| 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 atOctober      30, 2008 |
|--------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                       |                                                                                                     |
| American      Electric Power Company, Inc. | 403,554,634                                                                                         |
|                                       | ($6.50      par value)                                                                                   |
| Appalachian      Power Company             | 13,499,500                                                                                               |
|                                       | (no      par value)                                                                                      |
| Columbus      Southern Power Company       | 16,410,426                                                                                               |
|                                       | (no      par value)                                                                                      |
| Indiana      Michigan Power Company        | 1,400,000                                                                                                |
|                                       | (no      par value)                                                                                      |
| Ohio      Power Company                    | 27,952,473                                                                                               |
|                                       | (no      par value)                                                                                      |
| Public      Service Company of Oklahoma    | 9,013,000                                                                                                |
|                                       | ($15      par value)                                                                                     |
| Southwestern      Electric Power Company   | 7,536,640                                                                                                |
|                                       | ($18      par value)                                                                                     |

----

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

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

|                                                                                     |
|------------------------------------------------------------------------------------------|
| Condensed      Notes to Condensed Financial Statements of Registrant      Subsidiaries   |
|                                                                                     |
| Combined      Management’s Discussion and Analysis of Registrant      Subsidiaries |
|                                                                                     |
| Controls      and Procedures                                                             |
|                                                                                     |
| Part      II.  OTHER INFORMATION                                               |
|                                                                                     |
| Item      1.                                                                             | Legal      Proceedings |
| Item      1A.                                                                            | Risk      Factors |
| Item      2.                                                                             | Unregistered      Sales of Equity Securities and Use of Proceeds |
| Item      4.                                                                             | Submission      of Matters to a Vote of Security Holders |
| Item      5.                                                                             | Other      Information |
| Item      6.                                                                             | Exhibits: |
| Exhibit      10(a) (AEP)                                                                 |
| Exhibit      10(b) (AEP)                                                                 |
| Exhibit      10(c) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo)                        |
| Exhibit      10(d) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo)                        |
| Exhibit      10(e) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo)                        |
| Exhibit      10(f) (AEP, APCo, CSPCo, I&M, OPCo, PSO,  SWEPCo)                  |
| Exhibit      12 (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo)                           |
| Exhibit      31(a) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo)                        |
| Exhibit      31(b) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo)                        |
| Exhibit      32(a) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo)                        |
| Exhibit      32(b) (AEP, APCo, CSPCo, I&M, OPCo, PSO, SWEPCo)                        |
|                                                                                     |
| SIGNATURE                                                                                |

