| 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 requirementsfor the past 90 days. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Yes   X                                                                                                                                                                                                                                                                                                                                  | No        |

| Indicate by check mark whether American Electric Power Company, Inc. has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or forsuch shorter period that the registrant was required to submit and post such files). |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      Yes   X                                                                                                                                                                                                                                                                                                                                                        | No         |

| 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 has submitted electronically and posted on its corporate website, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Yes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 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                                         Acceleratedfiler                            Non-accelerated filer                                                  Smallerreporting 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.  Seethe definitions of ‘large accelerated filer,’ ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Exchange Act.                                                                                                                                                                                                                                                                                                                                                                            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Large accelerated filer                                               Acceleratedfiler                             Non-accelerated filer       X                                        Smallerreporting 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 30, 2009                                                                       |
|---------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                  |   |   |                                                                                                                                                              |
| American Electric Power Company, Inc. |   |   |                         476,790,811  |
|                                  |   |   | ($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 Narrative Financial Discussion and Analysis                        |   |   |
|                                              | Quantitative and Qualitative Disclosures About Risk Management Activities             |   |   |
|                                              | Condensed Financial Statements                                                        |   |   |
|                                              | Index to Condensed Notes to Condensed Financial Statements of Registrant Subsidiaries |   |   |
|                                              |                                                                                  |   |   |
| Southwestern Electric Power Company Consolidated: |                                                                                  |   |
|                                              | Management’s Financial Discussion and Analysis                                  |   |   |
|                                              | Quantitative and Qualitative Disclosures About Risk Management Activities             |   |   |
|                                              | Condensed Consolidated Financial Statements                                           |   |   |
|                                              | Index to Condensed Notes to Condensed Financial Statements of Registrant Subsidiaries |   |   |

|                                                                           |     |                                                        |   |
|--------------------------------------------------------------------------------|----------|-------------------------------------------------------------|--------|
| Condensed Notes to Condensed Financial Statements of Registrant Subsidiaries   |     |                                                        |
|                                                                           |     |                                                        |   |
| Combined Management’s Discussion and Analysis of Registrant Subsidiaries |     |                                                        |
|                                                                           |     |                                                        |   |
| 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 Matters to a Vote of Security Holders            |   |   |
|                                                                           | Item 5.  | Other Information                                           |   |   |
|                                                                           | Item 6.  | Exhibits:                                                   |   |   |
|                                                                           |     |                                                        |   |   | Exhibit 12 |   |   |
|                                                                           |     |                                                        |   |   | Exhibit 31(a) |   |   |
|                                                                           |     |                                                        |   |   | Exhibit 31(b) |   |   |
|                                                                           |     |                                                        |   |   | Exhibit 32(a) |   |   |
|                                                                           |     |                                                        |   |   | Exhibit 32(b) |   |   |
|                                                                           |     |                                                        |   |   |   |   |   |
| 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 individualregistrant 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.                                                                                                                                                                                           |
| AEP Power Pool          |   | Members are APCo, CSPCo, I&M, KPCo and OPCo.  The Pool shares the generation, cost of generation and resultant wholesale off-system sales of the member companies.                                               |
| AEP 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.                                                                                                                                                                                                      |
| AEPSC                   |   | American Electric Power Service Corporation, a service subsidiary providing management and professional services to AEP and its subsidiaries.                                                                                  |
| AFUDC                   |   | Allowance for Funds Used During Construction.                                                                                                                                                                                  |
| ALJ                     |   | Administrative Law Judge.                                                                                                                                                                                                      |
| AOCI                    |   | Accumulated Other Comprehensive Income.                                                                                                                                                                                        |
| APB                     |   | Accounting Principles Board Opinion.                                                                                                                                                                                           |
| APCo                    |   | Appalachian Power Company, an AEP electric utility subsidiary.                                                                                                                                                                 |
| APSC                    |   | Arkansas Public Service Commission.                                                                                                                                                                                            |
| CAA                     |   | Clean Air Act.                                                                                                                                                                                                                 |
| CO2                     |   | Carbon Dioxide.                                                                                                                                                                                                                |
| Cook Plant              |   | Donald C. Cook Nuclear Plant, a two-unit, 2,110 MW nuclear plant owned by I&M.                                                                                                                                             |
| CSPCo                   |   | Columbus Southern Power Company, an AEP electric utility subsidiary.                                                                                                                                                           |
| CSW                     |   | Central and South West Corporation, a subsidiary of AEP (Effective January 21, 2003, the legal name of Central and South West Corporation was changed to AEP Utilities, Inc.).                                                 |
| CSW Operating Agreement |   | Agreement, dated January 1, 1997, by and among PSO, SWEPCo, TCC and TNC governing generating capacity allocation.  This agreement was amended in May 2006 to remove TCC and TNC.  AEPSC acts as the agent. |
| CTC                     |   | Competition Transition Charge.                                                                                                                                                                                                 |
| CWIP                    |   | Construction Work in Progress.                                                                                                                                                                                                 |
| DHLC                    |   | Dolet Hills Lignite Company, LLC, a wholly-owned lignite mining subsidiary of SWEPCo that is consolidated under FIN 46R.                                                                                                       |
| E&R                 |   | Environmental compliance and transmission and distribution system reliability.                                                                                                                                                 |
| EaR                     |   | Earnings at Risk, a method to quantify risk exposure.                                                                                                                                                                          |
| EIS                     |   | Energy Insurance Services, Inc., a protected cell insurance company that AEP consolidates under FIN 46R.                                                                                                                       |
| EITF                    |   | Financial Accounting Standards Board’s Emerging Issues Task Force.                                                                                                                                                       |
| EITF 06-10              |   | EITF Issue No. 06-10 “Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements.”                                                                                                              |
| ENEC                    |   | Expanded Net Energy Cost.                                                                                                                                                                                                      |
| ERCOT                   |   | Electric Reliability Council of Texas.                                                                                                                                                                                         |
| ERISA                   |   | Employee Retirement Income Security Act of 1974, as amended.                                                                                                                                                                   |
| ESP                     |   | Electric Security Plan.                                                                                                                                                                                                        |
| ETT                     |   | Electric Transmission Texas, LLC, a 50% equity interest joint venture with MidAmerican Energy Holdings Company formed to own and operate electric transmission facilities in ERCOT.                                            |

| FAC                        |   | Fuel Adjustment Clause.                                                                                                                                                                                                                              |
|----------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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.”                                                                                                                                                                                  |
| FSP                        |   | FASB Staff Position.                                                                                                                                                                                                                                 |
| FSP FIN 39-1               |   | FSP FIN 39-1, “Amendment of FASB Interpretation No. 39.”                                                                                                                                                                                 |
| FSP SFAS 107-1 andAPB 28-1 |   | FSP SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.”                                                                                                                                            |
| FTR                        |   | Financial Transmission Right, a financial instrument that entitles the holder to receive compensation for certain congestion-related transmission charges that arise when the power grid is congested resulting in differences in locational prices. |
| GAAP                       |   | Accounting Principles Generally Accepted in the United States of America.                                                                                                                                                                            |
| I&M                    |   | Indiana Michigan Power Company, an AEP electric utility subsidiary.                                                                                                                                                                                  |
| 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.                                                                                                                                                                                                               |
| JBR                        |   | Jet Bubbling Reactor.                                                                                                                                                                                                                                |
| JMG                        |   | JMG Funding LP.                                                                                                                                                                                                                                      |
| KGPCo                      |   | Kingsport Power Company, an AEP electric distribution subsidiary.                                                                                                                                                                                    |
| KPCo                       |   | Kentucky Power Company, an AEP electric utility subsidiary.                                                                                                                                                                                          |
| kV                         |   | Kilovolt.                                                                                                                                                                                                                                            |
| KWH                        |   | Kilowatthour.                                                                                                                                                                                                                                        |
| LPSC                       |   | Louisiana Public Service Commission.                                                                                                                                                                                                                 |
| MISO                       |   | Midwest Independent Transmission System Operator.                                                                                                                                                                                                    |
| MLR                        |   | Member load ratio, the method used to allocate AEP Power Pool transactions to its members.                                                                                                                                                           |
| MMBtu                      |   | Million British Thermal Units.                                                                                                                                                                                                                       |
| MTM                        |   | Mark-to-Market.                                                                                                                                                                                                                                      |
| MW                         |   | Megawatt.                                                                                                                                                                                                                                            |
| MWH                        |   | Megawatthour.                                                                                                                                                                                                                                        |
| NOx                        |   | Nitrogen oxide.                                                                                                                                                                                                                                      |
| Nonutility Money Pool      |   | AEP Consolidated’s Nonutility Money Pool.                                                                                                                                                                                                      |
| NSR                        |   | New Source Review.                                                                                                                                                                                                                                   |
| 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.                                                                                                                                                                                                                                    |
| PATH                       |   | Potomac Appalachian Transmission Highline, LLC and its subsidiaries, a joint venture with Allegheny Energy Inc. formed to own and operate electric transmission facilities in PJM.                                                                   |
| 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.                                                                    |
| 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.                                                                                                                                 |
| SEC                                         |   | United States Securities and Exchange Commission.                                                                                                          |
| SECA                                        |   | Seams Elimination Cost Allocation.                                                                                                                         |
| SEET                                        |   | Significant Excess Earnings Test.                                                                                                                          |
| 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.                                                                                                                 |
| SWEPCo                                      |   | Southwestern Electric Power Company, an AEP electric utility subsidiary.                                                                                   |
| TCC                                         |   | AEP Texas Central Company, an AEP electric utility subsidiary.                                                                                             |
| TEM                                         |   | SUEZ Energy Marketing NA, Inc. (formerly known as Tractebel Energy Marketing, Inc.).                                                                       |
| Texas Restructuring   Legislation |   | Legislation enacted in 1999 to restructure the electric utility industry in Texas.                                                                         |
| TNC                                         |   | AEP Texas North Company, an AEP electric utility subsidiary.                                                                                               |
| True-up Proceeding                          |   | A filing made under the Texas Restructuring Legislation to finalize the amount of stranded costs and other true-up items and the recovery of such amounts. |
| 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 West Virginia.                                                                                                                |

----

FORWARD-LOOKING INFORMATION

| · | The economic climate and growth in, or contraction within, our service territory and changes in market demand and demographic patterns.                                                                                                                                                                                                                                        |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Inflationary or deflationary interest rate trends.                                                                                                                                                                                                                                                                                                                             |
| · | Volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing our ability to finance new capital projects and refinance existing debt at attractive rates.                                                                                                                               |
| · | The availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material.                                                                                                                                                                        |
| · | 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 including our ability to restore I&M’s Donald C. Cook Nuclear Plant Unit 1 in a timely manner.                                                                                                                                                                                      |
| · | 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 the Turk Plant, and transmission line facilities (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 cancelled) through applicable ratecases 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.                                                                                                                                                                                                                                                                                                                      |
| · | 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 regional transmission organizations, including PJM and SPP.                                                                                                                                                                          |
| · | 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 and the impact on future funding requirements.                                                                                                                                                       |
| · | 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.                                                                                                                                                                                                                     |

| AEP and its Registrant Subsidiaries expressly disclaim any obligation to update any forward-looking information. |
|------------------------------------------------------------------------------------------------------------------|

----

| · | Margins from Off-system Sales - Margins from off-system sales continue to decrease due to reductions in sales volumes and weak market power prices, reflecting reduced overall demand for electricity.  We currently forecast that off-system sales volumes will decreaseby approximately 34% in 2009 in comparison to 2008.                                                                                                                                                                                                                                                                                  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · | Industrial KWH Sales - Industrial KWH sales for the quarter ended June 30, 2009 and the six months ended June 30, 2009 were down 21% and 18%, respectively.  Approximately half of the decrease in the first six months of 2009 was due to cutbacks or closures by sevenof our large metals producing customers.  We also experienced additional significant decreases in KWH sales to customers in the plastics, rubber, auto and paper manufacturing industries.  When the economy and export markets recover, we expect to see a return to more normal levels of industrial KWH sales. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · | Risk of Loss of Major Customers - We monitor the financial strength and viability of each of our major industrial customers individually.  We factor our industrial customer analyses into our operationalplanning.  In July 2009, Ormet, a major industrial customer currently operating at a reduced load of approximately 400 MW, announced that it will substantially curtail operations starting in September 2009.                                                                                                                                                                       |

| · | Arkansas - In February 2009, SWEPCo filed an application with the APSC for an annual base rate increase of $25 million based on a requested return on equity of 11.5%.  SWEPCo also requested a separate rider to recover, in current rates, financing costs related tothe construction of the Stall Unit and the Turk Plant.  A decision is not expected until the fourth quarter of 2009 or the first quarter of 2010. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | Indiana - In March 2009, the IURC approved the settlement agreement with I&M with modifications that provide for an annual increase in revenues of $42 million, including a $19 million increase in revenue from base rates and $23 million in additional tracker revenues forcertain incurred costs, subject to true-up.                                                                                                                |

| · | Ohio - In March 2009, and as amended in July 2009, the PUCO issued an order that modified and approved CSPCo’s and OPCo’s ESP filings.  Among other things, the ESP order authorized capped increases to revenues during the three-year ESP period and alsoauthorized a fuel adjustment clause (FAC) which allows CSPCo and OPCo to phase-in and defer actual FAC costs incurred in excess of the caps, that will be trued-up, subject to annual caps.  The projected revenue increases for CSPCo and OPCo are listed below: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Projected Revenue Increases |
|--------|-----------------------------|
|   | 2009                        |   | 2010 |   | 2011 |
|   | (in millions)               |
| CSPCo  | $                 | 94  |   | $ | 109  |   | $ | 116  |
| OPCo   |                        | 103  |   |   | 125  |   |   | 153  |

| · | Virginia - In July 2009, APCo filed a base rate case with the Virginia SCC requesting an increase in the generation and distribution portions of base rates of $169 million annually based on a 13.35% return on common equity which includes a 0.85% return on equity performanceincentive increase as permitted by law.  The new generation and distribution base rates will be effective, subject to refund, no later than December 2009.  In July 2009, APCo filed a motion with the Virginia SCC requesting permission to file, in August 2009, supplemental schedules and testimony reflecting a recent Virginia SCC’s order in an unaffiliated utility’s base rate case concerning the appropriate capital structure to be used in the determination of the revenue requirement. In May 2009, APCo filed an application with the Virginia SCC to increase its fuel adjustment charge by approximately $227 million from July 2009 through August 2010.  Due to the significance of the estimated required increase in fuel rates, APCo’s application proposed an alternative that would allow APCo to recover applicablecosts over the period July 2009 through August 2011.  In August 2009, the Virginia SCC issued an order which provides for a $130 million fuel revenue increase. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | West Virginia - In March 2009, APCo and WPCo filed an annual ENEC filing with the WVPSC for an increase of approximately $442 million (later adjusted to $398 million) for incremental fuel, purchased power and environmental compliance project expenses, to become effectiveJuly 2009.  In March 2009, the WVPSC issued an order suspending the rate increase request until December 2009.  APCo and WPCo expect a decision from the WVPSC on the 2009 ENEC filing during the third quarter of 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|             | 2010          |   |   |
|------------------|---------------|--------|--------|
|             | Capital       |   |   |
|             | Expenditure   |   |   |
|             | Budget (a)    |   |   |
|             | (in millions) |   |   |
| New Generation   |          | $      | 251    |   | (b) |
| Environmental    |          |   | 252    |   |   |
| Other Generation |          |   | 431    |   |   |
| Transmission     |          |   | 290    |   |   |
| Distribution     |          |   | 552    |   |   |
| Corporate        |          |   | 70     |   |   |
|             |          |   |   |   |   |
| Total            |          | $      | 1,846  |   |   |

| (a) | Does not include AFUDC.                                                                                                        |
|-----|--------------------------------------------------------------------------------------------------------------------------------|
| (b) | Includes $212 million and $35 million in budgeted capital expenditures related to the Turk Plant and Stall Unit, respectively. |

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

| · | Commercial barging operations that annually transport approximately 33 million tons of coal and dry bulk commodities primarily on the Ohio, Illinois and lower Mississippi Rivers. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                                                                    | Three Months Ended June 30, |   | Six Months Ended June 30, |   |
|-------------------------------------------------------------------------|-----------------------------|--------|---------------------------|--------|
|                                                                    | 2009                        |   | 2008                      |   | 2009 |   | 2008 |   |
|                                                                    | (in millions)               |   |
| Utility Operations                                                      |                        | $      | 327                       |   |   | $ | 264 |   |   | $ | 673 |   |   | $ | 677 |   |
| AEP River Operations                                               |                        |   | 1                         |   |   |   | 3 |   |   |   | 12 |   |   |   | 10 |   |
| Generation and Marketing                                                |                        |   | 4                         |   |   |   | 26 |   |   |   | 28 |   |   |   | 27 |   |
| All Other (a)                                                           |                        |   | (10                       | )      |   |   | (12 | ) |   |   | (28 | ) |   |   | 143 |   |
| Income Before Discontinued Operations  and Extraordinary Loss |                        | $      | 322                       |   |   | $ | 281 |   |   | $ | 685 |   |   | $ | 857 |   |

| (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 settlement of a purchase power and sale agreement with TEM related to the Plaquemine Cogeneration Facility which was sold in 2006. |
|   | ·              | Revenue sharing related to the Plaquemine Cogeneration Facility. |

|                                                                    |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|-------------------------------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                                                    |   | 2009                       |   |   | 2008                     |   |   | 2009 |   |   | 2008 |   |
|                                                                    |   | (in millions)              |   |
| Revenues                                                                |   | $                          | 3,056  |   |                     | $      | 3,313 |   |   | $ | 6,323 |   |   | $ | 6,607 |   |
| Fuel and Purchased Power                                                |   |                       | 996    |   |                     |   | 1,374 |   |   |   | 2,192 |   |   |   | 2,587 |   |
| Gross Margin                                                            |   |                       | 2,060  |   |                     |   | 1,939 |   |   |   | 4,131 |   |   |   | 4,020 |   |
| Depreciation and Amortization                                           |   |                       | 388    |   |                     |   | 365 |   |   |   | 761 |   |   |   | 720 |   |
| Other Operating Expenses                                                |   |                       | 993    |   |                     |   | 1,026 |   |   |   | 1,987 |   |   |   | 1,967 |   |
| Operating Income                                                        |   |                       | 679    |   |                     |   | 548 |   |   |   | 1,383 |   |   |   | 1,333 |   |
| Other Income, Net                                                       |   |                       | 25     |   |                     |   | 48 |   |   |   | 55 |   |   |   | 91 |   |
| Interest Expense                                                        |   |                       | 227    |   |                     |   | 218 |   |   |   | 447 |   |   |   | 426 |   |
| Income Tax Expense                                                      |   |                       | 150    |   |                     |   | 114 |   |   |   | 318 |   |   |   | 321 |   |
| Income Before Discontinued Operations and  Extraordinary Loss |   | $                          | 327    |   |                     | $      | 264 |   |   | $ | 673 |   |   | $ | 677 |   |

|                                                                                          | Three Months EndedJune 30, |   | Six Months EndedJune 30, |         |
|-----------------------------------------------------------------------------------------------|----------------------------|--------|--------------------------|--------------|
| Energy/Delivery Summary                                                                       | 2009                       |   | 2008                     |         | 2009 |   | 2008 |   |
|                                                                                          | (in millions of KWH)       |
| Energy                                                                                        |                       |   |                     |         |   |   |   |   |   |   |
| Retail:                                                                                       |                       |   |                     |         |   |   |   |   |   |   |
| Residential                                                                                   | 9,798                 |   |                     | 9,829   |   | 24,166  |   |   | 24,329  |   |
| Commercial                                                                                    | 9,918                 |   |                     | 9,909   |   | 19,312  |   |   | 19,456  |   |
| Industrial                                                                                    | 11,926                |   |                     | 15,060  |   | 24,052  |   |   | 29,410  |   |
| Miscellaneous                                                                                 | 614                   |   |                     | 639     |   | 1,191  |   |   | 1,248  |   |
| Total Retail                                                                                  | 32,256                |   |                     | 35,437  |   | 68,721  |   |   | 74,443  |   |
|                                                                                          |                       |   |                     |         |   |   |   |   |   |   |
| Wholesale                                                                                     | 7,167                 |   |                     | 10,996  |   | 13,944  |   |   | 22,738  |   |
|                                                                                          |                       |   |                     |         |   |   |   |   |   |   |
| Delivery                                                                                      |                       |   |                     |         |   |   |   |   |   |   |
| Texas Wires – Energy delivered to customers served by AEP’s Texas Wires Companies | 6,888                 |   |                     | 7,132   |   | 12,626  |   |   | 12,955  |   |
| Total KWHs                                                                                    | 46,311                |   |                     | 53,565  |   | 95,291  |   |   | 110,136  |   |

|                       | Three Months EndedJune 30, |   | Six Months EndedJune 30, |      |
|----------------------------|----------------------------|--------|--------------------------|-----------|
|                       | 2009                       |   | 2008                     |      | 2009 |   | 2008 |   |
|                       | (in degree days)           |
| Weather Summary            |                       |   |                     |      |   |   |   |   |   |   |
| Eastern Region             |                       |   |                     |      |   |   |   |   |   |   |
| Actual – Heating (a) | 156                   |   |                     | 136  |   | 2,056  |   |   | 1,966  |   |
| Normal – Heating (b) | 171                   |   |                     | 175  |   | 1,962  |   |   | 1,943  |   |
|                       |                       |   |                     |      |   |   |   |   |   |   |
| Actual – Cooling (c) | 300                   |   |                     | 277  |   | 305  |   |   | 277  |   |
| Normal – Cooling (b) | 286                   |   |                     | 278  |   | 290  |   |   | 281  |   |
|                       |                       |   |                     |      |   |   |   |   |   |   |
| Western Region (d)         |                       |   |                     |      |   |   |   |   |   |   |
| Actual – Heating (a) | 48                    |   |                     | 40   |   | 902  |   |   | 981  |   |
| Normal – Heating (b) | 34                    |   |                     | 35   |   | 939  |   |   | 966  |   |
|                       |                       |   |                     |      |   |   |   |   |   |   |
| Actual – Cooling (c) | 670                   |   |                     | 677  |   | 708  |   |   | 703  |   |
| Normal – Cooling (b) | 658                   |   |                     | 652  |   | 678  |   |   | 672  |   |

| (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 2008                              |   |   |   |   | $      | 264    |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                |   |   |   |   |   |   |   |
| Changes in Gross Margin:                            |   |   |   |   |   |   |   |
| Retail Margins                                      |   |   | 226    |   |   |   |   |   |
| Off-system Sales                                    |   |   | (155   | )      |   |   |   |   |
| Transmission Revenues                               |   |   | 8      |   |   |   |   |   |
| Other Revenues                                      |   |   | 42     |   |   |   |   |   |
| Total Change in Gross Margin                        |   |   |   |   |   |   | 121    |   |
|                                                |   |   |   |   |   |   |   |   |
| Total Expenses and Other:                           |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance                     |   |   | 35     |   |   |   |   |   |
| Gain on Sales of Assets, Net                        |   |   | (2     | )      |   |   |   |   |
| Depreciation and Amortization                       |   |   | (23    | )      |   |   |   |   |
| Interest and Investment Income                      |   |   | (19    | )      |   |   |   |   |
| Carrying Costs Income                               |   |   | (14    | )      |   |   |   |   |
| Allowance for Equity Funds Used During Construction |   |   | 9      |   |   |   |   |   |
| Interest Expense                                    |   |   | (9     | )      |   |   |   |   |
| Equity Earnings of Unconsolidated Subsidiaries      |   |   | 1      |   |   |   |   |   |
| Total Expenses and Other                            |   |   |   |   |   |   | (22    | ) |
|                                                |   |   |   |   |   |   |   |   |
| Income Tax Expense                                  |   |   |   |   |   |   | (36    | ) |
|                                                |   |   |   |   |   |   |   |   |
| Second Quarter of 2009                              |   |   |   |   |   | $      | 327    |   |

| · | Retail Margins increased $226 million primarily due to the following:                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                               | An $83 million increase related to the PUCO’s approval of our Ohio ESPs, a $44 million increase related to base rates and recovery of E&R costs in Virginia and construction financing costs in West Virginia, a $24 million increase in base rates in Oklahoma and a $20 million net rate increase for I&M. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                               | A $40 million increase in fuel margins in Ohio due to the deferral of fuel costs by CSPCo and OPCo in 2009.  The PUCO’s March 2009 approval of CSPCo’s and OPCo’s ESPs allows for the recovery of fuel and related costs during the ESP period.  See “Ohio Electric Security Plan Filings” sectionof Note 3. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                               | A $62 million increase resulting from reduced sharing of off-system sales margins with retail customers in our eastern service territory due to a decrease in total off-system sales. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                               | A $29 million increase related to a coal contract amendment in 2008. |
|   | These increases were partially offset by:                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                               | A $56 million decrease in margins from industrial sales due to reduced operating levels and suspended operations by certain large industrial customers in our service territories. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                               | A $20 million decrease in fuel margins due to higher fuel and purchased power costs related to the Cook Plant Unit 1 shutdown.  This decrease in fuel margins was offset by a corresponding increase in Other Revenues as discussed below. |
| · | Margins from Off-system Sales decreased $155 million primarily due to lower physical sales volumes and lower margins in our eastern service territory reflecting lower market prices, partially offset by higher trading margins.                                                                                                                                                                                                                                    |
| · | Transmission Revenues increased $8 million primarily due to increased rates in the ERCOT and SPP regions.                                                                                                                                                                                                                                                                                                                                                            |
| · | Other Revenues increased $42 million primarily due to Cook Plant accidental outage insurance policy proceeds of $45 million.  Of these insurance proceeds, $20 million were used to offset fuel costs associated with the Cook Plant Unit 1 shutdown.  This increase in revenues was offset by a corresponding decrease in RetailMargins as discussed above.  See “Cook Plant Unit 1 Fire and Shutdown” section of Note 4. |

| · | Other Operation and Maintenance expenses decreased $35 million primarily due to a $27 million decrease in plant outage and other maintenance expenses and an $8 million decrease related to the 2008 true-up of the 2007 Oklahoma ice storm costs.                                                                                                                                                             |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation and Amortization increased $23 million primarily due to higher depreciable property balances as the result of environmental improvements placed in service at OPCo and various other property additions and higher depreciation rates for OPCo related to shortened depreciable lives for certain generating facilities.                                                                          |
| · | Interest and Investment Income decreased $19 million primarily due to the 2008 favorable effect of claims for refund filed with the IRS and the second quarter 2009 write-off of other-than-temporary losses related to equity investments made by EIS.                                                                                                                                                        |
| · | Carrying Costs Income decreased $14 million primarily due to the completion of reliability deferrals in Virginia in December 2008 and the decrease of environmental deferrals in Virginia in 2009.                                                                                                                                                                                                             |
| · | Allowance for Equity Funds Used During Construction increased $9 million as a result of construction at SWEPCo’s Turk Plant and Stall Unit and the reapplication of SFAS 71 regulatory accounting for the generation portion of SWEPCo’s Texas retail jurisdiction effective April 2009.  See “Texas Rate Matters –Texas Restructuring – SPP” section of Note 3. |
| · | Interest Expense increased $9 million primarily due to increased long-term debt and higher interest rates on variable rate, long-term debt.                                                                                                                                                                                                                                                                    |
| · | Income Tax Expense increased $36 million due to an increase in pretax income.                                                                                                                                                                                                                                                                                                                                  |

| Six Months Ended June 30, 2008                      |   |   |   |   | $      | 677    |   |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                |   |   |   |   |   |   |   |
| Changes in Gross Margin:                            |   |   |   |   |   |   |   |
| Retail Margins                                      |   |   | 286    |   |   |   |   |   |
| Off-system Sales                                    |   |   | (291   | )      |   |   |   |   |
| Transmission Revenues                               |   |   | 12     |   |   |   |   |   |
| Other Revenues                                      |   |   | 104    |   |   |   |   |   |
| Total Change in Gross Margin                        |   |   |   |   |   |   | 111    |   |
|                                                |   |   |   |   |   |   |   |   |
| Total Expenses and Other:                           |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance                     |   |   | (21    | )      |   |   |   |   |
| Gain on Sales of Assets, Net                        |   |   | 1      |   |   |   |   |   |
| Depreciation and Amortization                       |   |   | (41    | )      |   |   |   |   |
| Interest and Investment Income                      |   |   | (29    | )      |   |   |   |   |
| Carrying Costs Income                               |   |   | (22    | )      |   |   |   |   |
| Allowance for Equity Funds Used During Construction |   |   | 15     |   |   |   |   |   |
| Interest Expense                                    |   |   | (21    | )      |   |   |   |   |
| Total Expenses and Other                            |   |   |   |   |   |   | (118   | ) |
|                                                |   |   |   |   |   |   |   |   |
| Income Tax Expense                                  |   |   |   |   |   |   | 3      |   |
|                                                |   |   |   |   |   |   |   |   |
| Six Months Ended June 30, 2009                      |   |   |   |   |   | $      | 673    |   |

| · | Retail Margins increased $286 million primarily due to the following:                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                | A $104 million increase related to base rates and recovery of E&R costs in Virginia and construction financing costs in West Virginia, a $96 million increase related to the PUCO’s approval of our Ohio ESPs, a $41 million increase in base rates in Oklahoma and a $25 million net rate increase for I&M. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                | A $116 million increase resulting from reduced sharing of off-system sales margins with retail customers in our eastern service territory due to a decrease in total off-system sales. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                | A $47 million increase in fuel margins in Ohio due to the deferral of fuel costs by CSPCo and OPCo in 2009.  The PUCO’s March 2009 approval of CSPCo’s and OPCo’s ESPs allows for the recovery of fuel and related costs during the ESP period.  See “Ohio Electric Security Plan Filings” sectionof Note 3. |
|   | These increases were partially offset by:                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                | An $89 million decrease in margins from industrial sales due to reduced operating levels and suspended operations by certain large industrial customers in our service territories. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                | A $40 million decrease in fuel margins due to higher fuel and purchased power costs related to the Cook Plant Unit 1 shutdown.  This decrease in fuel margins was offset by a corresponding increase in Other Revenues as discussed below. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                | A $29 million decrease related to coal contract amendments in 2008. |
| · | Margins from Off-system Sales decreased $291 million primarily due to lower physical sales volumes and lower margins in our eastern service territory reflecting lower market prices, partially offset by higher trading margins.                                                                                                                                                                                                                                     |
| · | Transmission Revenues increased $12 million primarily due to increased rates in the ERCOT and SPP regions.                                                                                                                                                                                                                                                                                                                                                            |
| · | Other Revenues increased $104 million primarily due to Cook Plant accidental outage insurance policy proceeds of $99 million.  Of these insurance proceeds, $40 million were used to offset fuel costs associated with the Cook Plant Unit 1 shutdown.  This increase in revenues was offset by a corresponding decrease inRetail Margins as discussed above.  See “Cook Plant Unit 1 Fire and Shutdown” section of Note 4. |

| · | Other Operation and Maintenance expenses increased $21 million primarily due to the following:                                                                                                                                                                                                                                                                                                                  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                          | The deferral of $72 million of Oklahoma ice storm costs in 2008 resulting from an OCC order approving recovery of January and December 2007 ice storm expenses. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                          | A $38 million increase related to storm restoration expenses, primarily in our eastern service territory. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                          | A $13 million net increase related to an obligation to contribute to the “Partnership with Ohio” fund for low income, at-risk customers ordered by the PUCO’s March 2009 approval of CSPCo’s and OPCo’s ESPs.  See “Ohio Electric Security Plan Filings” section of Note 3. |
|   | These increases were partially offset by:                                                                                                                                                                                                                                                                                                                                                                       |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                          | A $54 million decrease in plant outage and other plant operating and maintenance expenses. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                          | A $32 million decrease in tree trimming, reliability and other transmission and distribution expenses. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                          | The write-off in the first quarter of 2008 of $10 million of unrecoverable pre-construction costs for PSO’s cancelled Red Rock Generating Facility. |
| · | Depreciation and Amortization increased $41 million primarily due to higher depreciable property balances as the result of environmental improvements placed in service at OPCo and various other property additions and higher depreciation rates for OPCo related to shortened depreciable lives for certain generating facilities.                                                                           |
| · | Interest and Investment Income decreased $29 million primarily due to the 2008 favorable effect of claims for refund filed with the IRS and the second quarter 2009 write-off of other-than-temporary losses related to equity investments made by EIS.                                                                                                                                                         |
| · | Carrying Costs Income decreased $22 million primarily due to the completion of reliability deferrals in Virginia in December 2008 and the decrease of environmental deferrals in Virginia in 2009.                                                                                                                                                                                                              |
| · | Allowance for Equity Funds Used During Construction increased $15 million as a result of construction at SWEPCo’s Turk Plant and Stall Unit and the reapplication of SFAS 71 regulatory accounting for the generation portion of SWEPCo’s Texas retail jurisdiction effective April 2009.  See “Texas Rate Matters –Texas Restructuring – SPP” section of Note 3. |
| · | Interest Expense increased $21 million primarily due to increased long-term debt and higher interest rates on variable rate, long term debt.                                                                                                                                                                                                                                                                    |

| Debt and Equity Capitalization                        |   |            |         |              |
|-------------------------------------------------------|--------|-----------------|--------------|-------------------|
|                                                  |   | June 30, 2009   |         | December 31, 2008 |
|                                                  |   | ($ in millions) |
| Long-term Debt, including amounts due within one year |   | $               | 16,696  |              | 55.5% |   | $ | 15,983  |   | 55.6% |
| Short-term Debt                                       |   |            | 562     |              | 1.8    |   |   | 1,976  |   | 6.9    |
| Total Debt                                            |   |            | 17,258  |              | 57.3    |   |   | 17,959  |   | 62.5    |
| Preferred Stock of Subsidiaries                       |   |            | 61      |              | 0.2    |   |   | 61  |   | 0.2    |
| AEP Common Equity                                     |   |            | 12,745  |              | 42.4    |   |   | 10,693  |   | 37.2    |
| Noncontrolling Interests                              |   |            | 18      |              | 0.1    |   |   | 17  |   | 0.1    |
|                                                  |   |            |         |              |   |   |   |   |   |   |
| Total Debt and Equity Capitalization                  |   | $               | 30,082  |              | 100.0% |   | $ | 28,730  |   | 100.0% |

|                                       |   | Amount        |   |   | Maturity |
|--------------------------------------------|--------|---------------|--------|--------|----------|
|                                       |   | (in millions) |   |   |     |
| Commercial Paper Backup:                   |   |          |   |   |     |
| Revolving Credit Facility                  |   | $             | 1,500  |   |     | March 2011 |
| Revolving Credit Facility                  |   |          | 1,454  |   | (a)      | April 2012 |
| Revolving Credit Facility                  |   |          | 627    |   | (a)      | April 2011 |
| Total                                      |   |          | 3,581  |   |     |   |
| Cash and Cash Equivalents                  |   |          | 358    |   |     |   |
| Total Liquidity Sources                    |   |          | 3,939  |   |     |   |
| Less: Cash Drawn on Credit Facilities |   |          | 219    |   | (b)      |   |
| AEP Commercial Paper Outstanding           |   |          | 316    |   |     |   |
| Letters of Credit Issued                   |   |          | 485    |   |     |   |
|                                       |   |          |   |   |     |   |
| Net Available Liquidity                    |   | $             | 2,919  |   |     |   |

| (a) | Contractually terminated Lehman Brothers Bank’s commitment amount of $69 million in June 2009. |
|-----|------------------------------------------------------------------------------------------------------|
| (b) | Repaid in July 2009.                                                                                 |

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

| · | Placed AEP on negative outlook due to concern about overall credit worthiness, pending rate cases and recessionary pressures.                  |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Affirmed the Baa2 rating for TCC and downgraded TNC to Baa2.  Both companies were also placed on stable outlook.                     |
| · | Placed OPCo on review for possible downgrade due to concerns about financial metrics and pending cost and construction recoveries.             |
| · | Affirmed the stable rating outlooks for CSPCo, I&M, KPCo and PSO.                                                                          |
| · | Changed the rating outlook for APCo from negative to stable.                                                                                   |
| · | Downgraded SWEPCo to Baa3 and placed it on stable outlook, reflecting higher business risk associated with the construction of the Turk Plant. |

| · | Affirmed its stable rating outlook for I&M, PSO and TNC.                                                                                                   |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Changed its rating outlook for TCC from stable to negative due to weak cash flow ratios, challenging regulatory environment and upcoming capital expenditures. |
| · | Changed its rating outlook for SWEPCo from stable to negative due to elevated debt levels to fund Stall Unit and Turk Plant.                                   |

|                                                 | Six Months Ended |   |
|------------------------------------------------------|------------------|--------|
|                                                 | June 30,         |   |
|                                                 | 2009             |   | 2008 |   |
|                                                 | (in millions)    |   |
| Cash and Cash Equivalents at Beginning of Period     |             | $      | 411 |   |   | $ | 178 |   |
| Net Cash Flows from Operating Activities             |             |   | 857 |   |   |   | 1,201 |   |
| Net Cash Flows Used for Investing Activities         |             |   | (1,478 | ) |   |   | (1,645 | ) |
| Net Cash Flows from Financing Activities             |             |   | 568 |   |   |   | 484 |   |
| Net Increase (Decrease) in Cash and Cash Equivalents |             |   | (53 | ) |   |   | 40 |   |
| Cash and Cash Equivalents at End of Period           |             | $      | 358 |   |   | $ | 218 |   |

|                                     | Six Months Ended |   |
|------------------------------------------|------------------|--------|
|                                     | June 30,         |   |
|                                     | 2009             |   | 2008 |   |
|                                     | (in millions)    |   |
| Net Income                               |             | $      | 680 |   |   | $ | 858 |   |
| Less Discontinued Operations, Net of Tax |             |   | - |   |   |   | (1 | ) |
| Income Before Discontinued Operations    |             |   | 680 |   |   |   | 857 |   |
| Depreciation and Amortization            |             |   | 779 |   |   |   | 736 |   |
| Other                                    |             |   | (602 | ) |   |   | (392 | ) |
| Net Cash Flows from Operating Activities |             | $      | 857 |   |   | $ | 1,201 |   |

|                                         | Six Months Ended |   |
|----------------------------------------------|------------------|--------|
|                                         | June 30,         |   |
|                                         | 2009             |   | 2008 |   |
|                                         | (in millions)    |   |
| Construction Expenditures                    |             | $      | (1,547 | ) |   | $ | (1,608 | ) |
| Proceeds from Sales of Assets                |             |   | 240 |   |   |   | 69 |   |
| Other                                        |             |   | (171 | ) |   |   | (106 | ) |
| Net Cash Flows Used for Investing Activities |             | $      | (1,478 | ) |   | $ | (1,645 | ) |

|                                     | Six Months Ended |   |
|------------------------------------------|------------------|--------|
|                                     | June 30,         |   |
|                                     | 2009             |   | 2008 |   |
|                                     | (in millions)    |   |
| Issuance of Common Stock, Net            |             | $      | 1,688 |   |   | $ | 72 |   |
| Issuance/Retirement of Debt, Net         |             |   | (711 | ) |   |   | 777 |   |
| Dividends Paid on Common Stock           |             |   | (364 | ) |   |   | (333 | ) |
| Other                                    |             |   | (45 | ) |   |   | (32 | ) |
| Net Cash Flows from Financing Activities |             | $      | 568 |   |   | $ | 484 |   |

|                                                 | June 30,      |   | December 31, |   |
|------------------------------------------------------|---------------|--------|--------------|--------|
|                                                 | 2009          |   | 2008         |   |
|                                                 | (in millions) |   |
| AEP Credit Accounts Receivable Purchase Commitments  |          | $      | 596          |   |   | $ | 650 |   |
| Rockport Plant Unit 2 Future Minimum Lease Payments  |          |   | 1,996        |   |   |   | 2,070 |   |
| Railcars Maximum Potential Loss From Lease Agreement |          |   | 25           |   |   |   | 25 |   |

|       |   |        |   |          |   |          |   |          |   |      |   |       |   |                |    |        | 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) |   |      |   |       |   |                |    |        |
| AEGCo      |   | Dresden     | (c)    | Ohio          |   | $             | 321    |          | $      | 198       |   | Gas        |   | Combined-cycle      |    | 580         |       | 2013 |
| SWEPCo     |   | Stall       |   | Louisiana     |   |          | 384    |          |   | 322       |   | Gas        |   | Combined-cycle      |    | 500         |       | 2010 |
| SWEPCo     |   | Turk        | (d)    | Arkansas      |   |          | 1,628  | (d)           |   | 560       | (e)    | Coal       |   | Ultra-supercritical |    | 600         | (d)        | 2012 |
| APCo       |   | Mountaineer | (f)    | West Virginia |   |          |   | (f)           |   |      |   | Coal       |   | IGCC                |    | 629         |       |   | (f) |
| CSPCo/OPCo |   | Great Bend  | (f)    | Ohio          |   |          |   | (f)           |   |      |   | Coal       |   | IGCC                |    | 629         |       |   | (f) |

| (a) | Amount excludes AFUDC.                                                                                                                                                                                                                  |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amount includes AFUDC.                                                                                                                                                                                                                  |
| (c) | 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. |
| (d) | SWEPCo owns approximately 73%, or 440 MW, totaling $1.2 billion in capital investment.  See “Turk Plant” section below.                                                                                           |
| (e) | Amount represents SWEPCo’s CWIP balance only.                                                                                                                                                                                     |
| (f) | Construction of IGCC plants is subject to regulatory approvals.  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 |   |   | Cash Flow Hedge Contracts |   |   | CollateralDeposits |   |   | Total  |   |
|-------------------------------------------------------|--------|--------------------|--------|--------|-------------------------|--------|--------|-----------|--------|--------|----------------------------------------|--------|--------|---------------------------|--------|--------|--------------------|--------|--------|--------|--------|
| Current Assets                                        |   | $                  | 257    |   |                    | $      | 33     |      |   | $      | 7                                      |   |   | $                         | 297    |   |               | $      | 56     |   |   | $ | (18 | ) |   | $ | 335 |   |
| Noncurrent Assets                                     |   |               | 182    |   |                    |   | 205    |      |   |   | 6                                      |   |   |                      | 393    |   |               |   | 4      |   |   |   | (17 | ) |   |   | 380 |   |
| Total Assets                                          |   |               | 439    |   |                    |   | 238    |      |   |   | 13                                     |   |   |                      | 690    |   |               |   | 60     |   |   |   | (35 | ) |   |   | 715 |   |
|                                                  |   |               |   |   |                    |   |   |      |   |   |                                   |   |   |                      |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Current Liabilities                                   |   |               | 154    |   |                    |   | 25     |      |   |   | 12                                     |   |   |                      | 191    |   |               |   | 23     |   |   |   | (56 | ) |   |   | 158 |   |
| Noncurrent Liabilities                                |   |               | 104    |   |                    |   | 73     |      |   |   | 6                                      |   |   |                      | 183    |   |               |   | 5      |   |   |   | (50 | ) |   |   | 138 |   |
| Total Liabilities                                     |   |               | 258    |   |                    |   | 98     |      |   |   | 18                                     |   |   |                      | 374    |   |               |   | 28     |   |   |   | (106 | ) |   |   | 296 |   |
|                                                  |   |               |   |   |                    |   |   |      |   |   |                                   |   |   |                      |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Total MTMDerivative Contract Net Assets (Liabilities) |   | $                  | 181    |   |                    | $      | 140    |      |   | $      | (5                                     | )      |   | $                         | 316    |   |               | $      | 32     |   |   | $ | 71 |   |   | $ | 419 |   |

|                                                                                                        |   | Utility Operations |   |   | GenerationandMarketing |   |   | All Other |   |   | Total  |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|--------|-----------|--------|--------|--------|--------|
| Total MTM Risk Management Contract Net Assets (Liabilities) at December 31, 2008                       |   | $                  | 175    |   |                   | $      | 104    |      |   | $      | (7     | )      |   | $ | 272 |   |
| (Gain) Loss from Contracts Realized/Settled During the Period and Entered in a Prior Period                 |   |               | (60    | )      |                   |   | (6     | )         |   |   | 2      |   |   |   | (64 | ) |
| Fair Value of New Contracts at Inception When Entered During the Period (a)                            |   |               | 13     |   |                   |   | 54     |      |   |   | -      |   |   |   | 67 |   |
| Net Option Premiums Paid (Received) for Unexercised or Unexpired Option Contracts Entered During the Period |   |               | -      |   |                   |   | -      |      |   |   | -      |   |   |   | - |   |
| Changes in Fair Value Due to Valuation Methodology Changes on Forward Contracts                             |   |               | -      |   |                   |   | -      |      |   |   | -      |   |   |   | - |   |
| Changes in Fair Value Due to Market Fluctuations During the Period (b)                            |   |               | 11     |   |                   |   | (12    | )         |   |   | -      |   |   |   | (1 | ) |
| Changes in Fair Value Allocated to Regulated Jurisdictions (c)                                         |   |               | 42     |   |                   |   | -      |      |   |   | -      |   |   |   | 42 |   |
| Total MTM Risk Management Contract Net Assets (Liabilities) at June 30, 2009                      |   | $                  | 181    |   |                   | $      | 140    |      |   | $      | (5     | )      |   |   | 316 |   |
| Cash Flow Hedge Contracts                                                                              |   |               |   |   |                   |   |   |      |   |   |   |   |   |   | 32 |   |
| Collateral Deposits                                                                                         |   |               |   |   |                   |   |   |      |   |   |   |   |   |   | 71 |   |
| Ending Net Risk Management Assets at June 30, 2009                                                          |   |               |   |   |                   |   |   |      |   |   |   |   |   | $ | 419 |   |

| (a) | Reflects fair value on long-term structured 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 delivery term.  A significant portion of the total volumetricposition has been economically hedged. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market fluctuations are attributable to various factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                                    |
| (c) | “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 liabilities/assets.                                                                                                      |

|                                               |   | Remainder2009 |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | 2013   |   |   | After2013 (f) |   |   | Total  |   |
|----------------------------------------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------|--------|--------|--------|--------|
| Utility Operations                                 |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |          |   |   |   |   |
| Level 1 (a)                                        |   | $             | (3     | )      |   | $      | -      |   |   | $      | -      |   |   | $      | -      |   |          | $      | -      |   |   | $ | - |   |   | $ | (3 | ) |
| Level 2 (b)                                        |   |          | 46     |   |   |   | 45     |   |   |   | 17     |   |   |   | -      |   |          |   | 3      |   |   |   | 1 |   |   |   | 112 |   |
| Level 3 (c)                                        |   |          | 13     |   |   |   | 18     |   |   |   | 6      |   |   |   | 3      |   |          |   | -      |   |   |   | - |   |   |   | 40 |   |
| Total                                              |   |          | 56     |   |   |   | 63     |   |   |   | 23     |   |   |   | 3      |   |          |   | 3      |   |   |   | 1 |   |   |   | 149 |   |
|                                               |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Generation and Marketing                           |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Level 1 (a)                                        |   |          | (5     | )      |   |   | 1      |   |   |   | -      |   |   |   | -      |   |          |   | -      |   |   |   | - |   |   |   | (4 | ) |
| Level 2 (b)                                        |   |          | 4      |   |   |   | 15     |   |   |   | 18     |   |   |   | 16     |   |          |   | 20     |   |   |   | 44 |   |   |   | 117 |   |
| Level 3 (c)                                        |   |          | -      |   |   |   | 1      |   |   |   | 1      |   |   |   | 2      |   |          |   | 2      |   |   |   | 21 |   |   |   | 27 |   |
| Total                                              |   |          | (1     | )      |   |   | 17     |   |   |   | 19     |   |   |   | 18     |   |          |   | 22     |   |   |   | 65 |   |   |   | 140 |   |
|                                               |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| All Other                                          |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Level 1 (a)                                        |   |          | -      |   |   |   | (1     | )      |   |   | -      |   |   |   | -      |   |          |   | -      |   |   |   | - |   |   |   | (1 | ) |
| Level 2 (b)                                        |   |          | (2     | )      |   |   | (4     | )      |   |   | 2      |   |   |   | -      |   |          |   | -      |   |   |   | - |   |   |   | (4 | ) |
| Level 3 (c)                                        |   |          | -      |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |          |   | -      |   |   |   | - |   |   |   | - |   |
| Total                                              |   |          | (2     | )      |   |   | (5     | )      |   |   | 2      |   |   |   | -      |   |          |   | -      |   |   |   | - |   |   |   | (5 | ) |
|                                               |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Total                                              |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Level 1 (a)                                        |   |          | (8     | )      |   |   | -      |   |   |   | -      |   |   |   | -      |   |          |   | -      |   |   |   | - |   |   |   | (8 | ) |
| Level 2 (b)                                        |   |          | 48     |   |   |   | 56     |   |   |   | 37     |   |   |   | 16     |   |          |   | 23     |   |   |   | 45 |   |   |   | 225 |   |
| Level 3 (c) (d)                                    |   |          | 13     |   |   |   | 19     |   |   |   | 7      |   |   |   | 5      |   |          |   | 2      |   |   |   | 21 |   |   |   | 67 |   |
| Total                                              |   |          | 53     |   |   |   | 75     |   |   |   | 44     |   |   |   | 21     |   |          |   | 25     |   |   |   | 66 |   |   |   | 284 |   |
| Dedesignated Risk Management Contracts (e)         |   |          | 7      |   |   |   | 14     |   |   |   | 6      |   |   |   | 5      |   |          |   | -      |   |   |   | - |   |   |   | 32 |   |
| Total MTM Risk Management Contract Net Assets |   | $             | 60     |   |   | $      | 89     |   |   | $      | 50     |   |   | $      | 26     |   |          | $      | 25     |   |   | $ | 66 |   |   | $ | 316 |   |

| (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 ongoingbasis.                                                                                                                                                                                                                                                                                                                |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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.  Level2 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.  Level3 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 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 contracts.                                                                                                                                                                                                                                                                                                                     |
| (f) | There is mark-to-market value of $66 million in individual periods beyond 2013.  $46 million of this mark-to-market value is in periods 2014-2018, $15 million is in periods 2019-2023 and $5 million is in periods 2024-2028.                                                                                                                                                                                                                                                                                                                                                                                                                                 |

|                          |   | Exposure Before Credit Collateral              |   |   | Credit Collateral |   |   | Net Exposure |   |   | Number of Counterparties >10% ofNet Exposure |   |   | Net Exposureof Counterparties >10% |   |
|-------------------------------|--------|------------------------------------------------|--------|--------|-------------------|--------|--------|--------------|--------|--------|-------------------------------------------------|--------|--------|---------------------------------------|--------|
| Counterparty Credit Quality   |   | (in millions, except number of counterparties) |   |
| Investment Grade              |   | $                                              | 656    |   |              | $      | 56     |         |   | $      | 600                                             |   |   |                                  | 1      |   |   | $ | 121 |   |
| Split Rating                  |   |                                           | 14     |   |              |   | -      |         |   |   | 14                                              |   |   |                                  | 3      |   |   |   | 13 |   |
| Noninvestment Grade           |   |                                           | 14     |   |              |   | 2      |         |   |   | 12                                              |   |   |                                  | 1      |   |   |   | 11 |   |
| No External Ratings:          |   |                                           |   |   |              |   |   |         |   |   |                                            |   |   |                                  |   |   |   |   |   |   |
| Internal Investment Grade     |   |                                           | 304    |   |              |   | 3      |         |   |   | 301                                             |   |   |                                  | 3      |   |   |   | 245 |   |
| Internal Noninvestment Grade  |   |                                           | 81     |   |              |   | 11     |         |   |   | 70                                              |   |   |                                  | 2      |   |   |   | 54 |   |
| Total as of June 30, 2009     |   | $                                              | 1,069  |   |              | $      | 72     |         |   | $      | 997                                             |   |   |                                  | 10     |   |   | $ | 444 |   |
|                          |   |                                           |   |   |              |   |   |         |   |   |                                            |   |   |                                  |   |   |   |   |   |   |
| Total as of December 31, 2008 |   | $                                              | 793    |   |              | $      | 29     |         |   | $      | 764                                             |   |   |                                  | 9      |   |   | $ | 284 |   |

| Six Months Ended |   |   |   |    | Twelve Months Ended |
|------------------|--------|--------|--------|---------|---------------------|
| June 30, 2009    |   |   |   |    | December 31, 2008   |
| (in millions)    |   |   |   |    | (in millions)       |
| End              |   | High   |   | Average |                | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $1               |   | $2     |   | $1      |                | $- |   |   |   |   | $- |   | $3 |   | $1 |   | $- |

