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

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

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

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

----

|                                       |   |   |   Number      of shares of common stock outstanding of the registrants atApril      30, 2008            |
|--------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------|
|                                       |   |   |                                                                                                              |
| American      Electric Power Company, Inc. |   |   |                       401,591,005 |
|                                       |   |   | ($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      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 individual registrant is filed by such      registrant on its own behalf. Each registrant makes no representation as      to information relating to the other  registrants. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

GLOSSARY OF TERMS

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

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

| IGCC                           |   | Integrated      Gasification Combined Cycle, technology that turns coal into a      cleaner-burning gas.                                                                                          |
|--------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| IRS                            |   | Internal      Revenue Service.                                                                                                                                                                    |
| IURC                           |   | Indiana      Utility Regulatory Commission.                                                                                                                                                       |
| I&M                        |   | Indiana      Michigan Power Company, an AEP electric utility  subsidiary.                                                                                                                         |
| JMG                            |   | JMG      Funding LP.                                                                                                                                                                              |
| KPCo                           |   | Kentucky      Power Company, an AEP electric utility subsidiary.                                                                                                                                  |
| KPSC                           |   | Kentucky      Public Service Commission.                                                                                                                                                          |
| kV                             |   | Kilovolt.                                                                                                                                                                                         |
| KWH                            |   | Kilowatthour.                                                                                                                                                                                     |
| LPSC                           |   | Louisiana      Public Service Commission.                                                                                                                                                         |
| MISO                           |   | Midwest      Independent Transmission System Operator.                                                                                                                                            |
| MTM                            |   | Mark-to-Market.                                                                                                                                                                                   |
| MW                             |   | Megawatt.                                                                                                                                                                                         |
| MWH                            |   | Megawatthour.                                                                                                                                                                                     |
| NOx                            |   | Nitrogen      oxide.                                                                                                                                                                              |
| Nonutility      Money Pool     |   | AEP      System’s Nonutility Money Pool.                                                                                                                                                    |
| NSR                            |   | New      Source Review.                                                                                                                                                                           |
| NYMEX                          |   | New      York Mercantile Exchange.                                                                                                                                                                |
| OCC                            |   | Corporation      Commission of the State of Oklahoma.                                                                                                                                             |
| OPCo                           |   | Ohio      Power Company, an AEP electric utility subsidiary.                                                                                                                                      |
| OPEB                           |   | Other      Postretirement Benefit Plans.                                                                                                                                                          |
| OTC                            |   | Over      the counter.                                                                                                                                                                            |
| 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.                                                                                                 |
| REP                            |   | Texas      Retail Electric Provider.                                                                                                                                                              |
| Risk      Management Contracts |   | Trading      and nontrading derivatives, including those derivatives designated as cash      flow and fair value hedges.                                                                          |
| Rockport      Plant            |   | A      generating plant, consisting of two 1,300 MW coal-fired generating units      near Rockport, Indiana, owned by AEGCo and I&M.                                                          |
| RSP                            |   | Rate      Stabilization Plan.                                                                                                                                                                     |
| RTO                            |   | Regional      Transmission Organization.                                                                                                                                                          |
| S&P                        |   | Standard      and Poor’s.                                                                                                                                                                   |
| SCR                            |   | Selective      Catalytic Reduction.                                                                                                                                                               |
| SEC                            |   | United      States Securities and Exchange Commission.                                                                                                                                            |
| SECA                           |   | Seams      Elimination Cost Allocation.                                                                                                                                                           |
| SFAS                           |   | Statement      of Financial Accounting Standards issued by the Financial Accounting      Standards Board.                                                                                         |
| SFAS      71                   |   | Statement      of Financial Accounting Standards No. 71, “Accounting for the Effects of      Certain Types of Regulation.”                                                            |

| SFAS      109                                    |   | Statement      of Financial Accounting Standards No. 109, “Accounting for Income      Taxes.”                                                                                                                  |
|--------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SFAS      133                                    |   | Statement      of Financial Accounting Standards No. 133, “Accounting for Derivative      Instruments and Hedging Activities.”                                                                                 |
| SFAS      157                                    |   | Statement      of Financial Accounting Standards No. 157, “Fair Value      Measurements.”                                                                                                                      |
| SIA                                              |   | System      Integration Agreement.                                                                                                                                                                                         |
| SNF                                              |   | Spent      Nuclear Fuel.                                                                                                                                                                                                   |
| SO2                                              |   | Sulfur      Dioxide.                                                                                                                                                                                                       |
| SPP                                              |   | Southwest      Power Pool.                                                                                                                                                                                                 |
| Stall      Unit                                  |   | J.      Lamar Stall Unit at Arsenal Hill Plant.                                                                                                                                                                            |
| Sweeny                                           |   | Sweeny      Cogeneration Limited Partnership, owner and operator of a four unit, 480      MW gas-fired generation facility, owned 50% by AEP.  AEP’s 50%      interest in Sweeny was sold in October 2007. |
| SWEPCo                                           |   | Southwestern      Electric Power Company, an AEP electric utility  subsidiary.                                                                                                                                             |
| TCC                                              |   | AEP      Texas Central Company, an AEP electric utility  subsidiary.                                                                                                                                                       |
| TEM                                              |   | SUEZ      Energy Marketing NA, Inc. (formerly known as Tractebel Energy Marketing,      Inc.).                                                                                                                             |
| Texas      Restructuring   Legislation |   | Legislation      enacted in 1999 to restructure the electric utility industry in      Texas.                                                                                                                               |
| TNC                                              |   | AEP      Texas North Company, an AEP electric utilitysubsidiary.                                                                                                                                                           |
| True-up      Proceeding                          |   | A      filing made under the Texas Restructuring Legislation to finalize the      amount of stranded costs and other true-up items and the recovery of such      amounts.                                                  |
| Turk      Plant                                  |   | John      W. Turk, Jr. Plant.                                                                                                                                                                                              |
| Utility      Money Pool                          |   | AEP      System’s Utility Money Pool.                                                                                                                                                                                |
| VaR                                              |   | Value      at Risk, a method to quantify risk exposure.                                                                                                                                                                    |
| Virginia      SCC                                |   | Virginia      State Corporation Commission.                                                                                                                                                                                |
| WPCo                                             |   | Wheeling      Power Company, an AEP electric distribution subsidiary.                                                                                                                                                      |
| WVPSC                                            |   | Public      Service Commission of WestVirginia.                                                                                                                                                                            |

----

FORWARD-LOOKING INFORMATION

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

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

----

| · | In      February 2008, APCo and WPCo filed for an increase of approximately $156      million including a $135 million increase in the Expanded Net Energy Cost      recovery mechanism, a $17 million increase in construction cost surcharges      and $4 million of reliability expenditures, to all become effective July      2008.                                                                                                                                                                                                                                                                                                      |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | In      February 2008, the FERC approved a PATH request for a transmission formula      rate and ordered that the formula rates go into effect in March      2008.  Settlement negotiations began and motions for rehearing      were filed by intervening parties in March 2008.  PATH requested      an incentive return of 14.3% on its equity investment using a 50/50 debt      to equity ratio, the recovery of deferred pre-operating, pre-construction      costs and the recovery of construction financing costs through the      inclusion of CWIP in rate base with a true-up to actual for these      costs. |
| · | In      March 2008, the OCC approved a settlement for recovery of 2007 Oklahoma      ice storm costs, subject to an audit of December ice storm costs to be      filed in July 2008.  As a result, PSO recorded an $81 million      regulatory asset for actual ice storm maintenance expenses and related      carrying costs less $9 million of amortization expense to offset      recognition of deferred gains from  sales of SO2      emission allowances.                                                                                                                                                          |
| · | In      March 2008, PSO and all other parties signed a settlement agreement that      provides for recovery of $11 million of pre-construction costs related to      PSO’s Red Rock Generating Facility.  PSO filed the settlement      with the OCC for approval.  A hearing on the settlement is      scheduled for May 2008.  As a result of the settlement, PSO      wrote-off $10 million of its remaining unrecoverable deferred      pre-construction costs/cancellation fees in the first quarter of      2008.                                                                                   |
| · | In      March 2008, the WVPSC granted APCo a Certificate of Public Convenience and      Necessity and recovery of pre-construction and construction financing      costs related to the planned construction of the IGCC plant in West      Virginia.  Various intervenors filed petitions with the WVPSC to      reconsider the order.  In April 2008, the Virginia SCC denied      APCo’s request for approval of the plant and to recover pre-construction      and construction financing costs.  In April 2008, APCo filed a      petition for reconsideration in Virginia.                          |
| · | In      March 2008, the LPSC approved the application to construct the Turk      Plant.  In January 2008, a Texas ALJ recommended that SWEPCo’s      application be denied and subsequently, in March 2008,  the PUCT      voted to reopen the record and conduct additional      hearings.  SWEPCo expects a decision from the PUCT in the last      half of 2008.                                                                                                                                                                                                                                       |
| · | In      March 2008, APCo filed a notice with the Virginia SCC that it plans to      file a general base rate case no sooner than May 2008.  APCo      will also file for recovery of $46 million of incremental E&R      costs.                                                                                                                                                                                                                                                                                                                                                                                                 |
| · | In      April 2008, the LPSC approved a settlement agreement between SWEPCo and      the LPSC staff that established a formula rate plan with a three-year      term.  Beginning August 2008, rates shall be established to      allow SWEPCo to earn an adjusted return on common equity of      10.565%.                                                                                                                                                                                                                                                                                                                          |
| · | In      April 2008, the Ohio legislature passed legislation which allows utilities      to set prices by filing an Electric Security Plan along with the ability      to simultaneously file a Market Rate Option.  The PUCO would      have authority to approve or modify the utility’s request to set      prices.  Both alternatives would involve earnings tests      monitored by the PUCO.  The legislation still must be signed by      the Ohio governor and will become law 90 days after the Governor’s      signature.                                                                  |

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

| · | Barging      operations that annually transport approximately 35 million tons of coal      and dry bulk commodities primarily on the Ohio, Illinois and Lower      Mississippi Rivers.  Approximately 39% of the barging is for the      transportation of agricultural products, 30% for coal, 14% for steel and      17% for other commodities. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|                          | Three      Months Ended March      31, |   |
|-------------------------------|----------------------------------------|--------|
|                          | 2008                                   |   | 2007 |   |
|                          | (in      millions)                     |   |
| Utility      Operations       |                                   | $      | 410 |   |   | $ | 253 |   |
| MEMCO      Operations         |                                   |   | 7 |   |   |   | 15 |   |
| Generation      and Marketing |                                   |   | 1 |   |   |   | (1 | ) |
| All      Other (a)            |                                   |   | 155 |   |   |   | 4 |   |
| Net      Income               |                                   | $      | 573 |   |   | $ | 271 |   |

| (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 the      fourth quarter of 2006. |
|   | ·                   | Revenue      sharing related to the Plaquemine Cogeneration  Facility. |

|                                                            |   | Three      Months Ended |   |
|-----------------------------------------------------------------|--------|-------------------------|--------|
|                                                            |   | March      31,          |   |
|                                                            |   | 2008                    |   |   | 2007 |   |
|                                                            |   | (in      millions)      |   |
| Revenues                                                        |   | $                       | 3,294  |   |   | $ | 3,033 |   |
| Fuel      and Purchased Power                                   |   |                    | 1,213  |   |   |   | 1,119 |   |
| Gross      Margin                                               |   |                    | 2,081  |   |   |   | 1,914 |   |
| Depreciation      and Amortization                              |   |                    | 355    |   |   |   | 383 |   |
| Other      Operating Expenses                                   |   |                    | 941    |   |   |   | 991 |   |
| Operating      Income                                           |   |                    | 785    |   |   |   | 540 |   |
| Other      Income, Net                                          |   |                    | 42     |   |   |   | 18 |   |
| Interest      Charges and Preferred Stock Dividend Requirements |   |                    | 210    |   |   |   | 179 |   |
| Income      Tax Expense                                         |   |                    | 207    |   |   |   | 126 |   |
| Net      Income                                                 |   | $                       | 410    |   |   | $ | 253 |   |

|                                                                                                                          |   | 2008                      |   |   | 2007   |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|--------|--------|--------|
| Energy      Summary                                                                                                           |   | (in      millions of KWH) |   |
| Retail:                                                                                                                       |   |                      |   |   |   |   |
| Residential                                                                                                                   |   |                      | 14,500 |   |   |   | 14,139 |   |
| Commercial                                                                                                                    |   |                      | 9,547  |   |   |   | 9,359 |   |
| Industrial                                                                                                                    |   |                      | 14,350 |   |   |   | 13,565 |   |
| Miscellaneous                                                                                                                 |   |                      | 609    |   |   |   | 614 |   |
| Total      Retail                                                                                                             |   |                      | 39,006 |   |   |   | 37,677 |   |
|                                                                                                                          |   |                      |   |   |   |   |   |   |
| Wholesale                                                                                                                     |   |                      | 11,666 |   |   |   | 8,778 |   |
|                                                                                                                          |   |                      |   |   |   |   |   |   |
| Texas      Wires – Energy Delivered to Customers Served by      TNC           and TCC in ERCOT |   |                      | 5,823  |   |   |   | 5,831 |   |
| Total      KWHs                                                                                                               |   |                      | 56,495 |   |   |   | 52,286 |   |

|                            |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2008 |   | 2007 |   |
|---------------------------------|--------|-----------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|------|--------|
| Weather      Summary            |   | (in      degree days) |   |
| Eastern      Region             |   |                  |   |   |   |
| Actual      – Heating (a) |   | 1,824                 |   | 1,816  |   |
| Normal      – Heating (b) |   | 1,767                 |   | 1,792  |   |
|                            |   |                  |   |   |   |
| Actual      – Cooling (c) |   | -                     |   | 14     |   |
| Normal      – Cooling (b) |   | 3                     |   | 3      |   |
|                            |   |                  |   |   |   |
| Western Region      (d)         |   |                  |   |   |   |
| Actual      – Heating (a) |   | 949                   |   | 902    |   |
| Normal      – Heating (b) |   | 931                   |   | 959    |   |
|                            |   |                  |   |   |   |
| Actual      – Cooling (c) |   | 26                    |   | 56     |   |
| Normal      – Cooling (b) |   | 20                    |   | 18     |   |

| (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.                                        |

| First      Quarter of 2007                        |   |   |   |   | $      | 253    |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 114    |   |   |   |   |   |
| Off-system      Sales                             |   |   | 40     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 8      |   |   |   |   |   |
| Other      Revenues                               |   |   | 5      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 167    |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | 81     |   |   |   |   |   |
| Gain      on Dispositions of Assets, Net          |   |   | (21    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 28     |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (10    | )      |   |   |   |   |
| Carrying      Costs Income                        |   |   | 10     |   |   |   |   |   |
| Interest      Income                              |   |   | 11     |   |   |   |   |   |
| Other      Income, Net                            |   |   | 3      |   |   |   |   |   |
| Interest      and Other Charges                   |   |   | (31    | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 71     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (81    | ) |
|                                              |   |   |   |   |   |   |   |   |
| First      Quarter of 2008                        |   |   |   |   |   | $      | 410    |   |

| · | Retail      Margins increased $114 million primarily due to the    following:                                                                                                                                                   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                          | A      $44 million increase related to RSP rate increases implemented in our Ohio      jurisdictions with PUCO approval, a $14 million increase related to      recovery of E&R costs in Virginia and construction financing costs in      West Virginia, a $9 million increase in base rates in Texas and an $8      million increase in base rates in Oklahoma. |
|   | ·                                                                                                                                                                                                                          | A      $58 million increase related to an OPCo coal contract amendment which      reduced future deliveries to OPCo in exchange for consideration      received. |
|   | ·                                                                                                                                                                                                                          | A      $23 million increase related to increased residential and commercial usage      and customer growth. |
|   | ·                                                                                                                                                                                                                          | A      $21 million increase related to increased usage by Ormet, an industrial      customer in Ohio.  See “Ormet” section of Note  3. |
|   | These      increases were partially offset by:                                                                                                                                                                                  |
|   | ·                                                                                                                                                                                                                          | A      $55 million decrease related to increased fuel, consumable and allowance      costs in Ohio. |
| · | Margins      from Off-system Sales increased $40 million primarily due to higher east      physical off-system sales margins mostly due to higher volumes and      stronger prices, partially offset by lower trading  margins. |

| · | Other      Operation and Maintenance expenses decreased $81 million primarily due to      a deferral of storm restoration costs of $80 million in Oklahoma as a      result of a rate settlement to recover 2007 storm restoration costs      partially offset by an increase in generation expenses from base      operations and the write-off of $10 million of unrecoverable      pre-construction costs for PSO’s canceled Red Rock Generating      Facility. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Gain      on Disposition of Assets, Net decreased $21 million due to the cessation      of the earnings sharing agreement with Centrica from the sale of our Texas      REPs in 2002.  In 2007, we received the final earnings sharing      payment of $20 million.                                                                                                                                                                                            |
| · | Depreciation      and Amortization expense decreased $28 million primarily due to lower      commission-approved depreciation rates in Indiana, Michigan, Virginia,      Oklahoma and Texas and lower Ohio regulatory asset amortization, partially      offset by higher depreciable property balances.                                                                                                                                                                 |
| · | Taxes      Other Than Income Taxes increased $10 million primarily due to higher      property taxes related to property additions.                                                                                                                                                                                                                                                                                                                                      |
| · | Carrying      Costs Income increased $10 million primarily due to increased carrying      cost income on cost deferrals in Virginia and Oklahoma.                                                                                                                                                                                                                                                                                                                        |
| · | Interest      and Other Charges increased $31 million primarily due to additional debt      issued in 2007 and higher interest rates on variable rate      debt.                                                                                                                                                                                                                                                                                                         |
| · | Income      Tax Expense increased $81 million due to an increase in pretax      income.                                                                                                                                                                                                                                                                                                                                                                                  |

|                                                       |   | March      31, 2008  |   |   | December      31, 2007 |   |
|------------------------------------------------------------|--------|----------------------|--------|--------|------------------------|--------|
|                                                       |   | ($      in millions) |   |
| Long-term      Debt, including amounts due within one year |   | $                    | 15,636 |   |                   |   | 58.8 | % |   | $ | 14,994 |   |   |   | 58.1 | % |
| Short-term      Debt                                       |   |                 | 409    |   |                   |   | 1.5 |   |   |   | 660 |   |   |   | 2.6 |   |
| Total      Debt                                            |   |                 | 16,045 |   |                   |   | 60.3 |   |   |   | 15,654 |   |   |   | 60.7 |   |
| Common      Equity                                         |   |                 | 10,489 |   |                   |   | 39.5 |   |   |   | 10,079 |   |   |   | 39.1 |   |
| Preferred      Stock                                       |   |                 | 61     |   |                   |   | 0.2 |   |   |   | 61 |   |   |   | 0.2 |   |
|                                                       |   |                 |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Debt and Equity Capitalization                  |   | $                    | 26,595 |   |                   |   | 100.0 | % |   | $ | 25,794 |   |   |   | 100.0 | % |

|                                        |                           |   | Amount             |              | Maturity          |
|---------------------------------------------|--------------------------------|--------|--------------------|-------------------|-------------------|
|                                        |                           |   | (in      millions) |              |              |
| Commercial      Paper Backup:               |                           |   |               |              |              |   |
|                                        | Revolving      Credit Facility |   |               | $                 | 1,500   |   | March      2011 |
|                                        | Revolving      Credit Facility |   |               |              | 1,500   |   | April      2012 |
| Total                                       |                           |   |               | 3,000   |              |   |
| Cash      and Cash Equivalents              |                           |   |               | 155     |              |   |
| Total      Liquidity Sources                |                           |   |               | 3,155   |              |   |
| Less:      AEP Commercial Paper Outstanding |                           |   |               | 409     |              |   |
|                                        | Letters      of Credit Drawn   |   |               |              | 57      |   |   |
|                                        |                           |   |               |              |              |   |
| Net      Available Liquidity                |                           |   | $                  | 2,689   |              |   |

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

|                                                  | Three      Months Ended |   |
|-------------------------------------------------------|-------------------------|--------|
|                                                  | March      31,          |   |
|                                                  | 2008                    |   | 2007 |   |
|                                                  | (in      millions)      |   |
| Cash      and Cash Equivalents at Beginning of Period |                    | $      | 178 |   |   | $ | 301 |   |
| Net      Cash Flows from Operating Activities         |                    |   | 628 |   |   |   | 351 |   |
| Net      Cash Flows Used for Investing Activities     |                    |   | (894 | ) |   |   | (628 | )  |
| Net      Cash Flows from Financing Activities         |                    |   | 243 |   |   |   | 235 |   |
| Net      Decrease in Cash and Cash Equivalents        |                    |   | (23 | ) |   |   | (42 | )  |
| Cash      and Cash Equivalents at End of Period       |                    | $      | 155 |   |   | $ | 259 |   |

|                                          | Three      Months Ended |   |
|-----------------------------------------------|-------------------------|--------|
|                                          | March      31,          |   |
|                                          | 2008                    |   | 2007 |   |
|                                          | (in      millions)      |   |
| Net      Income                               |                    | $      | 573 |   |   | $ | 271 |   |
| Depreciation      and Amortization            |                    |   | 363 |   |   |   | 391 |   |
| Other                                         |                    |   | (308 | ) |   |   | (311 | ) |
| Net      Cash Flows from Operating Activities |                    | $      | 628 |   |   | $ | 351 |   |

|                                              | Three      Months Ended |   |
|---------------------------------------------------|-------------------------|--------|
|                                              | March      31,          |   |
|                                              | 2008                    |   | 2007 |   |
|                                              | (in      millions)      |   |
| Construction      Expenditures                    |                    | $      | (778 | ) |   | $ | (907 | )  |
| Proceeds      from Sales of Assets                |                    |   | 18 |   |   |   | 68 |   |
| Other                                             |                    |   | (134 | ) |   |   | 211 |   |
| Net      Cash Flows Used for Investing Activities |                    | $      | (894 | ) |   | $ | (628 | ) |

|                                          | Three      Months Ended |   |
|-----------------------------------------------|-------------------------|--------|
|                                          | March      31,          |   |
|                                          | 2008                    |   | 2007 |   |
|                                          | (in      millions)      |   |
| Issuance      of Common Stock                 |                    | $      | 45 |   |   | $ | 54 |   |
| Issuance/Retirement      of Debt, Net         |                    |   | 376 |   |   |   | 355 |   |
| Dividends      Paid on Common Stock           |                    |   | (165 | ) |   |   | (155 | )  |
| Other                                         |                    |   | (13 | ) |   |   | (19 | )  |
| Net      Cash Flows from Financing Activities |                    | $      | 243 |   |   | $ | 235 |   |

|                                                      | March      31,2008 |   | December      31,2007 |   |
|-----------------------------------------------------------|--------------------|--------|-----------------------|--------|
|                                                      | (in      millions) |
| AEP      Credit Accounts Receivable Purchase Commitments  |               | $      | 502                   |   |   | $ | 507 |   |
| Rockport      Plant Unit 2 Future Minimum Lease Payments  |               |   | 2,216                 |   |   |   | 2,216 |   |
| Railcars      Maximum Potential Loss From Lease Agreement |               |   | 30                    |   |   |   | 30 |   |

|       |   |            |   |               |   |               |   |               |   |           |   |            |   |                |    |        | Commercial |
|------------|--------|-----------------|--------|--------------------|--------|--------------------|--------|--------------------|--------|----------------|--------|-----------------|--------|---------------------|---------|-------------|------------|
|       |   |            |   |               |   | Total              |   |               |   |           |   |            |   |                | Nominal |        | Operation  |
| Operating  |   | Project         |   |               |   | Projected          |   |               |   |           |   |            |   |                | MW      |        | Date       |
| Company    |   | Name            |   | Location           |   | Cost      (a)      |   | CWIP      (b)      |   | Fuel      Type |   | Plant      Type |   | Capacity            |    | (Projected) |
|       |   |            |   |               |   | (in      millions) |   | (in      millions) |   |           |   |            |   |                |    |        |
| PSO        |   | Southwestern    | (c)    | Oklahoma           |   | $                  | 58     |               | $      | -              |   | Gas             |   | Simple-cycle        |    | 170         |       | 2008 |
| PSO        |   | Riverside       |   | Oklahoma           |   |               | 59     |               |   | 57             |   | Gas             |   | Simple-cycle        |    | 170         |       | 2008 |
| AEGCo      |   | Dresden         | (d)    | Ohio               |   |               | 305    | (d)                |   | 101            |   | Gas             |   | Combined-cycle      |    | 580         |       | 2010 |
| SWEPCo     |   | Stall           |   | Louisiana          |   |               | 378    |               |   | 76             |   | Gas             |   | Combined-cycle      |    | 500         |       | 2010 |
| SWEPCo     |   | Turk            | (e)    | Arkansas           |   |               | 1,522  | (e)                |   | 313            |   | Coal            |   | Ultra-supercritical |    | 600         | (e)        | 2012 |
| APCo       |   | Mountaineer     |   | West      Virginia |   |               | 2,230  |               |   | -              |   | Coal            |   | IGCC                |    | 629         |       | 2012 |
| CSPCo/OPCo |   | Great      Bend |   | Ohio               |   |               | 2,700  | (f)                |   | -              |   | Coal            |   | IGCC                |    | 629         |       | 2017 |

| (a) | Amount      excludes AFUDC.                                                                                                                                                                                                                                                                                |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amount      includes AFUDC.                                                                                                                                                                                                                                                                                |
| (c) | Southwestern      Units were placed in service on February 29, 2008.                                                                                                                                                                                                                                       |
| (d) | 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.                                                |
| (e) | SWEPCo      plans to own approximately 73%, or 440 MW, totaling $1,110 million in      capital investment.  The increase in the cost estimate relates      to cost escalations due to the delay in receipt of permits and      approvals.  See “Turk Plant” section below. |
| (f) | Cost      estimates, updated to reflect cost escalations due to revised commercial      operation date of 2017, are not yet filed with the PUCO.  See      “Ohio IGCC Plant” section of Note3.                                                                                       |

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

----

----

|                                                                                   |   | Utility      Operations |   |   | Generation      andMarketing |   |   | All      Other |   |   | Sub-TotalMTM      Risk Management Contracts |   |   | MTMof      Cash Flow and Fair Value Hedges |   |   |  CollateralDeposits |   |   | Total  |   |
|----------------------------------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------------|--------|--------|----------------|--------|--------|---------------------------------------------|--------|--------|--------------------------------------------|--------|--------|--------------------------|--------|--------|--------|--------|
| Current      Assets                                                                    |   | $                       | 411    |   |                         | $      | 215    |           |   | $      | 95                                          |   |   | $                                          | 721    |   |                     | $      | 25     |   |   | $ | (48 | ) |   | $ | 698 |   |
| Noncurrent      Assets                                                                 |   |                    | 199    |   |                         |   | 101    |           |   |   | 71                                          |   |   |                                       | 371    |   |                     |   | 8      |   |   |   | (37 | ) |   |   | 342 |   |
| Total      Assets                                                                      |   |                    | 610    |   |                         |   | 316    |           |   |   | 166                                         |   |   |                                       | 1,092  |   |                     |   | 33     |   |   |   | (85 | ) |   |   | 1,040 |   |
|                                                                                   |   |                    |   |   |                         |   |   |           |   |   |                                        |   |   |                                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Current      Liabilities                                                               |   |                    | (365   | )      |                         |   | (231   | )              |   |   | (96                                         | )      |   |                                       | (692   | )      |                     |   | (82    | )      |   |   | 94 |   |   |   | (680 | ) |
| Noncurrent      Liabilities                                                            |   |                    | (104   | )      |                         |   | (43    | )              |   |   | (77                                         | )      |   |                                       | (224   | )      |                     |   | (3     | )      |   |   | 6 |   |   |   | (221 | ) |
| Total      Liabilities                                                                 |   |                    | (469   | )      |                         |   | (274   | )              |   |   | (173                                        | )      |   |                                       | (916   | )      |                     |   | (85    | )      |   |   | 100 |   |   |   | (901 | ) |
|                                                                                   |   |                    |   |   |                         |   |   |           |   |   |                                        |   |   |                                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract      Net        Assets (Liabilities) |   | $                       | 141    |   |                         | $      | 42     |           |   | $      | (7                                          | )      |   | $                                          | 176    |   |                     | $      | (52    | )      |   |   |   15 |   |   | $ | 139 |   |

|                                                                                                                                                                     |   | Utility      Operations |   |   | GenerationandMarketing |   |   | All      Other |   |   | Total  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|--------|----------------|--------|--------|--------|--------|
| Total      MTM Risk Management Contract Net Assets           (Liabilities) at December 31, 2007                                                 |   | $                       | 156    |   |                   | $      | 43     |           |   | $      | (8     | )      |   | $ | 191 |   |
| (Gain)      Loss from Contracts Realized/Settled      During           the Period and Entered in a Prior Period                       |   |                    | (28    | )      |                   |   | 1      |           |   |   | -      |   |   |   | (27 | ) |
| Fair      Value of New Contracts at Inception When Entered  During      the Period (a)                                                               |   |                    | 1      |   |                   |   | -      |           |   |   | -      |   |   |   | 1 |   |
| Changes      in Fair Value Due to Valuation Methodology  Changes      on Forward Contracts (b)                                                            |   |                    | 4      |   |                   |   | 2      |           |   |   | 1      |   |   |   | 7 |   |
| Changes      in Fair Value Due to Market Fluctuations During   the      Period (c)                                                                   |   |                    | 3      |   |                   |   | (4     | )              |   |   | -      |   |   |   | (1 | ) |
| Changes      in Fair Value Allocated to Regulated Jurisdictions(d)                                                                                                  |   |                    | 5      |   |                   |   | -      |           |   |   | -      |   |   |   | 5 |   |
| Total      MTM Risk Management Contract Net      Assets                 (Liabilities) at March 31, 2008 |   | $                       | 141    |   |                   | $      | 42     |           |   | $      | (7     | )      |   | $ | 176 |   |
| Net      Cash Flow and Fair Value Hedge Contracts                                                                                                                   |   |                    |   |   |                   |   |   |           |   |   |   |   |   |   | (52 | ) |
| Collateral      Deposits                                                                                                                                                 |   |                    |   |   |                   |   |   |           |   |   |   |   |   |   | 15 |   |
| Ending      Net Risk Management Assets at March  31, 2008                                                                                                           |   |                    |   |   |                   |   |   |           |   |   |   |   |   | $ | 139 |   |