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

----

GLOSSARY OF TERMS

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

| AEGCo                         |   | AEP      Generating Company, an AEP electric utility subsidiary.                                                                                                                                  |
|-------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| AEP      or Parent            |   | American      Electric Power Company, Inc.                                                                                                                                                        |
| AEP      Consolidated         |   | AEP      and its majority owned consolidated subsidiaries and consolidated      affiliates.                                                                                                       |
| AEP      Credit               |   | AEP      Credit, Inc., a subsidiary of AEP which factors accounts receivable and      accrued utility revenues for affiliated electric utility      companies.                                    |
| AEP      East companies       |   | APCo,      CSPCo, I&M, KPCo and OPCo.                                                                                                                                                         |
| AEPSC                         |   | American      Electric Power Service Corporation, a service subsidiary providing      management and professional services to AEP and its      subsidiaries.                                      |
| AEP      System or the System |   | American      Electric Power System, an integrated electric utility system, owned and      operated by AEP’s electric utility subsidiaries.                                                 |
| AEP      Power Pool           |   | Members      are APCo, CSPCo, I&M, KPCo and OPCo.  The Pool shares the      generation, cost of generation and resultant wholesale off-system sales of      the member companies.   |
| AEP      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.                                                                                                                                                                              |
| Cook      Plant               |   | Donald      C. Cook Nuclear Plant, a two-unit, 2,110 MW nuclear plant owned by      I&M.                                                                                                      |
| CSPCo                         |   | Columbus      Southern Power Company, an AEP electric utility  subsidiary.                                                                                                                        |
| CSW                           |   | Central      and South West Corporation, a subsidiary of AEP (Effective January 21,      2003, the legal name of Central and South West Corporation was changed to      AEP Utilities, Inc.).     |
| CTC                           |   | Competition      Transition Charge.                                                                                                                                                               |
| CWIP                          |   | Construction      Work in Progress.                                                                                                                                                               |
| DETM                          |   | Duke      Energy Trading and Marketing L.L.C., a risk management      counterparty.                                                                                                               |
| DOE                           |   | United      States Department of Energy.                                                                                                                                                          |
| E&R                       |   | Environmental      compliance and transmission and distribution system      reliability.                                                                                                          |
| EaR                           |   | Earnings      at Risk, a method to quantify risk exposure.                                                                                                                                        |
| EITF                          |   | Financial      Accounting Standards Board’s Emerging Issues TaskForce.                                                                                                                      |
| EPS                           |   | Earnings      Per Share.                                                                                                                                                                          |
| ERCOT                         |   | Electric      Reliability Council of Texas.                                                                                                                                                       |
| ETT                           |   | Electric      Transmission Texas, LLC, a 50% equity interest joint venture with      MidAmerican Energy Holding Company formed to own and operate electric      transmission facilities in ERCOT. |
| FASB                          |   | Financial      Accounting Standards Board.                                                                                                                                                        |
| Federal      EPA              |   | United      States Environmental Protection Agency.                                                                                                                                               |
| FERC                          |   | Federal      Energy Regulatory Commission.                                                                                                                                                        |
| FIN                           |   | FASB      Interpretation No.                                                                                                                                                                      |
| FIN      46R                  |   | FIN      46R, “Consolidation of Variable Interest Entities.”                                                                                                                          |
| FIN      48                   |   | FIN      48, “Accounting for Uncertainty in Income Taxes” and FASB Staff Position      FIN 48-1 “Definition of Settlement in FASB      Interpretation No. 48.”            |
| FSP                           |   | FASB      Staff Position.                                                                                                                                                                         |

| FTR                            |   | Financial      Transmission Right, a financial instrument that entitles the holder to      receive compensation for     certain      congestion-related      transmission charges that arise when the power grid is congested          resulting in      differences in locational      prices. |
|--------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| GAAP                           |   | Accounting      Principles Generally Accepted in the United States of    America.                                                                                                                                                                                                                                                            |
| HPL                            |   | Houston      Pipeline Company, a former AEP subsidiary.                                                                                                                                                                                                                                                                                      |
| IGCC                           |   | Integrated      Gasification Combined Cycle, technology that turns coal into a      cleaner-burning gas.                                                                                                                                                                                                                                     |
| Interconnection      Agreement |   | Agreement,      dated July 6, 1951, as amended, by and among APCo, CSPCo, I&M, KPCo      and OPCo, defining the sharing of costs and benefits associated with their      respective generating plants.                                                                                                                                   |
| IRS                            |   | Internal      Revenue Service.                                                                                                                                                                                                                                                                                                               |
| IURC                           |   | Indiana      Utility Regulatory Commission.                                                                                                                                                                                                                                                                                                  |
| 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.                                                                                                                                                                                                                                                                                                                      |
| OCC                            |   | Corporation      Commission of the State of Oklahoma.                                                                                                                                                                                                                                                                                        |
| OPCo                           |   | Ohio      Power Company, an AEP electric utility subsidiary.                                                                                                                                                                                                                                                                                 |
| OPEB                           |   | Other      Postretirement Benefit Plans.                                                                                                                                                                                                                                                                                                     |
| OTC                            |   | Over-the-counter.                                                                                                                                                                                                                                                                                                                            |
| PJM                            |   | Pennsylvania      – New Jersey – Maryland regional transmission  organization.                                                                                                                                                                                                                                                   |
| PM                             |   | Particulate      Matter.                                                                                                                                                                                                                                                                                                                     |
| PSO                            |   | Public      Service Company of Oklahoma, an AEP electric utility      subsidiary.                                                                                                                                                                                                                                                            |
| PUCO                           |   | Public      Utilities Commission of Ohio.                                                                                                                                                                                                                                                                                                    |
| PUCT                           |   | Public      Utility Commission of Texas.                                                                                                                                                                                                                                                                                                     |
| Registrant      Subsidiaries   |   | AEP      subsidiaries which are SEC registrants; APCo, CSPCo, I&M, OPCo, PSO      and SWEPCo.                                                                                                                                                                                                                                            |
| REP                            |   | Texas      Retail Electric Provider.                                                                                                                                                                                                                                                                                                         |
| Risk      Management Contracts |   | Trading      and nontrading derivatives, including those derivatives designated as cash      flow and fair value hedges.                                                                                                                                                                                                                     |
| Rockport      Plant            |   | A      generating plant, consisting of two 1,300 MW coal-fired generating units      near Rockport, Indiana, owned by AEGCo and I&M.                                                                                                                                                                                                     |
| RSP                            |   | Rate      Stabilization Plan.                                                                                                                                                                                                                                                                                                                |
| RTO                            |   | Regional      Transmission Organization.                                                                                                                                                                                                                                                                                                     |
| S&P                        |   | Standard      and Poor’s.                                                                                                                                                                                                                                                                                                              |
| SCR                            |   | Selective      Catalytic Reduction.                                                                                                                                                                                                                                                                                                          |
| SEC                            |   | United      States Securities and Exchange Commission.                                                                                                                                                                                                                                                                                       |
| SECA                           |   | Seams      Elimination Cost Allocation.                                                                                                                                                                                                                                                                                                      |
| SFAS                           |   | Statement      of Financial Accounting Standards issued by the Financial Accounting      Standards Board.                                                                                                                                                                                                                                    |