----

AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES

|                                                                      |   | Three Months Ended |        |   | Six Months Ended |   |
|---------------------------------------------------------------------------|--------|--------------------|-------------|--------|------------------|--------|
| REVENUES                                                                  |   | 2009               |        |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| Utility Operations                                                        |   | $                  | 3,035       |   |             | $      | 3,200 |   |   | $ | 6,302 |   |   | $ | 6,210 |   |
| Other Revenues                                                            |   |               | 167         |   |             |   | 346 |   |   |   | 358 |   |   |   | 803 |   |
| TOTAL REVENUES                                                            |   |               | 3,202       |   |             |   | 3,546 |   |   |   | 6,660 |   |   |   | 7,013 |   |
| EXPENSES                                                                  |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Fuel and Other Consumables Used for Electric Generation                   |   |               | 764         |   |             |   | 1,053 |   |   |   | 1,693 |   |   |   | 2,033 |   |
| Purchased Electricity for Resale                                          |   |               | 258         |   |             |   | 366 |   |   |   | 553 |   |   |   | 629 |   |
| Other Operation and Maintenance                                           |   |               | 911         |   |             |   | 982 |   |   |   | 1,825 |   |   |   | 1,860 |   |
| Gain on Sales of Assets, Net                                              |   |               | (2          | )      |             |   | (5 | ) |   |   | (11 | ) |   |   | (8 | ) |
| Asset Impairments and Other Related Charges                               |   |               | -           |   |             |   | - |   |   |   | - |   |   |   | (255 | ) |
| Depreciation and Amortization                                             |   |               | 397         |   |             |   | 373 |   |   |   | 779 |   |   |   | 736 |   |
| Taxes Other Than Income Taxes                                             |   |               | 192         |   |             |   | 191 |   |   |   | 389 |   |   |   | 389 |   |
| TOTAL EXPENSES                                                            |   |               | 2,520       |   |             |   | 2,960 |   |   |   | 5,228 |   |   |   | 5,384 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME                                                          |   |               | 682         |   |             |   | 586 |   |   |   | 1,432 |   |   |   | 1,629 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense):                                                   |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest and Investment Income (Loss)                                     |   |               | (5          | )      |             |   | 15 |   |   |   | - |   |   |   | 31 |   |
| Carrying Costs Income                                                     |   |               | 12          |   |             |   | 26 |   |   |   | 21 |   |   |   | 43 |   |
| Allowance for Equity Funds Used During Construction                       |   |               | 20          |   |             |   | 11 |   |   |   | 36 |   |   |   | 21 |   |
| Interest Expense                                                          |   |               | (240        | )      |             |   | (234 | ) |   |   | (478 | ) |   |   | (453 | ) |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAX EXPENSE AND EQUITY EARNINGS                      |   |               | 469         |   |             |   | 404 |   |   |   | 1,011 |   |   |   | 1,271 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income Tax Expense                                                        |   |               | 148         |   |             |   | 123 |   |   |   | 327 |   |   |   | 416 |   |
| Equity Earnings of Unconsolidated Subsidiaries                            |   |               | 1           |   |             |   | - |   |   |   | 1 |   |   |   | 2 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS              |   |               | 322         |   |             |   | 281 |   |   |   | 685 |   |   |   | 857 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| DISCONTINUED OPERATIONS, NET OF TAX                                       |   |               | -           |   |             |   | 1 |   |   |   | - |   |   |   | 1 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE EXTRAORDINARY LOSS                                          |   |               | 322         |   |             |   | 282 |   |   |   | 685 |   |   |   | 858 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EXTRAORDINARY LOSS, NET OF TAX                                            |   |               | (5          | )      |             |   | - |   |   |   | (5 | ) |   |   | - |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME                                                                |   |               | 317         |   |             |   | 282 |   |   |   | 680 |   |   |   | 858 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Less:  Net Income Attributable to Noncontrolling Interests      |   |               | 1           |   |             |   | 1 |   |   |   | 3 |   |   |   | 3 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME ATTRIBUTABLE TO AEP SHAREHOLDERS                               |   |               | 316         |   |             |   | 281 |   |   |   | 677 |   |   |   | 855 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Less:  Preferred Stock Dividend Requirements of Subsidiaries         |   |               | -           |   |             |   | - |   |   |   | 1 |   |   |   | 1 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS                          |   | $                  | 316         |   |             | $      | 281 |   |   | $ | 676 |   |   | $ | 854 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED AVERAGE NUMBER OF BASIC AEP COMMON SHARES OUTSTANDING            |   |               | 472,220,041 |   |             |   | 401,513,958 |   |   |   | 439,703,968 |   |   |   | 401,155,975 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS   |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income Before Discontinued Operations and Extraordinary Loss              |   | $                  | 0.68        |   |             | $      | 0.70 |   |   | $ | 1.55 |   |   | $ | 2.13 |   |
| Discontinued Operations, Net of Tax                                       |   |               | -           |   |             |   | - |   |   |   | - |   |   |   | - |   |
| Income Before Extraordinary Loss                                          |   |               | 0.68        |   |             |   | 0.70 |   |   |   | 1.55 |   |   |   | 2.13 |   |
| Extraordinary Loss, Net of Tax                                            |   |               | (0.01       | )      |             |   | - |   |   |   | (0.01 | ) |   |   | - |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL BASIC EARNINGS PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS    |   | $                  | 0.67        |   |             | $      | 0.70 |   |   | $ | 1.54 |   |   | $ | 2.13 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED AVERAGE NUMBER OF DILUTED AEP COMMON SHARES OUTSTANDING          |   |               | 472,222,817 |   |             |   | 402,785,942 |   |   |   | 439,983,030 |   |   |   | 402,429,019 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income Before Discontinued Operations and Extraordinary Loss              |   | $                  | 0.68        |   |             | $      | 0.70 |   |   | $ | 1.55 |   |   | $ | 2.12 |   |
| Discontinued Operations, Net of Tax                                       |   |               | -           |   |             |   | - |   |   |   | - |   |   |   | - |   |
| Income Before Extraordinary Loss                                          |   |               | 0.68        |   |             |   | 0.70 |   |   |   | 1.55 |   |   |   | 2.12 |   |
| Extraordinary Loss, Net of Tax                                            |   |               | (0.01       | )      |             |   | - |   |   |   | (0.01 | ) |   |   | - |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS  |   | $                  | 0.67        |   |             | $      | 0.70 |   |   | $ | 1.54 |   |   | $ | 2.12 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| CASH DIVIDENDS PAID PER SHARE                                             |   | $                  | 0.41        |   |             | $      | 0.41 |   |   | $ | 0.82 |   |   | $ | 0.82 |   |
|                                                                      |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |
| See Condensed Notes to Condensed consolidated Financial Statements        |   |               |        |   |             |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                         |   | 2009   |   |   | 2008   |   |
|------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| CURRENT ASSETS                                                               |   |   |   |   |   |   |
| Cash and Cash Equivalents                                                    |   | $      | 358    |   |   | $      | 411 |   |
| Other Temporary Investments                                                  |   |   | 289    |   |   |   | 327 |   |
| Accounts Receivable:                                                         |   |   |   |   |   |   |   |   |
| Customers                                                                    |   |   | 570    |   |   |   | 569 |   |
| Accrued Unbilled Revenues                                                    |   |   | 437    |   |   |   | 449 |   |
| Miscellaneous                                                                |   |   | 73     |   |   |   | 90 |   |
| Allowance for Uncollectible Accounts                                         |   |   | (43    | )      |   |   | (42 | ) |
| Total Accounts Receivable                                                    |   |   | 1,037  |   |   |   | 1,066 |   |
| Fuel                                                                         |   |   | 911    |   |   |   | 634 |   |
| Materials and Supplies                                                       |   |   | 575    |   |   |   | 539 |   |
| Risk Management Assets                                                       |   |   | 335    |   |   |   | 256 |   |
| Regulatory Asset for Under-Recovered Fuel Costs                              |   |   | 352    |   |   |   | 284 |   |
| Margin Deposits                                                              |   |   | 135    |   |   |   | 86 |   |
| Prepayments and Other Current Assets                                         |   |   | 232    |   |   |   | 172 |   |
| TOTAL CURRENT ASSETS                                                         |   |   | 4,224  |   |   |   | 3,775 |   |
|                                                                         |   |   |   |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT                                                |   |   |   |   |   |   |   |   |
| Electric:                                                                    |   |   |   |   |   |   |   |   |
| Production                                                                   |   |   | 22,480 |   |   |   | 21,242 |   |
| Transmission                                                                 |   |   | 8,084  |   |   |   | 7,938 |   |
| Distribution                                                                 |   |   | 13,179 |   |   |   | 12,816 |   |
| Other Property, Plant and Equipment (including coal mining and nuclear fuel) |   |   | 3,810  |   |   |   | 3,741 |   |
| Construction Work in Progress                                                |   |   | 3,145  |   |   |   | 3,973 |   |
| Total Property, Plant and Equipment                                          |   |   | 50,698 |   |   |   | 49,710 |   |
| Accumulated Depreciation and Amortization                                    |   |   | 17,139 |   |   |   | 16,723 |   |
| TOTAL PROPERTY, PLANT AND EQUIPMENT - NET                                    |   |   | 33,559 |   |   |   | 32,987 |   |
|                                                                         |   |   |   |   |   |   |   |   |
| OTHER NONCURRENT ASSETS                                                      |   |   |   |   |   |   |   |   |
| Regulatory Assets                                                            |   |   | 3,979  |   |   |   | 3,783 |   |
| Securitized Transition Assets                                                |   |   | 1,983  |   |   |   | 2,040 |   |
| Spent Nuclear Fuel and Decommissioning Trusts                                |   |   | 1,268  |   |   |   | 1,260 |   |
| Goodwill                                                                     |   |   | 76     |   |   |   | 76 |   |
| Long-term Risk Management Assets                                             |   |   | 380    |   |   |   | 355 |   |
| Deferred Charges and Other Noncurrent Assets                                 |   |   | 869    |   |   |   | 879 |   |
| TOTAL OTHER NONCURRENT ASSETS                                                |   |   | 8,555  |   |   |   | 8,393 |   |
|                                                                         |   |   |   |   |   |   |   |   |
| TOTAL ASSETS                                                                 |   | $      | 46,338 |   |   | $      | 45,155 |   |

| See Condensed Notes to Condensed Consolidated Financial Statements. |
|---------------------------------------------------------------------|

----

|                                                                             |        |   |          |         |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2009 |   | 2008 |
|----------------------------------------------------------------------------------|-------------|--------|---------------|--------------|--------|--------|--------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|------|
| CURRENT LIABILITIES                                                              |        |   | (in millions) |
| Accounts Payable                                                                 |        |   | $             | 1,096   |   | $      | 1,297   |
| Short-term Debt                                                                  |        |   |          | 562     |   |   | 1,976   |
| Long-term Debt Due Within One Year                                               |        |   |          | 1,346   |   |   | 447     |
| Risk Management Liabilities                                                      |        |   |          | 158     |   |   | 134     |
| Customer Deposits                                                                |        |   |          | 271     |   |   | 254     |
| Accrued Taxes                                                                    |        |   |          | 553     |   |   | 634     |
| Accrued Interest                                                                 |        |   |          | 273     |   |   | 270     |
| Regulatory Liability for Over-Recovered Fuel Costs                               |        |   |          | 130     |   |   | 66      |
| Other Current Liabilities                                                        |        |   |          | 1,004   |   |   | 1,219   |
| TOTAL CURRENT LIABILITIES                                                        |        |   |          | 5,393   |   |   | 6,297   |
|                                                                             |        |   |          |         |   |   |         |
| NONCURRENT LIABILITIES                                                           |        |   |          |         |   |   |         |
| Long-term Debt                                                                   |        |   |          | 15,350  |   |   | 15,536  |
| Long-term Risk Management Liabilities                                            |        |   |          | 138     |   |   | 170     |
| Deferred Income Taxes                                                            |        |   |          | 5,417   |   |   | 5,128   |
| Regulatory Liabilities and Deferred Investment Tax Credits                       |        |   |          | 2,746   |   |   | 2,789   |
| Asset Retirement Obligations                                                     |        |   |          | 1,181   |   |   | 1,154   |
| Employee Benefits and Pension Obligations                                        |        |   |          | 2,169   |   |   | 2,184   |
| Deferred Credits and Other Noncurrent Liabilities                                |        |   |          | 1,120   |   |   | 1,126   |
| TOTAL NONCURRENT LIABILITIES                                                     |        |   |          | 28,121  |   |   | 28,087  |
|                                                                             |        |   |          |         |   |   |         |
| TOTAL LIABILITIES                                                                |        |   |          | 33,514  |   |   | 34,384  |
|                                                                             |        |   |          |         |   |   |         |
| Cumulative Preferred Stock Not Subject to Mandatory Redemption                   |        |   |          | 61      |   |   | 61      |
|                                                                             |        |   |          |         |   |   |         |
| Commitments and Contingencies (Note 4)                                           |        |   |          |         |   |   |         |
|                                                                             |        |   |          |         |   |   |         |
| EQUITY                                                                           |        |   |          |         |   |   |         |
| Common Stock Par Value $6.50:                                                    |        |   |          |         |   |   |         |
|                                                                             | 2009        |   | 2008          |         |   |   |         |   |   |   |   |
| Shares Authorized                                                                | 600,000,000 |   | 600,000,000   |         |   |   |         |   |   |   |   |
| Shares Issued                                                                    | 497,033,402 |   | 426,321,248   |         |   |   |         |   |   |   |   |
| (20,249,992 shares were held in treasury at June 30, 2009 and December 31, 2008) |        |   |          | 3,231   |   |   | 2,771   |
| Paid-in Capital                                                                  |        |   |          | 5,755   |   |   | 4,527   |
| Retained Earnings                                                                |        |   |          | 4,160   |   |   | 3,847   |
| Accumulated Other Comprehensive Income (Loss)                                    |        |   |          | (401)        |   |   | (452)        |
| TOTAL AEP COMMON SHAREHOLDERS’ EQUITY                                      |        |   |          | 12,745  |   |   | 10,693  |
|                                                                             |        |   |          |         |   |   |         |
| Noncontrolling Interests                                                         |        |   |          | 18      |   |   | 17      |
|                                                                             |        |   |          |         |   |   |         |
| TOTAL EQUITY                                                                     |        |   |          | 12,763  |   |   | 10,710  |
|                                                                             |        |   |          |         |   |   |         |
| TOTAL LIABILITIES AND EQUITY                                                     |        |   | $             | 46,338  |   | $      | 45,155  |

| See Condensed Notes to Condensed Consolidated Financial Statements. |
|---------------------------------------------------------------------|

----

|                                                                             |   | 2009   |   |   | 2008   |   |
|----------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| OPERATING ACTIVITIES                                                             |   |   |   |   |   |   |
| Net Income                                                                       |   | $      | 680    |   |   | $      | 858 |   |
| Less:  Discontinued Operations, Net of Tax                             |   |   | -      |   |   |   | (1 | ) |
| Income Before Discontinued Operations                                            |   |   | 680    |   |   |   | 857 |   |
| Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities: |   |   |   |   |   |   |   |   |
| Depreciation and Amortization                                                    |   |   | 779    |   |   |   | 736 |   |
| Deferred Income Taxes                                                            |   |   | 360    |   |   |   | 316 |   |
| Extraordinary Loss, Net of Tax                                                   |   |   | 5      |   |   |   | - |   |
| Carrying Costs Income                                                            |   |   | (21    | )      |   |   | (43 | ) |
| Allowance for Equity Funds Used During Construction                              |   |   | (36    | )      |   |   | (21 | ) |
| Mark-to-Market of Risk Management Contracts                                      |   |   | (83    | )      |   |   | 66 |   |
| Amortization of Nuclear Fuel                                                     |   |   | 25     |   |   |   | 45 |   |
| Deferred Property Taxes                                                          |   |   | 38     |   |   |   | 36 |   |
| Fuel Over/Under-Recovery, Net                                                    |   |   | (246   | )      |   |   | (245 | ) |
| Gain on Sales of Assets, Net                                                     |   |   | (11    | )      |   |   | (8 | ) |
| Change in Other Noncurrent Assets                                                |   |   | -      |   |   |   | (195 | ) |
| Change in Other Noncurrent Liabilities                                           |   |   | 84     |   |   |   | (90 | ) |
| Changes in Certain Components of Working Capital:                                |   |   |   |   |   |   |   |   |
| Accounts Receivable, Net                                                         |   |   | 29     |   |   |   | (123 | ) |
| Fuel, Materials and Supplies                                                     |   |   | (313   | )      |   |   | (82 | ) |
| Margin Deposits                                                                  |   |   | (49    | )      |   |   | (16 | ) |
| Accounts Payable                                                                 |   |   | 18     |   |   |   | 188 |   |
| Customer Deposits                                                                |   |   | 17     |   |   |   | 18 |   |
| Accrued Taxes, Net                                                               |   |   | (110   | )      |   |   | (61 | ) |
| Accrued Interest                                                                 |   |   | 3      |   |   |   | 16 |   |
| Other Current Assets                                                             |   |   | (25    | )      |   |   | (13 | ) |
| Other Current Liabilities                                                        |   |   | (287   | )      |   |   | (180 | ) |
| Net Cash Flows from Operating Activities                                         |   |   | 857    |   |   |   | 1,201 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| INVESTING ACTIVITIES                                                             |   |   |   |   |   |   |   |   |
| Construction Expenditures                                                        |   |   | (1,547 | )      |   |   | (1,608 | ) |
| Change in Other Temporary Investments, Net                                       |   |   | 43     |   |   |   | 48 |   |
| Purchases of Investment Securities                                               |   |   | (443   | )      |   |   | (635 | ) |
| Sales of Investment Securities                                                   |   |   | 411    |   |   |   | 666 |   |
| Acquisitions of Nuclear Fuel                                                     |   |   | (152   | )      |   |   | (99 | ) |
| Acquisitions of Assets                                                           |   |   | (11    | )      |   |   | (81 | ) |
| Proceeds from Sales of Assets                                                    |   |   | 240    |   |   |   | 69 |   |
| Other Investing Activities                                                       |   |   | (19    | )      |   |   | (5 | ) |
| Net Cash Flows Used for Investing Activities                                     |   |   | (1,478 | )      |   |   | (1,645 | ) |
|                                                                             |   |   |   |   |   |   |   |   |
| FINANCING ACTIVITIES                                                             |   |   |   |   |   |   |   |   |
| Issuance of Common Stock, Net                                                    |   |   | 1,688  |   |   |   | 72 |   |
| Change in Short-term Debt, Net                                                   |   |   | (1,414 | )      |   |   | 45 |   |
| Issuance of Long-term Debt                                                       |   |   | 1,075  |   |   |   | 2,204 |   |
| Retirement of Long-term Debt                                                     |   |   | (372   | )      |   |   | (1,472 | ) |
| Principal Payments for Capital Lease Obligations                                 |   |   | (42    | )      |   |   | (48 | ) |
| Dividends Paid on Common Stock                                                   |   |   | (364   | )      |   |   | (333 | ) |
| Dividends Paid on Cumulative Preferred Stock                                     |   |   | (1     | )      |   |   | (1 | ) |
| Other Financing Activities                                                       |   |   | (2     | )      |   |   | 17 |   |
| Net Cash Flows from Financing Activities                                         |   |   | 568    |   |   |   | 484 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| Net Increase (Decrease) in Cash and Cash Equivalents                             |   |   | (53    | )      |   |   | 40 |   |
| Cash and Cash Equivalents at Beginning of Period                                 |   |   | 411    |   |   |   | 178 |   |
| Cash and Cash Equivalents at End of Period                                       |   | $      | 358    |   |   | $      | 218 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| SUPPLEMENTARY INFORMATION                                                        |   |   |   |   |   |   |   |   |
| Cash Paid for Interest, Net of Capitalized Amounts                               |   | $      | 495    |   |   | $      | 412 |   |
| Net Cash Paid for Income Taxes                                                   |   |   | 27     |   |   |   | 131 |   |
| Noncash Acquisitions Under Capital Leases                                        |   |   | 17     |   |   |   | 35 |   |
| Noncash Acquisition of Land/Mineral Rights                                       |   |   | -      |   |   |   | 42 |   |
| Construction Expenditures Included in Accounts Payable at June 30,               |   |   | 270    |   |   |   | 328 |   |
|                                                                             |   |   |   |   |   |   |   |   |
| See Condensed Notes to Condensed Consolidated Financial Statements.              |   |   |   |   |   |   |   |   |

----

|                                                                   | AEP Common Shareholders |      |   |   |        |
|------------------------------------------------------------------------|-------------------------|-----------|--------|--------|-------------|
|                                                                   | Common Stock            |      |   |   |        |   | Accumulated |   |   |   |   |
|                                                                   |                    |      |   |   |        |   |   |   | Other |   |   |   |   |
|                                                                   |                    |      |   |   | Paid-in     |   | Retained |   | Comprehensive |   | Noncontrolling |   |   |
|                                                                   | Shares                  |      | Amount |   | Capital     |   | Earnings |   | Income (Loss) |   | Interests |   | Total |
| TOTAL EQUITY – DECEMBER 31, 2007                                 |                    | 422  |   | $      | 2,743  |   | $ | 4,352  |   | $ | 3,138  |   | $ | (154) |   | $ | 18   |   | $ | 10,097  |
|                                                                   |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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) |   |   |   |   |   | (3) |   |   | (333) |
| Preferred Stock Dividends                                              |                    |      |   |   |        |   |   |   |   |   | (1) |   |   |   |   |   |   |   |   | (1) |
| Other Changes in Equity                                                |                    |      |   |   |        |   |   | 2  |   |   |   |   |   |   |   |   | 1  |   |   | 3  |
| SUBTOTAL – EQUITY                                                |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 9,827  |
|                                                                   |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                   |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income (Loss), Net of Taxes:                       |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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                                                             |                    |      |   |   |        |   |   |   |   |   | 855  |   |   |   |   |   | 3  |   |   | 858  |
| TOTAL COMPREHENSIVE INCOME                                             |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 823  |
|                                                                   |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – JUNE 30, 2008                                     |                    | 424  |   | $      | 2,754  |   | $ | 4,415  |   | $ | 3,651  |   | $ | (189) |   | $ | 19   |   | $ | 10,650  |
|                                                                   |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – DECEMBER 31, 2008                                 |                    | 426  |   | $      | 2,771  |   | $ | 4,527  |   | $ | 3,847  |   | $ | (452) |   | $ | 17   |   | $ | 10,710  |
|                                                                   |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of Common Stock                                               |                    | 71   |   |   | 460    |   |   | 1,278  |   |   |   |   |   |   |   |   |   |   |   | 1,738  |
| Common Stock Dividends                                                 |                    |      |   |   |        |   |   |   |   |   | (363) |   |   |   |   |   | (3) |   |   | (366) |
| Preferred Stock Dividends                                              |                    |      |   |   |        |   |   |   |   |   | (1) |   |   |   |   |   |   |   |   | (1) |
| Other Changes in Equity                                                |                    |      |   |   |        |   |   | (50) |   |   |   |   |   |   |   |   | 1  |   |   | (49) |
| SUBTOTAL – EQUITY                                                |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 12,032  |
|                                                                   |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                   |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income, Net of Taxes:                              |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Flow Hedges, Net of Tax of $9                                     |                    |      |   |   |        |   |   |   |   |   |   |   |   | 17  |   |   |   |   |   | 17  |
| Securities Available for Sale, Net of Tax of $5                        |                    |      |   |   |        |   |   |   |   |   |   |   |   | 9  |   |   |   |   |   | 9  |
| Amortization of Pension and OPEB Deferred Costs, Net of Tax of $14     |                    |      |   |   |        |   |   |   |   |   |   |   |   | 25  |   |   |   |   |   | 25  |
| NET INCOME                                                             |                    |      |   |   |        |   |   |   |   |   | 677  |   |   |   |   |   | 3  |   |   | 680  |
| TOTAL COMPREHENSIVE INCOME                                             |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 731  |
|                                                                   |                    |      |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – JUNE 30, 2009                                     |                    | 497  |   | $      | 3,231       |   | $ | 5,755  |   | $ | 4,160 |   | $ | (401) |   | $ | 18  |   | $ | 12,763  |

| See Condensed Notes to Condensed Consolidated Financial Statements. |
|---------------------------------------------------------------------|

----

| 1.  | Significant Accounting Matters                       |
|-----|------------------------------------------------------|
| 2.  | New Accounting Pronouncements and Extraordinary Item |
| 3.  | Rate Matters                                         |
| 4.  | Commitments, Guarantees and Contingencies            |
| 5.  | Acquisitions and Discontinued Operations             |
| 6.  | Benefit Plans                                        |
| 7.  | Business Segments                                    |
| 8.  | Derivatives and Hedging                              |
| 9.  | Fair Value Measurements                              |
| 10. | Income Taxes                                         |
| 11. | Financing Activities                                 |

----

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

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

|                                                  |   | Three Months Ended June 30,          |   |
|-------------------------------------------------------|--------|--------------------------------------|--------|
|                                                  |   | 2009                                 |   |   | 2008 |   |
|                                                  |   | (in millions, except per share data) |   |
|                                                  |   |                                 |   |   | $/share |   |   |   |   |   | $/share |   |
| Earnings Applicable to AEP Common Shareholders        |   | $                                    | 316    |   |   |   |   |   | $ | 281 |   |   |   |   |
|                                                  |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted Average Number of Basic Shares Outstanding   |   |                                 | 472.2  |   |   | $ | 0.67 |   |   |   | 401.5 |   |   | $ | 0.70 |   |
| Weighted Average Dilutive Effect of:                  |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performance Share Units                               |   |                                 | -      |   |   |   | - |   |   |   | 0.9 |   |   |   | - |   |
| Stock Options                                         |   |                                 | -      |   |   |   | - |   |   |   | 0.2 |   |   |   | - |   |
| Restricted Stock Units                                |   |                                 | -      |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Restricted Shares                                     |   |                                 | -      |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Weighted Average Number of Diluted Shares Outstanding |   |                                 | 472.2  |   |   | $ | 0.67 |   |   |   | 402.8 |   |   | $ | 0.70 |   |

|                                                  |   | Six Months Ended June 30,            |   |
|-------------------------------------------------------|--------|--------------------------------------|--------|
|                                                  |   | 2009                                 |   |   | 2008 |   |
|                                                  |   | (in millions, except per share data) |   |
|                                                  |   |                                 |   |   | $/share |   |   |   |   |   | $/share |   |
| Earnings Applicable to AEP Common Shareholders        |   | $                                    | 676    |   |   |   |   |   | $ | 854 |   |   |   |   |
|                                                  |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted Average Number of Basic Shares Outstanding   |   |                                 | 439.7  |   |   | $ | 1.54 |   |   |   | 401.2 |   |   | $ | 2.13 |   |
| Weighted Average Dilutive Effect of:                  |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performance Share Units                               |   |                                 | 0.3    |   |   |   | - |   |   |   | 0.8 |   |   |   | (0.01 | ) |
| Stock Options                                         |   |                                 | -      |   |   |   | - |   |   |   | 0.2 |   |   |   | - |   |
| Restricted Stock Units                                |   |                                 | -      |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Restricted Shares                                     |   |                                 | -      |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Weighted Average Number of Diluted Shares Outstanding |   |                                 | 440.0  |   |   | $ | 1.54 |   |   |   | 402.4 |   |   | $ | 2.12 |   |

|                              |   | SWEPCoSabine |   |   | SWEPCoDHLC |   |   | OPCoJMG |   |   | EIS    |   |
|-----------------------------------|--------|--------------|--------|--------|------------|--------|--------|---------|--------|--------|--------|--------|
| ASSETS                            |   |         |   |   |       |   |   |    |   |   |   |   |
| Current Assets                    |   | $            | 37     |   |       | $      | 15     |    |   | $      | 16     |   |   | $ | 118 |   |
| Net Property, Plant and Equipment |   |         | 125    |   |       |   | 30     |    |   |   | 413    |   |   |   | - |   |
| Other Noncurrent Assets           |   |         | 30     |   |       |   | 12     |    |   |   | 1      |   |   |   | 2 |   |
| Total Assets                      |   | $            | 192    |   |       | $      | 57     |    |   | $      | 430    |   |   | $ | 120 |   |
|                              |   |         |   |   |       |   |   |    |   |   |   |   |   |   |   |   |
| LIABILITIES AND EQUITY            |   |         |   |   |       |   |   |    |   |   |   |   |   |   |   |   |
| Current Liabilities               |   | $            | 40     |   |       | $      | 12     |    |   | $      | 150    |   |   | $ | 33 |   |
| Noncurrent Liabilities            |   |         | 152    |   |       |   | 42     |    |   |   | 262    |   |   |   | 76 |   |
| Equity                            |   |         | -      |   |       |   | 3      |    |   |   | 18     |   |   |   | 11 |   |
| Total Liabilities and Equity      |   | $            | 192    |   |       | $      | 57     |    |   | $      | 430    |   |   | $ | 120 |   |

|                              |   | SWEPCoSabine |   |   | SWEPCoDHLC |   |   | OPCoJMG |   |   | EIS    |   |
|-----------------------------------|--------|--------------|--------|--------|------------|--------|--------|---------|--------|--------|--------|--------|
| ASSETS                            |   |         |   |   |       |   |   |    |   |   |   |   |
| Current Assets                    |   | $            | 33     |   |       | $      | 22     |    |   | $      | 11     |   |   | $ | 107 |   |
| Net Property, Plant and Equipment |   |         | 117    |   |       |   | 33     |    |   |   | 423    |   |   |   | - |   |
| Other Noncurrent Assets           |   |         | 24     |   |       |   | 11     |    |   |   | 1      |   |   |   | 2 |   |
| Total Assets                      |   | $            | 174    |   |       | $      | 66     |    |   | $      | 435    |   |   | $ | 109 |   |
|                              |   |         |   |   |       |   |   |    |   |   |   |   |   |   |   |   |
| LIABILITIES AND EQUITY            |   |         |   |   |       |   |   |    |   |   |   |   |   |   |   |   |
| Current Liabilities               |   | $            | 32     |   |       | $      | 18     |    |   | $      | 161    |   |   | $ | 30 |   |
| Noncurrent Liabilities            |   |         | 142    |   |       |   | 44     |    |   |   | 257    |   |   |   | 60 |   |
| Equity                            |   |         | -      |   |       |   | 4      |    |   |   | 17     |   |   |   | 19 |   |
| Total Liabilities and Equity      |   | $            | 174    |   |       | $      | 66     |    |   | $      | 435    |   |   | $ | 109 |   |

|                          |   | June 30, 2009                                |   | December 31, 2008 |   |
|-------------------------------|--------|----------------------------------------------|--------|-------------------|--------|
|                          |   | As Reported on the ConsolidatedBalance Sheet |   | MaximumExposure   |   | As Reported on the ConsolidatedBalance Sheet |   |   | MaximumExposure |   |
|                          |   |                                         |   | (in millions)     |   |   |   |   |
| Capital Contribution from AEP |   | $                                            | 5      |              |   | $ | 5 |   |   | $ | 4 |   |   | $ | 4 |   |
| Retained Earnings             |   |                                         | 2      |              |   |   | 2 |   |   |   | 2 |   |   |   | 2 |   |
|                          |   |                                         |   |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Investment in PATH-WV   |   | $                                            | 7      |              |   | $ | 7 |   |   | $ | 6 |   |   | $ | 6 |   |

|   | Total Depreciation Expense Variance |   |
|--------|-------------------------------------|--------|
|   | Three Months Ended                  |   | Six Months Ended |   |
|   | June 30, 2009/2008                  |   | June 30, 2009/2008 |   |
|   | (in millions)                       |   |
| CSPCo  |                                | $      | (5 | ) |   | $ | (9 | ) |
| OPCo   |                                |   | 17 |   |   |   | 34 |   |

|                                                                                                               |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|--------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                                                                                               |   | 2009                       |   |   | 2008                     |   |   | 2009 |   |   | 2008 |   |
| Related Party Transactions                                                                                         |   | (in millions)              |   |
| AEP Consolidated Revenues – Utility Operations:                                                              |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Power Pool Purchases – Ohio Valley Electric Corporation   (43.47% owned) (a)                       |   | $                          | -      |   |                     | $      | (13 | ) |   | $ | - |   |   | $ | (25 | ) |
| AEP Consolidated Revenues – Other:                                                                           |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Ohio Valley Electric Corporation – Barging and Other   Transportation Services (43.47% Owned) |   |                       | 7      |   |                     |   | 5 |   |   |   | 16 |   |   |   | 14 |   |
| AEP Consolidated Expenses – Purchased Energy for Resale:                                                     |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Ohio Valley Electric Corporation (43.47% Owned)                                                                    |   |                       | 72     |   |                     |   | 61 |   |   |   | 142 |   |   |   | 124 |   |

| (a) | In 2006, the AEP Power Pool began purchasing power from OVEC as part of risk management activities.  The agreement expired in May 2008 and subsequently ended in December 2008. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                    | Three Months EndedJune 30, |   | Six Months EndedJune 30, |   |
|-------------------------------------------------------------------------|----------------------------|--------|--------------------------|--------|
|                                                                    | 2009                       |   | 2008                     |   | 2009 |   | 2008 |   |
| Amounts Attributable To AEP Common Shareholders                         | (in millions)              |   |
| Income Before Discontinued Operations and  Extraordinary Loss |                       | $      | 321                      |   |   | $ | 280 |   |   | $ | 681 |   |   | $ | 853 |   |
| Discontinued Operations, Net of Tax                                     |                       |   | -                        |   |   |   | 1 |   |   |   | - |   |   |   | 1 |   |
| Extraordinary Loss, Net of Tax                                          |                       |   | (5                       | )      |   |   | - |   |   |   | (5 | ) |   |   | - |   |
| Net Income                                                              |                       | $      | 316                      |   |   | $ | 281 |   |   | $ | 676 |   |   | $ | 854 |   |

| 2.   | NEW ACCOUNTING PRONOUNCEMENTS AND EXTRAORDINARY ITEM |
|----------------|------------------------------------------------------|

| · | Reclassifies Minority Interest Expense of $1 million and $2 million and Interest Expense of $0 million and $1 million for the three and six months ended June 30, 2008, respectively, as Net Income Attributable to Noncontrolling Interest below Net Income in the presentation of Earnings Attributable to AEP Common Shareholders in our CondensedConsolidated Statements of Income. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Repositions Preferred Stock Dividend Requirements of Subsidiaries of $0 million and $1 million for the three and six months ended June 30, 2008, respectively, below Net Income in the presentation of Earnings Attributable to AEP Common Shareholders in our Condensed Consolidated Statements of Income.                                                                             |
| · | Reclassifies minority interest of $17 million as of December 31, 2008 previously included in Deferred Credits and Other Noncurrent Liabilities and Total Liabilities as Noncontrolling Interest in Total Equity on our Consolidated Balance Sheets.                                                                                                                                     |
| · | Separately reflects changes in Noncontrolling Interest in the Statements of Changes in Equity and Comprehensive Income (Loss).                                                                                                                                                                                                                                                          |
| · | Reclassifies dividends paid to noncontrolling interests of $3 million for the six months ended June 30, 2008 from Operating Activities to Financing Activities in our Condensed Consolidated Statements of Cash Flows.                                                                                                                                                                  |

| FSP SFAS 107-1 and APB 28-1 “Interim Disclosures about Fair Value of Financial Instruments” (FSP SFAS 107-1 and APB 28-1) |
|---------------------------------------------------------------------------------------------------------------------------------------|

| FSP SFAS 115-2 and SFAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments” (FSP SFAS 115-2 and SFAS 124-2) |
|----------------------------------------------------------------------------------------------------------------------------------------------|

| · | The power to direct the activities of the VIE that most significantly impact the VIE’s economic performance.                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The obligation to absorb the losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. |

| SFAS 168 “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles” (SFAS 168) |
|----------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | CSPCo should attempt to mitigate the costs of its gridSMART advanced metering proposal that will affect portions of its service territory by seeking matching funds under the American Recovery and Reinvestment Act of 2009.  CSPCo plans to file for these matching federal funds during the third quarter of 2009.  As a result, a rider wasestablished to recover 50% or $32 million of the projected $64 million revenue requirement related to gridSMART. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | CSPCo and OPCo can recover their incremental carrying costs related to environmental investments made from 2001 through 2008 that are not reflected in existing rates.  Future recovery during the ESP period of incremental carrying charges on environmental expenditures incurred beginning in 2009 may be requested in annual filings. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | CSPCo’s and OPCo’s Provider of Last Resort revenues were increased by $97 million and $55 million, respectively, to compensate for the risk of customers changing electric suppliers during the ESP period. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | CSPCo and OPCo must fund a combined minimum of $15 million in costs over the ESP period for low-income, at-risk customer programs.  In March 2009, this funding obligation was recognized as a liability and charged to Other Operation and Maintenance expense.  At June 30, 2009, CSPCo’s and OPCo’s liability balance was $6.5million each. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | 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’snet 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 |
|----|-------------------------------------------|

| The Comprehensive Environmental Response Compensation and Liability Act (Superfund) and State Remediation |
|-----------------------------------------------------------------------------------------------------------|

|                           |   | U.K. Generation(a) |   |
|--------------------------------|--------|--------------------|--------|
| Three Months Ended June 30,    |   | (in millions)      |   |
| 2009 Revenue                   |   | $                  | -      |   |
| 2009 Pretax Income             |   |               | -      |   |
| 2009 Earnings, Net of Tax |   |               | -      |   |
|                           |   |               |   |   |
| 2008 Revenue                   |   | $                  | -      |   |
| 2008 Pretax Income             |   |               | 2      |   |
| 2008 Earnings, Net of Tax |   |               | 1      |   |

|                           |   | U.K. Generation(a) |   |
|--------------------------------|--------|--------------------|--------|
| Six Months Ended June 30,      |   | (in millions)      |   |
| 2009 Revenue                   |   | $                  | -      |   |
| 2009 Pretax Income             |   |               | -      |   |
| 2009 Earnings, Net of Tax |   |               | -      |   |
|                           |   |               |   |   |
| 2008 Revenue                   |   | $                  | -      |   |
| 2008 Pretax Income             |   |               | 2      |   |
| 2008 Earnings, Net of Tax |   |               | 1      |   |

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

|                                  |                        |   | Other Postretirement        |   |
|---------------------------------------|-----------------------------|--------|-----------------------------|--------|
|                                  | Pension Plans               |   | Benefit Plans               |   |
|                                  | Three Months Ended June 30, |   | Three Months Ended June 30, |   |
|                                  | 2009                        |   | 2008                        |   | 2009 |   | 2008 |   |
|                                  | (in millions)               |   |
| Service Cost                          |                        | $      | 26                          |   |   | $ | 25 |   |   | $ | 11 |   |   | $ | 11 |   |
| Interest Cost                         |                        |   | 64                          |   |   |   | 62 |   |   |   | 28 |   |   |   | 28 |   |
| Expected Return on Plan Assets        |                        |   | (81                         | )      |   |   | (84 | ) |   |   | (20 | ) |   |   | (28 | ) |
| Amortization of Transition Obligation |                        |   | -                           |   |   |   | - |   |   |   | 6 |   |   |   | 7 |   |
| Amortization of Net Actuarial Loss    |                        |   | 15                          |   |   |   | 10 |   |   |   | 10 |   |   |   | 2 |   |
| Net Periodic Benefit Cost             |                        | $      | 24                          |   |   | $ | 13 |   |   | $ | 35 |   |   | $ | 20 |   |

|                                  |                      |   | Other Postretirement      |   |
|---------------------------------------|---------------------------|--------|---------------------------|--------|
|                                  | Pension Plans             |   | Benefit Plans             |   |
|                                  | Six Months Ended June 30, |   | Six Months Ended June 30, |   |
|                                  | 2009                      |   | 2008                      |   | 2009 |   | 2008 |   |
|                                  | (in millions)             |   |
| Service Cost                          |                      | $      | 52                        |   |   | $ | 50 |   |   | $ | 21 |   |   | $ | 21 |   |
| Interest Cost                         |                      |   | 127                       |   |   |   | 125 |   |   |   | 55 |   |   |   | 56 |   |
| Expected Return on Plan Assets        |                      |   | (161                      | )      |   |   | (168 | ) |   |   | (40 | ) |   |   | (56 | ) |
| Amortization of Transition Obligation |                      |   | -                         |   |   |   | - |   |   |   | 13 |   |   |   | 14 |   |
| Amortization of Net Actuarial Loss    |                      |   | 30                        |   |   |   | 19 |   |   |   | 21 |   |   |   | 5 |   |
| Net Periodic Benefit Cost             |                      | $      | 48                        |   |   | $ | 26 |   |   | $ | 70 |   |   | $ | 40 |   |

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

| · | Commercial barging operations that annually transport approximately 33 million tons of coal and dry bulk commodities primarily on the Ohio, Illinois and lower Mississippi Rivers. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | 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 2006.                                                                             |
| · | Revenue sharing related to the Plaquemine Cogeneration Facility.                                                                                                                                                                           |

|                                                                |   |               |        | Nonutility Operations    |   |                   |   |          |     |                    |   |
|---------------------------------------------------------------------|--------|--------------------|-------------|--------------------------|--------|------------------------|--------|---------------|----------|-------------------------|--------|
|                                                                |   | Utility Operations |        | AEP RiverOperations |   | GenerationandMarketing |   | All Other (a) |     | Reconciling Adjustments |   | Consolidated |   |
|                                                                |   | (in millions)      |
| Three Months Ended June 30, 2009                                    |   |               |        |                     |   |                   |   |          |     |                    |   |   |   |   |   |   |   |   |   |
| Revenues from:                                                      |   |               |        |                     |   |                   |   |          |     |                    |   |   |   |   |   |   |   |   |   |
| External Customers                                                  |   | $                  | 3,035  | (d)                      | $      | 105               |   | $             | 58  |                    | $      | 4  |   | $ | -  |   | $ | 3,202  |   |
| Other Operating Segments                                            |   |               | 21     | (d)                      |   | 3                 |   |          | 1   |                    |   | 5  |   |   | (30) |   |   | -  |   |
| Total Revenues                                                      |   | $                  | 3,056  |                     | $      | 108               |   | $             | 59  |                    | $      | 9  |   | $ | (30) |   | $ | 3,202  |   |
|                                                                |   |               |        |                     |   |                   |   |          |     |                    |   |   |   |   |   |   |   |   |   |
| Income (Loss) Before Discontinued Operations and Extraordinary Loss |   | $                  | 327    |                     | $      | 1                 |   | $             | 4   |                    | $      | (10) |   | $ | -  |   | $ | 322  |   |
| Extraordinary Loss, Net of Tax                                      |   |               | (5)         |                     |   | -                 |   |          | -   |                    |   | -  |   |   | -  |   |   | (5) |   |
| Net Income (Loss)                                                   |   |               | 322    |                     |   | 1                 |   |          | 4   |                    |   | (10) |   |   | -  |   |   | 317  |   |
| Less: Net Income Attributable to Noncontrolling Interests           |   |               | 1      |                     |   | -                 |   |          | -   |                    |   | -  |   |   | -  |   |   | 1  |   |
| Net Income (Loss) Attributable to AEP Shareholders             |   |               | 321    |                     |   | 1                 |   |          | 4   |                    |   | (10) |   |   | -  |   |   | 316  |   |
| Less: Preferred Stock Dividend Requirements of Subsidiaries         |   |               | -      |                     |   | -                 |   |          | -   |                    |   | -  |   |   | -  |   |   | -  |   |
| Earnings (Loss) Attributable to AEP Common Shareholders             |   | $                  | 321    |                     | $      | 1                 |   | $             | 4   |                    | $      | (10) |   | $ | -  |   | $ | 316  |   |

|                                                                     |   |               |        | Nonutility Operations    |   |                   |   |          |      |                    |   |
|--------------------------------------------------------------------------|--------|--------------------|-------------|--------------------------|--------|------------------------|--------|---------------|-----------|-------------------------|--------|
|                                                                     |   | Utility Operations |        | AEP RiverOperations |   | 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 |   | $                  | 264    |                     | $      | 3                 |   | $             | 26   |                    | $      | (12) |   | $ | -  |   | $ | 281  |   |
| Discontinued Operations, Net of Tax                                      |   |               | -      |                     |   | -                 |   |          | -    |                    |   | 1  |   |   | -  |   |   | 1  |   |
| Net Income (Loss)                                                        |   |               | 264    |                     |   | 3                 |   |          | 26   |                    |   | (11) |   |   | -  |   |   | 282  |   |
| Less: Net Income Attributable to Noncontrolling Interests                |   |               | 1      |                     |   | -                 |   |          | -    |                    |   | -  |   |   | -  |   |   | 1  |   |
| Net Income (Loss) Attributable to AEP Shareholders                       |   |               | 263    |                     |   | 3                 |   |          | 26   |                    |   | (11) |   |   | -  |   |   | 281  |   |
| Less: Preferred Stock Dividend Requirements of Subsidiaries              |   |               | -      |                     |   | -                 |   |          | -    |                    |   | -  |   |   | -  |   |   | -  |   |
| Earnings (Loss) Attributable to AEP Common Shareholders                  |   | $                  | 263    |                     | $      | 3                 |   | $             | 26   |                    | $      | (11) |   | $ | -  |   | $ | 281  |   |

|                                                                |   |               |        | Nonutility Operations    |   |                   |   |          |      |                    |   |
|---------------------------------------------------------------------|--------|--------------------|-------------|--------------------------|--------|------------------------|--------|---------------|-----------|-------------------------|--------|
|                                                                |   | Utility Operations |        | AEP RiverOperations |   | GenerationandMarketing |   | All Other (a) |      | Reconciling Adjustments |   | Consolidated |   |
|                                                                |   | (in millions)      |
| Six Months Ended June 30, 2009                                      |   |               |        |                     |   |                   |   |          |      |                    |   |   |   |   |   |   |   |   |   |
| Revenues from:                                                      |   |               |        |                     |   |                   |   |          |      |                    |   |   |   |   |   |   |   |   |   |
| External Customers                                                  |   | $                  | 6,302  | (d)                      | $      | 228               |   | $             | 145  |                    | $      | (15) |   | $ | -  |   | $ | 6,660  |   |
| Other Operating Segments                                            |   |               | 21     | (d)                      |   | 9                 |   |          | 6    |                    |   | 27  |   |   | (63) |   |   | -  |   |
| Total Revenues                                                      |   | $                  | 6,323  |                     | $      | 237               |   | $             | 151  |                    | $      | 12  |   | $ | (63) |   | $ | 6,660  |   |
|                                                                |   |               |        |                     |   |                   |   |          |      |                    |   |   |   |   |   |   |   |   |   |
| Income (Loss) Before Discontinued Operations and Extraordinary Loss |   | $                  | 673    |                     | $      | 12                |   | $             | 28   |                    | $      | (28) |   | $ | -  |   | $ | 685  |   |
| Extraordinary Loss, Net of Tax                                      |   |               | (5)         |                     |   | -                 |   |          | -    |                    |   | -  |   |   | -  |   |   | (5) |   |
| Net Income (Loss)                                                   |   |               | 668    |                     |   | 12                |   |          | 28   |                    |   | (28) |   |   | -  |   |   | 680  |   |
| Less: Net Income Attributable to Noncontrolling Interests           |   |               | 3      |                     |   | -                 |   |          | -    |                    |   | -  |   |   | -  |   |   | 3  |   |
| Net Income (Loss) Attributable to AEP Shareholders                  |   |               | 665    |                     |   | 12                |   |          | 28   |                    |   | (28) |   |   | -  |   |   | 677  |   |
| Less: Preferred Stock Dividend Requirements of Subsidiaries         |   |               | 1      |                     |   | -                 |   |          | -    |                    |   | -  |   |   | -  |   |   | 1  |   |
| Earnings (Loss) Attributable to AEP Common Shareholders             |   | $                  | 664    |                     | $      | 12                |   | $             | 28   |                    | $      | (28) |   | $ | -  |   | $ | 676  |   |

|                                                         |   |               |        | Nonutility Operations    |   |                   |   |          |      |                    |   |
|--------------------------------------------------------------|--------|--------------------|-------------|--------------------------|--------|------------------------|--------|---------------|-----------|-------------------------|--------|
|                                                         |   | Utility Operations |        | AEP RiverOperations |   | 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 |   | $                  | 677    |                     | $      | 10                |   | $             | 27   |                    | $      | 143  |   | $ | -  |   | $ | 857  |   |
| Discontinued Operations, Net of Tax                          |   |               | -      |                     |   | -                 |   |          | -    |                    |   | 1  |   |   | -  |   |   | 1  |   |
| Net Income                                                   |   |               | 677    |                     |   | 10                |   |          | 27   |                    |   | 144  |   |   | -  |   |   | 858  |   |
| Less: Net Income Attributable to Noncontrolling Interests    |   |               | 3      |                     |   | -                 |   |          | -    |                    |   | -  |   |   | -  |   |   | 3  |   |
| Net Income Attributable to AEP Shareholders                  |   |               | 674    |                     |   | 10                |   |          | 27   |                    |   | 144  |   |   | -  |   |   | 855  |   |
| Less: Preferred Stock Dividend Requirements of Subsidiaries  |   |               | 1      |                     |   | -                 |   |          | -    |                    |   | -  |   |   | -  |   |   | 1  |   |
| Earnings Attributable to AEP Common Shareholders             |   | $                  | 673    |                     | $      | 10                |   | $             | 27   |                    | $      | 144  |   | $ | -  |   | $ | 854  |   |

|                                                 |   |               |         | Nonutility Operations    |   |                   |   |          |      |                       |   |
|------------------------------------------------------|--------|--------------------|--------------|--------------------------|--------|------------------------|--------|---------------|-----------|----------------------------|--------|
|                                                 |   | Utility Operations |         | AEP RiverOperations |   | GenerationandMarketing |   | All Other (a) |      | Reconciling Adjustments(c) |   | Consolidated |   |
|                                                 |   | (in millions)      |         |
| June 30, 2009                                        |   |               |         |                     |   |                   |   |          |      |                       |   |   |   |   |   |   |   |   |   |
| Total Property, Plant and Equipment                  |   | $                  | 49,976  |                     | $      | 380               |   | $             | 570  |                       | $      | 10  |   | $ | (238) |   | $ | 50,698  |   |
| Accumulated Depreciation and Amortization            |   |               | 16,925  |                     |   | 80                |   |          | 154  |                       |   | 8  |   |   | (28) |   |   | 17,139  |   |
| Total Property, Plant and Equipment – Net |   | $                  | 33,051  |                     | $      | 300               |   | $             | 416  |                       | $      | 2  |   | $ | (210) |   | $ | 33,559  |   |
|                                                 |   |               |         |                     |   |                   |   |          |      |                       |   |   |   |   |   |   |   |   |   |
| Total Assets                                         |   | $                  | 44,981  |                     | $      | 421               |   | $             | 782  |                       | $      | 15,055  |   | $ | (14,901) | (b) | $ | 46,338  |   |