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

|                           |   | Remainder2008 |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | After2012      (f) |   |   | Total  |   |
|--------------------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|
| Utility      Operations:       |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |
| Level      1 (a)               |   | $             | (6     | )      |   | $      | (3     | )      |   | $      | -      |   |   | $      | -      |   |               | $      | -      |   |   | $ | - |   |   |   | (9 | ) |
| Level      2 (b)               |   |          | 28     |   |   |   | 43     |   |   |   | 29     |   |   |   | 2      |   |               |   | 1      |   |   |   | - |   |   |   | 103 |   |
| Level      3 (c)               |   |          | -      |   |   |   | 4      |   |   |   | (7     | )      |   |   | -      |   |               |   | -      |   |   |   | - |   |   |   | (3 | ) |
| Total                          |   |          | 22     |   |   |   | 44     |   |   |   | 22     |   |   |   | 2      |   |               |   | 1      |   |   |   | - |   |   |   | 91 |   |
|                           |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Generation      and Marketing: |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Level      1 (a)               |   |          | (21    | )      |   |   | 5      |   |   |   | -      |   |   |   | -      |   |               |   | -      |   |   |   | - |   |   |   | (16 | ) |
| Level      2 (b)               |   |          | 4      |   |   |   | (6     | )      |   |   | 2      |   |   |   | 3      |   |               |   | 3      |   |   |   | - |   |   |   | 6 |   |
| Level      3 (c)               |   |          | -      |   |   |   | 1      |   |   |   | 9      |   |   |   | 9      |   |               |   | 8      |   |   |   | 25 |   |   |   | 52 |   |
| Total                          |   |          | (17    | )      |   |   | -      |   |   |   | 11     |   |   |   | 12     |   |               |   | 11     |   |   |   | 25 |   |   |   | 42 |   |
|                           |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| All      Other:                |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Level      1 (a)               |   |          | -      |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |               |   | -      |   |   |   | - |   |   |   | - |   |
| Level      2 (b)               |   |          | (1     | )      |   |   | (4     | )      |   |   | (4     | )      |   |   | 2      |   |               |   | -      |   |   |   | - |   |   |   | (7 | ) |
| Level      3 (c)               |   |          | -      |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |               |   | -      |   |   |   | - |   |   |   | - |   |
| Total                          |   |          | (1     | )      |   |   | (4     | )      |   |   | (4     | )      |   |   | 2      |   |               |   | -      |   |   |   | - |   |   |   | (7 | ) |
|                           |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Total:                         |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Level      1 (a)               |   |          | (27    | )      |   |   | 2      |   |   |   | -      |   |   |   | -      |   |               |   | -      |   |   |   | - |   |   |   | (25 | ) |
| Level      2 (b)               |   |          | 31     |   |   |   | 33     |   |   |   | 27     |   |   |   | 7      |   |               |   | 4      |   |   |   | - |   |   |   | 102 |   |
| Level      3 (c) (d)           |   |          | -      |   |   |   | 5      |   |   |   | 2      |   |   |   | 9      |   |               |   | 8      |   |   |   | 25 |   |   |   | 49 |   |
| Total                          |   | $             | 4      |   |   | $      | 40     |   |   | $      | 29     |   |   | $      | 16     |   |               | $      | 12     |   |   | $ | 25 |   |   | $ | 126 |   |

| Dedesignated      Risk Management   Contracts (e)         |   |   | 11 |   |   | 14 |   |   | 14 |   |   | 6  |   |   | 5  |   |   | -  |   |    | 50  |   |
|---------------------------------------------------------------------|--------|--------|----|--------|--------|----|--------|--------|----|--------|--------|----|--------|--------|----|--------|--------|----|--------|---------|-----|--------|
| Total      MTM Risk Management   Contract Net Assets |   | $      | 15 |   | $      | 54 |   | $      | 43 |   | $      | 22 |   | $      | 17 |   | $      | 25 |   |  $ | 176 |   |

| (a) | Level      1 inputs are quoted prices (unadjusted) in active markets for identical      assets or liabilities that the reporting entity has the ability to access      at the measurement date.  Level 1 inputs primarily consist of      exchange traded contracts that exhibit sufficient frequency and volume to      provide pricing information on an ongoing basis.                                                                                                                                                                                                                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Level      2 inputs are inputs other than quoted prices included within Level 1 that      are observable for the asset or liability, either directly or      indirectly.  If the asset or liability has a specified      (contractual) term, a Level 2 input must be observable for substantially      the full term of the asset or liability.  Level 2 inputs      primarily consist of OTC broker quotes in moderately active or less active      markets, exchange traded contracts where there was not sufficient market      activity to warrant inclusion in Level 1, and OTC broker quotes that are      corroborated by the same or similar transactions that have occurred in the      market. |
| (c) | Level      3 inputs are unobservable inputs for the asset or      liability.  Unobservable inputs shall be used to measure fair      value to the extent that the observable inputs are not available, thereby      allowing for situations in which there is little, if any, market activity      for the asset or liability at the measurement date.  Level 3      inputs primarily consist of unobservable market data or are valued based      on models and/or assumptions.                                                                                                                                                                                                                         |
| (d) | A      significant portion of the total volumetric position within the      consolidated level 3 balance has been economically  hedged.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (e) | Dedesignated      Risk Management Contracts are contracts that were originally MTM but were      subsequently elected as normal under SFAS 133.  At the time of      the normal election the MTM value was frozen and no longer fair      valued.  This will be amortized within Utility Operations      Revenues over the remaining life of the contract.                                                                                                                                                                                                                                                                                                                                               |
| (f) | There      is mark-to-market value of $25 million in individual periods beyond      2012.  $8 million of this mark-to-market value is in 2013, $8      million is in 2014, $3 million is in 2015, $3 million is in 2016 and $3      million is in 2017.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

| Commodity        |   | Transaction      Class               |              | Market/Region                                      |   | Tenor            |
|------------------|--------|--------------------------------------|-------------------|----------------------------------------------------|--------|------------------|
|             |   |                                 |              |                                               |   | (in      Months) |
| Natural      Gas |   | Futures                              |              | NYMEX      / Henry Hub                             |   | 60               |
|             |   | Physical      Forwards               |              | Gulf      Coast, Texas                             |   | 21               |
|             |   | Swaps                                |              | Gas      East, Mid-Continent, Gulf Coast, Texas    |   | 21               |
|             |   | Exchange      Option Volatility      |              | NYMEX      / Henry Hub                             |   | 12               |
| Power            |   | Futures                              |              | Power      East – PJM                        |   | 36               |
|             |   | Physical      Forwards               |              | Power      East – Cinergy                    |   | 45               |
|             |   | Physical      Forwards               |              | Power      East – PJM West                   |   | 57               |
|             |   | Physical      Forwards               |              | Power      East – AEP Dayton (PJM)           |   | 57               |
|             |   | Physical      Forwards               |              | Power      East – ERCOT                      |   | 33               |
|             |   | Physical      Forwards               |              | Power      East – Entergy                    |   | 33               |
|             |   | Physical      Forwards               |              | Power      West – PV, NP15, SP15, MidC, Mead |   | 57               |
|             |   | Peak      Power Volatility (Options) | Cinergy,      PJM |                                               | 12     |
| Emissions        |   | Credits                              |              | SO2,      NOx                                      |   | 45               |
| Coal             |   | Physical      Forwards               |              | PRB,      NYMEX, CSX                               |   | 33               |

|                                                                                                              |   | Power  |   |   | Interest      Rate andForeignCurrency |   |   | Total  |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|---------------------------------------|--------|--------|--------|--------|
| Beginning      Balance in AOCI, December 31, 2007                                                                 |   | $      | (1     | )      |                                  | $      | (25    | )      |   | $ | (26 | ) |
| Changes      in Fair Value                                                                                        |   |   | (26    | )      |                                  |   | (6     | )      |   |   | (32 | ) |
| Reclassifications      from AOCI for  Cash      Flow Hedges Settled                                |   |   | 2      |   |                                  |   | -      |   |   |   | 2 |   |
| Ending      Balance in AOCI, March 31, 2008                                                                       |   | $      | (25    | )      |                                  | $      | (31    | )      |   | $ | (56 | ) |
|                                                                                                              |   |   |   |   |                                  |   |   |   |   |   |   |   |
| After      Tax Portion Expected to be Reclassified to          Earnings During Next 12 Months |   | $      | (31    | )      |                                  | $      | (6     | )      |   | $ | (37 | ) |

| Counterparty      Credit Quality   |   | Exposure      Before Credit Collateral |   |   | Credit      Collateral |   |   | Net      Exposure |   |   | Number      of Counterparties >10% ofNet      Exposure |   |   | Net      Exposure of Counterparties >10% |   |
|------------------------------------|--------|----------------------------------------|--------|--------|------------------------|--------|--------|-------------------|--------|--------|-----------------------------------------------------------|--------|--------|---------------------------------------------|--------|
| Investment      Grade              |   | $                                      | 659    |   |                   | $      | 75     |              |   | $      | 584                                                       |   |   |                                        | 1      |   |   | $ | 93 |   |
| Split      Rating                  |   |                                   | 15     |   |                   |   | -      |              |   |   | 15                                                        |   |   |                                        | 4      |   |   |   | 14 |   |
| Noninvestment      Grade           |   |                                   | 100    |   |                   |   | 47     |              |   |   | 53                                                        |   |   |                                        | 1      |   |   |   | 48 |   |
| No      External Ratings:          |   |                                   |   |   |                   |   |   |              |   |   |                                                      |   |   |                                        |   |   |   |   |   |   |
| Internal      Investment Grade     |   |                                   | 125    |   |                   |   | -      |              |   |   | 125                                                       |   |   |                                        | 3      |   |   |   | 95 |   |
| Internal      Noninvestment Grade  |   |                                   | 47     |   |                   |   | 3      |              |   |   | 44                                                        |   |   |                                        | 2      |   |   |   | 42 |   |
| Total      as of March 31, 2008    |   | $                                      | 946    |   |                   | $      | 125    |              |   | $      | 821                                                       |   |   |                                        | 11     |   |   | $ | 292 |   |
|                               |   |                                   |   |   |                   |   |   |              |   |   |                                                      |   |   |                                        |   |   |   |   |   |   |
| Total      as of December 31, 2007 |   | $                                      | 673    |   |                   | $      | 42     |              |   | $      | 631                                                       |   |   |                                        | 6      |   |   | $ | 74 |   |

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

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

----

AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARYCOMPANIES

|                                                                                                  |   | 2008   |        |   | 2007   |   |
|-------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| REVENUES                                                                                              |   |   |        |   |   |   |
| Utility      Operations                                                                               |   | $      | 3,010       |   |   | $      | 2,886 |   |
| Other                                                                                                 |   |   | 457         |   |   |   | 283 |   |
| TOTAL                                                                                                 |   |   | 3,467       |   |   |   | 3,169 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| EXPENSES                                                                                              |   |   |        |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation                                          |   |   | 980         |   |   |   | 886 |   |
| Purchased      Energy for Resale                                                                      |   |   | 263         |   |   |   | 246 |   |
| Other      Operation and Maintenance                                                                  |   |   | 878         |   |   |   | 938 |   |
| Gain      on Disposition of Assets, Net                                                               |   |   | (3          | )      |   |   | (23 | ) |
| Asset      Impairments and Other Related Items                                                        |   |   | (255        | )      |   |   | - |   |
| Depreciation      and Amortization                                                                    |   |   | 363         |   |   |   | 391 |   |
| Taxes      Other Than Income Taxes                                                                    |   |   | 198         |   |   |   | 186 |   |
| TOTAL                                                                                                 |   |   | 2,424       |   |   |   | 2,624 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| OPERATING      INCOME                                                                                 |   |   | 1,043       |   |   |   | 545 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| Interest      and Investment Income                                                                   |   |   | 16          |   |   |   | 23 |   |
| Carrying      Costs Income                                                                            |   |   | 17          |   |   |   | 8 |   |
| Allowance      For Equity Funds Used During Construction                                              |   |   | 10          |   |   |   | 8 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| INTEREST      AND OTHER CHARGES                                                                       |   |   |        |   |   |   |   |   |
| Interest      Expense                                                                                 |   |   | 220         |   |   |   | 186 |   |
| Preferred      Stock Dividend Requirements of Subsidiaries                                            |   |   | 1           |   |   |   | 1 |   |
| TOTAL                                                                                                 |   |   | 221         |   |   |   | 187 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE, MINORITY        INTEREST      EXPENSE AND EQUITY EARNINGS |   |   | 865         |   |   |   | 397 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| Income      Tax Expense                                                                               |   |   | 293         |   |   |   | 130 |   |
| Minority      Interest Expense                                                                        |   |   | 1           |   |   |   | 1 |   |
| Equity      Earnings of Unconsolidated Subsidiaries                                                   |   |   | 2           |   |   |   | 5 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| NET      INCOME                                                                                       |   | $      | 573         |   |   | $      | 271 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| WEIGHTED      AVERAGE NUMBER OF BASIC SHARES OUTSTANDING                                              |   |   | 400,797,993 |   |   |   | 397,314,642 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| BASIC      EARNINGS PER SHARE                                                                         |   | $      | 1.43        |   |   | $      | 0.68 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| WEIGHTED      AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING                                            |   |   | 402,072,098 |   |   |   | 398,552,113 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| DILUTED      EARNINGS PER SHARE                                                                       |   | $      | 1.43        |   |   | $      | 0.68 |   |
|                                                                                                  |   |   |        |   |   |   |   |   |
| CASH      DIVIDENDS PAID PER SHARE                                                                    |   | $      | 0.41        |   |   | $      | 0.39 |   |

----

|                                                   |   | 2008   |   |    | 2007   |   |
|--------------------------------------------------------|--------|--------|--------|---------|--------|--------|
| CURRENT      ASSETS                                    |   |   |   |    |   |   |
| Cash      and Cash Equivalents                         |   | $      | 155    |    |   | $      | 178 |   |
| Other      Temporary Investments                       |   |   | 339    |    |   |   | 365 |   |
| Accounts      Receivable:                              |   |   |   |    |   |   |   |   |
|         Customers                            |   |   | 662    |    |   |   | 730 |   |
|         Accrued Unbilled Revenues            |   |   | 343    |    |   |   | 379 |   |
|         Miscellaneous                        |   |   | 88     |    |   |   | 60 |   |
|         Allowance for Uncollectible Accounts |   |   | (43    | )  |   |   | (52 | )  |
|         Total Accounts Receivable            |   |   | 1,050  |    |   |   | 1,117 |   |
| Fuel,      Materials and Supplies                      |   |   | 947    |    |   |   | 967 |   |
| Risk      Management Assets                            |   |   | 698    |    |   |   | 271 |   |
| Margin      Deposits                                   |   |   | 51     |    |   |   | 47 |   |
| Prepayments      and Other                             |   |   | 121    |    |   |   | 81 |   |
| TOTAL                                                  |   |   | 3,361  |    |   |   | 3,026 |   |
|                                                   |   |   |   |    |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                     |   |   |   |    |   |   |   |   |
| Electric:                                              |   |   |   |    |   |   |   |   |
|        Production                                 |   |   | 20,502 |    |   |   | 20,233 |   |
|        Transmission                               |   |   | 7,498  |    |   |   | 7,392 |   |
|        Distribution                               |   |   | 12,217 |    |   |   | 12,056 |   |
| Other      (including coal mining and nuclear fuel)    |   |   | 3,472  |    |   |   | 3,445 |   |
| Construction      Work in Progress                     |   |   | 3,001  |    |   |   | 3,019 |   |
| Total                                                  |   |   | 46,690 |    |   |   | 46,145 |   |
| Accumulated      Depreciation and Amortization         |   |   | 16,319 |    |   |   | 16,275 |   |
| TOTAL      - NET                                       |   |   | 30,371 |    |   |   | 29,870 |   |
|                                                   |   |   |   |    |   |   |   |   |
| OTHER      NONCURRENT ASSETS                           |   |   |   |    |   |   |   |   |
| Regulatory      Assets                                 |   |   | 2,224  |    |   |   | 2,199 |   |
| Securitized      Transition Assets                     |   |   | 2,109  |    |   |   | 2,108 |   |
| Spent      Nuclear Fuel and Decommissioning Trusts     |   |   | 1,324  |    |   |   | 1,347 |   |
| Goodwill                                               |   |   | 76     |    |   |   | 76 |   |
| Long-term      Risk Management Assets                  |   |   | 342    |    |   |   | 319 |   |
| Employee      Benefits and Pension Assets              |   |   | 484    |    |   |   | 486 |   |
| Deferred      Charges and Other                        |   |   | 1,026  |    |   |   | 888 |   |
| TOTAL                                                  |   |   | 7,585  |    |   |   | 7,423 |   |
|                                                   |   |   |   |    |   |   |   |   |
| TOTAL      ASSETS                                      |   | $      | 41,317 |    |   | $      | 40,319 |   |

----

|                                                                                                                  |        |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2008 |   | 2007 |   |
|-----------------------------------------------------------------------------------------------------------------------|-------------|--------|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|------|--------|
| CURRENT      LIABILITIES                                                                                              |        |   | (in      millions) |   |
| Accounts      Payable                                                                                                 |        |   | $                  | 1,176  |   | $      | 1,324  |   |
| Short-term      Debt                                                                                                  |        |   |               | 409    |   |   | 660    |   |
| Long-term      Debt Due Within One Year                                                                               |        |   |               | 931    |   |   | 792    |   |
| Risk      Management Liabilities                                                                                      |        |   |               | 680    |   |   | 240    |   |
| Customer      Deposits                                                                                                |        |   |               | 308    |   |   | 301    |   |
| Accrued      Taxes                                                                                                    |        |   |               | 743    |   |   | 601    |   |
| Accrued      Interest                                                                                                 |        |   |               | 196    |   |   | 235    |   |
| Other                                                                                                                 |        |   |               | 729    |   |   | 1,008  |   |
| TOTAL                                                                                                                 |        |   |               | 5,172  |   |   | 5,161  |   |
|                                                                                                                  |        |   |               |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                                                                           |        |   |               |   |   |   |   |   |
| Long-term      Debt                                                                                                   |        |   |               | 14,705 |   |   | 14,202 |   |
| Long-term      Risk Management Liabilities                                                                            |        |   |               | 221    |   |   | 188    |   |
| Deferred      Income Taxes                                                                                            |        |   |               | 4,854  |   |   | 4,730  |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits                                                       |        |   |               | 2,883  |   |   | 2,952  |   |
| Asset      Retirement Obligations                                                                                     |        |   |               | 1,071  |   |   | 1,075  |   |
| Employee      Benefits and Pension Obligations                                                                        |        |   |               | 703    |   |   | 712    |   |
| Deferred      Gain on Sale and Leaseback – Rockport Plant Unit 2                                                |        |   |               | 136    |   |   | 139    |   |
| Deferred      Credits and Other                                                                                       |        |   |               | 1,022  |   |   | 1,020  |   |
| TOTAL                                                                                                                 |        |   |               | 25,595 |   |   | 25,018 |   |
|                                                                                                                  |        |   |               |   |   |   |   |   |
| TOTAL      LIABILITIES                                                                                                |        |   |               | 30,767 |   |   | 30,179 |   |
|                                                                                                                  |        |   |               |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption                                                   |        |   |               | 61     |   |   | 61     |   |
|                                                                                                                  |        |   |               |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                                                                           |        |   |               |   |   |   |   |   |
|                                                                                                                  |        |   |               |   |   |   |   |   |
| COMMON      SHAREHOLDERS’ EQUITY                                                                                |        |   |               |   |   |   |   |   |
| Common      Stock Par Value $6.50 Per Share:                                                                          |        |   |               |   |   |   |   |   |
|                                                                                                                  | 2008        |   | 2007               |   |   |   |   |   |   |   |   |   |
| Shares      Authorized                                                                                                | 600,000,000 |   | 600,000,000        |   |   |   |   |   |   |   |   |   |
| Shares      Issued                                                                                                    | 423,005,402 |   | 421,926,696        |   |   |   |   |   |   |   |   |   |
| (21,499,992      shares were held in treasury at March 31, 2008 and December 31, 2007,        respectively) |        |   |               | 2,750  |   |   | 2,743  |   |
| Paid-in      Capital                                                                                                  |        |   |               | 4,391  |   |   | 4,352  |   |
| Retained      Earnings                                                                                                |        |   |               | 3,535  |   |   | 3,138  |   |
| Accumulated      Other Comprehensive Income (Loss)                                                                    |        |   |               | (187   | )      |   | (154   | )      |
| TOTAL                                                                                                                 |        |   |               | 10,489 |   |   | 10,079 |   |
|                                                                                                                  |        |   |               |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                 |        |   | $                  | 41,317 |   | $      | 40,319 |   |

----

|                                                                                       |   | 2008   |   |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |   |   |   |   |
| Net      Income                                                                            |   | $      | 573    |   |   | $      | 271 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |   |   |   |   |   |   |
| Depreciation      and Amortization                                                         |   |   | 363    |   |   |   | 391 |   |
| Deferred      Income Taxes                                                                 |   |   | 111    |   |   |   | 5 |   |
| Deferred      Investment Tax Credits                                                       |   |   | (5     | )      |   |   | (6 | )  |
| Carrying      Costs Income                                                                 |   |   | (17    | )      |   |   | (8 | )  |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (10    | )      |   |   | (8 | )  |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | (26    | )      |   |   | 21 |   |
| Amortization      of Nuclear Fuel                                                          |   |   | 22     |   |   |   | 16 |   |
| Deferred      Property Taxes                                                               |   |   | (64    | )      |   |   | (67 | )  |
| Fuel      Over/Under-Recovery, Net                                                         |   |   | (57    | )      |   |   | (62 | )  |
| Gain      on Sales of Assets and Equity Investments, Net                                   |   |   | (3     | )      |   |   | (23 | )  |
| Change      in Other Noncurrent Assets                                                     |   |   | (119   | )      |   |   | 52 |   |
| Change      in Other Noncurrent Liabilities                                                |   |   | (66    | )      |   |   | 16 |   |
| Changes      in Certain Components of Working Capital:                                     |   |   |   |   |   |   |   |   |
|          Accounts Receivable, Net                                           |   |   | 61     |   |   |   | (29 | )  |
|          Fuel, Materials and Supplies                                       |   |   | 20     |   |   |   | (3 | )  |
|          Margin Deposits                                                    |   |   | (4     | )      |   |   | 19 |   |
|          Accounts Payable                                                   |   |   | (7     | )      |   |   | (31 | )  |
|          Customer Deposits                                                  |   |   | 6      |   |   |   | (8 | )  |
|          Accrued Taxes                                                      |   |   | 149    |   |   |   | 32 |   |
|          Accrued Interest                                                   |   |   | (44    | )      |   |   | 25 |   |
|          Other Current Assets                                               |   |   | (21    | )      |   |   | (40 | )  |
|          Other Current Liabilities                                          |   |   | (234   | )      |   |   | (212 | )  |
| Net      Cash Flows from Operating Activities                                              |   |   | 628    |   |   |   | 351 |   |
|                                                                                       |   |   |   |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |   |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (778   | )      |   |   | (907 | )  |
| Change      in Other Temporary Investments, Net                                            |   |   | (26    | )      |   |   | (20 | )  |
| Purchases      of Investment Securities                                                    |   |   | (491   | )      |   |   | (3,693 | )  |
| Sales      of Investment Securities                                                        |   |   | 500    |   |   |   | 3,929 |   |
| Proceeds      from Sales of Assets                                                         |   |   | 18     |   |   |   | 68 |   |
| Other                                                                                      |   |   | (117   | )      |   |   | (5 | )  |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (894   | )      |   |   | (628 | )  |
|                                                                                       |   |   |   |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |   |   |   |   |   |   |
| Issuance      of Common Stock                                                              |   |   | 45     |   |   |   | 54 |   |
| Change      in Short-term Debt, Net                                                        |   |   | (251   | )      |   |   | 157 |   |
| Issuance      of Long-term Debt                                                            |   |   | 916    |   |   |   | 247 |   |
| Retirement      of Long-term Debt                                                          |   |   | (289   | )      |   |   | (49 | )  |
| Dividends      Paid on Common Stock                                                        |   |   | (165   | )      |   |   | (155 | )  |
| Other                                                                                      |   |   | (13    | )      |   |   | (19 | )  |
| Net      Cash Flows from Financing Activities                                              |   |   | 243    |   |   |   | 235 |   |
|                                                                                       |   |   |   |   |   |   |   |   |
| Net      Decrease in Cash and Cash Equivalents                                             |   |   | (23    | )      |   |   | (42 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 178    |   |   |   | 301 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 155    |   |   | $      | 259 |   |
|                                                                                       |   |   |   |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |   |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 252    |   |   | $      | 152 |   |
| Net      Cash Paid for Income Taxes                                                        |   |   | 36     |   |   |   | 66 |   |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 19     |   |   |   | 11 |   |
| Noncash      Acquisition of Land/Mineral Rights                                            |   |   | 42     |   |   |   | - |   |
| Construction      Expenditures Included in Accounts Payable at March 31,                   |   |   | 284    |   |   |   | 323 |   |

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

----

|                                                                              |   | Common      Stock |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |
|-----------------------------------------------------------------------------------|--------|-------------------|--------|--------|--------|--------|--------|----------------------|--------|--------|------------------------|--------|--------|----------------------------------------------------|--------|
|                                                                              |   | Shares            |   |   | Amount |   |   | Paid-in      Capital |   |   | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total |   |
|                                                                              |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |
| DECEMBER      31, 2006                                                            |   |              | 418    |   |   | $      | 2,718  |                 |   | $      | 4,221                  |   |   | $                                                  | 2,696  |   |   | $ | (223 | ) |   | $ | 9,412 |   |
|                                                                              |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                  |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               | (17    | ) |   |   |   |   |   |   | (17 | ) |
| Issuance      of Common Stock                                                     |   |              | 2      |   |   |   | 10     |                 |   |   | 44                     |   |   |                                               |   |   |   |   |   |   |   |   | 54 |   |
| Common      Stock Dividends                                                       |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               | (155   | ) |   |   |   |   |   |   | (155 | ) |
| Other                                                                             |   |              |   |   |   |   |   |                 |   |   | 5                      |   |   |                                               |   |   |   |   |   |   |   |   | 5 |   |
| TOTAL                                                                             |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   | 9,299 |   |
|                                                                              |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                         |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |   |
| Other      Comprehensive Loss, Net of        Tax:                            |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $12                                          |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   | (22 | ) |   |   | (22 | ) |
| Securities      Available for Sale, Net of Tax  of      $4                   |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   | (8 | ) |   |   | (8 | ) |
| NET      INCOME                                                                   |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               | 271    |   |   |   |   |   |   |   | 271 |   |
| TOTAL      COMPREHENSIVE        INCOME                                       |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   | 241 |   |
| MARCH      31, 2007                                                               |   |              | 420    |   |   | $      | 2,728  |                 |   | $      | 4,270                  |   |   | $                                                  | 2,795  |   |   | $ | (253 | ) |   | $ | 9,540 |   |
|                                                                              |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |   |
| DECEMBER      31, 2007                                                            |   |              | 422    |   |   | $      | 2,743  |                 |   | $      | 4,352                  |   |   | $                                                  | 3,138  |   |   | $ | (154 | ) |   | $ | 10,079 |   |
| EITF      06-10 Adoption, Net of Tax of $6                                        |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               | (10    | ) |   |   |   |   |   |   | (10 | ) |
| SFAS      157 Adoption, Net of Tax of $0                                          |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               | (1     | ) |   |   |   |   |   |   | (1 | ) |
| Issuance      of Common Stock                                                     |   |              | 1      |   |   |   | 7      |                 |   |   | 38                     |   |   |                                               |   |   |   |   |   |   |   |   | 45 |   |
| Common      Stock Dividends                                                       |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               | (165   | ) |   |   |   |   |   |   | (165 | ) |
| Other                                                                             |   |              |   |   |   |   |   |                 |   |   | 1                      |   |   |                                               |   |   |   |   |   |   |   |   | 1 |   |
| TOTAL                                                                             |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   | 9,949 |   |
|                                                                              |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                         |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |   |
| Other      Comprehensive Income (Loss),        Net of Tax:                   |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $17                                          |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   | (30 | ) |   |   | (30 | ) |
| Securities      Available for Sale, Net of Tax  of      $3                   |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   | (6 | ) |   |   | (6 | ) |
| Amortization      of Pension and OPEB  Deferred      Costs, Net of Tax of $2 |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   | 3 |   |   |   | 3 |   |
| NET      INCOME                                                                   |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               | 573    |   |   |   |   |   |   |   | 573 |   |
| TOTAL      COMPREHENSIVE        INCOME                                       |   |              |   |   |   |   |   |                 |   |   |                   |   |   |                                               |   |   |   |   |   |   |   |   | 540 |   |
| MARCH      31, 2008                                                               |   |              | 423    |   |   | $      | 2,750  |                 |   | $      | 4,391                  |   |   | $                                                  | 3,535  |   |   | $ | (187 | ) |   | $ | 10,489 |   |

