                                                                       | Commitments,      Guarantees and Contingencies | APCo,      CSPCo, I&M, OPCo, PSO, SWEPCo |
| 5.                                                                                                                                                                                                                                       | Acquisition | CSPCo |
| 6.                                                                                                                                                                                                                                       | Benefit      Plans | APCo,      CSPCo, I&M, OPCo, PSO, SWEPCo |
| 7.                                                                                                                                                                                                                                       | Business      Segments | APCo,      CSPCo, I&M, OPCo, PSO, SWEPCo |
| 8.                                                                                                                                                                                                                                       | Income      Taxes | APCo,      CSPCo, I&M, OPCo, PSO, SWEPCo |
| 9.                                                                                                                                                                                                                                       | Financing      Activities | APCo,      CSPCo, I&M, OPCo, PSO,SWEPCo |

----

| 1. | SIGNIFICANT ACCOUNTING      MATTERS |
|----|-------------------------------------|

| 2.   | NEW ACCOUNTING      PRONOUNCEMENTS AND EXTRAORDINARYITEM |
|----------------|----------------------------------------------------------|

| APCo                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |
|-------------------------------------------------|--------|---------------------|--------|--------|--------------|--------|-----------|--------------|--------|--------|--------|--------|--------|--------|------------|
|                                            |   | Level      1        |   |   | Level      2 |   |      | Level      3 |   |   | Other  |   |   | Total  |       |
| Assets:                                         |   | (in      thousands) |   |
|                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |
| Risk      Management Assets:                    |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |
| Risk      Management Contracts (a)              |   | $                   | 35,609 |   |         | $      | 1,261,131 |         |   | $      | 10,761 |   |   | $      | (1,012,957 | ) |   | $ | 294,544 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 9,201     |         |   |   | -      |   |   |   | (4,967     | ) |   |   | 4,234 |   |
| Dedesignated      Risk Management Contracts (b) |   |                | -      |   |         |   | -         |         |   |   | -      |   |   |   | 14,916     |   |   |   | 14,916 |   |
| Total      Risk Management Assets               |   | $                   | 35,609 |   |         | $      | 1,270,332 |         |   | $      | 10,761 |   |   | $      | (1,003,008 | ) |   | $ | 313,694 |   |
|                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
| Liabilities:                                    |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
|                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
| Risk      Management Liabilities:               |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 37,928 |   |         | $      | 1,226,686 |         |   | $      | 29,321 |   |   | $      | (1,008,877 | ) |   | $ | 285,058 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 34,986    |         |   |   | -      |   |   |   | (4,967     | ) |   |   | 30,019 |   |
| DETM      Assignment (c)                        |   |                | -      |   |         |   | -         |         |   |   | -      |   |   |   | 7,116      |   |   |   | 7,116 |   |
| Total      Risk Management Liabilities          |   | $                   | 37,928 |   |         | $      | 1,261,672 |         |   | $      | 29,321 |   |   | $      | (1,006,728 | ) |   | $ | 322,193 |   |

| CSPCo                                           |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|-------------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                            |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                         |   | (in      thousands) |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Other      Cash Deposits (e)                    |   | $                   | 35,806 |   |         | $      | -       |         |   | $      | -      |   |   | $      | 1,169    |   |   | $ | 36,975 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Assets:                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 21,385 |   |         | $      | 692,082 |         |   | $      | 6,467  |   |   | $      | (557,082 | ) |   | $ | 162,852 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 4,503   |         |   |   | -      |   |   |   | (2,983   | ) |   |   | 1,520 |   |
| Dedesignated      Risk Management Contracts (b) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 8,958    |   |   |   | 8,958 |   |
| Total      Risk Management Assets               |   | $                   | 21,385 |   |         | $      | 696,585 |         |   | $      | 6,467  |   |   | $      | (551,107 | ) |   | $ | 173,330 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Total      Assets                               |   | $                   | 57,191 |   |         | $      | 696,585 |         |   | $      | 6,467  |   |   | $      | (549,938 | ) |   | $ | 210,305 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:               |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 22,778 |   |         | $      | 671,311 |         |   | $      | 17,589 |   |   | $      | (553,617 | ) |   | $ | 158,061 |   |
| Cash      Flow and Fair Value Hedges (b)        |   |                | -      |   |         |   | 21,011  |         |   |   | -      |   |   |   | (2,983   | ) |   |   | 18,028 |   |
| DETM      Assignment (c)                        |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 4,274    |   |   |   | 4,274 |   |
| Total      Risk Management Liabilities          |   | $                   | 22,778 |   |         | $      | 692,322 |         |   | $      | 17,589 |   |   | $      | (552,326 | ) |   | $ | 180,363 |   |

| I&M                                                 |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |
|---------------------------------------------------------|--------|---------------------|---------|--------|--------------|--------|-----------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                                    |   | Level      1        |    |   | Level      2 |   |      | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                                 |   | (in      thousands) |    |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |
| Risk      Management Assets:                            |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)                      |   | $                   | 20,545  |   |         | $      | 643,285   |         |   | $      | 6,215  |   |   | $      | (516,431 | ) |   | $ | 153,614 |   |
| Cash      Flow and Fair Value Hedges (a)                |   |                | -       |   |         |   | 4,326     |         |   |   | -      |   |   |   | (2,866   | ) |   |   | 1,460 |   |
| Dedesignated      Risk Management Contracts (b)         |   |                | -       |   |         |   | -         |         |   |   | -      |   |   |   | 8,606    |   |   |   | 8,606 |   |
| Total      Risk Management Assets                       |   | $                   | 20,545  |   |         | $      | 647,611   |         |   | $      | 6,215  |   |   | $      | (510,691 | ) |   | $ | 163,680 |   |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Spent      Nuclear Fuel and Decommissioning Trusts:     |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Cash      and Cash Equivalents (d)                      |   | $                   | -       |   |         | $      | 16,728    |         |   | $      | -      |   |   | $      | 12,246   |   |   | $ | 28,974 |   |
| Debt      Securities                                    |   |                | 326,416 |   |         |   | 507,611   |         |   |   | -      |   |   |   | -        |   |   |   | 834,027 |   |
| Equity      Securities                                  |   |                | 498,926 |   |         |   | -         |         |   |   | -      |   |   |   | -        |   |   |   | 498,926 |   |
| TotalSpent Nuclear Fuel and      Decommissioning Trusts |   | $                   | 825,342 |   |         | $      | 524,339   |         |   | $      | -      |   |   | $      | 12,246   |   |   | $ | 1,361,927 |   |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Total      Assets                                       |   | $                   | 845,887 |   |         | $      | 1,171,950 |         |   | $      | 6,215  |   |   | $      | (498,445 | ) |   | $ | 1,525,607 |   |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                            |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:                       |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)                      |   | $                   | 21,883  |   |         | $      | 623,352   |         |   | $      | 16,890 |   |   | $      | (512,683 | ) |   | $ | 149,442 |   |
| Cash      Flow and Fair Value Hedges (a)                |   |                | -       |   |         |   | 20,186    |         |   |   | -      |   |   |   | (2,866   | ) |   |   | 17,320 |   |
| DETM      Assignment (c)                                |   |                | -       |   |         |   | -         |         |   |   | -      |   |   |   | 4,107    |   |   |   | 4,107 |   |
| Total      Risk Management Liabilities                  |   | $                   | 21,883  |   |         | $      | 643,538   |         |   | $      | 16,890 |   |   | $      | (511,442 | ) |   | $ | 170,869 |   |