|                                                 |   |               |         | Nonutility Operations    |   |                   |   |          |      |                       |   |
|------------------------------------------------------|--------|--------------------|--------------|--------------------------|--------|------------------------|--------|---------------|-----------|----------------------------|--------|
|                                                 |   | Utility Operations |         | AEP RiverOperations |   | GenerationandMarketing |   | All Other (a) |      | Reconciling Adjustment (c) |   | Consolidated |   |
| December 31, 2008                                    |   | (in millions)      |         |
| Total Property, Plant and Equipment                  |   | $                  | 48,997  |                     | $      | 371               |   | $             | 565  |                       | $      | 10  |   | $ | (233) |   | $ | 49,710  |   |
| Accumulated Depreciation and  Amortization |   |               | 16,525  |                     |   | 73                |   |          | 140  |                       |   | 8  |   |   | (23) |   |   | 16,723  |   |
| Total Property, Plant and Equipment – Net      |   | $                  | 32,472  |                     | $      | 298               |   | $             | 425  |                       | $      | 2  |   | $ | (210) |   | $ | 32,987  |   |
|                                                 |   |               |         |                     |   |                   |   |          |      |                       |   |   |   |   |   |   |   |   |   |
| Total Assets                                         |   | $                  | 43,773  |                     | $      | 439               |   | $             | 737  |                       | $      | 14,501  |   | $ | (14,295) | (b) | $ | 45,155  |   |

| (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 2006.  The cash settlement of $255 million ($164 million, net of tax) is included in Net Income. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Revenue sharing related to the Plaquemine Cogeneration Facility. |
| (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 or sales activity for these energymarketing contracts as Revenues from External Customers for the Utility Operations segment.  This is offset by the Utility Operations segment’s related net sales (purchases) for these contracts with AEPEP in Revenues from Other Operating Segments of $(1) million and $26 million for the three months ended June 30, 2009 and 2008, respectively, and $(6) million and $238 million for the six months ended June 30, 2009 and 2008, respectively.  The Generation and Marketing segment also reportsthese purchase or sales contracts with Utility Operations as Revenues from Other Operating Segments.  These affiliated contracts between PSO and SWEPCo with AEPEP will end in December 2009. |

| Notional Volume of Derivative Instruments |
|-------------------------------------------|
| June 30, 2009                             |
|                                      |   |   |   |   | Unit of |
| Primary Risk Exposure                     |   | Volume |   | Measure |
|                                      |   | (in millions) |   |
| Commodity:                                |   |   |   |   |   |
| Power                                     |   |   | 590   |   | MWHs |
| Coal                                      |   |   | 56   |    | Tons |
| Natural Gas                               |   |   | 192   |   | MMBtu |
| Heating Oil and Gasoline                  |   |   |  8   |    | Gallons |
| Interest Rate                             |   | $ | 421   |    | USD |
|                                      |   |   |   |   |   |
| Interest Rate and Foreign Currency        |   | $ | 497   |   | USD |

| Fair Value of Derivative InstrumentsJune 30, 2009      |            |
|--------------------------------------------------------|-----------------|
|                                                   | Risk Management |   |   |   |   |   |   |   |   |   |
|                                                   | Contracts       |   | Hedging Contracts |   |   |   |   |   |
|                                                   |            |   |   |   | Interest Rate |   |   |   |   |   |
|                                                   |            |   |   |   | and Foreign |   | Other |   |   |   |
| Balance Sheet Location                                 | Commodity (a)   |   | Commodity (a) |   | Currency |   | (b) |   | Total |   |
|                                                   | (in millions)   |   |
| Current Risk Management Assets                         |            | $ | 2,006 |   |   | $ | 37 |   |   | $ | 30 |   |   | $ | (1,738 | ) |   | $ | 335 |   |
| Long-term Risk Management Assets                       |            |   | 885 |   |   |   | 5 |   |   |   | - |   |   |   | (510 | ) |   |   | 380 |   |
| Total Assets                                           |            |   | 2,891 |   |   |   | 42 |   |   |   | 30 |   |   |   | (2,248 | ) |   |   | 715 |   |
|                                                   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Risk Management Liabilities                    |            |   | 1,914 |   |   |   | 31 |   |   |   | 3 |   |   |   | (1,790 | ) |   |   | 158 |   |
| Long-term Risk Management Liabilities                  |            |   | 693 |   |   |   | 4 |   |   |   | 2 |   |   |   | (561 | ) |   |   | 138 |   |
| Total Liabilities                                      |            |   | 2,607 |   |   |   | 35 |   |   |   | 5 |   |   |   | (2,351 | ) |   |   | 296 |   |
|                                                   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |            | $ | 284 |   |   | $ | 7 |   |   | $ | 25 |   |   | $ | 103 |   |   | $ | 419 |   |

| (a) | Derivative instruments within these categories are reported gross.  These instruments are subject to master netting agreements and are presented in the Condensed Consolidated Balance Sheet on a net basis in accordance with FIN 39 “Offsetting of Amounts Related to Certain Contracts.” |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amounts represent counterparty netting of risk management contracts, associated cash collateral in accordance with FSP FIN 39-1 and dedesignated risk management contracts.                                                                                                                                       |

| Amount of Gain (Loss) Recognized onRisk Management Contracts |
|--------------------------------------------------------------|

|                                    | Three Months Ended |   | Six Months Ended |   |
|-----------------------------------------|--------------------|--------|------------------|--------|
|                                    | June 30, 2009      |   | June 30, 2009    |   |
| Location of Gain (Loss)                 | (in millions)      |   |
| Utility Operations Revenue              |               | $      | 33               |   |   | $ | 99 |   |
| Other Revenue                           |               |   | 5                |   |   |   | 18 |   |
| Regulatory Assets                       |               |   | -                |   |   |   | (1 | ) |
| Regulatory Liabilities                  |               |   | 26               |   |   |   | 81 |   |
| Total Gain on Risk Management Contracts |               | $      | 64               |   |   | $ | 197 |   |

| Total Accumulated Other Comprehensive Income (Loss) Activity for Cash Flow Hedges                   |   |
|-----------------------------------------------------------------------------------------------------|--------|
| For the Three Months Ended June 30, 2009                                                            |   |
|                                                                                                |   | Commodity |   |   | Interest Rate and Foreign Currency |   |   | Total |   |
|                                                                                                |   | (in millions) |   |
| Beginning Balance in AOCI as of April 1, 2009                                                       |   | $ | 9 |   |   | $ | (28 | ) |   | $ | (19 | ) |
| Changes in Fair Value Recognized in AOCI                                                            |   |   | - |   |   |   | 15 |   |   |   | 15 |   |
| Amount of (Gain) or Loss Reclassified from AOCI  to Income Statement/within Balance Sheet |   |   |   |   |   |   |   |   |   |   |   |   |
| Utility Operations Revenue                                                                          |   |   | (4 | ) |   |   | - |   |   |   | (4 | ) |
| Other Revenue                                                                                       |   |   | (4 | ) |   |   | - |   |   |   | (4 | ) |
| Purchased Electricity for Resale                                                                    |   |   | 6 |   |   |   | - |   |   |   | 6 |   |
| Interest Expense                                                                                    |   |   | - |   |   |   | 2 |   |   |   | 2 |   |
| Regulatory Assets                                                                                   |   |   | 1 |   |   |   | - |   |   |   | 1 |   |
| Regulatory Liabilities                                                                              |   |   | (2 | ) |   |   | - |   |   |   | (2 | ) |
| Ending Balance in AOCI as of June 30, 2009                                                          |   | $ | 6 |   |   | $ | (11 | ) |   | $ | (5 | ) |

| Total Accumulated Other Comprehensive Income (Loss) Activity for Cash Flow Hedges                   |   |
|-----------------------------------------------------------------------------------------------------|--------|
| For the Six Months Ended June 30, 2009                                                              |   |
|                                                                                                |   | Commodity |   |   | Interest Rate and Foreign Currency |   |   | Total |   |
|                                                                                                |   | (in millions) |   |
| Beginning Balance in AOCI as of January 1, 2009                                                     |   | $ | 7 |   |   | $ | (29 | ) |   | $ | (22 | ) |
| Changes in Fair Value Recognized in AOCI                                                            |   |   | (3 | ) |   |   | 15 |   |   |   | 12 |   |
| Amount of (Gain) or Loss Reclassified from AOCI  to Income Statement/within Balance Sheet |   |   |   |   |   |   |   |   |   |   |   |   |
| Utility Operations Revenue                                                                          |   |   | (6 | ) |   |   | - |   |   |   | (6 | ) |
| Other Revenue                                                                                       |   |   | (6 | ) |   |   | - |   |   |   | (6 | ) |
| Purchased Electricity for Resale                                                                    |   |   | 14 |   |   |   | - |   |   |   | 14 |   |
| Interest Expense                                                                                    |   |   | - |   |   |   | 3 |   |   |   | 3 |   |
| Regulatory Assets                                                                                   |   |   | 3 |   |   |   | - |   |   |   | 3 |   |
| Regulatory Liabilities                                                                              |   |   | (3 | ) |   |   | - |   |   |   | (3 | ) |
| Ending Balance in AOCI as of June 30, 2009                                                          |   | $ | 6 |   |   | $ | (11 | ) |   | $ | (5 | ) |

| Impact of Cash Flow Hedges on our Condensed Consolidated Balance SheetJune 30, 2009 |          |
|-------------------------------------------------------------------------------------|---------------|
|                                                                                | Commodity     |   | Interest Rate and Foreign Currency |   | Total |   |
|                                                                                | (in millions) |   |
| Hedging Assets (a)                                                                  |          | $ | 30 |   |   | $ | 30 |   |   | $ | 60 |   |
| Hedging Liabilities (a)                                                             |          |   | (23 | ) |   |   | (5 | ) |   |   | (28 | ) |
| AOCI Gain (Loss) Net of Tax                                                         |          |   | 6 |   |   |   | (11 | ) |   |   | (5 | ) |
| Portion Expected to be Reclassified to Net Income During the Next Twelve Months     |          |   | 6 |   |   |   | (5 | ) |   |   | 1 |   |

| (a) | Hedging Assets and Hedging Liabilities are included in Risk Management Assets and Liabilities on our Condensed Consolidated Balance Sheet. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------|

|           |   |          |   |
|----------------|--------|---------------|--------|
|           |   | June 30, 2009 |   |   | December 31, 2008 |   |
|           |   | Book Value    |   |   | Fair Value |   |   | Book Value |   |   | Fair Value |   |
|           |   | (in millions) |   |
| Long-term Debt |   | $             | 16,696 |   |   | $ | 16,600 |   |   | $ | 15,983 |   |   | $ | 15,113 |   |

|                              | June 30, 2009 |   | December 31, 2008      |   |
|-----------------------------------|---------------|--------|------------------------|--------|
|                              | Cost          |   | Gross Unrealized Gains |   | Gross Unrealized Losses |   | EstimatedFairValue |   | Cost |   | Gross Unrealized Gains |   | Gross Unrealized Losses |   | EstimatedFairValue |   |
| Other Temporary Investments       | (in millions) |   |
| Cash (a)                          |          | $      | 199                    |   |   | $ | - |   |   | $ | - |   |   | $ | 199 |   |   | $ | 243 |   |   | $ | - |   |   | $ | - |   |   | $ | 243 |   |
| Debt Securities                   |          |   | 56                     |   |   |   | - |   |   |   | - |   |   |   | 56 |   |   |   | 56 |   |   |   | - |   |   |   | - |   |   |   | 56 |   |
| Equity Securities                 |          |   | 18                     |   |   |   | 16 |   |   |   | - |   |   |   | 34 |   |   |   | 27 |   |   |   | 11 |   |   |   | 10 |   |   |   | 28 |   |
| Total Other Temporary Investments |          | $      | 273                    |   |   | $ | 16 |   |   | $ | - |   |   | $ | 289 |   |   | $ | 326 |   |   | $ | 11 |   |   | $ | 10 |   |   | $ | 327 |   |

| (a) | Primarily represents amounts held for the payment of debt. |
|-----|------------------------------------------------------------|

|               |             |   |           |   |                 |   | Gross Realized   |   |
|--------------------|------------------|--------|----------------|--------|----------------------|--------|------------------|--------|
|               | Proceeds From    |   | Purchases      |   | Gross Realized Gains |   | Losses on        |   |
|               | Investment Sales |   | of Investments |   | on Investment Sales  |   | Investment Sales |   |
|               | (in millions)    |   |
| Three Months Ended |             | $      | -              |   |                 | $      | 1                |   |   | $ | - |   |   | $ | - |   |
| Six Months Ended   |             |   | -              |   |                 |   | 1                |   |   |   | - |   |   |   | - |   |

|                                               | June 30, 2009      |   | December 31, 2008    |   |
|----------------------------------------------------|--------------------|--------|----------------------|--------|
|                                               | EstimatedFairValue |   | GrossUnrealizedGains |   | Other-Than-TemporaryImpairments |   | EstimatedFairValue |   | GrossUnrealizedGains |   | Other-Than-TemporaryImpairments |   |
|                                               | (in millions)      |   |
| Cash                                               |               | $      | 16                   |   |   | $ | - |   |   | $ | - |   |   | $ | 18 |   |   | $ | - |   |   | $ | - |   |
| Debt Securities                                    |               |   | 767                  |   |   |   | 28 |   |   |   | (3 | ) |   |   | 773 |   |   |   | 52 |   |   |   | (3 | ) |
| Equity Securities                                  |               |   | 485                  |   |   |   | 145 |   |   |   | (135 | ) |   |   | 469 |   |   |   | 89 |   |   |   | (82 | ) |
| Spent Nuclear Fuel and Decommissioning Trusts |               | $      | 1,268                |   |   | $ | 173 |   |   | $ | (138 | ) |   | $ | 1,260 |   |   | $ | 141 |   |   | $ | (85 | ) |

|               |             |   |           |   |                 |   | Gross Realized   |   |
|--------------------|------------------|--------|----------------|--------|----------------------|--------|------------------|--------|
|               | Proceeds From    |   | Purchases      |   | Gross Realized Gains |   | Losses on        |   |
|               | Investment Sales |   | of Investments |   | on Investment Sales  |   | Investment Sales |   |
|               | (in millions)    |   |
| Three Months Ended |             | $      | 253            |   |                 | $      | 264              |   |   | $ | 6 |   |   | $ | (1 | ) |
| Six Months Ended   |             |   | 411            |   |                 |   | 442              |   |   |   | 9 |   |   |   | (1 | ) |

|                     |   | Fair Valueof DebtSecurities |   |
|--------------------------|--------|-----------------------------|--------|
|                     |   | (in millions)               |   |
| Within 1 year            |   | $                           | 40     |   |
| 1 year – 5 years   |   |                        | 214    |   |
| 5 years – 10 years |   |                        | 242    |   |
| After 10 years           |   |                        | 271    |   |
| Total                    |   | $                           | 767    |   |

| Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2009 |   |
|----------------------------------------------------------------------------------------|--------|
|                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Other |   |   | Total |   |
| Assets:                                                                                |   | (in millions) |   |
|                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents (a)                                                          |   | $ | 278 |   |   | $ | - |   |   | $ | - |   |   | $ | 80 |   |   | $ | 358 |   |
| Debt Securities (b)                                                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total Cash and Cash Equivalents                                                        |   |   | 278 |   |   |   | - |   |   |   | - |   |   |   | 80 |   |   |   | 358 |   |
|                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Temporary Investments                                                            |   |   |   |
| Cash and Cash Equivalents (a)                                                          |   |   | 167 |   |   |   | - |   |   |   | - |   |   |   | 32 |   |   |   | 199 |   |
| Debt Securities (c)                                                                    |   |   | 56 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 56 |   |
| Equity Securities (d)                                                                  |   |   | 34 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 34 |   |
| TotalOther Temporary Investments                                                       |   |   | 257 |   |   |   | - |   |   |   | - |   |   |   | 32 |   |   |   | 289 |   |
|                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk Management Assets                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk Management Contracts (e)                                                          |   |   | 48 |   |   |   | 2,733 |   |   |   | 92 |   |   |   | (2,250 | ) |   |   | 623 |   |
| Cash Flow Hedges (e)                                                                   |   |   | 6 |   |   |   | 67 |   |   |   | - |   |   |   | (13 | ) |   |   | 60 |   |
| Dedesignated Risk Management Contracts (f)                                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 32 |   |   |   | 32 |   |
| Total Risk Management Assets                                                           |   |   | 54 |   |   |   | 2,800 |   |   |   | 92 |   |   |   | (2,231 | ) |   |   | 715 |   |
|                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Spent Nuclear Fuel and Decommissioning Trusts                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents (g)                                                          |   |   | - |   |   |   | 5 |   |   |   | - |   |   |   | 11 |   |   |   | 16 |   |
| Debt Securities (h)                                                                    |   |   | - |   |   |   | 767 |   |   |   | - |   |   |   | - |   |   |   | 767 |   |
| Equity Securities (d)                                                                  |   |   | 485 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 485 |   |
| TotalSpent Nuclear Fuel and Decommissioning Trusts                                     |   |   | 485 |   |   |   | 772 |   |   |   | - |   |   |   | 11 |   |   |   | 1,268 |   |
|                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                                                                           |   | $ | 1,074 |   |   | $ | 3,572 |   |   | $ | 92 |   |   | $ | (2,108 | ) |   | $ | 2,630 |   |
|                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk Management Liabilities                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk Management Contracts (e)                                                          |   | $ | 56 |   |   | $ | 2,508 |   |   | $ | 25 |   |   | $ | (2,321 | ) |   | $ | 268 |   |
| Cash Flow Hedges (e)                                                                   |   |   | 2 |   |   |   | 39 |   |   |   | - |   |   |   | (13 | ) |   |   | 28 |   |
| Total Risk Management Liabilities                                                      |   | $ | 58 |   |   | $ | 2,547 |   |   | $ | 25 |   |   | $ | (2,334 | ) |   | $ | 296 |   |

| Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2008 |   |
|--------------------------------------------------------------------------------------------|--------|
|                                                                                       |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Other |   |   | Total |   |
| Assets:                                                                                    |   | (in millions) |   |
|                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents (a)                                                              |   | $ | 304 |   |   | $ | - |   |   | $ | - |   |   | $ | 60 |   |   | $ | 364 |   |
| Debt Securities (b)                                                                        |   |   | - |   |   |   | 47 |   |   |   | - |   |   |   | - |   |   |   | 47 |   |
| Total Cash and Cash Equivalents                                                            |   |   | 304 |   |   |   | 47 |   |   |   | - |   |   |   | 60 |   |   |   | 411 |   |
|                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Temporary Investments                                                                |   |   |   |
| Cash and Cash Equivalents (a)                                                              |   |   | 217 |   |   |   | - |   |   |   | - |   |   |   | 26 |   |   |   | 243 |   |
| Debt Securities (c)                                                                        |   |   | 56 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 56 |   |
| Equity Securities (d)                                                                      |   |   | 28 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 28 |   |
| TotalOther Temporary Investments                                                           |   |   | 301 |   |   |   | - |   |   |   | - |   |   |   | 26 |   |   |   | 327 |   |
|                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk Management Assets                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk Management Contracts (e)                                                              |   |   | 61 |   |   |   | 2,413 |   |   |   | 86 |   |   |   | (2,022 | ) |   |   | 538 |   |
| Cash Flow Hedges (e)                                                                       |   |   | 6 |   |   |   | 32 |   |   |   | - |   |   |   | (4 | ) |   |   | 34 |   |
| Dedesignated Risk Management Contracts (f)                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 39 |   |   |   | 39 |   |
| Total Risk Management Assets                                                               |   |   | 67 |   |   |   | 2,445 |   |   |   | 86 |   |   |   | (1,987 | ) |   |   | 611 |   |
|                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Spent Nuclear Fuel and Decommissioning Trusts                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents (g)                                                              |   |   | - |   |   |   | 6 |   |   |   | - |   |   |   | 12 |   |   |   | 18 |   |
| Debt Securities (h)                                                                        |   |   | - |   |   |   | 773 |   |   |   | - |   |   |   | - |   |   |   | 773 |   |
| Equity Securities (d)                                                                      |   |   | 469 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 469 |   |
| TotalSpent Nuclear Fuel and Decommissioning Trusts                                         |   |   | 469 |   |   |   | 779 |   |   |   | - |   |   |   | 12 |   |   |   | 1,260 |   |
|                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                                                                               |   | $ | 1,141 |   |   | $ | 3,271 |   |   | $ | 86 |   |   | $ | (1,889 | ) |   | $ | 2,609 |   |
|                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk Management Liabilities                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk Management Contracts (e)                                                              |   | $ | 77 |   |   | $ | 2,213 |   |   | $ | 37 |   |   | $ | (2,054 | ) |   | $ | 273 |   |
| Cash Flow Hedges (e)                                                                       |   |   | 1 |   |   |   | 34 |   |   |   | - |   |   |   | (4 | ) |   |   | 31 |   |
| Total Risk Management Liabilities                                                          |   | $ | 78 |   |   | $ | 2,247 |   |   | $ | 37 |   |   | $ | (2,058 | ) |   | $ | 304 |   |

| (a) | Amounts in “Other” column primarily represent cash deposits in bank accounts with financial institutions or with third parties.  Level 1 amounts primarily represent investments in money market funds.                                                                                                                                                |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amount represents commercial paper investments with maturities of less than ninety days.                                                                                                                                                                                                                                                                                     |
| (c) | Amounts represent debt-based mutual funds.                                                                                                                                                                                                                                                                                                                                   |
| (d) | Amount represents publicly traded equity securities and equity-based mutual funds.                                                                                                                                                                                                                                                                                           |
| (e) | Amounts in “Other” column primarily represent counterparty netting of risk management contracts and associated cash collateral under FSP FIN 39-1.                                                                                                                                                                                                               |
| (f) | “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 MTM value will be amortized into Utility Operations Revenues over the remaininglife of the contracts. |
| (g) | Amounts in “Other” column primarily represent accrued interest receivables from financial institutions.  Level 2 amounts primarily represent investments in money market funds.                                                                                                                                                                        |
| (h) | Amounts represent corporate, municipal and treasury bonds.                                                                                                                                                                                                                                                                                                                   |

| Three Months Ended June 30, 2009                                                                                                                        |   | Net Risk Management Assets (Liabilities) |   |   | Other Temporary Investments |   |   | Investments in Debt Securities |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|--------|-----------------------------|--------|--------|--------------------------------|--------|
|                                                                                                                                                    |   | (in millions)                            |   |
| Balance as of April 1, 2009                                                                                                                             |   | $                                        | 86     |   |                        | $      | -      |                           |   | $ | - |   |
| Realized (Gain) Loss Included in Net Income (or Changes in Net Assets) (a)                                                                              |   |                                     | (15    | )      |                        |   | -      |                           |   |   | - |   |
| Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held    at the Reporting Date (a) |   |                                     | 7      |   |                        |   | -      |                           |   |   | - |   |
| Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income                                                                      |   |                                     | -      |   |                        |   | -      |                           |   |   | - |   |
| Purchases, Issuances and Settlements (b)                                                                                                                |   |                                     | -      |   |                        |   | -      |                           |   |   | - |   |
| Transfers in and/or out of Level 3 (c)                                                                                                                  |   |                                     | (29    | )      |                        |   | -      |                           |   |   | - |   |
| Changes in Fair Value Allocated to Regulated Jurisdictions (d)                                                                                          |   |                                     | 18     |   |                        |   | -      |                           |   |   | - |   |
| Balance as of June 30, 2009                                                                                                                             |   | $                                        | 67     |   |                        | $      | -      |                           |   | $ | - |   |

| Six Months Ended June 30, 2009                                                                                                                          |   | Net Risk Management Assets (Liabilities) |   |   | Other Temporary Investments |   |   | Investments in Debt Securities |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|--------|-----------------------------|--------|--------|--------------------------------|--------|
|                                                                                                                                                    |   | (in millions)                            |   |
| Balance as of January 1, 2009                                                                                                                           |   | $                                        | 49     |   |                        | $      | -      |                           |   | $ | - |   |
| Realized (Gain) Loss Included in Net Income (or Changes in Net Assets) (a)                                                                              |   |                                     | (20    | )      |                        |   | -      |                           |   |   | - |   |
| Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held    at the Reporting Date (a) |   |                                     | 40     |   |                        |   | -      |                           |   |   | - |   |
| Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income                                                                 |   |                                     | -      |   |                        |   | -      |                           |   |   | - |   |
| Purchases, Issuances and Settlements (b)                                                                                                                |   |                                     | -      |   |                        |   | -      |                           |   |   | - |   |
| Transfers in and/or out of Level 3 (c)                                                                                                                  |   |                                     | (25    | )      |                        |   | -      |                           |   |   | - |   |
| Changes in Fair Value Allocated to Regulated Jurisdictions (d)                                                                                          |   |                                     | 23     |   |                        |   | -      |                           |   |   | - |   |
| Balance as of June 30, 2009                                                                                                                             |   | $                                        | 67     |   |                        | $      | -      |                           |   | $ | - |   |

| 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 Net Income (or Changes in Net Assets) (a)                                                                         |   |                                     | (2     | )      |                        |   | -      |                           |   |   | - |   |
| Unrealized Gain (Loss) Included in Net Income (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 (b)                                                                                                           |   |                                     | -      |   |                        |   | (22    | )                              |   |   | (17 | ) |
| Transfers in and/or out of Level 3 (c)                                                                                                             |   |                                     | (8     | )      |                        |   | -      |                           |   |   | - |   |
| Changes in Fair Value Allocated to Regulated Jurisdictions (d)                                                                                     |   |                                     | (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 Net Income (or Changes in Net Assets) (a)                                                                              |   |                                     | (2     | )      |                        |   | -      |                           |   |   | - |   |
| Unrealized Gain (Loss) Included in Net Income (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 (b)                                                                                                                |   |                                     | -      |   |                        |   | (118   | )                              |   |   | (17 | ) |
| Transfers in and/or out of Level 3 (c)                                                                                                                  |   |                                     | (1     | )      |                        |   | 118    |                           |   |   | 17 |   |
| Changes in Fair Value Allocated to Regulated Jurisdictions (d)                                                                                          |   |                                     | (51    | )      |                        |   | -      |                           |   |   | - |   |
| Balance as of June 30, 2008                                                                                                                             |   | $                                        | (8     | )      |                        | $      | -      |                           |   | $ | - |   |

| (a) | Included in revenues on our Condensed Consolidated Statements of Income.                                                                                                                                                                                                                                                                                  |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Includes principal amount of securities settled during the period.                                                                                                                                                                                                                                                                                        |
| (c) | “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 theperiod. |
| (d) | “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 liabilities/assets.                                                               |

| 10.   INCOME TAXES |
|-----------------------------------|

|  11.   FINANCING ACTIVITIES |
|-------------------------------------------------|

|                              |   | June 30,      |   |   | December 31, |   |
|-----------------------------------|--------|---------------|--------|--------|--------------|--------|
| Type of Debt                      |   | 2009          |   |   | 2008         |   |
|                              |   | (in millions) |   |
| Senior Unsecured Notes            |   | $             | 11,820 |   |         | $      | 11,069 |   |
| Pollution Control Bonds           |   |          | 2,080  |   |         |   | 1,946 |   |
| Notes Payable                     |   |          | 146    |   |         |   | 233 |   |
| Securitization Bonds              |   |          | 2,051  |   |         |   | 2,132 |   |
| Junior Subordinated Debentures    |   |          | 315    |   |         |   | 315 |   |
| Spent Nuclear Fuel Obligation (a) |   |          | 264    |   |         |   | 264 |   |
| Other Long-term Debt              |   |          | 88     |   |         |   | 88 |   |
| Unamortized Discount (net)        |   |          | (68    | )      |         |   | (64 | ) |
| Total Long-term Debt Outstanding  |   |          | 16,696 |   |         |   | 15,983 |   |
| Less Portion Due Within One Year  |   |          | 1,346  |   |         |   | 447 |   |
| Long-term Portion                 |   | $             | 15,350 |   |         | $      | 15,536 |   |

| (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 $304 millionand $301 million at June 30, 2009 and December 31, 2008, 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:      |                    |   |             |        |          |     |
| APCo            | Senior Unsecured Notes  |   | $                | 350    |          | 7.95     | 2020 |
| I&M         | Senior Unsecured Notes  |   |             | 475    |          | 7.00     | 2019 |
| I&M         | Pollution Control Bonds |   |             | 50     |          | 6.25     | 2025 |
| I&M         | Pollution Control Bonds |   |             | 50     |          | 6.25     | 2025 |
| PSO             | Pollution Control Bonds |   |             | 34     |          | 5.25     | 2014 |
|            |                    |   |             |        |          |     |   |
| Non-Registrant: |                    |   |             |        |          |     |   |
| KPCo            | Senior Unsecured Notes  |   |             | 40     |          | 7.25     | 2021 |
| KPCo            | Senior Unsecured Notes  |   |             | 30     |          | 8.03     | 2029 |
| KPCo            | Senior Unsecured Notes  |   |             | 60     |          | 8.13     | 2039 |
| Total Issuances |                    |   | $                | 1,089  | (a)           |     |   |

| (a) | Amount indicated on statement of cash flows of $1,075 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 |   | $                     | 150  |          | 6.60     | 2009 |
| OPCo                                     | Notes Payable          |   |                  | 1    |          | 6.27     | 2009 |
| OPCo                                     | Notes Payable          |   |                  | 7    |          | 7.21     | 2009 |
| OPCo                                     | Notes Payable          |   |                  | 70   |          | 7.49     | 2009 |
| PSO                                      | Senior Unsecured Notes |   |                  | 50   |          | 4.70     | 2009 |
| SWEPCo                                   | Notes Payable          |   |                  | 2    |          | 4.47     | 2011 |
|                                     |                   |   |                  |      |          |     |   |
| Non-Registrant:                          |                   |   |                  |      |          |     |   |
| AEP Subsidiaries                         | Notes Payable          |   |                  | 3    |          | Variable | 2017 |
| AEP Subsidiaries                         | Notes Payable          |   |                  | 4    |          | 5.88     | 2011 |
| AEGCo                                    | Senior Unsecured Notes |   |                  | 4    |          | 6.33     | 2037 |
| TCC                                      | Securitization Bonds   |   |                  | 31   |          | 5.56     | 2010 |
| TCC                                      | Securitization Bonds   |   |                  | 50   |          | 4.98     | 2010 |
| Total Retirements and Principal Payments |                   |   | $                     | 372  |          |     |   |

|                                             |   | June 30, 2009     |          |             | December 31, 2008 |   |
|--------------------------------------------------|--------|-------------------|---------------|------------------|-------------------|--------|
|                                             |   | OutstandingAmount |          | InterestRate (a) |              |   | OutstandingAmount |   | InterestRate (a) |   |
| Type of Debt                                     |   | (in thousands)    |          |             |              |   | (in thousands) |   |   |   |
| Line of Credit – AEP                       |   | $                 | 219,000  | (b)              | 0.79%             | (c)    |   | $ | 1,969,000  |   | 2.28% | (c) |
| Line of Credit – Sabine Mining Company (d) |   |              | 14,872   |             | 1.74%             |   |   |   | 7,172  |   | 1.54% |   |
| Commercial Paper – AEP                     |   |              | 316,263  |             | 0.67%             |   |   |   | -  |   | -  |   |
| Commercial Paper – JMG (e)                 |   |              | 11,500   |             | 1.25%             |   |   |   | -  |   | -  |   |
| Total                                            |   | $                 | 561,635  |             |              |   |   | $ | 1,976,172  |   |   |   |

| (a) | Weighted average rate.                                                                                                                                                                                               |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Paid $1.75 billion primarily with proceeds from the April 2009 equity issuance.  Paid remaining $219 million in July 2009.                                                                                 |
| (c) | Rate based on LIBOR.                                                                                                                                                                                                 |
| (d) | Sabine Mining Company is consolidated under FIN 46R.  This line of credit does not reduce available liquidity under AEP’s credit facilities.                                                         |
| (e) | This commercial paper was used to pay down debt in the second quarter of 2009 and matured on July 1, 2009.  This commercial paper does not reduce available liquidity under AEP’s credit facilities. |

----

----

APPALACHIAN POWER COMPANY AND SUBSIDIARIES

| Second Quarter of 2008          |   |   |   |   | $      | 26     |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                            |   |   |   |   |   |   |   |
| Changes in Gross Margin:        |   |   |   |   |   |   |   |
| Retail Margins                  |   |   | 66     |   |   |   |   |   |
| Off-system Sales                |   |   | (48    | )      |   |   |   |   |
| Other                           |   |   | (1     | )      |   |   |   |   |
| Total Change in Gross Margin    |   |   |   |   |   |   | 17     |   |
|                            |   |   |   |   |   |   |   |   |
| Total Expenses and Other:       |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance |   |   | 8      |   |   |   |   |   |
| Depreciation and Amortization   |   |   | (3     | )      |   |   |   |   |
| Carrying Costs Income           |   |   | (12    | )      |   |   |   |   |
| Other Income                    |   |   | (3     | )      |   |   |   |   |
| Interest Expense                |   |   | (4     | )      |   |   |   |   |
| Total Expenses and Other        |   |   |   |   |   |   | (14    | ) |
|                            |   |   |   |   |   |   |   |   |
| Second Quarter of 2009          |   |   |   |   |   | $      | 29     |   |

| · | Retail Margins increased $66 million primarily due to the following:                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                              | A $38 million increase in rate relief primarily due to the impact of the Virginia base rate order issued in October 2008, an increase in the recovery of E&R costs in Virginia and an increase in the recovery of construction financing costs in West Virginia. |
|   | ·                                                                                                                                                                                              | A $37 million increase due to a decrease in sharing of off-system sales margins with customers in Virginia and West Virginia. |
|   | ·                                                                                                                                                                                              | A $6 million increase due to new rates effective January 2009 for a power supply contract with KGPCo. |
|   | These increases were partially offset by:                                                                                                                                                           |
|   | ·                                                                                                                                                                                              | A $14 million decrease due to higher capacity settlement expenses under the Interconnection Agreement net of recovery in West Virginia and environmental deferrals in Virginia. |
|   | ·                                                                                                                                                                                              | An $8 million decrease in industrial sales due to reduced operating levels and suspended operations by certain large industrial customers in APCo’s service territory. |
| · | Margins from Off-system Sales decreased $48 million primarily due to lower physical sales volumes and lower margins as a result of lower market prices, partially offset by higher trading margins. |

| · | Other Operation and Maintenance expenses decreased $8 million primarily due to a $6 million regulatory asset recorded in June 2009 for the deferral of transmission costs.  See “Virginia Rate Matters – Rate Adjustment Clauses” section of Note 3. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation and Amortization expenses increased $3 million primarily due to a greater depreciation base resulting from asset improvements.                                                                                                                                      |
| · | Carrying Costs Income decreased $12 million due to the completion of reliability deferrals in Virginia in December 2008 and the decrease of environmental deferrals in Virginia in 2009.                                                                                         |
| · | Interest Expense increased $4 million primarily due to an increase in long-term debt issuances.                                                                                                                                                                                  |

| Six Months Ended June 30, 2008  |   |   |   |   | $      | 82     |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                            |   |   |   |   |   |   |   |
| Changes in Gross Margin:        |   |   |   |   |   |   |   |
| Retail Margins                  |   |   | 153    |   |   |   |   |   |
| Off-system Sales                |   |   | (95    | )      |   |   |   |   |
| Total Change in Gross Margin    |   |   |   |   |   |   | 58     |   |
|                            |   |   |   |   |   |   |   |   |
| Total Expenses and Other:       |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance |   |   | 20     |   |   |   |   |   |
| Depreciation and Amortization   |   |   | (10    | )      |   |   |   |   |
| Carrying Costs Income           |   |   | (17    | )      |   |   |   |   |
| Other Income                    |   |   | (5     | )      |   |   |   |   |
| Interest Expense                |   |   | (10    | )      |   |   |   |   |
| Total Expenses and Other        |   |   |   |   |   |   | (22    | ) |
|                            |   |   |   |   |   |   |   |   |
| Income Tax Expense              |   |   |   |   |   |   | (14    | ) |
|                            |   |   |   |   |   |   |   |   |
| Six Months Ended June 30, 2009  |   |   |   |   |   | $      | 104    |   |

| · | Retail Margins increased $153 million primarily due to the following:                                                                                                                               |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                              | A $91 million increase in rate relief primarily due to the impact of the Virginia base rate order issued in October 2008, an increase in the recovery of E&R costs in Virginia and an increase in the recovery of construction financing costs in West Virginia. |
|   | ·                                                                                                                                                                                              | A $70 million increase due to a decrease in sharing of off-system sales margins with customers in Virginia and West Virginia. |
|   | ·                                                                                                                                                                                              | A $13 million increase due to new rates effective January 2009 for a power supply contract with KGPCo. |
|   | These increases were partially offset by:                                                                                                                                                           |
|   | ·                                                                                                                                                                                              | A $28 million decrease due to higher capacity settlement expenses under the Interconnection Agreement net of recovery in West Virginia and environmental deferrals in Virginia. |
|   | ·                                                                                                                                                                                              | A $10 million decrease in industrial sales due to reduced operating levels and suspended operations by certain large industrial customers in APCo’s service territory. |
| · | Margins from Off-system Sales decreased $95 million primarily due to lower physical sales volumes and lower margins as a result of lower market prices, partially offset by higher trading margins. |

| · | Other Operation and Maintenance expenses decreased $20 million due to an $11 million decrease in employee-related expenses and generation plant maintenance.  In addition, a $6 million regulatory asset was recorded in June 2009 for the deferral of transmission costs.  See “Virginia Rate Matters – Rate AdjustmentClauses” section of Note 3. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation and Amortization expenses increased $10 million primarily due to a greater depreciation base resulting from asset improvements and the amortization of carrying charges and depreciation expenses that are being collected through the Virginia E&R surcharges.                                                                                                          |
| · | Carrying Costs Income decreased $17 million due to the completion of reliability deferrals in Virginia in December 2008 and the decrease of environmental deferrals in Virginia in 2009.                                                                                                                                                                                                  |
| · | Interest Expense increased $10 million primarily due to an increase in long-term debt issuances.                                                                                                                                                                                                                                                                                          |
| · | Income Tax Expense increased $14 million primarily due to an increase in pretax book income, partially offset by a decrease in state income taxes.                                                                                                                                                                                                                                        |

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

|                                             |   | 2009           |     |   | 2008   |   |
|--------------------------------------------------|--------|----------------|----------|--------|--------|--------|
|                                             |   | (in thousands) |     |
| Cash and Cash Equivalents at Beginning of Period |   | $              | 1,996    |   |   | $      | 2,195 |   |
| Cash Flows from (Used for):                      |   |           |     |   |   |   |   |   |
| Operating Activities                             |   |           | (90,383  | )      |   |   | 140,378 |   |
| Investing Activities                             |   |           | (313,971 | )      |   |   | (296,095 | ) |
| Financing Activities                             |   |           | 404,159  |   |   |   | 155,398 |   |
| Net Decrease in Cash and Cash Equivalents        |   |           | (195     | )      |   |   | (319 | ) |
| Cash and Cash Equivalents at End of Period       |   | $              | 1,801    |   |   | $      | 1,876 |   |

|                   |   | PrincipalAmount |          | Interest |   | Due    |
|------------------------|--------|-----------------|---------------|----------|--------|--------|
| Type of Debt           |   |            | Rate          |     | Date   |
|                   |   | (in thousands)  |          | (%)      |   |   |
| Senior Unsecured Notes |   | $               | 350,000  |     | 7.95   |   | 2020 |

|                   |   | PrincipalAmount Paid |          | Interest |   | Due    |
|------------------------|--------|----------------------|---------------|----------|--------|--------|
| Type of Debt           |   |                 | Rate          |     | Date   |
|                   |   | (in thousands)       |          | (%)      |   |   |
| Senior Unsecured Notes |   | $                    | 150,000  |     | 6.60   |   | 2009 |
| Land Note              |   |                 | 8        |     | 13.718 |   | 2026 |

----

|                                                   |   | MTM Risk   |          | Cash Flow |   | DETM        |   |       |        |   |
|--------------------------------------------------------|--------|------------|---------------|-----------|--------|-------------|--------|------------|-------------|--------|
|                                                   |   | Management |          | Hedge     |   | Assignment  |   | Collateral |        |   |
|                                                   |   | Contracts  |          | Contracts |   | (a)         |   | Deposits   |        | Total  |
| Current Assets                                         |   | $          | 82,398   |      | $      | 3,752  |   | $          | -      |   | $ | (5,587) |   | $ | 80,563  |
| Noncurrent Assets                                      |   |       | 61,751   |      |   | 1,110  |   |       | -      |   |   | (5,468) |   |   | 57,393  |
| Total MTM Derivative Contract Assets                   |   |       | 144,149  |      |   | 4,862  |   |       | -      |   |   | (11,055) |   |   | 137,956  |
|                                                   |   |       |          |      |   |        |   |       |        |   |   |   |   |   |   |
| Current Liabilities                                    |   |       | 48,726   |      |   | 1,326  |   |       | 2,698  |   |   | (18,571) |   |   | 34,179  |
| Noncurrent Liabilities                                 |   |       | 34,853   |      |   | 1,020  |   |       | 1,270  |   |   | (14,509) |   |   | 22,634  |
| Total MTM Derivative Contract Liabilities              |   |       | 83,579   |      |   | 2,346  |   |       | 3,968  |   |   | (33,080) |   |   | 56,813  |
|                                                   |   |       |          |      |   |        |   |       |        |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |   | $          | 60,570   |      | $      | 2,516  |   | $          | (3,968)     |   |  $ | 22,025  |   | $ | 81,143  |

| (a) | See “Natural Gas Contracts with DETM” section of Note 15 of the 2008 Annual Report. |
|-----|-------------------------------------------------------------------------------------------------|

| Total MTM Risk Management Contract Net Assets at December 31, 2008                                          |   | $      | 56,936  |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| (Gain) Loss from Contracts Realized/Settled During the Period and Entered in a Prior Period                 |   |   | (19,473 | )      |
| 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 |   |   | (183    | )      |
| Change in Fair Value Due to Valuation Methodology Changes on Forward Contracts                              |   |   | -       |   |
| Changes in Fair Value Due to Market Fluctuations During the Period (b)                                      |   |   | (464    | )      |
| Changes in Fair Value Allocated to Regulated Jurisdictions (c)                                              |   |   | 23,754  |   |
| Total MTM Risk Management Contract Net Assets                                                               |   |   | 60,570  |   |
| Cash Flow Hedge Contracts                                                                                   |   |   | 2,516   |   |
| DETM Assignment (d)                                                                                         |   |   | (3,968  | )      |
| Collateral Deposits                                                                                         |   |   | 22,025  |   |
| Ending Net Risk Management Assets at June 30, 2009                                                          |   | $      | 81,143  |   |

| (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 delivery term.  A significant portion of the total volumetric positionhas been economically hedged. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market fluctuations are attributable to various factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                         |
| (c) | “Changes in Fair Value Allocated to Regulated Jurisdictions” relates to the net gains (losses) of those contracts that are not reflected in the Condensed Consolidated Statements of Income.  These net gains (losses) are recorded as regulatory liabilities/assets.                                                                                          |
| (d) | See “Natural Gas Contracts with DETM” section of Note 15 of the 2008 Annual Report.                                                                                                                                                                                                                                                                                      |

|                                               | Remainder |         |   |    |         |   |   |         |   |   | After       |   |   |
|----------------------------------------------------|-----------|--------------|--------|---------|--------------|--------|--------|--------------|--------|--------|-------------|--------|--------|
|                                               | 2009      |         | 2010   |    | 2011         |   | 2012   |         | 2013   |   | 2013        |   | Total  |
| Level 1 (a)                                        | $         | (1,052)      |   | $       | (29)         |   | $      | 1       |   | $      | -      |   | $      | -  |   | $ | -  |   | $ | (1,080) |
| Level 2 (b)                                        |      | 14,474  |   |    | 14,445  |   |   | 6,184   |   |   | 182    |   |   | 1,130  |   |   | 404  |   |   | 36,819  |
| Level 3 (c)                                        |      | 4,458   |   |    | 6,383   |   |   | 2,140   |   |   | 940    |   |   | (21) |   |   | -  |   |   | 13,900  |
| Total                                              |      | 17,880  |   |    | 20,799  |   |   | 8,325   |   |   | 1,122  |   |   | 1,109  |   |   | 404  |   |   | 49,639  |
| Dedesignated Risk Management Contracts (d)         |      | 2,481   |   |    | 4,862   |   |   | 1,894   |   |   | 1,694  |   |   | -  |   |   | -  |   |   | 10,931  |
| Total MTM Risk Management Contract Net Assets | $         | 20,361  |   |  $ | 25,661  |   | $      | 10,219  |   | $      | 2,816  |   | $      | 1,109  |   | $ | 404  |   | $ | 60,570  |

| (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 ongoingbasis.                                                                                                                                                                                                                                                                                                                |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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.  Level2 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.  Level3 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 contracts.                                                                                                                                                                                                                                                                                                                                       |

| Six Months Ended |   |   |   |    | Twelve Months Ended |
|------------------|--------|--------|--------|---------|---------------------|
| June 30, 2009    |   |   |   |    | December 31, 2008   |
| (in thousands)   |   |   |   |    | (in thousands)      |
| End              |   | High   |   | Average |                | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $357             |   | $699   |   | $353    |                | $151 |   |   |   |   | $176 |   | $1,096 |   | $396 |   | $161 |

----

|                                                                       |   | Three Months Ended |    |   | Six Months Ended |   |
|----------------------------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                                                       |   | 2009               |    |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| REVENUES                                                                   |   |               |    |   |             |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution                         |   | $                  | 572,027 |   |             | $      | 566,089 |   |   | $ | 1,299,986 |   |   | $ | 1,207,546 |   |
| Sales to AEP Affiliates                                                    |   |               | 62,038  |   |             |   | 97,508 |   |   |   | 118,269 |   |   |   | 187,598 |   |
| Other Revenues                                                             |   |               | 2,047   |   |             |   | 3,800 |   |   |   | 3,886 |   |   |   | 7,280 |   |
| TOTAL REVENUES                                                             |   |               | 636,112 |   |             |   | 667,397 |   |   |   | 1,422,141 |   |   |   | 1,402,424 |   |
|                                                                       |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                   |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Fuel and Other Consumables Used for Electric Generation                    |   |               | 118,891 |   |             |   | 159,237 |   |   |   | 262,572 |   |   |   | 333,067 |   |
| Purchased Electricity for Resale                                           |   |               | 59,631  |   |             |   | 52,931 |   |   |   | 135,447 |   |   |   | 96,130 |   |
| Purchased Electricity from AEP Affiliates                                  |   |               | 171,064 |   |             |   | 186,243 |   |   |   | 368,188 |   |   |   | 375,838 |   |
| Other Operation                                                            |   |               | 63,537  |   |             |   | 68,415 |   |   |   | 129,039 |   |   |   | 143,946 |   |
| Maintenance                                                                |   |               | 49,478  |   |             |   | 52,235 |   |   |   | 105,388 |   |   |   | 110,079 |   |
| Depreciation and Amortization                                              |   |               | 64,148  |   |             |   | 61,592 |   |   |   | 134,143 |   |   |   | 124,164 |   |
| Taxes Other Than Income Taxes                                              |   |               | 23,796  |   |             |   | 24,104 |   |   |   | 47,899 |   |   |   | 48,095 |   |
| TOTAL EXPENSES                                                             |   |               | 550,545 |   |             |   | 604,757 |   |   |   | 1,182,676 |   |   |   | 1,231,319 |   |
|                                                                       |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME                                                           |   |               | 85,567  |   |             |   | 62,640 |   |   |   | 239,465 |   |   |   | 171,105 |   |
|                                                                       |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense):                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest Income                                                            |   |               | 395     |   |             |   | 2,827 |   |   |   | 777 |   |   |   | 5,596 |   |
| Carrying Costs Income                                                      |   |               | 5,791   |   |             |   | 17,411 |   |   |   | 9,874 |   |   |   | 26,997 |   |
| Allowance for Equity Funds Used During Construction                        |   |               | 1,184   |   |             |   | 2,652 |   |   |   | 3,837 |   |   |   | 4,148 |   |
| Interest Expense                                                           |   |               | (51,457 | )      |             |   | (47,119 | ) |   |   | (101,162 | ) |   |   | (91,259 | ) |
|                                                                       |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAX EXPENSE                                           |   |               | 41,480  |   |             |   | 38,411 |   |   |   | 152,791 |   |   |   | 116,587 |   |
|                                                                       |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income Tax Expense                                                         |   |               | 12,310  |   |             |   | 12,129 |   |   |   | 49,214 |   |   |   | 34,992 |   |
|                                                                       |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME                                                                 |   |               | 29,170  |   |             |   | 26,282 |   |   |   | 103,577 |   |   |   | 81,595 |   |
|                                                                       |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Preferred Stock Dividend Requirements Including Capital Stock Expense |   |               | 225     |   |             |   | 238 |   |   |   | 450 |   |   |   | 476 |   |
|                                                                       |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS ATTRIBUTABLE TO COMMON STOCK                                      |   | $                  | 28,945  |   |             | $      | 26,044 |   |   | $ | 103,127 |   |   | $ | 81,119 |   |

----

|                                                                  |   | Common Stock |    |   | Paid-in Capital |   |      | Retained Earnings |   |   | Accumulated Other Comprehensive Income (Loss) |   |   | Total  |    |
|-----------------------------------------------------------------------|--------|--------------|---------|--------|-----------------|--------|-----------|-------------------|--------|--------|-----------------------------------------------|--------|--------|--------|---------|
| TOTAL COMMON SHAREHOLDER’S EQUITY – 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                                           | )      |   |   |    |   |   |   | - |   |
| SUBTOTAL – COMMON SHAREHOLDER’S EQUITY                    |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   | 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 |   |
|                                                                  |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – JUNE 30, 2008         |   | $            | 260,458 |   |            | $      | 1,150,226 |              |   | $      | 910,264                                       |   |   | $      | (52,250 | ) |   | $ | 2,268,698 |   |
|                                                                  |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2008     |   | $            | 260,458 |   |            | $      | 1,225,292 |              |   | $      | 951,066                                       |   |   | $      | (60,225 | ) |   | $ | 2,376,591 |   |
|                                                                  |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| Capital Contribution from Parent                                      |   |         |    |   |            |   | 250,000   |              |   |   |                                          |   |   |   |    |   |   |   | 250,000 |   |
| Common Stock Dividends                                                |   |         |    |   |            |   |      |              |   |   | (20,000                                       | )      |   |   |    |   |   |   | (20,000 | ) |
| Preferred Stock Dividends                                             |   |         |    |   |            |   |      |              |   |   | (399                                          | )      |   |   |    |   |   |   | (399 | ) |
| Capital Stock Expense                                                 |   |         |    |   |            |   | 51        |              |   |   | (51                                           | )      |   |   |    |   |   |   | - |   |
| SUBTOTAL – COMMON SHAREHOLDER’S EQUITY                    |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   | 2,606,192 |   |
|                                                                  |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                  |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| Other Comprehensive Income, Net of Taxes:                             |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| Cash Flow Hedges, Net of Tax of $217                             |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   | 403     |   |   |   | 403 |   |
| Amortization of Pension and OPEB Deferred Costs, Net of Tax of $1,034 |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   | 1,920   |   |   |   | 1,920 |   |
| NET INCOME                                                            |   |         |    |   |            |   |      |              |   |   | 103,577                                       |   |   |   |    |   |   |   | 103,577 |   |
| TOTAL COMPREHENSIVE INCOME                                            |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   | 105,900 |   |
|                                                                  |   |         |    |   |            |   |      |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – JUNE 30, 2009         |   | $            | 260,458 |   |            | $      | 1,475,343 |              |   | $      | 1,034,193                                     |   |   | $      | (57,902 | ) |   | $ | 2,712,092 |   |