----

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

----

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

|                                              |   | Three      Months Ended March 31,         |   |
|---------------------------------------------------|--------|-------------------------------------------|--------|
|                                              |   | 2008                                      |   |   | 2007 |   |
|                                              |   | (in      millions, except per share data) |   |
|                                              |   |                                      |   |   | $/share |   |   |   |   |   | $/share |   |
| Earnings      Applicable to Common Stock          |   | $                                         | 573    |   |   |   |   |   | $ | 271 |   |   |   |   |
|                                              |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      Number of Basic Shares Outstanding   |   |                                      | 400.8  |   |   | $ | 1.43 |   |   |   | 397.3 |   |   | $ | 0.68 |   |
| Average      Dilutive Effect of:                  |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performance      Share Units                      |   |                                      | 0.9    |   |   |   | - |   |   |   | 0.6 |   |   |   | - |   |
| Stock      Options                                |   |                                      | 0.2    |   |   |   | - |   |   |   | 0.5 |   |   |   | - |   |
| Restricted      Stock Units                       |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Restricted      Shares                            |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Average      Number of Diluted Shares Outstanding |   |                                      | 402.1  |   |   | $ | 1.43 |   |   |   | 398.6 |   |   | $ | 0.68 |   |

|                                                                                                                         |   | Three      Months Ended March 31, |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                                                                         |   | 2008                              |   |   | 2007 |   |
| Related      Party Transactions                                                                                              |   | (in      millions)                |   |
| AEP      Consolidated Revenues – Utility Operations:                                                                   |   |                              |   |   |   |   |
| Power      Pool Purchases – Ohio Valley Electric Corporation (43.47%      owned)                                       |   | $                                 | (13    | ) |   | $ | - |   |
| AEP      Consolidated Revenues – Other:                                                                                |   |                              |   |   |   |   |   |   |
| Ohio      Valley Electric Corporation – Barging and Other Transportation      Services        (43.47% Owned) |   |                              | 9      |   |   |   | 9 |   |
| AEP      Consolidated Expenses – Purchased Energy for Resale:                                                          |   |                              |   |   |   |   |   |   |
| Ohio      Valley Electric Corporation (43.47% Owned)                                                                         |   |                              | 63     |   |   |   | 49 |   |
| Sweeny      Cogeneration Limited Partnership (a)                                                                             |   |                              | -      |   |   |   | 30 |   |

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

| 2. | NEW ACCOUNTING      PRONOUNCEMENTS |
|----|------------------------------------|

| Assets      and Liabilities Measured at Fair Value on a Recurring Basis as of March      31, 2008 |   |
|---------------------------------------------------------------------------------------------------|--------|
|                                                                                              |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |   | Other |   |   | Total |   |
| Assets:                                                                                           |   | (in      millions) |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents (a)                                                                |   | $ | 109 |   |   | $ | - |   |   | $ | - |   |   | $ | 46 |   |   | $ | 155 |   |
|  Other      Temporary Investments:                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents (b)                                                                |   | $ | 147 |   |   | $ | - |   |   | $ | - |   |   | $ | 32 |   |   | $ | 179 |   |
| Debt      Securities                                                                              |   |   | 120 |   |   |   | - |   |   |   | 22 |   |   |   | - |   |   |   | 142 |   |
| Equity      Securities                                                                            |   |   | 18 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 18 |   |
| TotalOther Temporary      Investments                                                             |   | $ | 285 |   |   | $ | - |   |   | $ | 22 |   |   | $ | 32 |   |   | $ | 339 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Assets:                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Contracts (c)                                                                |   | $ | 206 |   |   | $ | 3,201 |   |   | $ | 116 |   |   | $ | (2,566 | ) |   | $ | 957 |   |
| Cash      Flow and Fair Value Hedges (c)                                                          |   |   | - |   |   |   | 46 |   |   |   | - |   |   |   | (13 | ) |   |   | 33 |   |
| Dedesignated      Risk Management Contracts (d)                                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 50 |   |   |   | 50 |   |
| Total      Risk Management Assets                                                                 |   | $ | 206 |   |   | $ | 3,247 |   |   | $ | 116 |   |   | $ | (2,529 | ) |   | $ | 1,040 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Spent      Nuclear Fuel and Decommissioning Trusts:                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents (e)                                                                |   | $ | - |   |   | $ | 13 |   |   | $ | - |   |   | $ | 10 |   |   | $ | 23 |   |
| Debt      Securities                                                                              |   |   | 343 |   |   |   | 492 |   |   |   | - |   |   |   | - |   |   |   | 835 |   |
| Equity      Securities                                                                            |   |   | 466 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 466 |   |
| TotalSpent Nuclear Fuel and      Decommissioning        Trusts                               |   | $ | 809 |   |   | $ | 505 |   |   | $ | - |   |   | $ | 10 |   |   | $ | 1,324 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investments      in Debt Securities – Noncurrent (f)                                        |   | $ | - |   |   | $ | - |   |   | $ | 17 |   |   | $ | - |   |   | $ | 17 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                                                                                 |   | $ | 1,409 |   |   | $ | 3,752 |   |   | $ | 155 |   |   | $ | (2,441 | ) |   | $ | 2,875 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Liabilities:                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Contracts (c)                                                                |   | $ | 231 |   |   | $ | 3,099 |   |   | $ | 67 |   |   | $ | (2,581 | ) |   | $ | 816 |   |
| Cash      Flow and Fair Value Hedges (c)                                                          |   |   | 5 |   |   |   | 93 |   |   |   | - |   |   |   | (13 | ) |   |   | 85 |   |
| Total      Risk Management Liabilities                                                            |   | $ | 236 |   |   | $ | 3,192 |   |   | $ | 67 |   |   | $ | (2,594 | ) |   | $ | 901 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term      Debt (g)                                                                           |   | $ | - |   |   | $ | 50 |   |   | $ | - |   |   | $ | - |   |   | $ | 50 |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Liabilities                                                                            |   | $ | 236 |   |   | $ | 3,242 |   |   | $ | 67 |   |   | $ | (2,594 | ) |   | $ | 951 |   |

| (a) | Amounts      in “Other” column primarily represent cash deposits in bank accounts with      financial institutions.  Level 1 amounts primarily represent      investments in money market funds.                                                                                                                                                                     |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amounts      in “Other” column primarily represent cash deposits with third      parties.  Level 1 amounts primarily represent investments in      money market funds.                                                                                                                                                                                               |
| (c) | Amounts      in “Other” column primarily represent counterparty netting of risk      management contracts and associated cash collateral under FASB Staff      Position FIN 39-1.                                                                                                                                                                                              |
| (d) | “Dedesignated      Risk Management Contracts” are contracts that were originally MTM but were      subsequently elected as normal under SFAS 133.  At the time of      the normal election the MTM value was frozen and no longer fair      valued.  This will be amortized into Utility Operations Revenues      over the remaining life of the contract. |
| (e) | Amounts      in “Other” column primarily represent deposits-in-transit and accrued      interest receivables to/from financial institutions.  Level 2      amounts primarily represent investments in money market    funds.                                                                                                                                         |
| (f) | “Investments      in Debt Securities – Noncurrent” represent investments in auction-rate      securities where redemption has not been publicly noticed by the issuer      and are included in Deferred Charges and Other on the accompanying      Condensed Consolidated Balance Sheets.                                                                                |
| (g) | Amount      represents the fair valued portion of long-term debt designated as a fair      value hedge.                                                                                                                                                                                                                                                                                    |

|                                                                                                                                                                       |   | Net      Risk Management Assets (Liabilities) |   |   | Other      Temporary Investments |   |   | Investments      in Debt Securities |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------|----------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                                                                                                       |   | (in      millions)                            |   |
| Balance      as of January 1, 2008                                                                                                                                         |   | $                                             | 49     |   |                             | $      | -      |                                |   | $ | - |   |
| Realized      (Gain) Loss Included in Earnings (or Changes in Net Assets)      (a)                                                                                         |   |                                          | (3     | )      |                             |   | -      |                                |   |   | - |   |
| Unrealized      Gain (Loss) Included in Earnings (or Changes in Net      Assets)          Relating to Assets Still Held at the Reporting Date (a) |   |                                          | 5      |   |                             |   | -      |                                |   |   | - |   |
| Realized      and Unrealized Gains (Losses) Included in Other Comprehensive      Income                                                                               |   |                                          | -      |   |                             |   | -      |                                |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                                                  |   |                                          | -      |   |                             |   | (96    | )                                   |   |   | - |   |
| Transfers      in and/or out of Level 3 (b)                                                                                                                                |   |                                          | (5     | )      |                             |   | 118    |                                |   |   | 17 |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                                        |   |                                          | 3      |   |                             |   | -      |                                |   |   | - |   |
| Balance      as of March 31, 2008                                                                                                                                          |   | $                                             | 49     |   |                             | $      | 22     |                                |   | $ | 17 |   |

| (a) | Included      in revenues on our Condensed Consolidated Statement of Income for the      Three Months Ended March 31, 2008.                                                                                                                                                                                                                                                         |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Transfers      in and/or out of Level 3” represent existing assets or liabilities that      were either previously categorized as a higher level for which the inputs      to the model became unobservable or assets and liabilities that were      previously classified as level 3 for which the lowest significant input      became observable during the period. |
| (c) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected on the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/liabilities for those subsidiaries that      operate in regulated jurisdictions. |

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

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

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

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

| 5. | ACQUISITIONS AND      DISPOSITIONS |
|----|------------------------------------|

|                                       |                              |   | Other                             |   |
|--------------------------------------------|-----------------------------------|--------|-----------------------------------|--------|
|                                       |                              |   | Postretirement                    |   |
|                                       | Pension      Plans                |   | Benefit      Plans                |   |
|                                       | Three      Months Ended March 31, |   | Three      Months Ended March 31, |   |
|                                       | 2008                              |   | 2007                              |   | 2008 |   | 2007 |   |
|                                       | (in      millions)                |   |
| Service      Cost                          |                              | $      | 25                                |   |   | $ | 24 |   |   | $ | 10 |   |   | $ | 10 |   |
| Interest      Cost                         |                              |   | 63                                |   |   |   | 59 |   |   |   | 28 |   |   |   | 26 |   |
| Expected      Return on Plan Assets        |                              |   | (84                               | )      |   |   | (85 | ) |   |   | (28 | ) |   |   | (26 | ) |
| Amortization      of Transition Obligation |                              |   | -                                 |   |   |   | - |   |   |   | 7 |   |   |   | 7 |   |
| Amortization      of Net Actuarial Loss    |                              |   | 9                                 |   |   |   | 15 |   |   |   | 3 |   |   |   | 3 |   |
| Net      Periodic Benefit Cost             |                              | $      | 13                                |   |   | $ | 13 |   |   | $ | 20 |   |   | $ | 20 |   |

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

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

| · | Barging      operations that annually transport approximately 35 million tons of coal      and dry bulk commodities primarily on the Ohio, Illinois and lower      Mississippi Rivers.  Approximately 39% of the barging is for      transportation of agricultural products, 30% for coal, 14% for steel and      17% for other commodities. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

|                                   |   |                    |   |      | Nonutility      Operations |   |   |                   |   |   |               |   |   |                         |   |
|----------------------------------------|--------|-------------------------|--------|-----------|----------------------------|--------|--------|------------------------|--------|--------|--------------------|--------|--------|------------------------------|--------|
|                                   |   | Utility      Operations |   |      | MEMCOOperations            |   |   | GenerationandMarketing |   |   | All      Other (a) |   |   | Reconciling      Adjustments |   |   | Consolidated |   |
|                                   |   | (in      millions)      |   |
| Three      Months Ended March 31, 2008 |   |                    |   |      |                       |   |   |                   |   |   |               |   |   |                         |   |   |   |   |
| Revenues      from:                    |   |                    |   |      |                       |   |   |                   |   |   |               |   |   |                         |   |   |   |   |
| External      Customers                |   | $                       | 3,010  | (d)  |                       | $      | 138    |                   |   | $      | 271                |   |   | $                            | 48     |   |   | $ | - |   |   | $ | 3,467 |   |
| Other      Operating Segments          |   |                    | 284    | (d)  |                       |   | 4      |                   |   |   | (212               | )      |   |                         | (43    | ) |   |   | (33 | ) |   |   | - |   |
| Total      Revenues                    |   | $                       | 3,294  |      |                       | $      | 142    |                   |   | $      | 59                 |   |   | $                            | 5      |   |   | $ | (33 | ) |   | $ | 3,467 |   |
|                                   |   |                    |   |      |                       |   |   |                   |   |   |               |   |   |                         |   |   |   |   |   |   |   |   |   |   |
| Net      Income                        |   | $                       | 410    |      |                       | $      | 7      |                   |   | $      | 1                  |   |   | $                            | 155    |   |   | $ | - |   |   | $ | 573 |   |

|                                   |   |                    |   |      | Nonutility      Operations |   |   |                   |   |   |               |   |   |                         |   |
|----------------------------------------|--------|-------------------------|--------|-----------|----------------------------|--------|--------|------------------------|--------|--------|--------------------|--------|--------|------------------------------|--------|
|                                   |   | Utility      Operations |   |      | MEMCOOperations            |   |   | GenerationandMarketing |   |   | All      Other (a) |   |   | Reconciling      Adjustments |   |   | Consolidated |   |
|                                   |   | (in      millions)      |   |
| Three      Months Ended March 31, 2007 |   |                    |   |      |                       |   |   |                   |   |   |               |   |   |                         |   |   |   |   |
| Revenues      from:                    |   |                    |   |      |                       |   |   |                   |   |   |               |   |   |                         |   |   |   |   |
| External      Customers                |   | $                       | 2,886  | (d)  |                       | $      | 117    |                   |   | $      | 115                |   |   | $                            | 51     |   |   | $ | - |   |   | $ | 3,169 |   |
| Other      Operating Segments          |   |                    | 147    | (d)  |                       |   | 3      |                   |   |   | (73                | )      |   |                         | (45    | ) |   |   | (32 | ) |   |   | - |   |
| Total      Revenues                    |   | $                       | 3,033  |      |                       | $      | 120    |                   |   | $      | 42                 |   |   | $                            | 6      |   |   | $ | (32 | ) |   | $ | 3,169 |   |
|                                   |   |                    |   |      |                       |   |   |                   |   |   |               |   |   |                         |   |   |   |   |   |   |   |   |   |   |
| Net      Income (Loss)                 |   | $                       | 253    |      |                       | $      | 15     |                   |   | $      | (1                 | )      |   | $                            | 4      |   |   | $ | - |   |   | $ | 271 |   |

|                                                                       |   |                    |   |   | Nonutility      Operations |   |   |                   |   |   |               |   |   |                            |   |
|----------------------------------------------------------------------------|--------|-------------------------|--------|--------|----------------------------|--------|--------|------------------------|--------|--------|--------------------|--------|--------|---------------------------------|--------|
|                                                                       |   | Utility      Operations |   |   | MEMCOOperations            |   |   | GenerationandMarketing |   |   | All      Other (a) |   |   | Reconciling      Adjustments(c) |   |   | Consolidated |   |
|                                                                       |   | (in      millions)      |   |
| March      31, 2008                                                        |   |                    |   |   |                       |   |   |                   |   |   |               |   |   |                            |   |   |   |   |
| Total      Property, Plant and Equipment                                   |   | $                       | 46,055 |   |                       | $      | 265    |                   |   | $      | 575                |   |   | $                               | 40     |   |   | $ | (245 | ) |   | $ | 46,690 |   |
| Accumulated      Depreciation and  Amortization                  |   |                    | 16,144 |   |                       |   | 63     |                   |   |   | 119                |   |   |                            | 8      |   |   |   | (15 | ) |   |   | 16,319 |   |
| Total      Property, Plant and        Equipment –      Net |   | $                       | 29,911 |   |                       | $      | 202    |                   |   | $      | 456                |   |   | $                               | 32     |   |   | $ | (230 | ) |   | $ | 30,371 |   |
|                                                                       |   |                    |   |   |                       |   |   |                   |   |   |               |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                                                          |   | $                       | 40,287 |   |                       | $      | 340    |                   |   | $      | 902                |   |   | $                               | 12,707 |   |   | $ | (12,919 | )(b) |   | $ | 41,317 |   |

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

| (a)    | All      Other includes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | The      first quarter 2008 cash settlement of a purchase power and sale agreement      with TEM related to the Plaquemine Cogeneration Facility which was sold in      the fourth quarter of 2006.  The cash settlement of $255 million      ($163 million, net of tax) is included in Net Income. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Parent’s      guarantee revenue received from affiliates, investment income, interest      income and interest expense and other nonallocated costs, which netted to      a $7 million after-tax loss for the first quarter of  2008. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Revenue      sharing related to the Plaquemine CogenerationFacility. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 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. |
| (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 AEPEP (Generation and Marketing segment) and entered into intercompany      financial and physical purchase and sales agreements with      AEPEP.  As a result, we reported third-party net purchases for      these energy marketing contracts as a reduction of Revenues from External      Customers for the Utility Operations segment.  This is offset by      the Utility Operations segment’s related sales to AEPEP in Revenues from      Other Operating Segments of $212 million.  The Generation and      Marketing segment reports purchases related to these contracts as a      reduction to Revenues from Other Operating  segments. |

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

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

|                                   |   | March      31,     |   |   | December      31, |   |
|----------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
| Type      of Debt                      |   | 2008               |   |   | 2007              |   |
|                                   |   | (in      millions) |   |
| Senior      Unsecured Notes            |   | $                  | 10,349 |   |              | $      | 9,905 |   |
| Pollution      Control Bonds           |   |               | 2,216  |   |              |   | 2,190 |   |
| First      Mortgage Bonds              |   |               | -      |   |              |   | 19 |   |
| Notes      Payable                     |   |               | 264    |   |              |   | 311 |   |
| Securitization      Bonds              |   |               | 2,183  |   |              |   | 2,257 |   |
| Junior      Subordinated Debentures    |   |               | 315    |   |              |   | - |   |
| Notes      Payable To Trust            |   |               | 113    |   |              |   | 113 |   |
| Spent      Nuclear Fuel Obligation (a) |   |               | 261    |   |              |   | 259 |   |
| Other      Long-term Debt              |   |               | 3      |   |              |   | 2 |   |
| Unamortized      Discount (net)        |   |               | (68    | )      |              |   | (62 | ) |
| Total      Long-term Debt Outstanding  |   |               | 15,636 |   |              |   | 14,994 |   |
| Less      Portion Due Within One Year  |   |               | 716    |   |              |   | 792 |   |
| Long-term      Portion                 |   | $                  | 14,920 |   |              | $      | 14,202 |   |

| (a) | Pursuant      to the Nuclear Waste Policy Act of 1982, I&M (a nuclear licensee) has      an obligation to the United States Department of Energy for spent nuclear      fuel disposal.  The obligation includes a one-time fee for      nuclear fuel consumed prior to April 7, 1983.  Trust fund assets      related to this obligation of $289 million and $285 million at March 31,      2008 and December 31, 2007, respectively, are included in Spent Nuclear      Fuel and Decommissioning Trusts on our Condensed Consolidated Balance      Sheets. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Company              |   | Type      of Debt                   |   | Principal      Amount |   | Interest      Rate |   | Due      Date |   |
|----------------------|--------|-------------------------------------|--------|-----------------------|--------|--------------------|--------|---------------|--------|
|                 |   |                                |   | (in      millions)    |   | (%)                |   |          |   |
| Issuances:           |   |                                |   |                  |   |               |   |          |   |
| AEP                  |   | Junior      Subordinated Debentures |   | $                     | 315    |               | 8.75   |          | 2063   |   |
| APCo                 |   | Senior      Unsecured Notes         |   |                  | 500    |               | 7.00   |          | 2038   |   |
|                 |   |                                |   |                  |   |               |   |          |   |   |
| Non-Registrant:      |   |                                |   |                  |   |               |   |          |   |   |
| TCC                  |   | Pollution      Control Bonds        |   |                  | 120    |               | 5.125  |          | 2030   |   |
| Total      Issuances |   |                                |   | $                     | 935    | (a)                |   |          |   |   |

| Other      than the possible dividend restrictions of the AEP Junior Subordinated      Debentures, the above borrowing arrangements does not contain      guarantees, collateral or dividend    restrictions. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                               |   |
| (a)                                                                                                                                                                                                                | Amount      indicated on statement of cash flows of $916 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:      |   |                         |   |                       |   |               |     |          |   |
| CSPCo                                                     |   | Senior      Unsecured Notes  |   | $                          | 52     |               | 6.51     |          | 2008   |   |
| I&M                                                   |   | Pollution      Control Bonds |   |                       | 45     |               | Variable |          | 2009   |   |
| I&M                                                   |   | Pollution      Control Bonds |   |                       | 50     |               | Variable |          | 2025   |   |
| OPCo                                                      |   | Notes      Payable           |   |                       | 1      |               | 6.81     |          | 2008   |   |
| OPCo                                                      |   | Notes      Payable           |   |                       | 6      |               | 6.27     |          | 2009   |   |
| SWEPCo                                                    |   | Notes      Payable           |   |                       | 1      |               | 4.47     |          | 2011   |   |
| SWEPCo                                                    |   | Notes      Payable           |   |                       | 1      |               | Variable |          | 2008   |   |
|                                                      |   |                         |   |                       |   |               |     |          |   |   |
| Non-Registrant:                                           |   |                         |   |                       |   |               |     |          |   |   |
| AEP      Subsidiaries                                     |   | Notes      Payable           |   |                       | 2      |               | Variable |          | 2017   |   |
| AEGCo                                                     |   | Senior      Unsecured Notes  |   |                       | 4      |               | 6.33     |          | 2037   |   |
| AEPSC                                                     |   | Mortgage      Notes          |   |                       | 34     |               | 9.60     |          | 2008   |   |
| TCC                                                       |   | Securitization      Bonds    |   |                       | 29     |               | 5.01     |          | 2008   |   |
| TCC                                                       |   | Securitization      Bonds    |   |                       | 45     |               | 4.98     |          | 2010   |   |
| TCC                                                       |   | First      Mortgage Bonds    |   |                       | 19     |               | 7.125    |          | 2008   |   |
| Total      Retirements and   Principal Payments |   |                         | $      | 289                        |   |               |     |          |   |

|                                                  |   | March      31, 2008 |    |                  | December      31, 2007 |   |
|-------------------------------------------------------|--------|---------------------|---------|-----------------------|------------------------|--------|
|                                                  |   | OutstandingAmount   |    | InterestRate      (a) |                   |   | OutstandingAmount |   | InterestRate      (a) |   |
| Type      of Debt                                     |   | (in      thousands) |    |                  |                   |   | (in      thousands) |   |   |   |
| Commercial      Paper – AEP                     |   | $                   | 408,959 |                  | 3.66                   | %      |   | $ | 659,135 |   | 5.54 | % |
| Commercial      Paper – JMG (b)                 |   |                | -       |                  | -                      |   |   |   | 701 |   | 5.35 | % |
| Line      of Credit – Sabine Mining Company (c) |   |                | -       |                  | -                      |   |   |   | 285 |   | 5.25 | % |
| Total                                                 |   | $                   | 408,959 |                  |                   |   |   | $ | 660,121 |   |   |   |

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

----

----

APPALACHIAN POWER COMPANY AND SUBSIDIARIES

| First      Quarter of 2007                        |   |   |   |   | $      | 70     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (20    | )      |   |   |   |   |
| Off-system      Sales                             |   |   | 16     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 1      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | (3     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (20    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (3     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (3     | )      |   |   |   |   |
| Carrying      Costs Income                        |   |   | 6      |   |   |   |   |   |
| Other      Income                                 |   |   | 1      |   |   |   |   |   |
| Interest      Expense                             |   |   | (12    | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (31    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 19     |   |
|                                              |   |   |   |   |   |   |   |   |
|         First Quarter of 2008           |   |   |   |   |   | $      | 55     |   |

| · | Retail      Margins decreased $20 million primarily due to higher capacity settlement      expenses under the Interconnection Agreement and an increase in refunds to      customers of off-system sales margins.  These decreases were      partially offset by an increase in the recovery of APCo’s environmental      and reliability costs and an increase in retail sales related to customer      usage. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Margins      from Off-system Sales increased $16 million primarily due to higher      physical sales margins partially offset by lower trading margins.                                                                                                                                                                                                                                                                         |

| · | Other      Operation and Maintenance expenses increased $20 million primarily due to      a $9 million increase in steam generation expenses primarily for      maintenance at the Mountaineer Plant and an increase of $5 million in      distribution maintenance expenses resulting from Virginia and West      Virginia wind storm damage.  In addition, operational expenses      increased by $8 million due to decreased Transmission Equalization      Agreement credits resulting from APCo’s peak demand set in February 2007      and increased employee-related expenses. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization expenses increased $3 million primarily due to the      amortization of carrying charges and depreciation expense that are being      collected through the Virginia E&R surcharges.                                                                                                                                                                                                                                                                                                                                                                           |
| · | Taxes      Other Than Income Taxes increased $3 million primarily due to higher      franchise taxes which resulted from an amended tax return recognized in      2007.                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | Carrying      Costs Income increased $6 million related to carrying costs associated      with the Virginia E&R case.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| · | Interest      Expense increased $12 million primarily due to an $8 million increase in      interest expense from long-term debt issuances and a $3 million decrease      in the debt component of AFUDC resulting from the reapplication of SFAS      71.                                                                                                                                                                                                                                                                                                                                            |
| · | Income      Tax Expense decreased $19 million primarily due to a decrease in pretax      book income and state income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

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

|                                                      |   | 2008                |     |   | 2007   |   |
|-----------------------------------------------------------|--------|---------------------|----------|--------|--------|--------|
|                                                      |   | (in      thousands) |     |
| Cash      and Cash Equivalents at Beginning of Period     |   | $                   | 2,195    |   |   | $      | 2,318 |   |
| Cash      Flows From (Used For):                          |   |                |     |   |   |   |   |   |
| Operating      Activities                                 |   |                | 118,832  |   |   |   | 176,029 |   |
| Investing      Activities                                 |   |                | (409,179 | )      |   |   | (200,894 | ) |
| Financing      Activities                                 |   |                | 290,804  |   |   |   | 24,534 |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents |   |                | 457      |   |   |   | (331 | ) |
| Cash      and Cash Equivalents at End of Period           |   | $                   | 2,652    |   |   | $      | 1,987 |   |

|                       |   | PrincipalAmount     |    | Interest |   | Due    |
|----------------------------|--------|---------------------|---------|----------|--------|--------|
| Type      of Debt          |   |                | Rate    |     | Date   |
|                       |   | (in      thousands) |    | (%)      |   |   |
| Senior      Unsecured Debt |   | $                   | 500,000 |     | 7.000  |   | 2038 |

----

|                                                             |   | MTM      Risk Management Contracts |     |   | Cash      Flow &Fair      Value Hedges |   |    | DETM      Assignment (a) |   |   |  CollateralDeposits |   |   | Total  |   |
|------------------------------------------------------------------|--------|------------------------------------|----------|--------|--------------------------------------------|--------|---------|--------------------------|--------|--------|--------------------------|--------|--------|--------|--------|
| Current      Assets                                              |   | $                                  | 139,911  |   |                                       | $      | 5,003   |                     |   | $      | -                        |   |   | $      | (3,346 | ) |   | $ | 141,568 |   |
| Noncurrent      Assets                                           |   |                               | 77,550   |   |                                       |   | 852     |                     |   |   | -                        |   |   |   | (4,827 | ) |   |   | 73,575 |   |
| Total      MTM Derivative Contract Assets                        |   |                               | 217,461  |   |                                       |   | 5,855   |                     |   |   | -                        |   |   |   | (8,173 | ) |   |   | 215,143 |   |
|                                                             |   |                               |     |   |                                       |   |    |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Current      Liabilities                                         |   |                               | (129,250 | )      |                                       |   | (23,448 | )                        |   |   | (3,734                   | )      |   |   | 11,797 |   |   |   | (144,635 | ) |
| Noncurrent      Liabilities                                      |   |                               | (48,108  | )      |                                       |   | (54     | )                        |   |   | (4,306                   | )      |   |   | 554    |   |   |   | (51,914 | ) |
| Total      MTM Derivative Contract Liabilities              |   |                               | (177,358 | )      |                                       |   | (23,502 | )                        |   |   | (8,040                   | )      |   |   | 12,351 |   |   |   | (196,549 | ) |
|                                                             |   |                               |     |   |                                       |   |    |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $                                  | 40,103   |   |                                       | $      | (17,647 | )                        |   | $      | (8,040                   | )      |   | $      | 4,178  |   |   | $ | 18,594 |   |

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

| Total      MTM Risk Management Contract Net Assets at December 31,    2007                                                 |   | $      | 45,870  |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| (Gain)      Loss from Contracts Realized/Settled During the Period and Entered in a      Prior Period                      |   |   | (8,194  | )      |
| Fair      Value of New Contracts at Inception When Entered During the Period      (a)                                      |   |   | -       |   |
| Net      Option Premiums Paid/(Received) for Unexercised or Unexpired Option      Contracts Entered During the Period |   |   | -       |   |
| Change      in Fair Value Due to Valuation Methodology Changes on Forward Contracts      (b)                               |   |   | 864     |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                             |   |   | (204    | )      |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                        |   |   | 1,767   |   |
| Total      MTM Risk Management Contract Net Assets                                                                         |   |   | 40,103  |   |
| Net      Cash Flow & Fair Value Hedge Contracts                                                                        |   |   | (17,647 | )      |
| DETM      Assignment (e)                                                                                                   |   |   | (8,040  | )      |
| Collateral      Deposits                                                                                                   |   |   | 4,178   |   |
| Ending      Net Risk Management Assets at March 31, 2008                                                                   |   | $      | 18,594  |   |

| (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.  Inception value is only recorded if observable market      data can be obtained for valuation inputs for the entire contract      term.  The contract prices are valued against market curves      associated with the delivery location and deliveryterm. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents      the impact of applying AEP’s credit risk when measuring the fair value of      derivative liabilities according to SFAS 157.                                                                                                                                                                                                                                                                                                          |
| (c) | Market      fluctuations are attributable to various factors such as supply/demand,      weather, storage, etc.                                                                                                                                                                                                                                                                                                                                             |
| (d) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected in the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/ liabilities for those subsidiaries that      operate in regulated jurisdictions.                                                                        |
| (e) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report.                                                                                                                                                                                                                                                                                                                                                   |

|             |   | Remainder2008 |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | After2012 |   |   | Total  |   |
|------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
| Level      1 (a) |   | $             | (3,547 | )      |   | $      | (893   | )      |   | $      | (20    | )      |   | $      | -      |   |      | $      | -      |   |   | $ | - |   |   | $ | (4,460 | ) |
| Level      2 (b) |   |          | 6,543  |   |   |   | 12,561 |   |   |   | 9,182  |   |   |   | 637    |   |      |   | 470    |   |   |   | - |   |   |   | 29,393 |   |
| Level      3 (c) |   |          | 25     |   |   |   | 1,152  |   |   |   | (2,090 | )      |   |   | (19    | )      |      |   | (11    | )      |   |   | - |   |   |   | (943 | ) |
| Total            |   | $             | 3,021  |   |   | $      | 12,820 |   |   | $      | 7,072  |   |   | $      | 618    |   |      | $      | 459    |   |   | $ | - |   |   | $ | 23,990 |   |

| Dedesignated Risk Management   Contracts      (d) |   |   | 3,577 |   |   |   | 4,602  |   |   |   | 4,565  |   |   |   | 1,778 |   |   |   | 1,591 |   |   |   | - |   |   |   | 16,113 |   |
|----------------------------------------------------------------------------|--------|--------|-------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-------|--------|--------|--------|-------|--------|--------|--------|---|--------|--------|--------|--------|--------|
| Total      MTM Risk Management   Contract Net Assets        |   | $      | 6,598 |   |   | $      | 17,422 |   |   | $      | 11,637 |   |   | $      | 2,396 |   |   | $      | 2,050 |   |   | $      | - |   |   | $      | 40,103 |   |