| OPCo                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |
|-------------------------------------------------|--------|---------------------|--------|--------|--------------|--------|-----------|--------------|--------|--------|--------|--------|--------|--------|------------|
|                                            |   | Level      1        |   |   | Level      2 |   |      | Level      3 |   |   | Other  |   |   | Total  |       |
| Assets:                                         |   | (in      thousands) |   |
|                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |
| Other      Cash Deposits (e)                    |   | $                   | 3,216  |   |         | $      | -         |         |   | $      | -      |   |   | $      | 2,182      |   |   | $ | 5,398 |   |
|                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
| Risk      Management Assets:                    |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 24,915 |   |         | $      | 1,255,573 |         |   | $      | 7,493  |   |   | $      | (1,038,518 | ) |   | $ | 249,463 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 5,259     |         |   |   | -      |   |   |   | (3,475     | ) |   |   | 1,784 |   |
| Dedesignated      Risk Management Contracts (b) |   |                | -      |   |         |   | -         |         |   |   | -      |   |   |   | 10,436     |   |   |   | 10,436 |   |
| Total      Risk Management Assets               |   | $                   | 24,915 |   |         | $      | 1,260,832 |         |   | $      | 7,493  |   |   | $      | (1,031,557 | ) |   | $ | 261,683 |   |
|                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
| Total      Assets                               |   | $                   | 28,131 |   |         | $      | 1,260,832 |         |   | $      | 7,493  |   |   | $      | (1,029,375 | ) |   | $ | 267,081 |   |
|                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
| Liabilities:                                    |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
|                                            |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
| Risk      Management Liabilities:               |   |                |   |   |         |   |      |         |   |   |   |   |   |   |       |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 26,538 |   |         | $      | 1,230,208 |         |   | $      | 20,738 |   |   | $      | (1,043,217 | ) |   | $ | 234,267 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 27,153    |         |   |   | -      |   |   |   | (3,475     | ) |   |   | 23,678 |   |
| DETM      Assignment (c)                        |   |                | -      |   |         |   | -         |         |   |   | -      |   |   |   | 4,979      |   |   |   | 4,979 |   |
| Total      Risk Management Liabilities          |   | $                   | 26,538 |   |         | $      | 1,257,361 |         |   | $      | 20,738 |   |   | $      | (1,041,713 | ) |   | $ | 262,924 |   |

| PSO                                      |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                     |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                  |   | (in      thousands) |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)       |   | $                   | 52,111 |   |         | $      | 562,955 |         |   | $      | 7      |   |   | $      | (515,708 | ) |   | $ | 99,365 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | -        |   |   |   | - |   |
| Total      Risk Management Assets        |   | $                   | 52,111 |   |         | $      | 562,955 |         |   | $      | 7      |   |   | $      | (515,708 | ) |   | $ | 99,365 |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:        |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)       |   | $                   | 51,180 |   |         | $      | 560,473 |         |   | $      | 30     |   |   | $      | (517,065 | ) |   | $ | 94,618 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | -        |   |   |   | - |   |
| DETM      Assignment (c)                 |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 195      |   |   |   | 195 |   |
| Total      Risk Management Liabilities   |   | $                   | 51,180 |   |         | $      | 560,473 |         |   | $      | 30     |   |   | $      | (516,870 | ) |   | $ | 94,813 |   |

| SWEPCo                                   |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                     |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                  |   | (in      thousands) |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)       |   | $                   | 61,460 |   |         | $      | 701,896 |         |   | $      | 5      |   |   | $      | (640,985 | ) |   | $ | 122,376 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | 80      |         |   |   | -      |   |   |   | (9       | ) |   |   | 71 |   |
| Total      Risk Management Assets        |   | $                   | 61,460 |   |         | $      | 701,976 |         |   | $      | 5      |   |   | $      | (640,994 | ) |   | $ | 122,447 |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:        |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)       |   | $                   | 60,361 |   |         | $      | 698,711 |         |   | $      | 50     |   |   | $      | (643,321 | ) |   | $ | 115,801 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | 13      |         |   |   | -      |   |   |   | (9       | ) |   |   | 4 |   |
| DETM      Assignment (c)                 |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 230      |   |   |   | 230 |   |
| Total      Risk Management Liabilities   |   | $                   | 60,361 |   |         | $      | 698,724 |         |   | $      | 50     |   |   | $      | (643,100 | ) |   | $ | 116,035 |   |

| (a) | Amounts      in “Other” column primarily represent counterparty netting of risk      management contracts and associated cash collateral under FSP FIN      39-1.                                                                                                                                                                                                              |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Dedesignated      Risk Management Contracts” are contracts that were originally MTM but were      subsequently elected as normal under SFAS 133.  At the time of      the normal election the MTM value was frozen and no longer fair      valued.  This will be amortized into Utility Operations Revenues      over the remaining life of the contract. |
| (c) | See      “Natural Gas Contracts with DETM” section of Note 16 in the 2007 Annual      Report.                                                                                                                                                                                                                                                                                  |
| (d) | Amounts      in “Other” column primarily represent accrued interest receivables to/from      financial institutions.  Level 2 amounts primarily represent      investments in money market funds.                                                                                                                                                                    |
| (e) | Amounts      in “Other” column primarily represent cash deposits with third      parties.  Level 1 amounts primarily represent investments in      money market funds.                                                                                                                                                                                               |

| Three      Months Ended June 30, 2008                                                                                                                                 |   | APCo                |    |   | CSPCo  |   |    | I&M |   |   | OPCo    |   |   | PSO    |    |   | SWEPCo |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|--------|--------|--------|---------|---------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|
|                                                                                                                                                                  |   | (in      thousands) |    |
| Balance      as of April 1, 2008                                                                                                                                      |   | $                   | (942    | )      |   | $      | (552    | )       |   | $      | (519    | )      |   | $      | (837    | )      |   | $      | (21 | ) |   | $ | (35 | ) |
| Realized      (Gain) Loss Included in Earnings   (or Changes in Net Assets)      (a)                                                                        |   |                | (532    | )      |   |   | (324    | )       |   |   | (315    | )      |   |   | (327    | )      |   |   | 1 |   |   |   | 4 |   |
| Unrealized      Gain (Loss) Included in Earnings   (or Changes in Net Assets)      Relating to   Assets Still Held at the Reporting Date      (a) |   |                | -       |   |   |   | 261     |    |   |   | -       |   |   |   | 161     |   |   |   | - |   |   |   | (5 | ) |
| Realized      and Unrealized Gains (Losses)   Included in Other Comprehensive      Income                                                                   |   |                | -       |   |   |   | -       |    |   |   | -       |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                                             |   |                | -       |   |   |   | -       |    |   |   | -       |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Transfers      in and/or out of Level 3 (b)                                                                                                                           |   |                | (2,186  | )      |   |   | (1,313  | )       |   |   | (1,261  | )      |   |   | (1,530  | )      |   |   | - |   |   |   | - |   |
| Changes      in Fair Value Allocated to    Regulated Jurisdictions      (c)                                                                       |   |                | (14,900 | )      |   |   | (9,194  | )       |   |   | (8,580  | )      |   |   | (10,712 | )      |   |   | (3 | ) |   |   | (9 | ) |
| Balance      as of June 30, 2008                                                                                                                                      |   | $                   | (18,560 | )      |   | $      | (11,122 | )       |   | $      | (10,675 | )      |   | $      | (13,245 | )      |   | $      | (23 | ) |   | $ | (45 | ) |