----

|                                            |   | 2009   |      |   | 2008   |   |
|-------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT ASSETS                                  |   |   |      |   |   |   |
| Cash and Cash Equivalents                       |   | $      | 1,801     |   |   | $      | 1,996 |   |
| Accounts Receivable:                            |   |   |      |   |   |   |   |   |
| Customers                                       |   |   | 149,544   |   |   |   | 175,709 |   |
| Affiliated Companies                            |   |   | 69,952    |   |   |   | 110,982 |   |
| Accrued Unbilled Revenues                       |   |   | 35,511    |   |   |   | 55,733 |   |
| Miscellaneous                                   |   |   | 1,040     |   |   |   | 498 |   |
| Allowance for Uncollectible Accounts            |   |   | (6,141    | )      |   |   | (6,176 | ) |
| Total Accounts Receivable                       |   |   | 249,906   |   |   |   | 336,746 |   |
| Fuel                                            |   |   | 218,208   |   |   |   | 131,239 |   |
| Materials and Supplies                          |   |   | 82,595    |   |   |   | 76,260 |   |
| Risk Management Assets                          |   |   | 80,563    |   |   |   | 65,140 |   |
| Accrued Tax Benefits                            |   |   | 87,254    |   |   |   | 15,599 |   |
| Regulatory Asset for Under-Recovered Fuel Costs |   |   | 303,623   |   |   |   | 165,906 |   |
| Prepayments and Other Current Assets            |   |   | 62,052    |   |   |   | 45,657 |   |
| TOTAL CURRENT ASSETS                            |   |   | 1,086,002 |   |   |   | 838,543 |   |
|                                            |   |   |      |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT                   |   |   |      |   |   |   |   |   |
| Electric:                                       |   |   |      |   |   |   |   |   |
| Production                                      |   |   | 4,206,882 |   |   |   | 3,708,850 |   |
| Transmission                                    |   |   | 1,791,345 |   |   |   | 1,754,192 |   |
| Distribution                                    |   |   | 2,571,796 |   |   |   | 2,499,974 |   |
| Other Property, Plant and Equipment             |   |   | 355,400   |   |   |   | 358,873 |   |
| Construction Work in Progress                   |   |   | 645,739   |   |   |   | 1,106,032 |   |
| Total Property, Plant and Equipment             |   |   | 9,571,162 |   |   |   | 9,427,921 |   |
| Accumulated Depreciation and Amortization       |   |   | 2,717,946 |   |   |   | 2,675,784 |   |
| TOTAL PROPERTY, PLANT AND EQUIPMENT – NET |   |   | 6,853,216 |   |   |   | 6,752,137 |   |
|                                            |   |   |      |   |   |   |   |   |
| OTHER NONCURRENT ASSETS                         |   |   |      |   |   |   |   |   |
| Regulatory Assets                               |   |   | 1,033,039 |   |   |   | 999,061 |   |
| Long-term Risk Management Assets                |   |   | 57,393    |   |   |   | 51,095 |   |
| Deferred Charges and Other Noncurrent Assets    |   |   | 110,605   |   |   |   | 121,828 |   |
| TOTAL OTHER NONCURRENT ASSETS                   |   |   | 1,201,037 |   |   |   | 1,171,984 |   |
|                                            |   |   |      |   |   |   |   |   |
| TOTAL ASSETS                                    |   | $      | 9,140,255 |   |   | $      | 8,762,664 |   |

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

----

|                                                           |   |   | 2009           |            | 2008   |
|----------------------------------------------------------------|--------|--------|----------------|-----------------|--------|
| CURRENT LIABILITIES                                            |   |   | (in thousands) |
| Advances from Affiliates                                       |   |   | $              | 175,376    |   | $ | 194,888  |
| Accounts Payable:                                              |   |   |           |            |   |   |   |
| General                                                        |   |   |           | 210,147    |   |   | 358,081  |
| Affiliated Companies                                           |   |   |           | 102,248    |   |   | 206,813  |
| Long-term Debt Due Within One Year – Nonaffiliated       |   |   |           | 200,018    |   |   | 150,017  |
| Long-term Debt Due Within One Year – Affiliated          |   |   |           | 100,000    |   |   | -  |
| Risk Management Liabilities                                    |   |   |           | 34,179     |   |   | 30,620  |
| Customer Deposits                                              |   |   |           | 56,976     |   |   | 54,086  |
| Deferred Income Taxes                                          |   |   |           | 137,159    |   |   | -  |
| Accrued Taxes                                                  |   |   |           | 58,432     |   |   | 65,550  |
| Accrued Interest                                               |   |   |           | 52,456     |   |   | 47,804  |
| Other Current Liabilities                                      |   |   |           | 78,598     |   |   | 113,655  |
| TOTAL CURRENT LIABILITIES                                      |   |   |           | 1,205,589  |   |   | 1,221,514  |
|                                                           |   |   |           |            |   |   |   |
| NONCURRENT LIABILITIES                                         |   |   |           |            |   |   |   |
| Long-term Debt – Nonaffiliated                           |   |   |           | 3,071,770  |   |   | 2,924,495  |
| Long-term Debt – Affiliated                              |   |   |           | -          |   |   | 100,000  |
| Long-term Risk Management Liabilities                          |   |   |           | 22,634     |   |   | 26,388  |
| Deferred Income Taxes                                          |   |   |           | 1,137,275  |   |   | 1,131,164  |
| Regulatory Liabilities and Deferred Investment Tax Credits     |   |   |           | 528,204    |   |   | 521,508  |
| Employee Benefits and Pension Obligations                      |   |   |           | 327,766    |   |   | 331,000  |
| Deferred Credits and Other Noncurrent Liabilities              |   |   |           | 117,173    |   |   | 112,252  |
| TOTAL NONCURRENT LIABILITIES                                   |   |   |           | 5,204,822  |   |   | 5,146,807  |
|                                                           |   |   |           |            |   |   |   |
| TOTAL LIABILITIES                                              |   |   |           | 6,410,411  |   |   | 6,368,321  |
|                                                           |   |   |           |            |   |   |   |
| 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                                                |   |   |           | 1,475,343  |   |   | 1,225,292  |
| Retained Earnings                                              |   |   |           | 1,034,193  |   |   | 951,066  |
| Accumulated Other Comprehensive Income (Loss)                  |   |   |           | (57,902)        |   |   | (60,225) |
| TOTAL COMMON SHAREHOLDER’S EQUITY                        |   |   |           | 2,712,092  |   |   | 2,376,591  |
|                                                           |   |   |           |            |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY               |   |   | $              | 9,140,255  |   | $ | 8,762,664  |

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

----

|                                                                                        |   | 2009   |     |   | 2008   |   |
|---------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING ACTIVITIES                                                                        |   |   |     |   |   |   |
| Net Income                                                                                  |   | $      | 103,577  |   |   | $      | 81,595 |   |
| Adjustments to Reconcile Net Income to Net Cash Flows from (Used for) Operating Activities: |   |   |     |   |   |   |   |   |
| Depreciation and Amortization                                                               |   |   | 134,143  |   |   |   | 124,164 |   |
| Deferred Income Taxes                                                                       |   |   | 135,034  |   |   |   | 71,728 |   |
| Carrying Costs Income                                                                       |   |   | (9,874   | )      |   |   | (26,997 | ) |
| Allowance for Equity Funds Used During Construction                                         |   |   | (3,837   | )      |   |   | (4,148 | ) |
| Mark-to-Market of Risk Management Contracts                                                 |   |   | (23,490  | )      |   |   | 17,298 |   |
| Change in Other Noncurrent Assets                                                           |   |   | (24,202  | )      |   |   | (14,006 | ) |
| Change in Other Noncurrent Liabilities                                                      |   |   | 13,786   |   |   |   | (20,038 | ) |
| Changes in Certain Components of Working Capital:                                           |   |   |     |   |   |   |   |   |
| Accounts Receivable, Net                                                                    |   |   | 86,840   |   |   |   | 2,583 |   |
| Fuel, Materials and Supplies                                                                |   |   | (93,304  | )      |   |   | (5,495 | ) |
| Accounts Payable                                                                            |   |   | (136,330 | )      |   |   | 40,905 |   |
| Accrued Taxes, Net                                                                          |   |   | (78,773  | )      |   |   | (31,213 | ) |
| Fuel Over/Under-Recovery, Net                                                               |   |   | (137,717 | )      |   |   | (77,036 | ) |
| Other Current Assets                                                                        |   |   | (29,341  | )      |   |   | (14,225 | ) |
| Other Current Liabilities                                                                   |   |   | (26,895  | )      |   |   | (4,737 | ) |
| Net Cash Flows from (Used for) Operating Activities                                         |   |   | (90,383  | )      |   |   | 140,378 |   |
|                                                                                        |   |   |     |   |   |   |   |   |
| INVESTING ACTIVITIES                                                                        |   |   |     |   |   |   |   |   |
| Construction Expenditures                                                                   |   |   | (327,982 | )      |   |   | (311,550 | ) |
| Change in Other Cash Deposits                                                               |   |   | 235      |   |   |   | (15 | ) |
| Acquisitions of Assets                                                                      |   |   | (876     | )      |   |   | - |   |
| Proceeds from Sales of Assets                                                               |   |   | 14,652   |   |   |   | 15,470 |   |
| Net Cash Flows Used for Investing Activities                                                |   |   | (313,971 | )      |   |   | (296,095 | ) |
|                                                                                        |   |   |     |   |   |   |   |   |
| FINANCING ACTIVITIES                                                                        |   |   |     |   |   |   |   |   |
| Capital Contribution from Parent                                                            |   |   | 250,000  |   |   |   | 125,000 |   |
| Issuance of Long-term Debt – Nonaffiliated                                            |   |   | 345,666  |   |   |   | 617,111 |   |
| Change in Advances from Affiliates, Net                                                     |   |   | (19,512  | )      |   |   | (171,455 | ) |
| Retirement of Long-term Debt – Nonaffiliated                                          |   |   | (150,008 | )      |   |   | (412,782 | ) |
| Principal Payments for Capital Lease Obligations                                            |   |   | (1,669   | )      |   |   | (2,077 | ) |
| Dividends Paid on Common Stock                                                              |   |   | (20,000  | )      |   |   | - |   |
| Dividends Paid on Cumulative Preferred Stock                                                |   |   | (399     | )      |   |   | (399 | ) |
| Other Financing Activities                                                                  |   |   | 81       |   |   |   | - |   |
| Net Cash Flows from Financing Activities                                                    |   |   | 404,159  |   |   |   | 155,398 |   |
|                                                                                        |   |   |     |   |   |   |   |   |
| Net Decrease in Cash and Cash Equivalents                                                   |   |   | (195     | )      |   |   | (319 | ) |
| Cash and Cash Equivalents at Beginning of Period                                            |   |   | 1,996    |   |   |   | 2,195 |   |
| Cash and Cash Equivalents at End of Period                                                  |   | $      | 1,801    |   |   | $      | 1,876 |   |
|                                                                                        |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY INFORMATION                                                                   |   |   |     |   |   |   |   |   |
| Cash Paid for Interest, Net of Capitalized Amounts                                          |   | $      | 114,983  |   |   | $      | 86,873 |   |
| Net Cash Received for Income Taxes                                                          |   |   | (2,644   | )      |   |   | (10,708 | ) |
| Noncash Acquisitions Under Capital Leases                                                   |   |   | 526      |   |   |   | 1,014 |   |
| Construction Expenditures Included in Accounts Payable at June 30,                          |   |   | 69,300   |   |   |   | 98,958 |   |

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

----

|                                                 | 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             |
| Derivatives and Hedging                              | Note 8             |
| Fair Value Measurements                              | Note 9             |
| Income Taxes                                         | Note 10            |
| Financing Activities                                 | Note 11            |

----

----

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES

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

| Second Quarter of 2008          |   |   |   |   | $      | 56     |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                            |   |   |   |   |   |   |   |
| Changes in Gross Margin:        |   |   |   |   |   |   |   |
| Retail Margins                  |   |   | 48     |   |   |   |   |   |
| Off-system Sales                |   |   | (28    | )      |   |   |   |   |
| Other                           |   |   | (1     | )      |   |   |   |   |
| Total Change in Gross Margin    |   |   |   |   |   |   | 19     |   |
|                            |   |   |   |   |   |   |   |   |
| Total Expenses and Other:       |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance |   |   | 22     |   |   |   |   |   |
| Depreciation and Amortization   |   |   | 13     |   |   |   |   |   |
| Taxes Other Than Income Taxes   |   |   | (2     | )      |   |   |   |   |
| Other Income                    |   |   | (1     | )      |   |   |   |   |
| Interest Expense                |   |   | (4     | )      |   |   |   |   |
| Total Expenses and Other        |   |   |   |   |   |   | 28     |   |
|                            |   |   |   |   |   |   |   |   |
| Income Tax Expense              |   |   |   |   |   |   | (19    | ) |
|                            |   |   |   |   |   |   |   |   |
| Second Quarter of 2009          |   |   |   |   |   | $      | 84     |   |

| · | Retail Margins increased $48 million primarily due to:                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                              | A $38 million increase related to the implementation of higher rates set by the Ohio ESP. |
|   | ·                                                                                                                                                                                              | A $17 million increase in fuel margins due to the deferral of fuel costs in 2009.  The PUCO’s March 2009 approval of CSPCo’s ESP allows for the recovery of fuel and related costs incurred since January 1, 2009.  See “Ohio Electric Security Plan Filings” section of Note 3. |
|   | These increases were partially offset by:                                                                                                                                                           |
|   | ·                                                                                                                                                                                              | A $12 million decrease related to the cessation of Restructuring Transition Charge (RTC) revenues with the implementation of rates under the Ohio ESP. |
|   | ·                                                                                                                                                                                              | An $8 million decrease in industrial sales due to reduced operating levels and suspended operations by certain large industrial customers in CSPCo’s service territory. |
| · | Margins from Off-system Sales decreased $28 million primarily due to lower physical sales volumes and lower margins as a result of lower market prices, partially offset by higher trading margins. |

| · | Other Operation and Maintenance expenses decreased $22 million primarily due to:                                                                  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                            | An $8 million decrease in expenses related to CSPCo’s Unit Power Agreement for AEGCo’s Lawrenceburg Plant.  In 2008, these expenses were recorded in Other Operation and Maintenance.  With the March 2009 ESP order, approval was granted to record these costs in purchased power and recover through the FAC. |
|   | ·                                                                                                                                            | A $5 million decrease in boiler plant removal and maintenance expenses primarily related to work performed at the Conesville Plant in 2008. |
|   | ·                                                                                                                                            | A $4 million decrease in recoverable PJM expenses. |
| · | Depreciation and Amortization decreased $13 million primarily due to the completed amortization of transition regulatory assets in December 2008. |
| · | Interest Expense increased $4 million due to adjustments recorded in 2008 related to tax reserves.                                                |
| · | Income Tax Expense increased $19 million primarily due to an increase in pretax book income.                                                      |

| Six Months Ended June 30, 2008  |   |   |   |   | $      | 133    |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                            |   |   |   |   |   |   |   |
| Changes in Gross Margin:        |   |   |   |   |   |   |   |
| Retail Margins                  |   |   | 29     |   |   |   |   |   |
| Off-system Sales                |   |   | (51    | )      |   |   |   |   |
| Other                           |   |   | (1     | )      |   |   |   |   |
| Total Change in Gross Margin    |   |   |   |   |   |   | (23    | ) |
|                            |   |   |   |   |   |   |   |   |
| Total Expenses and Other:       |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance |   |   | 11     |   |   |   |   |   |
| Depreciation and Amortization   |   |   | 27     |   |   |   |   |   |
| Taxes Other Than Income Taxes   |   |   | (3     | )      |   |   |   |   |
| Other Income                    |   |   | (4     | )      |   |   |   |   |
| Interest Expense                |   |   | (5     | )      |   |   |   |   |
| Total Expenses and Other        |   |   |   |   |   |   | 26     |   |
|                            |   |   |   |   |   |   |   |   |
| Income Tax Expense              |   |   |   |   |   |   | (3     | ) |
|                            |   |   |   |   |   |   |   |   |
| Six Months Ended June 30, 2009  |   |   |   |   |   | $      | 133    |   |

| · | Retail Margins increased $29 million primarily due to:                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                              | A $43 million increase related to the implementation of higher rates set by the Ohio ESP. |
|   | ·                                                                                                                                                                                              | A $22 million increase in fuel margins due to the deferral of fuel costs in 2009.  The PUCO’s March 2009 approval of CSPCo’s ESP allows for the recovery of fuel and related costs incurred since January 1, 2009.  See “Ohio Electric Security Plan Filings” section of Note 3. |
|   | These increases were partially offset by:                                                                                                                                                           |
|   | ·                                                                                                                                                                                              | A $26 million decrease as a result of Restructuring Transition Charge (RTC) revenues.  The PUCO allowed CSPCo to continue collecting the RTC pending the implementation of the new ESP tariffs which did not occur until March 30, 2009.  During the first quarter of 2009, these revenues were offset in fuel under-recovery.  In2008, RTC revenues were recorded but were offset through the amortization of the transition regulatory assets as discussed below.  With the implementation of the Ohio ESP, RTC revenues ended.  See “Ohio Electric Security Plan Filings” section of Note 3. |
|   | ·                                                                                                                                                                                              | A $5 million decrease in retail sales.  Industrial sales decreased $12 million due to reduced operating levels and suspended operations by certain large industrial customers in CSPCo’s service territory.  This decrease was partially offset by an $8 million increase in residential sales. |
| · | Margins from Off-system Sales decreased $51 million primarily due to lower physical sales volumes and lower margins as a result of lower market prices, partially offset by higher trading margins. |

| · | Other Operation and Maintenance expenses decreased $11 million primarily due to:                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                          | A $17 million decrease in expenses related to CSPCo’s Unit Power Agreement for AEGCo’s Lawrenceburg Plant.  In 2008, these expenses were recorded in Other Operation and Maintenance.  With the March 2009 ESP order, approval was granted to record these costs in purchased power and recover through the FAC. |
|   | ·                                                                                                                                                                                                                          | A $2 million decrease in net allocated transmission expenses related to the Transmission Agreement. |
|   | ·                                                                                                                                                                                                                          | A $2 million decrease in boiler plant maintenance expenses primarily related to work performed at the Conesville Plant in 2008. |
|   | ·                                                                                                                                                                                                                          | A $2 million decrease in maintenance expenses for overhead transmission lines. |
|   | These decreases were partially offset by:                                                                                                                                                                                       |
|   | ·                                                                                                                                                                                                                          | A $10 million increase in overhead line expenses primarily due to ice and wind storms in the first quarter of 2009 and increased vegetation management activities. |
|   | ·                                                                                                                                                                                                                          | A $7 million increase related to an obligation to contribute to the “Partnership with Ohio” fund for low income, at-risk customers ordered by the PUCO’s March 2009 approval of CSPCo’s ESP.  See “Ohio Electric Security Plan Filings” section of Note 3. |
| · | Depreciation and Amortization decreased $27 million primarily due to the completed amortization of transition regulatory assets in December 2008.                                                                               |
| · | Taxes Other Than Income Taxes increased $3 million due to increases in property taxes.                                                                                                                                          |
| · | Other Income decreased $4 million primarily due to interest income recorded in 2008 on expected federal tax refund related to Simple Service Cost Method.                                                                       |
| · | Interest Expense increased $5 million primarily due to an increase in long-term borrowings and adjustments recorded in 2008 related to tax reserves, which were partially offset by an increase in the debt component of AFUDC. |
| · | Income Tax Expense increased $3 million primarily due to an increase in pretax book income and state income taxes and changes in certain book/tax differences.                                                                  |

----

----

|                                                    |   | Three Months Ended |    |   | Six Months Ended |   |
|---------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                                    |   | 2009               |    |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| REVENUES                                                |   |               |    |   |             |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution      |   | $                  | 488,193 |   |             | $      | 500,056 |   |   | $ | 949,115 |   |   | $ | 1,005,380 |   |
| Sales to AEP Affiliates                                 |   |               | 19,165  |   |             |   | 47,413 |   |   |   | 29,371 |   |   |   | 82,521 |   |
| Other Revenues                                          |   |               | 518     |   |             |   | 1,478 |   |   |   | 1,126 |   |   |   | 2,695 |   |
| TOTAL REVENUES                                          |   |               | 507,876 |   |             |   | 548,947 |   |   |   | 979,612 |   |   |   | 1,090,596 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Fuel and Other Consumables Used for Electric Generation |   |               | 63,476  |   |             |   | 86,253 |   |   |   | 134,420 |   |   |   | 171,380 |   |
| Purchased Electricity for Resale                        |   |               | 22,422  |   |             |   | 45,010 |   |   |   | 52,260 |   |   |   | 87,196 |   |
| Purchased Electricity from AEP Affiliates               |   |               | 96,068  |   |             |   | 110,578 |   |   |   | 189,160 |   |   |   | 204,682 |   |
| Other Operation                                         |   |               | 65,555  |   |             |   | 84,955 |   |   |   | 141,643 |   |   |   | 158,021 |   |
| Maintenance                                             |   |               | 31,618  |   |             |   | 34,435 |   |   |   | 62,632 |   |   |   | 57,666 |   |
| Depreciation and Amortization                           |   |               | 34,626  |   |             |   | 47,693 |   |   |   | 69,571 |   |   |   | 96,295 |   |
| Taxes Other Than Income Taxes                           |   |               | 43,145  |   |             |   | 40,989 |   |   |   | 88,427 |   |   |   | 85,545 |   |
| TOTAL EXPENSES                                          |   |               | 356,910 |   |             |   | 449,913 |   |   |   | 738,113 |   |   |   | 860,785 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME                                        |   |               | 150,966 |   |             |   | 99,034 |   |   |   | 241,499 |   |   |   | 229,811 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense):                                 |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest Income                                         |   |               | 234     |   |             |   | 1,603 |   |   |   | 474 |   |   |   | 3,942 |   |
| Carrying Costs Income                                   |   |               | 1,721   |   |             |   | 1,538 |   |   |   | 3,410 |   |   |   | 3,304 |   |
| Allowance for Equity Funds Used During Construction     |   |               | 585     |   |             |   | 565 |   |   |   | 1,885 |   |   |   | 1,420 |   |
| Interest Expense                                        |   |               | (21,076 | )      |             |   | (17,246 | ) |   |   | (41,869 | ) |   |   | (36,485 | ) |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAX EXPENSE                        |   |               | 132,430 |   |             |   | 85,494 |   |   |   | 205,399 |   |   |   | 201,992 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income Tax Expense                                      |   |               | 48,252  |   |             |   | 29,101 |   |   |   | 72,363 |   |   |   | 69,446 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME                                              |   |               | 84,178  |   |             |   | 56,393 |   |   |   | 133,036 |   |   |   | 132,546 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Capital Stock Expense                                   |   |               | 40      |   |             |   | 40 |   |   |   | 79 |   |   |   | 79 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS ATTRIBUTABLE TO COMMON STOCK                   |   | $                  | 84,138  |   |             | $      | 56,353 |   |   | $ | 132,957 |   |   | $ | 132,467 |   |

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

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

----

|                                                                |   | Common Stock |   |   | Paid-in Capital |   |    | Retained Earnings |   |   | AccumulatedOtherComprehensive Income (Loss) |   |   | Total  |    |
|---------------------------------------------------------------------|--------|--------------|--------|--------|-----------------|--------|---------|-------------------|--------|--------|---------------------------------------------|--------|--------|--------|---------|
| TOTAL COMMON SHAREHOLDER’S EQUITY – 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                                         | )      |   |   |    |   |   |   | - |   |
| SUBTOTAL – COMMON SHAREHOLDER’S EQUITY                  |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   | 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 |   |
|                                                                |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – JUNE 30, 2008       |   | $            | 41,026 |   |            | $      | 580,428 |              |   | $      | 630,252                                     |   |   | $      | (27,681 | ) |   | $ | 1,224,025 |   |
|                                                                |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2008   |   | $            | 41,026 |   |            | $      | 580,506 |              |   | $      | 674,758                                     |   |   | $      | (51,025 | ) |   | $ | 1,245,265 |   |
|                                                                |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   |   |   |
| Common Stock Dividends                                              |   |         |   |   |            |   |    |              |   |   | (100,000                                    | )      |   |   |    |   |   |   | (100,000 | ) |
| Capital Stock Expense                                               |   |         |   |   |            |   | 79      |              |   |   | (79                                         | )      |   |   |    |   |   |   | - |   |
| Noncash Dividend of Property to Parent                              |   |         |   |   |            |   |    |              |   |   | (8,123                                      | )      |   |   |    |   |   |   | (8,123 | ) |
| SUBTOTAL – COMMON SHAREHOLDER’S EQUITY                  |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   | 1,137,142 |   |
|                                                                |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   |   |   |
| Other Comprehensive Income (Loss), Net of Taxes:               |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   |   |   |
| Cash Flow Hedges, Net of Tax of $184                                |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   | (342    | ) |   |   | (342 | ) |
| Amortization of Pension and OPEB Deferred Costs, Net of Tax of $514 |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   | 954     |   |   |   | 954 |   |
| NET INCOME                                                          |   |         |   |   |            |   |    |              |   |   | 133,036                                     |   |   |   |    |   |   |   | 133,036 |   |
| TOTAL COMPREHENSIVE INCOME                                          |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   | 133,648 |   |
|                                                                |   |         |   |   |            |   |    |              |   |   |                                        |   |   |   |    |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – JUNE 30, 2009       |   | $            | 41,026 |   |            | $      | 580,585 |              |   | $      | 699,592                                     |   |   | $      | (50,413 | ) |   | $ | 1,270,790 |   |

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

----

|                                            |   | 2009   |      |   | 2008   |   |
|-------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT ASSETS                                  |   |   |      |   |   |   |
| Cash and Cash Equivalents                       |   | $      | 1,313     |   |   | $      | 1,063 |   |
| Other Cash Deposits                             |   |   | 21,225    |   |   |   | 32,300 |   |
| Accounts Receivable:                            |   |   |      |   |   |   |   |   |
| Customers                                       |   |   | 44,477    |   |   |   | 56,008 |   |
| Affiliated Companies                            |   |   | 15,378    |   |   |   | 44,235 |   |
| Accrued Unbilled Revenues                       |   |   | 19,287    |   |   |   | 18,359 |   |
| Miscellaneous                                   |   |   | 5,147     |   |   |   | 11,546 |   |
| Allowance for Uncollectible Accounts            |   |   | (3,774    | )      |   |   | (2,895 | ) |
| Total Accounts Receivable                       |   |   | 80,515    |   |   |   | 127,253 |   |
| Fuel                                            |   |   | 66,275    |   |   |   | 42,075 |   |
| Materials and Supplies                          |   |   | 38,602    |   |   |   | 33,781 |   |
| Emission Allowances                             |   |   | 15,627    |   |   |   | 20,211 |   |
| Risk Management Assets                          |   |   | 42,398    |   |   |   | 35,984 |   |
| Margin Deposits                                 |   |   | 23,204    |   |   |   | 13,613 |   |
| Prepayments and Other Current Assets            |   |   | 13,752    |   |   |   | 27,880 |   |
| TOTAL CURRENT ASSETS                            |   |   | 302,911   |   |   |   | 334,160 |   |
|                                            |   |   |      |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT                   |   |   |      |   |   |   |   |   |
| Electric:                                       |   |   |      |   |   |   |   |   |
| Production                                      |   |   | 2,356,628 |   |   |   | 2,326,056 |   |
| Transmission                                    |   |   | 583,591   |   |   |   | 574,018 |   |
| Distribution                                    |   |   | 1,680,596 |   |   |   | 1,625,000 |   |
| Other Property, Plant and Equipment             |   |   | 200,914   |   |   |   | 211,088 |   |
| Construction Work in Progress                   |   |   | 419,899   |   |   |   | 394,918 |   |
| Total Property, Plant and Equipment             |   |   | 5,241,628 |   |   |   | 5,131,080 |   |
| Accumulated Depreciation and Amortization       |   |   | 1,825,274 |   |   |   | 1,781,866 |   |
| TOTAL PROPERTY, PLANT AND EQUIPMENT – NET |   |   | 3,416,354 |   |   |   | 3,349,214 |   |
|                                            |   |   |      |   |   |   |   |   |
| OTHER NONCURRENT ASSETS                         |   |   |      |   |   |   |   |   |
| Regulatory Assets                               |   |   | 331,579   |   |   |   | 298,357 |   |
| Long-term Risk Management Assets                |   |   | 30,381    |   |   |   | 28,461 |   |
| Deferred Charges and Other Noncurrent Assets    |   |   | 89,602    |   |   |   | 125,814 |   |
| TOTAL OTHER NONCURRENT ASSETS                   |   |   | 451,562   |   |   |   | 452,632 |   |
|                                            |   |   |      |   |   |   |   |   |
| TOTAL ASSETS                                    |   | $      | 4,170,827 |   |   | $      | 4,136,006 |   |

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

----

|                                                       |   |   | 2009           |            | 2008   |
|------------------------------------------------------------|--------|--------|----------------|-----------------|--------|
| CURRENT LIABILITIES                                        |   |   | (in thousands) |
| Advances from Affiliates                                   |   |   | $              | 162,659    |   | $ | 74,865  |
| Accounts Payable:                                          |   |   |           |            |   |   |   |
| General                                                    |   |   |           | 111,309    |   |   | 131,417  |
| Affiliated Companies                                       |   |   |           | 51,071     |   |   | 120,420  |
| Long-term Debt Due Within One Year – Affiliated      |   |   |           | 100,000    |   |   | -  |
| Risk Management Liabilities                                |   |   |           | 17,949     |   |   | 16,490  |
| Customer Deposits                                          |   |   |           | 31,535     |   |   | 30,145  |
| Accrued Taxes                                              |   |   |           | 124,752    |   |   | 185,293  |
| Other Current Liabilities                                  |   |   |           | 101,911    |   |   | 82,678  |
| TOTAL CURRENT LIABILITIES                                  |   |   |           | 701,186    |   |   | 641,308  |
|                                                       |   |   |           |            |   |   |   |
| NONCURRENT LIABILITIES                                     |   |   |           |            |   |   |   |
| Long-term Debt – Nonaffiliated                       |   |   |           | 1,343,799  |   |   | 1,343,594  |
| Long-term Debt – Affiliated                          |   |   |           | -          |   |   | 100,000  |
| Long-term Risk Management Liabilities                      |   |   |           | 11,984     |   |   | 14,774  |
| Deferred Income Taxes                                      |   |   |           | 476,204    |   |   | 435,773  |
| Regulatory Liabilities and Deferred Investment Tax Credits |   |   |           | 172,371    |   |   | 161,102  |
| Employee Benefits and Pension Obligations                  |   |   |           | 144,746    |   |   | 148,123  |
| Deferred Credits and Other Noncurrent Liabilities          |   |   |           | 49,747     |   |   | 46,067  |
| TOTAL NONCURRENT LIABILITIES                               |   |   |           | 2,198,851  |   |   | 2,249,433  |
|                                                       |   |   |           |            |   |   |   |
| TOTAL LIABILITIES                                          |   |   |           | 2,900,037  |   |   | 2,890,741  |
|                                                       |   |   |           |            |   |   |   |
| 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                                            |   |   |           | 580,585    |   |   | 580,506  |
| Retained Earnings                                          |   |   |           | 699,592    |   |   | 674,758  |
| Accumulated Other Comprehensive Income (Loss)              |   |   |           | (50,413)        |   |   | (51,025) |
| TOTAL COMMON SHAREHOLDER’S EQUITY                    |   |   |           | 1,270,790  |   |   | 1,245,265  |
|                                                       |   |   |           |            |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY           |   |   | $              | 4,170,827  |   | $ | 4,136,006  |

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

----

|                                                                             |   | 2009   |     |   | 2008   |   |
|----------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING ACTIVITIES                                                             |   |   |     |   |   |   |
| Net Income                                                                       |   | $      | 133,036  |   |   | $      | 132,546 |   |
| Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities: |   |   |     |   |   |   |   |   |
| Depreciation and Amortization                                                    |   |   | 69,571   |   |   |   | 96,295 |   |
| Deferred Income Taxes                                                            |   |   | 60,104   |   |   |   | 9,670 |   |
| Carrying Costs Income                                                            |   |   | (3,410   | )      |   |   | (3,304 | ) |
| Allowance for Equity Funds Used During Construction                              |   |   | (1,885   | )      |   |   | (1,420 | ) |
| Mark-to-Market of Risk Management Contracts                                      |   |   | (10,671  | )      |   |   | 10,859 |   |
| Deferred Property Taxes                                                          |   |   | 44,075   |   |   |   | 43,745 |   |
| Fuel Over/Under-Recovery, Net                                                    |   |   | (33,963  | )      |   |   | - |   |
| Change in Other Noncurrent Assets                                                |   |   | (10,738  | )      |   |   | (19,046 | ) |
| Change in Other Noncurrent Liabilities                                           |   |   | 20,003   |   |   |   | (2,759 | ) |
| Changes in Certain Components of Working Capital:                                |   |   |     |   |   |   |   |   |
| Accounts Receivable, Net                                                         |   |   | 46,738   |   |   |   | (18,134 | ) |
| Fuel, Materials and Supplies                                                     |   |   | (29,021  | )      |   |   | (1,912 | ) |
| Accounts Payable                                                                 |   |   | (84,284  | )      |   |   | 8,747 |   |
| Customer Deposits                                                                |   |   | 1,390    |   |   |   | 2,095 |   |
| Accrued Taxes, Net                                                               |   |   | (60,756  | )      |   |   | (25,530 | ) |
| Other Current Assets                                                             |   |   | 3,600    |   |   |   | (2,160 | ) |
| Other Current Liabilities                                                        |   |   | 5,772    |   |   |   | (13,657 | ) |
| Net Cash Flows from Operating Activities                                         |   |   | 149,561  |   |   |   | 216,035 |   |
|                                                                             |   |   |     |   |   |   |   |   |
| INVESTING ACTIVITIES                                                             |   |   |     |   |   |   |   |   |
| Construction Expenditures                                                        |   |   | (147,128 | )      |   |   | (191,668 | ) |
| Change in Other Cash Deposits                                                    |   |   | 11,075   |   |   |   | 16,785 |   |
| Change in Advances to Affiliates, Net                                            |   |   | -        |   |   |   | (25,199 | ) |
| Acquisitions of Assets                                                           |   |   | (184     | )      |   |   | - |   |
| Proceeds from Sales of Assets                                                    |   |   | 465      |   |   |   | 700 |   |
| Net Cash Flows Used for Investing Activities                                     |   |   | (135,772 | )      |   |   | (199,382 | ) |
|                                                                             |   |   |     |   |   |   |   |   |
| FINANCING ACTIVITIES                                                             |   |   |     |   |   |   |   |   |
| Issuance of Long-term Debt – Nonaffiliated                                 |   |   | -        |   |   |   | 346,934 |   |
| Change in Advances from Affiliates, Net                                          |   |   | 87,794   |   |   |   | (95,199 | ) |
| Retirement of Long-term Debt – Nonaffiliated                               |   |   | -        |   |   |   | (204,245 | ) |
| Principal Payments for Capital Lease Obligations                                 |   |   | (1,333   | )      |   |   | (1,441 | ) |
| Dividends Paid on Common Stock                                                   |   |   | (100,000 | )      |   |   | (62,500 | ) |
| Net Cash Flows Used for Financing Activities                                     |   |   | (13,539  | )      |   |   | (16,451 | ) |
|                                                                             |   |   |     |   |   |   |   |   |
| Net Increase in Cash and Cash Equivalents                                        |   |   | 250      |   |   |   | 202 |   |
| Cash and Cash Equivalents at Beginning of Period                                 |   |   | 1,063    |   |   |   | 1,389 |   |
| Cash and Cash Equivalents at End of Period                                       |   | $      | 1,313    |   |   | $      | 1,591 |   |
|                                                                             |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY INFORMATION                                                        |   |   |     |   |   |   |   |   |
| Cash Paid for Interest, Net of Capitalized Amounts                               |   | $      | 53,045   |   |   | $      | 38,531 |   |
| Net Cash Paid for Income Taxes                                                   |   |   | 1,239    |   |   |   | 22,307 |   |
| Noncash Acquisitions Under Capital Leases                                        |   |   | 565      |   |   |   | 1,228 |   |
| Construction Expenditures Included in Accounts Payable at June 30,               |   |   | 42,894   |   |   |   | 62,157 |   |
| Noncash Dividend of Property to Parent                                           |   |   | 8,123    |   |   |   | - |   |

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

----

|                                                 | 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            |
| Derivatives and Hedging                              | Note 8            |
| Fair Value Measurements                              | Note 9            |
| Income Taxes                                         | Note 10           |
| Financing Activities                                 | Note 11           |

----

----

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES

| Second Quarter of 2008           |   |   |   |   | $      | 50     |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                             |   |   |   |   |   |   |   |
| Changes in Gross Margin:         |   |   |   |   |   |   |   |
| Retail Margins                   |   |   | (21    | )      |   |   |   |   |
| FERC Municipals and Cooperatives |   |   | 5      |   |   |   |   |   |
| Off-system Sales                 |   |   | (28    | )      |   |   |   |   |
| Other                            |   |   | 39     |   |   |   |   |   |
| Total Change in Gross Margin     |   |   |   |   |   |   | (5     | ) |
|                             |   |   |   |   |   |   |   |   |
| Total Expenses and Other:        |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance  |   |   | 11     |   |   |   |   |   |
| Depreciation and Amortization    |   |   | (2     | )      |   |   |   |   |
| Taxes Other Than Income Taxes    |   |   | 2      |   |   |   |   |   |
| Other Income                     |   |   | 2      |   |   |   |   |   |
| Interest Expense                 |   |   | (9     | )      |   |   |   |   |
| Total Expenses and Other         |   |   |   |   |   |   | 4      |   |
|                             |   |   |   |   |   |   |   |   |
| Second Quarter of 2009           |   |   |   |   |   | $      | 49     |   |

| · | Retail Margins decreased $21 million primarily due to the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | A $16 million decline due to a 20% decrease in industrial sales resulting from reduced operating levels and suspended operations by certain large industrial customers. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Lower fuel recoveries reflecting $20 million of insurance recoveries allocated to customers under fuel clauses. |
|   | These decreases were partially offset by:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | A $13 million increase in capacity revenue reflecting MLR changes. |
| · | FERC Municipals and Cooperatives margins increased $5 million due to higher revenues under formula rate plans in 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| · | Margins from Off-system Sales decreased $28 million primarily due to lower physical sales volumes and lower margins as a result of lower market prices, partially offset by higher trading margins.                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| · | Other revenues increased $39 million primarily due to Cook Plant accidental outage insurance policy proceeds of $45 million.  Of these insurance proceeds, $20 million were used to offset fuel costs in customer bills which are primarily included in Retail Margins.  See “Cook Plant Unit 1 Fire and Shutdown”section of Note 4.  A decrease in River Transportation Division (RTD) revenues partially offset the insurance proceeds.  RTD’s related expenses which offset the RTD revenues are included in Other Operation on the Condensed Consolidated Statements of Income. |

| · | Other Operation and Maintenance expenses decreased $11 million primarily due to a $5 million decline in operation and maintenance expenses for RTD caused by decreased barging activity in addition to a $3 million decline in accretion expense. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Interest Expense increased $9 million primarily due to increased borrowings.  In January 2009, I&M issued $475 million of 7% senior unsecured notes.                                                                                |

| Six Months Ended June 30, 2008   |   |   |   |   | $      | 105    |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                             |   |   |   |   |   |   |   |
| Changes in Gross Margin:         |   |   |   |   |   |   |   |
| Retail Margins                   |   |   | (23    | )      |   |   |   |   |
| FERC Municipals and Cooperatives |   |   | 4      |   |   |   |   |   |
| Off-system Sales                 |   |   | (56    | )      |   |   |   |   |
| Transmission Revenues            |   |   | (1     | )      |   |   |   |   |
| Other                            |   |   | 95     |   |   |   |   |   |
| Total Change in Gross Margin     |   |   |   |   |   |   | 19     |   |
|                             |   |   |   |   |   |   |   |   |
| Total Expenses and Other:        |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance  |   |   | 26     |   |   |   |   |   |
| Depreciation and Amortization    |   |   | (3     | )      |   |   |   |   |
| Taxes Other Than Income Taxes    |   |   | 1      |   |   |   |   |   |
| Other Income                     |   |   | 4      |   |   |   |   |   |
| Interest Expense                 |   |   | (13    | )      |   |   |   |   |
| Total Expenses and Other         |   |   |   |   |   |   | 15     |   |
|                             |   |   |   |   |   |   |   |   |
| Income Tax Expense               |   |   |   |   |   |   | (10    | ) |
|                             |   |   |   |   |   |   |   |   |
| Six Months Ended June 30, 2009   |   |   |   |   |   | $      | 129    |   |

| · | Retail Margins decreased $23 million primarily due to the following:                                                                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                             | A $30 million decline due to a 20% decrease in industrial sales resulting from reduced operating levels and suspended operations by certain large industrial customers. |
|   | ·                                                                                                                                                                                                                                                                                                                                                             | Lower fuel recoveries reflecting $40 million of Cook Plant accidental outage insurance recoveries allocated to customers under fuel clauses. |
|   | These decreases were partially offset by:                                                                                                                                                                                                                                                                                                                          |
|   | ·                                                                                                                                                                                                                                                                                                                                                             | A $21 million increase in capacity revenue reflecting MLR changes. |
|   | ·                                                                                                                                                                                                                                                                                                                                                             | A $17 million increase from an Indiana rate settlement.  See “Indiana Base Rate Filing” section of Note 3. |
|   | ·                                                                                                                                                                                                                                                                                                                                                             | A $10 million favorable impact for lower PJM charges reflecting a decline in sales volume. |
| · | FERC Municipals and Cooperatives margins increased $4 million due to higher revenues under formula rate plans in 2009.                                                                                                                                                                                                                                             |
| · | Margins from Off-system Sales decreased $56 million primarily due to lower physical sales volumes and lower margins as a result of lower market prices, partially offset by higher trading margins.                                                                                                                                                                |
| · | Other revenues increased $95 million primarily due to Cook Plant accidental outage insurance policy proceeds of $99 million.  Of the insurance proceeds, $40 million were used to offset fuel costs in customer bills which are primarily included in Retail Margins.  See “Cook Plant Unit 1 Fire and Shutdown”section of Note 4. |

| · | Other Operation and Maintenance expenses decreased $26 million primarily due to lower nuclear and coal production, transmission and distribution costs and deferral of NSR and OPEB costs included in the rate settlement for recovery.  See “Indiana Base Rate Filing” section of Note 3. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Interest Expense increased $13 million primarily due to increased borrowings.  In January 2009, I&M issued $475 million of 7% senior unsecured notes.                                                                                                                                                   |
| · | Income Tax Expense increased $10 million primarily due to an increase in pretax book income, partially offset by a decrease in state income taxes.                                                                                                                                                                    |

----

----

|                                                    |   | Three Months Ended |    |   | Six Months Ended |   |
|---------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                                    |   | 2009               |    |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| REVENUES                                                |   |               |    |   |             |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution      |   | $                  | 400,347 |   |             | $      | 425,018 |   |   | $ | 822,274 |   |   | $ | 856,610 |   |
| Sales to AEP Affiliates                                 |   |               | 57,385  |   |             |   | 83,927 |   |   |   | 117,371 |   |   |   | 160,439 |   |
| Other Revenues – Affiliated                       |   |               | 25,192  |   |             |   | 29,257 |   |   |   | 55,932 |   |   |   | 52,476 |   |
| Other Revenues – Nonaffiliated                    |   |               | 47,492  |   |             |   | 4,445 |   |   |   | 101,883 |   |   |   | 10,271 |   |
| TOTAL REVENUES                                          |   |               | 530,416 |   |             |   | 542,647 |   |   |   | 1,097,460 |   |   |   | 1,079,796 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Fuel and Other Consumables Used for Electric Generation |   |               | 108,202 |   |             |   | 108,496 |   |   |   | 211,162 |   |   |   | 209,737 |   |
| Purchased Electricity for Resale                        |   |               | 30,853  |   |             |   | 26,441 |   |   |   | 69,214 |   |   |   | 47,924 |   |
| Purchased Electricity from AEP Affiliates               |   |               | 80,893  |   |             |   | 91,858 |   |   |   | 160,871 |   |   |   | 184,499 |   |
| Other Operation                                         |   |               | 115,224 |   |             |   | 124,687 |   |   |   | 224,684 |   |   |   | 245,053 |   |
| Maintenance                                             |   |               | 51,488  |   |             |   | 52,608 |   |   |   | 97,762 |   |   |   | 103,829 |   |
| Depreciation and Amortization                           |   |               | 33,629  |   |             |   | 31,757 |   |   |   | 66,374 |   |   |   | 63,479 |   |
| Taxes Other Than Income Taxes                           |   |               | 18,253  |   |             |   | 20,342 |   |   |   | 38,949 |   |   |   | 40,244 |   |
| TOTAL EXPENSES                                          |   |               | 438,542 |   |             |   | 456,189 |   |   |   | 869,016 |   |   |   | 894,765 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME                                        |   |               | 91,874  |   |             |   | 86,458 |   |   |   | 228,444 |   |   |   | 185,031 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense):                                 |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest Income                                         |   |               | 974     |   |             |   | 1,904 |   |   |   | 3,517 |   |   |   | 2,733 |   |
| Allowance for Equity Funds Used During Construction     |   |               | 2,783   |   |             |   | 128 |   |   |   | 4,338 |   |   |   | 1,008 |   |
| Interest Expense                                        |   |               | (26,173 | )      |             |   | (17,146 | ) |   |   | (49,704 | ) |   |   | (36,348 | ) |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAX EXPENSE                        |   |               | 69,458  |   |             |   | 71,344 |   |   |   | 186,595 |   |   |   | 152,424 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income Tax Expense                                      |   |               | 20,949  |   |             |   | 21,200 |   |   |   | 57,134 |   |   |   | 47,022 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME                                              |   |               | 48,509  |   |             |   | 50,144 |   |   |   | 129,461 |   |   |   | 105,402 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Preferred Stock Dividend Requirements                   |   |               | 85      |   |             |   | 85 |   |   |   | 170 |   |   |   | 170 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS ATTRIBUTABLE TO COMMON STOCK                   |   | $                  | 48,424  |   |             | $      | 50,059 |   |   | $ | 129,291 |   |   | $ | 105,232 |   |

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

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

----

|                                                                           |   | Common Stock |   |   | Paid-in Capital |   |    | Retained Earnings |   |   | Accumulated Other Comprehensive Income (Loss) |   |   | Total  |    |
|--------------------------------------------------------------------------------|--------|--------------|--------|--------|-----------------|--------|---------|-------------------|--------|--------|-----------------------------------------------|--------|--------|--------|---------|
|                                                                           |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |
| TOTAL COMMON SHAREHOLDER’S EQUITY – 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 | ) |
| SUBTOTAL – COMMON SHAREHOLDER’S EQUITY                             |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   | 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 |   |
|                                                                           |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – JUNE 30, 2008                  |   | $            | 56,584 |   |            | $      | 861,291 |              |   | $      | 549,833                                       |   |   | $      | (24,032 | ) |   | $ | 1,443,676 |   |
|                                                                           |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2008              |   | $            | 56,584 |   |            | $      | 861,291 |              |   | $      | 538,637                                       |   |   | $      | (21,694 | ) |   | $ | 1,434,818 |   |
|                                                                           |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| Capital Contribution from Parent                                               |   |         |   |   |            |   | 120,000 |              |   |   |                                          |   |   |   |    |   |   |   | 120,000 |   |
| Common Stock Dividends                                                         |   |         |   |   |            |   |    |              |   |   | (49,000                                       | )      |   |   |    |   |   |   | (49,000 | ) |
| Preferred Stock Dividends                                                      |   |         |   |   |            |   |    |              |   |   | (170                                          | )      |   |   |    |   |   |   | (170 | ) |
| Gain on Reacquired Preferred Stock                                             |   |         |   |   |            |   | 1       |              |   |   |                                          |   |   |   |    |   |   |   | 1 |   |
| SUBTOTAL – COMMON SHAREHOLDER’S EQUITY                             |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   | 1,505,649 |   |
|                                                                           |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                           |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| Other Comprehensive Income, Net of Taxes:                                      |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| Cash Flow Hedges, Net of Tax of $103                                           |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   | 192     |   |   |   | 192 |   |
| Amortization of Pension and OPEB Deferred  Costs, Net of Tax of $184 |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   | 341     |   |   |   | 341 |   |
| NET INCOME                                                                     |   |         |   |   |            |   |    |              |   |   | 129,461                                       |   |   |   |    |   |   |   | 129,461 |   |
| TOTAL COMPREHENSIVE INCOME                                                     |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   | 129,994 |   |
|                                                                           |   |         |   |   |            |   |    |              |   |   |                                          |   |   |   |    |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – JUNE 30, 2009                  |   | $            | 56,584 |   |            | $      | 981,292 |              |   | $      | 618,928                                       |   |   | $      | (21,161 | ) |   | $ | 1,635,643 |   |

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

----

|                                                                         |   | 2009   |      |   | 2008   |   |
|------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT ASSETS                                                               |   |   |      |   |   |   |
| Cash and Cash Equivalents                                                    |   | $      | 812       |   |   | $      | 728 |   |
| Accounts Receivable:                                                         |   |   |      |   |   |   |   |   |
| Customers                                                                    |   |   | 76,191    |   |   |   | 70,432 |   |
| Affiliated Companies                                                         |   |   | 84,849    |   |   |   | 94,205 |   |
| Accrued Unbilled Revenues                                                    |   |   | 12,446    |   |   |   | 19,260 |   |
| Miscellaneous                                                                |   |   | 1,976     |   |   |   | 1,010 |   |
| Allowance for Uncollectible Accounts                                         |   |   | (3,343    | )      |   |   | (3,310 | ) |
| Total Accounts Receivable                                                    |   |   | 172,119   |   |   |   | 181,597 |   |
| Fuel                                                                         |   |   | 70,060    |   |   |   | 67,138 |   |
| Materials and Supplies                                                       |   |   | 156,390   |   |   |   | 150,644 |   |
| Risk Management Assets                                                       |   |   | 41,711    |   |   |   | 35,012 |   |
| Accrued Tax Benefits                                                         |   |   | 32,591    |   |   |   | 3,523 |   |
| Regulatory Asset for Under-Recovered Fuel Costs                              |   |   | 28,143    |   |   |   | 33,066 |   |
| Prepayments and Other Current Assets                                         |   |   | 93,205    |   |   |   | 63,210 |   |
| TOTAL CURRENT ASSETS                                                         |   |   | 595,031   |   |   |   | 534,918 |   |
|                                                                         |   |   |      |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT                                                |   |   |      |   |   |   |   |   |
| Electric:                                                                    |   |   |      |   |   |   |   |   |
| Production                                                                   |   |   | 3,562,756 |   |   |   | 3,534,188 |   |
| Transmission                                                                 |   |   | 1,143,391 |   |   |   | 1,115,762 |   |
| Distribution                                                                 |   |   | 1,337,501 |   |   |   | 1,297,482 |   |
| Other Property, Plant and Equipment (including nuclear fuel and coal mining) |   |   | 797,462   |   |   |   | 703,287 |   |
| Construction Work in Progress                                                |   |   | 267,862   |   |   |   | 249,020 |   |
| Total Property, Plant and Equipment                                          |   |   | 7,108,972 |   |   |   | 6,899,739 |   |
| Accumulated Depreciation, Depletion and Amortization                         |   |   | 3,075,760 |   |   |   | 3,019,206 |   |
| TOTAL PROPERTY, PLANT AND EQUIPMENT – NET                              |   |   | 4,033,212 |   |   |   | 3,880,533 |   |
|                                                                         |   |   |      |   |   |   |   |   |
| OTHER NONCURRENT ASSETS                                                      |   |   |      |   |   |   |   |   |
| Regulatory Assets                                                            |   |   | 493,402   |   |   |   | 455,132 |   |
| Spent Nuclear Fuel and Decommissioning Trusts                                |   |   | 1,268,442 |   |   |   | 1,259,533 |   |
| Long-term Risk Management Assets                                             |   |   | 29,535    |   |   |   | 27,616 |   |
| Deferred Charges and Other Noncurrent Assets                                 |   |   | 99,201    |   |   |   | 86,193 |   |
| TOTAL OTHER NONCURRENT ASSETS                                                |   |   | 1,890,580 |   |   |   | 1,828,474 |   |
|                                                                         |   |   |      |   |   |   |   |   |
| TOTAL ASSETS                                                                 |   | $      | 6,518,823 |   |   | $      | 6,243,925 |   |