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

|                                                               |   | Power  |    |   | InterestRate |   |   | ForeignCurrency |   |   | Total |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------------|--------|--------|-----------------|--------|--------|-------|--------|
| Beginning      Balance in AOCI December 31, 2007                   |   | $      | 783     |   |         | $      | (6,602 | )               |   | $      | (125  | )      |   | $ | (5,944 | ) |
| Changes      in Fair Value                                         |   |   | (11,413 | )      |         |   | (3,105 | )               |   |   | 206   |   |   |   | (14,312 | ) |
| Reclassifications      from AOCI for Cash Flow Hedges Settled |   |   | 110     |   |         |   | 387    |            |   |   | 2     |   |   |   | 499 |   |
| Ending      Balance in AOCI March 31, 2008                         |   | $      | (10,520 | )      |         | $      | (9,320 | )               |   | $      | 83    |   |   | $ | (19,757 | ) |

| Three      Months EndedMarch      31, 2008           |   |   | Twelve      Months EndedDecember      31, 2007       |   |
|------------------------------------------------------|--------|--------|------------------------------------------------------|--------|
| (in      thousands)                                  |   |   | (in      thousands)                                  |   |
| End                                                  |   |   | High                                                 |   |   | Average |   |   | Low |   |   | End |   |   | High |   |   | Average |   |   | Low |   |
|         $566 |   |   |              $709 |   |   |         $356 |   |   |              $161 |   |   |               $455 |   |   |       $2,328 |   |   |              $569 |   |   |        $117 |   |

----

|                                                                            |   | 2008   |    |   | 2007   |   |
|---------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| REVENUES                                                                        |   |   |    |   |   |   |
| Electric      Generation, Transmission and Distribution                         |   | $      | 641,457 |   |   | $      | 601,546 |   |
| Sales      to AEP Affiliates                                                    |   |   | 90,090  |   |   |   | 61,545 |   |
| Other                                                                           |   |   | 3,480   |   |   |   | 2,637 |   |
| TOTAL                                                                           |   |   | 735,027 |   |   |   | 665,728 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| EXPENSES                                                                        |   |   |    |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation                    |   |   | 173,830 |   |   |   | 171,186 |   |
| Purchased      Electricity for Resale                                           |   |   | 43,199  |   |   |   | 35,950 |   |
| Purchased      Electricity from AEP Affiliates                                  |   |   | 189,595 |   |   |   | 127,601 |   |
| Other      Operation                                                            |   |   | 75,531  |   |   |   | 67,629 |   |
| Maintenance                                                                     |   |   | 57,844  |   |   |   | 45,753 |   |
| Depreciation      and Amortization                                              |   |   | 62,572  |   |   |   | 59,160 |   |
| Taxes      Other Than Income Taxes                                              |   |   | 23,991  |   |   |   | 21,275 |   |
| TOTAL                                                                           |   |   | 626,562 |   |   |   | 528,554 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| OPERATING      INCOME                                                           |   |   | 108,465 |   |   |   | 137,174 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| Other      Income (Expense):                                                    |   |   |    |   |   |   |   |   |
| Interest      Income                                                            |   |   | 2,769   |   |   |   | 639 |   |
| Carrying      Costs Income                                                      |   |   | 9,586   |   |   |   | 3,166 |   |
| Allowance      for Equity Funds Used During Construction                        |   |   | 1,496   |   |   |   | 2,777 |   |
| Interest      Expense                                                           |   |   | (44,140 | )      |   |   | (31,823 | ) |
|                                                                            |   |   |    |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                                           |   |   | 78,176  |   |   |   | 111,933 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| Income      Tax Expense                                                         |   |   | 22,863  |   |   |   | 41,706 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| NET      INCOME                                                                 |   |   | 55,313  |   |   |   | 70,227 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| Preferred      Stock Dividend Requirements including Capital Stock Expense |   |   | 238     |   |   |   | 238 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                                        |   | $      | 55,075  |   |   | $      | 69,989 |   |

----

|                                                                                                 |   | Common      Stock |    |   | Paid-in      Capital |   |      | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|-----------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
|                                                                                                 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |
| DECEMBER      31, 2006                                                                               |   | $                 | 260,458 |   |                 | $      | 1,024,994 |                   |   | $      | 805,513                                            |   |   | $      | (54,791 | ) |   | $ | 2,036,174 |   |
|                                                                                                 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                                     |   |              |    |   |                 |   |      |                   |   |   | (2,685                                             | )      |   |   |    |   |   |   | (2,685 | ) |
| Common      Stock Dividends                                                                          |   |              |    |   |                 |   |      |                   |   |   | (15,000                                            | )      |   |   |    |   |   |   | (15,000 | ) |
| Preferred      Stock Dividends                                                                       |   |              |    |   |                 |   |      |                   |   |   | (200                                               | )      |   |   |    |   |   |   | (200 | ) |
| Capital      Stock Expense                                                                           |   |              |    |   |                 |   | 38        |                   |   |   | (38                                                | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 2,018,289 |   |
|                                                                                                 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                            |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Loss, Net of Taxes:                                                         |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $4,030                                                          |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | (7,484  | ) |   |   | (7,484 | ) |
| NET      INCOME                                                                                      |   |              |    |   |                 |   |      |                   |   |   | 70,227                                             |   |   |   |    |   |   |   | 70,227 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                      |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 62,743 |   |
|                                                                                                 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2007                                                                                  |   | $                 | 260,458 |   |                 | $      | 1,025,032 |                   |   | $      | 857,817                                            |   |   | $      | (62,275 | ) |   | $ | 2,081,032 |   |
|                                                                                                 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| 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                                                                |   |              |    |   |                 |   | 75,000    |                   |   |   |                                               |   |   |   |    |   |   |   | 75,000 |   |
| Preferred      Stock Dividends                                                                       |   |              |    |   |                 |   |      |                   |   |   | (200                                               | )      |   |   |    |   |   |   | (200 | ) |
| Capital      Stock Expense                                                                           |   |              |    |   |                 |   | 39        |                   |   |   | (38                                                | )      |   |   |    |   |   |   | 1 |   |
| TOTAL                                                                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 2,154,366 |   |
|                                                                                                 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                            |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss),   Net      of Taxes:                          |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of      $7,438                                                |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | (13,813 | ) |   |   | (13,813 | ) |
| Amortization      of Pension and OPEB Deferred         Costs, Net of Tax of $449 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | 833     |   |   |   | 833 |   |
| NET      INCOME                                                                                      |   |              |    |   |                 |   |      |                   |   |   | 55,313                                             |   |   |   |    |   |   |   | 55,313 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                      |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 42,333 |   |
|                                                                                                 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2008                                                                                  |   | $                 | 260,458 |   |                 | $      | 1,100,188 |                   |   | $      | 884,220                                            |   |   | $      | (48,167 | ) |   | $ | 2,196,699 |   |

----

|                                                   |   | 2008   |      |   | 2007   |   |
|--------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                    |   |   |      |   |   |   |
| Cash      and Cash Equivalents                         |   | $      | 2,652     |   |   | $      | 2,195 |   |
| Advances      to Affiliates                            |   |   | 261,823   |   |   |   | - |   |
| Accounts      Receivable:                              |   |   |      |   |   |   |   |   |
|         Customers                            |   |   | 165,994   |   |   |   | 176,834 |   |
|         Affiliated Companies                 |   |   | 85,530    |   |   |   | 113,582 |   |
|         Accrued Unbilled Revenues            |   |   | 30,578    |   |   |   | 38,397 |   |
|         Miscellaneous                        |   |   | 1,736     |   |   |   | 2,823 |   |
|         Allowance for Uncollectible Accounts |   |   | (5,861    | )      |   |   | (13,948 | )  |
|         Total Accounts Receivable            |   |   | 277,977   |   |   |   | 317,688 |   |
| Fuel                                                   |   |   | 61,287    |   |   |   | 82,203 |   |
| Materials      and Supplies                            |   |   | 77,159    |   |   |   | 76,685 |   |
| Risk      Management Assets                            |   |   | 141,568   |   |   |   | 62,955 |   |
| Prepayments      and Other                             |   |   | 24,396    |   |   |   | 16,369 |   |
| TOTAL                                                  |   |   | 846,862   |   |   |   | 558,095 |   |
|                                                   |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                     |   |   |      |   |   |   |   |   |
| Electric:                                              |   |   |      |   |   |   |   |   |
|         Production                           |   |   | 3,623,812 |   |   |   | 3,625,788 |   |
|         Transmission                         |   |   | 1,677,426 |   |   |   | 1,675,081 |   |
|         Distribution                         |   |   | 2,400,382 |   |   |   | 2,372,687 |   |
| Other                                                  |   |   | 356,552   |   |   |   | 351,827 |   |
| Construction      Work in Progress                     |   |   | 779,850   |   |   |   | 713,063 |   |
| Total                                                  |   |   | 8,838,022 |   |   |   | 8,738,446 |   |
| Accumulated      Depreciation and Amortization         |   |   | 2,610,635 |   |   |   | 2,591,833 |   |
| TOTAL      - NET                                       |   |   | 6,227,387 |   |   |   | 6,146,613 |   |
|                                                   |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                           |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                 |   |   | 666,207   |   |   |   | 652,739 |   |
| Long-term      Risk Management Assets                  |   |   | 73,575    |   |   |   | 72,366 |   |
| Deferred      Charges and Other                        |   |   | 205,816   |   |   |   | 191,871 |   |
| TOTAL                                                  |   |   | 945,598   |   |   |   | 916,976 |   |
|                                                   |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                      |   | $      | 8,019,847 |   |   | $      | 7,621,684 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | -         |   |   | $      | 275,257 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
|         General                                           |   |                | 226,940   |   |   |   | 241,871 |   |
|         Affiliated Companies                              |   |                | 102,784   |   |   |   | 106,852 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 287,229   |   |   |   | 239,732 |   |
| Risk      Management Liabilities                                    |   |                | 144,635   |   |   |   | 51,708 |   |
| Customer      Deposits                                              |   |                | 48,828    |   |   |   | 45,920 |   |
| Accrued      Taxes                                                  |   |                | 53,966    |   |   |   | 58,519 |   |
| Accrued      Interest                                               |   |                | 53,051    |   |   |   | 41,699 |   |
| Other                                                               |   |                | 88,254    |   |   |   | 139,476 |   |
| TOTAL                                                               |   |                | 1,005,687 |   |   |   | 1,201,034 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 2,952,929 |   |   |   | 2,507,567 |   |
| Long-term      Debt – Affiliated                              |   |                | 100,000   |   |   |   | 100,000 |   |
| Long-term      Risk Management Liabilities                          |   |                | 51,914    |   |   |   | 47,357 |   |
| Deferred      Income Taxes                                          |   |                | 973,047   |   |   |   | 948,891 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 505,872   |   |   |   | 505,556 |   |
| Deferred      Credits and Other                                     |   |                | 215,947   |   |   |   | 211,495 |   |
| TOTAL                                                               |   |                | 4,799,709 |   |   |   | 4,320,866 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 5,805,396 |   |   |   | 5,521,900 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 17,752    |   |   |   | 17,752 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – No Par Value:                             |   |                |      |   |   |   |   |   |
|         Authorized – 30,000,000 Shares              |   |                |      |   |   |   |   |   |
|         Outstanding – 13,499,500 Shares             |   |                | 260,458   |   |   |   | 260,458 |   |
| Paid-in      Capital                                                |   |                | 1,100,188 |   |   |   | 1,025,149 |   |
| Retained      Earnings                                              |   |                | 884,220   |   |   |   | 831,612 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (48,167   | )      |   |   | (35,187 | ) |
| TOTAL                                                               |   |                | 2,196,699 |   |   |   | 2,082,032 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 8,019,847 |   |   | $      | 7,621,684 |   |

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 55,313   |   |   | $      | 70,227 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
|  Depreciation      and Amortization                                                   |   |   | 62,572   |   |   |   | 59,160 |   |
|  Deferred      Income Taxes                                                           |   |   | 25,066   |   |   |   | (3,901 | )  |
|  Carrying      Costs Income                                                           |   |   | (9,586   | )      |   |   | (3,166 | )  |
|  Allowance      for Equity Funds Used During Construction                             |   |   | (1,496   | )      |   |   | (2,777 | )  |
|  Mark-to-Market      of Risk Management Contracts                                     |   |   | (1,658   | )      |   |   | (3,255 | )  |
|  Change      in Other Noncurrent Assets                                               |   |   | (13,102  | )      |   |   | (9,970 | )  |
|  Change      in Other Noncurrent Liabilities                                          |   |   | (5,555   | )      |   |   | 30,172 |   |
|  Changes      in Certain Components of Working Capital:                               |   |   |     |   |   |   |   |   |
|              Accounts Receivable, Net                   |   |   | 32,344   |   |   |   | 8,849 |   |
|              Fuel, Materials and Supplies               |   |   | 20,442   |   |   |   | (1,034 | )  |
|              Accounts Payable                           |   |   | 4,235    |   |   |   | (19,891 | )  |
|              Accrued Taxes, Net                         |   |   | (2,942   | )      |   |   | 29,539 |   |
|              Accrued Interest                           |   |   | 11,351   |   |   |   | 21,608 |   |
|              Fuel Over/Under Recovery, Net              |   |   | (26,584  | )      |   |   | 12,987 |   |
|              Other Current Assets                       |   |   | (6,690   | )      |   |   | 2,074 |   |
|              Other Current Liabilities                  |   |   | (24,878  | )      |   |   | (14,593 | )  |
| Net      Cash Flows from Operating Activities                                              |   |   | 118,832  |   |   |   | 176,029 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (158,722 | )      |   |   | (202,007 | )  |
| Change      in Other Cash Deposits, Net                                                    |   |   | -        |   |   |   | (29 | )  |
| Change      in Advances to Affiliates, Net                                                 |   |   | (261,823 | )      |   |   | - |   |
| Proceeds      from Sales of Assets                                                         |   |   | 11,366   |   |   |   | 1,142 |   |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (409,179 | )      |   |   | (200,894 | )  |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Capital      Contribution from Parent                                                      |   |   | 75,000   |   |   |   | - |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 492,325  |   |   |   | - |   |
| Change      in Advances from Affiliates, Net                                               |   |   | (275,257 | )      |   |   | 47,885 |   |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (3       | )      |   |   | (3 | )  |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (1,061   | )      |   |   | (1,112 | )  |
| Amortization      of Funds From Amended Coal Contract                                      |   |   | -        |   |   |   | (7,036 | )  |
| Dividends      Paid on Common Stock                                                        |   |   | -        |   |   |   | (15,000 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (200     | )      |   |   | (200 | )  |
| Net      Cash Flows from Financing Activities                                              |   |   | 290,804  |   |   |   | 24,534 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                  |   |   | 457      |   |   |   | (331 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 2,195    |   |   |   | 2,318 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 2,652    |   |   | $      | 1,987 |   |

| SUPPLEMENTARY      INFORMATION                                           |   |   |   |   |   |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Cash      Paid for Interest, Net of Capitalized Amounts                  |   | $      | 35,527 |   |   | $      | 7,084 |   |
| Net      Cash Paid for Income Taxes                                      |   |   | 338    |   |   |   | 7,775 |   |
| Noncash      Acquisitions Under Capital Leases                           |   |   | 478    |   |   |   | 444 |   |
| Construction      Expenditures Included in Accounts Payable at March 31, |   |   | 83,766 |   |   |   | 113,021 |   |

----

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

----

----

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES

| First      Quarter of 2007                        |   |   |   |   | $      | 47     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 52     |   |   |   |   |   |
| Off-system      Sales                             |   |   | 10     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 1      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 63     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (13    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 2      |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (4     | )      |   |   |   |   |
| Interest      Expense                             |   |   | (4     | )      |   |   |   |   |
| Other                                             |   |   | 3      |   |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (16    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (18    | ) |
|                                              |   |   |   |   |   |   |   |   |
| First      Quarter of 2008                        |   |   |   |   |   | $      | 76     |   |

| · | Retail      Margins increased $52 million primarily due to:                                                                               |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                    | A      $32 million increase in rate revenues related to CSPCo’s RSP (see “Ohio      Rate Matters” section of Note 3). |
|   | ·                                                                                                                                    | A      $32 million decrease in capacity settlement charges due to recent plant      acquisitions and changes in relative peak demands of AEP Power Pool      members under the Interconnection Agreement. |
|   | ·                                                                                                                                    | An      $11 million increase in industrial revenue due to increased usage by      Ormet, a major industrial customer. |
|   | These      increases were partially offset by:                                                                                            |
|   | ·                                                                                                                                    | A      $14 million decrease in fuel margins. |
| · | Margins      from Off-system Sales increased $10 million primarily due to higher      physical sales margins and higher trading  margins. |

| ·                               | Other      Operation and Maintenance expenses increased $13 million primarily due      to:                                                                                                                                                                                                                          |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          ·  | An      $8 million increase in expenses related to CSPCo’s Unit Power Agreement      for AEGCo’s Lawrenceburg Plant which began in May 2007.                                                                                                                                                            |
| ·                          | A      $3 million increase in boiler plant maintenance expenses primarily related      to work performed at the Conesville and Stuart Plants.                                                                                                                                                                       |
| ·                               | Depreciation      and Amortization decreased $2 million primarily due to the amortization of      IGCC pre-construction costs, which ended in the second quarter of      2007.  The amortization of IGCC pre-construction costs was      offset by a corresponding increase in Retail Margins in    2007. |
| ·                               | Taxes      Other Than Income Taxes increased $4 million due to increases in property      taxes, state excise taxes and gross receipt taxes.                                                                                                                                                                        |
| ·                               | Interest      Expense increased $4 million primarily due to increases in long-term      borrowings and short-term borrowings from the Utility Money Pool and a      reduction in the debt component of AFUDC.                                                                                                       |
| ·                               | Income      Tax Expense increased $18 million primarily due to an increase in pretax      book income.                                                                                                                                                                                                              |

----

----

|                                                         |   | 2008   |         |   | 2007   |   |
|--------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|
| REVENUES                                                     |   |   |         |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $      | 505,324      |   |   | $      | 423,466 |   |
| Sales      to AEP Affiliates                                 |   |   | 35,108       |   |   |   | 23,013 |   |
| Other                                                        |   |   | 1,217        |   |   |   | 1,433 |   |
| TOTAL                                                        |   |   | 541,649      |   |   |   | 447,912 |   |
|                                                         |   |   |         |   |   |   |   |   |
| EXPENSES                                                     |   |   |         |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |   | 85,127       |   |   |   | 75,862 |   |
| Purchased      Electricity for Resale                        |   |   | 42,186       |   |   |   | 31,311 |   |
| Purchased      Electricity from AEP Affiliates               |   |   | 94,104       |   |   |   | 83,541 |   |
| Other      Operation                                         |   |   | 73,066       |   |   |   | 61,159 |   |
| Maintenance                                                  |   |   | 23,231       |   |   |   | 22,564 |   |
| Depreciation      and Amortization                           |   |   | 48,602       |   |   |   | 50,297 |   |
| Taxes      Other Than Income Taxes                           |   |   | 44,556       |   |   |   | 40,582 |   |
| TOTAL                                                        |   |   | 410,872      |   |   |   | 365,316 |   |
|                                                         |   |   |         |   |   |   |   |   |
| OPERATING      INCOME                                        |   |   | 130,777      |   |   |   | 82,596 |   |
|                                                         |   |   |         |   |   |   |   |   |
| Other      Income (Expense):                                 |   |   |         |   |   |   |   |   |
| Interest      Income                                         |   |   | 2,339        |   |   |   | 422 |   |
| Carrying      Costs Income                                   |   |   | 1,766        |   |   |   | 1,092 |   |
| Allowance      for Equity Funds Used During Construction     |   |   | 855          |   |   |   | 772 |   |
| Interest      Expense                                        |   |   | (19,239      | )      |   |   | (15,281 | ) |
|                                                         |   |   |         |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |   | 116,498      |   |   |   | 69,601 |   |
|                                                         |   |   |         |   |   |   |   |   |
| Income      Tax Expense                                      |   |   | 40,345       |   |   |   | 22,620 |   |
|                                                         |   |   |         |   |   |   |   |   |
| NET INCOME                                                   |   |   | 76,153       |   |   |   | 46,981 |   |
|                                                         |   |   |         |   |   |   |   |   |
| Capital      Stock Expense                                   |   |   | 39           |   |   |   | 39 |   |
|                                                         |   |   |         |   |   |   |   |   |
| EARNINGS APPLICABLE TO COMMON      STOCK                |   | $      | 76,114  |   |   | $      | 46,942  |   |

----

|                                                                                                  |   | Common      Stock |   |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|-------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
|                                                                                                  |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |
| DECEMBER      31, 2006                                                                                |   | $                 | 41,026 |   |                 | $      | 580,192 |                   |   | $      | 456,787                                            |   |   | $      | (21,988 | ) |   | $ | 1,056,017 |   |
|                                                                                                  |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                                      |   |              |   |   |                 |   |    |                   |   |   | (3,022                                             | )      |   |   |    |   |   |   | (3,022 | ) |
| Common      Stock Dividends                                                                           |   |              |   |   |                 |   |    |                   |   |   | (20,000                                            | )      |   |   |    |   |   |   | (20,000 | ) |
| Capital      Stock Expense                                                                            |   |              |   |   |                 |   | 39      |                   |   |   | (39                                                | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                                                 |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,032,995 |   |
|                                                                                                  |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                             |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Loss, Net of Taxes:                                                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $2,841                                                           |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | (5,276  | ) |   |   | (5,276 | ) |
| NET      INCOME                                                                                       |   |              |   |   |                 |   |    |                   |   |   | 46,981                                             |   |   |   |    |   |   |   | 46,981 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                       |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 41,705 |   |
|                                                                                                  |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2007                                                                                   |   | $                 | 41,026 |   |                 | $      | 580,231 |                   |   | $      | 480,707                                            |   |   | $      | (27,264 | ) |   | $ | 1,074,700 |   |
|                                                                                                  |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| 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                                                                           |   |              |   |   |                 |   |    |                   |   |   | (37,500                                            | )      |   |   |    |   |   |   | (37,500 | ) |
| Capital      Stock Expense                                                                            |   |              |   |   |                 |   | 39      |                   |   |   | (39                                                | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                                                 |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,125,366 |   |
|                                                                                                  |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                             |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss), Net of Taxes:                                       |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $3,553                                                           |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | (6,598  | ) |   |   | (6,598 | ) |
| Amortization      of Pension and OPEB Deferred Costs, Net of          Tax of $152 |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 283     |   |   |   | 283 |   |
| NET      INCOME                                                                                       |   |              |   |   |                 |   |    |                   |   |   | 76,153                                             |   |   |   |    |   |   |   | 76,153 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                       |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 69,838 |   |
|                                                                                                  |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2008                                                                                   |   | $                 | 41,026 |   |                 | $      | 580,388 |                   |   | $      | 598,899                                            |   |   | $      | (25,109 | ) |   | $ | 1,195,204 |   |

----

|                                                   |   | 2008   |      |   | 2007   |   |
|--------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                    |   |   |      |   |   |   |
| Cash      and Cash Equivalents                         |   | $      | 1,616     |   |   | $      | 1,389 |   |
| Other      Cash Deposits                               |   |   | 53,760    |   |   |   | 53,760 |   |
| Accounts      Receivable:                              |   |   |      |   |   |   |   |   |
|         Customers                            |   |   | 68,611    |   |   |   | 57,268 |   |
|         Affiliated Companies                 |   |   | 19,614    |   |   |   | 32,852 |   |
|         Accrued Unbilled Revenues            |   |   | 20,685    |   |   |   | 14,815 |   |
|         Miscellaneous                        |   |   | 9,354     |   |   |   | 9,905 |   |
|         Allowance for Uncollectible Accounts |   |   | (2,604    | )      |   |   | (2,563 | )  |
|         Total Accounts Receivable            |   |   | 115,660   |   |   |   | 112,277 |   |
| Fuel                                                   |   |   | 29,677    |   |   |   | 35,849 |   |
| Materials      and Supplies                            |   |   | 36,313    |   |   |   | 36,626 |   |
| Emission      Allowances                               |   |   | 14,594    |   |   |   | 16,811 |   |
| Risk      Management Assets                            |   |   | 78,080    |   |   |   | 33,558 |   |
| Prepayments      and Other                             |   |   | 14,369    |   |   |   | 9,960 |   |
| TOTAL                                                  |   |   | 344,069   |   |   |   | 300,230 |   |
|                                                   |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                     |   |   |      |   |   |   |   |   |
| Electric:                                              |   |   |      |   |   |   |   |   |
|         Production                           |   |   | 2,073,747 |   |   |   | 2,072,564 |   |
|         Transmission                         |   |   | 553,853   |   |   |   | 510,107 |   |
|         Distribution                         |   |   | 1,565,111 |   |   |   | 1,552,999 |   |
| Other                                                  |   |   | 202,962   |   |   |   | 198,476 |   |
| Construction      Work in Progress                     |   |   | 436,001   |   |   |   | 415,327 |   |
| Total                                                  |   |   | 4,831,674 |   |   |   | 4,749,473 |   |
| Accumulated      Depreciation and Amortization         |   |   | 1,721,170 |   |   |   | 1,697,793 |   |
| TOTAL      - NET                                       |   |   | 3,110,504 |   |   |   | 3,051,680 |   |
|                                                   |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                           |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                 |   |   | 227,062   |   |   |   | 235,883 |   |
| Long-term      Risk Management Assets                  |   |   | 43,808    |   |   |   | 41,852 |   |
| Deferred      Charges and Other                        |   |   | 163,218   |   |   |   | 181,563 |   |
| TOTAL                                                  |   |   | 434,088   |   |   |   | 459,298 |   |
|                                                   |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                      |   | $      | 3,888,661 |   |   | $      | 3,811,208 |   |

----

|                                                            |   | 2008                |      |   | 2007   |   |
|-----------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                        |   | (in      thousands) |      |
| Advances      from Affiliates                                   |   | $                   | 163,999   |   |   | $      | 95,199 |   |
| Accounts      Payable:                                          |   |                |      |   |   |   |   |   |
|  General                                                   |   |                | 119,321   |   |   |   | 113,290 |   |
|  Affiliated      Companies                                 |   |                | 58,734    |   |   |   | 65,292 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated   |   |                | 108,550   |   |   |   | 112,000 |   |
| Risk      Management Liabilities                                |   |                | 81,151    |   |   |   | 28,237 |   |
| Customer      Deposits                                          |   |                | 43,029    |   |   |   | 43,095 |   |
| Accrued      Taxes                                              |   |                | 177,810   |   |   |   | 179,831 |   |
| Other                                                           |   |                | 65,117    |   |   |   | 96,892 |   |
| TOTAL                                                           |   |                | 817,711   |   |   |   | 733,836 |   |
|                                                            |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                     |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                       |   |                | 1,037,769 |   |   |   | 1,086,224 |   |
| Long-term      Debt – Affiliated                          |   |                | 100,000   |   |   |   | 100,000 |   |
| Long-term      Risk Management Liabilities                      |   |                | 30,982    |   |   |   | 27,419 |   |
| Deferred      Income Taxes                                      |   |                | 446,119   |   |   |   | 437,306 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits |   |                | 162,382   |   |   |   | 165,635 |   |
| Deferred      Credits and Other                                 |   |                | 98,494    |   |   |   | 96,511 |   |
| TOTAL                                                           |   |                | 1,875,746 |   |   |   | 1,913,095 |   |
|                                                            |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                          |   |                | 2,693,457 |   |   |   | 2,646,931 |   |
|                                                            |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                     |   |                |      |   |   |   |   |   |
|                                                            |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                          |   |                |      |   |   |   |   |   |
| Common      Stock – No Par Value:                         |   |                |      |   |   |   |   |   |
|  Authorized      – 24,000,000 Shares                 |   |                |      |   |   |   |   |   |
|  Outstanding      – 16,410,426 Shares                |   |                | 41,026    |   |   |   | 41,026 |   |
| Paid-in      Capital                                            |   |                | 580,388   |   |   |   | 580,349 |   |
| Retained      Earnings                                          |   |                | 598,899   |   |   |   | 561,696 |   |
| Accumulated      Other Comprehensive Income (Loss)              |   |                | (25,109   | )      |   |   | (18,794 | ) |
| TOTAL                                                           |   |                | 1,195,204 |   |   |   | 1,164,277 |   |
|                                                            |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDER’S EQUITY           |   | $                   | 3,888,661 |   |   | $      | 3,811,208 |   |