| Six      Months Ended June 30, 2008                                                                                                                                   |   | APCo                |    |   | CSPCo  |   |    | I&M |   |   | OPCo    |   |   | PSO    |    |   | SWEPCo |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|--------|--------|--------|---------|---------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|
|                                                                                                                                                                  |   | (in      thousands) |    |
| Balance      as of January 1, 2008                                                                                                                                    |   | $                   | (697    | )      |   | $      | (263    | )       |   | $      | (280    | )      |   | $      | (1,607  | )      |   | $      | (243 | ) |   | $ | (408 | ) |
| Realized      (Gain) Loss Included in Earnings   (or Changes in Net Assets)      (a)                                                                        |   |                | (467    | )      |   |   | (339    | )       |   |   | (312    | )      |   |   | 232     |   |   |   | 98 |   |   |   | 174 |   |
| Unrealized      Gain (Loss) Included in Earnings   (or Changes in Net Assets)      Relating to   Assets Still Held at the Reporting Date      (a) |   |                | -       |   |   |   | (1,138  | )       |   |   | -       |   |   |   | (2,019  | )      |   |   | - |   |   |   | (64 | ) |
| Realized      and Unrealized Gains (Losses)   Included in Other Comprehensive      Income                                                                   |   |                | -       |   |   |   | -       |    |   |   | -       |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                                             |   |                | -       |   |   |   | -       |    |   |   | -       |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Transfers      in and/or out of Level 3 (b)                                                                                                                           |   |                | (122    | )      |   |   | (188    | )       |   |   | (158    | )      |   |   | 861     |   |   |   | 232 |   |   |   | 375 |   |
| Changes      in Fair Value Allocated to    Regulated Jurisdictions      (c)                                                                       |   |                | (17,274 | )      |   |   | (9,194  | )       |   |   | (9,925  | )      |   |   | (10,712 | )      |   |   | (110 | ) |   |   | (122 | ) |
| Balance      as of June 30, 2008                                                                                                                                      |   | $                   | (18,560 | )      |   | $      | (11,122 | )       |   | $      | (10,675 | )      |   | $      | (13,245 | )      |   | $      | (23 | ) |   | $ | (45 | ) |

| (a) | Included      in revenues on the Condensed Statement of Income.                                                                                                                                                                                                                                                                                                                     |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Transfers      in and/or out of Level 3” represent existing assets or liabilities that      were either previously categorized as a higher level for which the inputs      to the model became unobservable or assets and liabilities that were      previously classified as level 3 for which the lowest significant input      became observable during the period. |
| (c) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected on the Condensed      Statements of Income.  These net gains (losses) are recorded as      regulatory assets/liabilities for those subsidiaries that operate in      regulated jurisdictions.              |

|    |   | Retained            |   |   |   |
|---------|--------|---------------------|--------|--------|--------|
|    |   | Earnings            |   | Tax    |   |
| Company |   | Reduction           |   | Amount |   |
|    |   | (in      thousands) |   |
| APCo    |   | $                   | 2,181  |   | $      | 1,175 |   |
| CSPCo   |   |                | 1,095  |   |   | 589 |   |
| I&M |   |                | 1,398  |   |   | 753 |   |
| OPCo    |   |                | 1,864  |   |   | 1,004 |   |
| PSO     |   |                | 1,107  |   |   | 596 |   |
| SWEPCo  |   |                | 1,156  |   |   | 622 |   |

| APCo                                         |   |                   |   |   |             |   |   |                                 |   |
|----------------------------------------------|--------|------------------------|--------|--------|------------------|--------|--------|--------------------------------------|--------|
|                                         |   | As      Reported for   |   |   |             |   |   |  As Reported      for      |   |
| Balance      Sheet                           |   | the      December 2007 |   |   | FIN      39-1    |   |   |  the June      2008   |   |
| Line      Description                        |   | 10-K                   |   |   | Reclassification |   |   |  10-Q                      |
| Current      Assets:                         |   | (in      thousands)    |
|   Risk      Management Assets      |   | $                      | 64,707 |   |             | $      | (1,752 | )                                    |   | $  |  62,955 |   |
|   Prepayments      and Other       |   |                   | 19,675 |   |             |   | (3,306 | )                                    |   |   | 16,369 |   |
| Long-term      Risk Management Assets        |   |                   | 74,954 |   |             |   | (2,588 | )                                    |   |   | 72,366 |   |
|                                         |   |                   |   |   |             |   |   |                                 |   |   |   |   |
| Current      Liabilities:                    |   |                   |   |   |             |   |   |                                 |   |   |   |   |
|   Risk      Management Liabilities |   |                   | 54,955 |   |             |   | (3,247 | )                                    |   |   | 51,708 |   |
|   Customer      Deposits           |   |                   | 50,260 |   |             |   | (4,340 | )                                    |   |   |  45,920 |   |
| Long-term      Risk Management Liabilities   |   |                   | 47,416 |   |             |   | (59    | )                                    |   |   | 47,357 |   |

| CSPCo                                        |   |                   |   |   |                   |   |   |                                   |   |    |
|----------------------------------------------|--------|------------------------|--------|--------|------------------------|--------|--------|----------------------------------------|--------|---------|
|                                         |   | As      Reported for   |   |   |                   |   |   |    As      Reported for |   |
| Balance      Sheet                           |   | the      December 2007 |   |   | FIN      39-1          |   |   |         the      June 2008   |   |
| Line      Description                        |   | 10-K                   |   |   |  Reclassification |   |   |   10-Q                       |   |
| Current      Assets:                         |   | (in      thousands)    |
|   Risk      Management Assets      |   | $                      | 34,564 |   |                   | $      | (1,006 | )                                      |   | $  | 33,558 |   |
|   Prepayments      and Other       |   |                   | 11,877 |   |                   |   | (1,917 | )                                      |   |    | 9,960 |   |
| Long-term      Risk Management Assets        |   |                   | 43,352 |   |                   |   | (1,500 | )                                      |   |    | 41,852 |   |
|                                         |   |                   |   |   |                   |   |   |                                   |   |    |   |   |
| Current      Liabilities:                    |   |                   |   |   |                   |   |   |                                   |   |    |   |   |
|   Risk      Management Liabilities |   |                   | 30,118 |   |                   |   | (1,881 | )                                      |   |    |  28,237 |   |
|   Customer      Deposits           |   |                   | 45,602 |   |                   |   | (2,507 | )                                      |   |    |  43,095 |   |
| Long-term      Risk Management Liabilities   |   |                   | 27,454 |   |                   |   | (35    | )                                      |   |    |  27,419 |   |

| I&M                                      |   |                   |   |   |             |   |   |                       |   |
|----------------------------------------------|--------|------------------------|--------|--------|------------------|--------|--------|----------------------------|--------|
|                                         |   | As      Reported for   |   |   |             |   |   | As      Reported for  |   |
| Balance      Sheet                           |   | the      December 2007 |   |   | FIN      39-1    |   |   | the      June 2008    |   |
| Line      Description                        |   | 10-K                   |   |   | Reclassification |   |   |  10-Q                 |   |
| Current      Assets:                         |   | (in      thousands)    |
|   Risk      Management Assets      |   | $                      | 33,334 |   |             | $      | (969   | )                          |   | $ |  32,365 |   |
|   Prepayments      and Other       |   |                   | 12,932 |   |             |   | (1,841 | )                          |   |   |  11,091 |   |
| Long-term      Risk Management Assets        |   |                   | 41,668 |   |             |   | (1,441 | )                          |   |   |  40,227 |   |
|                                         |   |                   |   |   |             |   |   |                       |   |   |   |   |
| Current      Liabilities:                    |   |                   |   |   |             |   |   |                       |   |   |   |   |
|   Risk      Management Liabilities |   |                   | 29,078 |   |             |   | (1,807 | )                          |   |   |  27,271 |   |
|   Customer      Deposits           |   |                   | 28,855 |   |             |   | (2,410 | )                          |   |   |  26,445 |   |
| Long-term      Risk Management Liabilities   |   |                   | 26,382 |   |             |   | (34    | )                          |   |   |  26,348 |   |