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

----

|                                                           |   | 2009           |            | 2008   |
|----------------------------------------------------------------|--------|----------------|-----------------|--------|
| CURRENT LIABILITIES                                            |   | (in thousands) |
| Advances from Affiliates                                       |   | $              | 2,350      |   | $ | 476,036  |
| Accounts Payable:                                              |   |           |            |   |   |   |
| General                                                        |   |           | 124,953    |   |   | 194,211  |
| Affiliated Companies                                           |   |           | 62,600     |   |   | 117,589  |
| Long-term Debt Due Within One Year – Affiliated          |   |           | 25,000     |   |   | -  |
| Risk Management Liabilities                                    |   |           | 17,698     |   |   | 16,079  |
| Customer Deposits                                              |   |           | 28,088     |   |   | 26,809  |
| Accrued Taxes                                                  |   |           | 73,695     |   |   | 66,363  |
| Accrued Interest                                               |   |           | 25,812     |   |   | 14,863  |
| Obligations Under Capital Leases                               |   |           | 30,990     |   |   | 43,512  |
| Other Current Liabilities                                      |   |           | 83,317     |   |   | 126,297  |
| TOTAL CURRENT LIABILITIES                                      |   |           | 474,503    |   |   | 1,081,759  |
|                                                           |   |           |            |   |   |   |
| NONCURRENT LIABILITIES                                         |   |           |            |   |   |   |
| Long-term Debt – Nonaffiliated                           |   |           | 1,950,138  |   |   | 1,377,914  |
| Long-term Risk Management Liabilities                          |   |           | 11,653     |   |   | 14,311  |
| Deferred Income Taxes                                          |   |           | 523,154    |   |   | 412,264  |
| Regulatory Liabilities and Deferred Investment Tax Credits     |   |           | 645,164    |   |   | 656,396  |
| Asset Retirement Obligations                                   |   |           | 926,644    |   |   | 902,920  |
| Deferred Credits and Other Noncurrent Liabilities              |   |           | 343,847    |   |   | 355,463  |
| TOTAL NONCURRENT LIABILITIES                                   |   |           | 4,400,600  |   |   | 3,719,268  |
|                                                           |   |           |            |   |   |   |
| TOTAL LIABILITIES                                              |   |           | 4,875,103  |   |   | 4,801,027  |
|                                                           |   |           |            |   |   |   |
| Cumulative Preferred Stock Not Subject to Mandatory Redemption |   |           | 8,077      |   |   | 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                                                |   |           | 981,292    |   |   | 861,291  |
| Retained Earnings                                              |   |           | 618,928    |   |   | 538,637  |
| Accumulated Other Comprehensive Income (Loss)                  |   |           | (21,161)        |   |   | (21,694) |
| TOTAL COMMON SHAREHOLDER’S EQUITY                        |   |           | 1,635,643  |   |   | 1,434,818  |
|                                                           |   |           |            |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $              | 6,518,823  |   | $ | 6,243,925  |

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

----

|                                                                             |   | 2009   |     |   | 2008   |   |
|----------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING ACTIVITIES                                                             |   |   |     |   |   |   |
| Net Income                                                                       |   | $      | 129,461  |   |   | $      | 105,402 |   |
| Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities: |   |   |     |   |   |   |   |   |
| Depreciation and Amortization                                                    |   |   | 66,374   |   |   |   | 63,479 |   |
| Deferred Income Taxes                                                            |   |   | 92,892   |   |   |   | 41,362 |   |
| Deferral of Incremental Nuclear Refueling Outage Expenses, Net                   |   |   | (13,928  | )      |   |   | (8,576 | ) |
| Allowance for Equity Funds Used During Construction                              |   |   | (4,338   | )      |   |   | (1,008 | ) |
| Mark-to-Market of Risk Management Contracts                                      |   |   | (10,602  | )      |   |   | 10,862 |   |
| Amortization of Nuclear Fuel                                                     |   |   | 24,718   |   |   |   | 45,312 |   |
| Change in Other Noncurrent Assets                                                |   |   | (8,727   | )      |   |   | (9,103 | ) |
| Change in Other Noncurrent Liabilities                                           |   |   | 26,606   |   |   |   | 19,847 |   |
| Changes in Certain Components of Working Capital:                                |   |   |     |   |   |   |   |   |
| Accounts Receivable, Net                                                         |   |   | 9,383    |   |   |   | 6,194 |   |
| Fuel, Materials and Supplies                                                     |   |   | (8,668   | )      |   |   | 1,094 |   |
| Accounts Payable                                                                 |   |   | (62,884  | )      |   |   | 449 |   |
| Accrued Taxes, Net                                                               |   |   | (21,736  | )      |   |   | 6,607 |   |
| Other Current Assets                                                             |   |   | (33,306  | )      |   |   | (11,777 | ) |
| Other Current Liabilities                                                        |   |   | (29,323  | )      |   |   | (23,583 | ) |
| Net Cash Flows from Operating Activities                                         |   |   | 155,922  |   |   |   | 246,561 |   |
|                                                                             |   |   |     |   |   |   |   |   |
| INVESTING ACTIVITIES                                                             |   |   |     |   |   |   |   |   |
| Construction Expenditures                                                        |   |   | (162,153 | )      |   |   | (140,537 | ) |
| Purchases of Investment Securities                                               |   |   | (441,928 | )      |   |   | (276,031 | ) |
| Sales of Investment Securities                                                   |   |   | 411,027  |   |   |   | 241,079 |   |
| Acquisitions of Nuclear Fuel                                                     |   |   | (152,150 | )      |   |   | (98,732 | ) |
| Other Investing Activities                                                       |   |   | 15,473   |   |   |   | 2,912 |   |
| Net Cash Flows Used for Investing Activities                                     |   |   | (329,731 | )      |   |   | (271,309 | ) |
|                                                                             |   |   |     |   |   |   |   |   |
| FINANCING ACTIVITIES                                                             |   |   |     |   |   |   |   |   |
| Capital Contribution from Parent                                                 |   |   | 120,000  |   |   |   | - |   |
| Issuance of Long-term Debt – Nonaffiliated                                 |   |   | 567,797  |   |   |   | 115,553 |   |
| Issuance of Long-term Debt – Affiliated                                    |   |   | 25,000   |   |   |   | - |   |
| Change in Advances from Affiliates, Net                                          |   |   | (473,686 | )      |   |   | 227,643 |   |
| Retirement of Long-term Debt – Nonaffiliated                               |   |   | -        |   |   |   | (262,000 | ) |
| Retirement of Cumulative Preferred Stock                                         |   |   | (2       | )      |   |   | - |   |
| Principal Payments for Capital Lease Obligations                                 |   |   | (16,235  | )      |   |   | (18,935 | ) |
| Dividends Paid on Common Stock                                                   |   |   | (49,000  | )      |   |   | (37,500 | ) |
| Dividends Paid on Cumulative Preferred Stock                                     |   |   | (170     | )      |   |   | (170 | ) |
| Other Financing Activities                                                       |   |   | 189      |   |   |   | - |   |
| Net Cash Flows from Financing Activities                                         |   |   | 173,893  |   |   |   | 24,591 |   |
|                                                                             |   |   |     |   |   |   |   |   |
| Net Increase (Decrease) in Cash and Cash Equivalents                             |   |   | 84       |   |   |   | (157 | ) |
| Cash and Cash Equivalents at Beginning of Period                                 |   |   | 728      |   |   |   | 1,139 |   |
| Cash and Cash Equivalents at End of Period                                       |   | $      | 812      |   |   | $      | 982 |   |
|                                                                             |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY INFORMATION                                                        |   |   |     |   |   |   |   |   |
| Cash Paid for Interest, Net of Capitalized Amounts                               |   | $      | 51,199   |   |   | $      | 38,706 |   |
| Net Cash Paid (Received) for Income Taxes                                        |   |   | (23      | )      |   |   | 13,827 |   |
| Noncash Acquisitions Under Capital Leases                                        |   |   | 1,380    |   |   |   | 2,911 |   |
| Construction Expenditures Included in Accounts Payable at June 30,               |   |   | 26,763   |   |   |   | 20,650 |   |
| Acquisition of Nuclear Fuel Included in Accounts Payable at June 30,             |   |   | 9        |   |   |   | - |   |

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

----

|                                                 | 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            |
| Derivatives and Hedging                              | Note 8            |
| Fair Value Measurements                              | Note 9            |
| Income Taxes                                         | Note 10           |
| Financing Activities                                 | Note 11           |

----

----

OHIO POWER COMPANY CONSOLIDATED

| Second Quarter of 2008          |   |   |   |   | $      | 53     |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                            |   |   |   |   |   |   |   |
| Changes in Gross Margin:        |   |   |   |   |   |   |   |
| Retail Margins                  |   |   | 81     |   |   |   |   |   |
| Off-system Sales                |   |   | (32    | )      |   |   |   |   |
| Other                           |   |   | (3     | )      |   |   |   |   |
| Total Change in Gross Margin    |   |   |   |   |   |   | 46     |   |
|                            |   |   |   |   |   |   |   |   |
| Total Expenses and Other:       |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance |   |   | (3     | )      |   |   |   |   |
| Depreciation and Amortization   |   |   | (18    | )      |   |   |   |   |
| Carrying Costs Income           |   |   | (2     | )      |   |   |   |   |
| Other Income                    |   |   | (2     | )      |   |   |   |   |
| Interest Expense                |   |   | 6      |   |   |   |   |   |
| Total Expenses and Other        |   |   |   |   |   |   | (19    | ) |
|                            |   |   |   |   |   |   |   |   |
| Income Tax Expense              |   |   |   |   |   |   | (16    | ) |
|                            |   |   |   |   |   |   |   |   |
| Second Quarter of 2009          |   |   |   |   |   | $      | 64     |   |

| · | Retail Margins increased $81 million primarily due to the following:                                                                                                                                                                                                                                 |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                               | A $45 million increase related to the implementation of higher rates set by the Ohio ESP. |
|   | ·                                                                                                                                                                                                                                                                                               | A $29 million increase related to a coal contract amendment in the second quarter of 2008. |
|   | ·                                                                                                                                                                                                                                                                                               | A $24 million increase in fuel margins due to the deferral of fuel costs in 2009.  The PUCO’s March 2009 approval of OPCo’s ESP allows for the recovery of fuel and related costs beginning January 1, 2009.  See “Ohio Electric Security Plan Filings” section of Note 3. |
|   | ·                                                                                                                                                                                                                                                                                               | A $13 million increase in capacity settlements under the Interconnection Agreement. |
|   | These increases were partially offset by:                                                                                                                                                                                                                                                            |
|   | ·                                                                                                                                                                                                                                                                                               | A $21 million decrease in industrial sales due to reduced operating levels and suspended operations by certain large industrial customers in OPCo’s service territory. |
| · | Margins from Off-system Sales decreased $32 million primarily due to lower physical sales volumes and lower margins as a result of lower market prices, partially offset by higher trading margins.                                                                                                  |
| · | Other revenues decreased $3 million primarily due to decreased gains on sales of emission allowances.  Due to the implementation of OPCo’s ESP as discussed above, emission gains and losses incurred after January 1, 2009 will be included in OPCo’s fuel adjustment clause. |

| · | Other Operation and Maintenance expenses increased $3 million primarily due to:                                                    |
|--------|------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                             | A $6 million increase in maintenance of overhead lines primarily due to increased vegetation management activities. |
|   | ·                                                                                                                             | A $5 million increase in removal costs at the Gavin and Mitchell Plants. |
|   | These increases were partially offset by:                                                                                          |
|   | ·                                                                                                                             | A $5 million decrease in maintenance expenses from planned and forced outages at various plants. |
|   | ·                                                                                                                             | A $4 million decrease in recoverable PJM expenses. |
| · | Depreciation and Amortization increased $18 million primarily due to:                                                              |
|   | ·                                                                                                                             | A $21 million increase from higher depreciable property balances as a result of environmental improvements placed in service and various other property additions and higher depreciation rates related to shortened depreciable lives for certain generating facilities. |
|   | The increase was partially offset by:                                                                                              |
|   | ·                                                                                                                             | A $7 million decrease due to the completion of the amortization of regulatory assets in December 2008. |
| · | Interest Expense decreased $6 million primarily due to an unrealized gain on an interest rate hedge of a forecasted debt issuance. |
| · | Income Tax Expense increased $16 million primarily due to an increase in pretax book income and state income taxes.                |

| Six Months Ended June 30, 2008  |   |   |   |   | $      | 192    |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                            |   |   |   |   |   |   |   |
| Changes in Gross Margin:        |   |   |   |   |   |   |   |
| Retail Margins                  |   |   | 44     |   |   |   |   |   |
| Off-system Sales                |   |   | (61    | )      |   |   |   |   |
| Other                           |   |   | 7      |   |   |   |   |   |
| Total Change in Gross Margin    |   |   |   |   |   |   | (10    | ) |
|                            |   |   |   |   |   |   |   |   |
| Total Expenses and Other:       |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance |   |   | (24    | )      |   |   |   |   |
| Depreciation and Amortization   |   |   | (34    | )      |   |   |   |   |
| Carrying Costs Income           |   |   | (4     | )      |   |   |   |   |
| Other Income                    |   |   | (4     | )      |   |   |   |   |
| Interest Expense                |   |   | 1      |   |   |   |   |   |
| Total Expenses and Other        |   |   |   |   |   |   | (65    | ) |
|                            |   |   |   |   |   |   |   |   |
| Income Tax Expense              |   |   |   |   |   |   | 20     |   |
|                            |   |   |   |   |   |   |   |   |
| Six Months Ended June 30, 2009  |   |   |   |   |   | $      | 137    |   |

| · | Retail Margins increased $44 million primarily due to the following:                                                                                                                                                                                                                                 |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                               | A $53 million increase related to the implementation of higher rates set by the Ohio ESP. |
|   | ·                                                                                                                                                                                                                                                                                               | A $25 million increase in fuel margins due to the deferral of fuel costs in 2009.  The PUCO’s March 2009 approval of OPCo’s ESP allows for the recovery of fuel and related costs beginning January 1, 2009.  See “Ohio Electric Security Plan Filings” section of Note 3. |
|   | ·                                                                                                                                                                                                                                                                                               | A $22 million increase in capacity settlements under the Interconnection Agreement. |
|   | These increases were partially offset by:                                                                                                                                                                                                                                                            |
|   | ·                                                                                                                                                                                                                                                                                               | A $30 million decrease in industrial sales due to reduced operating levels and suspended operations by certain large industrial customers in OPCo’s service territory. |
|   | ·                                                                                                                                                                                                                                                                                               | A $29 million decrease related to coal contract amendments recorded in 2008. |
| · | Margins from Off-system Sales decreased $61 million primarily due to lower physical sales volumes and lower margins as a result of lower market prices, partially offset by higher trading margins.                                                                                                  |
| · | Other revenues increased $7 million primarily due to increased gains on sales of emission allowances.  Due to the implementation of OPCo’s ESP as discussed above, emission gains and losses incurred after January 1, 2009 will be included in OPCo’s fuel adjustment clause. |

| · | Other Operation and Maintenance expenses increased $24 million primarily due to:                                                                  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                            | A $7 million increase in maintenance of overhead lines due to ice and wind storm costs incurred in January and February 2009 and a $7 million increase in vegetation management activities. |
|   | ·                                                                                                                                            | A $6 million increase related to an obligation to contribute to the “Partnership with Ohio” fund for low income, at-risk customers ordered by the PUCO’s March 2009 approval of OPCo’s ESP.  See “Ohio Electric Security Plan Filings” section of Note 3. |
|   | ·                                                                                                                                            | A $5 million increase in removal costs at Gavin and Mitchell Plants. |
| · | Depreciation and Amortization increased $34 million primarily due to:                                                                             |
|   | ·                                                                                                                                            | A $39 million increase from higher depreciable property balances as a result of environmental improvements placed in service and various other property additions and higher depreciation rates related to shortened depreciable lives for certain generating facilities. |
|   | ·                                                                                                                                            | A $5 million increase as a result of the completion of the amortization of a regulated liability in December 2008 related to energy sales to Ormet at below market rates.  See “Ormet” section of Note 3. |
|   | These increases were partially offset by:                                                                                                         |
|   | ·                                                                                                                                            | A $14 million decrease due to the completion of the amortization of regulatory assets in December 2008. |
| · | Income Tax Expense decreased $20 million primarily due to a decrease in pretax book income partially offset by an increase in state income taxes. |

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

|                                             |   | 2009           |     |   | 2008   |   |
|--------------------------------------------------|--------|----------------|----------|--------|--------|--------|
|                                             |   | (in thousands) |     |
| Cash and Cash Equivalents at Beginning of Period |   | $              | 12,679   |   |   | $      | 6,666 |   |
| Cash Flows from (Used for):                      |   |           |     |   |   |   |   |   |
| Operating Activities                             |   |           | (19,453  | )      |   |   | 290,822 |   |
| Investing Activities                             |   |           | (296,508 | )      |   |   | (271,527 | ) |
| Financing Activities                             |   |           | 320,054  |   |   |   | (15,863 | ) |
| Net Increase in Cash and Cash Equivalents        |   |           | 4,093    |   |   |   | 3,432 |   |
| Cash and Cash Equivalents at End of Period       |   | $              | 16,772   |   |   | $      | 10,098 |   |

|                                |   | PrincipalAmount Paid |           | Interest |   | Due    |
|-------------------------------------|--------|----------------------|----------------|----------|--------|--------|
| Type of Debt                        |   |                 | Rate           |     | Date   |
|                                |   |                 | (in thousands) |     | (%)    |   |   |
| Notes Payable – Nonaffiliated |   | $                    | 6,500     |     | 7.21   |   | 2009 |
| Notes Payable – Nonaffiliated |   |                 | 1,000     |     | 6.27   |   | 2009 |
| Notes Payable – Nonaffiliated |   |                 | 70,000    |     | 7.49   |   | 2009 |

----

|                                                   |   | MTM Risk Management Contracts |    |   | Cash Flow HedgeContracts |   |   | DETM Assignment (a) |   |   | CollateralDeposits |   |   | Total  |    |
|--------------------------------------------------------|--------|-------------------------------|---------|--------|--------------------------|--------|--------|---------------------|--------|--------|--------------------|--------|--------|--------|---------|
| Current Assets                                         |   | $                             | 66,735  |   |                     | $      | 32,840 |                |   | $      | -                  |   |   | $      | (3,671  | ) |   | $ | 95,904 |   |
| Noncurrent Assets                                      |   |                          | 43,026  |   |                     |   | 735    |                |   |   | -                  |   |   |   | (3,592  | ) |   |   | 40,169 |   |
| Total MTM Derivative Contract Assets                   |   |                          | 109,761 |   |                     |   | 33,575 |                |   |   | -                  |   |   |   | (7,263  | ) |   |   | 136,073 |   |
|                                                   |   |                          |    |   |                     |   |   |                |   |   |               |   |   |   |    |   |   |   |   |   |
| Current Liabilities                                    |   |                          | 42,441  |   |                     |   | 871    |                |   |   | 1,773              |   |   |   | (12,201 | ) |   |   | 32,884 |   |
| Noncurrent Liabilities                                 |   |                          | 26,616  |   |                     |   | 671    |                |   |   | 834                |   |   |   | (9,599  | ) |   |   | 18,522 |   |
| Total MTM Derivative Contract Liabilities              |   |                          | 69,057  |   |                     |   | 1,542  |                |   |   | 2,607              |   |   |   | (21,800 | ) |   |   | 51,406 |   |
|                                                   |   |                          |    |   |                     |   |   |                |   |   |               |   |   |   |    |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |   | $                             | 40,704  |   |                     | $      | 32,033 |                |   | $      | (2,607             | )      |   | $      | 14,537  |   |   | $ | 84,667 |   |

| (a) | See “Natural Gas Contracts with DETM” section of Note 15 of the 2008 Annual Report. |
|-----|-------------------------------------------------------------------------------------------------|

| Total MTM Risk Management Contract Net Assets at December 31, 2008                                          |   | $      | 37,761  |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| (Gain) Loss from Contracts Realized/Settled During the Period and Entered in a Prior Period                 |   |   | (13,137 | )      |
| Fair Value of New Contracts at Inception When Entered During the Period (a)                                 |   |   | 7,469   |   |
| Net Option Premiums Paid/(Received) for Unexercised or Unexpired Option Contracts Entered During the Period |   |   | (135    | )      |
| Change in Fair Value Due to Valuation Methodology Changes on Forward Contracts                              |   |   | -       |   |
| Changes in Fair Value Due to Market Fluctuations During the Period (b)                                      |   |   | 7,511   |   |
| Changes in Fair Value Allocated to Regulated Jurisdictions (c)                                              |   |   | 1,235   |   |
| Total MTM Risk Management Contract Net Assets                                                               |   |   | 40,704  |   |
| Cash Flow Hedge Contracts                                                                                   |   |   | 32,033  |   |
| DETM Assignment (d)                                                                                         |   |   | (2,607  | )      |
| Collateral Deposits                                                                                         |   |   | 14,537  |   |
| Ending Net Risk Management Assets at June 30, 2009                                                          |   | $      | 84,667  |   |

| (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 delivery term.  A significant portion of the total volumetric positionhas been economically hedged. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market fluctuations are attributable to various factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                         |
| (c) | “Changes in Fair Value Allocated to Regulated Jurisdictions” relates to the net gains (losses) of those contracts that are not reflected in the Condensed Consolidated Statements of Income.  These net gains (losses) are recorded as regulatory liabilities/assets.                                                                                          |
| (d) | See “Natural Gas Contracts with DETM” section of Note 15 of the 2008 Annual Report.                                                                                                                                                                                                                                                                                      |

|                                               | Remainder |         |   |    |         |   |   |        |   |   | After       |   |   |
|----------------------------------------------------|-----------|--------------|--------|---------|--------------|--------|--------|-------------|--------|--------|-------------|--------|--------|
|                                               | 2009      |         | 2010   |    | 2011         |   | 2012   |        | 2013   |   | 2013        |   | Total  |
| Level 1 (a)                                        | $         | (692)        |   | $       | (19)         |   | $      | 1      |   | $      | -      |   | $      | -  |   | $ | -  |   | $ | (710) |
| Level 2 (b)                                        |      | 11,069  |   |    | 9,369   |   |   | 3,263  |   |   | 112    |   |   | 743  |   |   | 266  |   |   | 24,822  |
| Level 3 (c)                                        |      | 3,201   |   |    | 4,199   |   |   | 1,406  |   |   | 618    |   |   | (14) |   |   | -  |   |   | 9,410  |
| Total                                              |      | 13,578  |   |    | 13,549  |   |   | 4,670  |   |   | 730    |   |   | 729  |   |   | 266  |   |   | 33,522  |
| Dedesignated Risk Management Contracts (d)         |      | 1,630   |   |    | 3,195   |   |   | 1,244  |   |   | 1,113  |   |   | -  |   |   | -  |   |   | 7,182  |
| Total MTM Risk Management Contract Net Assets | $         | 15,208  |   |  $ | 16,744  |   | $      | 5,914  |   | $      | 1,843  |   | $      | 729  |   | $ | 266  |   | $ | 40,704  |

| (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 ongoingbasis.                                                                                                                                                                                                                                                                                                                |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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.  Level2 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.  Level3 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 contracts.                                                                                                                                                                                                                                                                                                                                       |

| Six Months Ended |   |   |   |    | Twelve Months Ended |
|------------------|--------|--------|--------|---------|---------------------|
| June 30, 2009    |   |   |   |    | December 31, 2008   |
| (in thousands)   |   |   |   |    | (in thousands)      |
| End              |   | High   |   | Average |                | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $277             |   | $530   |   | $271    |                | $113 |   |   |   |   | $140 |   | $1,284 |   | $411 |   | $131 |

----

|                                                     |   | Three Months Ended |    |   | Six Months Ended |   |
|----------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                                     |   | 2009               |    |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| REVENUES                                                 |   |               |    |   |             |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution       |   | $                  | 457,465 |   |             | $      | 515,884 |   |   | $ | 982,151 |   |   | $ | 1,071,362 |   |
| Sales to AEP Affiliates                                  |   |               | 210,998 |   |             |   | 256,399 |   |   |   | 437,692 |   |   |   | 493,247 |   |
| Other Revenues – Affiliated                        |   |               | 6,281   |   |             |   | 6,487 |   |   |   | 13,769 |   |   |   | 11,786 |   |
| Other Revenues – Nonaffiliated                     |   |               | 3,269   |   |             |   | 3,591 |   |   |   | 7,116 |   |   |   | 8,154 |   |
| TOTAL REVENUES                                           |   |               | 678,013 |   |             |   | 782,361 |   |   |   | 1,440,728 |   |   |   | 1,584,549 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                 |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Fuel and Other Consumables Used for Electric Generation  |   |               | 189,475 |   |             |   | 330,190 |   |   |   | 442,949 |   |   |   | 569,124 |   |
| Purchased Electricity for Resale                         |   |               | 43,969  |   |             |   | 39,155 |   |   |   | 96,238 |   |   |   | 73,732 |   |
| Purchased Electricity from AEP Affiliates                |   |               | 20,465  |   |             |   | 35,157 |   |   |   | 37,207 |   |   |   | 67,673 |   |
| Other Operation                                          |   |               | 96,249  |   |             |   | 91,959 |   |   |   | 195,847 |   |   |   | 181,841 |   |
| Maintenance                                              |   |               | 58,150  |   |             |   | 59,218 |   |   |   | 118,190 |   |   |   | 107,915 |   |
| Depreciation and Amortization                            |   |               | 89,384  |   |             |   | 71,173 |   |   |   | 173,407 |   |   |   | 139,739 |   |
| Taxes Other Than Income Taxes                            |   |               | 46,482  |   |             |   | 45,937 |   |   |   | 97,974 |   |   |   | 97,515 |   |
| TOTAL EXPENSES                                           |   |               | 544,174 |   |             |   | 672,789 |   |   |   | 1,161,812 |   |   |   | 1,237,539 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME                                         |   |               | 133,839 |   |             |   | 109,572 |   |   |   | 278,916 |   |   |   | 347,010 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense):                                  |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other Income                                             |   |               | 417     |   |             |   | 2,452 |   |   |   | 1,528 |   |   |   | 5,904 |   |
| Carrying Costs Income                                    |   |               | 2,425   |   |             |   | 3,994 |   |   |   | 4,009 |   |   |   | 8,223 |   |
| Interest Expense                                         |   |               | (35,241 | )      |             |   | (41,438 | ) |   |   | (73,922 | ) |   |   | (75,357 | ) |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAX EXPENSE                         |   |               | 101,440 |   |             |   | 74,580 |   |   |   | 210,531 |   |   |   | 285,780 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income Tax Expense                                       |   |               | 37,528  |   |             |   | 21,271 |   |   |   | 74,010 |   |   |   | 94,181 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME                                               |   |               | 63,912  |   |             |   | 53,309 |   |   |   | 136,521 |   |   |   | 191,599 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Less: Net Income Attributable to Noncontrolling Interest |   |               | 553     |   |             |   | 415 |   |   |   | 1,016 |   |   |   | 878 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME ATTRIBUTABLE TO OPCo SHAREHOLDERS             |   |               | 63,359  |   |             |   | 52,894 |   |   |   | 135,505 |   |   |   | 190,721 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Less: Preferred Stock Dividend Requirements              |   |               | 183     |   |             |   | 183 |   |   |   | 366 |   |   |   | 366 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS ATTRIBUTABLE TO OPCo COMMON SHAREHOLDER         |   | $                  | 63,176  |   |             | $      | 52,711 |   |   | $ | 135,139 |   |   | $ | 190,355 |   |

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

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

----

|                                                                                 |   | OPCo Common Shareholder |    |   |            |   |      |              |   |
|--------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-----------------|--------|-----------|-------------------|--------|
|                                                                                 |   | Common Stock            |    |   | Paid-in Capital |   |      | Retained Earnings |   |   | AccumulatedOtherComprehensiveIncome (Loss) |   |   | NoncontrollingInterest |   |   | Total |   |
|                                                                                 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – DECEMBER 31, 2007                                               |   | $                       | 321,201 |   |            | $      | 536,640   |              |   | $ | 1,469,717 |   |   | $ | (36,541 | ) |   | $ | 15,923 |   |   | $ | 2,306,940 |   |
|                                                                                 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EITF 06-10 Adoption, Net of Tax of $1,004                                            |   |                    |    |   |            |   |      |              |   |   | (1,864 | ) |   |   |   |   |   |   |   |   |   |   | (1,864 | ) |
| SFAS 157 Adoption, Net of Tax of $152                                                |   |                    |    |   |            |   |      |              |   |   | (282 | ) |   |   |   |   |   |   |   |   |   |   | (282 | ) |
| Common Stock Dividends – Nonaffiliated                                         |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   | (878 | ) |   |   | (878 | ) |
| Preferred Stock Dividends                                                            |   |                    |    |   |            |   |      |              |   |   | (366 | ) |   |   |   |   |   |   |   |   |   |   | (366 | ) |
| Other Changes in Equity                                                              |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   | 1,524 |   |   |   | 1,524 |   |
| SUBTOTAL – EQUITY                                                              |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,305,074 |   |
|                                                                                 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 |   |   |   |   |   |   |   | 878 |   |   |   | 191,599 |   |
| TOTAL COMPREHENSIVE INCOME                                                           |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 180,503 |   |
|                                                                                 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – JUNE 30, 2008                                              |   | $                       | 321,201 |   |            | $      | 536,640   |              |   | $ | 1,657,926 |   |   | $ | (47,637 | ) |   | $ | 17,447 |   |   | $ | 2,485,577 |   |
|                                                                                 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – DECEMBER 31, 2008                                          |   | $                       | 321,201 |   |            | $      | 536,640   |              |   | $ | 1,697,962 |   |   | $ | (133,858 | ) |   | $ | 16,799 |   |   | $ | 2,438,744 |   |
|                                                                                 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Contribution from Parent                                                     |   |                    |    |   |            |   | 550,000   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 550,000 |   |
| Common Stock Dividends – Affiliated                                            |   |                    |    |   |            |   |      |              |   |   | (25,000 | ) |   |   |   |   |   |   |   |   |   |   | (25,000 | ) |
| Common Stock Dividends – Nonaffiliated                                         |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   | (1,016 | ) |   |   | (1,016 | ) |
| Preferred Stock Dividends                                                            |   |                    |    |   |            |   |      |              |   |   | (366 | ) |   |   |   |   |   |   |   |   |   |   | (366 | ) |
| Other Changes in Equity                                                              |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   | 1,111 |   |   |   | 1,111 |   |
| SUBTOTAL – EQUITY                                                              |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,963,473 |   |
|                                                                                 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                                 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income, Net of Taxes:                                       |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Flow Hedges, Net of Tax of $7,828                                               |   |                    |    |   |            |   |      |              |   |   |   |   |   |   | 14,538 |   |   |   |   |   |   |   | 14,538 |   |
| Amortization of Pension and OPEB Deferred Costs, Net of Tax of $1,459 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   | 2,709 |   |   |   |   |   |   |   | 2,709 |   |
| NET INCOME                                                                           |   |                    |    |   |            |   |      |              |   |   | 135,505 |   |   |   |   |   |   |   | 1,016 |   |   |   | 136,521 |   |
| TOTAL COMPREHENSIVE INCOME                                                           |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 153,768 |   |
|                                                                                 |   |                    |    |   |            |   |      |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – JUNE 30, 2009                                              |   | $                       | 321,201 |   |            | $      | 1,086,640 |              |   | $ | 1,808,101 |   |   | $ | (116,611 | ) |   | $ | 17,910 |   |   | $ | 3,117,241 |   |

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

----

|                                            |   | 2009   |      |   | 2008   |   |
|-------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT ASSETS                                  |   |   |      |   |   |   |
| Cash and Cash Equivalents                       |   | $      | 16,772    |   |   | $      | 12,679 |   |
| Advances to Affiliates                          |   |   | 40,319    |   |   |   | - |   |
| Accounts Receivable:                            |   |   |      |   |   |   |   |   |
| Customers                                       |   |   | 71,877    |   |   |   | 91,235 |   |
| Affiliated Companies                            |   |   | 135,260   |   |   |   | 118,721 |   |
| Accrued Unbilled Revenues                       |   |   | 15,233    |   |   |   | 18,239 |   |
| Miscellaneous                                   |   |   | 6,726     |   |   |   | 23,393 |   |
| Allowance for Uncollectible Accounts            |   |   | (3,996    | )      |   |   | (3,586 | ) |
| Total Accounts Receivable                       |   |   | 225,100   |   |   |   | 248,002 |   |
| Fuel                                            |   |   | 347,050   |   |   |   | 186,904 |   |
| Materials and Supplies                          |   |   | 112,921   |   |   |   | 107,419 |   |
| Risk Management Assets                          |   |   | 95,904    |   |   |   | 53,292 |   |
| Accrued Tax Benefits                            |   |   | 53,941    |   |   |   | 13,568 |   |
| Prepayments and Other Current Assets            |   |   | 46,105    |   |   |   | 42,999 |   |
| TOTAL CURRENT ASSETS                            |   |   | 938,112   |   |   |   | 664,863 |   |
|                                            |   |   |      |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT                   |   |   |      |   |   |   |   |   |
| Electric:                                       |   |   |      |   |   |   |   |   |
| Production                                      |   |   | 6,656,180 |   |   |   | 6,025,277 |   |
| Transmission                                    |   |   | 1,149,422 |   |   |   | 1,111,637 |   |
| Distribution                                    |   |   | 1,515,437 |   |   |   | 1,472,906 |   |
| Other Property, Plant and Equipment             |   |   | 372,229   |   |   |   | 391,862 |   |
| Construction Work in Progress                   |   |   | 247,703   |   |   |   | 787,180 |   |
| Total Property, Plant and Equipment             |   |   | 9,940,971 |   |   |   | 9,788,862 |   |
| Accumulated Depreciation and Amortization       |   |   | 3,208,227 |   |   |   | 3,122,989 |   |
| TOTAL PROPERTY, PLANT AND EQUIPMENT – NET |   |   | 6,732,744 |   |   |   | 6,665,873 |   |
|                                            |   |   |      |   |   |   |   |   |
| OTHER NONCURRENT ASSETS                         |   |   |      |   |   |   |   |   |
| Regulatory Assets                               |   |   | 585,234   |   |   |   | 449,216 |   |
| Long-term Risk Management Assets                |   |   | 40,169    |   |   |   | 39,097 |   |
| Deferred Charges and Other Noncurrent Assets    |   |   | 137,138   |   |   |   | 184,777 |   |
| TOTAL OTHER NONCURRENT ASSETS                   |   |   | 762,541   |   |   |   | 673,090 |   |
|                                            |   |   |      |   |   |   |   |   |
| TOTAL ASSETS                                    |   | $      | 8,433,397 |   |   | $      | 8,003,826 |   |

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

----

|                                                           |   |   |   |   | 2009           |            | 2008   |
|----------------------------------------------------------------|--------|--------|--------|--------|----------------|-----------------|--------|
| CURRENT LIABILITIES                                            |   |   |   |   | (in thousands) |
| Advances from Affiliates                                       |   |   |   |   | $              | -          |   | $ | 133,887  |
| Accounts Payable:                                              |   |   |   |   |           |            |   |   |   |
| General                                                        |   |   |   |   |           | 173,266    |   |   | 193,675  |
| Affiliated Companies                                           |   |   |   |   |           | 109,313    |   |   | 206,984  |
| Short-term Debt – Nonaffiliated                          |   |   |   |   |           | 11,500     |   |   | -  |
| Long-term Debt Due Within One Year – Nonaffiliated       |   |   |   |   |           | 479,450    |   |   | 77,500  |
| Risk Management Liabilities                                    |   |   |   |   |           | 32,884     |   |   | 29,218  |
| Customer Deposits                                              |   |   |   |   |           | 26,102     |   |   | 24,333  |
| Accrued Taxes                                                  |   |   |   |   |           | 134,477    |   |   | 187,256  |
| Accrued Interest                                               |   |   |   |   |           | 40,677     |   |   | 44,245  |
| Other Current Liabilities                                      |   |   |   |   |           | 190,281    |   |   | 163,702  |
| TOTAL CURRENT LIABILITIES                                      |   |   |   |   |           | 1,197,950  |   |   | 1,060,800  |
|                                                           |   |   |   |   |           |            |   |   |   |
| NONCURRENT LIABILITIES                                         |   |   |   |   |           |            |   |   |   |
| Long-term Debt – Nonaffiliated                           |   |   |   |   |           | 2,282,752  |   |   | 2,761,876  |
| Long-term Debt – Affiliated                              |   |   |   |   |           | 200,000    |   |   | 200,000  |
| Long-term Risk Management Liabilities                          |   |   |   |   |           | 18,522     |   |   | 23,817  |
| Deferred Income Taxes                                          |   |   |   |   |           | 1,022,642  |   |   | 927,072  |
| Regulatory Liabilities and Deferred Investment Tax Credits     |   |   |   |   |           | 128,985    |   |   | 127,788  |
| Employee Benefits and Pension Obligations                      |   |   |   |   |           | 283,345    |   |   | 288,106  |
| Deferred Credits and Other Noncurrent Liabilities              |   |   |   |   |           | 165,334    |   |   | 158,996  |
| TOTAL NONCURRENT LIABILITIES                                   |   |   |   |   |           | 4,101,580  |   |   | 4,487,655  |
|                                                           |   |   |   |   |           |            |   |   |   |
| TOTAL LIABILITIES                                              |   |   |   |   |           | 5,299,530  |   |   | 5,548,455  |
|                                                           |   |   |   |   |           |            |   |   |   |
| Cumulative Preferred Stock Not Subject to Mandatory Redemption |   |   |   |   |           | 16,626     |   |   | 16,627  |
|                                                           |   |   |   |   |           |            |   |   |   |
| Commitments and Contingencies (Note 4)                         |   |   |   |   |           |            |   |   |   |
|                                                           |   |   |   |   |           |            |   |   |   |
| EQUITY                                                         |   |   |   |   |           |            |   |   |   |
| Common Stock – No Par Value:                             |   |   |   |   |           |            |   |   |   |
| Authorized – 40,000,000 Shares                           |   |   |   |   |           |            |   |   |   |
| Outstanding – 27,952,473 Shares                          |   |   |   |   |           | 321,201    |   |   | 321,201  |
| Paid-in Capital                                                |   |   |   |   |           | 1,086,640  |   |   | 536,640  |
| Retained Earnings                                              |   |   |   |   |           | 1,808,101  |   |   | 1,697,962  |
| Accumulated Other Comprehensive Income (Loss)                  |   |   |   |   |           | (116,611)       |   |   | (133,858) |
| TOTAL COMMON SHAREHOLDER’S EQUITY                        |   |   |   |   |           | 3,099,331  |   |   | 2,421,945  |
|                                                           |   |   |   |   |           |            |   |   |   |
| Noncontrolling Interest                                        |   |   |   |   |           | 17,910     |   |   | 16,799  |
|                                                           |   |   |   |   |           |            |   |   |   |
| TOTAL EQUITY                                                   |   |   |   |   |           | 3,117,241  |   |   | 2,438,744  |
|                                                           |   |   |   |   |           |            |   |   |   |
| TOTAL LIABILITIES AND EQUITY                                   |   |   |   |   | $              | 8,433,397  |   | $ | 8,003,826  |

----

|                                                                                        |   | 2009   |     |   | 2008   |   |
|---------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING ACTIVITIES                                                                        |   |   |     |   |   |   |
| Net Income                                                                                  |   | $      | 136,521  |   |   | $      | 191,599 |   |
| Adjustments to Reconcile Net Income to Net Cash Flows from (Used for) Operating Activities: |   |   |     |   |   |   |   |   |
| Depreciation and Amortization                                                               |   |   | 173,407  |   |   |   | 139,739 |   |
| Deferred Income Taxes                                                                       |   |   | 117,372  |   |   |   | 27,984 |   |
| Carrying Costs Income                                                                       |   |   | (4,009   | )      |   |   | (8,223 | ) |
| Allowance for Equity Funds Used During Construction                                         |   |   | (768     | )      |   |   | (1,246 | ) |
| Mark-to-Market of Risk Management Contracts                                                 |   |   | (16,123  | )      |   |   | 2,018 |   |
| Deferred Property Taxes                                                                     |   |   | 44,125   |   |   |   | 42,089 |   |
| Fuel Over/Under-Recovery, Net                                                               |   |   | (141,874 | )      |   |   | - |   |
| Change in Other Noncurrent Assets                                                           |   |   | 6,483    |   |   |   | (59,294 | ) |
| Change in Other Noncurrent Liabilities                                                      |   |   | 15,173   |   |   |   | 13,265 |   |
| Changes in Certain Components of Working Capital:                                           |   |   |     |   |   |   |   |   |
| Accounts Receivable, Net                                                                    |   |   | 20,986   |   |   |   | (38,279 | ) |
| Fuel, Materials and Supplies                                                                |   |   | (165,648 | )      |   |   | (40,620 | ) |
| Accounts Payable                                                                            |   |   | (100,613 | )      |   |   | 47,035 |   |
| Accrued Taxes, Net                                                                          |   |   | (93,152  | )      |   |   | (5,865 | ) |
| Other Current Assets                                                                        |   |   | (14,965  | )      |   |   | (9,620 | ) |
| Other Current Liabilities                                                                   |   |   | 3,632    |   |   |   | (9,760 | ) |
| Net Cash Flows from (Used for) Operating Activities                                         |   |   | (19,453  | )      |   |   | 290,822 |   |
| INVESTING ACTIVITIES                                                                        |   |   |     |   |   |   |   |   |
| Construction Expenditures                                                                   |   |   | (276,255 | )      |   |   | (276,911 | ) |
| Change in Advances to Affiliates, Net                                                       |   |   | (40,319  | )      |   |   | - |   |
| Proceeds from Sales of Assets                                                               |   |   | 17,261   |   |   |   | 5,889 |   |
| Other Investing Activities                                                                  |   |   | 2,805    |   |   |   | (505 | ) |
| Net Cash Flows Used for Investing Activities                                                |   |   | (296,508 | )      |   |   | (271,527 | ) |
|                                                                                        |   |   |     |   |   |   |   |   |
| FINANCING ACTIVITIES                                                                        |   |   |     |   |   |   |   |   |
| Capital Contribution from Parent                                                            |   |   | 550,000  |   |   |   | - |   |
| Issuance of Long-term Debt – Nonaffiliated                                            |   |   | (445     | )      |   |   | 164,474 |   |
| Change in Short-term Debt, Net – Nonaffiliated                                        |   |   | 11,500   |   |   |   | (701 | ) |
| Change in Advances from Affiliates, Net                                                     |   |   | (133,887 | )      |   |   | 72,285 |   |
| Retirement of Long-term Debt – Nonaffiliated                                          |   |   | (77,500  | )      |   |   | (257,463 | ) |
| Retirement of Cumulative Preferred Stock                                                    |   |   | (1       | )      |   |   | - |   |
| Principal Payments for Capital Lease Obligations                                            |   |   | (2,224   | )      |   |   | (3,214 | ) |
| Funds from Amended Coal Contact                                                             |   |   | -        |   |   |   | 10,000 |   |
| Dividends Paid on Common Stock – Nonaffiliated                                        |   |   | (463     | )      |   |   | (878 | ) |
| Dividends Paid on Common Stock – Affiliated                                           |   |   | (25,000  | )      |   |   | - |   |
| Dividends Paid on Cumulative Preferred Stock                                                |   |   | (366     | )      |   |   | (366 | ) |
| Other Financing Activities                                                                  |   |   | (1,560   | )      |   |   | - |   |
| Net Cash Flows from (Used for) Financing Activities                                         |   |   | 320,054  |   |   |   | (15,863 | ) |
|                                                                                        |   |   |     |   |   |   |   |   |
| Net Increase in Cash and Cash Equivalents                                                   |   |   | 4,093    |   |   |   | 3,432 |   |
| Cash and Cash Equivalents at Beginning of Period                                            |   |   | 12,679   |   |   |   | 6,666 |   |
| Cash and Cash Equivalents at End of Period                                                  |   | $      | 16,772   |   |   | $      | 10,098 |   |

| SUPPLEMENTARY INFORMATION                                          |   |   |    |   |   |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Cash Paid for Interest, Net of Capitalized Amounts                 |   | $      | 100,522 |   |   | $      | 72,685 |   |
| Net Cash Paid for Income Taxes                                     |   |   | 2,566   |   |   |   | 32,569 |   |
| Noncash Acquisitions Under Capital Leases                          |   |   | 468     |   |   |   | 1,673 |   |
| Noncash Acquisition of Coal Land Rights                       |   |   | -       |   |   |   | 41,600 |   |
| Construction Expenditures Included in Accounts Payable at June 30, |   |   | 16,391  |   |   |   | 27,610 |   |

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

----

|                                                 | 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            |
| Derivatives and Hedging                              | Note 8            |
| Fair Value Measurements                              | Note 9            |
| Income Taxes                                         | Note 10           |
| Financing Activities                                 | Note 11           |

----

----

PUBLIC SERVICE COMPANY OF OKLAHOMA

| Second Quarter of 2008              |   |   |   |   | $      | 4      |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                |   |   |   |   |   |   |   |
| Changes in Gross Margin:            |   |   |   |   |   |   |   |
| Retail and Off-system Sales Margins |   |   | 32     |   |   |   |   |   |
| Other                               |   |   | 2      |   |   |   |   |   |
| Total Change in Gross Margin        |   |   |   |   |   |   | 34     |   |
|                                |   |   |   |   |   |   |   |   |
| Total Expenses and Other:           |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance     |   |   | (4     | )      |   |   |   |   |
| Deferral of Ice Storm Costs         |   |   | 8      |   |   |   |   |   |
| Depreciation and Amortization       |   |   | (4     | )      |   |   |   |   |
| Other Income                        |   |   | (1     | )      |   |   |   |   |
| Interest Expense                    |   |   | (1     | )      |   |   |   |   |
| Total Expenses and Other            |   |   |   |   |   |   | (2     | ) |
|                                |   |   |   |   |   |   |   |   |
| Income Tax Expense                  |   |   |   |   |   |   | (12    | ) |
|                                |   |   |   |   |   |   |   |   |
| Second Quarter of 2009              |   |   |   |   |   | $      | 24     |   |

| · | Retail and Off-system Sales Margins increased $32 million primarily due to an increase in retail sales margins resulting from base rate adjustments. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Other revenues increased $2 million primarily due to higher third party nonutility construction projects and nonaffiliated rent revenue.             |

| · | Other Operation and Maintenance expenses increased $4 million primarily due to:                                                                                                                    |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                             | A $7 million increase due to a prior year credit adjustment related to the December 2007 ice storm. |
|   | ·                                                                                                                                                                                             | A $2 million increase in employee-related expenses. |
|   | ·                                                                                                                                                                                             | A $1 million increase in transmission operating expense primarily due to higher SPP costs. |
|   | These increases were partially offset by:                                                                                                                                                          |
|   | ·                                                                                                                                                                                             | A $6 million decrease in generation plant maintenance expense primarily due to higher planned maintenance in 2008. |
| · | Deferral of Ice Storm Costs decreased $8 million due to 2008 costs and true-up entries to adjust actual December 2007 ice storm costs to the 2007 estimated accrual.                               |
| · | Depreciation and Amortization expenses increased $4 million primarily due to the amortization of regulatory assets, largest of which was related to the Generation Cost Recovery regulatory asset. |
| · | Income Tax Expense increased $12 million primarily due to an increase in pretax book income.                                                                                                       |

| Six Months Ended June 30, 2008      |   |   |   |   | $      | 42     |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                |   |   |   |   |   |   |   |
| Changes in Gross Margin:            |   |   |   |   |   |   |   |
| Retail and Off-system Sales Margins |   |   | 49     |   |   |   |   |   |
| Transmission Revenues               |   |   | 1      |   |   |   |   |   |
| Other                               |   |   | (8     | )      |   |   |   |   |
| Total Change in Gross Margin        |   |   |   |   |   |   | 42     |   |
|                                |   |   |   |   |   |   |   |   |
| Total Expenses and Other:           |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance     |   |   | 22     |   |   |   |   |   |
| Deferral of Ice Storm Costs         |   |   | (72    | )      |   |   |   |   |
| Depreciation and Amortization       |   |   | (6     | )      |   |   |   |   |
| Other Income                        |   |   | (3     | )      |   |   |   |   |
| Interest Expense                    |   |   | (1     | )      |   |   |   |   |
| Total Expenses and Other            |   |   |   |   |   |   | (60    | ) |
|                                |   |   |   |   |   |   |   |   |
| Income Tax Expense                  |   |   |   |   |   |   | 6      |   |
|                                |   |   |   |   |   |   |   |   |
| Six Months Ended June 30, 2009      |   |   |   |   |   | $      | 30     |   |

| · | Retail and Off-system Sales Margins increased $49 million primarily due to an increase in retail sales margins resulting from base rate adjustments. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Other revenues decreased $8 million related to the sale of SO2 allowances.                                                                           |

| · | Other Operation and Maintenance expenses decreased $22 million primarily due to:                                                                                                                   |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                             | The write-off in the first quarter of 2008 of $10 million of unrecoverable pre-construction costs related to the cancelled Red Rock Generating Facility. |
|   | ·                                                                                                                                                                                             | An $8 million decrease due to lower plant maintenance expense primarily due to the deferral of generation maintenance expenses as a result of PSO’s base rate filing.  See “2008 Oklahoma Base Rate Filing” section of Note 3. |
|   | ·                                                                                                                                                                                             | A $2 million decrease in employee-related expenses. |
| · | 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.                             |
| · | Depreciation and Amortization expenses increased $6 million primarily due to the amortization of regulatory assets, largest of which was related to the Generation Cost Recovery regulatory asset. |
| · | Other Income decreased $3 million primarily due to carrying charges related to the Generation Cost Recovery regulatory assets and a decrease in the equity component of AFUDC.                     |
| · | Income Tax Expense decreased $6 million primarily due to a decrease in pretax book income.                                                                                                         |

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

|                                                 |   | 2009           |     |   | 2008   |   |
|------------------------------------------------------|--------|----------------|----------|--------|--------|--------|
|                                                 |   | (in thousands) |     |
| Cash and Cash Equivalents at Beginning of Period     |   | $              | 1,345    |   |   | $      | 1,370 |   |
| Cash Flows from (Used for):                          |   |           |     |   |   |   |   |   |
| Operating Activities                                 |   |           | 199,675  |   |   |   | (6,309 | ) |
| Investing Activities                                 |   |           | (118,301 | )      |   |   | (99,942 | ) |
| Financing Activities                                 |   |           | (81,659  | )      |   |   | 106,405 |   |
| Net Increase (Decrease) in Cash and Cash Equivalents |   |           | (285     | )      |   |   | 154 |   |
| Cash and Cash Equivalents at End of Period           |   | $              | 1,060    |   |   | $      | 1,524 |   |

|                    |   | Principal      |         | Interest |   | Due    |
|-------------------------|--------|----------------|--------------|----------|--------|--------|
| Type of Debt            |   | Amount         |         | Rate     |   | Date   |
|                    |   | (in thousands) |         | (%)      |   |   |
| Pollution Control Bonds |   | $              | 33,700  |     | 5.25   |   | 2014 |

|                   |   | PrincipalAmount Paid |         | Interest |   | Due    |
|------------------------|--------|----------------------|--------------|----------|--------|--------|
| Type of Debt           |   |                 | Rate         |     | Date   |
|                   |   | (in thousands)       |         | (%)      |   |   |
| Senior Unsecured Notes |   | $                    | 50,000  |     | 4.70   |   | 2009 |