----

|                                                                                       |   | 2008   |    |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |    |   |   |   |
| Net      Income                                                                            |   | $      | 76,153  |   |   | $      | 46,981 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |    |   |   |   |   |   |
|  Depreciation      and Amortization                                                   |   |   | 48,602  |   |   |   | 50,297 |   |
|  Deferred      Income Taxes                                                           |   |   | 872     |   |   |   | (716 | )  |
|  Allowance      for Equity Funds Used During Construction                             |   |   | (855    | )      |   |   | (772 | )  |
|  Mark-to-Market      of Risk Management Contracts                                     |   |   | (1,499  | )      |   |   | 1,936 |   |
|  Deferred      Property Taxes                                                         |   |   | 21,728  |   |   |   | 18,954 |   |
|  Change      in Other Noncurrent Assets                                               |   |   | (11,440 | )      |   |   | (1,232 | )  |
|  Change      in Other Noncurrent Liabilities                                          |   |   | 1,292   |   |   |   | (15,510 | )  |
|  Changes      in Certain Components of Working Capital:                               |   |   |    |   |   |   |   |   |
|           Accounts Receivable, Net                                     |   |   | (3,383  | )      |   |   | 19,839 |   |
|           Fuel, Materials and Supplies                                 |   |   | 6,485   |   |   |   | 3,218 |   |
|           Accounts Payable                                             |   |   | (6,756  | )      |   |   | (7,659 | )  |
|           Accrued Taxes, Net                                           |   |   | (2,001  | )      |   |   | (8,651 | )  |
|           Other Current Assets                                         |   |   | (2,211  | )      |   |   | 4,531 |   |
|           Other Current Liabilities                                    |   |   | (20,972 | )      |   |   | (4,515 | )  |
| Net      Cash Flows from Operating Activities                                              |   |   | 106,015 |   |   |   | 106,701 |   |
|                                                                                       |   |   |    |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |    |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (84,513 | )      |   |   | (85,641 | )  |
| Change      in Advances to Affiliates, Net                                                 |   |   | -       |   |   |   | (922 | )  |
| Other                                                                                      |   |   | 150     |   |   |   | 169 |   |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (84,363 | )      |   |   | (86,394 | )  |
|                                                                                       |   |   |    |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |    |   |   |   |   |   |
| Change      in Advances from Affiliates, Net                                               |   |   | 68,800  |   |   |   | (696 | )  |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (52,000 | )      |   |   | - |   |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (725    | )      |   |   | (693 | )  |
| Dividends      Paid on Common Stock                                                        |   |   | (37,500 | )      |   |   | (20,000 | )  |
| Net      Cash Flows Used for Financing Activities                                          |   |   | (21,425 | )      |   |   | (21,389 | )  |
|                                                                                       |   |   |    |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                  |   |   | 227     |   |   |   | (1,082 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 1,389   |   |   |   | 1,319 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 1,616   |   |   | $      | 237 |   |

| SUPPLEMENTARY      INFORMATION                                           |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cash      Paid for Interest, Net of Capitalized Amounts                  |   | $      | 24,351 |   |   | $      | 20,132 |   |
| Net      Cash Paid (Received) for Income Taxes                           |   |   | 2,494  |   |   |   | (2,907 | )      |
| Noncash      Acquisitions Under Capital Leases                           |   |   | 355    |   |   |   | 275    |   |
| Construction      Expenditures Included in Accounts Payable at March 31, |   |   | 48,392 |   |   |   | 20,636 |   |

----

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

----

----

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES

| First      Quarter of 2007                        |   |   |   |   | $      | 29     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 1      |   |   |   |   |   |
| FERC      Municipals and Cooperatives             |   |   | 4      |   |   |   |   |   |
| Off-system      Sales                             |   |   | 9      |   |   |   |   |   |
| Transmission      Revenues                        |   |   | (1     | )      |   |   |   |   |
| Other                                             |   |   | 7      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 20     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (8     | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 25     |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (2     | )      |   |   |   |   |
| Other      Income                                 |   |   | 1      |   |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 16     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (10    | ) |
|                                              |   |   |   |   |   |   |   |   |
| First      Quarter of 2008                        |   |   |   |   |   | $      | 55     |   |

| · | FERC      Municipals and Cooperatives margins increased $4 million due to higher      prices in 2008.                                                                                                                                                                                                                                                                                                                        |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Margins      from Off-system Sales increased $9 million primarily due to higher      physical sales margins partially offset by lower trading      margins.                                                                                                                                                                                                                                                                  |
| · | Other      revenues increased $7 million primarily due to increased River      Transportation Division (RTD) revenues for barging      services.  RTD’s related expenses which offset the RTD revenue      increase are included in Other Operation on the Condensed Consolidated      Statements of Income resulting in a return approved under a regulatory      order impacting I&M’s earnings. |

| · | Other      Operation and Maintenance expenses increased $8 million primarily due to      higher operation and maintenance expenses for RTD caused by increased      barging activity.                                                                                                                                                                                                                                                                                                                                           |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization expense decreased $25 million primarily due to reduced      depreciation rates reflecting longer estimated lives for Cook and Tanners      Creek Plants.  Depreciation rates were reduced for the Indiana      jurisdiction in June 2007 and the FERC and Michigan jurisdictions in      October 2007.  See “Indiana Depreciation Study Filing” and      “Michigan Depreciation Study Filing” sections of Note 4 in the 2007 Annual      Report. |
| · | Income      Tax Expense increased $10 million primarily due to an increase in pretax      book income.                                                                                                                                                                                                                                                                                                                                                                                                                          |

----

----

|                                                         |   | 2008   |    |   | 2007   |   |
|--------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| REVENUES                                                     |   |   |    |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $      | 431,592 |   |   | $      | 405,164 |   |
| Sales      to AEP Affiliates                                 |   |   | 76,512  |   |   |   | 67,429 |   |
| Other      – Affiliated                                |   |   | 23,219  |   |   |   | 12,667 |   |
| Other      – Nonaffiliated                             |   |   | 5,826   |   |   |   | 7,609 |   |
| TOTAL                                                        |   |   | 537,149 |   |   |   | 492,869 |   |
|                                                         |   |   |    |   |   |   |   |   |
| EXPENSES                                                     |   |   |    |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |   | 101,241 |   |   |   | 96,117 |   |
| Purchased      Electricity for Resale                        |   |   | 21,483  |   |   |   | 17,940 |   |
| Purchased      Electricity from AEP Affiliates               |   |   | 92,641  |   |   |   | 77,513 |   |
| Other      Operation                                         |   |   | 120,366 |   |   |   | 120,733 |   |
| Maintenance                                                  |   |   | 51,221  |   |   |   | 42,430 |   |
| Depreciation      and Amortization                           |   |   | 31,722  |   |   |   | 56,307 |   |
| Taxes      Other Than Income Taxes                           |   |   | 19,902  |   |   |   | 17,994 |   |
| TOTAL                                                        |   |   | 438,576 |   |   |   | 429,034 |   |
|                                                         |   |   |    |   |   |   |   |   |
| OPERATING      INCOME                                        |   |   | 98,573  |   |   |   | 63,835 |   |
|                                                         |   |   |    |   |   |   |   |   |
| Other      Income (Expense):                                 |   |   |    |   |   |   |   |   |
| Interest      Income                                         |   |   | 829     |   |   |   | 588 |   |
| Allowance      for Equity Funds Used During Construction     |   |   | 880     |   |   |   | 265 |   |
| Interest      Expense                                        |   |   | (19,202 | )      |   |   | (19,821 | ) |
|                                                         |   |   |    |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |   | 81,080  |   |   |   | 44,867 |   |
|                                                         |   |   |    |   |   |   |   |   |
| Income      Tax Expense                                      |   |   | 25,822  |   |   |   | 15,404 |   |
|                                                         |   |   |    |   |   |   |   |   |
| NET      INCOME                                              |   |   | 55,258  |   |   |   | 29,463 |   |
|                                                         |   |   |    |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                   |   |   | 85      |   |   |   | 85 |   |
|                                                         |   |   |    |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                     |   | $      | 55,173  |   |   | $      | 29,378 |   |

----

|                                                                                                                         |   | Common      Stock |   |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
| DECEMBER      31, 2006                                                                                                       |   | $                 | 56,584 |   |                 | $      | 861,290 |                   |   | $      | 386,616                                            |   |   | $      | (15,051 | ) |   | $ | 1,289,439 |   |
|                                                                                                                         |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                                                             |   |              |   |   |                 |   |    |                   |   |   | 327                                                |   |   |   |    |   |   |   | 327 |   |
| Common      Stock Dividends                                                                                                  |   |              |   |   |                 |   |    |                   |   |   | (10,000                                            | )      |   |   |    |   |   |   | (10,000 | ) |
| Preferred      Stock Dividends                                                                                               |   |              |   |   |                 |   |    |                   |   |   | (85                                                | )      |   |   |    |   |   |   | (85 | ) |
| TOTAL                                                                                                                        |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,279,681 |   |
|                                                                                                                         |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Loss, Net of Taxes:                                                                                 |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $2,850                                                                                  |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | (5,293  | ) |   |   | (5,293 | ) |
| NET      INCOME                                                                                                              |   |              |   |   |                 |   |    |                   |   |   | 29,463                                             |   |   |   |    |   |   |   | 29,463 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                                              |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 24,170 |   |
|                                                                                                                         |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2007                                                                                                          |   | $                 | 56,584 |   |                 | $      | 861,290 |                   |   | $      | 406,321                                            |   |   | $      | (20,344 | ) |   | $ | 1,303,851 |   |
|                                                                                                                         |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| 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                                                                                                  |   |              |   |   |                 |   |    |                   |   |   | (18,750                                            | )      |   |   |    |   |   |   | (18,750 | ) |
| Preferred      Stock Dividends                                                                                               |   |              |   |   |                 |   |    |                   |   |   | (85                                                | )      |   |   |    |   |   |   | (85 | ) |
| TOTAL                                                                                                                        |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,365,466 |   |
|                                                                                                                         |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss),  Net of      Taxes:                                                        |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $3,208                                                                                  |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | (5,958  | ) |   |   | (5,958 | ) |
| Amortization      of Pension and OPEB Deferred Costs, Net of              Tax of $59 |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 110     |   |   |   | 110 |   |
| NET      INCOME                                                                                                              |   |              |   |   |                 |   |    |                   |   |   | 55,258                                             |   |   |   |    |   |   |   | 55,258 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                                              |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 49,410 |   |
|                                                                                                                         |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2008                                                                                                          |   | $                 | 56,584 |   |                 | $      | 861,291 |                   |   | $      | 518,524                                            |   |   | $      | (21,523 | ) |   | $ | 1,414,876 |   |

----

|                                                      |   | 2008   |      |   | 2007   |   |
|-----------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                       |   |   |      |   |   |   |
| Cash      and Cash Equivalents                            |   | $      | 1,731     |   |   | $      | 1,139 |   |
| Accounts      Receivable:                                 |   |   |      |   |   |   |   |   |
|         Customers                               |   |   | 69,932    |   |   |   | 70,995 |   |
|         Affiliated Companies                    |   |   | 61,930    |   |   |   | 92,018 |   |
|         Accrued Unbilled Revenues               |   |   | 19,501    |   |   |   | 16,207 |   |
|         Miscellaneous                           |   |   | 1,783     |   |   |   | 1,335 |   |
|         Allowance for Uncollectible Accounts    |   |   | (2,769    | )      |   |   | (2,711 | )  |
|         Total Accounts Receivable               |   |   | 150,377   |   |   |   | 177,844 |   |
| Fuel                                                      |   |   | 50,379    |   |   |   | 61,342 |   |
| Materials      and Supplies                               |   |   | 142,240   |   |   |   | 141,384 |   |
| Risk      Management Assets                               |   |   | 73,579    |   |   |   | 32,365 |   |
| Accrued      Tax Benefits                                 |   |   | 786       |   |   |   | 4,438 |   |
| Prepayments      and Other                                |   |   | 20,718    |   |   |   | 11,091 |   |
| TOTAL                                                     |   |   | 439,810   |   |   |   | 429,603 |   |
|                                                      |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                        |   |   |      |   |   |   |   |   |
| Electric:                                                 |   |   |      |   |   |   |   |   |
|         Production                              |   |   | 3,488,509 |   |   |   | 3,529,524 |   |
|         Transmission                            |   |   | 1,088,696 |   |   |   | 1,078,575 |   |
|         Distribution                            |   |   | 1,211,073 |   |   |   | 1,196,397 |   |
| Other      (including nuclear fuel and coal mining)       |   |   | 624,600   |   |   |   | 626,390 |   |
| Construction      Work in Progress                        |   |   | 134,279   |   |   |   | 122,296 |   |
| Total                                                     |   |   | 6,547,157 |   |   |   | 6,553,182 |   |
| Accumulated      Depreciation, Depletion and Amortization |   |   | 2,969,464 |   |   |   | 2,998,416 |   |
| TOTAL      - NET                                          |   |   | 3,577,693 |   |   |   | 3,554,766 |   |
|                                                      |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                              |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                    |   |   | 252,438   |   |   |   | 246,435 |   |
| Spent      Nuclear Fuel and Decommissioning Trusts        |   |   | 1,324,398 |   |   |   | 1,346,798 |   |
| Long-term      Risk Management Assets                     |   |   | 41,740    |   |   |   | 40,227 |   |
| Deferred      Charges and Other                           |   |   | 138,219   |   |   |   | 128,623 |   |
| TOTAL                                                     |   |   | 1,756,795 |   |   |   | 1,762,083 |   |
|                                                      |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                         |   | $      | 5,774,298 |   |   | $      | 5,746,452 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 185,938   |   |   | $      | 45,064 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
|  General                                                       |   |                | 91,756    |   |   |   | 184,435 |   |
|  Affiliated      Companies                                     |   |                | 58,556    |   |   |   | 61,749 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 50,000    |   |   |   | 145,000 |   |
| Risk      Management Liabilities                                    |   |                | 76,295    |   |   |   | 27,271 |   |
| Customer      Deposits                                              |   |                | 27,146    |   |   |   | 26,445 |   |
| Accrued      Taxes                                                  |   |                | 97,369    |   |   |   | 60,995 |   |
| Obligations      Under Capital Leases                               |   |                | 43,749    |   |   |   | 43,382 |   |
| Other                                                               |   |                | 107,027   |   |   |   | 130,232 |   |
| TOTAL                                                               |   |                | 737,836   |   |   |   | 724,573 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 1,424,713 |   |   |   | 1,422,427 |   |
| Long-term      Risk Management Liabilities                          |   |                | 29,587    |   |   |   | 26,348 |   |
| Deferred      Income Taxes                                          |   |                | 336,058   |   |   |   | 321,716 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 755,477   |   |   |   | 789,346 |   |
| Asset      Retirement Obligations                                   |   |                | 863,680   |   |   |   | 852,646 |   |
| Deferred      Credits and Other                                     |   |                | 203,991   |   |   |   | 215,617 |   |
| TOTAL                                                               |   |                | 3,613,506 |   |   |   | 3,628,100 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 4,351,342 |   |   |   | 4,352,673 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 8,080     |   |   |   | 8,080 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – No Par Value:                             |   |                |      |   |   |   |   |   |
|  Authorized      – 2,500,000 Shares                      |   |                |      |   |   |   |   |   |
|  Outstanding      – 1,400,000 Shares                     |   |                | 56,584    |   |   |   | 56,584 |   |
| Paid-in      Capital                                                |   |                | 861,291   |   |   |   | 861,291 |   |
| Retained      Earnings                                              |   |                | 518,524   |   |   |   | 483,499 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (21,523   | )      |   |   | (15,675 | ) |
| TOTAL                                                               |   |                | 1,414,876 |   |   |   | 1,385,699 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 5,774,298 |   |   | $      | 5,746,452 |   |

----

|                                                                                          |   | 2008   |     |   | 2007   |   |
|-----------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                     |   |   |     |   |   |   |
| Net      Income                                                                               |   | $      | 55,258   |   |   | $      | 29,463 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities:    |   |   |     |   |   |   |   |   |
|  Depreciation      and Amortization                                                      |   |   | 31,722   |   |   |   | 56,307 |   |
|  Deferred      Income Taxes                                                              |   |   | 5,191    |   |   |   | (3,638 | )  |
|  Amortization      (Deferral) of Incremental Nuclear Refueling Outage Expenses,      Net |   |   | (881     | )      |   |   | 12,191 |   |
|  Allowance      for Equity Funds Used During Construction                                |   |   | (880     | )      |   |   | (265 | )  |
|  Mark-to-Market      of Risk Management Contracts                                        |   |   | (1,308   | )      |   |   | 2,316 |   |
|  Amortization      of Nuclear Fuel                                                       |   |   | 21,619   |   |   |   | 16,372 |   |
|  Deferred      Property Taxes                                                            |   |   | (11,412  | )      |   |   | (10,836 | )  |
|  Change      in Other Noncurrent Assets                                                  |   |   | 658      |   |   |   | 5,994 |   |
|  Change      in Other Noncurrent Liabilities                                             |   |   | 14,234   |   |   |   | (1,971 | )  |
|  Changes      in Certain Components of Working Capital:                                  |   |   |     |   |   |   |   |   |
|           Accounts Receivable, Net                                        |   |   | 27,467   |   |   |   | 38,789 |   |
|           Fuel, Materials and Supplies                                    |   |   | 10,107   |   |   |   | 14,985 |   |
|           Accounts Payable                                                |   |   | 408      |   |   |   | (38,233 | )  |
|           Accrued Taxes, Net                                              |   |   | 40,026   |   |   |   | 39,525 |   |
|           Accrued Rent – Rockport Plant Unit 2                      |   |   | 18,464   |   |   |   | 18,464 |   |
|           Other Current Assets                                            |   |   | (6,718   | )      |   |   | 737 |   |
|           Other Current Liabilities                                       |   |   | (39,998  | )      |   |   | (35,427 | )  |
| Net      Cash Flows from Operating Activities                                                 |   |   | 163,957  |   |   |   | 144,773 |   |
|                                                                                          |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                     |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                                |   |   | (67,945  | )      |   |   | (62,252 | )  |
| Purchases      of Investment Securities                                                       |   |   | (132,311 | )      |   |   | (204,874 | )  |
| Sales      of Investment Securities                                                           |   |   | 113,951  |   |   |   | 183,927 |   |
| Acquisitions      of Nuclear Fuel                                                             |   |   | (98,385  | )      |   |   | (5,366 | )  |
| Proceeds      from Sales of Assets and Other                                                  |   |   | 2,815    |   |   |   | 248 |   |
| Net      Cash Flows Used for Investing Activities                                             |   |   | (181,875 | )      |   |   | (88,317 | )  |
|                                                                                          |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                     |   |   |     |   |   |   |   |   |
| Change      in Advances from Affiliates, Net                                                  |   |   | 140,874  |   |   |   | (45,414 | )  |
| Retirement      of Long-term Debt – Nonaffiliated                                       |   |   | (95,000  | )      |   |   | - |   |
| Principal      Payments for Capital Lease Obligations                                         |   |   | (8,529   | )      |   |   | (1,573 | )  |
| Dividends      Paid on Common Stock                                                           |   |   | (18,750  | )      |   |   | (10,000 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                             |   |   | (85      | )      |   |   | (85 | )  |
| Net      Cash Flows from (Used for) Financing Activities                                      |   |   | 18,510   |   |   |   | (57,072 | )  |
|                                                                                          |   |   |     |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                     |   |   | 592      |   |   |   | (616 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                         |   |   | 1,139    |   |   |   | 1,369 |   |
| Cash      and Cash Equivalents at End of Period                                               |   | $      | 1,731    |   |   | $      | 753 |   |

| SUPPLEMENTARY      INFORMATION                                           |   |   |   |   |   |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Cash      Paid for Interest, Net of Capitalized Amounts                  |   | $      | 20,216 |   |   | $      | 15,048 |   |
| Net      Cash Received for Income Taxes                                  |   |   | (1,118 | )      |   |   | (2,768 | ) |
| Noncash      Acquisitions Under Capital Leases                           |   |   | 2,023  |   |   |   | 369 |   |
| Construction      Expenditures Included in Accounts Payable at March 31, |   |   | 16,280 |   |   |   | 20,243 |   |

----

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

----

----

OHIO POWER COMPANY CONSOLIDATED

| First      Quarter of 2007                        |   |   |   |   | $      | 79     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 41     |   |   |   |   |   |
| Off-system      Sales                             |   |   | 13     |   |   |   |   |   |
| Other                                             |   |   | 7      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 61     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | 24     |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | 16     |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (3     | )      |   |   |   |   |
| Other      Income                                 |   |   | 2      |   |   |   |   |   |
| Interest      Expense                             |   |   | (8     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 31     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (33    | ) |
|                                              |   |   |   |   |   |   |   |   |
| First      Quarter of 2008                        |   |   |   |   |   | $      | 138    |   |

| · | Retail      Margins increased $41 million primarily due to the    following:                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                         | A      $58 million increase related to a coal contract amendment which reduced      future deliveries to OPCo in exchange for consideration      received. |
|   | ·                                                                                                                         | An      $11 million increase related to new rates implemented as approved by the      PUCO in OPCo’s RSP. |
|   | ·                                                                                                                         | A      $6 million increase primarily related to increased usage by Ormet, an      industrial customer.  See “Ormet” section of Note    3. |
|   | These      increases were partially offset by:                                                                                 |
|   | ·                                                                                                                         | A      $40 million decrease related to increased fuel, consumable and allowance      costs. |
| · | Margins      from Off-system Sales increased $13 million due to higher physical sales      margins and higher trading margins. |
| · | Other      revenues increased $7 million primarily due to increased gains on sales of      emission allowances.                |

| · | Other      Operation and Maintenance expenses decreased $24 million primarily due to      the higher maintenance and removal costs for planned and forced outages at      the Gavin and Mitchell Plants in 2007.                                                                                                                                                                                                                       |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization decreased $16 million primarily dueto:                                                                                                                                                                                                                                                                                                                                                              |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                 | An      $18 million decrease in amortization as a result of completion of      amortization of regulatory assets in December 2007. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                 | A      $3 million decrease due to the amortization of IGCC pre-construction      costs, which ended in the second quarter of 2007.  The      amortization of IGCC pre-construction costs was offset by a corresponding      increase in Retail Margins in 2007. |
|   | These      decreases were partially offset by:                                                                                                                                                                                                                                                                                                                                                                                         |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                 | A      $7 million increase in depreciation related to environmental improvements      placed in service at the Mitchell Plant during 2007. |
| · | Taxes      Other Than Income Taxes increased $3 million primarily due to increased      taxable property value.                                                                                                                                                                                                                                                                                                                        |
| · | Interest      Expense increased $8 million primarily due to the issuance of additional      long-term debt and a decrease in the debt component of AFUDC as a result      of Mitchell Plant environmental improvements placed in      service.  These decreases were partially offset by a decrease in      interest expense related to OPCo's borrowing from the Utility Money Pool      as a result of reduced borrowings. |
| · | Income      Tax Expense increased $33 million primarily due to an increase in pretax      book income.                                                                                                                                                                                                                                                                                                                                 |

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

|                                                  |   | 2008                |     |   | 2007   |   |
|-------------------------------------------------------|--------|---------------------|----------|--------|--------|--------|
|                                                  |   | (in      thousands) |     |
| Cash      and Cash Equivalents at Beginning of Period |   | $                   | 6,666    |   |   | $      | 1,625 |   |
| Cash      Flows From (Used For):                      |   |                |     |   |   |   |   |   |
| Operating      Activities                             |   |                | 151,617  |   |   |   | 96,864 |   |
| Investing      Activities                             |   |                | (140,253 | )      |   |   | (306,826 | ) |
| Financing      Activities                             |   |                | (14,413  | )      |   |   | 209,598 |   |
| Net      Decrease in Cash and Cash Equivalents        |   |                | (3,049   | )      |   |   | (364 | ) |
| Cash      and Cash Equivalents at End of Period       |   | $                   | 3,617    |   |   | $      | 1,261 |   |

| Type      of Debt                        |   | PrincipalAmount      Paid |   | Interest      Rate |                                                             | Due      Date |
|------------------------------------------|--------|---------------------------|--------|--------------------|------------------------------------------------------------------|---------------|
|                                     |   | (in      thousands)       |   | (%)                |                                                             |          |
| Notes      Payable – Nonaffiliated |   | $                         | 1,463  |               | 6.81           |          | 2008 |
| Notes      Payable – Nonaffiliated |   |                      | 6,000  |               | 6.27           |          | 2009 |

----

|                                                             |   | MTM      Risk Management Contracts |     |   | Cash      Flow &Fair      Value Hedges |   |    | DETM      Assignment (a) |   |   |  CollateralDeposits |   |   | Total  |   |
|------------------------------------------------------------------|--------|------------------------------------|----------|--------|--------------------------------------------|--------|---------|--------------------------|--------|--------|--------------------------|--------|--------|--------|--------|
| Current      Assets                                              |   | $                                  | 113,255  |   |                                       | $      | 1,939   |                     |   | $      | -                        |   |   | $      | (2,420 | ) |   | $ | 112,774 |   |
| Noncurrent      Assets                                           |   |                               | 58,242   |   |                                       |   | 596     |                     |   |   | -                        |   |   |   | (3,378 | ) |   |   | 55,460 |   |
| Total      MTM Derivative Contract Assets                        |   |                               | 171,497  |   |                                       |   | 2,535   |                     |   |   | -                        |   |   |   | (5,798 | ) |   |   | 168,234 |   |
|                                                             |   |                               |     |   |                                       |   |    |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Current      Liabilities                                         |   |                               | (107,058 | )      |                                       |   | (18,774 | )                        |   |   | (2,613                   | )      |   |   | 10,016 |   |   |   | (118,429 | ) |
| Noncurrent      Liabilities                                      |   |                               | (35,767  | )      |                                       |   | (37     | )                        |   |   | (3,013                   | )      |   |   | 443    |   |   |   | (38,374 | ) |
| Total      MTM Derivative Contract Liabilities              |   |                               | (142,825 | )      |                                       |   | (18,811 | )                        |   |   | (5,626                   | )      |   |   | 10,459 |   |   |   | (156,803 | ) |
|                                                             |   |                               |     |   |                                       |   |    |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $                                  | 28,672   |   |                                       | $      | (16,276 | )                        |   | $      | (5,626                   | )      |   | $      | 4,661  |   |   | $ | 11,431 |   |

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

| Total      MTM Risk Management Contract Net Assets at December 31,    2007                                                        |   | $      | 30,248  |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| (Gain)      Loss from Contracts Realized/Settled During the Period and Entered in a      Prior Period                             |   |   | (6,055  | )      |
| 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 |   |   | (64     | )      |
| Change      in Fair Value Due to Valuation Methodology Changes on Forward Contracts      (b)                                      |   |   | 1,434   |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                                    |   |   | 451     |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                               |   |   | 2,658   |   |
| Total      MTM Risk Management Contract Net Assets                                                                                |   |   | 28,672  |   |
| Net      Cash Flow & Fair Value Hedge Contracts                                                                               |   |   | (16,276 | )      |
| DETM      Assignment (e)                                                                                                          |   |   | (5,626  | )      |
| Collateral      Deposits                                                                                                          |   |   | 4,661   |   |
| Ending      Net Risk Management Assets at March 31, 2008                                                                          |   | $      | 11,431  |   |

| (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.  Inception value is only recorded if observable market      data can be obtained for valuation inputs for the entire contract      term.  The contract prices are valued against market curves      associated with the delivery location and deliveryterm. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents      the impact of applying AEP’s credit risk when measuring the fair value of      derivative liabilities according to SFAS 157.                                                                                                                                                                                                                                                                                                          |
| (c) | Market      fluctuations are attributable to various factors such as supply/demand,      weather, storage, etc.                                                                                                                                                                                                                                                                                                                                             |
| (d) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected in the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/ liabilities for those subsidiaries that      operate in regulated jurisdictions.                                                                        |
| (e) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report.                                                                                                                                                                                                                                                                                                                                                   |

|             |   | Remainder2008 |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | After2012 |   |   | Total  |   |
|------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
| Level      1 (a) |   | $             | (2,482 | )      |   | $      | (625   | )      |   | $      | (14    | )      |   | $      | -      |   |      | $      | -      |   |   | $ | - |   |   | $ | (3,121 | ) |
| Level      2 (b) |   |          | 3,427  |   |   |   | 10,392 |   |   |   | 6,762  |   |   |   | 446    |   |      |   | 329    |   |   |   | - |   |   |   | 21,356 |   |
| Level      3 (c) |   |          | (168   | )      |   |   | 809    |   |   |   | (1,457 | )      |   |   | (13    | )      |      |   | (8     | )      |   |   | - |   |   |   | (837 | ) |
| Total            |   | $             | 777    |   |   | $      | 10,576 |   |   | $      | 5,291  |   |   | $      | 433    |   |      | $      | 321    |   |   | $ | - |   |   | $ | 17,398 |   |

| Dedesignated      Risk Management   Contracts (d)        |   |   | 2,503 |   |   | 3,220  |   |   |   | 3,194 |   |   |   | 1,244 |   |   |   | 1,113 |   |   |   | - |   |   |   | 11,274 |   |
|--------------------------------------------------------------------|--------|--------|-------|--------|--------|--------|--------|--------|--------|-------|--------|--------|--------|-------|--------|--------|--------|-------|--------|--------|--------|---|--------|--------|--------|--------|--------|
| Total      MTM Risk Management  Contract      Net Assets |   | $      | 3,280 |   | $      | 13,796 |   |   | $      | 8,485 |   |   | $      | 1,677 |   |   | $      | 1,434 |   |   | $      | - |   |   | $      | 28,672 |   |

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

|                                                               |   | Power  |   |   | Interest      Rate |   |   | ForeignCurrency |   |   | Total |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------------------|--------|--------|-----------------|--------|--------|-------|--------|
| Beginning      Balance in AOCI December 31, 2007                   |   | $      | (756   | )      |               | $      | 2,167  |            |   | $      | (254  | )      |   | $ | 1,157 |   |
| Changes      in Fair Value                                         |   |   | (8,025 | )      |               |   | (1,097 | )               |   |   | 409   |   |   |   | (8,713 | ) |
| Reclassifications      from AOCI for Cash Flow Hedges Settled |   |   | 338    |   |               |   | (203   | )               |   |   | (233  | )      |   |   | (98 | ) |
| Ending      Balance in AOCI March 31, 2008                         |   | $      | (8,443 | )      |               | $      | 867    |            |   | $      | (78   | )      |   | $ | (7,654 | ) |

| Three      Months Ended March 31, 2008               |   |   | Twelve      Months Ended December 31, 2007     |   |
|------------------------------------------------------|--------|--------|------------------------------------------------|--------|
| (in      thousands)                                  |   |   | (in      thousands)                            |   |
| End                                                  |   |   | High                                           |   |   | Average |   |   | Low |   |   | End |   |   | High |   |   | Average |   |   | Low |   |
|         $652 |   |   |        $780 |   |   |        $342 |   |   |        $132 |   |   |        $325 |   |   |       $2,054 |   |   |        $490 |   |   |         $90 |   |