| OPCo                                         |   |                   |   |   |             |   |   |                       |   |
|----------------------------------------------|--------|------------------------|--------|--------|------------------|--------|--------|----------------------------|--------|
|                                         |   | As      Reported for   |   |   |             |   |   | As      Reported for  |   |
| Balance      Sheet                           |   | the      December 2007 |   |   | FIN      39-1    |   |   | the      June 2008    |   |
| Line      Description                        |   | 10-K                   |   |   | Reclassification |   |   |  10-Q                 |   |
| Current      Assets:                         |   | (in      thousands)    |
|   Risk      Management Assets      |   | $                      | 45,490 |   |             | $      | (1,254 | )                          |   | $ |  44,236 |   |
|   Prepayments      and Other       |   |                   | 20,532 |   |             |   | (2,232 | )                          |   |   |  18,300 |   |
| Long-term      Risk Management Assets        |   |                   | 51,334 |   |             |   | (1,748 | )                          |   |   |  49,586 |   |
|                                         |   |                   |   |   |             |   |   |                       |   |   |   |   |
| Current      Liabilities:                    |   |                   |   |   |             |   |   |                       |   |   |   |   |
|   Risk      Management Liabilities |   |                   | 42,740 |   |             |   | (2,192 | )                          |   |   |  40,548 |   |
|   Customer      Deposits           |   |                   | 33,615 |   |             |   | (3,002 | )                          |   |   |  30,613 |   |
| Long-term      Risk Management Liabilities   |   |                   | 32,234 |   |             |   | (40    | )                          |   |   |  32,194 |   |

| PSO                                          |   |                   |   |   |             |   |   |                       |   |
|----------------------------------------------|--------|------------------------|--------|--------|------------------|--------|--------|----------------------------|--------|
|                                         |   | As      Reported for   |   |   |             |   |   | As      Reported for  |   |
| Balance      Sheet                           |   | the      December 2007 |   |   | FIN      39-1    |   |   | the      June 2008    |   |
| Line      Description                        |   | 10-K                   |   |   | Reclassification |   |   |  10-Q                 |   |
| Current      Assets:                         |   | (in      thousands)    |
|   Risk      Management Assets      |   | $                      | 33,338 |   |             | $      | (30    | )                          |   | $ | 33,308 |   |
|   Margin      Deposits             |   |                   | 9,119  |   |             |   | (139   | )                          |   |   | 8,980 |   |
| Long-term      Risk Management Assets        |   |                   | 3,376  |   |             |   | (18    | )                          |   |   | 3,358 |   |
|                                         |   |                   |   |   |             |   |   |                       |   |   |   |   |
| Current      Liabilities:                    |   |                   |   |   |             |   |   |                       |   |   |   |   |
|   Risk      Management Liabilities |   |                   | 27,151 |   |             |   | (33    | )                          |   |   | 27,118 |   |
|   Customer      Deposits           |   |                   | 41,525 |   |             |   | (48    | )                          |   |   | 41,477 |   |
| Long-term      Risk Management Liabilities   |   |                   | 2,914  |   |             |   | (106   | )                          |   |   | 2,808 |   |

| SWEPCo                                       |   |                   |   |   |             |   |   |                       |   |
|----------------------------------------------|--------|------------------------|--------|--------|------------------|--------|--------|----------------------------|--------|
|                                         |   | As      Reported for   |   |   |             |   |   | As      Reported for  |   |
| Balance      Sheet                           |   | the      December 2007 |   |   | FIN      39-1    |   |   | the      June 2008    |   |
| Line      Description                        |   | 10-K                   |   |   | Reclassification |   |   |  10-Q                 |   |
| Current      Assets:                         |   | (in      thousands)    |
|   Risk      Management Assets      |   | $                      | 39,893 |   |             | $      | (43    | )                          |   | $ | 39,850 |   |
|   Margin      Deposits             |   |                   | 10,814 |   |             |   | (164   | )                          |   |   | 10,650 |   |
| Long-term      Risk Management Assets        |   |                   | 4,095  |   |             |   | (22    | )                          |   |   | 4,073 |   |
|                                         |   |                   |   |   |             |   |   |                       |   |   |   |   |
| Current      Liabilities:                    |   |                   |   |   |             |   |   |                       |   |   |   |   |
|   Risk      Management Liabilities |   |                   | 32,668 |   |             |   | (39    | )                          |   |   | 32,629 |   |
|   Customer      Deposits           |   |                   | 37,537 |   |             |   | (64    | )                          |   |   | 37,473 |   |
| Long-term      Risk Management Liabilities   |   |                   | 3,460  |   |             |   | (126   | )                          |   |   | 3,334 |   |

|    | June      30, 2008         |   |
|---------|----------------------------|--------|
|    | Cash      Collateral       |   | Cash      Collateral |   |
|    | Received                   |   | Paid |   |
|    | Netted      Against        |   | Netted      Against |   |
|    |  Risk      Management |   | Risk      Management |   |
|    | Assets                     |   | Liabilities |   |
|    | (in      thousands)        |   |
| APCo    | $                          | 23,799 |   | $ | 19,719 |   |
| CSPCo   |                       | 14,288 |   |   | 10,823 |   |
| I&M |                       | 13,724 |   |   | 9,976 |   |
| OPCo    |                       | 16,688 |   |   | 21,387 |   |
| PSO     |                       | 1,744  |   |   | 3,101 |   |
| SWEPCo  |                       | 2,060  |   |   | 4,396 |   |

| 3. | RATE      MATTERS |
|----|-------------------|

| Company |   | (in      millions) |   |
|---------|--------|--------------------|--------|
| APCo    |   | $                  | 70.2   |   |
| CSPCo   |   |               | 38.8   |   |
| I&M |   |               | 41.3   |   |
| OPCo    |   |               | 53.3   |   |

|    |   | 2007               |   |   | 2006   |   |
|---------|--------|--------------------|--------|--------|--------|--------|
| Company |   | (in      millions) |   |
| APCo    |   | $                  | 1.7    |   |   | $      | 12.0 |   |
| CSPCo   |   |               | 0.9    |   |   |   | 6.7 |   |
| I&M |   |               | 1.0    |   |   |   | 7.0 |   |
| OPCo    |   |               | 1.3    |   |   |   | 9.1 |   |

| 4. | COMMITMENTS,      GUARANTEES AND CONTINGENCIES |
|----|------------------------------------------------|

|                            |   |                |    |     |               | Borrower |
|---------------------------------|--------|---------------------|---------|----------|--------------------|----------|
| Company                         |   | Amount              |    | Maturity |               | Sublimit |
|                            |   | (in      thousands) |    |     |               |     |   |
| $1.5      billion LOC:          |   |                |    |     |               |     |   |   |
|     I&M |   | $                   | 1,113   |     | March      2009    |     |   | N/A |
|     SWEPCo  |   |                | 4,000   |     | December      2008 |     |   | N/A |
|                            |   |                |    |     |               |     |   |   |
| $650      million LOC:          |   |                |    |     |               |     |   |   |
|     APCo    |   | $                   | 126,717 |     | June      2009     |     | $ | 300,000 |
|     I&M |   |                | 77,886  |     | May      2009      |     |   | 230,000 |
|     OPCo    |   |                | 166,899 |     | June      2009     |     |   | 400,000 |

|    |   | Maximum            |   |
|---------|--------|--------------------|--------|
|    |   | Potential          |   |
|    |   | Loss               |   |
| Company |   | (in      millions) |   |
| APCo    |   | $                  | 10     |   |
| CSPCo   |   |               | 5      |   |
| I&M |   |               | 7      |   |
| OPCo    |   |               | 10     |   |
| PSO     |   |               | 6      |   |
| SWEPCo  |   |               | 6      |   |