| SFAS      71                              |   | Statement      of Financial Accounting Standards No. 71, “Accounting for the Effects of      Certain Types of Regulation.”                                                                                     |
|-------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SFAS      133                             |   | Statement      of Financial Accounting Standards No. 133, “Accounting for Derivative      Instruments and Hedging Activities.”                                                                                 |
| SNF                                       |   | Spent      Nuclear Fuel.                                                                                                                                                                                                   |
| SO2                                       |   | Sulfur      Dioxide.                                                                                                                                                                                                       |
| SPP                                       |   | Southwest      Power Pool.                                                                                                                                                                                                 |
| Stall      Unit                           |   | J.      Lamar Stall Unit at Arsenal Hill Plant.                                                                                                                                                                            |
| Sweeny                                    |   | Sweeny      Cogeneration Limited Partnership, owner and operator of a four unit, 480      MW gas-fired generation facility, owned 50% by AEP.  AEP’s 50%      interest in Sweeny was sold in October 2007. |
| SWEPCo                                    |   | Southwestern      Electric Power Company, an AEP electric utility  subsidiary.                                                                                                                                             |
| TCC                                       |   | AEP      Texas Central Company, an AEP electric utility  subsidiary.                                                                                                                                                       |
| TEM                                       |   | SUEZ      Energy Marketing NA, Inc. (formerly known as Tractebel Energy Marketing,      Inc.).                                                                                                                             |
| Texas      Restructuring Legislation |   | Legislation      enacted in 1999 to restructure the electric utility industry in      Texas.                                                                                                                               |
| TNC                                       |   | AEP      Texas North Company, an AEP electric utilitysubsidiary.                                                                                                                                                           |
| True-up      Proceeding                   |   | A      filing made under the Texas Restructuring Legislation to finalize the      amount of stranded costs and other true-up items and the recovery of such      amounts.                                                  |
| Turk      Plant                           |   | John      W. Turk, Jr. Plant.                                                                                                                                                                                              |
| Utility      Money Pool                   |   | AEP      System’s Utility Money Pool.                                                                                                                                                                                |
| VaR                                       |   | Value      at Risk, a method to quantify risk exposure.                                                                                                                                                                    |
| Virginia      SCC                         |   | Virginia      State Corporation Commission.                                                                                                                                                                                |
| WPCo                                      |   | Wheeling      Power Company, an AEP electric distribution subsidiary.                                                                                                                                                      |
| WVPSC                                     |   | Public      Service Commission of WestVirginia.                                                                                                                                                                            |