----

|                                                   |   | MTM Risk Management Contracts |   |   | Cash FlowHedgeContracts |   |   | DETM Assignment (a) |   |   | CollateralDeposits |   |   | Total  |   |
|--------------------------------------------------------|--------|-------------------------------|--------|--------|-------------------------|--------|--------|---------------------|--------|--------|--------------------|--------|--------|--------|--------|
| Current Assets                                         |   | $                             | 5,144  |   |                    | $      | 164    |                |   | $      | -                  |   |   | $      | -      |   |   | $ | 5,308 |   |
| Noncurrent Assets                                      |   |                          | 400    |   |                    |   | 71     |                |   |   | -                  |   |   |   | -      |   |   |   | 471 |   |
| Total MTM Derivative Contract Assets                   |   |                          | 5,544  |   |                    |   | 235    |                |   |   | -                  |   |   |   | -      |   |   |   | 5,779 |   |
|                                                   |   |                          |   |   |                    |   |   |                |   |   |               |   |   |   |   |   |   |   |   |   |
| Current Liabilities                                    |   |                          | 4,684  |   |                    |   | 54     |                |   |   | 65                 |   |   |   | (123   | ) |   |   | 4,680 |   |
| Noncurrent Liabilities                                 |   |                          | 337    |   |                    |   | -      |                |   |   | 30                 |   |   |   | (13    | ) |   |   | 354 |   |
| Total MTM Derivative Contract Liabilities              |   |                          | 5,021  |   |                    |   | 54     |                |   |   | 95                 |   |   |   | (136   | ) |   |   | 5,034 |   |
|                                                   |   |                          |   |   |                    |   |   |                |   |   |               |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |   | $                             | 523    |   |                    | $      | 181    |                |   | $      | (95                | )      |   | $      | 136    |   |   | $ | 745 |   |

| (a) | See “Natural Gas Contracts with DETM” section of Note 15 of the 2008 Annual Report. |
|-----|-------------------------------------------------------------------------------------------------|

| Total MTM Risk Management Contract Net Assets at December 31, 2008                                          |   | $      | 1,660 |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|-------|--------|
| (Gain) Loss from Contracts Realized/Settled During the Period and Entered in a Prior Period                 |   |   | (437  | )      |
| 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 |   |   | (17   | )      |
| Change in Fair Value Due to Valuation Methodology Changes on Forward Contracts                              |   |   | -     |   |
| Changes in Fair Value Due to Market Fluctuations During the Period (b)                                      |   |   | (19   | )      |
| Changes in Fair Value Allocated to Regulated Jurisdictions (c)                                              |   |   | (664  | )      |
| Total MTM Risk Management Contract Net Assets                                                               |   |   | 523   |   |
| Cash Flow Hedge Contracts                                                                                   |   |   | 181   |   |
| DETM Assignment (d)                                                                                         |   |   | (95   | )      |
| Collateral Deposits                                                                                         |   |   | 136   |   |
| Ending Net Risk Management Assets at June 30, 2009                                                          |   | $      | 745   |   |

| (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 delivery term.  A significant portion of the total volumetricposition has been economically hedged. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market fluctuations are attributable to various factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                         |
| (c) | “Changes in Fair Value Allocated to Regulated Jurisdictions” relates to the net gains (losses) of those contracts that are not reflected in the Condensed Statements of Income.  These net gains (losses) are recorded as regulatory liabilities/assets.                                                                                                       |
| (d) | See “Natural Gas Contracts with DETM” section of Note 15 of the 2008 Annual Report.                                                                                                                                                                                                                                                                                      |

|                                                        |   | Remainder2009 |      | 2010   |   | 2011      |   | 2012   |    | 2013   |   | After2013 |   | Total  |
|-------------------------------------------------------------|--------|---------------|-----------|--------|--------|-----------|--------|--------|---------|--------|--------|-----------|--------|--------|
| Level 1 (a)                                                 |   | $             | (140)     |   | $      | -    |   | $      | -  |   | $      | -    |   | $      | -  |   | $ | -  |   | $ | (140) |
| Level 2 (b)                                                 |   |          | 609  |   |   | 236  |   |   | (186)   |   |   | (8)       |   |   | -  |   |   | -  |   |   | 651  |
| Level 3 (c)                                                 |   |          | 11   |   |   | 1    |   |   | -  |   |   | -    |   |   | -  |   |   | -  |   |   | 12  |
| Total MTM Risk Management Contract Net Assets (Liabilities) |   | $             | 480  |   | $      | 237  |   | $      | (186)   |   | $      | (8)       |   | $      | -  |   | $ | -  |   | $ | 523  |

| (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 ongoingbasis.                                                                                                                                                                                                                                                                                                                |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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.  Level2 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.  Level3 inputs primarily consist of unobservable market data or are valued based on models and/or assumptions.                                                                                                                                                                                                         |

| Six Months Ended |   |   |   |    | Twelve Months Ended |
|------------------|--------|--------|--------|---------|---------------------|
| June 30, 2009    |   |   |   |    | December 31, 2008   |
| (in thousands)   |   |   |   |    | (in thousands)      |
| End              |   | High   |   | Average |                | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $15              |   | $34    |   | $12     |                | $4 |   |   |   |   | $4 |   | $164 |   | $44 |   | $6 |

----

|                                                    |   | Three Months Ended |    |   | Six Months Ended |   |
|---------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                                    |   | 2009               |    |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| REVENUES                                                |   |               |    |   |             |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution      |   | $                  | 263,763 |   |             | $      | 357,675 |   |   | $ | 542,534 |   |   | $ | 676,555 |   |
| Sales to AEP Affiliates                                 |   |               | 11,690  |   |             |   | 41,767 |   |   |   | 27,513 |   |   |   | 57,702 |   |
| Other Revenues                                          |   |               | 1,688   |   |             |   | 892 |   |   |   | 2,381 |   |   |   | 2,077 |   |
| TOTAL REVENUES                                          |   |               | 277,141 |   |             |   | 400,334 |   |   |   | 572,428 |   |   |   | 736,334 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Fuel and Other Consumables Used for Electric Generation |   |               | 62,753  |   |             |   | 143,537 |   |   |   | 182,152 |   |   |   | 296,742 |   |
| Purchased Electricity for Resale                        |   |               | 46,108  |   |             |   | 104,016 |   |   |   | 90,533 |   |   |   | 152,598 |   |
| Purchased Electricity from AEP Affiliates               |   |               | 3,416   |   |             |   | 21,506 |   |   |   | 9,331 |   |   |   | 38,775 |   |
| Other Operation                                         |   |               | 46,521  |   |             |   | 45,186 |   |   |   | 86,066 |   |   |   | 101,185 |   |
| Maintenance                                             |   |               | 27,965  |   |             |   | 25,655 |   |   |   | 53,395 |   |   |   | 60,242 |   |
| Deferral of Ice Storm Costs                             |   |               | -       |   |             |   | 8,223 |   |   |   | - |   |   |   | (71,679 | ) |
| Depreciation and Amortization                           |   |               | 28,529  |   |             |   | 24,720 |   |   |   | 56,479 |   |   |   | 50,887 |   |
| Taxes Other Than Income Taxes                           |   |               | 10,958  |   |             |   | 10,474 |   |   |   | 21,709 |   |   |   | 21,426 |   |
| TOTAL EXPENSES                                          |   |               | 226,250 |   |             |   | 383,317 |   |   |   | 499,665 |   |   |   | 650,176 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME                                        |   |               | 50,891  |   |             |   | 17,017 |   |   |   | 72,763 |   |   |   | 86,158 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense):                                 |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest Income                                         |   |               | 580     |   |             |   | 967 |   |   |   | 1,228 |   |   |   | 2,095 |   |
| Carrying Costs Income                                   |   |               | 1,019   |   |             |   | 2,128 |   |   |   | 2,730 |   |   |   | 3,762 |   |
| Allowance for Equity Funds Used During Construction     |   |               | 571     |   |             |   | 516 |   |   |   | 741 |   |   |   | 1,875 |   |
| Interest Expense                                        |   |               | (15,163 | )      |             |   | (14,525 | ) |   |   | (29,968 | ) |   |   | (29,466 | ) |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAX EXPENSE                        |   |               | 37,898  |   |             |   | 6,103 |   |   |   | 47,494 |   |   |   | 64,424 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income Tax Expense                                      |   |               | 13,776  |   |             |   | 1,976 |   |   |   | 17,334 |   |   |   | 22,898 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME                                              |   |               | 24,122  |   |             |   | 4,127 |   |   |   | 30,160 |   |   |   | 41,526 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Preferred Stock Dividend Requirements                   |   |               | 53      |   |             |   | 53 |   |   |   | 106 |   |   |   | 106 |   |
|                                                    |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS ATTRIBUTABLE TO COMMON STOCK                   |   | $                  | 24,069  |   |             | $      | 4,074 |   |   | $ | 30,054 |   |   | $ | 41,420 |   |

| The common stock of PSO is wholly-owned by AEP. |
|-------------------------------------------------|

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

----

|                                                              |   | Common Stock |    |   | Paid-in Capital |   |    | Retained Earnings |   |   | Accumulated Other Comprehensive Income (Loss) |   |   | Total  |   |
|-------------------------------------------------------------------|--------|--------------|---------|--------|-----------------|--------|---------|-------------------|--------|--------|-----------------------------------------------|--------|--------|--------|--------|
| TOTAL COMMON SHAREHOLDER’S EQUITY – 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 | ) |
| SUBTOTAL – COMMON SHAREHOLDER’S EQUITY                |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   | 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 |   |
|                                                              |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – JUNE 30, 2008     |   | $            | 157,230 |   |            | $      | 340,016 |              |   | $      | 214,852                                       |   |   | $      | (796   | ) |   | $ | 711,302 |   |
|                                                              |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2008 |   | $            | 157,230 |   |            | $      | 340,016 |              |   | $      | 251,704                                       |   |   | $      | (704   | ) |   | $ | 748,246 |   |
|                                                              |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   |   |   |
| Capital Contribution from Parent                                  |   |         |    |   |            |   | 20,000  |              |   |   |                                          |   |   |   |   |   |   |   | 20,000 |   |
| Common Stock Dividends                                            |   |         |    |   |            |   |    |              |   |   | (14,500                                       | )      |   |   |   |   |   |   | (14,500 | ) |
| Preferred Stock Dividends                                         |   |         |    |   |            |   |    |              |   |   | (106                                          | )      |   |   |   |   |   |   | (106 | ) |
| Gain on Reacquired Preferred Stock                                |   |         |    |   |            |   | 1       |              |   |   |                                          |   |   |   |   |   |   |   | 1 |   |
| Other Changes in Common Shareholder’s Equity                |   |         |    |   |            |   | 4,214   |              |   |   | (4,214                                        | )      |   |   |   |   |   |   | - |   |
| SUBTOTAL – COMMON SHAREHOLDER’S EQUITY                |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   | 753,641 |   |
|                                                              |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME                                              |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income, Net of Taxes:                    |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   |   |   |
| Cash Flow Hedges, Net of Tax of $117                              |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   | 218    |   |   |   | 218 |   |
| NET INCOME                                                        |   |         |    |   |            |   |    |              |   |   | 30,160                                        |   |   |   |   |   |   |   | 30,160 |   |
| TOTAL COMPREHENSIVE INCOME                                        |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   | 30,378 |   |
|                                                              |   |         |    |   |            |   |    |              |   |   |                                          |   |   |   |   |   |   |   |   |   |
| TOTAL COMMON SHAREHOLDER’S EQUITY – JUNE 30, 2009     |   | $            | 157,230 |   |            | $      | 364,231 |              |   | $      | 263,044                                       |   |   | $      | (486   | ) |   | $ | 784,019 |   |

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

----

|                                            |   | 2009   |      |   | 2008   |   |
|-------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT ASSETS                                  |   |   |      |
| Cash and Cash Equivalents                       |   | $      | 1,060     |   |   | $      | 1,345 |   |
| Advances to Affiliates                          |   |   | 19,438    |   |   |   | - |   |
| Accounts Receivable:                            |   |   |      |   |   |   |   |   |
| Customers                                       |   |   | 28,425    |   |   |   | 39,823 |   |
| Affiliated Companies                            |   |   | 60,841    |   |   |   | 138,665 |   |
| Miscellaneous                                   |   |   | 6,841     |   |   |   | 8,441 |   |
| Allowance for Uncollectible Accounts            |   |   | (33       | )      |   |   | (20 | ) |
| Total Accounts Receivable                       |   |   | 96,074    |   |   |   | 186,909 |   |
| Fuel                                            |   |   | 22,055    |   |   |   | 27,060 |   |
| Materials and Supplies                          |   |   | 44,730    |   |   |   | 44,047 |   |
| Risk Management Assets                          |   |   | 5,308     |   |   |   | 5,830 |   |
| Deferred Tax Benefits                           |   |   | 33,922    |   |   |   | 9,123 |   |
| Accrued Tax Benefits                            |   |   | 1,759     |   |   |   | 3,876 |   |
| Prepayments and Other Current Assets            |   |   | 3,010     |   |   |   | 3,371 |   |
| TOTAL CURRENT ASSETS                            |   |   | 227,356   |   |   |   | 281,561 |   |
|                                            |   |   |      |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT                   |   |   |      |   |   |   |   |   |
| Electric:                                       |   |   |      |   |   |   |   |   |
| Production                                      |   |   | 1,289,840 |   |   |   | 1,266,716 |   |
| Transmission                                    |   |   | 636,041   |   |   |   | 622,665 |   |
| Distribution                                    |   |   | 1,524,892 |   |   |   | 1,468,481 |   |
| Other Property, Plant and Equipment             |   |   | 248,602   |   |   |   | 248,897 |   |
| Construction Work in Progress                   |   |   | 59,702    |   |   |   | 85,252 |   |
| Total Property, Plant and Equipment             |   |   | 3,759,077 |   |   |   | 3,692,011 |   |
| Accumulated Depreciation and Amortization       |   |   | 1,215,036 |   |   |   | 1,192,130 |   |
| TOTAL PROPERTY, PLANT AND EQUIPMENT – NET |   |   | 2,544,041 |   |   |   | 2,499,881 |   |
|                                            |   |   |      |   |   |   |   |   |
| OTHER NONCURRENT ASSETS                         |   |   |      |   |   |   |   |   |
| Regulatory Assets                               |   |   | 289,511   |   |   |   | 304,737 |   |
| Long-term Risk Management Assets                |   |   | 471       |   |   |   | 917 |   |
| Deferred Charges and Other Noncurrent Assets    |   |   | 32,558    |   |   |   | 13,702 |   |
| TOTAL OTHER NONCURRENT ASSETS                   |   |   | 322,540   |   |   |   | 319,356 |   |
|                                            |   |   |      |   |   |   |   |   |
| TOTAL ASSETS                                    |   | $      | 3,093,937 |   |   | $      | 3,100,798 |   |

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

----

|                                                           |   |   | 2009           |            | 2008   |
|----------------------------------------------------------------|--------|--------|----------------|-----------------|--------|
| CURRENT LIABILITIES                                            |   |   | (in thousands) |
| Advances from Affiliates                                       |   |   | $              | -          |   | $ | 70,308  |
| Accounts Payable:                                              |   |   |           |            |   |   |   |
| General                                                        |   |   |           | 66,804     |   |   | 84,121  |
| Affiliated Companies                                           |   |   |           | 99,632     |   |   | 86,407  |
| Long-term Debt Due Within One Year – Nonaffiliated       |   |   |           | -          |   |   | 50,000  |
| Risk Management Liabilities                                    |   |   |           | 4,680      |   |   | 4,753  |
| Customer Deposits                                              |   |   |           | 42,375     |   |   | 40,528  |
| Accrued Taxes                                                  |   |   |           | 56,683     |   |   | 19,000  |
| Regulatory Liability for Over-Recovered Fuel Costs             |   |   |           | 125,817    |   |   | 58,395  |
| Provision for Revenue Refund                                   |   |   |           |  -    |   |   | 52,100  |
| Other Current Liabilities                                      |   |   |           | 45,005     |   |   | 61,194  |
| TOTAL CURRENT LIABILITIES                                      |   |   |           | 440,996    |   |   | 526,806  |
|                                                           |   |   |           |            |   |   |   |
| NONCURRENT LIABILITIES                                         |   |   |           |            |   |   |   |
| Long-term Debt – Nonaffiliated                           |   |   |           | 868,679    |   |   | 834,859  |
| Long-term Risk Management Liabilities                          |   |   |           | 354        |   |   | 378  |
| Deferred Income Taxes                                          |   |   |           | 532,873    |   |   | 514,720  |
| Regulatory Liabilities and Deferred Investment Tax Credits     |   |   |           | 323,441    |   |   | 323,750  |
| Deferred Credits and Other Noncurrent Liabilities              |   |   |           | 138,317    |   |   | 146,777  |
| TOTAL NONCURRENT LIABILITIES                                   |   |   |           | 1,863,664  |   |   | 1,820,484  |
|                                                           |   |   |           |            |   |   |   |
| TOTAL LIABILITIES                                              |   |   |           | 2,304,660  |   |   | 2,347,290  |
|                                                           |   |   |           |            |   |   |   |
| Cumulative Preferred Stock Not Subject to Mandatory Redemption |   |   |           | 5,258      |   |   | 5,262  |
|                                                           |   |   |           |            |   |   |   |
| Commitments and Contingencies (Note 4)                         |   |   |           |            |   |   |   |
|                                                           |   |   |           |            |   |   |   |
| COMMON SHAREHOLDER’S EQUITY                              |   |   |           |            |   |   |   |
| Common Stock – Par Value – $15 Per Share:          |   |   |           |            |   |   |   |
| Authorized – 11,000,000 Shares                           |   |   |           |            |   |   |   |
| Issued – 10,482,000 Shares                               |   |   |           |            |   |   |   |
| Outstanding – 9,013,000 Shares                           |   |   |           | 157,230    |   |   | 157,230  |
| Paid-in Capital                                                |   |   |           | 364,231    |   |   | 340,016  |
| Retained Earnings                                              |   |   |           | 263,044    |   |   | 251,704  |
| Accumulated Other Comprehensive Income (Loss)                  |   |   |           | (486)           |   |   | (704) |
| TOTAL COMMON SHAREHOLDER’S EQUITY                        |   |   |           | 784,019    |   |   | 748,246  |
|                                                           |   |   |           |            |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY               |   |   | $              | 3,093,937  |   | $ | 3,100,798  |

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

----

|                                                                                        |   | 2009   |     |   | 2008   |   |
|---------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING ACTIVITIES                                                                        |   |   |     |   |   |   |
| Net Income                                                                                  |   | $      | 30,160   |   |   | $      | 41,526 |   |
| Adjustments to Reconcile Net Income to Net Cash Flows from (Used for) Operating Activities: |   |   |     |   |   |   |   |   |
| Depreciation and Amortization                                                               |   |   | 56,479   |   |   |   | 50,887 |   |
| Deferred Income Taxes                                                                       |   |   | (6,130   | )      |   |   | 70,618 |   |
| Deferral of Ice Storm Costs                                                                 |   |   | -        |   |   |   | (71,679 | ) |
| Allowance for Equity Funds Used During Construction                                         |   |   | (741     | )      |   |   | (1,875 | ) |
| Mark-to-Market of Risk Management Contracts                                                 |   |   | 1,053    |   |   |   | 2,216 |   |
| Deferred Property Taxes                                                                     |   |   | (18,700  | )      |   |   | (17,796 | ) |
| Change in Other Noncurrent Assets                                                           |   |   | (845     | )      |   |   | 25,981 |   |
| Change in Other Noncurrent Liabilities                                                      |   |   | (3,290   | )      |   |   | (33,384 | ) |
| Changes in Certain Components of Working Capital:                                           |   |   |     |   |   |   |   |   |
| Accounts Receivable, Net                                                                    |   |   | 87,923   |   |   |   | 1,270 |   |
| Fuel, Materials and Supplies                                                                |   |   | 4,322    |   |   |   | (7,964 | ) |
| Margin Deposits                                                                             |   |   | 286      |   |   |   | 7,988 |   |
| Accounts Payable                                                                            |   |   | 7,980    |   |   |   | 18,238 |   |
| Accrued Taxes, Net                                                                          |   |   | 39,800   |   |   |   | (2,317 | ) |
| Fuel Over/Under-Recovery, Net                                                               |   |   | 15,268   |   |   |   | (73,573 | ) |
| Other Current Assets                                                                        |   |   | (171     | )      |   |   | 820 |   |
| Other Current Liabilities                                                                   |   |   | (13,719  | )      |   |   | (17,265 | ) |
| Net Cash Flows from (Used for) Operating Activities                                         |   |   | 199,675  |   |   |   | (6,309 | ) |
|                                                                                        |   |   |     |   |   |   |   |   |
| INVESTING ACTIVITIES                                                                        |   |   |     |   |   |   |   |   |
| Construction Expenditures                                                                   |   |   | (98,559  | )      |   |   | (151,711 | ) |
| Change in Advances to Affiliates, Net                                                       |   |   | (19,438  | )      |   |   | 51,202 |   |
| Other Investing Activities                                                                  |   |   | (304     | )      |   |   | 567 |   |
| Net Cash Flows Used for Investing Activities                                                |   |   | (118,301 | )      |   |   | (99,942 | ) |
|                                                                                        |   |   |     |   |   |   |   |   |
| FINANCING ACTIVITIES                                                                        |   |   |     |   |   |   |   |   |
| Capital Contribution from Parent                                                            |   |   | 20,000   |   |   |   | 30,000 |   |
| Issuance of Long-term Debt – Nonaffiliated                                            |   |   | 33,283   |   |   |   | - |   |
| Change in Advances from Affiliates, Net                                                     |   |   | (70,308  | )      |   |   | 110,981 |   |
| Retirement of Long-term Debt – Nonaffiliated                                          |   |   | (50,000  | )      |   |   | (33,700 | ) |
| Retirement of Cumulative Preferred Stock                                                    |   |   | (2       | )      |   |   | - |   |
| Principal Payments for Capital Lease Obligations                                            |   |   | (772     | )      |   |   | (770 | ) |
| Dividends Paid on Common Stock                                                              |   |   | (14,500  | )      |   |   | - |   |
| Dividends Paid on Cumulative Preferred Stock                                                |   |   | (106     | )      |   |   | (106 | ) |
| Other Financing Activities                                                                  |   |   | 746      |   |   |   | - |   |
| Net Cash Flows from (Used for) Financing Activities                                         |   |   | (81,659  | )      |   |   | 106,405 |   |
|                                                                                        |   |   |     |   |   |   |   |   |
| Net Increase (Decrease) in Cash and Cash Equivalents                                        |   |   | (285     | )      |   |   | 154 |   |
| Cash and Cash Equivalents at Beginning of Period                                            |   |   | 1,345    |   |   |   | 1,370 |   |
| Cash and Cash Equivalents at End of Period                                                  |   | $      | 1,060    |   |   | $      | 1,524 |   |
|                                                                                        |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY INFORMATION                                                                   |   |   |     |   |   |   |   |   |
| Cash Paid for Interest, Net of Capitalized Amounts                                          |   | $      | 44,038   |   |   | $      | 27,774 |   |
| Net Cash Paid (Received) for Income Taxes                                                   |   |   | 3,584    |   |   |   | (19,529 | ) |
| Noncash Acquisitions Under Capital Leases                                                   |   |   | 522      |   |   |   | 253 |   |
| Construction Expenditures Included in Accounts Payable at June 30,                          |   |   | 5,932    |   |   |   | 11,731 |   |

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

----

|                                                 | 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                  |
| Derivatives and Hedging                              | Note 8                  |
| Fair Value Measurements                              | Note 9                  |
| Income Taxes                                         | Note 10                 |
| Financing Activities                                 | Note 11                 |

----

----

SOUTHWESTERN ELECTRIC POWER COMPANY CONSOLIDATED

| Second Quarter of 2008                  |   |   |   |   | $      | 15     |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                    |   |   |   |   |   |   |   |
| Changes in Gross Margin:                |   |   |   |   |   |   |   |
| Retail and Off-system Sales Margins (a) |   |   | 10     |   |   |   |   |   |
| Transmission Revenues                   |   |   | 3      |   |   |   |   |   |
| Total Change in Gross Margin            |   |   |   |   |   |   | 13     |   |
|                                    |   |   |   |   |   |   |   |   |
| Total Expenses and Other:               |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance         |   |   | 4      |   |   |   |   |   |
| Depreciation and Amortization           |   |   | 1      |   |   |   |   |   |
| Other Income                            |   |   | 8      |   |   |   |   |   |
| Interest Expense                        |   |   | (2     | )      |   |   |   |   |
| Total Expenses and Other                |   |   |   |   |   |   | 11     |   |
|                                    |   |   |   |   |   |   |   |   |
| Income Tax Expense                      |   |   |   |   |   |   | (3     | ) |
|                                    |   |   |   |   |   |   |   |   |
| Second Quarter of 2009                  |   |   |   |   |   | $      | 36     |   |

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

| · | Retail and Off-system Sales Margins increased $10 million primarily due to:                 |
|--------|---------------------------------------------------------------------------------------------|
|   | ·                                                                                      | A $9 million increase in fuel recovery primarily due to a higher FERC fuel recovery level in 2009 for formula rate customers. |
|   | ·                                                                                      | A $4 million increase in rate relief related to the Louisiana Formula Rate Plan.  See “Louisiana Rate Matters – Formula Rate Filing” section of Note 3. |
|   | These increases are partially offset by:                                                    |
|   | ·                                                                                      | A $4 million decrease in industrial sales due to reduced operating levels and suspended operations by certain large industrial customers in SWEPCo’s service territory. |
| · | Transmission Revenues increased $3 million primarily due to higher rates in the SPP region. |

| · | Other Operation and Maintenance expenses decreased $4 million primarily due to a decrease in distribution expense resulting from the capitalization of a portion of the January 2009 Northern Arkansas ice storm costs for new assets installed.                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Other Income increased $8 million primarily due to an increase in the equity component of AFUDC as a result of construction at the Turk Plant and Stall Unit and the reapplication of SFAS 71 regulatory accounting for the generation portion of SWEPCo’s Texas retail jurisdiction effective April 2009.  See “TexasRate Matters – Texas Restructuring – SPP” section of Note 3. |
| · | Interest Expense increased $2 million primarily due to higher interest expense on debt to fund new generation capital expenditures partially offset by higher AFUDC debt.                                                                                                                                                                                                                                                       |
| · | Income Tax Expense increased $3 million primarily due to an increase in pretax book income and state income taxes, partially offset by changes in certain book/tax differences accounted for on a flow-through basis.                                                                                                                                                                                                           |

| Six Months Ended June 30, 2008          |   |   |   |   | $      | 21     |   |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                    |   |   |   |   |   |   |   |
| Changes in Gross Margin:                |   |   |   |   |   |   |   |
| Retail and Off-system Sales Margins (a) |   |   | 6      |   |   |   |   |   |
| Transmission Revenues                   |   |   | 5      |   |   |   |   |   |
| Other                                   |   |   | (2     | )      |   |   |   |   |
| Total Change in Gross Margin            |   |   |   |   |   |   | 9      |   |
|                                    |   |   |   |   |   |   |   |   |
| Total Expenses and Other:               |   |   |   |   |   |   |   |   |
| Other Operation and Maintenance         |   |   | 14     |   |   |   |   |   |
| Taxes Other Than Income Taxes           |   |   | 2      |   |   |   |   |   |
| Other Income                            |   |   | 11     |   |   |   |   |   |
| Interest Expense                        |   |   | (1     | )      |   |   |   |   |
| Total Expenses and Other                |   |   |   |   |   |   | 26     |   |
|                                    |   |   |   |   |   |   |   |   |
| Income Tax Expense                      |   |   |   |   |   |   | (9     | ) |
|                                    |   |   |   |   |   |   |   |   |
| Six Months Ended June 30, 2009          |   |   |   |   |   | $      | 47     |   |

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

| · | Retail and Off-system Sales Margins increased $6 million primarily due to:                                                                                                                                                                                                                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                    | A $7 million increase in rate relief related to the Louisiana Formula Rate Plan.  See “Louisiana Rate Matters – Formula Rate Filing” section of Note 3. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                    | A $6 million increase in wholesale and municipal revenue due to the annual true-up for formula rate customers in 2009 and to higher prices. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                    | A $5 million increase in fuel recovery due to a higher FERC fuel recovery level in 2009 for formula rate customers. |
|   | These increases are partially offset by:                                                                                                                                                                                                                                                                                                                                                                  |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                    | A $12 million decrease in retail sales margins primarily related to reduced customer usage.  A $7 million decrease was experienced in the industrial sector due to reduced operating levels and suspended operations by certain large industrial customers in SWEPCo’s service territory. |
| · | Transmission Revenues increased $5 million primarily due to higher rates in the SPP region.                                                                                                                                                                                                                                                                                                               |
| · | Other revenues decreased $2 million primarily due to a decrease in revenues from coal deliveries from SWEPCo’s mining subsidiary, Dolet Hills Lignite Company, LLC to Cleco Corporation, a nonaffiliated entity.  The decreased revenue from coal deliveries was offset by a corresponding decrease in Other Operation and Maintenanceexpenses from mining operations as discussed below. |

| · | Other Operation and Maintenance expenses decreased $14 million primarily due to:                                                                                                                                                                                                                                                                                                                                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                      | A $5 million decrease in steam plant maintenance expense primarily due to a reduction in planned and unplanned outages. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                      | A $3 million decrease in expenses for coal deliveries from SWEPCo’s mining subsidiary, Dolet Hills Lignite Company, LLC.  The decreased expenses for coal deliveries were partially offset by a corresponding decrease in revenues from mining operations as discussed above. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                      | A $2 million decrease in operation expense as a result of lower employee-related expenses. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                      | A $2 million gain on sale of property related to the sale of percentage ownership of Turk Plant to nonaffiliated companies who exercised their participation options. |
| · | Taxes Other Than Income Taxes decreased $2 million primarily due to lower property tax, revenue related taxes and sales and use tax.                                                                                                                                                                                                                                                                                        |
| · | Other Income increased $11 million primarily due to an increase in the equity component of AFUDC as a result of construction at the Turk Plant and Stall Unit and the reapplication of SFAS 71 regulatory accounting for the generation portion of SWEPCo’s Texas retail jurisdiction effective April 2009.  See “Texas RateMatters – Texas Restructuring – SPP” section of Note 3. |
| · | Interest Expense increased $1 million primarily due to increased interest on debt of $7 million related to increased construction expenditures which were partially offset by a $6 million increase in the debt component of AFUDC.                                                                                                                                                                                         |
| · | Income Tax Expense increased $9 million primarily due to an increase in pretax book income and state income taxes, partially offset by changes in certain book/tax differences accounted for on a flow-through basis.                                                                                                                                                                                                       |

|                  | Moody’s |   | S&P |   | Fitch      |
|-----------------------|---------------|--------|---------|--------|------------|
|                  |          |   |    |   |       |
| Senior Unsecured Debt | Baa3          |   | BBB     |   |  BBB+ |

|                                                 |   | 2009           |     |   | 2008   |   |
|------------------------------------------------------|--------|----------------|----------|--------|--------|--------|
|                                                 |   | (in thousands) |     |
| Cash and Cash Equivalents at Beginning of Period     |   | $              | 1,910    |   |   | $      | 1,742 |   |
| Cash Flows from (Used for):                          |   |           |     |   |   |   |   |   |
| Operating Activities                                 |   |           | 222,403  |   |   |   | 76,537 |   |
| Investing Activities                                 |   |           | (236,343 | )      |   |   | (569,109 | ) |
| Financing Activities                                 |   |           | 13,541   |   |   |   | 493,072 |   |
| Net Increase (Decrease) in Cash and Cash Equivalents |   |           | (399     | )      |   |   | 500 |   |
| Cash and Cash Equivalents at End of Period           |   | $              | 1,511    |   |   | $      | 2,242 |   |

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

----

|                                                   |   | MTM Risk Management Contracts |   |   | Cash Flow Hedge Contracts |   |   | DETM Assignment (a) |   |   | CollateralDeposits |   |   | Total  |   |
|--------------------------------------------------------|--------|-------------------------------|--------|--------|---------------------------|--------|--------|---------------------|--------|--------|--------------------|--------|--------|--------|--------|
| Current Assets                                         |   | $                             | 7,548  |   |                      | $      | 156    |                |   | $      | -                  |   |   | $      | -      |   |   | $ | 7,704 |   |
| Noncurrent Assets                                      |   |                          | 755    |   |                      |   | 52     |                |   |   | -                  |   |   |   | -      |   |   |   | 807 |   |
| Total MTM Derivative Contract Assets                   |   |                          | 8,303  |   |                      |   | 208    |                |   |   | -                  |   |   |   | -      |   |   |   | 8,511 |   |
|                                                   |   |                          |   |   |                      |   |   |                |   |   |               |   |   |   |   |   |   |   |   |   |
| Current Liabilities                                    |   |                          | 5,634  |   |                      |   | 153    |                |   |   | 76                 |   |   |   | (145   | ) |   |   | 5,718 |   |
| Noncurrent Liabilities                                 |   |                          | 415    |   |                      |   | -      |                |   |   | 36                 |   |   |   | (26    | ) |   |   | 425 |   |
| Total MTM Derivative Contract Liabilities              |   |                          | 6,049  |   |                      |   | 153    |                |   |   | 112                |   |   |   | (171   | ) |   |   | 6,143 |   |
|                                                   |   |                          |   |   |                      |   |   |                |   |   |               |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |   | $                             | 2,254  |   |                      | $      | 55     |                |   | $      | (112               | )      |   | $      | 171    |   |   | $ | 2,368 |   |

| (a) | See “Natural Gas Contracts with DETM” section of Note 15 of the 2008 Annual Report. |
|-----|-------------------------------------------------------------------------------------------------|

| Total MTM Risk Management Contract Net Assets at December 31, 2008                                          |   | $      | 2,643 |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|-------|--------|
| (Gain) Loss from Contracts Realized/Settled During the Period and Entered in a Prior Period                 |   |   | (666  | )      |
| 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 |   |   | (35   | )      |
| Change in Fair Value Due to Valuation Methodology Changes on Forward Contracts                              |   |   | -     |   |
| Changes in Fair Value Due to Market Fluctuations During the Period (b)                                      |   |   | 73    |   |
| Changes in Fair Value Allocated to Regulated Jurisdictions (c)                                              |   |   | 239   |   |
| Total MTM Risk Management Contract Net Assets                                                               |   |   | 2,254 |   |
| Cash Flow Hedge Contracts                                                                                   |   |   | 55    |   |
| DETM Assignment (d)                                                                                         |   |   | (112  | )      |
| Collateral Deposits                                                                                         |   |   | 171   |   |
| Ending Net Risk Management Assets at June 30, 2009                                                          |   | $      | 2,368 |   |

| (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 delivery term.  A significant portion of the total volumetricposition has been economically hedged. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Market fluctuations are attributable to various factors such as supply/demand, weather, etc.                                                                                                                                                                                                                                                                                         |
| (c) | “Changes in Fair Value Allocated to Regulated Jurisdictions” relates to the net gains (losses) of those contracts that are not reflected in the Condensed Consolidated Statements of Income.  These net gains (losses) are recorded as regulatory liabilities/assets.                                                                                          |
| (d) | See “Natural Gas Contracts with DETM” section of Note 15 of the 2008 Annual Report.                                                                                                                                                                                                                                                                                      |

|                                                        |   | Remainder2009 |        | 2010   |   | 2011        |   | 2012   |    | 2013   |   | After2013 |   | Total  |
|-------------------------------------------------------------|--------|---------------|-------------|--------|--------|-------------|--------|--------|---------|--------|--------|-----------|--------|--------|
| Level 1 (a)                                                 |   | $             | (165)       |   | $      | -      |   | $      | -  |   | $      | -    |   | $      | -  |   | $ | -  |   | $ | (165) |
| Level 2 (b)                                                 |   |          | 1,050  |   |   | 1,714  |   |   | (349)   |   |   | (11)      |   |   | -  |   |   | -  |   |   | 2,404  |
| Level 3 (c)                                                 |   |          | 13     |   |   | 2      |   |   | -  |   |   | -    |   |   | -  |   |   | -  |   |   | 15  |
| Total MTM Risk Management Contract Net Assets (Liabilities) |   | $             | 898    |   | $      | 1,716  |   | $      | (349)   |   | $      | (11)      |   | $      | -  |   | $ | -  |   | $ | 2,254  |

| (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 ongoingbasis.                                                                                                                                                                                                                                                                                                                |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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.  Level2 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.  Level3 inputs primarily consist of unobservable market data or are valued based on models and/or assumptions.                                                                                                                                                                                                         |

| Six Months Ended |   |   |   |    | Twelve Months Ended |
|------------------|--------|--------|--------|---------|---------------------|
| June 30, 2009    |   |   |   |    | December 31, 2008   |
| (in thousands)   |   |   |   |    | (in thousands)      |
| End              |   | High   |   | Average |                | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $25              |   | $49    |   | $20     |                | $6 |   |   |   |   | $8 |   | $220 |   | $62 |   | $8 |

----

|                                                     |   | Three Months Ended |    |   | Six Months Ended |   |
|----------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                                     |   | 2009               |    |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| REVENUES                                                 |   |               |    |   |             |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution       |   | $                  | 326,992 |   |             | $      | 397,428 |   |   | $ | 629,375 |   |   | $ | 711,342 |   |
| Sales to AEP Affiliates                                  |   |               | 5,706   |   |             |   | 17,592 |   |   |   | 14,050 |   |   |   | 31,184 |   |
| Lignite Revenues – Nonaffiliated                   |   |               | 7,518   |   |             |   | 8,204 |   |   |   | 18,238 |   |   |   | 20,191 |   |
| Other Revenues                                           |   |               | 566     |   |             |   | 393 |   |   |   | 921 |   |   |   | 693 |   |
| TOTAL REVENUES                                           |   |               | 340,782 |   |             |   | 423,617 |   |   |   | 662,584 |   |   |   | 763,410 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                 |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Fuel and Other Consumables Used for Electric Generation  |   |               | 117,135 |   |             |   | 147,147 |   |   |   | 243,450 |   |   |   | 264,808 |   |
| Purchased Electricity for Resale                         |   |               | 30,339  |   |             |   | 54,378 |   |   |   | 54,736 |   |   |   | 94,648 |   |
| Purchased Electricity from AEP Affiliates                |   |               | 10,520  |   |             |   | 51,932 |   |   |   | 23,530 |   |   |   | 72,372 |   |
| Other Operation                                          |   |               | 59,566  |   |             |   | 58,757 |   |   |   | 113,770 |   |   |   | 122,336 |   |
| Maintenance                                              |   |               | 23,314  |   |             |   | 27,692 |   |   |   | 50,016 |   |   |   | 55,160 |   |
| Depreciation and Amortization                            |   |               | 35,559  |   |             |   | 36,897 |   |   |   | 72,351 |   |   |   | 73,033 |   |
| Taxes Other Than Income Taxes                            |   |               | 15,479  |   |             |   | 15,705 |   |   |   | 30,868 |   |   |   | 33,124 |   |
| TOTAL EXPENSES                                           |   |               | 291,912 |   |             |   | 392,508 |   |   |   | 588,721 |   |   |   | 715,481 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME                                         |   |               | 48,870  |   |             |   | 31,109 |   |   |   | 73,863 |   |   |   | 47,929 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense):                                  |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest Income                                          |   |               | 363     |   |             |   | 1,540 |   |   |   | 817 |   |   |   | 2,417 |   |
| Allowance for Equity Funds Used During Construction      |   |               | 12,369  |   |             |   | 2,952 |   |   |   | 18,774 |   |   |   | 6,015 |   |
| Interest Expense                                         |   |               | (18,990 | )      |             |   | (17,270 | ) |   |   | (35,289 | ) |   |   | (34,412 | ) |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAX EXPENSE                         |   |               | 42,612  |   |             |   | 18,331 |   |   |   | 58,165 |   |   |   | 21,949 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income Tax Expense                                       |   |               | 6,834   |   |             |   | 3,351 |   |   |   | 10,687 |   |   |   | 1,364 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE EXTRAORDINARY LOSS                         |   |               | 35,778  |   |             |   | 14,980 |   |   |   | 47,478 |   |   |   | 20,585 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EXTRAORDINARY LOSS, NET OF TAX                           |   |               | (5,325  | )      |             |   | - |   |   |   | (5,325 | ) |   |   | - |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME                                               |   |               | 30,453  |   |             |   | 14,980 |   |   |   | 42,153 |   |   |   | 20,585 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Less: Net Income Attributable to Noncontrolling Interest |   |               | 812     |   |             |   | 899 |   |   |   | 1,949 |   |   |   | 1,894 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME ATTRIBUTABLE TO SWEPCo SHAREHOLDERS           |   |               | 29,641  |   |             |   | 14,081 |   |   |   | 40,204 |   |   |   | 18,691 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Less: Preferred Stock Dividend Requirements              |   |               | 57      |   |             |   | 57 |   |   |   | 114 |   |   |   | 114 |   |
|                                                     |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS ATTRIBUTABLE TO SWEPCo COMMON SHAREHOLDER       |   | $                  | 29,584  |   |             | $      | 14,024 |   |   | $ | 40,090 |   |   | $ | 18,577 |   |

| The common stock of SWEPCo is wholly-owned by AEP. |
|----------------------------------------------------|

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

----

|                                                                  |   | SWEPCo Common Shareholder |    |   |            |   |    |             |   |
|-----------------------------------------------------------------------|--------|---------------------------|---------|--------|-----------------|--------|---------|------------------|--------|
|                                                                  |   | Common Stock              |    |   | Paid-in Capital |   |    | RetainedEarnings |   |   | AccumulatedOtherComprehensiveIncome (Loss) |   |   | NoncontrollingInterest |   |   | Total |   |
|                                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – DECEMBER 31, 2007                                |   | $                         | 135,660 |   |            | $      | 330,003 |             |   | $ | 523,731 |   |   | $ | (16,439 | ) |   | $ | 1,687 |   |   | $ | 974,642 |   |
|                                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 |   |
| Common Stock Dividends – Nonaffiliated                          |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   | (1,915 | ) |   |   | (1,915 | ) |
| Preferred Stock Dividends                                             |   |                      |    |   |            |   |    |             |   |   | (114 | ) |   |   |   |   |   |   |   |   |   |   | (114 | ) |
| SUBTOTAL – EQUITY                                               |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,071,467 |   |
|                                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income (Loss), Net of Taxes:                      |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Flow Hedges, Net of Tax of $89                                   |   |                      |    |   |            |   |    |             |   |   |   |   |   |   | (172 | ) |   |   | 7 |   |   |   | (165 | ) |
| Amortization of Pension and OPEB Deferred Costs, Net of Tax of $253   |   |                      |    |   |            |   |    |             |   |   |   |   |   |   | 471 |   |   |   |   |   |   |   | 471 |   |
| NET INCOME                                                            |   |                      |    |   |            |   |    |             |   |   | 18,691 |   |   |   |   |   |   |   | 1,894 |   |   |   | 20,585 |   |
| TOTAL COMPREHENSIVE INCOME                                            |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 20,891 |   |
|                                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – JUNE 30, 2008                                    |   | $                         | 135,660 |   |            |   | 430,003 |             |   |   | 541,162 |   |   |   | (16,140 | ) |   |   | 1,673 |   |   | $ | 1,092,358 |   |
|                                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – DECEMBER 31, 2008                                |   | $                         | 135,660 |   |            | $      | 530,003 |             |   | $ | 615,110 |   |   | $ | (32,120 | ) |   | $ | 276 |   |   | $ | 1,248,929 |   |
|                                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Contribution from Parent                                      |   |                      |    |   |            |   | 17,500  |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 17,500 |   |
| Common Stock Dividends – Nonaffiliated                          |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   | (1,920 | ) |   |   | (1,920 | ) |
| Preferred Stock Dividends                                             |   |                      |    |   |            |   |    |             |   |   | (114 | ) |   |   |   |   |   |   |   |   |   |   | (114 | ) |
| Other Changes in Equity                                               |   |                      |    |   |            |   | 2,476   |             |   |   | (2,476 | ) |   |   |   |   |   |   |   |   |   |   | - |   |
| SUBTOTAL – EQUITY                                               |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,264,395 |   |
|                                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income, Net of Taxes:                             |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Flow Hedges, Net of Tax of $306                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   | 568 |   |   |   |   |   |   |   | 568 |   |
| Amortization of Pension and OPEB Deferred Costs, Net of Tax of $8,583 |   |                      |    |   |            |   |    |             |   |   |   |   |   |   | 15,939 |   |   |   |   |   |   |   | 15,939 |   |
| NET INCOME                                                            |   |                      |    |   |            |   |    |             |   |   | 40,204 |   |   |   |   |   |   |   | 1,949 |   |   |   | 42,153 |   |
| TOTAL COMPREHENSIVE INCOME                                            |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 58,660 |   |
|                                                                  |   |                      |    |   |            |   |    |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL EQUITY – JUNE 30, 2009                                    |   | $                         | 135,660 |   |            | $      | 549,979 |             |   | $ | 652,724 |   |   | $ | (15,613 | ) |   | $ | 305 |   |   | $ | 1,323,055 |   |

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

----

|                                            |   | 2009   |      |   | 2008   |   |
|-------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT ASSETS                                  |   |   |      |   |   |   |
| Cash and Cash Equivalents                       |   | $      | 1,511     |   |   | $      | 1,910 |   |
| Advances to Affiliates                          |   |   | 31,999    |   |   |   | - |   |
| Accounts Receivable:                            |   |   |      |   |   |   |   |   |
| Customers                                       |   |   | 54,045    |   |   |   | 53,506 |   |
| Affiliated Companies                            |   |   | 33,581    |   |   |   | 121,928 |   |
| Miscellaneous                                   |   |   | 11,241    |   |   |   | 12,052 |   |
| Allowance for Uncollectible Accounts            |   |   | (26       | )      |   |   | (135 | ) |
| Total Accounts Receivable                       |   |   | 98,841    |   |   |   | 187,351 |   |
| Fuel                                            |   |   | 99,995    |   |   |   | 100,018 |   |
| Materials and Supplies                          |   |   | 54,040    |   |   |   | 49,724 |   |
| Risk Management Assets                          |   |   | 7,704     |   |   |   | 8,185 |   |
| Regulatory Asset for Under-Recovered Fuel Costs |   |   | 16,137    |   |   |   | 75,006 |   |
| Prepayments and Other Current Assets            |   |   | 31,148    |   |   |   | 20,147 |   |
| TOTAL CURRENT ASSETS                            |   |   | 341,375   |   |   |   | 442,341 |   |
|                                            |   |   |      |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT                   |   |   |      |   |   |   |   |   |
| Electric:                                       |   |   |      |   |   |   |   |   |
| Production                                      |   |   | 1,816,300 |   |   |   | 1,808,482 |   |
| Transmission                                    |   |   | 824,083   |   |   |   | 786,731 |   |
| Distribution                                    |   |   | 1,433,405 |   |   |   | 1,400,952 |   |
| Other Property, Plant and Equipment             |   |   | 716,560   |   |   |   | 711,260 |   |
| Construction Work in Progress                   |   |   | 1,000,865 |   |   |   | 869,103 |   |
| Total Property, Plant and Equipment             |   |   | 5,791,213 |   |   |   | 5,576,528 |   |
| Accumulated Depreciation and Amortization       |   |   | 2,086,162 |   |   |   | 2,014,154 |   |
| TOTAL PROPERTY, PLANT AND EQUIPMENT – NET |   |   | 3,705,051 |   |   |   | 3,562,374 |   |
|                                            |   |   |      |   |   |   |   |   |
| OTHER NONCURRENT ASSETS                         |   |   |      |   |   |   |   |   |
| Regulatory Assets                               |   |   | 249,681   |   |   |   | 210,174 |   |
| Long-term Risk Management Assets                |   |   | 807       |   |   |   | 1,500 |   |
| Deferred Charges and Other Noncurrent Assets    |   |   | 58,062    |   |   |   | 36,696 |   |
| TOTAL OTHER NONCURRENT ASSETS                   |   |   | 308,550   |   |   |   | 248,370 |   |
|                                            |   |   |      |   |   |   |   |   |
| TOTAL ASSETS                                    |   | $      | 4,354,976 |   |   | $      | 4,253,085 |   |

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

----

|                                                           |   |   | 2009           |            | 2008   |
|----------------------------------------------------------------|--------|--------|----------------|-----------------|--------|
| CURRENT LIABILITIES                                            |   |   | (in thousands) |
| Advances from Affiliates                                       |   |   | $              | -          |   | $ | 2,526  |
| Accounts Payable:                                              |   |   |           |            |   |   |   |
| General                                                        |   |   |           | 155,171    |   |   | 133,538  |
| Affiliated Companies                                           |   |   |           | 62,199     |   |   | 51,040  |
| Short-term Debt – Nonaffiliated                          |   |   |           | 14,872     |   |   | 7,172  |
| Long-term Debt Due Within One Year – Nonaffiliated       |   |   |           | 4,406      |   |   | 4,406  |
| Long-term Debt Due Within One Year – Affiliated          |   |   |           | 50,000     |   |   | -  |
| Risk Management Liabilities                                    |   |   |           | 5,718      |   |   | 6,735  |
| Customer Deposits                                              |   |   |           | 39,337     |   |   | 35,622  |
| Accrued Taxes                                                  |   |   |           | 97,810     |   |   | 33,744  |
| Accrued Interest                                               |   |   |           | 33,526     |   |   | 36,647  |
| Provision for Revenue Refund                                   |   |   |           | 28,207     |   |   | 54,100  |
| Other Current Liabilities                                      |   |   |           | 60,884     |   |   | 102,535  |
| TOTAL CURRENT LIABILITIES                                      |   |   |           | 552,130    |   |   | 468,065  |
|                                                           |   |   |           |            |   |   |   |
| NONCURRENT LIABILITIES                                         |   |   |           |            |   |   |   |
| Long-term Debt – Nonaffiliated                           |   |   |           | 1,421,745  |   |   | 1,423,743  |
| Long-term Debt – Affiliated                              |   |   |           | -          |   |   | 50,000  |
| Long-term Risk Management Liabilities                          |   |   |           | 425        |   |   | 516  |
| Deferred Income Taxes                                          |   |   |           | 403,097    |   |   | 403,125  |
| Regulatory Liabilities and Deferred Investment Tax Credits     |   |   |           | 329,617    |   |   | 335,749  |
| Asset Retirement Obligations                                   |   |   |           | 52,885     |   |   | 53,433  |
| Employment Benefits and Pension Obligations                    |   |   |           | 123,532    |   |   | 117,772  |
| Deferred Credits and Other Noncurrent Liabilities              |   |   |           | 143,793    |   |   | 147,056  |
| TOTAL NONCURRENT LIABILITIES                                   |   |   |           | 2,475,094  |   |   | 2,531,394  |
|                                                           |   |   |           |            |   |   |   |
| TOTAL LIABILITIES                                              |   |   |           | 3,027,224  |   |   | 2,999,459  |
|                                                           |   |   |           |            |   |   |   |
| Cumulative Preferred Stock Not Subject to Mandatory Redemption |   |   |           | 4,697      |   |   | 4,697  |
|                                                           |   |   |           |            |   |   |   |
| Commitments and Contingencies (Note 4)                         |   |   |           |            |   |   |   |
|                                                           |   |   |           |            |   |   |   |
| 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                                                |   |   |           | 549,979    |   |   | 530,003  |
| Retained Earnings                                              |   |   |           | 652,724    |   |   | 615,110  |
| Accumulated Other Comprehensive Income (Loss)                  |   |   |           | (15,613)        |   |   | (32,120) |
| TOTAL COMMON SHAREHOLDER’S EQUITY                        |   |   |           | 1,322,750  |   |   | 1,248,653  |
|                                                           |   |   |           |            |   |   |   |
| Noncontrolling Interest                                        |   |   |           | 305        |   |   | 276  |
|                                                           |   |   |           |            |   |   |   |
| TOTAL EQUITY                                                   |   |   |           | 1,323,055  |   |   | 1,248,929  |
|                                                           |   |   |           |            |   |   |   |
| TOTAL LIABILITIES AND EQUITY                                   |   |   | $              | 4,354,976  |   | $ | 4,253,085  |