| 5. | ACQUISITION |
|----|-------------|

|  6. | BENEFIT      PLANS |
|----------|--------------------|

|                                       |                             |   | Other      Postretirement        |   |
|--------------------------------------------|----------------------------------|--------|----------------------------------|--------|
|                                       | Pension      Plans               |   | Benefit      Plans               |   |
|                                       | Three      Months Ended June 30, |   | Three      Months Ended June 30, |   |
|                                       | 2008                             |   | 2007                             |   | 2008 |   | 2007 |   |
|                                       | (in      millions)               |   |
| Service      Cost                          | $                                | 25     |                             | $      | 23 |   | $ | 11 |   | $ | 11 |   |
| Interest      Cost                         |                             | 62     |                             |   | 57 |   |   | 28 |   |   | 26 |   |
| Expected      Return on Plan Assets        |                             | (84    | )                                |   | (82 | ) |   | (28 | ) |   | (26 | ) |
| Amortization      of Transition Obligation |                             | -      |                             |   | - |   |   | 7 |   |   | 7 |   |
| Amortization      of Net Actuarial Loss    |                             | 10     |                             |   | 14 |   |   | 2 |   |   | 3 |   |
| Net      Periodic Benefit Cost             | $                                | 13     |                             | $      | 12 |   | $ | 20 |   | $ | 21 |   |

|                                       |                           |   | Other      Postretirement      |   |
|--------------------------------------------|--------------------------------|--------|--------------------------------|--------|
|                                       | Pension      Plans             |   | Benefit      Plans             |   |
|                                       | Six      Months Ended June 30, |   | Six      Months Ended June 30, |   |
|                                       | 2008                           |   | 2007                           |   | 2008 |   | 2007 |   |
|                                       | (in      millions)             |   |
| Service      Cost                          | $                              | 50     |                           | $      | 47 |   | $ | 21 |   | $ | 21 |   |
| Interest      Cost                         |                           | 125    |                           |   | 116 |   |   | 56 |   |   | 52 |   |
| Expected      Return on Plan Assets        |                           | (168   | )                              |   | (167 | ) |   | (56 | ) |   | (52 | ) |
| Amortization      of Transition Obligation |                           | -      |                           |   | - |   |   | 14 |   |   | 14 |   |
| Amortization      of Net Actuarial Loss    |                           | 19     |                           |   | 29 |   |   | 5 |   |   | 6 |   |
| Net      Periodic Benefit Cost             | $                              | 26     |                           | $      | 25 |   | $ | 40 |   | $ | 41 |   |

|    |   |                             |   | Other      Postretirement        |   |
|---------|--------|----------------------------------|--------|----------------------------------|--------|
|    |   | Pension      Plans               |   | Benefit      Plans               |   |
|    |   | Three      Months Ended June 30, |   | Three      Months Ended June 30, |   |
|    |   | 2008                             |   | 2007                             |   | 2008 |   | 2007 |   |
| Company |   | (in      thousands)              |   |
| APCo    |   | $                                | 834    |                             | $      | 842 |   | $ | 3,700 |   | $ | 3,560 |   |
| CSPCo   |   |                             | (349   | )                                |   | (258 | ) |   | 1,499 |   |   | 1,491 |   |
| I&M |   |                             | 1,820  |                             |   | 1,900 |   |   | 2,423 |   |   | 2,531 |   |
| OPCo    |   |                             | 320    |                             |   | 245 |   |   | 2,817 |   |   | 2,801 |   |
| PSO     |   |                             | 508    |                             |   | 424 |   |   | 1,387 |   |   | 1,430 |   |
| SWEPCo  |   |                             | 936    |                             |   | 747 |   |   | 1,376 |   |   | 1,419 |   |

|    |   |                           |   | Other      Postretirement      |   |
|---------|--------|--------------------------------|--------|--------------------------------|--------|
|    |   | Pension      Plans             |   | Benefit      Plans             |   |
|    |   | Six      Months Ended June 30, |   | Six      Months Ended June 30, |   |
|    |   | 2008                           |   | 2007                           |   | 2008 |   | 2007 |   |
| Company |   | (in      thousands)            |   |
| APCo    |   | $                              | 1,669  |                           | $      | 1,684 |   | $ | 7,399 |   | $ | 7,120 |   |
| CSPCo   |   |                           | (698   | )                              |   | (515 | ) |   | 2,997 |   |   | 2,982 |   |
| I&M |   |                           | 3,641  |                           |   | 3,800 |   |   | 4,846 |   |   | 5,061 |   |
| OPCo    |   |                           | 639    |                           |   | 490 |   |   | 5,633 |   |   | 5,603 |   |
| PSO     |   |                           | 1,016  |                           |   | 848 |   |   | 2,774 |   |   | 2,861 |   |
| SWEPCo  |   |                           | 1,871  |                           |   | 1,493 |   |   | 2,752 |   |   | 2,838 |   |

|  7. | BUSINESS      SEGMENTS |
|----------|------------------------|

|  8. | INCOME      TAXES |
|----------|-------------------|

|       |   |                         |   | Principal           |    | Interest |     | Due    |
|------------|--------|------------------------------|--------|---------------------|---------|----------|----------|--------|
| Company    |   | Type      of Debt            |   | Amount              |    | Rate     |     | Date   |
|       |   |                         |   | (in      thousands) |    | (%)      |     |   |
| Issuances: |   |                         |   |                |    |     |     |   |   |
| APCo       |   | Pollution      Control Bonds |   | $                   | 75,000  |     | Variable |   | 2036 |
| APCo       |   | Pollution      Control Bonds |   |                | 50,275  |     | Variable |   | 2036 |
| APCo       |   | Senior      Unsecured Notes  |   |                | 500,000 |     | 7.00     |   | 2038 |
| CSPCo      |   | Senior      Unsecured Notes  |   |                | 350,000 |     | 6.05     |   | 2018 |
| I&M    |   | Pollution      Control Bonds |   |                | 25,000  |     | Variable |   | 2019 |
| I&M    |   | Pollution      Control Bonds |   |                | 52,000  |     | Variable |   | 2021 |
| I&M    |   | Pollution      Control Bonds |   |                | 40,000  |     | 5.25     |   | 2025 |
| OPCo       |   | Pollution      Control Bonds |   |                | 50,000  |     | Variable |   | 2014 |
| OPCo       |   | Pollution      Control Bonds |   |                | 50,000  |     | Variable |   | 2014 |
| OPCo       |   | Pollution      Control Bonds |   |                | 65,000  |     | Variable |   | 2036 |
| SWEPCo     |   | Senior      Unsecured Notes  |   |                | 400,000 |     | 6.45     |   | 2019 |

|                                                                  |   |                         |   | Principal           |    | Interest |     | Due    |
|-----------------------------------------------------------------------|--------|------------------------------|--------|---------------------|---------|----------|----------|--------|
| Company                                                               |   | Type      of Debt            |   | Amount      Paid    |    | Rate     |     | Date   |
|                                                                  |   |                         |   | (in      thousands) |    | (%)      |     |   |
| Retirements      and Principal     Payments: |   |                         |   |                |    |     |     |   |   |
| APCo                                                                  |   | Senior      Unsecured Notes  |   | $                   | 200,000 |     | 3.60     |   | 2008 |
| APCo                                                                  |   | Pollution      Control Bonds |   |                | 40,000  |     | Variable |   | 2019 |
| APCo                                                                  |   | Pollution      Control Bonds |   |                | 30,000  |     | Variable |   | 2019 |
| APCo                                                                  |   | Pollution      Control Bonds |   |                | 17,500  |     | Variable |   | 2021 |
| APCo                                                                  |   | Pollution      Control Bonds |   |                | 50,275  |     | Variable |   | 2036 |
| APCo                                                                  |   | Pollution      Control Bonds |   |                | 75,000  |     | Variable |   | 2037 |
| APCo                                                                  |   | Other                        |   |                | 7       |     | 13.718   |   | 2026 |
| CSPCo                                                                 |   | Senior      Unsecured Notes  |   |                | 52,000  |     | 6.51     |   | 2008 |
| CSPCo                                                                 |   | Senior      Unsecured Notes  |   |                | 60,000  |     | 6.55     |   | 2008 |
| CSPCo                                                                 |   | Pollution      Control Bonds |   |                | 48,550  |     | Variable |   | 2038 |
| CSPCo                                                                 |   | Pollution      Control Bonds |   |                | 43,695  |     | Variable |   | 2038 |
| I&M                                                               |   | Pollution      Control Bonds |   |                | 45,000  |     | Variable |   | 2009 |
| I&M                                                               |   | Pollution      Control Bonds |   |                | 25,000  |     | Variable |   | 2019 |
| I&M                                                               |   | Pollution      Control Bonds |   |                | 52,000  |     | Variable |   | 2021 |
| I&M                                                               |   | Pollution      Control Bonds |   |                | 50,000  |     | Variable |   | 2025 |
| I&M                                                               |   | Pollution      Control Bonds |   |                | 40,000  |     | Variable |   | 2025 |
| I&M                                                               |   | Pollution      Control Bonds |   |                | 50,000  |     | Variable |   | 2025 |
| OPCo                                                                  |   | Notes      Payable           |   |                | 1,463   |     | 6.81     |   | 2008 |
| OPCo                                                                  |   | Notes      Payable           |   |                | 6,000   |     | 6.27     |   | 2009 |
| OPCo                                                                  |   | Pollution      Control Bonds |   |                | 50,000  |     | Variable |   | 2014 |
| OPCo                                                                  |   | Pollution      Control Bonds |   |                | 50,000  |     | Variable |   | 2016 |
| OPCo                                                                  |   | Pollution      Control Bonds |   |                | 50,000  |     | Variable |   | 2022 |
| OPCo                                                                  |   | Pollution      Control Bonds |   |                | 35,000  |     | Variable |   | 2022 |
| OPCo                                                                  |   | Pollution      Control Bonds |   |                | 65,000  |     | Variable |   | 2036 |
| PSO                                                                   |   | Pollution      Control Bonds |   |                | 33,700  |     | Variable |   | 2014 |
| SWEPCo                                                                |   | Notes      Payable           |   |                | 1,500   |     | Variable |   | 2008 |
| SWEPCo                                                                |   | Notes      Payable           |   |                | 2,203   |     | 4.47     |   | 2011 |