----

|                                                         |   | 2008   |    |   | 2007   |   |
|--------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| REVENUES                                                     |   |   |    |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $      | 555,478 |   |   | $      | 492,534 |   |
| Sales      to AEP Affiliates                                 |   |   | 236,848 |   |   |   | 178,894 |   |
| Other      - Affiliated                                      |   |   | 5,299   |   |   |   | 4,038 |   |
| Other      - Nonaffiliated                                   |   |   | 4,563   |   |   |   | 3,975 |   |
| TOTAL                                                        |   |   | 802,188 |   |   |   | 679,441 |   |
|                                                         |   |   |    |   |   |   |   |   |
| EXPENSES                                                     |   |   |    |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |   | 238,934 |   |   |   | 198,293 |   |
| Purchased      Electricity for Resale                        |   |   | 34,577  |   |   |   | 24,854 |   |
| Purchased      Electricity from AEP Affiliates               |   |   | 32,516  |   |   |   | 20,966 |   |
| Other      Operation                                         |   |   | 89,882  |   |   |   | 102,987 |   |
| Maintenance                                                  |   |   | 48,697  |   |   |   | 59,148 |   |
| Depreciation      and Amortization                           |   |   | 68,566  |   |   |   | 84,276 |   |
| Taxes      Other Than Income Taxes                           |   |   | 51,578  |   |   |   | 48,385 |   |
| TOTAL                                                        |   |   | 564,750 |   |   |   | 538,909 |   |
|                                                         |   |   |    |   |   |   |   |   |
| OPERATING      INCOME                                        |   |   | 237,438 |   |   |   | 140,532 |   |
|                                                         |   |   |    |   |   |   |   |   |
| Other      Income (Expense):                                 |   |   |    |   |   |   |   |   |
| Interest      Income                                         |   |   | 2,908   |   |   |   | 412 |   |
| Carrying      Costs Income                                   |   |   | 4,229   |   |   |   | 3,541 |   |
| Allowance      for Equity Funds Used During Construction     |   |   | 544     |   |   |   | 571 |   |
| Interest      Expense                                        |   |   | (34,382 | )      |   |   | (25,931 | ) |
|                                                         |   |   |    |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |   | 210,737 |   |   |   | 119,125 |   |
|                                                         |   |   |    |   |   |   |   |   |
| Income      Tax Expense                                      |   |   | 72,910  |   |   |   | 39,864 |   |
|                                                         |   |   |    |   |   |   |   |   |
| NET      INCOME                                              |   |   | 137,827 |   |   |   | 79,261 |   |
|                                                         |   |   |    |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                   |   |   | 183     |   |   |   | 183 |   |
|                                                         |   |   |    |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                     |   | $      | 137,644 |   |   | $      | 79,078 |   |

----

|                                                                                                                         |   | Common      Stock |    |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
|                                                                                                                         |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |
| DECEMBER      31, 2006                                                                                                       |   | $                 | 321,201 |   |                 | $      | 536,639 |                   |   | $      | 1,207,265                                          |   |   | $      | (56,763 | ) |   | $ | 2,008,342 |   |
|                                                                                                                         |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                                                             |   |              |    |   |                 |   |    |                   |   |   | (5,380                                             | )      |   |   |    |   |   |   | (5,380 | ) |
| Preferred      Stock Dividends                                                                                               |   |              |    |   |                 |   |    |                   |   |   | (183                                               | )      |   |   |    |   |   |   | (183 | ) |
| TOTAL                                                                                                                        |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 2,002,779 |   |
|                                                                                                                         |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Loss, Net of Taxes:                                                                                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $3,485                                                                                  |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | (6,471  | ) |   |   | (6,471 | ) |
| NET      INCOME                                                                                                              |   |              |    |   |                 |   |    |                   |   |   | 79,261                                             |   |   |   |    |   |   |   | 79,261 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                                              |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 72,790 |   |
|                                                                                                                         |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2007                                                                                                          |   | $                 | 321,201 |   |                 | $      | 536,639 |                   |   | $      | 1,280,963                                          |   |   | $      | (63,234 | ) |   | $ | 2,075,569 |   |
|                                                                                                                         |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| DECEMBER      31, 2007                                                                                                       |   | $                 | 321,201 |   |                 | $      | 536,640 |                   |   | $      | 1,469,717                                          |   |   | $      | (36,541 | ) |   | $ | 2,291,017 |   |
|                                                                                                                         |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $1,004                                                                               |   |              |    |   |                 |   |    |                   |   |   | (1,864                                             | )      |   |   |    |   |   |   | (1,864 | ) |
| SFAS      157 Adoption, Net of Tax of $152                                                                                   |   |              |    |   |                 |   |    |                   |   |   | (282                                               | )      |   |   |    |   |   |   | (282 | ) |
| Preferred      Stock Dividends                                                                                               |   |              |    |   |                 |   |    |                   |   |   | (183                                               | )      |   |   |    |   |   |   | (183 | ) |
| TOTAL                                                                                                                        |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 2,288,688 |   |
|                                                                                                                         |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss),   Net      of Taxes:                                                  |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
|        Cash Flow Hedges, Net of Tax of $4,745                                                                           |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | (8,811  | ) |   |   | (8,811 | ) |
|        Amortization of Pension and OPEB Deferred Costs, Net of           Tax of $379 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 703     |   |   |   | 703 |   |
| NET      INCOME                                                                                                              |   |              |    |   |                 |   |    |                   |   |   | 137,827                                            |   |   |   |    |   |   |   | 137,827 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                                              |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 129,719 |   |
|                                                                                                                         |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2008                                                                                                          |   | $                 | 321,201 |   |                 | $      | 536,640 |                   |   | $      | 1,605,215                                          |   |   | $      | (44,649 | ) |   | $ | 2,418,407 |   |

----

|                                                   |   | 2008   |      |   | 2007   |   |
|--------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                    |   |   |      |   |   |   |
| Cash      and Cash Equivalents                         |   | $      | 3,617     |   |   | $      | 6,666 |   |
| Accounts      Receivable:                              |   |   |      |   |   |   |   |   |
|         Customers                            |   |   | 94,852    |   |   |   | 104,783 |   |
|         Affiliated Companies                 |   |   | 121,141   |   |   |   | 119,560 |   |
|         Accrued Unbilled Revenues            |   |   | 36,275    |   |   |   | 26,819 |   |
|         Miscellaneous                        |   |   | 22,113    |   |   |   | 1,578 |   |
|         Allowance for Uncollectible Accounts |   |   | (3,451    | )      |   |   | (3,396 | )  |
|         Total Accounts Receivable            |   |   | 270,930   |   |   |   | 249,344 |   |
| Fuel                                                   |   |   | 96,984    |   |   |   | 92,874 |   |
| Materials      and Supplies                            |   |   | 108,467   |   |   |   | 108,447 |   |
| Risk      Management Assets                            |   |   | 112,774   |   |   |   | 44,236 |   |
| Prepayments      and Other                             |   |   | 31,207    |   |   |   | 18,300 |   |
| TOTAL                                                  |   |   | 623,979   |   |   |   | 519,867 |   |
|                                                   |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                     |   |   |      |   |   |   |   |   |
| Electric:                                              |   |   |      |   |   |   |   |   |
|         Production                           |   |   | 5,898,316 |   |   |   | 5,641,537 |   |
|         Transmission                         |   |   | 1,073,766 |   |   |   | 1,068,387 |   |
|         Distribution                         |   |   | 1,410,479 |   |   |   | 1,394,988 |   |
| Other                                                  |   |   | 370,583   |   |   |   | 318,805 |   |
| Construction      Work in Progress                     |   |   | 531,974   |   |   |   | 716,640 |   |
| Total                                                  |   |   | 9,285,118 |   |   |   | 9,140,357 |   |
| Accumulated      Depreciation and Amortization         |   |   | 3,008,893 |   |   |   | 2,967,285 |   |
| TOTAL      - NET                                       |   |   | 6,276,225 |   |   |   | 6,173,072 |   |
|                                                   |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                           |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                 |   |   | 322,170   |   |   |   | 323,105 |   |
| Long-term      Risk Management Assets                  |   |   | 55,460    |   |   |   | 49,586 |   |
| Deferred      Charges and Other                        |   |   | 254,286   |   |   |   | 272,799 |   |
| TOTAL                                                  |   |   | 631,916   |   |   |   | 645,490 |   |
|                                                   |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                      |   | $      | 7,532,120 |   |   | $      | 7,338,429 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 87,408    |   |   | $      | 101,548 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
|         General                                           |   |                | 156,776   |   |   |   | 141,196 |   |
|         Affiliated Companies                              |   |                | 112,964   |   |   |   | 137,389 |   |
| Short-term      Debt – Nonaffiliated                          |   |                | -         |   |   |   | 701 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 137,225   |   |   |   | 55,188 |   |
| Risk      Management Liabilities                                    |   |                | 118,429   |   |   |   | 40,548 |   |
| Customer      Deposits                                              |   |                | 30,682    |   |   |   | 30,613 |   |
| Accrued      Taxes                                                  |   |                | 200,688   |   |   |   | 185,011 |   |
| Accrued      Interest                                               |   |                | 37,532    |   |   |   | 41,880 |   |
| Other                                                               |   |                | 115,627   |   |   |   | 149,658 |   |
| TOTAL                                                               |   |                | 997,331   |   |   |   | 883,732 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 2,505,088 |   |   |   | 2,594,410 |   |
| Long-term      Debt – Affiliated                              |   |                | 200,000   |   |   |   | 200,000 |   |
| Long-term      Risk Management Liabilities                          |   |                | 38,374    |   |   |   | 32,194 |   |
| Deferred      Income Taxes                                          |   |                | 937,500   |   |   |   | 914,170 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 157,453   |   |   |   | 160,721 |   |
| Deferred      Credits and Other                                     |   |                | 243,402   |   |   |   | 229,635 |   |
| TOTAL                                                               |   |                | 4,081,817 |   |   |   | 4,131,130 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 5,079,148 |   |   |   | 5,014,862 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Minority      Interest                                              |   |                | 17,938    |   |   |   | 15,923 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 16,627    |   |   |   | 16,627 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – No Par Value:                             |   |                |      |   |   |   |   |   |
|         Authorized – 40,000,000 Shares              |   |                |      |   |   |   |   |   |
|         Outstanding – 27,952,473 Shares             |   |                | 321,201   |   |   |   | 321,201 |   |
| Paid-in      Capital                                                |   |                | 536,640   |   |   |   | 536,640 |   |
| Retained      Earnings                                              |   |                | 1,605,215 |   |   |   | 1,469,717 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (44,649   | )      |   |   | (36,541 | )  |
| TOTAL                                                               |   |                | 2,418,407 |   |   |   | 2,291,017 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 7,532,120 |   |   | $      | 7,338,429 |   |

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 137,827  |   |   | $      | 79,261 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
|  Depreciation      and Amortization                                                   |   |   | 68,566   |   |   |   | 84,276 |   |
|  Deferred      Income Taxes                                                           |   |   | 10,850   |   |   |   | 2,851 |   |
|  Carrying      Costs Income                                                           |   |   | (4,229   | )      |   |   | (3,541 | )  |
|  Allowance      for Equity Funds Used During Construction                             |   |   | (544     | )      |   |   | (571 | )  |
|  Mark-to-Market      of Risk Management Contracts                                     |   |   | (5,035   | )      |   |   | 980 |   |
|  Deferred      Property Taxes                                                         |   |   | 20,574   |   |   |   | 17,920 |   |
|  Change      in Other Noncurrent Assets                                               |   |   | (46,438  | )      |   |   | (3,835 | )  |
|  Change      in Other Noncurrent Liabilities                                          |   |   | 7,412    |   |   |   | (4,434 | )  |
|  Changes      in Certain Components of Working Capital:                               |   |   |     |   |   |   |   |   |
|            Accounts Receivable, Net                               |   |   | (21,586  | )      |   |   | (38,070 | )  |
|            Fuel, Materials and Supplies                           |   |   | (4,130   | )      |   |   | (19,684 | )  |
|            Accounts Payable                                       |   |   | 9,005    |   |   |   | (25,807 | )  |
|            Customer Deposits                                      |   |   | 69       |   |   |   | 4,443 |   |
|            Accrued Taxes, Net                                     |   |   | 15,790   |   |   |   | 6,360 |   |
|            Accrued Interest                                       |   |   | (4,348   | )      |   |   | (2,986 | )  |
|            Other Current Assets                                   |   |   | (13,020  | )      |   |   | (3,528 | )  |
|            Other Current Liabilities                              |   |   | (19,146  | )      |   |   | 3,229 |   |
| Net      Cash Flows from Operating Activities                                              |   |   | 151,617  |   |   |   | 96,864 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (142,257 | )      |   |   | (301,635 | )  |
| Change      in Other Cash Deposits, Net                                                    |   |   | -        |   |   |   | (7,988 | )  |
| Proceeds      from Sales of Assets                                                         |   |   | 2,004    |   |   |   | 2,797 |   |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (140,253 | )      |   |   | (306,826 | )  |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Change      in Short-term Debt, Net – Nonaffiliated                                  |   |   | (701     | )      |   |   | 3,300 |   |
| Change      in Advances from Affiliates, Net                                               |   |   | (14,140  | )      |   |   | 215,846 |   |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (7,463   | )      |   |   | (7,463 | )  |
| Funds      from Amended Coal Contact                                                       |   |   | 10,000   |   |   |   | - |   |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (1,926   | )      |   |   | (1,902 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (183     | )      |   |   | (183 | )  |
| Net      Cash Flows from (Used for) Financing Activities                                   |   |   | (14,413  | )      |   |   | 209,598 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Decrease in Cash and Cash Equivalents                                             |   |   | (3,049   | )      |   |   | (364 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 6,666    |   |   |   | 1,625 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 3,617    |   |   | $      | 1,261 |   |

| SUPPLEMENTARY      INFORMATION                                           |   |   |   |   |   |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Cash      Paid for Interest, Net of Capitalized Amounts                  |   | $      | 37,491 |   |   | $      | 29,646 |   |
| Net      Cash Paid (Received) for Income Taxes                           |   |   | 10,850 |   |   |   | (8,899 | ) |
| Noncash      Acquisitions Under Capital Leases                           |   |   | 687    |   |   |   | 608 |   |
| Noncash      Acquisition of Coal Land Rights                             |   |   | 41,600 |   |   |   | - |   |
| Construction      Expenditures Included in Accounts Payable at March 31, |   |   | 21,828 |   |   |   | 98,653 |   |

----

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

----

----

PUBLIC SERVICE COMPANY OF OKLAHOMA

| First      Quarter of 2007                        |   |   |   |   | $      | (20    | )      |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins          |   |   | 14     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 1      |   |   |   |   |   |
| Other                                             |   |   | 10     |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 25     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (7     | )      |   |   |   |   |
| Deferral      of Ice Storm Costs                  |   |   | 80     |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | (4     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (1     | )      |   |   |   |   |
| Other      Income                                 |   |   | 4      |   |   |   |   |   |
| Interest      Expense                             |   |   | (4     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 68     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (36    | ) |
|                                              |   |   |   |   |   |   |   |   |
| First      Quarter of 2008                        |   |   |   |   |   | $      | 37     |   |

| · | Retail      and Off-system Sales Margins increased $14 million primarily due      to:                                                                                                             |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                            | A      $15 million increase in retail sales margins mainly due to base rate      adjustments during the year and a slight increase in KWH      sales. |
|   | This      increase was offset by:                                                                                                                                                                 |
|   | ·                                                                                                                                                                                            | A      $1 million decrease in off-system margins retained from a net decrease of      $3 million from lower physical margins and lower trading      margins. |
| · | Other      revenues increased $10 million primarily due to the recognition of the      sale of SO2      allowances.  See “Oklahoma 2007 Ice Storms” section of Note      3. |

| · | Other      Operation and Maintenance expenses increased $7 million primarily due      to:                                                                                                                                                                       |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                          | A      $10 million increase in production expenses primarily due to a write-off      of pre-construction costs related to the cancelled Red Rock Generating      Facility.  See “Red Rock Generating Facility” section of Note      3. |
|   | ·                                                                                                                                                                                                                                                          | An      $8 million increase due to amortization of the ice storm Regulatory      Asset.  See “Oklahoma 2007 Ice Storms” section of Note      3. |
|   | ·                                                                                                                                                                                                                                                          | A      $3 million increase in transmission expense primarily due to an increase      in transmission services from nonaffiliated utilities and SPP charges and      fees. |
|   | ·                                                                                                                                                                                                                                                          | A      $2 million increase in distribution maintenance expense due to increased      vegetation management activities to enhance customer      reliability. |
|   | This      increase was partially offset by:                                                                                                                                                                                                                     |
|   | ·                                                                                                                                                                                                                                                          | A      $17 million decrease due to the $21 million ice storm repair costs      expensed in the first quarter 2007 compared to the $4 million ice storm      repair costs expensed in the first quarter 2008. |
| · | Deferral      of Ice Storm Costs in 2008 of $80 million results from an OCC order      approving recovery of ice storm costs related to storms in January and      December 2007.  See “Oklahoma 2007 Ice Storms” section of Note      3. |
| · | Depreciation      and Amortization expenses increased $4 million primarily due to the      amortization of regulatory assets related to the Lawton Settlement and the      ice storm regulatory asset.                                                          |
| · | Other      Income increased $4 million primarily due to an increase in carrying      charges related to the deferred ice storm costs and the Lawton      Settlement.                                                                                            |
| · | Interest      Expense increased $4 million primarily due to increased long-term      borrowings.                                                                                                                                                                |
| · | Income      Tax Expense increased $36 million primarily due to an increase in pretax      book income.                                                                                                                                                          |

----

----

|                                                         |   | 2008   |    |   | 2007   |   |
|--------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| REVENUES                                                     |   |   |    |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $      | 318,880 |   |   | $      | 290,080 |   |
| Sales      to AEP Affiliates                                 |   |   | 15,935  |   |   |   | 24,593 |   |
| Other                                                        |   |   | 1,185   |   |   |   | 640 |   |
| TOTAL                                                        |   |   | 336,000 |   |   |   | 315,313 |   |
|                                                         |   |   |    |   |   |   |   |   |
| EXPENSES                                                     |   |   |    |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |   | 153,205 |   |   |   | 142,515 |   |
| Purchased      Electricity for Resale                        |   |   | 48,582  |   |   |   | 67,409 |   |
| Purchased      Electricity from AEP Affiliates               |   |   | 17,269  |   |   |   | 13,484 |   |
| Other      Operation                                         |   |   | 55,999  |   |   |   | 41,007 |   |
| Maintenance                                                  |   |   | 34,587  |   |   |   | 43,085 |   |
| Deferral      of Ice Storm Costs                             |   |   | (79,902 | )      |   |   | - |   |
| Depreciation      and Amortization                           |   |   | 26,167  |   |   |   | 22,706 |   |
| Taxes      Other Than Income Taxes                           |   |   | 10,952  |   |   |   | 10,294 |   |
| TOTAL                                                        |   |   | 266,859 |   |   |   | 340,500 |   |
|                                                         |   |   |    |   |   |   |   |   |
| OPERATING      INCOME (LOSS)                                 |   |   | 69,141  |   |   |   | (25,187 | ) |
|                                                         |   |   |    |   |   |   |   |   |
| Other      Income (Expense):                                 |   |   |    |   |   |   |   |   |
| Other      Income                                            |   |   | 2,487   |   |   |   | 646 |   |
| Carrying      Costs Income                                   |   |   | 1,634   |   |   |   | - |   |
| Interest      Expense                                        |   |   | (14,941 | )      |   |   | (11,383 | ) |
|                                                         |   |   |    |   |   |   |   |   |
| INCOME      (LOSS) BEFORE INCOME TAX EXPENSE (CREDIT)        |   |   | 58,321  |   |   |   | (35,924 | ) |
|                                                         |   |   |    |   |   |   |   |   |
| Income      Tax Expense (Credit)                             |   |   | 20,922  |   |   |   | (15,498 | ) |
|                                                         |   |   |    |   |   |   |   |   |
| NET      INCOME (LOSS)                                       |   |   | 37,399  |   |   |   | (20,426 | ) |
|                                                         |   |   |    |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                   |   |   | 53      |   |   |   | 53 |   |
|                                                         |   |   |    |   |   |   |   |   |
| EARNINGS      (LOSS) APPLICABLE TO COMMON STOCK              |   | $      | 37,346  |   |   | $      | (20,479 | ) |

----

|                                                     |   | Common      Stock |    |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |   |
|----------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|--------|
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |
| DECEMBER      31, 2006                                   |   | $                 | 157,230 |   |                 | $      | 230,016 |                   |   | $      | 199,262                                            |   |   | $      | (1,070 | ) |   | $ | 585,438 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                         |   |              |    |   |                 |   |    |                   |   |   | (386                                               | )      |   |   |   |   |   |   | (386 | ) |
| Capital      Contribution from Parent                    |   |              |    |   |                 |   | 20,000  |                   |   |   |                                               |   |   |   |   |   |   |   | 20,000 |   |
| Preferred      Stock Dividends                           |   |              |    |   |                 |   |    |                   |   |   | (53                                                | )      |   |   |   |   |   |   | (53 | ) |
| TOTAL                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 604,999 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      LOSS                                  |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:           |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $24                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 45     |   |   |   | 45 |   |
| NET      LOSS                                            |   |              |    |   |                 |   |    |                   |   |   | (20,426                                            | )      |   |   |   |   |   |   | (20,426 | ) |
| TOTAL      COMPREHENSIVE LOSS                            |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | (20,381 | ) |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| MARCH      31, 2007                                      |   | $                 | 157,230 |   |                 | $      | 250,016 |                   |   | $      | 178,397                                            |   |   | $      | (1,025 | ) |   | $ | 584,618 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| 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 | ) |
| Preferred      Stock Dividends                           |   |              |    |   |                 |   |    |                   |   |   | (53                                                | )      |   |   |   |   |   |   | (53 | ) |
| TOTAL                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 639,738 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Other Comprehensive      Income, Net      of Taxes: |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $24                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 45     |   |   |   | 45 |   |
| NET      INCOME                                          |   |              |    |   |                 |   |    |                   |   |   | 37,399                                             |   |   |   |   |   |   |   | 37,399 |   |
| TOTAL      COMPREHENSIVE INCOME                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 37,444 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| MARCH      31, 2008                                      |   | $                 | 157,230 |   |                 | $      | 310,016 |                   |   | $      | 210,778                                            |   |   | $      | (842   | ) |   | $ | 677,182 |   |

----

|                                           |   | 2008   |      |   | 2007   |   |
|------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                            |   |   |      |
| Cash      and Cash Equivalents                 |   | $      | 1,435     |   |   | $      | 1,370 |   |
| Advances      to Affiliates                    |   |   | -         |   |   |   | 51,202 |   |
| Accounts      Receivable:                      |   |   |      |   |   |   |   |   |
|         Customers                    |   |   | 42,505    |   |   |   | 74,330 |   |
|         Affiliated Companies         |   |   | 94,257    |   |   |   | 59,835 |   |
|         Miscellaneous                |   |   | 14,450    |   |   |   | 10,315 |   |
|         Total Accounts Receivable    |   |   | 151,212   |   |   |   | 144,480 |   |
| Fuel                                           |   |   | 23,348    |   |   |   | 19,394 |   |
| Materials      and Supplies                    |   |   | 48,823    |   |   |   | 47,691 |   |
| Risk      Management Assets                    |   |   | 99,625    |   |   |   | 33,308 |   |
| Accrued      Tax Benefits                      |   |   | 27,513    |   |   |   | 31,756 |   |
| Margin      Deposits                           |   |   | 1,844     |   |   |   | 8,980 |   |
| Prepayments      and Other                     |   |   | 18,297    |   |   |   | 18,137 |   |
| TOTAL                                          |   |   | 372,097   |   |   |   | 356,318 |   |
|                                           |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT             |   |   |      |   |   |   |   |   |
| Electric:                                      |   |   |      |   |   |   |   |   |
|         Production                   |   |   | 1,170,963 |   |   |   | 1,110,657 |   |
|         Transmission                 |   |   | 579,163   |   |   |   | 569,746 |   |
|         Distribution                 |   |   | 1,369,834 |   |   |   | 1,337,038 |   |
| Other                                          |   |   | 245,669   |   |   |   | 241,722 |   |
| Construction      Work in Progress             |   |   | 154,375   |   |   |   | 200,018 |   |
| Total                                          |   |   | 3,520,004 |   |   |   | 3,459,181 |   |
| Accumulated      Depreciation and Amortization |   |   | 1,187,333 |   |   |   | 1,182,171 |   |
| TOTAL      - NET                               |   |   | 2,332,671 |   |   |   | 2,277,010 |   |
|                                           |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                   |   |   |      |   |   |   |   |   |
| Regulatory      Assets                         |   |   | 197,860   |   |   |   | 158,731 |   |
| Long-term      Risk Management Assets          |   |   | 5,784     |   |   |   | 3,358 |   |
| Deferred      Charges and Other                |   |   | 75,678    |   |   |   | 48,454 |   |
| TOTAL                                          |   |   | 279,322   |   |   |   | 210,543 |   |
|                                           |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                              |   | $      | 2,984,090 |   |   | $      | 2,843,871 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 62,159    |   |   | $      | - |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
|  General                                                       |   |                | 157,712   |   |   |   | 189,032 |   |
|  Affiliated      Companies                                     |   |                | 79,293    |   |   |   | 80,316 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 33,700    |   |   |   | - |   |
| Risk      Management Liabilities                                    |   |                | 82,378    |   |   |   | 27,118 |   |
| Customer      Deposits                                              |   |                | 41,775    |   |   |   | 41,477 |   |
| Accrued      Taxes                                                  |   |                | 36,238    |   |   |   | 18,374 |   |
| Regulatory      Liability for Over-Recovered Fuel Costs             |   |                | 16,269    |   |   |   | 11,697 |   |
| Other                                                               |   |                | 37,501    |   |   |   | 57,708 |   |
| TOTAL                                                               |   |                | 547,025   |   |   |   | 425,722 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 884,677   |   |   |   | 918,316 |   |
| Long-term      Risk Management Liabilities                          |   |                | 4,382     |   |   |   | 2,808 |   |
| Deferred      Income Taxes                                          |   |                | 495,817   |   |   |   | 456,497 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 314,622   |   |   |   | 338,788 |   |
| Deferred      Credits and Other                                     |   |                | 55,123    |   |   |   | 55,580 |   |
| TOTAL                                                               |   |                | 1,754,621 |   |   |   | 1,771,989 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 2,301,646 |   |   |   | 2,197,711 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 5,262     |   |   |   | 5,262 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – $15 Par Value Per Share:                  |   |                |      |   |   |   |   |   |
|         Authorized – 11,000,000 Shares              |   |                |      |   |   |   |   |   |
|         Issued – 10,482,000 Shares                  |   |                |      |   |   |   |   |   |
|         Outstanding – 9,013,000 Shares              |   |                | 157,230   |   |   |   | 157,230 |   |
| Paid-in      Capital                                                |   |                | 310,016   |   |   |   | 310,016 |   |
| Retained      Earnings                                              |   |                | 210,778   |   |   |   | 174,539 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (842      | )      |   |   | (887 | )  |
| TOTAL                                                               |   |                | 677,182   |   |   |   | 640,898 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 2,984,090 |   |   | $      | 2,843,871 |   |

----

|                                                                                                       |   | 2008   |    |   | 2007   |   |
|------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                                  |   |   |    |   |   |   |
| Net      Income (Loss)                                                                                     |   | $      | 37,399  |   |   | $      | (20,426 | )  |
| Adjustments      to Reconcile Net Income (Loss) to Net Cash Flows Used for      Operating Activities: |   |   |    |   |   |   |   |   |
| Depreciation      and Amortization                                                                         |   |   | 26,167  |   |   |   | 22,706 |   |
| Deferred      Income Taxes                                                                                 |   |   | 37,899  |   |   |   | 1,039 |   |
| Deferral      of Ice Storm Costs                                                                           |   |   | (79,902 | )      |   |   | - |   |
| Allowance      for Equity Funds Used During Construction                                                   |   |   | (1,359  | )      |   |   | (646 | )  |
| Mark-to-Market      of Risk Management Contracts                                                           |   |   | (11,881 | )      |   |   | 4,732 |   |
| Deferred      Property Taxes                                                                               |   |   | (26,694 | )      |   |   | (24,809 | )  |
| Change      in Other Noncurrent Assets                                                                     |   |   | 22,022  |   |   |   | 5,039 |   |
| Change      in Other Noncurrent Liabilities                                                                |   |   | (20,541 | )      |   |   | (11,269 | )  |
| Changes      in Certain Components of Working Capital:                                                     |   |   |    |   |   |   |   |   |
|          Accounts Receivable, Net                                                           |   |   | (5,027  | )      |   |   | 16,116 |   |
|          Fuel, Materials and Supplies                                                       |   |   | (5,086  | )      |   |   | (3,513 | )  |
|          Accounts Payable                                                                   |   |   | (25,698 | )      |   |   | 6,941 |   |
|          Accrued Taxes, Net                                                                 |   |   | 22,107  |   |   |   | (4,378 | )  |
|          Fuel Over/Under Recovery, Net                                                      |   |   | 4,572   |   |   |   | 16,572 |   |
|          Other Current Assets                                                               |   |   | 6,976   |   |   |   | 5,656 |   |
|          Other Current Liabilities                                                          |   |   | (20,759 | )      |   |   | (31,462 | )  |
| Net      Cash Flows Used for Operating Activities                                                          |   |   | (39,805 | )      |   |   | (17,702 | )  |
|                                                                                                       |   |   |    |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                                  |   |   |    |   |   |   |   |   |
| Construction      Expenditures                                                                             |   |   | (73,203 | )      |   |   | (61,301 | )  |
| Change      in Advances to Affiliates, Net                                                                 |   |   | 51,202  |   |   |   | - |   |
| Other                                                                                                      |   |   | 148     |   |   |   | (12 | )  |
| Net      Cash Flows Used for Investing Activities                                                          |   |   | (21,853 | )      |   |   | (61,313 | )  |
|                                                                                                       |   |   |    |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                                  |   |   |    |   |   |   |   |   |
| Capital      Contribution from Parent                                                                      |   |   | -       |   |   |   | 20,000 |   |
| Change      in Advances from Affiliates, Net                                                               |   |   | 62,159  |   |   |   | 59,371 |   |
| Principal      Payments for Capital Lease Obligations                                                      |   |   | (383    | )      |   |   | (370 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                                          |   |   | (53     | )      |   |   | (53 | ) |
| Net      Cash Flows from Financing Activities                                                              |   |   | 61,723  |   |   |   | 78,948 |   |
|                                                                                                       |   |   |    |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                                  |   |   | 65      |   |   |   | (67 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                                      |   |   | 1,370   |   |   |   | 1,651 |   |
| Cash      and Cash Equivalents at End of Period                                                            |   | $      | 1,435   |   |   | $      | 1,584 |   |

| SUPPLEMENTARY      INFORMATION                                           |   |   |    |   |   |   |
|--------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Cash      Paid for Interest, Net of Capitalized Amounts                  |   | $      | 12,380  |   |   | $      | 12,921 |   |
| Net      Cash Paid (Received) for Income Taxes                           |   |   | (19,408 | )      |   |   | 2,623 |   |
| Noncash      Acquisitions Under Capital Leases                           |   |   | 135     |   |   |   | 283 |   |
| Construction      Expenditures Included in Accounts Payable at March 31, |   |   | 21,086  |   |   |   | 19,038 |   |