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

----

|                                                                             |   | 2009   |     |   | 2008   |   |
|----------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING ACTIVITIES                                                             |   |   |     |   |   |   |
| Net Income                                                                       |   | $      | 42,153   |   |   | $      | 20,585 |   |
| Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities: |   |   |     |   |   |   |   |   |
| Depreciation and Amortization                                                    |   |   | 72,351   |   |   |   | 73,033 |   |
| Deferred Income Taxes                                                            |   |   | (29,774  | )      |   |   | 28,256 |   |
| Extraordinary Loss, Net of Tax                                                   |   |   | 5,325    |   |   |   | - |   |
| Allowance for Equity Funds Used During Construction                              |   |   | (18,774  | )      |   |   | (6,015 | ) |
| Mark-to-Market of Risk Management Contracts                                      |   |   | 279      |   |   |   | 1,541 |   |
| Deferred Property Taxes                                                          |   |   | (19,862  | )      |   |   | (19,866 | ) |
| Change in Other Noncurrent Assets                                                |   |   | 5,731    |   |   |   | 3,434 |   |
| Change in Other Noncurrent Liabilities                                           |   |   | 2,222    |   |   |   | (17,085 | ) |
| Changes in Certain Components of Working Capital:                                |   |   |     |   |   |   |   |   |
| Accounts Receivable, Net                                                         |   |   | 88,457   |   |   |   | 31,975 |   |
| Fuel, Materials and Supplies                                                     |   |   | (4,293   | )      |   |   | (14,978 | ) |
| Accounts Payable                                                                 |   |   | 22,698   |   |   |   | 60,552 |   |
| Accrued Taxes, Net                                                               |   |   | 64,066   |   |   |   | (12,503 | ) |
| Fuel Over/Under-Recovery, Net                                                    |   |   | 44,125   |   |   |   | (84,206 | ) |
| Other Current Assets                                                             |   |   | 1,902    |   |   |   | 7,296 |   |
| Other Current Liabilities                                                        |   |   | (54,203  | )      |   |   | 4,518 |   |
| Net Cash Flows from Operating Activities                                         |   |   | 222,403  |   |   |   | 76,537 |   |
|                                                                             |   |   |     |   |   |   |   |   |
| INVESTING ACTIVITIES                                                             |   |   |     |   |   |   |   |   |
| Construction Expenditures                                                        |   |   | (305,886 | )      |   |   | (266,145 | ) |
| Change in Advances to Affiliates, Net                                            |   |   | (31,999  | )      |   |   | (300,525 | ) |
| Proceeds from Sales of Assets                                                    |   |   | 105,453  |   |   |   | 141 |   |
| Other Investing Activities                                                       |   |   | (3,911   | )      |   |   | (2,580 | ) |
| Net Cash Flows Used for Investing Activities                                     |   |   | (236,343 | )      |   |   | (569,109 | ) |
|                                                                             |   |   |     |   |   |   |   |   |
| FINANCING ACTIVITIES                                                             |   |   |     |   |   |   |   |   |
| Capital Contribution from Parent                                                 |   |   | 17,500   |   |   |   | 100,000 |   |
| Issuance of Long-term Debt – Nonaffiliated                                 |   |   | (15      | )      |   |   | 396,446 |   |
| Change in Short-term Debt, Net – Nonaffiliated                             |   |   | 7,700    |   |   |   | 6,754 |   |
| Change in Advances from Affiliates, Net                                          |   |   | (2,526   | )      |   |   | (1,565 | ) |
| Retirement of Long-term Debt – Nonaffiliated                               |   |   | (2,203   | )      |   |   | (3,703 | ) |
| Principal Payments for Capital Lease Obligations                                 |   |   | (5,266   | )      |   |   | (2,831 | ) |
| Dividends Paid on Common Stock – Nonaffiliated                             |   |   | (1,645   | )      |   |   | (1,915 | ) |
| Dividends Paid on Cumulative Preferred Stock                                     |   |   | (114     | )      |   |   | (114 | ) |
| Other Financing Activities                                                       |   |   | 110      |   |   |   | - |   |
| Net Cash Flows from Financing Activities                                         |   |   | 13,541   |   |   |   | 493,072 |   |
|                                                                             |   |   |     |   |   |   |   |   |
| Net Increase (Decrease) in Cash and Cash Equivalents                             |   |   | (399     | )      |   |   | 500 |   |
| Cash and Cash Equivalents at Beginning of Period                                 |   |   | 1,910    |   |   |   | 1,742 |   |
| Cash and Cash Equivalents at End of Period                                       |   | $      | 1,511    |   |   | $      | 2,242 |   |

| SUPPLEMENTARY INFORMATION                                          |   |   |         |   |   |         |
|--------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------------|
| Cash Paid for Interest, Net of Capitalized Amounts                 |   | $      | 50,711  |   | $      | 19,848  |
| Net Cash Paid for Income Taxes                                     |   |   | 3,816   |   |   | 10,276  |
| Noncash Acquisitions Under Capital Leases                          |   |   | 1,751   |   |   | 17,236  |
| Construction Expenditures Included in Accounts Payable at June 30, |   |   | 86,920  |   |   | 68,670  |

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

----

|                                                 | 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             |
| Acquisition                                          | Note 5             |
| Benefit Plans                                        | Note 6             |
| Business Segments                                    | Note 7             |
| Derivatives and Hedging                              | Note 8             |
| Fair Value Measurements                              | Note 9             |
| Income Taxes                                         | Note 10            |
| Financing Activities                                 | Note 11            |
|                                                 |               |

----

| CONDENSED NOTES TO CONDENSED FINANCIAL STATEMENTS OF |
|------------------------------------------------------|

| 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 | SWEPCo |
| 6.                                                                                                                                                                                                                   | Benefit Plans | APCo, CSPCo, I&M, OPCo, PSO, SWEPCo |
| 7.                                                                                                                                                                                                                   | Business Segments | APCo, CSPCo, I&M, OPCo, PSO, SWEPCo |
| 8.                                                                                                                                                                                                                   | Derivatives and Hedging | APCo, CSPCo, I&M, OPCo, PSO, SWEPCo |
| 9.                                                                                                                                                                                                                   | Fair Value Measurements | APCo, CSPCo, I&M, OPCo, PSO, SWEPCo |
| 10.                                                                                                                                                                                                                  | Income Taxes | APCo, CSPCo, I&M, OPCo, PSO, SWEPCo |
| 11.                                                                                                                                                                                                                  | Financing Activities | APCo, CSPCo, I&M, OPCo, PSO, SWEPCo |

----

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

|                              |   | Sabine |   |   | DHLC   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|
| ASSETS                            |   |   |   |   |   |   |
| Current Assets                    |   | $      | 37     |   |   | $      | 15 |   |
| Net Property, Plant and Equipment |   |   | 125    |   |   |   | 30 |   |
| Other Noncurrent Assets           |   |   | 30     |   |   |   | 12 |   |
| Total Assets                      |   | $      | 192    |   |   | $      | 57 |   |
|                              |   |   |   |   |   |   |   |   |
| LIABILITIES AND EQUITY            |   |   |   |   |   |   |   |   |
| Current Liabilities               |   | $      | 40     |   |   | $      | 12 |   |
| Noncurrent Liabilities            |   |   | 152    |   |   |   | 42 |   |
| Equity                            |   |   | -      |   |   |   | 3 |   |
| Total Liabilities and Equity      |   | $      | 192    |   |   | $      | 57 |   |

|                              |   | Sabine |   |   | DHLC   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|
| ASSETS                            |   |   |   |   |   |   |
| Current Assets                    |   | $      | 33     |   |   | $      | 22 |   |
| Net Property, Plant and Equipment |   |   | 117    |   |   |   | 33 |   |
| Other Noncurrent Assets           |   |   | 24     |   |   |   | 11 |   |
| Total Assets                      |   | $      | 174    |   |   | $      | 66 |   |
|                              |   |   |   |   |   |   |   |   |
| LIABILITIES AND EQUITY            |   |   |   |   |   |   |   |   |
| Current Liabilities               |   | $      | 32     |   |   | $      | 18 |   |
| Noncurrent Liabilities            |   |   | 142    |   |   |   | 44 |   |
| Equity                            |   |   | -      |   |   |   | 4 |   |
| Total Liabilities and Equity      |   | $      | 174    |   |   | $      | 66 |   |

|                              |   | JMG    |   |
|-----------------------------------|--------|--------|--------|
| ASSETS                            |   |   |   |
| Current Assets                    |   | $      | 16     |   |
| Net Property, Plant and Equipment |   |   | 413    |   |
| Other Noncurrent Assets           |   |   | 1      |   |
| Total Assets                      |   | $      | 430    |   |
|                              |   |   |   |   |
| LIABILITIES AND EQUITY            |   |   |   |   |
| Current Liabilities               |   | $      | 150    |   |
| Noncurrent Liabilities            |   |   | 262    |   |
| Equity                            |   |   | 18     |   |
| Total Liabilities and Equity      |   | $      | 430    |   |

|                              |   | JMG    |   |
|-----------------------------------|--------|--------|--------|
| ASSETS                            |   |   |   |
| Current Assets                    |   | $      | 11     |   |
| Net Property, Plant and Equipment |   |   | 423    |   |
| Other Noncurrent Assets           |   |   | 1      |   |
| Total Assets                      |   | $      | 435    |   |
|                              |   |   |   |   |
| LIABILITIES AND EQUITY            |   |   |   |   |
| Current Liabilities               |   | $      | 161    |   |
| Noncurrent Liabilities            |   |   | 257    |   |
| Equity                            |   |   | 17     |   |
| Total Liabilities and Equity      |   | $      | 435    |   |

|    |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |   |
|---------|--------|-----------------------------|--------|--------|---------------------------|--------|
|    |   | 2009                        |   |   | 2008                      |   |   | 2009 |   |   | 2008 |   |
| Company |   | (in millions)               |   |
| APCo    |   | $                           | 46     |   |                      | $      | 53 |   |   | $ | 97 |   |   | $ | 117 |   |
| CSPCo   |   |                        | 31     |   |                      |   | 31 |   |   |   | 60 |   |   |   | 63 |   |
| I&M |   |                        | 32     |   |                      |   | 31 |   |   |   | 61 |   |   |   | 72 |   |
| OPCo    |   |                        | 46     |   |                      |   | 47 |   |   |   | 87 |   |   |   | 99 |   |
| PSO     |   |                        | 21     |   |                      |   | 27 |   |   |   | 43 |   |   |   | 58 |   |
| SWEPCo  |   |                        | 31     |   |                      |   | 31 |   |   |   | 60 |   |   |   | 66 |   |

|    | June 30, 2009      |   | December 31, 2008 |   |
|---------|--------------------|--------|-------------------|--------|
|    | As Reported in the |   | Maximum           |   | As Reported in the |   | Maximum |   |
|    | Balance Sheet      |   | Exposure          |   | Balance Sheet |   | Exposure |   |
| Company | (in millions)      |   |
| APCo    |               | $      | 17                |   |   | $ | 17 |   |   | $ | 27 |   |   | $ | 27 |   |
| CSPCo   |               |   | 12                |   |   |   | 12 |   |   |   | 15 |   |   |   | 15 |   |
| I&M |               |   | 12                |   |   |   | 12 |   |   |   | 14 |   |   |   | 14 |   |
| OPCo    |               |   | 18                |   |   |   | 18 |   |   |   | 21 |   |   |   | 21 |   |
| PSO     |               |   | 8                 |   |   |   | 8 |   |   |   | 10 |   |   |   | 10 |   |
| SWEPCo  |               |   | 12                |   |   |   | 12 |   |   |   | 14 |   |   |   | 14 |   |

|    | Three Months Ended June 30, |   | Six Months Ended June 30, |   |
|---------|-----------------------------|--------|---------------------------|--------|
|    | 2009                        |   | 2008                      |   | 2009 |   | 2008 |   |
| Company | (in millions)               |   |
| CSPCo   |                        | $      | 15                        |   |   | $ | 25 |   |   | $ | 32 |   |   | $ | 49 |   |
| I&M |                        |   | 60                        |   |   |   | 57 |   |   |   | 123 |   |   |   | 116 |   |

|    | June 30, 2009      |   | December 31, 2008 |   |
|---------|--------------------|--------|-------------------|--------|
|    | As Reported in the |   |              |   | As Reported in the |   |   |   |
|    | Consolidated       |   | Maximum           |   | Consolidated |   | Maximum |   |
|    | Balance Sheet      |   | Exposure          |   | Balance Sheet |   | Exposure |   |
| Company | (in millions)      |   |
| CSPCo   |               | $      | 6                 |   |   | $ | 6 |   |   | $ | 5 |   |   | $ | 5 |   |
| I&M |               |   | 20                |   |   |   | 20 |   |   |   | 23 |   |   |   | 23 |   |

|   | Total Depreciation Expense Variance |   |
|--------|-------------------------------------|--------|
|   | Three Months Ended                  |   | Six Months Ended |   |
|   | June 30, 2009/2008                  |   | June 30, 2009/2008 |   |
|   | (in thousands)                      |   |
| CSPCo  |                                | $      | (4,407 | ) |   | $ | (8,674 | ) |
| OPCo   |                                |   | 17,584 |   |   |   | 34,230 |   |

| 2. | NEW ACCOUNTING PRONOUNCEMENTS AND EXTRAORDINARY ITEM |
|----|------------------------------------------------------|

| · | Reclassifies Interest Expense of $415 thousand and $878 thousand for the three and six months ended June 30, 2008 as Net Income Attributable to Noncontrolling Interest below Net Income in the presentation of Earnings Attributable to OPCo Common Shareholder in its Condensed Consolidated Statements of Income. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Reclassifies Minority Interest of $16.8 million as of December 31, 2008 as Noncontrolling Interest in Total Equity on its Condensed Consolidated Balance Sheets.                                                                                                                                                     |
| · | Separately reflects changes in Noncontrolling Interest in its Statements of Changes in Equity and Comprehensive Income (Loss).                                                                                                                                                                                       |
| · | Reclassifies dividends paid to noncontrolling interests of $878 thousand for the six months ended June 30, 2008 from Operating Activities to Financing Activities in the Condensed Consolidated Statements of Cash Flows.                                                                                            |

| · | Reclassifies Minority Interest Expense of $899 thousand and $1.9 million for the three and six months ended June 30, 2008 as Net Income Attributable to Noncontrolling Interest below Net Income in the presentation of Earnings Attributable to SWEPCo Common Shareholder in its Condensed Consolidated Statements of Income. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Reclassifies Minority Interest of $276 thousand as of December 31, 2008 as Noncontrolling Interest in Total Equity on its Condensed Consolidated Balance Sheets.                                                                                                                                                               |
| · | Separately reflects changes in Noncontrolling Interest in the Statements of Changes in Equity and Comprehensive Income (Loss).                                                                                                                                                                                                 |
| · | Reclassifies dividends paid to noncontrolling interests of $1.9 million for the six months ended June 30, 2008 from Operating Activities to Financing Activities in the Condensed Consolidated Statements of Cash Flows.                                                                                                       |

| EITF Issue No. 08-5 “Issuer’s Accounting for Liabilities Measured at Fair Value with a Third-Party Credit     Enhancement” (EITF 08-5) |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| FSP SFAS 107-1 and APB 28-1 “Interim Disclosures about Fair Value of Financial Instruments” (FSP SFAS     107-1 and APB 28-1) |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| FSP SFAS 115-2 and SFAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments”     (FSP SFAS 115-2 and SFAS 124-2) |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| FSP SFAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability     Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP SFAS 157-4) |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | The power to direct the activities of the VIE that most significantly impact the VIE’s economic performance.                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | The obligation to absorb the losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. |

| SFAS 168 “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted     Accounting Principles” (SFAS 168) |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| ·   | CSPCo should attempt to mitigate the costs of its gridSMART advanced metering proposal that will affect portions of its service territory by seeking matching funds under the American Recovery and Reinvestment Act of 2009.  CSPCo plans to file for these matching federal funds during the third quarter of 2009.  As a result, a rider wasestablished to recover 50% or $32 million of the projected $64 million revenue requirement related to gridSMART. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | CSPCo and OPCo can recover their incremental carrying costs related to environmental investments made from 2001 through 2008 that are not reflected in existing rates.  Future recovery during the ESP period of incremental carrying charges on environmental expenditures incurred beginning in 2009 may be requested in annual filings. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | CSPCo’s and OPCo’s Provider of Last Resort revenues were increased by $97 million and $55 million, respectively, to compensate for the risk of customers changing electric suppliers during the ESP period. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | CSPCo and OPCo must fund a combined minimum of $15 million in costs over the ESP period for low-income, at-risk customer programs.  In March 2009, this funding obligation was recognized as a liability and charged to Other Operation expense.  At June 30, 2009, CSPCo’s and OPCo’s liability balance was $6.5 million each. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2008 Power Supply Cost Recovery (PSCR) Reconciliation (Cook Plant Unit 1 Fire and Shutdown) – Affecting I&M |
|-----------------------------------------------------------------------------------------------------------------------|

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

|    |   | 2007          |   |   | 2006   |   |
|---------|--------|---------------|--------|--------|--------|--------|
| Company |   | (in millions) |   |
| APCo    |   | $             | 1.7    |   |   | $      | 12.4 |   |
| CSPCo   |   |          | 0.9    |   |   |   | 6.9 |   |
| I&M |   |          | 1.0    |   |   |   | 7.3 |   |
| OPCo    |   |          | 1.3    |   |   |   | 9.4 |   |

|    |   | June 30, 2009 |   |
|---------|--------|---------------|--------|
| Company |   | (in millions) |   |
| APCo    |   | $             | 10.7   |   |
| CSPCo   |   |          | 5.9    |   |
| I&M |   |          | 6.3    |   |
| OPCo    |   |          | 8.2    |   |

|              |   |           |          |     |          | Borrower |
|-------------------|--------|----------------|---------------|----------|---------------|----------|
|              |   | Amount         |          | Maturity |          | Sublimit |
| Company           |   | (in thousands) |          |     |          |     |   |
| $1.5 billion LOC: |   |           |          |     |          |     |   |   |
| I&M           |   | $              | 300      |     | March 2010    |     |   | N/A   |
| SWEPCo            |   |           | 4,448    |     | December 2009 |     |   | N/A   |
|              |   |           |          |     |          |     |   |   |
| $627 million LOC: |   |           |          |     |          |     |   |   |
| APCo              |   | $              | 126,716  |     | June 2010     |     | $ | 300,000   |
| I&M           |   |           | 77,886   |     | May 2010      |     |   | 230,000   |
| OPCo              |   |           | 166,899  |     | June 2010     |     |   | 400,000   |

|    | Maximum        |   |
|---------|----------------|--------|
|    | Potential      |   |
|    | Loss           |   |
| Company | (in thousands) |   |
| APCo    |           | $      | 913 |   |
| CSPCo   |           |   | 379 |   |
| I&M |           |   | 618 |   |
| OPCo    |           |   | 799 |   |
| PSO     |           |   | 1,089 |   |
| SWEPCo  |           |   | 738 |   |

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

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

|                                  |                        |   | Other Postretirement        |   |
|---------------------------------------|-----------------------------|--------|-----------------------------|--------|
|                                  | Pension Plans               |   | Benefit Plans               |   |
|                                  | Three Months Ended June 30, |   | Three Months Ended June 30, |   |
|                                  | 2009                        |   | 2008                        |   | 2009 |   | 2008 |   |
|                                  | (in millions)               |   |
| Service Cost                          |                        | $      | 26                          |   |   | $ | 25 |   |   | $ | 11 |   |   | $ | 11 |   |
| Interest Cost                         |                        |   | 64                          |   |   |   | 62 |   |   |   | 28 |   |   |   | 28 |   |
| Expected Return on Plan Assets        |                        |   | (81                         | )      |   |   | (84 | ) |   |   | (20 | ) |   |   | (28 | ) |
| Amortization of Transition Obligation |                        |   | -                           |   |   |   | - |   |   |   | 6 |   |   |   | 7 |   |
| Amortization of Net Actuarial Loss    |                        |   | 15                          |   |   |   | 10 |   |   |   | 10 |   |   |   | 2 |   |
| Net Periodic Benefit Cost             |                        | $      | 24                          |   |   | $ | 13 |   |   | $ | 35 |   |   | $ | 20 |   |

|                                  |                      |   | Other Postretirement      |   |
|---------------------------------------|---------------------------|--------|---------------------------|--------|
|                                  | Pension Plans             |   | Benefit Plans             |   |
|                                  | Six Months Ended June 30, |   | Six Months Ended June 30, |   |
|                                  | 2009                      |   | 2008                      |   | 2009 |   | 2008 |   |
|                                  | (in millions)             |   |
| Service Cost                          |                      | $      | 52                        |   |   | $ | 50 |   |   | $ | 21 |   |   | $ | 21 |   |
| Interest Cost                         |                      |   | 127                       |   |   |   | 125 |   |   |   | 55 |   |   |   | 56 |   |
| Expected Return on Plan Assets        |                      |   | (161                      | )      |   |   | (168 | ) |   |   | (40 | ) |   |   | (56 | ) |
| Amortization of Transition Obligation |                      |   | -                         |   |   |   | - |   |   |   | 13 |   |   |   | 14 |   |
| Amortization of Net Actuarial Loss    |                      |   | 30                        |   |   |   | 19 |   |   |   | 21 |   |   |   | 5 |   |
| Net Periodic Benefit Cost             |                      | $      | 48                        |   |   | $ | 26 |   |   | $ | 70 |   |   | $ | 40 |   |

|    |                        |   | Other Postretirement        |   |
|---------|-----------------------------|--------|-----------------------------|--------|
|    | Pension Plans               |   | Benefit Plans               |   |
|    | Three Months Ended June 30, |   | Three Months Ended June 30, |   |
|    | 2009                        |   | 2008                        |   | 2009 |   | 2008 |   |
| Company | (in thousands)              |   |
| APCo    |                        | $      | 2,615                       |   |   | $ | 834 |   |   | $ | 6,057 |   |   | $ | 3,700 |   |
| CSPCo   |                        |   | 688                         |   |   |   | (349 | ) |   |   | 2,639 |   |   |   | 1,499 |   |
| I&M |                        |   | 3,485                       |   |   |   | 1,820 |   |   |   | 4,358 |   |   |   | 2,423 |   |
| OPCo    |                        |   | 2,067                       |   |   |   | 320 |   |   |   | 5,140 |   |   |   | 2,817 |   |
| PSO     |                        |   | 770                         |   |   |   | 508 |   |   |   | 2,284 |   |   |   | 1,387 |   |
| SWEPCo  |                        |   | 1,207                       |   |   |   | 936 |   |   |   | 2,364 |   |   |   | 1,376 |   |

|    |                      |   | Other Postretirement      |   |
|---------|---------------------------|--------|---------------------------|--------|
|    | Pension Plans             |   | Benefit Plans             |   |
|    | Six Months Ended June 30, |   | Six Months Ended June 30, |   |
|    | 2009                      |   | 2008                      |   | 2009 |   | 2008 |   |
| Company | (in thousands)            |   |
| APCo    |                      | $      | 5,230                     |   |   | $ | 1,669 |   |   | $ | 12,115 |   |   | $ | 7,399 |   |
| CSPCo   |                      |   | 1,376                     |   |   |   | (698 | ) |   |   | 5,277 |   |   |   | 2,997 |   |
| I&M |                      |   | 6,970                     |   |   |   | 3,641 |   |   |   | 8,716 |   |   |   | 4,846 |   |
| OPCo    |                      |   | 4,134                     |   |   |   | 639 |   |   |   | 10,279 |   |   |   | 5,633 |   |
| PSO     |                      |   | 1,540                     |   |   |   | 1,016 |   |   |   | 4,567 |   |   |   | 2,774 |   |
| SWEPCo  |                      |   | 2,415                     |   |   |   | 1,871 |   |   |   | 4,727 |   |   |   | 2,752 |   |

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

|  8. | DERIVATIVES AND HEDGING |
|----------|-------------------------|

| Notional Volume of Derivative Instruments           |    |
|-----------------------------------------------------|---------|
| June 30, 2009                                       |    |
| (in thousands)                                      |    |
|                                                |    |
| Primary Risk                                        | Unit of |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exposure                                            | Measure |   | APCo |   |   | CSPCo |   |   | I&M |   |   | OPCo |   |   | PSO |   |   | SWEPCo |   |
| Commodity:                                          |    |   |   |   |
| Power                                               | MWHs    |   |   | 185,883 |   |   |   | 98,584 |   |   |   | 95,407 |   |   |   | 122,120 |   |   |   | 414 |   |   |   | 487 |   |
| Coal                                                | Tons    |   |   | 11,009 |   |   |   | 5,481 |   |   |   | 6,293 |   |   |   | 21,540 |   |   |   | 3,870 |   |   |   | 5,408 |   |
| Natural Gas                                         | MMBtus  |   |   | 32,784 |   |   |   | 17,387 |   |   |   | 16,827 |   |   |   | 21,538 |   |   |   | 3,851 |   |   |   | 4,538 |   |
|    Heating Oil and Gasoline               | Gallons |   |   | 1,490 |   |   |   | 612 |   |   |   | 708 |   |   |   | 1,073 |   |   |   | 849 |   |   |   | 799 |   |
| Interest Rate                                       | USD     |   | $ | 41,428 |   |   | $ | 21,922 |   |   | $ | 21,353 |   |   | $ | 29,141 |   |   | $ | 2,352 |   |   | $ | 3,083 |   |
|                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest Rate and   Foreign Currency | USD     |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 400,000 |   |   | $ | - |   |   | $ | 3,932 |   |

|    | June 30, 2009   |   | December 31, 2008 |   |
|---------|-----------------|--------|-------------------|--------|
|    | Cash Collateral |   | Cash Collateral   |   | Cash Collateral |   | Cash Collateral |   |
|    | Received        |   | Paid              |   | Received |   | Paid |   |
|    | Netted Against  |   | Netted Against    |   | Netted Against |   | Netted Against |   |
|    | Risk Management |   | Risk Management   |   | Risk Management |   | Risk Management |   |
|    | Assets          |   | Liabilities       |   | Assets |   | Liabilities |   |
| Company | (in thousands)  |   |
| APCo    |            | $      | 11,055            |   |   | $ | 33,080 |   |   | $ | 2,189 |   |   | $ | 5,621 |   |
| CSPCo   |            |   | 5,863             |   |   |   | 17,542 |   |   |   | 1,229 |   |   |   | 3,156 |   |
| I&M |            |   | 5,674             |   |   |   | 16,982 |   |   |   | 1,189 |   |   |   | 3,054 |   |
| OPCo    |            |   | 7,263             |   |   |   | 21,800 |   |   |   | 1,522 |   |   |   | 3,909 |   |
| PSO     |            |   | -                 |   |   |   | 136 |   |   |   | - |   |   |   | 105 |   |
| SWEPCo  |            |   | -                 |   |   |   | 171 |   |   |   | - |   |   |   | 124 |   |

| Fair Value of Derivative Instruments                   |           |
|--------------------------------------------------------|----------------|
| June 30, 2009                                          |           |
|                                                   |           |
|                                                   | Risk           |   |   |   |   |   |   |   |
|                                                   | Management     |   |   |   |   |   |   |   |
| APCo                                                   | Contracts      |   | Hedging Contracts |   |   |   |   |   |
|                                                   |           |   |   |   | Interest Rate |   |   |   |   |   |
|                                                   | Commodity      |   | Commodity |   | and Foreign |   |   |   |   |   |
|                                                   | (a)            |   | (a) |   | Currency |   | Other (b) |   | Total |   |
| Balance Sheet Location                                 | (in thousands) |   |
| Current Risk Management Assets                         |           | $ | 610,801 |   |   | $ | 6,901 |   |   | $ | - |   |   | $ | (537,139 | ) |   | $ | 80,563 |   |
| Long-term Risk Management Assets                       |           |   | 215,917 |   |   |   | 1,821 |   |   |   | - |   |   |   | (160,345 | ) |   |   | 57,393 |   |
| Total Assets                                           |           |   | 826,718 |   |   |   | 8,722 |   |   |   | - |   |   |   | (697,484 | ) |   |   | 137,956 |   |
|                                                   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Risk Management Liabilities                    |           |   | 581,898 |   |   |   | 4,475 |   |   |   | - |   |   |   | (552,194 | ) |   |   | 34,179 |   |
| Long-term Risk Management Liabilities                  |           |   | 195,182 |   |   |   | 1,731 |   |   |   | - |   |   |   | (174,279 | ) |   |   | 22,634 |   |
| Total Liabilities                                      |           |   | 777,080 |   |   |   | 6,206 |   |   |   | - |   |   |   | (726,473 | ) |   |   | 56,813 |   |
|                                                   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |           | $ | 49,638 |   |   | $ | 2,516 |   |   | $ | - |   |   | $ | 28,989 |   |   | $ | 81,143 |   |

| CSPCo                                                  |           |   |              |   |          |   |      |   |   |   |
|--------------------------------------------------------|----------------|--------|-------------------|--------|---------------|--------|-----------|--------|--------|--------|
|                                                   | Risk           |   |              |   |          |   |      |   |
|                                                   | Management     |   |              |   |          |   |      |   |
|                                                   | Contracts      |   | Hedging Contracts |   |          |   |      |   |
|                                                   |           |   |              |   | Interest Rate |   |      |   |   |   |
|                                                   | Commodity      |   | Commodity         |   | and Foreign   |   |      |   |   |   |
|                                                   | (a)            |   | (a)               |   | Currency      |   | Other (b) |   | Total  |   |
| Balance Sheet Location                                 | (in thousands) |   |
| Current Risk Management Assets                         |           | $      | 321,847           |   |          | $      | 3,629     |   |   | $      | - |   |   | $ | (283,078 | ) |   | $ | 42,398 |   |
| Long-term Risk Management Assets                       |           |   | 113,877           |   |          |   | 953       |   |   |   | - |   |   |   | (84,449 | ) |   |   | 30,381 |   |
| Total Assets                                           |           |   | 435,724           |   |          |   | 4,582     |   |   |   | - |   |   |   | (367,527 | ) |   |   | 72,779 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Risk Management Liabilities                    |           |   | 306,637           |   |          |   | 2,374     |   |   |   | - |   |   |   | (291,062 | ) |   |   | 17,949 |   |
| Long-term Risk Management Liabilities                  |           |   | 102,905           |   |          |   | 917       |   |   |   | - |   |   |   | (91,838 | ) |   |   | 11,984 |   |
| Total Liabilities                                      |           |   | 409,542           |   |          |   | 3,291     |   |   |   | - |   |   |   | (382,900 | ) |   |   | 29,933 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |           | $      | 26,182            |   |          | $      | 1,291     |   |   | $      | - |   |   | $ | 15,373 |   |   | $ | 42,846 |   |

| I&M                                                |           |   |              |   |          |   |      |   |   |   |
|--------------------------------------------------------|----------------|--------|-------------------|--------|---------------|--------|-----------|--------|--------|--------|
|                                                   | Risk           |   |              |   |          |   |      |   |
|                                                   | Management     |   |              |   |          |   |      |   |
|                                                   | Contracts      |   | Hedging Contracts |   |          |   |      |   |
|                                                   |           |   |              |   | Interest Rate |   |      |   |   |   |
|                                                   | Commodity      |   | Commodity         |   | and Foreign   |   |      |   |   |   |
|                                                   | (a)            |   | (a)               |   | Currency      |   | Other (b) |   | Total  |   |
| Balance Sheet Location                                 | (in thousands) |   |
| Current Risk Management Assets                         |           | $      | 317,092           |   |          | $      | 3,533     |   |   | $      | - |   |   | $ | (278,914 | ) |   | $ | 41,711 |   |
| Long-term Risk Management Assets                       |           |   | 111,961           |   |          |   | 930       |   |   |   | - |   |   |   | (83,356 | ) |   |   | 29,535 |   |
| Total Assets                                           |           |   | 429,053           |   |          |   | 4,463     |   |   |   | - |   |   |   | (362,270 | ) |   |   | 71,246 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Risk Management Liabilities                    |           |   | 302,042           |   |          |   | 2,296     |   |   |   | - |   |   |   | (286,640 | ) |   |   | 17,698 |   |
| Long-term Risk Management Liabilities                  |           |   | 101,275           |   |          |   | 889       |   |   |   | - |   |   |   | (90,511 | ) |   |   | 11,653 |   |
| Total Liabilities                                      |           |   | 403,317           |   |          |   | 3,185     |   |   |   | - |   |   |   | (377,151 | ) |   |   | 29,351 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |           | $      | 25,736            |   |          | $      | 1,278     |   |   | $      | - |   |   | $ | 14,881 |   |   | $ | 41,895 |   |

| OPCo                                                   |           |   |              |   |          |   |      |   |   |   |
|--------------------------------------------------------|----------------|--------|-------------------|--------|---------------|--------|-----------|--------|--------|--------|
|                                                   | Risk           |   |              |   |          |   |      |   |
|                                                   | Management     |   |              |   |          |   |      |   |
|                                                   | Contracts      |   | Hedging Contracts |   |          |   |      |   |
|                                                   |           |   |              |   | Interest Rate |   |      |   |   |   |
|                                                   | Commodity      |   | Commodity         |   | and Foreign   |   |      |   |   |   |
|                                                   | (a)            |   | (a)               |   | Currency      |   | Other (b) |   | Total  |   |
| Balance Sheet Location                                 | (in thousands) |   |
| Current Risk Management Assets                         |           | $      | 484,204           |   |          | $      | 4,552     |   |   | $      | 30,356 |   |   | $ | (423,208 | ) |   | $ | 95,904 |   |
| Long-term Risk Management Assets                       |           |   | 167,044           |   |          |   | 1,201     |   |   |   | - |   |   |   | (128,076 | ) |   |   | 40,169 |   |
| Total Assets                                           |           |   | 651,248           |   |          |   | 5,753     |   |   |   | 30,356 |   |   |   | (551,284 | ) |   |   | 136,073 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Risk Management Liabilities                    |           |   | 463,042           |   |          |   | 2,939     |   |   |   | - |   |   |   | (433,097 | ) |   |   | 32,884 |   |
| Long-term Risk Management Liabilities                  |           |   | 154,683           |   |          |   | 1,137     |   |   |   | - |   |   |   | (137,298 | ) |   |   | 18,522 |   |
| Total Liabilities                                      |           |   | 617,725           |   |          |   | 4,076     |   |   |   | - |   |   |   | (570,395 | ) |   |   | 51,406 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |           | $      | 33,523            |   |          | $      | 1,677     |   |   | $      | 30,356 |   |   | $ | 19,111 |   |   | $ | 84,667 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |

| PSO                                                    |           |   |              |   |          |   |      |   |   |   |
|--------------------------------------------------------|----------------|--------|-------------------|--------|---------------|--------|-----------|--------|--------|--------|
|                                                   | Risk           |   |              |   |          |   |      |   |
|                                                   | Management     |   |              |   |          |   |      |   |
|                                                   | Contracts      |   | Hedging Contracts |   |          |   |      |   |
|                                                   |           |   |              |   | Interest Rate |   |      |   |   |   |
|                                                   | Commodity      |   | Commodity         |   | and Foreign   |   |      |   |   |   |
|                                                   | (a)            |   | (a)               |   | Currency      |   | Other (b) |   | Total  |   |
| Balance Sheet Location                                 | (in thousands) |   |
| Current Risk Management Assets                         |           | $      | 27,968            |   |          | $      | 164       |   |   | $      | - |   |   | $ | (22,824 | ) |   | $ | 5,308 |   |
| Long-term Risk Management Assets                       |           |   | 5,009             |   |          |   | 71        |   |   |   | - |   |   |   | (4,609 | ) |   |   | 471 |   |
| Total Assets                                           |           |   | 32,977            |   |          |   | 235       |   |   |   | - |   |   |   | (27,433 | ) |   |   | 5,779 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Risk Management Liabilities                    |           |   | 27,508            |   |          |   | 54        |   |   |   | - |   |   |   | (22,882 | ) |   |   | 4,680 |   |
| Long-term Risk Management Liabilities                  |           |   | 4,946             |   |          |   | -         |   |   |   | - |   |   |   | (4,592 | ) |   |   | 354 |   |
| Total Liabilities                                      |           |   | 32,454            |   |          |   | 54        |   |   |   | - |   |   |   | (27,474 | ) |   |   | 5,034 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |           | $      | 523               |   |          | $      | 181       |   |   | $      | - |   |   | $ | 41 |   |   | $ | 745 |   |

| SWEPCo                                                 |           |   |              |   |          |   |      |   |   |   |
|--------------------------------------------------------|----------------|--------|-------------------|--------|---------------|--------|-----------|--------|--------|--------|
|                                                   | Risk           |   |              |   |          |   |      |   |
|                                                   | Management     |   |              |   |          |   |      |   |
|                                                   | Contracts      |   | Hedging Contracts |   |          |   |      |   |
|                                                   |           |   |              |   | Interest Rate |   |      |   |   |   |
|                                                   | Commodity      |   | Commodity         |   | and Foreign   |   |      |   |   |   |
|                                                   | (a)            |   | (a)               |   | Currency      |   | Other (b) |   | Total  |   |
| Balance Sheet Location                                 | (in thousands) |   |
| Current Risk Management Assets                         |           | $      | 45,630            |   |          | $      | 156       |   |   | $      | - |   |   | $ | (38,082 | ) |   | $ | 7,704 |   |
| Long-term Risk Management Assets                       |           |   | 9,860             |   |          |   | 47        |   |   |   | 5 |   |   |   | (9,105 | ) |   |   | 807 |   |
| Total Assets                                           |           |   | 55,490            |   |          |   | 203       |   |   |   | 5 |   |   |   | (47,187 | ) |   |   | 8,511 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Risk Management Liabilities                    |           |   | 43,716            |   |          |   | -         |   |   |   | 153 |   |   |   | (38,151 | ) |   |   | 5,718 |   |
| Long-term Risk Management Liabilities                  |           |   | 9,520             |   |          |   | -         |   |   |   | - |   |   |   | (9,095 | ) |   |   | 425 |   |
| Total Liabilities                                      |           |   | 53,236            |   |          |   | -         |   |   |   | 153 |   |   |   | (47,246 | ) |   |   | 6,143 |   |
|                                                   |           |   |              |   |          |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets (Liabilities) |           | $      | 2,254             |   |          | $      | 203       |   |   | $      | (148 | ) |   | $ | 59 |   |   | $ | 2,368 |   |

| (a) | Derivative instruments within these categories are reported gross.  These instruments are subject to master netting agreements and are presented in the Condensed Balance Sheets on a net basis in accordance with FIN 39 “Offsetting of Amounts Related to Certain Contracts.” |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amounts represent counterparty netting of risk management contracts, associated cash collateral in accordance with FSP FIN 39-1 and dedesignated risk management contracts.                                                                                                                           |

| Amount of Gain (Loss) Recognized                            |           |
|-------------------------------------------------------------|----------------|
| on Risk Management Contracts                                |           |
| For the Three Months Ended June 30, 2009                    |           |
|                                                        |           |   |   |   |   |   |   |   |   |   |   |   |
|                                                        | APCo           |   | CSPCo |   | I&M |   | OPCo |   | PSO |   | SWEPCo |   |
|                                                        | (in thousands) |   |
| Location of Gain (Loss)                                     |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution Revenues |           | $ | 1,184 |   |   | $ | 9,261 |   |   | $ | 6,028 |   |   | $ | 10,804 |   |   | $ | (407 | ) |   | $ | (305 | ) |
| Sales to AEP Affiliates                                     |           |   | (306 | ) |   |   | (393 | ) |   |   | (447 | ) |   |   | 1,721 |   |   |   | 837 |   |   |   | 806 |   |
| Regulatory Assets                                           |           |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (62 | ) |
| Regulatory Liabilities                                      |           |   | 18,827 |   |   |   | 1,540 |   |   |   | 4,751 |   |   |   | 1,771 |   |   |   | (1,339 | ) |   |   | (324 | ) |
| Total Gain (Loss) on Risk Management Contracts              |           | $ | 19,705 |   |   | $ | 10,408 |   |   | $ | 10,332 |   |   | $ | 14,296 |   |   | $ | (909 | ) |   | $ | 115 |   |

| Amount of Gain (Loss) Recognized                            |           |
|-------------------------------------------------------------|----------------|
| on Risk Management Contracts                                |           |
| For the Six Months Ended June 30, 2009                      |           |
|                                                        |           |   |   |   |   |   |   |   |   |   |   |   |
|                                                        | APCo           |   | CSPCo |   | I&M |   | OPCo |   | PSO |   | SWEPCo |   |
|                                                        | (in thousands) |   |
| Location of Gain (Loss)                                     |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution Revenues |           | $ | 10,971 |   |   | $ | 20,006 |   |   | $ | 24,206 |   |   | $ | 24,298 |   |   | $ | 848 |   |   | $ | 1,218 |   |
| Sales to AEP Affiliates                                     |           |   | (7,326 | ) |   |   | (4,469 | ) |   |   | (4,418 | ) |   |   | (1,493 | ) |   |   | (625 | ) |   |   | (975 | ) |
| Regulatory Assets                                           |           |   | (755 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (103 | ) |
| Regulatory Liabilities                                      |           |   | 50,358 |   |   |   | 11,076 |   |   |   | 6,368 |   |   |   | 13,036 |   |   |   | (882 | ) |   |   | 249 |   |
| Total Gain (Loss) on Risk Management Contracts              |           | $ | 53,248 |   |   | $ | 26,613 |   |   | $ | 26,156 |   |   | $ | 35,841 |   |   | $ | (659 | ) |   | $ | 389 |   |

| Accumulated Other Comprehensive Income (Loss) Activity for Cash Flow Hedges                 |   |
|---------------------------------------------------------------------------------------------|--------|
| For the Three Months Ended June 30, 2009                                                    |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   | APCo |   |   | CSPCo |   |   | I&M |   |   | OPCo |   |   | PSO |   |   | SWEPCo |   |
|                                                                                        |   | (in thousands) |   |
| Commodity Contracts                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning Balance in AOCI as of  April 1, 2009                                    |   | $ | 4,066 |   |   | $ | 2,162 |   |   | $ | 2,091 |   |   | $ | 2,669 |   |   | $ | (24 | ) |   | $ | (21 | ) |
| Changes in Fair Value Recognized in AOCI                                                    |   |   | (207 | ) |   |   | (143 | ) |   |   | (119 | ) |   |   | (115 | ) |   |   | 155 |   |   |   | 166 |   |
| Amount of (Gain) or Loss Reclassified from AOCI to Income Statements/within Balance Sheets: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution Revenues                                 |   |   | (458 | ) |   |   | (1,158 | ) |   |   | (885 | ) |   |   | (1,434 | ) |   |   | - |   |   |   | - |   |
| Fuel and Other Consumables Used for Electric Generation                                     |   |   | (6 | ) |   |   | (4 | ) |   |   | (4 | ) |   |   | (5 | ) |   |   | (3 | ) |   |   | (3 | ) |
| Purchased Electricity for Resale                                                            |   |   | 132 |   |   |   | 334 |   |   |   | 255 |   |   |   | 413 |   |   |   | - |   |   |   | - |   |
| Property, Plant and Equipment                                                               |   |   | (3 | ) |   |   | (2 | ) |   |   | (1 | ) |   |   | (2 | ) |   |   | (1 | ) |   |   | (1 | ) |
| Regulatory Assets                                                                           |   |   | 497 |   |   |   | - |   |   |   | 68 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Regulatory Liabilities                                                                      |   |   | (1,725 | ) |   |   | - |   |   |   | (235 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Ending Balance in AOCI as of  June 30, 2009                                       |   | $ | 2,296 |   |   | $ | 1,189 |   |   | $ | 1,170 |   |   | $ | 1,526 |   |   | $ | 127 |   |   | $ | 141 |   |

|                                                                                        |   |           |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |
|---------------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                        |   | APCo           |   |   | CSPCo  |   |   | I&M |   |   | OPCo    |   |   | PSO    |   |   | SWEPCo |   |
|                                                                                        |   | (in thousands) |   |
| Interest Rate and Foreign Currency                                                          |   |           |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Contracts                                                                                   |   |           |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Beginning Balance in AOCI as of  April 1, 2009                                    |   | $              | (7,702 | )      |   | $      | -      |    |   | $      | (10,271 | )      |   | $      | 2,039  |   |   | $      | (658 | ) |   | $ | (5,808 | ) |
| Changes in Fair Value Recognized in AOCI                                                    |   |           | -      |   |   |   | -      |    |   |   | -       |   |   |   | 14,690 |   |   |   | - |   |   |   | 104 |   |
| Amount of (Gain) or Loss Reclassified from AOCI to Income Statements/within Balance Sheets: |   |           |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Depreciation and Amortization     Expense                  |   |           | -      |   |   |   | -      |    |   |   | -       |   |   |   | 1      |   |   |   | - |   |   |   | - |   |
| Interest Expense                                                                            |   |           | 417    |   |   |   | -      |    |   |   | 254     |   |   |   | (68    | )      |   |   | 45 |   |   |   | 207 |   |
| Ending Balance in AOCI as of  June 30, 2009                                       |   | $              | (7,285 | )      |   | $      | -      |    |   | $      | (10,017 | )      |   | $      | 16,662 |   |   | $      | (613 | ) |   | $ | (5,497 | ) |

|                                                                                        |   |           |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                        |   | APCo           |   |   | CSPCo  |   |   | I&M |   |   | OPCo   |   |   | PSO    |   |   | SWEPCo |   |
|                                                                                        |   | (in thousands) |   |
| TOTAL Contracts                                                                             |   |           |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Beginning Balance in AOCI as of  April 1, 2009                                    |   | $              | (3,636 | )      |   | $      | 2,162  |    |   | $      | (8,180 | )      |   | $      | 4,708  |   |   | $      | (682 | ) |   | $ | (5,829 | ) |
| Changes in Fair Value Recognized in AOCI                                                    |   |           | (207   | )      |   |   | (143   | )       |   |   | (119   | )      |   |   | 14,575 |   |   |   | 155 |   |   |   | 270 |   |
| Amount of (Gain) or Loss Reclassified from AOCI to Income Statements/within Balance Sheets: |   |           |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution Revenues                                 |   |           | (458   | )      |   |   | (1,158 | )       |   |   | (885   | )      |   |   | (1,434 | )      |   |   | - |   |   |   | - |   |
| Fuel and Other Consumables Used for Electric Generation                                     |   |           | (6     | )      |   |   | (4     | )       |   |   | (4     | )      |   |   | (5     | )      |   |   | (3 | ) |   |   | (3 | ) |
| Purchased Electricity for Resale                                                            |   |           | 132    |   |   |   | 334    |    |   |   | 255    |   |   |   | 413    |   |   |   | - |   |   |   | - |   |
| Depreciation and Amortization Expense                                                       |   |           | -      |   |   |   | -      |    |   |   | -      |   |   |   | 1      |   |   |   | - |   |   |   | - |   |
| Interest Expense                                                                            |   |           | 417    |   |   |   | -      |    |   |   | 254    |   |   |   | (68    | )      |   |   | 45 |   |   |   | 207 |   |
| Property, Plant and Equipment                                                               |   |           | (3     | )      |   |   | (2     | )       |   |   | (1     | )      |   |   | (2     | )      |   |   | (1 | ) |   |   | (1 | ) |
| Regulatory Assets                                                                           |   |           | 497    |   |   |   | -      |    |   |   | 68     |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Regulatory Liabilities                                                                      |   |           | (1,725 | )      |   |   | -      |    |   |   | (235   | )      |   |   | -      |   |   |   | - |   |   |   | - |   |
| Ending Balance in AOCI as of  June 30, 2009                                       |   | $              | (4,989 | )      |   | $      | 1,189  |    |   | $      | (8,847 | )      |   | $      | 18,188 |   |   | $      | (486 | ) |   | $ | (5,356 | ) |

| Total Accumulated Other Comprehensive Income (Loss) Activity for Cash Flow Hedges                |   |
|--------------------------------------------------------------------------------------------------|--------|
| For the Six Months Ended June 30, 2009                                                           |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   | APCo |   |   | CSPCo |   |   | I&M |   |   | OPCo |   |   | PSO |   |   | SWEPCo |   |
|                                                                                             |   | (in thousands) |   |
| Commodity Contracts                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning Balance in AOCI as of January 1, 2009                                                  |   | $ | 2,726 |   |   | $ | 1,531 |   |   | $ | 1,482 |   |   | $ | 1,898 |   |   | $ | - |   |   | $ | - |   |
| Changes in Fair Value Recognized in AOCI                                                         |   |   | 173 |   |   |   | (25 | ) |   |   | (6 | ) |   |   | 21 |   |   |   | 131 |   |   |   | 145 |   |
| Amount of (Gain) or Loss Reclassified from AOCI to Income Statements/within Balance Sheets:      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Electric Generation, Transmission and     Distribution Revenues |   |   | (709 | ) |   |   | (1,771 | ) |   |   | (1,389 | ) |   |   | (2,193 | ) |   |   | - |   |   |   | - |   |
|    Fuel and Other Consumables Used for     Electric Generation     |   |   | (6 | ) |   |   | (4 | ) |   |   | (4 | ) |   |   | (5 | ) |   |   | (3 | ) |   |   | (3 | ) |
| Purchased Electricity for Resale                                                                 |   |   | 594 |   |   |   | 1,460 |   |   |   | 1,181 |   |   |   | 1,807 |   |   |   | - |   |   |   | - |   |
| Property, Plant and Equipment                                                                    |   |   | (3 | ) |   |   | (2 | ) |   |   | (1 | ) |   |   | (2 | ) |   |   | (1 | ) |   |   | (1 | ) |
| Regulatory Assets                                                                                |   |   | 2,136 |   |   |   | - |   |   |   | 231 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Regulatory Liabilities                                                                           |   |   | (2,615 | ) |   |   | - |   |   |   | (324 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Ending Balance in AOCI as of  June 30, 2009                                            |   | $ | 2,296 |   |   | $ | 1,189 |   |   | $ | 1,170 |   |   | $ | 1,526 |   |   | $ | 127 |   |   | $ | 141 |   |

|                                                                                        |   |           |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |
|---------------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                        |   | APCo           |   |   | CSPCo  |   |   | I&M |   |   | OPCo    |   |   | PSO    |   |   | SWEPCo |   |
|                                                                                        |   | (in thousands) |   |
| Interest Rate and Foreign Currency                                                          |   |           |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Contracts                                                                                   |   |           |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Beginning Balance in AOCI as of January 1, 2009                                             |   | $              | (8,118 | )      |   | $      | -      |    |   | $      | (10,521 | )      |   | $      | 1,752  |   |   | $      | (704 | ) |   | $ | (5,924 | ) |
| Changes in Fair Value Recognized in AOCI                                                    |   |           | -      |   |   |   | -      |    |   |   | -       |   |   |   | 14,953 |   |   |   | - |   |   |   | 13 |   |
| Amount of (Gain) or Loss Reclassified from AOCI to Income Statements/within Balance Sheets: |   |           |   |   |   |   |   |    |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Depreciation and Amortization     Expense                  |   |           | -      |   |   |   | -      |    |   |   | (2      | )      |   |   | 2      |   |   |   | - |   |   |   | - |   |
| Interest Expense                                                                            |   |           | 833    |   |   |   | -      |    |   |   | 506     |   |   |   | (45    | )      |   |   | 91 |   |   |   | 414 |   |
| Ending Balance in AOCI as of  June 30, 2009                                       |   | $              | (7,285 | )      |   | $      | -      |    |   | $      | (10,017 | )      |   | $      | 16,662 |   |   | $      | (613 | ) |   | $ | (5,497 | ) |