|    |   |                |   | Remarketed      at    |   |               |                |   | Remarketed      at    |   |               |                |    | Remains      at   |   |               |   |
|---------|--------|---------------------|--------|-----------------------|--------|--------------------|---------------------|--------|-----------------------|--------|--------------------|---------------------|---------|-------------------|--------|--------------------|--------|
|    |   |                |   | Fixed      Rates      |   |               |                |   | Variable      Rates   |   |               |                |    | Auction      Rate |   |               |   |
|    |   |                |   | During      the First |   |               |                |   | During      the First |   | Variable      Rate |                |    | at                |   | Held      by       |   |
|    |   | Retired      in     |   | Six      Months of    |   | Fixed      Rate at |                |   | Six      Months of    |   | at                 |                |    | June      30,     |   | Trustee      at    |   |
|    |   | 2008                |   | 2008                  |   | June      30, 2008 |                |   | 2008                  |   | June      30, 2008 |                |    | 2008              |   | June      30, 2008 |   |
| Company |   | (in      thousands) |   |                  |   |               | (in      thousands) |   |                  |   |               | (in      thousands) |    |
| APCo    |   | $                   | -      |                  | $      | -                  |                |   | -                     | %      |               | $                   | 75,000  |              |   | 1.62               | %      |   | $ | - |   | $ | 87,500 |   |
| APCo    |   |                | -      |                  |   | -                  |                |   | -                     | %      |               |                | 50,275  |              |   | 1.68               | %      |   |   | - |   |   | - |   |
| CSPCo   |   |                | -      |                  |   | 56,000             |                |   | 5.10                  | %      |               |                | -       |              |   | -                  | %      |   |   | - |   |   | 92,245 |   |
| CSPCo   |   |                | -      |                  |   | 44,500             |                |   | 4.85                  | %      |               |                | -       |              |   | -                  | %      |   |   | - |   |   | - |   |
| I&M |   |                | 45,000 |                  |   | 40,000             |                |   | 5.25                  | %      |               |                | 52,000  |              |   | 1.57               | %      |   |   | - |   |   | 100,000 |   |
| I&M |   |                | -      |                  |   | -                  |                |   | -                     | %      |               |                | 25,000  |              |   | 1.50               | %      |   |   | - |   |   | - |   |
| OPCo    |   |                | -      |                  |   | -                  |                |   | -                     | %      |               |                | 65,000  |              |   | 1.60               | %      |   |   | 218,000 |   |   | 85,000 |   |
| OPCo    |   |                | -      |                  |   | -                  |                |   | -                     | %      |               |                | 50,000  |              |   | 1.45               | %      |   |   | - |   |   | - |   |
| OPCo    |   |                | -      |                  |   | -                  |                |   | -                     | %      |               |                | 50,000  |              |   | 1.47               | %      |   |   | - |   |   | - |   |
| PSO     |   |                | -      |                  |   | -                  |                |   | -                     | %      |               |                | -       |              |   | -                  | %      |   |   | - |   |   | 33,700 |   |
| SWEPCo  |   |                | -      |                  |   | 81,700             |                |   | 4.95                  | %      |               |                | -       |              |   | -                  | %      |   |   | 94,635 |   |   | - |   |
|    |   |                |   |                  |   |               |                |   |                  |   |               |                |    |              |   |               |   |   |   |   |   |   |   |   |
| Total   |   | $                   | 45,000 |                  | $      | 222,200            |                |   |                  |   |               | $                   | 367,275 |              |   |               |   |   | $ | 312,635 |   | $ | 398,445 |   |

|    |   |                |    |            |   |              |   |               |    | Loans                 |   |       |   |
|---------|--------|---------------------|---------|-----------------|--------|-------------------|--------|--------------------|---------|-----------------------|--------|------------|--------|
|    |   | Maximum             |    | Maximum         |   | Average           |   | Average            |    | (Borrowings)          |   | Authorized |   |
|    |   | Borrowings          |    | Loans      to   |   | Borrowings        |   | Loans      to      |    | to/from      Utility  |   | Short-Term |   |
|    |   | from      Utility   |    | Utility         |   | from      Utility |   | Utility      Money |    | Money      Pool as of |   | Borrowing  |   |
|    |   | Money      Pool     |    | Money      Pool |   | Money      Pool   |   | Pool               |    | June      30, 2008    |   | Limit      |   |
| Company |   | (in      thousands) |    |
| APCo    |   | $                   | 307,226 |            | $      | 269,987           |   | $                  | 226,292 |                  | $      | 187,192    |   | $ | (103,802 | ) |   | $ | 600,000 |   |
| CSPCo   |   |                | 238,172 |            |   | 150,358           |   |               | 157,569 |                  |   | 65,413     |   |   | 25,199 |   |   |   | 350,000 |   |
| I&M |   |                | 345,064 |            |   | -                 |   |               | 174,380 |                  |   | -          |   |   | (272,707 | ) |   |   | 500,000 |   |
| OPCo    |   |                | 415,951 |            |   | -                 |   |               | 165,436 |                  |   | -          |   |   | (173,833 | ) |   |   | 600,000 |   |
| PSO     |   |                | 128,114 |            |   | 59,384            |   |               | 61,023  |                  |   | 29,811     |   |   | (110,981 | ) |   |   | 300,000 |   |
| SWEPCo  |   |                | 168,495 |            |   | 300,525           |   |               | 87,426  |                  |   | 273,118    |   |   | 300,525 |   |   |   | 350,000 |   |

|                       |   | Six      Months Ended June 30, |   |
|----------------------------|--------|--------------------------------|--------|
|                       |   | 2008                           |   |   | 2007 |   |
| Maximum      Interest Rate |   |                           | 5.37   | % |   |   | 5.46 | % |
| Minimum      Interest Rate |   |                           | 2.91   | % |   |   | 5.30 | % |