----

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

----

----

SOUTHWESTERN ELECTRIC POWER COMPANYCONSOLIDATED

| First      Quarter of 2007                        |   |   |   |   | $      | 10     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins (a)      |   |   | 4      |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 1      |   |   |   |   |   |
| Other                                             |   |   | (1     | )      |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 4      |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (11    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (2     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (1     | )      |   |   |   |   |
| Other      Income                                 |   |   | 2      |   |   |   |   |   |
| Interest      Expense                             |   |   | (2     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (14    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 5      |   |
|                                              |   |   |   |   |   |   |   |   |
| First      Quarter of 2008                        |   |   |   |   |   | $      | 5      |   |

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

| · | Retail      and Off-system Sales Margins increased $4 million primarily due      to:                                                                                                                                                                                                                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                          | A      $3 million increase in retail sales margins related to higher fuel      recovery with regards to wholesale customers. |
|   | ·                                                                                                                                                                                                                                                                                                          | A      $2 million increase from lower sharing of net realized off-system sales      margins. |
| · | Other      revenues decreased $1 million primarily due to a $6 million decrease in      gains on sales of emission allowances partially offset by a $5 million      increase in revenue from coal deliveries from SWEPCo’s mining subsidiary,      Dolet Hills Lignite Company, LLC, to outside  parties. |

| · | Other      Operation and Maintenance expenses increased $11 million primarily due      to:                                                                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                              | A      $6 million increase in operating expenses from SWEPCo’s affiliated mining      operations. |
|   | ·                                                                                                                                                                                                                                                                                              | A      $2 million increase in administrative and general expenses, primarily      associated with outside services and employee-related      expenses. |
|   | ·                                                                                                                                                                                                                                                                                              | A      $1 million increase in Maintenance expenses from planned and forced      outages at the Welsh, Dolet Hills, Flint Creek, Knox Lee and Pirkey      Plants. |
| · | Depreciation      and Amortization increased $2 million primarily due to higher depreciable      asset balances.                                                                                                                                                                                    |
| · | Other      Income increased $2 million primarily due to an increase in the equity      component of AFUDC as a result of new generation projects at the Turk      Plant, Mattison Plant and Stall Unit.                                                                                             |
| · | Interest      Expense increased $2 million primarily due to higher interest of $3      million related to higher long-term debt partially offset by a $2 million      increase in the debt component of AFUDC due to new generation projects at      the Turk Plant, Mattison Plant and Stall Unit. |
| · | Income      Tax Expense decreased $5 million primarily due to a decrease in pretax      book income and state income taxes.                                                                                                                                                                         |

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

|                                                      |   | 2008                |     |   | 2007   |   |
|-----------------------------------------------------------|--------|---------------------|----------|--------|--------|--------|
|                                                      |   | (in      thousands) |     |
| Cash      and Cash Equivalents at Beginning of Period     |   | $                   | 1,742    |   |   | $      | 2,618 |   |
| Cash      Flows From (Used for):                          |   |                |     |   |   |   |   |   |
|  Operating      Activities                           |   |                | (4,102   | )      |   |   | 65,590 |   |
|  Investing      Activities                           |   |                | (125,877 | )      |   |   | (120,639 | ) |
|  Financing      Activities                           |   |                | 134,140  |   |   |   | 54,331 |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents |   |                | 4,161    |   |   |   | (718 | ) |
| Cash      and Cash Equivalents at End of Period           |   | $                   | 5,903    |   |   | $      | 1,900 |   |

| Type      of Debt                        |   | PrincipalAmount      Paid |   | Interest      Rate |                                                                                     | Due      Date |
|------------------------------------------|--------|---------------------------|--------|--------------------|------------------------------------------------------------------------------------------|---------------|
|                                     |   | (in      thousands)       |   | (%)                |                                                                                     |          |
| Notes      Payable – Nonaffiliated |   | $                         | 1,101  |               | 4.47               |          | 2011 |
| Notes      Payable – Nonaffiliated |   |                      | 750    |               | Variable                                                                                 |          | 2008 |

----

|                                                             |   | MTM      Risk Management Contracts |     |   | Cash      Flow &Fair      Value Hedges |   |   | DETM      Assignment (a) |   |   |  CollateralDeposits |   |   | Total  |   |
|------------------------------------------------------------------|--------|------------------------------------|----------|--------|--------------------------------------------|--------|--------|--------------------------|--------|--------|--------------------------|--------|--------|--------|--------|
| Current      Assets                                              |   | $                                  | 119,952  |   |                                       | $      | 160    |                     |   | $      | -                        |   |   | $      | (1,132 | ) |   | $ | 118,980 |   |
| Noncurrent      Assets                                           |   |                               | 7,125    |   |                                       |   | 75     |                     |   |   | -                        |   |   |   | (26    | ) |   |   | 7,174 |   |
| Total      MTM Derivative Contract Assets                        |   |                               | 127,077  |   |                                       |   | 235    |                     |   |   | -                        |   |   |   | (1,158 | ) |   |   | 126,154 |   |
|                                                             |   |                               |     |   |                                       |   |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Current      Liabilities                                         |   |                               | (113,496 | )      |                                       |   | (6     | )                        |   |   | (91                      | )      |   |   | 15,096 |   |   |   | (98,497 | ) |
| Noncurrent      Liabilities                                      |   |                               | (6,167   | )      |                                       |   | -      |                     |   |   | (105                     | )      |   |   | 961    |   |   |   | (5,311 | ) |
| Total      MTM Derivative Contract Liabilities              |   |                               | (119,663 | )      |                                       |   | (6     | )                        |   |   | (196                     | )      |   |   | 16,057 |   |   |   | (103,808 | ) |
|                                                             |   |                               |     |   |                                       |   |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $                                  | 7,414    |   |                                       | $      | 229    |                     |   | $      | (196                     | )      |   | $      | 14,899 |   |   | $ | 22,346 |   |

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

| Total      MTM Risk Management Contract Net Assets at December 31,    2007                                                 |   | $      | 8,131  |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)      Loss from Contracts Realized/Settled During the Period and Entered in a      Prior Period                      |   |   | (1,643 | )      |
| Fair      Value of New Contracts at Inception When Entered During the Period      (a)                                      |   |   | -      |   |
| Net      Option Premiums Paid/(Received) for Unexercised or Unexpired Option      Contracts Entered During the Period |   |   | -      |   |
| Change      in Fair Value Due to Valuation Methodology Changes on Forward Contracts      (b)                               |   |   | 326    |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                             |   |   | (141   | )      |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                        |   |   | 741    |   |
| Total      MTM Risk Management Contract Net Assets                                                                         |   |   | 7,414  |   |
| Net      Cash Flow & Fair Value Hedge Contracts                                                                        |   |   | 229    |   |
| DETM      Assignment (e)                                                                                                   |   |   | (196   | )      |
| Collateral      Deposits                                                                                                   |   |   | 14,899 |   |
| Ending      Net Risk Management Assets at March 31, 2008                                                                   |   | $      | 22,346 |   |

| (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.  Inception value is only recorded if observable market      data can be obtained for valuation inputs for the entire contract      term.  The contract prices are valued against market curves      associated with the delivery location and deliveryterm. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Represents      the impact of applying AEP’s credit risk when measuring the fair value of      derivative liabilities according to SFAS 157.                                                                                                                                                                                                                                                                                                          |
| (c) | Market      fluctuations are attributable to various factors such as supply/demand,      weather, storage, etc.                                                                                                                                                                                                                                                                                                                                             |
| (d) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected in the Condensed      Consolidated Statements of Income.  These net gains (losses) are      recorded as regulatory assets/ liabilities for those subsidiaries that      operate in regulated jurisdictions.                                                                        |
| (e) | See      “Natural Gas Contracts with DETM” section of Note 16 of the 2007 Annual      Report.                                                                                                                                                                                                                                                                                                                                                   |

|             |   | Remainder2008 |   |   | 2009   |   |   | 2010   |   |   | 2011 |   |   | 2012   |   |   | After2012 |   |   | Total  |   |
|------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
| Level      1 (a) |   | $             | 2,884  |   |   | $      | (283   | )      |   | $      | -    |   |   | $      | -      |   |      | $      | -      |   |   | $ | - |   |   | $ | 2,601 |   |
| Level      2 (b) |   |          | 3,168  |   |   |   | 1,551  |   |   |   | 143  |   |   |   | (14    | )      |      |   | -      |   |   |   | - |   |   |   | 4,848 |   |
| Level      3 (c) |   |          | (38    | )      |   |   | 1      |   |   |   | 2    |   |   |   | -      |   |      |   | -      |   |   |   | - |   |   |   | (35 | ) |
| Total            |   | $             | 6,014  |   |   | $      | 1,269  |   |   | $      | 145  |   |   | $      | (14    | )      |      | $      | -      |   |   | $ | - |   |   | $ | 7,414 |   |

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

|                                                                    |   | Interest      Rate |   |   | ForeignCurrency |   |   | Total  |   |
|-------------------------------------------------------------------------|--------|--------------------|--------|--------|-----------------|--------|--------|--------|--------|
| Beginning      Balance in AOCI December 31, 2007                        |   | $                  | (6,650 | )      |            | $      | 629    |   |   | $ | (6,021 | ) |
| Changes      in Fair Value                                              |   |               | -      |   |            |   | 68     |   |   |   | 68 |   |
| Reclassifications      from AOCI for Cash Flow Hedges      Settled |   |               | 207    |   |            |   | (544   | )      |   |   | (337 | ) |
| Ending      Balance in AOCI March 31, 2008                              |   | $                  | (6,443 | )      |            | $      | 153    |   |   | $ | (6,290 | ) |

| Three      Months Ended March 31, 2008                    |   |   | Twelve      Months Ended December 31, 2007           |   |
|-----------------------------------------------------------|--------|--------|------------------------------------------------------|--------|
| (in      thousands)                                       |   |   | (in      thousands)                                  |   |
| End                                                       |   |   | High                                                 |   |   | Average |   |   | Low |   |   | End |   |   | High |   |   | Average |   |   | Low |   |
|               $84 |   |   |              $143 |   |   |          $52 |   |   |          $11 |   |   |                $17 |   |   |              $245 |   |   |                $75 |   |   |                $7 |   |

----

|                                                                                         |   | 2008   |    |   | 2007   |   |
|----------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| REVENUES                                                                                     |   |   |    |   |   |   |
| Electric      Generation, Transmission and Distribution                                      |   | $      | 325,901 |   |   | $      | 327,284 |   |
| Sales      to AEP Affiliates                                                                 |   |   | 13,592  |   |   |   | 16,415 |   |
| Other                                                                                        |   |   | 300     |   |   |   | 400 |   |
| TOTAL                                                                                        |   |   | 339,793 |   |   |   | 344,099 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| EXPENSES                                                                                     |   |   |    |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation                                 |   |   | 117,661 |   |   |   | 111,987 |   |
| Purchased      Electricity for Resale                                                        |   |   | 40,270  |   |   |   | 52,498 |   |
| Purchased      Electricity from AEP Affiliates                                               |   |   | 20,440  |   |   |   | 22,917 |   |
| Other      Operation                                                                         |   |   | 63,579  |   |   |   | 53,783 |   |
| Maintenance                                                                                  |   |   | 27,468  |   |   |   | 26,339 |   |
| Depreciation      and Amortization                                                           |   |   | 36,136  |   |   |   | 34,122 |   |
| Taxes      Other Than Income Taxes                                                           |   |   | 17,419  |   |   |   | 15,991 |   |
| TOTAL                                                                                        |   |   | 322,973 |   |   |   | 317,637 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| OPERATING      INCOME                                                                        |   |   | 16,820  |   |   |   | 26,462 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| Other      Income (Expense):                                                                 |   |   |    |   |   |   |   |   |
| Interest      Income                                                                         |   |   | 877     |   |   |   | 705 |   |
| Allowance      for Equity Funds Used During Construction                                     |   |   | 3,063   |   |   |   | 1,391 |   |
| Interest      Expense                                                                        |   |   | (17,142 | )      |   |   | (15,490 | ) |
|                                                                                         |   |   |    |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE (CREDIT) AND MINORITY  INTEREST      EXPENSE |   |   | 3,618   |   |   |   | 13,068 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| Income      Tax Expense (Credit)                                                             |   |   | (1,987  | )      |   |   | 2,621 |   |
| Minority      Interest Expense                                                               |   |   | 995     |   |   |   | 842 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| NET      INCOME                                                                              |   |   | 4,610   |   |   |   | 9,605 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                                                   |   |   | 57      |   |   |   | 57 |   |
|                                                                                         |   |   |    |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                                                     |   | $      | 4,553   |   |   | $      | 9,548 |   |

----

|                                                                                                      |   | Common      Stock |    |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|-----------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
|                                                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |
| DECEMBER      31, 2006                                                                                    |   | $                 | 135,660 |   |                 | $      | 245,003 |                   |   | $      | 459,338                                            |   |   | $      | (18,799 | ) |   | $ | 821,202 |   |
|                                                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                                          |   |              |    |   |                 |   |    |                   |   |   | (1,642                                             | )      |   |   |    |   |   |   | (1,642 | ) |
| Preferred      Stock Dividends                                                                            |   |              |    |   |                 |   |    |                   |   |   | (57                                                | )      |   |   |    |   |   |   | (57 | ) |
| TOTAL                                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 819,503 |   |
|                                                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Loss, Net of Taxes:                                                              |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $39                                                                  |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | (327    | ) |   |   | (327 | ) |
| NET      INCOME                                                                                           |   |              |    |   |                 |   |    |                   |   |   | 9,605                                              |   |   |   |    |   |   |   | 9,605 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                           |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 9,278 |   |
|                                                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2007                                                                                       |   | $                 | 135,660 |   |                 | $      | 245,003 |                   |   | $      | 467,244                                            |   |   | $      | (19,126 | ) |   | $ | 828,781 |   |
|                                                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| DECEMBER      31, 2007                                                                                    |   | $                 | 135,660 |   |                 | $      | 330,003 |                   |   | $      | 523,731                                            |   |   | $      | (16,439 | ) |   | $ | 972,955 |   |
|                                                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $622                                                              |   |              |    |   |                 |   |    |                   |   |   | (1,156                                             | )      |   |   |    |   |   |   | (1,156 | ) |
| SFAS      157 Adoption, Net of Tax of $6                                                                  |   |              |    |   |                 |   |    |                   |   |   | 10                                                 |   |   |   |    |   |   |   | 10 |   |
| Capital      Contribution from Parent                                                                     |   |              |    |   |                 |   | 50,000  |                   |   |   |                                               |   |   |   |    |   |   |   | 50,000 |   |
| Preferred      Stock Dividends                                                                            |   |              |    |   |                 |   |    |                   |   |   | (57                                                | )      |   |   |    |   |   |   | (57 | ) |
| TOTAL                                                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,021,752 |   |
|                                                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other Comprehensive Income      (Loss), Net      of Taxes:                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $145                                                                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | (269    | ) |   |   | (269 | ) |
| Amortization      of Pension and OPEB Deferred Costs,         Net of Tax of $127 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 235     |   |   |   | 235 |   |
| NET      INCOME                                                                                           |   |              |    |   |                 |   |    |                   |   |   | 4,610                                              |   |   |   |    |   |   |   | 4,610 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                           |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 4,576 |   |
|                                                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| MARCH      31, 2008                                                                                       |   | $                 | 135,660 |   |                 | $      | 380,003 |                   |   | $      | 527,138                                            |   |   | $      | (16,473 | ) |   | $ | 1,026,328 |   |

----

|                                                   |   | 2008   |      |   | 2007   |   |
|--------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                    |   |   |      |   |   |   |
| Cash      and Cash Equivalents                         |   | $      | 5,903     |   |   | $      | 1,742 |   |
| Accounts      Receivable:                              |   |   |      |   |   |   |   |   |
|         Customers                            |   |   | 56,777    |   |   |   | 91,379 |   |
|         Affiliated Companies                 |   |   | 41,862    |   |   |   | 33,196 |   |
|         Miscellaneous                        |   |   | 14,213    |   |   |   | 10,544 |   |
|         Allowance for Uncollectible Accounts |   |   | (45       | )      |   |   | (143 | )  |
|         Total Accounts Receivable            |   |   | 112,807   |   |   |   | 134,976 |   |
| Fuel                                                   |   |   | 77,463    |   |   |   | 75,662 |   |
| Materials      and Supplies                            |   |   | 48,746    |   |   |   | 48,673 |   |
| Risk      Management Assets                            |   |   | 118,980   |   |   |   | 39,850 |   |
| Regulatory      Asset for Under-Recovered Fuel Costs   |   |   | 22,868    |   |   |   | 5,859 |   |
| Margin      Deposits                                   |   |   | 2,229     |   |   |   | 10,650 |   |
| Prepayments      and Other                             |   |   | 35,091    |   |   |   | 28,147 |   |
| TOTAL                                                  |   |   | 424,087   |   |   |   | 345,559 |   |
|                                                   |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                     |   |   |      |   |   |   |   |   |
| Electric:                                              |   |   |      |   |   |   |   |   |
|         Production                           |   |   | 1,743,766 |   |   |   | 1,743,198 |   |
|         Transmission                         |   |   | 743,285   |   |   |   | 737,975 |   |
|         Distribution                         |   |   | 1,331,547 |   |   |   | 1,312,746 |   |
| Other                                                  |   |   | 633,446   |   |   |   | 631,765 |   |
| Construction      Work in Progress                     |   |   | 546,248   |   |   |   | 451,228 |   |
| Total                                                  |   |   | 4,998,292 |   |   |   | 4,876,912 |   |
| Accumulated      Depreciation and Amortization         |   |   | 1,952,226 |   |   |   | 1,939,044 |   |
| TOTAL      - NET                                       |   |   | 3,046,066 |   |   |   | 2,937,868 |   |
|                                                   |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                           |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                 |   |   | 118,218   |   |   |   | 133,617 |   |
| Long-term      Risk Management Assets                  |   |   | 7,174     |   |   |   | 4,073 |   |
| Deferred      Charges and Other                        |   |   | 108,267   |   |   |   | 67,269 |   |
| TOTAL                                                  |   |   | 233,659   |   |   |   | 204,959 |   |
|                                                   |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                      |   | $      | 3,703,812 |   |   | $      | 3,488,386 |   |

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 89,210    |   |   | $      | 1,565 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
| General                                                             |   |                | 148,373   |   |   |   | 152,305 |   |
| Affiliated      Companies                                           |   |                | 67,172    |   |   |   | 51,767 |   |
| Short-term      Debt – Nonaffiliated                          |   |                | -         |   |   |   | 285 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 5,156     |   |   |   | 5,906 |   |
| Risk      Management Liabilities                                    |   |                | 98,497    |   |   |   | 32,629 |   |
| Customer      Deposits                                              |   |                | 37,788    |   |   |   | 37,473 |   |
| Accrued      Taxes                                                  |   |                | 53,395    |   |   |   | 26,494 |   |
| Regulatory      Liability for Over-Recovered Fuel Costs             |   |                | -         |   |   |   | 22,879 |   |
| Other                                                               |   |                | 72,623    |   |   |   | 76,554 |   |
| TOTAL                                                               |   |                | 572,214   |   |   |   | 407,857 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 1,140,303 |   |   |   | 1,141,311 |   |
| Long-term      Debt – Affiliated                              |   |                | 50,000    |   |   |   | 50,000 |   |
| Long-term      Risk Management Liabilities                          |   |                | 5,311     |   |   |   | 3,334 |   |
| Deferred      Income Taxes                                          |   |                | 367,814   |   |   |   | 361,806 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 327,117   |   |   |   | 334,014 |   |
| Deferred      Credits and Other                                     |   |                | 208,291   |   |   |   | 210,725 |   |
| TOTAL                                                               |   |                | 2,098,836 |   |   |   | 2,101,190 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 2,671,050 |   |   |   | 2,509,047 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Minority      Interest                                              |   |                | 1,737     |   |   |   | 1,687 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 4,697     |   |   |   | 4,697 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – Par Value – $18 Per Share:          |   |                |      |   |   |   |   |   |
| Authorized      – 7,600,000 Shares                            |   |                |      |   |   |   |   |   |
| Outstanding      – 7,536,640 Shares                           |   |                | 135,660   |   |   |   | 135,660 |   |
| Paid-in      Capital                                                |   |                | 380,003   |   |   |   | 330,003 |   |
| Retained      Earnings                                              |   |                | 527,138   |   |   |   | 523,731 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (16,473   | )      |   |   | (16,439 | ) |
| TOTAL                                                               |   |                | 1,026,328 |   |   |   | 972,955 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 3,703,812 |   |   | $      | 3,488,386 |   |

----

|                                                                                                              |   | 2008   |     |   | 2007   |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                                         |   |   |     |   |   |   |
| Net      Income                                                                                                   |   | $      | 4,610    |   |   | $      | 9,605 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from (Used for) Operating        Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                                                |   |   | 36,136   |   |   |   | 34,122 |   |
| Deferred      Income Taxes                                                                                        |   |   | 3,804    |   |   |   | (6,677 | )  |
| Allowance      for Equity Funds Used During Construction                                                          |   |   | (3,063   | )      |   |   | (1,391 | )  |
| Mark-to-Market      of Risk Management Contracts                                                                  |   |   | (14,231  | )      |   |   | 4,857 |   |
| Deferred      Property Taxes                                                                                      |   |   | (29,799  | )      |   |   | (28,815 | )  |
| Change      in Other Noncurrent Assets                                                                            |   |   | 6,589    |   |   |   | (1,807 | )  |
| Change      in Other Noncurrent Liabilities                                                                       |   |   | (14,634  | )      |   |   | (178 | )  |
| Changes      in Certain Components of Working Capital:                                                            |   |   |     |   |   |   |   |   |
|         Accounts Receivable, Net                                                                        |   |   | 22,169   |   |   |   | 20,469 |   |
|         Fuel, Materials and Supplies                                                                    |   |   | (1,874   | )      |   |   | (4,141 | )  |
|         Accounts Payable                                                                                |   |   | 7,398    |   |   |   | 13,806 |   |
|         Accrued Taxes, Net                                                                              |   |   | 21,279   |   |   |   | 36,113 |   |
|         Fuel Over/Under Recovery, Net                                                                   |   |   | (39,888  | )      |   |   | 4,212 |   |
|         Other Current Assets                                                                            |   |   | 7,683    |   |   |   | 11,381 |   |
|         Other Current Liabilities                                                                       |   |   | (10,281  | )      |   |   | (25,966 | )  |
| Net      Cash Flows from (Used for) Operating Activities                                                          |   |   | (4,102   | )      |   |   | 65,590 |   |
|                                                                                                              |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                                         |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                                                    |   |   | (125,358 | )      |   |   | (107,613 | )  |
| Change      in Advances to Affiliates, Net                                                                        |   |   | -        |   |   |   | (8,959 | )  |
| Other                                                                                                             |   |   | (519     | )      |   |   | (4,067 | )  |
| Net      Cash Flows Used for Investing Activities                                                                 |   |   | (125,877 | )      |   |   | (120,639 | )  |
|                                                                                                              |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                                         |   |   |     |   |   |   |   |   |
| Capital      Contribution from Parent                                                                             |   |   | 50,000   |   |   |   | - |   |
| Issuance      of Long-term Debt – Nonaffiliated                                                             |   |   | -        |   |   |   | 247,548 |   |
| Change      in Short-term Debt, Net – Nonaffiliated                                                         |   |   | (285     | )      |   |   | 3,290 |   |
| Change      in Advances from Affiliates, Net                                                                      |   |   | 87,645   |   |   |   | (188,965 | )  |
| Retirement      of Long-term Debt – Nonaffiliated                                                           |   |   | (1,851   | )      |   |   | (6,395 | )  |
| Principal      Payments for Capital Lease Obligations                                                             |   |   | (1,312   | )      |   |   | (1,090 | )  |
| Dividends      Paid on Cumulative Preferred Stock                                                                 |   |   | (57      | )      |   |   | (57 | )  |
| Net      Cash Flows from Financing Activities                                                                     |   |   | 134,140  |   |   |   | 54,331 |   |
|                                                                                                              |   |   |     |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                                         |   |   | 4,161    |   |   |   | (718 | )  |
| Cash      and Cash Equivalents at Beginning of Period                                                             |   |   | 1,742    |   |   |   | 2,618 |   |
| Cash      and Cash Equivalents at End of Period                                                                   |   | $      | 5,903    |   |   | $      | 1,900 |   |

| SUPPLEMENTARY      INFORMATION                                           |   |   |   |   |   |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Cash      Paid for Interest, Net of Capitalized Amounts                  |   | $      | 14,049 |   |   | $      | 16,747 |   |
| Net      Cash Paid for Income Taxes                                      |   |   | 641    |   |   |   | 580 |   |
| Noncash      Acquisitions Under Capital Leases                           |   |   | 6,796  |   |   |   | 3,192 |   |
| Construction      Expenditures Included in Accounts Payable at March 31, |   |   | 63,973 |   |   |   | 32,460 |   |