----

FORWARD-LOOKING INFORMATION

| · | Electric      load and customer growth.                                                                                                                                                                                                                                                                                                      |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Weather      conditions, including storms.                                                                                                                                                                                                                                                                                                   |
| · | Available      sources and costs of, and transportation for, fuels and the      creditworthiness and performance of fuel suppliers and      transporters.                                                                                                                                                                                    |
| · | Availability      of generating capacity and the performance of our generating      plants.                                                                                                                                                                                                                                                  |
| · | Our      ability to recover regulatory assets and stranded costs in connection with      deregulation.                                                                                                                                                                                                                                       |
| · | Our      ability to recover increases in fuel and other energy costs through      regulated or competitive electric rates.                                                                                                                                                                                                                   |
| · | Our      ability to build or acquire generating capacity (including our ability to      obtain any necessary regulatory approvals and permits) when needed at      acceptable prices and terms and to recover those costs (including the      costs of projects that are cancelled) 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 or contraction, 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 impacting 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      markets.                                                                                                                                                                       |
| · | Actions      of rating agencies, including changes in the ratings of    debt.                                                                                                                                                                                                                                                                |
| · | Volatility      and changes in markets for electricity, natural gas, coal, nuclear fuel      and other energy-related commodities.                                                                                                                                                                                                           |
| · | Changes      in utility regulation, including the implementation of the recently-passed      utility law in Ohio and the allocation of costs within    RTOs.                                                                                                                                                                                 |
| · | Accounting      pronouncements periodically issued by accounting standard-setting      bodies.                                                                                                                                                                                                                                               |
| · | The      impact of volatility in the capital markets on the value of the      investments held by our pension, other postretirement benefit plans and      nuclear decommissioning trust and the impact on future funding      requirements.                                                                                                 |
| · | Prices      for power that we generate and sell at wholesale.                                                                                                                                                                                                                                                                                |
| · | Changes      in technology, particularly with respect to new, developing or alternative      sources of generation.                                                                                                                                                                                                                          |
| · | Other      risks and unforeseen events, including wars, the effects of terrorism      (including increased security costs), embargoes and other catastrophic      events.                                                                                                                                                                    |

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

----

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

| (a) | Subject      to refund.  An      October settlement agreement of $168 million is pending with the Virginia      SCC.                                                    |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Net      of estimated amounts that PSO expects to recover through a generation cost      recovery rider which will terminate upon implementation of the new base      rates. |

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

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

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

|                                                              | Three      Months Ended September      30, |   | Nine      Months Ended September      30, |   |
|-------------------------------------------------------------------|--------------------------------------------|--------|-------------------------------------------|--------|
|                                                              | 2008                                       |   | 2007                                      |   | 2008 |   | 2007 |   |
|                                                              | (in      millions)                         |   |
| Utility      Operations                                           |                                       | $      | 357                                       |   |   | $ | 388 |   |   | $ | 1,030 |   |   | $ | 879 |   |
| AEP River      Operations                                    |                                       |   | 11                                        |   |   |   | 18 |   |   |   | 21 |   |   |   | 40 |   |
| Generation      and Marketing                                     |                                       |   | 16                                        |   |   |   | 3 |   |   |   | 43 |   |   |   | 17 |   |
| All      Other (a)                                                |                                       |   | (10                                       | )      |   |   | (2 | ) |   |   | 133 |   |   |   | (1 | ) |
| Income      Before Discontinued Operations and Extraordinary Loss |                                       | $      | 374                                       |   |   | $ | 407 |   |   | $ | 1,227 |   |   | $ | 935 |   |

| (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 of 2008 cash settlement of a purchase power and sale      agreement with TEM related to the Plaquemine Cogeneration Facility which      was sold in the fourth quarter of 2006.  The cash settlement of      $255 million ($163 million, net of tax) is included in Net      Income. |
|   | ·                   | Revenue      sharing related to the Plaquemine Cogeneration  Facility. |

|                                                              |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|-------------------------------------------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                                                              |   | 2008                                      |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
|                                                              |   | (in      millions)                        |   |
| Revenues                                                          |   | $                                         | 3,968  |   |                                     | $      | 3,600 |   |   | $ | 10,575 |   |   | $ | 9,587 |   |
| Fuel      and Purchased Power                                     |   |                                      | 1,841  |   |                                     |   | 1,413 |   |   |   | 4,428 |   |   |   | 3,641 |   |
| Gross      Margin                                                 |   |                                      | 2,127  |   |                                     |   | 2,187 |   |   |   | 6,147 |   |   |   | 5,946 |   |
| Depreciation      and Amortization                                |   |                                      | 379    |   |                                     |   | 374 |   |   |   | 1,099 |   |   |   | 1,122 |   |
| Other      Operating Expenses                                     |   |                                      | 1,034  |   |                                     |   | 1,037 |   |   |   | 3,001 |   |   |   | 2,985 |   |
| Operating      Income                                             |   |                                      | 714    |   |                                     |   | 776 |   |   |   | 2,047 |   |   |   | 1,839 |   |
| Other      Income, Net                                            |   |                                      | 46     |   |                                     |   | 27 |   |   |   | 135 |   |   |   | 72 |   |
| Interest      Charges and Preferred Stock Dividend Requirements   |   |                                      | 225    |   |                                     |   | 213 |   |   |   | 653 |   |   |   | 599 |   |
| Income      Tax Expense                                           |   |                                      | 178    |   |                                     |   | 202 |   |   |   | 499 |   |   |   | 433 |   |
| Income      Before Discontinued Operations and Extraordinary Loss |   | $                                         | 357    |   |                                     | $      | 388 |   |   | $ | 1,030 |   |   | $ | 879 |   |