|    |   | Average      Interest Rate for Funds |   |   | Average      Interest Rate for Funds |   |
|---------|--------|--------------------------------------|--------|--------|--------------------------------------|--------|
|    |   | Borrowed      from                   |   |   | Loaned      to                       |   |
|    |   | the      Utility Money Pool for the  |   |   | the      Utility Money Pool for the  |   |
|    |   | Six      Months Ended June 30,       |   |   | Six      Months Ended June 30,       |   |
|    |   | 2008                                 |   |   | 2007                                 |   |   | 2008 |   |   | 2007 |   |
| Company |   |                                 |   |
| APCo    |   |                                 | 3.86   | %      |                                 | 5.36   | % |   | 3.25 | % |   | - | % |
| CSPCo   |   |                                 | 3.66   | %      |                                 | 5.37   | % |   | 2.93 | % |   | 5.33 | % |
| I&M |   |                                 | 3.30   | %      |                                 | 5.35   | % |   | - | % |   | - | % |
| OPCo    |   |                                 | 3.39   | %      |                                 | 5.35   | % |   | - | % |   | 5.43 | % |
| PSO     |   |                                 | 3.03   | %      |                                 | 5.36   | % |   | 4.53 | % |   | - | % |
| SWEPCo  |   |                                 | 3.36   | %      |                                 | 5.36   | % |   | 2.93 | % |   | 5.34 | % |

|    |   |                                              |   | June      30, 2008  |   | December      31, 2007 |   |
|---------|--------|---------------------------------------------------|--------|---------------------|--------|------------------------|--------|
|    |   |                                              |   | Outstanding         |   | Interest               |   | Outstanding |   | Interest |   |
|    |   | Type      of Debt                                 |   | Amount              |   | Rate                   |   | Amount |   | Rate |   |
| Company |   |                                              |   | (in      thousands) |   |                   |   | (in      thousands) |   |   |   |
| OPCo    |   | Commercial      Paper – JMG                 |   | $                   | -      |                   | -      | % | $ | 701 |   | 5.35 | % |
| SWEPCo  |   | Line      of Credit – Sabine Mining Company |   |                | 7,039  |                   | 3.25   | % |   | 285 |   | 5.25 | % |

----

COMBINEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF REGISTRANTSUBSIDIARIES

|    |   |                 |   |                 |   | LOC      Amount    |   |
|---------|--------|----------------------|--------|----------------------|--------|--------------------|--------|
|    |   |                 |   |                 |   | Outstanding        |   |
|    |   | $650      million    |   | $350      million    |   | Against            |   |
|    |   | Credit      Facility |   | Credit      Facility |   | $650      million  |   |
|    |   | Borrowing/LOC        |   | Borrowing/LOC        |   | Agreement      at  |   |
|    |   | Limit                |   | Limit                |   | June      30, 2008 |   |
| Company |   | (in      millions)   |   |
| APCo    |   |                 | $      | 300                  |   |               | $      | 150 |   |   | $ | 127 |   |
| CSPCo   |   |                 |   | 230                  |   |               |   | 120 |   |   |   | - |   |
| I&M |   |                 |   | 230                  |   |               |   | 120 |   |   |   | 77 |   |
| OPCo    |   |                 |   | 400                  |   |               |   | 200 |   |   |   | 167 |   |
| PSO     |   |                 |   | 65                   |   |               |   | 35 |   |   |   | - |   |
| SWEPCo  |   |                 |   | 230                  |   |               |   | 120 |   |   |   | - |   |

|    |   |               |   | Remarketed      at    |   |                 |   |               |   |
|---------|--------|--------------------|--------|-----------------------|--------|----------------------|--------|--------------------|--------|
|    |   |               |   | Fixed      or         |   |                 |   |               |   |
|    |   |               |   | Variable      Rates   |   | Remains      in      |   | Held               |   |
|    |   | Retired            |   | During      the First |   | Auction      Rate at |   | by      Trustee at |   |
|    |   | in      2008       |   | Half      of 2008     |   | June      30, 2008   |   | June      30, 2008 |   |
| Company |   | (in      millions) |   |
| APCo    |   |               | $      | -                     |   |                 | $      | 125                |   |   | $ | - |   |   | $ | 88 |   |
| CSPCo   |   |               |   | -                     |   |                 |   | 101                |   |   |   | - |   |   |   | 92 |   |
| I&M |   |               |   | 45                    |   |                 |   | 117                |   |   |   | - |   |   |   | 100 |   |
| OPCo    |   |               |   | -                     |   |                 |   | 165                |   |   |   | 218 |   |   |   | 85 |   |
| PSO     |   |               |   | -                     |   |                 |   | -                  |   |   |   | - |   |   |   | 34 |   |
| SWEPCo  |   |               |   | -                     |   |                 |   | 82                 |   |   |   | 95 |   |   |   | - |   |

|    |   | Estimated      Construction Expenditures |   |
|---------|--------|------------------------------------------|--------|
|    |   | 2009                                     |   |   | 2010 |   |
| Company |   | (in      millions)                       |   |
| APCo    |   | $                                        | 583.2  |   |   | $ | 474.4 |   |
| CSPCo   |   |                                     | 311.7  |   |   |   | 308.3 |   |
| I&M |   |                                     | 457.7  |   |   |   | 496.8 |   |
| OPCo    |   |                                     | 441.1  |   |   |   | 410.9 |   |
| PSO     |   |                                     | 257.2  |   |   |   | 419.2 |   |
| SWEPCo  |   |                                     | 710.3  |   |   |   | 681.0 |   |

|       |   |            |   |               |   |               |   |               |   |           |   |            |   |     |    |        | Commercial |
|------------|--------|-----------------|--------|--------------------|--------|--------------------|--------|--------------------|--------|----------------|--------|-----------------|--------|----------|---------|-------------|------------|
|       |   |            |   |               |   | Total              |   |               |   |           |   |            |   |     | Nominal |        | Operation  |
| Operating  |   | Project         |   |               |   | Projected          |   |               |   |           |   |            |   |     | MW      |        | Date       |
| Company    |   | Name            |   | Location           |   | Cost      (a)      |   | CWIP      (b)      |   | Fuel      Type |   | Plant      Type |   | Capacity |    | (Projected) |
|       |   |            |   |               |   | (in      millions) |   | (in      millions) |   |           |   |            |   |     |    |        |
| PSO        |   | Southwestern    | (c)    | Oklahoma           |   |               | $      | 56                 |   |           |   | $               | -      |     |    | Gas         |       | Simple-cycle |   |   | 150 |   |   | 2008 |
| PSO        |   | Riverside       | (d)    | Oklahoma           |   |               |   | 58                 |   |           |   |            | -      |     |    | Gas         |       | Simple-cycle |   |   | 150 |   |   | 2008 |
| AEGCo      |   | Dresden         | (e)    | Ohio               |   |               |   | 309                |   | (e)            |   |            | 119    |     |    | Gas         |       | Combined-cycle |   |   | 580 |   |   | 2010 |
| SWEPCo     |   | Stall           |   | Louisiana          |   |               |   | 378                |   |           |   |            | 106    |     |    | Gas         |       | Combined-cycle |   |   | 500 |   |   | 2010 |
| SWEPCo     |   | Turk            | (f)    | Arkansas           |   |               |   | 1,522              |   | (f)            |   |            | 407    |     |    | Coal        |       | Ultra-supercritical |   |   | 600 |   | (f) | 2012 |
| APCo       |   | Mountaineer     | (g)    | West      Virginia |   |               |   | 2,230              |   | (g)            |   |            | -      |     |    | Coal        |       | IGCC |   |   | 629 |   |   | 2012(g) |
| CSPCo/OPCo |   | Great      Bend | (g)    | Ohio               |   |               |   | 2,700              |   | (g)            |   |            | -      |     |    | Coal        |       | IGCC |   |   | 629 |   |   | 2017(g) |