----

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

----

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

----

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

| 2. | NEW ACCOUNTING      PRONOUNCEMENTS |
|----|------------------------------------|

| APCo                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|-------------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                            |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                         |   | (in      thousands) |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)              |   | $                   | 14,644 |   |         | $      | 658,242 |         |   | $      | 9,808  |   |   | $      | (489,519 | ) |   | $ | 193,175 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 8,651   |         |   |   | -      |   |   |   | (2,796   | ) |   |   | 5,855 |   |
| Dedesignated      Risk Management Contracts (b) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 16,113   |   |   |   | 16,113 |   |
| Total      Risk Management Assets               |   | $                   | 14,644 |   |         | $      | 666,893 |         |   | $      | 9,808  |   |   | $      | (476,202 | ) |   | $ | 215,143 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:               |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 19,104 |   |         | $      | 628,849 |         |   | $      | 10,750 |   |   | $      | (493,696 | ) |   | $ | 165,007 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 26,298  |         |   |   | -      |   |   |   | (2,796   | ) |   |   | 23,502 |   |
| DETM      Assignment (c)                        |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 8,040    |   |   |   | 8,040 |   |
| Total      Risk Management Liabilities          |   | $                   | 19,104 |   |         | $      | 655,147 |         |   | $      | 10,750 |   |   | $      | (488,452 | ) |   | $ | 196,549 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Long-term      Debt (e)                         |   | $                   | -      |   |         | $      | 49,714  |         |   | $      | -      |   |   | $      | -        |   |   | $ | 49,714 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Total      Liabilities                          |   | $                   | 19,104 |   |         | $      | 704,861 |         |   | $      | 10,750 |   |   | $      | (488,452 | ) |   | $ | 246,263 |   |

| CSPCo                                           |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|-------------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                            |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                         |   | (in      thousands) |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Other      Cash Deposits (f)                    |   | $                   | 52,589 |   |         | $      | -       |         |   | $      | -      |   |   | $      | 1,171    |   |   | $ | 53,760 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Assets:                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 8,794  |   |         | $      | 374,975 |         |   | $      | 5,874  |   |   | $      | (279,296 | ) |   | $ | 110,347 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 3,544   |         |   |   | -      |   |   |   | (1,679   | ) |   |   | 1,865 |   |
| Dedesignated      Risk Management Contracts (b) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 9,676    |   |   |   | 9,676 |   |
| Total      Risk Management Assets               |   | $                   | 8,794  |   |         | $      | 378,519 |         |   | $      | 5,874  |   |   | $      | (271,299 | ) |   | $ | 121,888 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:               |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 11,473 |   |         | $      | 357,104 |         |   | $      | 6,426  |   |   | $      | (281,641 | ) |   | $ | 93,362 |   |
| Cash      Flow and Fair Value Hedges (b)        |   |                | -      |   |         |   | 15,621  |         |   |   | -      |   |   |   | (1,679   | ) |   |   | 13,942 |   |
| DETM      Assignment (c)                        |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 4,829    |   |   |   | 4,829 |   |
| Total      Risk Management Liabilities          |   | $                   | 11,473 |   |         | $      | 372,725 |         |   | $      | 6,426  |   |   | $      | (278,491 | ) |   | $ | 112,133 |   |

| I&M                                                 |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |
|---------------------------------------------------------|--------|---------------------|---------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                                    |   | Level      1        |    |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                                 |   | (in      thousands) |    |
|                                                    |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:                            |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)                      |   | $                   | 8,449   |   |         | $      | 348,611 |         |   | $      | 5,627  |   |   | $      | (258,654 | ) |   | $ | 104,033 |   |
| Cash      Flow and Fair Value Hedges (a)                |   |                | -       |   |         |   | 3,617   |         |   |   | -      |   |   |   | (1,627   | ) |   |   | 1,990 |   |
| Dedesignated      Risk Management Contracts (b)         |   |                | -       |   |         |   | -       |         |   |   | -      |   |   |   | 9,296    |   |   |   | 9,296 |   |
| Total      Risk Management Assets                       |   | $                   | 8,449   |   |         | $      | 352,228 |         |   | $      | 5,627  |   |   | $      | (250,985 | ) |   | $ | 115,319 |   |
|                                                    |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Spent      Nuclear Fuel and Decommissioning Trusts:     |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Cash      and Cash Equivalents (d)                      |   | $                   | -       |   |         | $      | 13,386  |         |   | $      | -      |   |   | $      | 10,286   |   |   | $ | 23,672 |   |
| Debt      Securities                                    |   |                | 343,078 |   |         |   | 491,865 |         |   |   | -      |   |   |   | -        |   |   |   | 834,943 |   |
| Equity      Securities                                  |   |                | 465,783 |   |         |   | -       |         |   |   | -      |   |   |   | -        |   |   |   | 465,783 |   |
| TotalSpent Nuclear Fuel and      Decommissioning Trusts |   | $                   | 808,861 |   |         | $      | 505,251 |         |   | $      | -      |   |   | $      | 10,286   |   |   | $ | 1,324,398 |   |
|                                                    |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Total      Assets                                       |   | $                   | 817,310 |   |         | $      | 857,479 |         |   | $      | 5,627  |   |   | $      | (240,699 | ) |   | $ | 1,439,717 |   |
|                                                    |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                            |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                                    |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:                       |   |                |    |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)                      |   | $                   | 11,022  |   |         | $      | 331,435 |         |   | $      | 6,146  |   |   | $      | (260,756 | ) |   | $ | 87,847 |   |
| Cash      Flow and Fair Value Hedges (a)                |   |                | -       |   |         |   | 15,022  |         |   |   | -      |   |   |   | (1,627   | ) |   |   | 13,395 |   |
| DETM      Assignment (c)                                |   |                | -       |   |         |   | -       |         |   |   | -      |   |   |   | 4,640    |   |   |   | 4,640 |   |
| Total      Risk Management Liabilities                  |   | $                   | 11,022  |   |         | $      | 346,457 |         |   | $      | 6,146  |   |   | $      | (257,743 | ) |   | $ | 105,882 |   |

| OPCo                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|-------------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                            |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                         |   | (in      thousands) |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)              |   | $                   | 10,246 |   |         | $      | 585,650 |         |   | $      | 7,039  |   |   | $      | (448,510 | ) |   | $ | 154,425 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 4,492   |         |   |   | -      |   |   |   | (1,957   | ) |   |   | 2,535 |   |
| Dedesignated      Risk Management Contracts (b) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 11,274   |   |   |   | 11,274 |   |
| Total      Risk Management Assets               |   | $                   | 10,246 |   |         | $      | 590,142 |         |   | $      | 7,039  |   |   | $      | (439,193 | ) |   | $ | 168,234 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:               |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 13,367 |   |         | $      | 564,294 |         |   | $      | 7,876  |   |   | $      | (453,171 | ) |   | $ | 132,366 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 20,768  |         |   |   | -      |   |   |   | (1,957   | ) |   |   | 18,811 |   |
| DETM      Assignment (c)                        |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 5,626    |   |   |   | 5,626 |   |
| Total      Risk Management Liabilities          |   | $                   | 13,367 |   |         | $      | 585,062 |         |   | $      | 7,876  |   |   | $      | (449,502 | ) |   | $ | 156,803 |   |

| PSO                                      |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                     |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                  |   | (in      thousands) |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)       |   | $                   | 31,254 |   |         | $      | 429,634 |         |   | $      | 47     |   |   | $      | (355,526 | ) |   | $ | 105,409 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | -        |   |   |   | - |   |
| Total      Risk Management Assets        |   | $                   | 31,254 |   |         | $      | 429,634 |         |   | $      | 47     |   |   | $      | (355,526 | ) |   | $ | 105,409 |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:        |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)       |   | $                   | 29,049 |   |         | $      | 425,533 |         |   | $      | 68     |   |   | $      | (368,056 | ) |   | $ | 86,594 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | -        |   |   |   | - |   |
| DETM      Assignment (c)                 |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 166      |   |   |   | 166 |   |
| Total      Risk Management Liabilities   |   | $                   | 29,049 |   |         | $      | 425,533 |         |   | $      | 68     |   |   | $      | (367,890 | ) |   | $ | 86,760 |   |

| SWEPCo                                   |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                     |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                  |   | (in      thousands) |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)       |   | $                   | 36,861 |   |         | $      | 516,029 |         |   | $      | 68     |   |   | $      | (427,039 | ) |   | $ | 125,919 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | 242     |         |   |   | -      |   |   |   | (7       | ) |   |   | 235 |   |
| Total      Risk Management Assets        |   | $                   | 36,861 |   |         | $      | 516,271 |         |   | $      | 68     |   |   | $      | (427,046 | ) |   | $ | 126,154 |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:        |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)       |   | $                   | 34,260 |   |         | $      | 511,181 |         |   | $      | 103    |   |   | $      | (441,938 | ) |   | $ | 103,606 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | 13      |         |   |   | -      |   |   |   | (7       | ) |   |   | 6 |   |
| DETM      Assignment (c)                 |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 196      |   |   |   | 196 |   |
| Total      Risk Management Liabilities   |   | $                   | 34,260 |   |         | $      | 511,194 |         |   | $      | 103    |   |   | $      | (441,749 | ) |   | $ | 103,808 |   |

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

| Net      Risk Management Assets (Liabilities)                                                                                                                                     |   | APCo                |   |   | CSPCo  |   |   | I&M |   |   | OPCo |   |   | PSO    |   |   | SWEPCo |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------|--------|--------|--------|---------|--------|--------|------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                                                              |   | (in      thousands) |   |
| Balance      as of January 1, 2008                                                                                                                                                |   | $                   | (697   | )      |   | $      | (263   | )       |   | $      | (280 | )      |   | $      | (1,607 | )      |   | $      | (243 | ) |   | $ | (408 | ) |
| Realized      (Gain) Loss Included in Earnings    (or Changes      in Net Assets) (a)                                                                    |   |                | (657   | )      |   |   | (414   | )       |   |   | (391 | )      |   |   | (176   | )      |   |   | 29 |   |   |   | 63 |   |
| Unrealized      Gain (Loss) Included in Earnings         (or Changes in Net Assets) Relating to         Assets Still Held at the Reporting Date (a) |   |                | -      |   |   |   | 721    |    |   |   | -    |   |   |   | 1,639  |   |   |   | - |   |   |   | 106 |   |
| Realized      and Unrealized Gains (Losses)          Included in Other Comprehensive Income                                                                   |   |                | -      |   |   |   | -      |    |   |   | -    |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                                                         |   |                | -      |   |   |   | -      |    |   |   | -    |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Transfers      in and/or out of Level 3 (b)                                                                                                                                       |   |                | (1,026 | )      |   |   | (596   | )       |   |   | (572 | )      |   |   | (693   | )      |   |   | - |   |   |   | - |   |
| Changes      in Fair Value Allocated to    Regulated Jurisdictions      (c)                                                                                   |   |                | 1,438  |   |   |   | -      |    |   |   | 724  |   |   |   | -      |   |   |   | 193 |   |   |   | 204 |   |
| Balance      as of March 31, 2008                                                                                                                                                 |   | $                   | (942   | )      |   | $      | (552   | )       |   | $      | (519 | )      |   | $      | (837   | )      |   | $      | (21 | ) |   | $ | (35 | ) |

| (a) | Included      in revenues on the Condensed Statement of Income for the three months      ended March 31, 2008.                                                                                                                                                                                                                                                                      |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Transfers      in and/or out of Level 3” represent existing assets or liabilities that      were either previously categorized as a higher level for which the inputs      to the model became unobservable or assets and liabilities that were      previously classified as level 3 for which the lowest significant input      became observable during the period. |
| (c) | “Changes      in Fair Value Allocated to Regulated Jurisdictions” relates to the net      gains (losses) of those contracts that are not reflected on the Condensed      Statements of Income.  These net gains (losses) are recorded as      regulatory assets/liabilities for those subsidiaries that operate in      regulated jurisdictions.              |

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

| APCo                                         |   |                                           |   |   |                          |   |   |                                        |   |
|----------------------------------------------|--------|------------------------------------------------|--------|--------|-------------------------------|--------|--------|---------------------------------------------|--------|
| Balance      SheetLine      Description      |   | As      Reported forthe      December 200710-K |   |   | FIN      39-1Reclassification |   |   | As      Reported forthe      March 200810-Q |   |
| Current      Assets:                         |   | (in      thousands)                            |   |
|   Risk      Management Assets      |   | $                                              | 64,707 |   |                          | $      | (1,752 | )                                           |   | $ | 62,955 |   |
|   Prepayments      and Other       |   |                                           | 19,675 |   |                          |   | (3,306 | )                                           |   |   | 16,369 |   |
| Long-term      Risk Management Assets        |   |                                           | 74,954 |   |                          |   | (2,588 | )                                           |   |   | 72,366 |   |
|                                         |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
| Current      Liabilities:                    |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
|   Risk      Management Liabilities |   |                                           | 54,955 |   |                          |   | (3,247 | )                                           |   |   | 51,708 |   |
|   Customer      Deposits           |   |                                           | 50,260 |   |                          |   | (4,340 | )                                           |   |   | 45,920 |   |
| Long-term      Risk Management Liabilities   |   |                                           | 47,416 |   |                          |   | (59    | )                                           |   |   | 47,357 |   |

| CSPCo                                        |   |                                           |   |   |                          |   |   |                                        |   |
|----------------------------------------------|--------|------------------------------------------------|--------|--------|-------------------------------|--------|--------|---------------------------------------------|--------|
| Balance      SheetLine      Description      |   | As      Reported forthe      December 200710-K |   |   | FIN      39-1Reclassification |   |   | As      Reported forthe      March 200810-Q |   |
| Current      Assets:                         |   | (in      thousands)                            |   |
|   Risk      Management Assets      |   | $                                              | 34,564 |   |                          | $      | (1,006 | )                                           |   | $ | 33,558 |   |
|   Prepayments      and Other       |   |                                           | 11,877 |   |                          |   | (1,917 | )                                           |   |   | 9,960 |   |
| Long-term      Risk Management Assets        |   |                                           | 43,352 |   |                          |   | (1,500 | )                                           |   |   | 41,852 |   |
|                                         |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
| Current      Liabilities:                    |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
|   Risk      Management Liabilities |   |                                           | 30,118 |   |                          |   | (1,881 | )                                           |   |   | 28,237 |   |
|   Customer      Deposits           |   |                                           | 45,602 |   |                          |   | (2,507 | )                                           |   |   | 43,095 |   |
| Long-term      Risk Management Liabilities   |   |                                           | 27,454 |   |                          |   | (35    | )                                           |   |   | 27,419 |   |

| I&M                                      |   |                                           |   |   |                          |   |   |                                        |   |
|----------------------------------------------|--------|------------------------------------------------|--------|--------|-------------------------------|--------|--------|---------------------------------------------|--------|
| Balance      SheetLine      Description      |   | As      Reported forthe      December 200710-K |   |   | FIN      39-1Reclassification |   |   | As      Reported forthe      March 200810-Q |   |
| Current      Assets:                         |   | (in      thousands)                            |   |
|   Risk      Management Assets      |   | $                                              | 33,334 |   |                          | $      | (969   | )                                           |   | $ | 32,365 |   |
|   Prepayments      and Other       |   |                                           | 12,932 |   |                          |   | (1,841 | )                                           |   |   | 11,091 |   |
| Long-term      Risk Management Assets        |   |                                           | 41,668 |   |                          |   | (1,441 | )                                           |   |   | 40,227 |   |
|                                         |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
| Current      Liabilities:                    |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
|   Risk      Management Liabilities |   |                                           | 29,078 |   |                          |   | (1,807 | )                                           |   |   | 27,271 |   |
|   Customer      Deposits           |   |                                           | 28,855 |   |                          |   | (2,410 | )                                           |   |   | 26,445 |   |
| Long-term      Risk Management Liabilities   |   |                                           | 26,382 |   |                          |   | (34    | )                                           |   |   | 26,348 |   |

| OPCo                                         |   |                                           |   |   |                          |   |   |                                        |   |
|----------------------------------------------|--------|------------------------------------------------|--------|--------|-------------------------------|--------|--------|---------------------------------------------|--------|
| Balance      SheetLine      Description      |   | As      Reported forthe      December 200710-K |   |   | FIN      39-1Reclassification |   |   | As      Reported forthe      March 200810-Q |   |
| Current      Assets:                         |   | (in      thousands)                            |   |
|   Risk      Management Assets      |   | $                                              | 45,490 |   |                          | $      | (1,254 | )                                           |   | $ | 44,236 |   |
|   Prepayments      and Other       |   |                                           | 20,532 |   |                          |   | (2,232 | )                                           |   |   | 18,300 |   |
| Long-term      Risk Management Assets        |   |                                           | 51,334 |   |                          |   | (1,748 | )                                           |   |   | 49,586 |   |
|                                         |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
| Current      Liabilities:                    |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
|   Risk      Management Liabilities |   |                                           | 42,740 |   |                          |   | (2,192 | )                                           |   |   | 40,548 |   |
|   Customer      Deposits           |   |                                           | 33,615 |   |                          |   | (3,002 | )                                           |   |   | 30,613 |   |
| Long-term      Risk Management Liabilities   |   |                                           | 32,234 |   |                          |   | (40    | )                                           |   |   | 32,194 |   |

| PSO                                          |   |                                           |   |   |                          |   |   |                                        |   |
|----------------------------------------------|--------|------------------------------------------------|--------|--------|-------------------------------|--------|--------|---------------------------------------------|--------|
| Balance      SheetLine      Description      |   | As      Reported forthe      December 200710-K |   |   | FIN      39-1Reclassification |   |   | As      Reported forthe      March 200810-Q |   |
| Current      Assets:                         |   | (in      thousands)                            |   |
|   Risk      Management Assets      |   | $                                              | 33,338 |   |                          | $      | (30    | )                                           |   | $ | 33,308 |   |
|   Margin      Deposits             |   |                                           | 9,119  |   |                          |   | (139   | )                                           |   |   | 8,980 |   |
| Long-term      Risk Management Assets        |   |                                           | 3,376  |   |                          |   | (18    | )                                           |   |   | 3,358 |   |
|                                         |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
| Current      Liabilities:                    |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
|   Risk      Management Liabilities |   |                                           | 27,151 |   |                          |   | (33    | )                                           |   |   | 27,118 |   |
|   Customer      Deposits           |   |                                           | 41,525 |   |                          |   | (48    | )                                           |   |   | 41,477 |   |
| Long-term      Risk Management Liabilities   |   |                                           | 2,914  |   |                          |   | (106   | )                                           |   |   | 2,808 |   |

| SWEPCo                                       |   |                                           |   |   |                          |   |   |                                        |
|----------------------------------------------|--------|------------------------------------------------|--------|--------|-------------------------------|--------|--------|---------------------------------------------|
| Balance      SheetLine      Description      |   | As      Reported forthe      December 200710-K |   |   | FIN      39-1Reclassification |   |   | As      Reported forthe      March 200810-Q |
| Current      Assets:                         |   | (in      thousands)                            |
|   Risk      Management Assets      |   | $                                              | 39,893 |   |                          | $      | (43    | )                                           |   | $ | 39,850 |   |
|   Margin      Deposits             |   |                                           | 10,814 |   |                          |   | (164   | )                                           |   |   | 10,650 |   |
| Long-term      Risk Management Assets        |   |                                           | 4,095  |   |                          |   | (22    | )                                           |   |   | 4,073 |   |
|                                         |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
| Current      Liabilities:                    |   |                                           |   |   |                          |   |   |                                        |   |   |   |   |
|   Risk      Management Liabilities |   |                                           | 32,668 |   |                          |   | (39    | )                                           |   |   | 32,629 |   |
|   Customer      Deposits           |   |                                           | 37,537 |   |                          |   | (64    | )                                           |   |   | 37,473 |   |
| Long-term      Risk Management Liabilities   |   |                                           | 3,460  |   |                          |   | (126   | )                                           |   |   | 3,334 |   |

|    | March      31, 2008  |   |
|---------|----------------------|--------|
|    | Cash      Collateral |   | Cash      Collateral |   |
|    | Received             |   | Paid |   |
|    | Netted      Against  |   | Netted      Against |   |
|    | Risk      Management |   | Risk      Management |   |
|    | Assets               |   | Liabilities |   |
|    | (in      thousands)  |   |
| APCo    | $                    | 8,173  |   | $ | 12,351 |   |
| CSPCo   |                 | 4,900  |   |   | 7,245 |   |
| I&M |                 | 4,701  |   |   | 6,803 |   |
| OPCo    |                 | 5,798  |   |   | 10,459 |   |
| PSO     |                 | 977    |   |   | 13,507 |   |
| SWEPCo  |                 | 1,158  |   |   | 16,057 |   |

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

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

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

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

|    |   | Maximum      Potential Loss |   |
|---------|--------|-----------------------------|--------|
| Company |   | (in      millions)          |   |
| APCo    |   | $                           | 9      |   |
| CSPCo   |   |                        | 4      |   |
| I&M |   |                        | 6      |   |
| OPCo    |   |                        | 9      |   |
| PSO     |   |                        | 5      |   |
| SWEPCo  |   |                        | 6      |   |

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

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

|                                       |                              |   | Other      Postretirement         |   |
|--------------------------------------------|-----------------------------------|--------|-----------------------------------|--------|
|                                       | Pension      Plans                |   | Benefit      Plans                |   |
|                                       | Three      Months Ended March 31, |   | Three      Months Ended March 31, |   |
|                                       | 2008                              |   | 2007                              |   | 2008 |   | 2007 |   |
|                                       | (in      millions)                |   |
| Service      Cost                          | $                                 | 25     |                              | $      | 24 |   | $ | 10 |   | $ | 10 |   |
| Interest      Cost                         |                              | 63     |                              |   | 59 |   |   | 28 |   |   | 26 |   |
| Expected      Return on Plan Assets        |                              | (84    | )                                 |   | (85 | ) |   | (28 | ) |   | (26 | ) |
| Amortization      of Transition Obligation |                              | -      |                              |   | - |   |   | 7 |   |   | 7 |   |
| Amortization      of Net Actuarial Loss    |                              | 9      |                              |   | 15 |   |   | 3 |   |   | 3 |   |
| Net      Periodic Benefit Cost             | $                                 | 13     |                              | $      | 13 |   | $ | 20 |   | $ | 20 |   |

|    |   |                              |   | Other      Postretirement         |   |
|---------|--------|-----------------------------------|--------|-----------------------------------|--------|
|    |   | Pension      Plans                |   | Benefit      Plans                |   |
|    |   | Three      Months Ended March 31, |   | Three      Months Ended March 31, |   |
|    |   | 2008                              |   | 2007                              |   | 2008 |   | 2007 |   |
| Company |   | (in      thousands)               |   |
| APCo    |   | $                                 | 835    |                              | $      | 842 |   | $ | 3,699 |   | $ | 3,560 |   |
| CSPCo   |   |                              | (349   | )                                 |   | (257 | ) |   | 1,498 |   |   | 1,491 |   |
| I&M |   |                              | 1,821  |                              |   | 1,900 |   |   | 2,423 |   |   | 2,530 |   |
| OPCo    |   |                              | 319    |                              |   | 245 |   |   | 2,816 |   |   | 2,802 |   |
| PSO     |   |                              | 508    |                              |   | 424 |   |   | 1,387 |   |   | 1,431 |   |
| SWEPCo  |   |                              | 935    |                              |   | 746 |   |   | 1,376 |   |   | 1,419 |   |

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

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

| Company    |   | Type      of Debt           |   | Principal      Amount |    | Interest      Rate |   | Due      Date |
|------------|--------|-----------------------------|--------|-----------------------|---------|--------------------|--------|---------------|
|       |   |                        |   | (in      thousands)   |    | (%)                |   |          |
| Issuances: |   |                        |   |                  |    |               |   |          |   |
| APCo       |   | Senior      Unsecured Notes |   | $                     | 500,000 |               | 7.00   |          | 2038 |

| Company                                                                     |   | Type      of Debt            |   | Principal      Amount      Paid |   | Interest      Rate |     | Due      Date |
|-----------------------------------------------------------------------------|--------|------------------------------|--------|---------------------------------|--------|--------------------|----------|---------------|
|                                                                        |   |                         |   | (in      thousands)             |   | (%)                |     |          |
| Retirements      and           Principal Payments: |   |                         |   |                            |   |               |     |          |   |
| APCo                                                                        |   | Other                        |   | $                               | 3      |               | 13.718   |          | 2026 |
| CSPCo                                                                       |   | Senior      Unsecured Notes  |   |                            | 52,000 |               | 6.51     |          | 2008 |
| I&M                                                                     |   | Pollution      Control Bonds |   |                            | 45,000 |               | Variable |          | 2009 |
| I&M                                                                     |   | Pollution      Control Bonds |   |                            | 50,000 |               | Variable |          | 2025 |
| OPCo                                                                        |   | Notes      Payable           |   |                            | 1,463  |               | 6.81     |          | 2008 |
| OPCo                                                                        |   | Notes      Payable           |   |                            | 6,000  |               | 6.27     |          | 2009 |
| SWEPCo                                                                      |   | Notes      Payable           |   |                            | 1,101  |               | 4.47     |          | 2011 |
| SWEPCo                                                                      |   | Notes      Payable           |   |                            | 750    |               | Variable |          | 2008 |

|    |   | As      of March 31, |   |
|---------|--------|----------------------|--------|
|    |   | 2008                 |   |
|    |   | (in      millions)   |   |
| APCo    |   | $                    | 213    |   |
| CSPCo   |   |                 | 193    |   |
| I&M |   |                 | 167    |   |
| OPCo    |   |                 | 468    |   |
| PSO     |   |                 | 34     |   |
| SWEPCo  |   |                 | 176    |   |

|    |   | Maximum      Borrowings from      Utility Money Pool |    |   | Maximum      Loans      to Utility      Money      Pool |   |    | Average      Borrowings from      Utility Money Pool |   |   | Average      Loans      to Utility      Money Pool |   |   | Loans      (Borrowings) to/from Utility Money Pool as of March 31,    2008 |    |   | Authorized      Short-Term      Borrowing Limit |   |
|---------|--------|------------------------------------------------------|---------|--------|---------------------------------------------------------|--------|---------|------------------------------------------------------|--------|--------|----------------------------------------------------|--------|--------|----------------------------------------------------------------------------|---------|--------|-------------------------------------------------|--------|
| Company |   | (in      thousands)                                  |    |
| APCo    |   | $                                                    | 307,226 |   |                                                    | $      | 269,987 |                                                 |   | $      | 261,154                                            |   |   | $                                                                          | 264,528 |   |                                            | $      | 261,823 |   |   | $ | 600,000 |   |
| CSPCo   |   |                                                 | 195,038 |   |                                                    |   | -       |                                                 |   |   | 139,127                                            |   |   |                                                                       | -       |   |                                            |   | (163,999 | ) |   |   | 350,000 |   |
| I&M |   |                                                 | 239,125 |   |                                                    |   | -       |                                                 |   |   | 102,772                                            |   |   |                                                                       | -       |   |                                            |   | (185,938 | ) |   |   | 500,000 |   |
| OPCo    |   |                                                 | 201,263 |   |                                                    |   | -       |                                                 |   |   | 102,902                                            |   |   |                                                                       | -       |   |                                            |   | (87,408 | ) |   |   | 600,000 |   |
| PSO     |   |                                                 | 62,159  |   |                                                    |   | 59,384  |                                                 |   |   | 20,089                                             |   |   |                                                                       | 30,664  |   |                                            |   | (62,159 | ) |   |   | 300,000 |   |
| SWEPCo  |   |                                                 | 89,210  |   |                                                    |   | -       |                                                 |   |   | 48,654                                             |   |   |                                                                       | -       |   |                                            |   | (89,210 | ) |   |   | 350,000 |   |

|                       |   | Three      Months Ended March 31, |
|----------------------------|--------|-----------------------------------|
|                       |   | 2008                              |   | 2007 |
| Maximum      Interest Rate |   | 5.37                              | % |   | 5.43 | % |
| Minimum      Interest Rate |   | 3.39                              | % |   | 5.30 | % |

|    |   | Average      Interest Rate for FundsBorrowed      from the Utility Money Pool      for theThree      Months Ended March 31, |   | Average      Interest Rate for FundsLoaned      to the Utility Money Pool      for theThree      Months Ended March 31, |
|---------|--------|-----------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------|
|    |   | 2008                                                                                                                        |   | 2007                                                                                                                    |   | 2008 |   | 2007 |
| Company |   |                                                                                                                        |   |
| APCo    |   |                                                                                                                        | 4.21   | %                                                                                                                       |   | 5.34 | % |   | 3.46 | % |   | - | % |
| CSPCo   |   |                                                                                                                        | 4.01   | %                                                                                                                       |   | 5.35 | % |   | - | % |   | 5.33 | % |
| I&M |   |                                                                                                                        | 3.99   | %                                                                                                                       |   | 5.34 | % |   | - | % |   | - | % |
| OPCo    |   |                                                                                                                        | 4.29   | %                                                                                                                       |   | 5.34 | % |   | - | % |   | - | % |
| PSO     |   |                                                                                                                        | 3.51   | %                                                                                                                       |   | 5.34 | % |   | 4.57 | % |   | - | % |
| SWEPCo  |   |                                                                                                                        | 4.00   | %                                                                                                                       |   | 5.35 | % |   | - | % |   | 5.34 | % |

|    |                                              |   | March      31, 2008 |   |         | December      31, 2007 |   |
|---------|---------------------------------------------------|--------|---------------------|--------|--------------|------------------------|--------|
|    | Type      of Debt                                 |   | OutstandingAmount   |   | InterestRate |                   |   | OutstandingAmount |   | InterestRate |   |
| Company |                                              |   | (in      thousands) |   |         |                   |   | (in      thousands) |   |   |   |
| OPCo    | Commercial      Paper – JMG                 |   | $                   | -      |         | -                      | %      |   | $ | 701 |   | 5.35 | % |
| SWEPCo  | Line      of Credit – Sabine Mining Company |   |                | -      |         | -                      | %      |   |   | 285 |   | 5.25 | % |

----

COMBINEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF REGISTRANTSUBSIDIARIES

|       |   |            |   |               |   |               |                                |   |               |    |           |   |            |   |     |                | Commercial  |
|------------|--------|-----------------|--------|--------------------|--------|--------------------|-------------------------------------|--------|--------------------|---------|----------------|--------|-----------------|--------|----------|---------------------|-------------|
|       |   |            |   |               |   | Total              |                                |   |               |    |           |   |            |   | Nominal  |                | Operation   |
| Operating  |   | Project         |   |               |   | Projected          |                                |   |               |    |           |   |            |   | MW       |                | Date        |
| Company    |   | Name            |   | Location           |   | Cost      (a)      |                                |   | CWIP      (b)      |    | Fuel      Type |   | Plant      Type |   | Capacity |                | (Projected) |
|       |   |            |   |               |   | (in      millions) |                                |   | (in      millions) |    |           |   |            |   |     |                |        |
| PSO        |   | Southwestern    | (c)    | Oklahoma           |   | $                  | 58                                  |   |               |  $ | -              |   |            | Gas    |     | Simple-cycle        |        |   | 170 |   | 2008 |
| PSO        |   | Riverside       |   | Oklahoma           |   |               | 59                                  |   |               |    | 57             |   |            | Gas    |     | Simple-cycle        |        |   | 170 |   | 2008 |
| AEGCo      |   | Dresden         | (d)    | Ohio               |   |               |           305   | (d)    |               |    | 101            |   |            | Gas    |     | Combined-cycle      |        |   | 580 |   | 2010 |
| SWEPCo     |   | Stall           |   | Louisiana          |   |               | 378                                 |   |               |    | 76             |   |            | Gas    |     | Combined-cycle      |        |   | 500 |   | 2010 |
| SWEPCo     |   | Turk            | (e)    | Arkansas           |   |               |           1,522 | (e)    |               |    | 313            |   |            | Coal   |     | Ultra-supercritical |        |   | 600 | (e) | 2012 |
| APCo       |   | Mountaineer     |   | West      Virginia |   |               | 2,230                               |   |               |    | -              |   |            | Coal   |     | IGCC                |        |   | 629 |   | 2012 |
| CSPCo/OPCo |   | Great      Bend |   | Ohio               |   |               |          2,700       | (f)    |               |    | -              |   |            | Coal   |     | IGCC                |        |   | 629 |   | 2017 |

| (a) | Amount      excludes AFUDC.                                                                                                                                                                                                                                                                                |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amount      includes AFUDC.                                                                                                                                                                                                                                                                                |
| (c) | Southwestern      Units were placed in service on February 29, 2008.                                                                                                                                                                                                                                       |
| (d) | 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.                                                |
| (e) | SWEPCo      plans to own approximately 73%, or 440 MW, totaling $1,110 million in      capital investment.  The increase in the cost estimate relates      to cost escalations due to the delay in receipt of permits and      approvals.  See “Turk Plant” section below. |
| (f) | Cost      estimates, updated to reflect cost escalations due to revised commercial      operation date of 2017, are not yet filed with the PUCO.  See      “Ohio IGCC Plant” section of Note3.                                                                                       |

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

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

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

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

----

CONTROLS AND PROCEDURES

----

PART II.  OTHER INFORMATION

| Period                         |   | Total      Numberof      SharesPurchased |   | Average      PricePaid      per Share |   | Total      Number of Shares Purchased as Part of Publicly Announced Plans or      Programs |   | Maximum      Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased      Under the Plans or Programs |   |
|--------------------------------|--------|------------------------------------------|--------|---------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------|--------|
| 01/01/08      – 01/31/08 |   | -                                        |   | $                                     | -      |                                                                                       | -      |                                                                                                                   | $      | - |   |
| 02/01/08      – 02/29/08 |   | -                                        |   |                                  | -      |                                                                                       | -      |                                                                                                                   |   | - |   |
| 03/01/08      – 03/31/08 |   | -                                        |   |                                  | -      |                                                                                       | -      |                                                                                                                   |   | - |   |

----

SIGNATURE