|                                                                                                                      |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
| Energy/Delivery      Summary                                                                                              |   | 2008                                      |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
|                                                                                                                      |   | (in      millions of KWH)                 |   |
| Energy                                                                                                                    |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Retail:                                                                                                                   |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Residential                                                                                                               |   |                                      | 12,754 |   |                                     |   | 13,749 |   |   |   | 37,084 |   |   |   | 38,015 |   |
| Commercial                                                                                                                |   |                                      | 10,794 |   |                                     |   | 11,164 |   |   |   | 30,249 |   |   |   | 30,750 |   |
| Industrial                                                                                                                |   |                                      | 14,761 |   |                                     |   | 14,697 |   |   |   | 44,171 |   |   |   | 43,110 |   |
| Miscellaneous                                                                                                             |   |                                      | 668    |   |                                     |   | 686 |   |   |   | 1,916 |   |   |   | 1,932 |   |
| Total      Retail                                                                                                         |   |                                      | 38,977 |   |                                     |   | 40,296 |   |   |   | 113,420 |   |   |   | 113,807 |   |
|                                                                                                                      |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Wholesale                                                                                                                 |   |                                      | 13,130 |   |                                     |   | 13,493 |   |   |   | 35,728 |   |   |   | 31,648 |   |
|                                                                                                                      |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Delivery                                                                                                                  |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Texas      Wires – Energy delivered to customers served by         AEP’s Texas Wires Companies |   |                                      | 7,961  |   |                                     |   | 7,721 |   |   |   | 20,916 |   |   |   | 20,297 |   |
| Total      KWHs                                                                                                           |   |                                      | 60,068 |   |                                     |   | 61,510 |   |   |   | 170,064 |   |   |   | 165,752 |   |

|                            |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|---------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                            |   | 2008                                      |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
|                            |   | (in      degree days)                     |   |
| Weather      Summary            |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Eastern Region                  |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Actual      – Heating (a) |   |                                      | -      |   |                                     |   | 2 |   |   |   | 1,960 |   |   |   | 2,041 |   |
| Normal      – Heating (b) |   |                                      | 7      |   |                                     |   | 7 |   |   |   | 1,950 |   |   |   | 1,973 |   |
|                            |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Actual      – Cooling (c) |   |                                      | 651    |   |                                     |   | 808 |   |   |   | 924 |   |   |   | 1,189 |   |
| Normal      – Cooling (b) |   |                                      | 687    |   |                                     |   | 685 |   |   |   | 969 |   |   |   | 963 |   |
|                            |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Western Region (d)              |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Actual      – Heating (a) |   |                                      | -      |   |                                     |   | - |   |   |   | 989 |   |   |   | 994 |   |
| Normal      – Heating (b) |   |                                      | 2      |   |                                     |   | 2 |   |   |   | 967 |   |   |   | 993 |   |
|                            |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Actual      – Cooling (c) |   |                                      | 1,250  |   |                                     |   | 1,406 |   |   |   | 1,951 |   |   |   | 2,084 |   |
| Normal      – Cooling (b) |   |                                      | 1,402  |   |                                     |   | 1,411 |   |   |   | 2,074 |   |   |   | 2,084 |   |

| (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.                                        |