|                                                                                        |   |           |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                        |   | APCo           |   |   | CSPCo  |   |   | I&M |   |   | OPCo   |   |   | PSO    |   |   | SWEPCo |   |
|                                                                                        |   | (in thousands) |   |
| TOTAL Contracts                                                                             |   |           |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |
| Beginning Balance in AOCI as of January 1, 2009                                             |   | $              | (5,392 | )      |   | $      | 1,531  |    |   | $      | (9,039 | )      |   | $      | 3,650  |   |   | $      | (704 | ) |   | $ | (5,924 | ) |
| Changes in Fair Value Recognized in AOCI                                                    |   |           | 173    |   |   |   | (25    | )       |   |   | (6     | )      |   |   | 14,974 |   |   |   | 131 |   |   |   | 158 |   |
| Amount of (Gain) or Loss Reclassified from AOCI to Income Statements/within Balance Sheets: |   |           |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric Generation, Transmission and Distribution Revenues                                 |   |           | (709   | )      |   |   | (1,771 | )       |   |   | (1,389 | )      |   |   | (2,193 | )      |   |   | - |   |   |   | - |   |
| Fuel and Other Consumables Used for Electric Generation                                     |   |           | (6     | )      |   |   | (4     | )       |   |   | (4     | )      |   |   | (5     | )      |   |   | (3 | ) |   |   | (3 | ) |
| Purchased Electricity for Resale                                                            |   |           | 594    |   |   |   | 1,460  |    |   |   | 1,181  |   |   |   | 1,807  |   |   |   | - |   |   |   | - |   |
| Depreciation and Amortization Expense                                                       |   |           | -      |   |   |   | -      |    |   |   | (2     | )      |   |   | 2      |   |   |   | - |   |   |   | - |   |
| Interest Expense                                                                            |   |           | 833    |   |   |   | -      |    |   |   | 506    |   |   |   | (45    | )      |   |   | 91 |   |   |   | 414 |   |
| Property, Plant and Equipment                                                               |   |           | (3     | )      |   |   | (2     | )       |   |   | (1     | )      |   |   | (2     | )      |   |   | (1 | ) |   |   | (1 | ) |
| Regulatory Assets                                                                           |   |           | 2,136  |   |   |   | -      |    |   |   | 231    |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Regulatory Liabilities                                                                      |   |           | (2,615 | )      |   |   | -      |    |   |   | (324   | )      |   |   | -      |   |   |   | - |   |   |   | - |   |
| Ending Balance in AOCI as of  June 30, 2009                                       |   | $              | (4,989 | )      |   | $      | 1,189  |    |   | $      | (8,847 | )      |   | $      | 18,188 |   |   | $      | (486 | ) |   | $ | (5,356 | ) |

|    | Hedging Assets (a) |   | Hedging Liabilities (a) |   | AOCI Gain (Loss) Net of Tax |   |
|---------|--------------------|--------|-------------------------|--------|-----------------------------|--------|
|    |               |   | Interest Rate           |   |                        |   | Interest Rate |   |   |   | Interest Rate |   |
|    |               |   | and Foreign             |   |                        |   | and Foreign |   |   |   | and Foreign |   |
|    | Commodity          |   | Currency                |   | Commodity                   |   | Currency |   | Commodity |   | Currency |   |
| Company | (in thousands)     |   |
| APCo    |               | $      | 4,862                   |   |                        | $      | - |   |   | $ | (2,346 | ) |   | $ | - |   |   | $ | 2,296 |   |   | $ | (7,285 | ) |
| CSPCo   |               |   | 2,536                   |   |                        |   | - |   |   |   | (1,245 | ) |   |   | - |   |   |   | 1,189 |   |   |   | - |   |
| I&M |               |   | 2,482                   |   |                        |   | - |   |   |   | (1,204 | ) |   |   | - |   |   |   | 1,170 |   |   |   | (10,017 | ) |
| OPCo    |               |   | 3,219                   |   |                        |   | 30,356 |   |   |   | (1,542 | ) |   |   | - |   |   |   | 1,526 |   |   |   | 16,662 |   |
| PSO     |               |   | 235                     |   |                        |   | - |   |   |   | (54 | ) |   |   | - |   |   |   | 127 |   |   |   | (613 | ) |
| SWEPCo  |               |   | 204                     |   |                        |   | 4 |   |   |   | - |   |   |   | (153 | ) |   |   | 141 |   |   |   | (5,497 | ) |

|    | Expected to be Reclassified to |   |          |   |
|---------|--------------------------------|--------|---------------|--------|
|    | Net Income During the Next     |   |          |   |
|    | Twelve Months                  |   |          |   |
|    |                           |   |          |   | Maximum Term for |   |
|    |                           |   | Interest Rate |   | Exposure to |   |
|    |                           |   | and Foreign   |   | Variability of Future |   |
|    | Commodity                      |   | Currency      |   | Cash Flows |   |
| Company | (in thousands)                 |   | (in months)   |   |
| APCo    |                           | $      | 2,238         |   |   | $ | (1,617 | ) |   |   | 20 |   |
| CSPCo   |                           |   | 1,166         |   |   |   | - |   |   |   | 20 |   |
| I&M |                           |   | 1,142         |   |   |   | (1,007 | ) |   |   | 20 |   |
| OPCo    |                           |   | 1,484         |   |   |   | 953 |   |   |   | 20 |   |
| PSO     |                           |   | 81            |   |   |   | (169 | ) |   |   | 18 |   |
| SWEPCo  |                           |   | 111           |   |   |   | (829 | ) |   |   | 41 |   |

| (a) | Hedging Assets and Hedging Liabilities are included in Risk Management Assets and Liabilities on the Condensed Balance Sheets. |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

|    |            |           | Amount of Collateral the |   | Amount          |   |
|---------|-----------------|----------------|--------------------------|--------|-----------------|--------|
|    |            |           | Registrant Subsidiaries  |   | Attributable to |   |
|    | Aggregate Fair  |           | Would Have Been          |   | RTO and ISO     |   |
|    | Value Contracts |           | Required to Post         |   | Activities      |   |
| Company |            | (in thousands) |                     |
| APCo    |            | $              | 15,931                   |   |            | $      | 15,931 |   |   | $ | 14,784 |   |
| CSPCo   |            |           | 8,449                    |   |            |   | 8,449 |   |   |   | 7,841 |   |
| I&M |            |           | 8,177                    |   |            |   | 8,177 |   |   |   | 7,588 |   |
| OPCo    |            |           | 10,466                   |   |            |   | 10,466 |   |   |   | 9,713 |   |
| PSO     |            |           | 5,888                    |   |            |   | 5,888 |   |   |   | 5,692 |   |
| SWEPCo  |            |           | 6,940                    |   |            |   | 6,940 |   |   |   | 6,709 |   |

|  9. | FAIR VALUE MEASUREMENTS |
|----------|-------------------------|

|    |   | June 30, 2009  |      |   | December 31, 2008 |   |
|---------|--------|----------------|-----------|--------|-------------------|--------|
|    |   | Book Value     |      |   | Fair Value        |   |   | Book Value |   |   | Fair Value |   |
| Company |   | (in thousands) |      |
| APCo    |   | $              | 3,371,788 |   |              | $      | 3,318,561 |   |   | $ | 3,174,512 |   |   | $ | 2,858,278 |   |
| CSPCo   |   |           | 1,443,799 |   |              |   | 1,430,222 |   |   |   | 1,443,594 |   |   |   | 1,410,609 |   |
| I&M |   |           | 1,975,138 |   |              |   | 1,949,360 |   |   |   | 1,377,914 |   |   |   | 1,308,712 |   |
| OPCo    |   |           | 2,962,202 |   |              |   | 2,971,092 |   |   |   | 3,039,376 |   |   |   | 2,953,131 |   |
| PSO     |   |           | 868,679   |   |              |   | 860,034 |   |   |   | 884,859 |   |   |   | 823,150 |   |
| SWEPCo  |   |           | 1,476,151 |   |              |   | 1,467,597 |   |   |   | 1,478,149 |   |   |   | 1,358,122 |   |

|                                               | June 30, 2009 |   | December 31, 2008 |   |
|----------------------------------------------------|---------------|--------|-------------------|--------|
|                                               | Estimated     |   | Gross             |   | Other-Than- |   | Estimated |   | Gross |   | Other-Than- |   |
|                                               | Fair          |   | Unrealized        |   | Temporary |   | Fair |   | Unrealized |   | Temporary |   |
|                                               | Value         |   | Gains             |   | Impairments |   | Value |   | Gains |   | Impairments |   |
|                                               | (in millions) |   |
| Cash                                               |          | $      | 16                |   |   | $ | - |   |   | $ | - |   |   | $ | 18 |   |   | $ | - |   |   | $ | - |   |
| Debt Securities                                    |          |   | 767               |   |   |   | 28 |   |   |   | (3 | ) |   |   | 773 |   |   |   | 52 |   |   |   | (3 | ) |
| Equity Securities                                  |          |   | 485               |   |   |   | 145 |   |   |   | (135 | ) |   |   | 469 |   |   |   | 89 |   |   |   | (82 | ) |
| Spent Nuclear Fuel and Decommissioning Trusts |          | $      | 1,268             |   |   | $ | 173 |   |   | $ | (138 | ) |   | $ | 1,260 |   |   | $ | 141 |   |   | $ | (85 | ) |

|               |             |   |           |   |                 |   | Gross Realized   |   |
|--------------------|------------------|--------|----------------|--------|----------------------|--------|------------------|--------|
|               | Proceeds From    |   | Purchases      |   | Gross Realized Gains |   | Losses on        |   |
|               | Investment Sales |   | of Investments |   | on Investment Sales  |   | Investment Sales |   |
|               | (in millions)    |   |
| Three Months Ended |             | $      | 253            |   |                 | $      | 264              |   |   | $ | 6 |   |   | $ | (1 | ) |
| Six Months Ended   |             |   | 411            |   |                 |   | 442              |   |   |   | 9 |   |   |   | (1 | ) |

|                     | Fair Value    |   |
|--------------------------|---------------|--------|
|                     | of Debt       |   |
|                     | Securities    |   |
|                     | (in millions) |   |
| Within 1 year            |          | $      | 40 |   |
| 1 year – 5 years   |          |   | 214 |   |
| 5 years – 10 years |          |   | 242 |   |
| After 10 years           |          |   | 271 |   |
| Total                    |          | $      | 767 |   |

| APCo                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
|--------------------------------------------|--------|----------------|--------|--------|---------|--------|---------|---------|--------|--------|--------|--------|--------|--------|----------|
|                                       |   | Level 1        |   |   | Level 2 |   |    | Level 3 |   |   | Other  |   |   | Total  |     |
| Assets:                                    |   | (in thousands) |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
| Other Cash Deposits (d)                    |   | $              | 421    |   |    | $      | -       |    |   | $      | -      |   |   | $      | 51       |   |   | $ | 472 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Assets                     |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   |           | 12,014 |   |    |   | 789,285 |    |   |   | 22,112 |   |   |   | (701,248 | ) |   |   | 122,163 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 8,652   |    |   |   | -      |   |   |   | (3,790   | ) |   |   | 4,862 |   |
| Dedesignated Risk Management Contracts (b) |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 10,931   |   |   |   | 10,931 |   |
| Total Risk Management Assets               |   |           | 12,014 |   |    |   | 797,937 |    |   |   | 22,112 |   |   |   | (694,107 | ) |   |   | 137,956 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Total Assets                               |   | $              | 12,435 |   |    | $      | 797,937 |    |   | $      | 22,112 |   |   | $      | (694,056 | ) |   | $ | 138,428 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                               |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Liabilities                |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   | $              | 13,094 |   |    | $      | 752,466 |    |   | $      | 8,212  |   |   | $      | (723,273 | ) |   | $ | 50,499 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 6,136   |    |   |   | -      |   |   |   | (3,790   | ) |   |   | 2,346 |   |
| DETM Assignment (c)                        |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 3,968    |   |   |   | 3,968 |   |
| Total Risk Management Liabilities          |   | $              | 13,094 |   |    | $      | 758,602 |    |   | $      | 8,212  |   |   | $      | (723,095 | ) |   | $ | 56,813 |   |

| APCo                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
|--------------------------------------------|--------|----------------|--------|--------|---------|--------|---------|---------|--------|--------|--------|--------|--------|--------|----------|
|                                       |   | Level 1        |   |   | Level 2 |   |    | Level 3 |   |   | Other  |   |   | Total  |     |
| Assets:                                    |   | (in thousands) |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
| Other Cash Deposits (d)                    |   | $              | 656    |   |    | $      | -       |    |   | $      | -      |   |   | $      | 52       |   |   | $ | 708 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Assets                     |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   |           | 16,105 |   |    |   | 667,748 |    |   |   | 11,981 |   |   |   | (597,676 | ) |   |   | 98,158 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 6,634   |    |   |   | -      |   |   |   | (1,413   | ) |   |   | 5,221 |   |
| Dedesignated Risk Management Contracts (b) |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 12,856   |   |   |   | 12,856 |   |
| Total Risk Management Assets               |   |           | 16,105 |   |    |   | 674,382 |    |   |   | 11,981 |   |   |   | (586,233 | ) |   |   | 116,235 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Total Assets                               |   | $              | 16,761 |   |    | $      | 674,382 |    |   | $      | 11,981 |   |   | $      | (586,181 | ) |   | $ | 116,943 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                               |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Liabilities                |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   | $              | 18,808 |   |    | $      | 628,974 |    |   | $      | 3,972  |   |   | $      | (601,108 | ) |   | $ | 50,646 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 2,545   |    |   |   | -      |   |   |   | (1,413   | ) |   |   | 1,132 |   |
| DETM Assignment (c)                        |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 5,230    |   |   |   | 5,230 |   |
| Total Risk Management Liabilities          |   | $              | 18,808 |   |    | $      | 631,519 |    |   | $      | 3,972  |   |   | $      | (597,291 | ) |   | $ | 57,008 |   |

| CSPCo                                      |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
|--------------------------------------------|--------|----------------|--------|--------|---------|--------|---------|---------|--------|--------|--------|--------|--------|--------|----------|
|                                       |   | Level 1        |   |   | Level 2 |   |    | Level 3 |   |   | Other  |   |   | Total  |     |
| Assets:                                    |   | (in thousands) |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
| Other Cash Deposits (d)                    |   | $              | 20,054 |   |    | $      | -       |    |   | $      | -      |   |   | $      | 1,171    |   |   | $ | 21,225 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Assets                     |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   |           | 6,371  |   |    |   | 415,979 |    |   |   | 11,726 |   |   |   | (369,631 | ) |   |   | 64,445 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 4,545   |    |   |   | -      |   |   |   | (2,009   | ) |   |   | 2,536 |   |
| Dedesignated Risk Management Contracts (b) |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 5,798    |   |   |   | 5,798 |   |
| Total Risk Management Assets               |   |           | 6,371  |   |    |   | 420,524 |    |   |   | 11,726 |   |   |   | (365,842 | ) |   |   | 72,779 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Total Assets                               |   | $              | 26,425 |   |    | $      | 420,524 |    |   | $      | 11,726 |   |   | $      | (364,671 | ) |   | $ | 94,004 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                               |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Liabilities                |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   | $              | 6,944  |   |    | $      | 396,596 |    |   | $      | 4,354  |   |   | $      | (381,310 | ) |   | $ | 26,584 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 3,254   |    |   |   | -      |   |   |   | (2,009   | ) |   |   | 1,245 |   |
| DETM Assignment (c)                        |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 2,104    |   |   |   | 2,104 |   |
| Total Risk Management Liabilities          |   | $              | 6,944  |   |    | $      | 399,850 |    |   | $      | 4,354  |   |   | $      | (381,215 | ) |   | $ | 29,933 |   |

| CSPCo                                      |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
|--------------------------------------------|--------|----------------|--------|--------|---------|--------|---------|---------|--------|--------|--------|--------|--------|--------|----------|
|                                       |   | Level 1        |   |   | Level 2 |   |    | Level 3 |   |   | Other  |   |   | Total  |     |
| Assets:                                    |   | (in thousands) |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
| Other Cash Deposits (d)                    |   | $              | 31,129 |   |    | $      | -       |    |   | $      | -      |   |   | $      | 1,171    |   |   | $ | 32,300 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Assets                     |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   |           | 9,042  |   |    |   | 366,557 |    |   |   | 6,724  |   |   |   | (328,027 | ) |   |   | 54,296 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 3,725   |    |   |   | -      |   |   |   | (794     | ) |   |   | 2,931 |   |
| Dedesignated Risk Management Contracts (b) |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 7,218    |   |   |   | 7,218 |   |
| Total Risk Management Assets               |   |           | 9,042  |   |    |   | 370,282 |    |   |   | 6,724  |   |   |   | (321,603 | ) |   |   | 64,445 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Total Assets                               |   | $              | 40,171 |   |    | $      | 370,282 |    |   | $      | 6,724  |   |   | $      | (320,432 | ) |   | $ | 96,745 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                               |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Liabilities                |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   | $              | 10,559 |   |    | $      | 344,860 |    |   | $      | 2,227  |   |   | $      | (329,954 | ) |   | $ | 27,692 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 1,429   |    |   |   | -      |   |   |   | (794     | ) |   |   | 635 |   |
| DETM Assignment (c)                        |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 2,937    |   |   |   | 2,937 |   |
| Total Risk Management Liabilities          |   | $              | 10,559 |   |    | $      | 346,289 |    |   | $      | 2,227  |   |   | $      | (327,811 | ) |   | $ | 31,264 |   |

| I&M                                                        |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |
|----------------------------------------------------------------|--------|----------------|---------|--------|---------|--------|-----------|---------|--------|--------|--------|--------|--------|--------|----------|
|                                                           |   | Level 1        |    |   | Level 2 |   |      | Level 3 |   |   | Other  |   |   | Total  |     |
| Assets:                                                        |   | (in thousands) |    |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |
| Risk Management Assets                                         |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |
| Risk Management Contracts (a)                                  |   | $              | 6,166   |   |    | $      | 409,813   |    |   | $      | 11,352 |   |   | $      | (364,177 | ) |   | $ | 63,154 |   |
| Cash Flow and Fair Value Hedges (a)                            |   |           | -       |   |    |   | 4,427     |    |   |   | -      |   |   |   | (1,945   | ) |   |   | 2,482 |   |
| Dedesignated Risk Management Contracts (b)                     |   |           | -       |   |    |   | -         |    |   |   | -      |   |   |   | 5,610    |   |   |   | 5,610 |   |
| Total Risk Management Assets                                   |   |           | 6,166   |   |    |   | 414,240   |    |   |   | 11,352 |   |   |   | (360,512 | ) |   |   | 71,246 |   |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Spent Nuclear Fuel and Decommissioning Trusts                  |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Cash and Cash Equivalents (e)                                  |   |           | -       |   |    |   | 5,280     |    |   |   | -      |   |   |   | 10,792   |   |   |   | 16,072 |   |
| Debt Securities (f)                                            |   |           | -       |   |    |   | 766,773   |    |   |   | -      |   |   |   | -        |   |   |   | 766,773 |   |
| Equity Securities (g)                                          |   |           | 485,597 |   |    |   | -         |    |   |   | -      |   |   |   | -        |   |   |   | 485,597 |   |
| TotalSpent Nuclear Fuel and   Decommissioning Trusts |   |           | 485,597 |   |    |   | 772,053   |    |   |   | -      |   |   |   | 10,792   |   |   |   | 1,268,442 |   |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Total Assets                                                   |   | $              | 491,763 |   |    | $      | 1,186,293 |    |   | $      | 11,352 |   |   | $      | (349,720 | ) |   | $ | 1,339,688 |   |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                                   |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Liabilities                                    |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)                                  |   | $              | 6,720   |   |    | $      | 390,658   |    |   | $      | 4,217  |   |   | $      | (375,485 | ) |   | $ | 26,110 |   |
| Cash Flow and Fair Value Hedges (a)                            |   |           | -       |   |    |   | 3,149     |    |   |   | -      |   |   |   | (1,945   | ) |   |   | 1,204 |   |
| DETM Assignment (c)                                            |   |           | -       |   |    |   | -         |    |   |   | -      |   |   |   | 2,037    |   |   |   | 2,037 |   |
| Total Risk Management Liabilities                              |   | $              | 6,720   |   |    | $      | 393,807   |    |   | $      | 4,217  |   |   | $      | (375,393 | ) |   | $ | 29,351 |   |

| I&M                                                        |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |
|----------------------------------------------------------------|--------|----------------|---------|--------|---------|--------|-----------|---------|--------|--------|--------|--------|--------|--------|----------|
|                                                           |   | Level 1        |    |   | Level 2 |   |      | Level 3 |   |   | Other  |   |   | Total  |     |
| Assets:                                                        |   | (in thousands) |    |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |
| Risk Management Assets                                         |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |
| Risk Management Contracts (a)                                  |   | $              | 8,750   |   |    | $      | 357,405   |    |   | $      | 6,508  |   |   | $      | (319,857 | ) |   | $ | 52,806 |   |
| Cash Flow and Fair Value Hedges (a)                            |   |           | -       |   |    |   | 3,605     |    |   |   | -      |   |   |   | (768     | ) |   |   | 2,837 |   |
| Dedesignated Risk Management Contracts (b)                     |   |           | -       |   |    |   | -         |    |   |   | -      |   |   |   | 6,985    |   |   |   | 6,985 |   |
| Total Risk Management Assets                                   |   |           | 8,750   |   |    |   | 361,010   |    |   |   | 6,508  |   |   |   | (313,640 | ) |   |   | 62,628 |   |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Spent Nuclear Fuel and Decommissioning Trusts                  |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Cash and Cash Equivalents (e)                                  |   |           | -       |   |    |   | 7,818     |    |   |   | -      |   |   |   | 11,845   |   |   |   | 19,663 |   |
| Debt Securities (f)                                            |   |           | -       |   |    |   | 771,216   |    |   |   | -      |   |   |   | -        |   |   |   | 771,216 |   |
| Equity Securities (g)                                          |   |           | 468,654 |   |    |   | -         |    |   |   | -      |   |   |   | -        |   |   |   | 468,654 |   |
| TotalSpent Nuclear Fuel and   Decommissioning Trusts |   |           | 468,654 |   |    |   | 779,034   |    |   |   | -      |   |   |   | 11,845   |   |   |   | 1,259,533 |   |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Total Assets                                                   |   | $              | 477,404 |   |    | $      | 1,140,044 |    |   | $      | 6,508  |   |   | $      | (301,795 | ) |   | $ | 1,322,161 |   |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                                   |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
|                                                           |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Liabilities                                    |   |           |    |   |    |   |      |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)                                  |   | $              | 10,219  |   |    | $      | 336,280   |    |   | $      | 2,156  |   |   | $      | (321,722 | ) |   | $ | 26,933 |   |
| Cash Flow and Fair Value Hedges (a)                            |   |           | -       |   |    |   | 1,383     |    |   |   | -      |   |   |   | (768     | ) |   |   | 615 |   |
| DETM Assignment (c)                                            |   |           | -       |   |    |   | -         |    |   |   | -      |   |   |   | 2,842    |   |   |   | 2,842 |   |
| Total Risk Management Liabilities                              |   | $              | 10,219  |   |    | $      | 337,663   |    |   | $      | 2,156  |   |   | $      | (319,648 | ) |   | $ | 30,390 |   |

| OPCo                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
|--------------------------------------------|--------|----------------|--------|--------|---------|--------|---------|---------|--------|--------|--------|--------|--------|--------|----------|
|                                       |   | Level 1        |   |   | Level 2 |   |    | Level 3 |   |   | Other  |   |   | Total  |     |
| Assets:                                    |   | (in thousands) |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
| Other Cash Deposits (d)                    |   | $              | 1,074  |   |    | $      | -       |    |   | $      | -      |   |   | $      | 1,674    |   |   | $ | 2,748 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Assets                     |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   |           | 7,892  |   |    |   | 623,403 |    |   |   | 14,845 |   |   |   | (550,824 | ) |   |   | 95,316 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 36,064  |    |   |   | -      |   |   |   | (2,489   | ) |   |   | 33,575 |   |
| Dedesignated Risk Management Contracts (b) |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 7,182    |   |   |   | 7,182 |   |
| Total Risk Management Assets               |   |           | 7,892  |   |    |   | 659,467 |    |   |   | 14,845 |   |   |   | (546,131 | ) |   |   | 136,073 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Total Assets                               |   | $              | 8,966  |   |    | $      | 659,467 |    |   | $      | 14,845 |   |   | $      | (544,457 | ) |   | $ | 138,821 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                               |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Liabilities                |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   | $              | 8,602  |   |    | $      | 598,581 |    |   | $      | 5,435  |   |   | $      | (565,361 | ) |   | $ | 47,257 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 4,031   |    |   |   | -      |   |   |   | (2,489   | ) |   |   | 1,542 |   |
| DETM Assignment (c)                        |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 2,607    |   |   |   | 2,607 |   |
| Total Risk Management Liabilities          |   | $              | 8,602  |   |    | $      | 602,612 |    |   | $      | 5,435  |   |   | $      | (565,243 | ) |   | $ | 51,406 |   |

| OPCo                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
|--------------------------------------------|--------|----------------|--------|--------|---------|--------|---------|---------|--------|--------|--------|--------|--------|--------|----------|
|                                       |   | Level 1        |   |   | Level 2 |   |    | Level 3 |   |   | Other  |   |   | Total  |     |
| Assets:                                    |   | (in thousands) |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |
| Other Cash Deposits (d)                    |   | $              | 4,197  |   |    | $      | -       |    |   | $      | -      |   |   | $      | 2,431    |   |   | $ | 6,628 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Assets                     |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   |           | 11,200 |   |    |   | 575,415 |    |   |   | 8,364  |   |   |   | (515,162 | ) |   |   | 79,817 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 4,614   |    |   |   | -      |   |   |   | (983     | ) |   |   | 3,631 |   |
| Dedesignated Risk Management Contracts (b) |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 8,941    |   |   |   | 8,941 |   |
| Total Risk Management Assets               |   |           | 11,200 |   |    |   | 580,029 |    |   |   | 8,364  |   |   |   | (507,204 | ) |   |   | 92,389 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Total Assets                               |   | $              | 15,397 |   |    | $      | 580,029 |    |   | $      | 8,364  |   |   | $      | (504,773 | ) |   | $ | 99,017 |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                               |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
|                                       |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Liabilities                |   |           |   |   |    |   |    |    |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk Management Contracts (a)              |   | $              | 13,080 |   |    | $      | 550,278 |    |   | $      | 2,801  |   |   | $      | (517,548 | ) |   | $ | 48,611 |   |
| Cash Flow and Fair Value Hedges (a)        |   |           | -      |   |    |   | 1,770   |    |   |   | -      |   |   |   | (983     | ) |   |   | 787 |   |
| DETM Assignment (c)                        |   |           | -      |   |    |   | -       |    |   |   | -      |   |   |   | 3,637    |   |   |   | 3,637 |   |
| Total Risk Management Liabilities          |   | $              | 13,080 |   |    | $      | 552,048 |    |   | $      | 2,801  |   |   | $      | (514,894 | ) |   | $ | 53,035 |   |

| PSO                                 |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
|-------------------------------------|--------|----------------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|--------|--------|---------|
|                                |   | Level 1        |   |   | Level 2 |   |   | Level 3 |   |   | Other  |   |   | Total  |    |
| Assets:                             |   | (in thousands) |   |
|                                |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
| Risk Management Assets              |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
| Risk Management Contracts (a)       |   | $              | 2,453  |   |    | $      | 29,559 |    |   | $      | 20     |   |   | $      | (26,488 | ) |   | $ | 5,544 |   |
| Cash Flow and Fair Value Hedges (a) |   |           | -      |   |    |   | 215    |    |   |   | -      |   |   |   | 20      |   |   |   | 235 |   |
| Total Risk Management Assets        |   | $              | 2,453  |   |    | $      | 29,774 |    |   | $      | 20     |   |   | $      | (26,468 | ) |   | $ | 5,779 |   |
|                                |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Liabilities:                        |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
|                                |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Risk Management Liabilities         |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Risk Management Contracts (a)       |   | $              | 2,593  |   |    | $      | 28,908 |    |   | $      | 8      |   |   | $      | (26,624 | ) |   | $ | 4,885 |   |
| Cash Flow and Fair Value Hedges (a) |   |           | -      |   |    |   | 34     |    |   |   | -      |   |   |   | 20      |   |   |   | 54 |   |
| DETM Assignment (c)                 |   |           | -      |   |    |   | -      |    |   |   | -      |   |   |   | 95      |   |   |   | 95 |   |
| Total Risk Management Liabilities   |   | $              | 2,593  |   |    | $      | 28,942 |    |   | $      | 8      |   |   | $      | (26,509 | ) |   | $ | 5,034 |   |

| PSO                               |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
|-----------------------------------|--------|----------------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|--------|--------|---------|
|                              |   | Level 1        |   |   | Level 2 |   |   | Level 3 |   |   | Other  |   |   | Total  |    |
| Assets:                           |   | (in thousands) |   |
|                              |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
| Risk Management Assets            |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
| Risk Management Contracts (a)     |   | $              | 3,295  |   |    | $      | 39,866 |    |   | $      | 8      |   |   | $      | (36,422 | ) |   | $ | 6,747 |   |
|                              |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Liabilities:                      |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
|                              |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Risk Management Liabilities       |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Risk Management Contracts (a)     |   | $              | 3,664  |   |    | $      | 37,835 |    |   | $      | 10     |   |   | $      | (36,527 | ) |   | $ | 4,982 |   |
| DETM Assignment (c)               |   |           | -      |   |    |   | -      |    |   |   | -      |   |   |   | 149     |   |   |   | 149 |   |
| Total Risk Management Liabilities |   | $              | 3,664  |   |    | $      | 37,835 |    |   | $      | 10     |   |   | $      | (36,378 | ) |   | $ | 5,131 |   |

| SWEPCo                              |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
|-------------------------------------|--------|----------------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|--------|--------|---------|
|                                |   | Level 1        |   |   | Level 2 |   |   | Level 3 |   |   | Other  |   |   | Total  |    |
| Assets:                             |   | (in thousands) |   |
|                                |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
| Risk Management Assets              |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
| Risk Management Contracts (a)       |   | $              | 2,891  |   |    | $      | 51,171 |    |   | $      | 31     |   |   | $      | (45,790 | ) |   | $ | 8,303 |   |
| Cash Flow and Fair Value Hedges (a) |   |           | -      |   |    |   | 291    |    |   |   | -      |   |   |   | (83     | ) |   |   | 208 |   |
| Total Risk Management Assets        |   | $              | 2,891  |   |    | $      | 51,462 |    |   | $      | 31     |   |   | $      | (45,873 | ) |   | $ | 8,511 |   |
|                                |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Liabilities:                        |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
|                                |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Risk Management Liabilities         |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Risk Management Contracts (a)       |   | $              | 3,056  |   |    | $      | 48,767 |    |   | $      | 16     |   |   | $      | (45,961 | ) |   | $ | 5,878 |   |
| Cash Flow and Fair Value Hedges (a) |   |           | -      |   |    |   | 236    |    |   |   | -      |   |   |   | (83     | ) |   |   | 153 |   |
| DETM Assignment (c)                 |   |           | -      |   |    |   | -      |    |   |   | -      |   |   |   | 112     |   |   |   | 112 |   |
| Total Risk Management Liabilities   |   | $              | 3,056  |   |    | $      | 49,003 |    |   | $      | 16     |   |   | $      | (45,932 | ) |   | $ | 6,143 |   |

| SWEPCo                              |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
|-------------------------------------|--------|----------------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|--------|--------|---------|
|                                |   | Level 1        |   |   | Level 2 |   |   | Level 3 |   |   | Other  |   |   | Total  |    |
| Assets:                             |   | (in thousands) |   |
|                                |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
| Risk Management Assets              |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |
| Risk Management Contracts (a)       |   | $              | 3,883  |   |    | $      | 61,471 |    |   | $      | 14     |   |   | $      | (55,710 | ) |   | $ | 9,658 |   |
| Cash Flow and Fair Value Hedges (a) |   |           | -      |   |    |   | 107    |    |   |   | -      |   |   |   | (80     | ) |   |   | 27 |   |
| Total Risk Management Assets        |   | $              | 3,883  |   |    | $      | 61,578 |    |   | $      | 14     |   |   | $      | (55,790 | ) |   | $ | 9,685 |   |
|                                |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Liabilities:                        |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
|                                |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Risk Management Liabilities         |   |           |   |   |    |   |   |    |   |   |   |   |   |   |    |   |   |   |   |   |
| Risk Management Contracts (a)       |   | $              | 4,318  |   |    | $      | 58,390 |    |   | $      | 17     |   |   | $      | (55,834 | ) |   | $ | 6,891 |   |
| Cash Flow and Fair Value Hedges (a) |   |           | -      |   |    |   | 265    |    |   |   | -      |   |   |   | (80     | ) |   |   | 185 |   |
| DETM Assignment (c)                 |   |           | -      |   |    |   | -      |    |   |   | -      |   |   |   | 175     |   |   |   | 175 |   |
| Total Risk Management Liabilities   |   | $              | 4,318  |   |    | $      | 58,655 |    |   | $      | 17     |   |   | $      | (55,739 | ) |   | $ | 7,251 |   |

| (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 revenues over the remaining life of the contract. |
| (c) | See “Natural Gas Contracts with DETM” section of Note 15 in the 2008 Annual Report.                                                                                                                                                                                                                                                 |
| (d) | Amounts in “Other” column primarily represent cash deposits with third parties.  Level 1 amounts primarily represent investments in money market funds.                                                                                                                                                                   |
| (e) | Amounts in “Other” column primarily represent accrued interest receivables from financial institutions.  Level 2 amounts primarily represent investments in money market funds.                                                                                                                                           |
| (f) | Amounts represent corporate, municipal and treasury bonds.                                                                                                                                                                                                                                                                                      |
| (g) | Amounts represent publicly traded equity securities and equity-based mutual funds.                                                                                                                                                                                                                                                              |

|                                                                                                                             |   | APCo           |   |   | CSPCo  |   |   | I&M |   |   | OPCo   |   |   | PSO    |   |   | SWEPCo |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Three Months Ended June 30, 2009                                                                                                 |   | (in thousands) |   |
| Balance as of April 1, 2009                                                                                                      |   | $              | 11,847 |   |   | $      | 6,294  |    |   | $      | 6,092  |   |   | $      | 7,802  |   |   | $      | 1 |   |   | $ | 2 |   |
| Realized (Gain) Loss Included in Net Income (or Changes in Net Assets) (a)                                                       |   |           | (4,739 | )      |   |   | (2,514 | )       |   |   | (2,432 | )      |   |   | (3,103 | )      |   |   | 3 |   |   |   | 5 |   |
| Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a) |   |           | -      |   |   |   | 3,878  |    |   |   | -      |   |   |   | 5,065  |   |   |   | - |   |   |   | - |   |
| Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income                                                    |   |           | -      |   |   |   | -      |    |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Purchases, Issuances and Settlements                                                                                             |   |           | -      |   |   |   | -      |    |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Transfers in and/or out of Level 3 (b)                                                                                           |   |           | (2,419 | )      |   |   | (1,283 | )       |   |   | (1,241 | )      |   |   | (1,589 | )      |   |   | - |   |   |   | - |   |
| Changes in Fair Value Allocated to Regulated Jurisdictions (c)                                                                   |   |           | 9,211  |   |   |   | 997    |    |   |   | 4,716  |   |   |   | 1,235  |   |   |   | 8 |   |   |   | 8 |   |
| Balance as of June 30, 2009                                                                                                      |   | $              | 13,900 |   |   | $      | 7,372  |    |   | $      | 7,135  |   |   | $      | 9,410  |   |   | $      | 12 |   |   | $ | 15 |   |

|                                                                                                                             |   | APCo           |   |   | CSPCo  |   |   | I&M |   |   | OPCo   |   |   | PSO    |   |   | SWEPCo |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Six Months Ended June 30, 2009                                                                                                   |   | (in thousands) |   |
| Balance as of January 1, 2009                                                                                                    |   | $              | 8,009  |   |   | $      | 4,497  |    |   | $      | 4,352  |   |   | $      | 5,563  |   |   | $      | (2 | ) |   | $ | (3 | ) |
| Realized (Gain) Loss Included in Net Income (or Changes in Net Assets) (a)                                                       |   |           | (6,200 | )      |   |   | (3,482 | )       |   |   | (3,369 | )      |   |   | (4,301 | )      |   |   | 3 |   |   |   | 5 |   |
| Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a) |   |           | -      |   |   |   | 5,466  |    |   |   | -      |   |   |   | 6,907  |   |   |   | - |   |   |   | - |   |
| Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income                                                    |   |           | -      |   |   |   | -      |    |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Purchases, Issuances and Settlements                                                                                             |   |           | -      |   |   |   | -      |    |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Transfers in and/or out of Level 3 (b)                                                                                           |   |           | (176   | )      |   |   | (106   | )       |   |   | (97    | )      |   |   | 6      |   |   |   | 36 |   |   |   | 58 |   |
| Changes in Fair Value Allocated to Regulated Jurisdictions (c)                                                                   |   |           | 12,267 |   |   |   | 997    |    |   |   | 6,249  |   |   |   | 1,235  |   |   |   | (25 | ) |   |   | (45 | ) |
| Balance as of June 30, 2009                                                                                                      |   | $              | 13,900 |   |   | $      | 7,372  |    |   | $      | 7,135  |   |   | $      | 9,410  |   |   | $      | 12 |   |   | $ | 15 |   |

| 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 Net Income      (or Changes in Net Assets) (a)                              |   |           | (532    | )      |   |   | (324    | )       |   |   | (315    | )      |   |   | (327    | )      |   |   | 1 |   |   |   | 4 |   |
| Unrealized Gain (Loss) Included in Net Income (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 Net Income      (or Changes in Net Assets) (a)                              |   |           | (467    | )      |   |   | (339    | )       |   |   | (312    | )      |   |   | 232     |   |   |   | 98 |   |   |   | 174 |   |
| Unrealized Gain (Loss) Included in Net Income (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 Statements 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 theperiod. |
| (c) | “Changes in Fair Value Allocated to Regulated Jurisdictions” relates to the net gains (losses) of those contracts that are not reflected on the Statements of Income.  These net gains (losses) are recorded as regulatory liabilities/assets.                                                                                      |

|  10. | INCOME TAXES |
|-----------|--------------|

|  11. | FINANCING ACTIVITIES |
|-----------|----------------------|

|       |   |                    |   | Principal      |          | Interest |   | Due    |
|------------|--------|-------------------------|--------|----------------|---------------|----------|--------|--------|
| Company    |   | Type of Debt            |   | Amount         |          | Rate     |   | Date   |
|       |   |                    |   | (in thousands) |          | (%)      |   |   |
| Issuances: |   |                    |   |           |          |     |   |   |   |
| APCo       |   | Senior Unsecured Notes  |   | $              | 350,000  |     | 7.95   |   | 2020 |
| I&M    |   | Senior Unsecured Notes  |   |           | 475,000  |     | 7.00   |   | 2019 |
| I&M    |   | Pollution Control Bonds |   |           | 50,000   |     | 6.25   |   | 2025 |
| I&M    |   | Pollution Control Bonds |   |           | 50,000   |     | 6.25   |   | 2025 |
| PSO        |   | Pollution Control Bonds |   |           | 33,700   |     | 5.25   |   | 2014 |

|                                            |   |                   |   | Principal      |          | Interest |   | Due    |
|-------------------------------------------------|--------|------------------------|--------|----------------|---------------|----------|--------|--------|
| Company                                         |   | Type of Debt           |   | Amount Paid    |          | Rate     |   | Date   |
|                                            |   |                   |   | (in thousands) |          | (%)      |   |   |
| Retirements and   Principal Payments: |   |                   |   |           |          |     |   |   |   |
| APCo                                            |   | Senior Unsecured Notes |   | $              | 150,000  |     | 6.60   |   | 2009 |
| APCo                                            |   | Land Note              |   |           | 8        |     | 13.718 |   | 2026 |
| OPCo                                            |   | Notes Payable          |   |           | 1,000    |     | 6.27   |   | 2009 |
| OPCo                                            |   | Notes Payable          |   |           | 6,500    |     | 7.21   |   | 2009 |
| OPCo                                            |   | Notes Payable          |   |           | 70,000   |     | 7.49   |   | 2009 |
| PSO                                             |   | Senior Unsecured Notes |   |           | 50,000   |     | 4.70   |   | 2009 |
| SWEPCo                                          |   | Notes Payable          |   |           | 2,203    |     | 4.47   |   | 2011 |

|    | June 30, 2009  |   |
|---------|----------------|--------|
| Company | (in thousands) |   |
| APCo    |           | $      | 17,500 |   |
| CSPCo   |           |   | 92,245 |   |
| OPCo    |           |   | 85,000 |   |

|    |           |   |       |   |         |   |          |   | 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, 2009    |   | Limit      |   |
| Company | (in thousands) |   |
| APCo    |           | $      | 420,925    |   |         | $      | -             |   |             | $      | 202,261    |   |   | $ | - |   |   | $ | (175,376 | ) |   | $ | 600,000 |   |
| CSPCo   |           |   | 203,306    |   |         |   | -             |   |             |   | 146,672    |   |   |   | - |   |   |   | (162,659 | ) |   |   | 350,000 |   |
| I&M |           |   | 491,107    |   |         |   | 22,979        |   |             |   | 122,731    |   |   |   | 12,724 |   |   |   | (2,350 | ) |   |   | 500,000 |   |
| OPCo    |           |   | 522,934    |   |         |   | 55,125        |   |             |   | 315,813    |   |   |   | 27,363 |   |   |   | 40,319 |   |   |   | 600,000 |   |
| PSO     |           |   | 77,976     |   |         |   | 87,443        |   |             |   | 56,378     |   |   |   | 37,667 |   |   |   | 19,438 |   |   |   | 300,000 |   |
| SWEPCo  |           |   | 62,871     |   |         |   | 143,123       |   |             |   | 19,501     |   |   |   | 28,466 |   |   |   | 31,999 |   |   |   | 350,000 |   |

|                  |   | Six Months Ended June 30, |
|-----------------------|--------|---------------------------|
|                  |   | 2009                      |   | 2008 |
| Maximum Interest Rate |   | 2.28%                     |   | 5.37% |
| Minimum Interest Rate |   | 0.65%                     |   | 2.91% |

|    |   | 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,       |
|    |   | 2009                            |   | 2008   |                            |   | 2009 |   | 2008 |
| Company |   |                            |
| APCo    |   | 1.45%                           |   | 3.86%  |                            |   | -% |   | 3.25% |
| CSPCo   |   | 1.27%                           |   | 3.66%  |                            |   | -% |   | 2.93% |
| I&M |   | 1.47%                           |   | 3.30%  |                            |   | 1.71% |   | -% |
| OPCo    |   | 1.35%                           |   | 3.39%  |                            |   | 0.72% |   | -% |
| PSO     |   | 2.01%                           |   | 3.03%  |                            |   | 1.31% |   | 4.53% |
| SWEPCo  |   | 1.67%                           |   | 3.36%  |                            |   | 1.38% |   | 2.93% |

|    |                                             |   | June 30, 2009  |         | December 31, 2008 |
|---------|--------------------------------------------------|--------|----------------|--------------|-------------------|
|    |                                             |   | Outstanding    |         | Interest          |   | Outstanding |   | Interest |
|    | Type of Debt                                     |   | Amount         |         | Rate (c)          |   | Amount |   | Rate (c) |
| Company |                                             |   | (in thousands) |         |              |   | (in thousands) |   |   |
| SWEPCo  | Line of Credit – Sabine Mining Company (a) |   | $              | 14,872  |              | 1.74% |   | $ | 7,172  |   | 1.54% |
| OPCo    | Commercial Paper – JMG (b)                 |   |           | 11,500  |              | 1.25% |   |   | -  |   | -  |

| (a) | Sabine Mining Company is consolidated under FIN 46R.                                                       |
|-----|------------------------------------------------------------------------------------------------------------|
| (b) | This commercial paper was used to pay down debt in the second quarter of 2009 and matured on July 1, 2009. |
| (c) | Weighted average rate.                                                                                     |

|    | Letters of Credit    |   |
|---------|----------------------|--------|
|    | Amount Outstanding   |   |
|    | Against $627 million |   |
|    | Agreement            |   |
| Company | (in thousands)       |   |
| APCo    |                 | $      | 126,716 |   |
| I&M |                 |   | 77,886 |   |
| OPCo    |                 |   | 166,899 |   |

----

COMBINED MANAGEMENT’S DISCUSSION AND ANALYSIS OF REGISTRANT SUBSIDIARIES

| ·   | Margins from Off-system Sales –  Margins from off-system sales for the AEP System continue to decrease due to reductions in sales volumes and weak market power prices, reflecting reduced overall demand for electricity.  Management currently forecasts that marginsfrom off-system volumes will decrease by approximately 34% in 2009 in comparison to 2008. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Industrial KWH Sales – The AEP System’s industrial KWH sales for the quarter and six months ended June 30, 2009 were down 21% and 18%, respectively.  Approximately half of these decreases were due to cutbacks or closures by customers who produce primary metals servedby APCo, CSPCo, I&M, OPCo, PSO and SWEPCo.  The Registrant Subsidiaries also experienced additional significant decreases in KWH sales to customers in the plastics and rubber, paper and transportation manufacturing industries.  When the economy and export markets recover, management expects to see a return to more normal levels of industrial KWH sales. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk of Loss of Major Customers – Management monitors the financial strength and viability of each major industrial customer individually.  The Registrant Subsidiaries factor industrial customer analyses into their operational planning.  In July 2009, CSPCo’sand OPCo’s largest customer, Ormet, a major industrial customer currently operating at a reduced load of approximately 400 MW, announced that it will substantially curtail operations starting in September 2009.  In February 2009, Century Aluminum, a major industrial customer (325 MW load) of APCo, announced the curtailment of operations at its Ravenswood, WV facility. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|    |   | Issuance      |   |
|---------|--------|---------------|--------|
| Company |   | (in millions) |   |
| APCo    |   | $             | 350    |   |
| I&M |   |          | 600    |   |
| PSO     |   |          | 34     |   |

|    |   | Budgeted      |      |
|---------|--------|---------------|-----------|
|    |   | Construction  |      |
|    |   | Expenditures  |      |
| Company |   | (in millions) |      |
| APCo    |   | $             | 297  |   |
| CSPCo   |   |          | 231  |   |
| I&M |   |          | 246  |   |
| OPCo    |   |          | 294  |   |
| PSO     |   |          | 162  |   |
| SWEPCo  |   |          | 423  | (a) |

| (a) | Includes $212 million and $35 million in budgeted capital expenditures related to the Turk Plant and Stall Unit, respectively. |
|-----|--------------------------------------------------------------------------------------------------------------------------------|

|    |            |   | LOC Amount    |   |
|---------|-----------------|--------|---------------|--------|
|    |            |   | Outstanding   |   |
|    | $627 million    |   | Against       |   |
|    | Credit Facility |   | $627 million  |   |
|    | Borrowing/LOC   |   | Agreement at  |   |
|    | Limit           |   | June 30, 2009 |   |
| Company | (in millions)   |   |
| APCo    |            | $      | 300           |   |   | $ | 127 |   |
| CSPCo   |            |   | 230           |   |   |   | - |   |
| I&M |            |   | 230           |   |   |   | 78 |   |
| OPCo    |            |   | 400           |   |   |   | 167 |   |
| PSO     |            |   | 65            |   |   |   | - |   |
| SWEPCo  |            |   | 230           |   |   |   | - |   |

|       |   |        |   |          |   |          |   |          |   |      |   |       |   |                |    |        | 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) |   |      |   |       |   |                |    |        |
| AEGCo      |   | Dresden     | (c)    | Ohio          |   | $             | 321    |          | $      | 198       |   | Gas        |   | Combined-cycle      |    | 580         |       | 2013 |
| SWEPCo     |   | Stall       |   | Louisiana     |   |          | 384    |          |   | 322       |   | Gas        |   | Combined-cycle      |    | 500         |       | 2010 |
| SWEPCo     |   | Turk        | (d)    | Arkansas      |   |          | 1,628  | (d)           |   | 560       | (e)    | Coal       |   | Ultra-supercritical |    | 600         | (d)        | 2012 |
| APCo       |   | Mountaineer | (f)    | West Virginia |   |          |   | (f)           |   |      |   | Coal       |   | IGCC                |    | 629         |       |   | (f) |
| CSPCo/OPCo |   | Great Bend  | (f)    | Ohio          |   |          |   | (f)           |   |      |   | Coal       |   | IGCC                |    | 629         |       |   | (f) |

| (a) | Amount excludes AFUDC.                                                                                                                                                                                                                  |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amount includes AFUDC.                                                                                                                                                                                                                  |
| (c) | 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. |
| (d) | SWEPCo owns approximately 73%, or 440 MW, totaling $1.2 billion in capital investment.  See “Turk Plant” section below.                                                                                           |
| (e) | Amount represents SWEPCo’s CWIP balance only.                                                                                                                                                                                     |
| (f) | Construction of IGCC plants is subject to regulatory approvals.  See “IGCC Plants” section below.                                                                                                                 |

| Company |   | Amount        |   |
|---------|--------|---------------|--------|
|    |   | (in millions) |   |
| APCo    |   | $             | 53     |   |
| CSPCo   |   |          | 38     |   |
| I&M |   |          | 54     |   |
| OPCo    |   |          | 38     |   |
| PSO     |   |          | 27     |   |
| SWEPCo  |   |          | 25     |   |

| · | 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 |   |

----

----

PART II.  OTHER INFORMATION

| Rate recovery approved in Ohio may be overturned on appeal or may not provide full recovery of fuel costs.      (Applies to AEP, OPCo and CSPCo) |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 |   |
|---------------------------|--------|--------------------------------|--------|-----------------------------|--------|--------|----------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------|--------|
| 04/01/09 – 04/30/09 |   |                           | 49     | (a)                         | $      | 61.60  |                                                                             |   |                                                                                                         | -      |   | $ | - |   |
| 05/01/09 – 05/31/09 |   |                           | -      |                        |   | -      |                                                                             |   |                                                                                                         | -      |   |   | - |   |
| 06/01/09 – 06/30/09 |   |                           | -      |                        |   | -      |                                                                             |   |                                                                                                         | -      |   |   | - |   |

| (a) | PSO purchased 40 shares of its 4% cumulative preferred stock in a privately-negotiated transaction outside of an announced program.  OPCo repurchased 9 shares of its 4.5% cumulative preferred stock in a privately-negotiated transaction outside of an announced program. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 1.   | Election of twelve 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 as follows: |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                  | Number of Shares Voted For |   | Number of Shares Abstaining |
|-----------------------|----------------------------|--------|-----------------------------|
|                  |                       |   |                        |
| E. R. Brooks          | 302,115,714                |   | 28,936,623                  |
| Donald M. Carlton     | 309,121,737                |   | 21,930,600                  |
| Ralph D. Crosby, Jr.  | 309,357,886                |   | 21,694,451                  |
| Linda A. Goodspeed    | 312,588,927                |   | 18,463,410                  |
| Thomas E. Hoaglin     | 284,524,087                |   | 46,528,250                  |
| Lester A. Hudson, Jr. | 308,886,821                |   | 22,165,516                  |
| Michael G. Morris     | 303,317,065                |   | 27,735,272                  |
| Lionel L. Nowell, III | 299,943,908                |   | 31,108,429                  |
| Richard L. Sandor     | 312,500,835                |   | 18,551,502                  |
| Kathryn D. Sullivan   | 312,442,550                |   | 18,609,787                  |
| Sara M. Tucker        | 327,027,667                |   | 4,024,670                   |
| John F. Turner        | 325,347,483                |   | 5,704,854                   |

| 2. | Approval of Amendment to Certificate of Incorporation.  The amendment was approved by a vote of the shareholders as follows: |
|----|----------------------------------------------------------------------------------------------------------------------------------------|

| Shares Voted FOR     |   | 239,498,852 |
|----------------------|--------|-------------|
| Shares Voted AGAINST |   | 20,977,190  |
| Shares ABSTAINING    |   | 2,538,124   |

| 3. | Ratification of the appointment of the firm of Deloitte & Touche LLP as the independent registered public accounting firm for 2009.  The proposal was approved by a vote of the shareholders as follows: |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Shares Voted FOR     |   | 326,890,110 |
|----------------------|--------|-------------|
| Shares Voted AGAINST |   | 3,466,843   |
| Shares ABSTAINING    |   | 695,384     |

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

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