| (a) | Amount      excludes AFUDC.                                                                                                                                                                                                                                                                                                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amount      includes AFUDC.  Turk’s CWIP includes joint owners’      share.                                                                                                                                                                                                                                                   |
| (c) | Southwestern      Units were placed in service on February 29, 2008.                                                                                                                                                                                                                                                                                |
| (d) | The      final Riverside Unit was placed in service on June 15,    2008.                                                                                                                                                                                                                                                                            |
| (e) | In      September 2007, AEGCo purchased the partially completed Dresden plant from      Dresden Energy LLC, a subsidiary of Dominion Resources, Inc., for $85      million, which is included in the “Total Projected Cost” section      above.                                                                                         |
| (f) | SWEPCo      plans to own approximately 73%, or 440 MW, totaling $1,110 million in      capital investment.  The increase in the cost estimate disclosed      in the 2007 Annual Report relates to cost escalations due to the delay in      receipt of permits and approvals.  See “Turk Plant” section      below. |
| (g) | Subject      to revision; construction of IGCC plants deferred pending regulatory      approval.  See “IGCC Plants” section  below.                                                                                                                                                                                           |

| · | Requirements      under the CAA to reduce emissions of SO2,      NOx,      particulate matter (PM) and mercury from fossil fuel-fired power plants;      and |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Requirements      under the Clean Water Act (CWA) to reduce the impacts of water intake      structures on aquatic species at certain power  plants.         |

|    |   | Estimated          |   |
|---------|--------|--------------------|--------|
|    |   | Compliance         |   |
|    |   | Investments        |   |
| Company |   | (in      millions) |   |
| APCo    |   |               | $      | 21 |   |
| CSPCo   |   |               |   | 19 |   |
| I&M |   |               |   | 118 |   |
| OPCo    |   |               |   | 31 |   |

|    |   | Retained            |   |   |   |
|---------|--------|---------------------|--------|--------|--------|
|    |   | Earnings            |   | Tax    |   |
| Company |   | Reduction           |   | Amount |   |
|    |   | (in      thousands) |   |
| APCo    |   |                | $      | 2,181  |   |   | $ | 1,175 |   |
| CSPCo   |   |                |   | 1,095  |   |   |   | 589 |   |
| I&M |   |                |   | 1,398  |   |   |   | 753 |   |
| OPCo    |   |                |   | 1,864  |   |   |   | 1,004 |   |
| PSO     |   |                |   | 1,107  |   |   |   | 596 |   |
| SWEPCo  |   |                |   | 1,156  |   |   |   | 622 |   |

| Company |   | (in      thousands) |   |
|---------|--------|---------------------|--------|
| APCo    |   | $                   | 7,646  |   |
| CSPCo   |   |                | 4,423  |   |
| I&M |   |                | 4,251  |   |
| OPCo    |   |                | 5,234  |   |
| PSO     |   |                | 187    |   |
| SWEPCo  |   |                | 229    |   |

----

CONTROLS AND PROCEDURES

----

PART II.  OTHER INFORMATION

| Period                         |   | Total      Numberof      SharesPurchased |   | Average      PricePaid      per Share |   | Total      Number of Shares Purchased as Part of Publicly Announced Plans or      Programs |   | Maximum      Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased      Under the Plans or Programs |   |
|--------------------------------|--------|------------------------------------------|--------|---------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------|--------|
| 04/01/08      – 04/30/08 |   | -                                        |   | $                                     | -      |                                                                                       | -      |                                                                                                                   | $      | - |   |
| 05/01/08      – 05/31/08 |   | -                                        |   |                                  | -      |                                                                                       | -      |                                                                                                                   |   | - |   |
| 06/01/08      – 06/30/08 |   | -                                        |   |                                  | -      |                                                                                       | -      |                                                                                                                   |   | - |   |

| 1.   | Election      of eleven directors to hold office until the next annual meeting and until      their successors are duly elected.  Each nominee for director      received the votes of shareholders asfollows: |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                       |   | Number      of Shares Voted For |        |   | Number      of Shares Abstaining |   |
|----------------------------|--------|---------------------------------|-------------|--------|----------------------------------|--------|
|                       |   |                            |        |   |                             |   |
| E.      R. Brooks          |   |                            | 312,075,636 |   |                             |   | 9,048,078 |   |
| Donald      M. Carlton     |   |                            | 312,678,087 |   |                             |   | 8,445,627 |   |
| Ralph      D. Crosby, Jr.  |   |                            | 313,030,107 |   |                             |   | 8,093,607 |   |
| John      P. DesBarres     |   |                            | 298,693,953 |   |                             |   | 22,429,761 |   |
| Linda      A. Goodspeed    |   |                            | 312,709,888 |   |                             |   | 8,413,826 |   |
| Thomas      E. Hoaglin     |   |                            | 311,691,406 |   |                             |   | 9,432,308 |   |
| Lester      A. Hudson, Jr. |   |                            | 312,928,042 |   |                             |   | 8,195,672 |   |
| Michael      G. Morris     |   |                            | 298,827,464 |   |                             |   | 22,296,250 |   |
| Lionel      L. Nowell, III |   |                            | 311,500,225 |   |                             |   | 9,623,489 |   |
| Richard      L. Sandor     |   |                            | 308,409,310 |   |                             |   | 12,714,404 |   |
| Kathryn      D. Sullivan   |   |                            | 310,429,848 |   |                             |   | 10,693,866 |   |

|   | 2. | Ratification      of the appointment of the firm of Deloitte & Touche LLP as the      independent registered public accounting firm for 2008.  The      proposal was approved by a vote of the shareholders as      follows: |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Votes      FOR       |   |   | 313,470,119 |   |
|----------------------|--------|--------|-------------|--------|
| Votes      AGAINST   |   |   | 4,721,969   |   |
| Votes      ABSTAINED |   |   | 2,931,626   |   |

| Nicholas      K. Akins | Robert      P. Powers |
|------------------------|-----------------------|
| Carl      L. English   | Stephen      P. Smith |
| John      B. Keane     | Brian      X. Tierney |
| Holly      K. Koeppel  | Susan      Tomasky    |
| Michael      G. Morris | Dennis      E. Welch  |

| Nicholas      K. Akins | Robert      P. Powers |
|------------------------|-----------------------|
| Carl      L. English   | Stephen      P. Smith |
| John      B. Keane     | Brian      X. Tierney |
| Holly      K. Koeppel  | Susan      Tomasky    |
| Michael      G. Morris | Dennis      E. Welch  |

| Nicholas      K. Akins  | Marc      E. Lewis           |
|-------------------------|------------------------------|
| Kent      D. Curry      | Susanne      M. Moorman Rowe |
| John      E. Ehler      | Michael      G. Morris       |
| Carl      L. English    | Helen      J. Murray         |
| Allen      R. Glassburn | Robert      P. Powers        |
| JoAnn      M. Grevenow  | Brian      X. Tierney        |
| Patrick      C. Hale    | Susan      Tomasky           |
| Holly      K. Koeppel   |                         |

| Nicholas      K. Akins | Robert      P. Powers |
|------------------------|-----------------------|
| Carl      L. English   | Stephen      P. Smith |
| John      B. Keane     | Brian      X. Tierney |
| Holly      K. Koeppel  | Susan      Tomasky    |
| Michael      G. Morris | Dennis      E. Welch  |

| Nicholas      K. Akins     | Michael      G. Morris     |
|----------------------------|----------------------------|
| Carl      L. English       | Richard      E. Munczinski |
| John      B. Keane         | Robert      P. Powers      |
| Holly      K. Koeppel      | Susan      Tomasky         |
| Venita      McCellon-Allen | Dennis      E. Welch       |

| Nicholas      K. Akins     | Michael      G. Morris     |
|----------------------------|----------------------------|
| Carl      L. English       | Richard      E. Munczinski |
| John      B. Keane         | Robert      P. Powers      |
| Holly      K. Koeppel      | Susan      Tomasky         |
| Venita      McCellon-Allen | Dennis      E. Welch       |

----

SIGNATURE