| Third      Quarter of 2007                        |   |   |   |   | $      | 388    |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (81    | )      |   |   |   |   |
| Off-system      Sales                             |   |   | (7     | )      |   |   |   |   |
| Transmission      Revenues                        |   |   | 4      |   |   |   |   |   |
| Other                                             |   |   | 24     |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | (60    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | -      |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | (5     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | 2      |   |   |   |   |   |
| Carrying      Costs Income                        |   |   | 7      |   |   |   |   |   |
| Interest      Income                              |   |   | 8      |   |   |   |   |   |
| Other      Income, Net                            |   |   | 5      |   |   |   |   |   |
| Interest      and Other Charges                   |   |   | (12    | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 5      |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 24     |   |
|                                              |   |   |   |   |   |   |   |   |
| Third      Quarter of 2008                        |   |   |   |   |   | $      | 357    |   |

| · | Retail      Margins decreased $81 million primarily due to the    following:                                                                                                                                                                                                                                                                       |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                             | A      $78 million increase in related to increased fuel and consumable expenses      in Ohio.  CSPCo      and OPCo have applied for an active fuel clause in their Ohio ESP to be      effective January 1, 2009. |
|   | ·                                                                                                                                                                                                                                                                                                                                             | An      $80 million decrease in usage primarily due to a 19% decrease in cooling      degree days in our eastern region, an 11% decrease in cooling degree days      in our western region as well as outages caused by Hurricanes Dolly,      Gustav and Ike.  Approximately 17% of our reduction in load was      attributable to these storms. |
|   | These      decreases were partially offset by:                                                                                                                                                                                                                                                                                                     |
|   | ·                                                                                                                                                                                                                                                                                                                                             | A      $61 million increase related to net rate increases implemented in our Ohio      jurisdictions, an $8 million increase related to recovery of E&R costs      in Virginia and the construction financing costs rider in West Virginia, a      $6 million increase in base rates in Texas and a $6 million increase in      base rates in Oklahoma. |
|   | ·                                                                                                                                                                                                                                                                                                                                             | A      $9 million increase related to increased usage by Ormet, an industrial      customer in Ohio.  See “Ormet” section of Note  3. |
| · | Margins      from Off-system Sales decreased $7 million primarily due to lower trading      margins and the favorable effects of a fuel reconciliation recorded in our      western service territory in the third quarter of 2007, partially offset      by increases in East physical off-system sales margins due mostly to      higher prices. |
| · | Transmission      Revenues increased $4 million primarily due to increased rates in the SPP      region.                                                                                                                                                                                                                                           |
| · | Other      revenues increased $24 million primarily due to increased third-party      engineering and construction work and an increase in pole attachment      revenue.                                                                                                                                                                           |

| · | Other      Operation and Maintenance expenses were flat in comparison to      2007.  We experienced decreases related to the      following:                           |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                           | A      $77 million decrease related to the recording of the NSR settlement in the      third quarter of 2007.  We are evaluating methods to pursue recovery      in all of our affected jurisdictions. |
|   | ·                                                                                                                                                                           | A      $9 million decrease related to the establishment of a regulatory asset in      the third quarter of 2008 for Virginia’s share of previously expended NSR      settlement costs. |
|   | These      decreases were offset by:                                                                                                                                             |
|   | ·                                                                                                                                                                           | A      $24 million increase in non-storm system improvements, customer work and      other distribution expenses. |
|   | ·                                                                                                                                                                           | A      $21 million increase in storm restoration costs, primarily related to      Hurricanes Dolly, Gustav and Ike. |
|   | ·                                                                                                                                                                           | A      $15 million increase in recoverable PJM expenses in  Ohio. |
|   | ·                                                                                                                                                                           | A      $10 million increase in generation plant maintenance. |
|   | ·                                                                                                                                                                           | An      $8 million increase in recoverable customer account expenses related to      the Universal Service Fund for Ohio customers who qualify for payment      assistance. |
|   | ·                                                                                                                                                                           | An      $8 million increase in transmission expenses for tree trimming and      reliability. |
| · | Depreciation      and Amortization expense increased $5 million primarily due to higher      depreciable property balances from the installation of environmental      upgrades. |
| · | Carrying      Costs Income increased $7 million primarily due to increased carrying cost      income on cost deferrals in Virginia and Oklahoma.                                 |
| · | Interest      Income increased $8 million primarily due to the favorable effect of      claims for refund filed with the IRS.                                                    |
| · | Interest      and Other Charges increased $12 million primarily due to additional debt      issued and higher interest rates on variable rate debt.                              |
| · | Income      Tax Expense decreased $24 million due to a decrease in pretax      income.                                                                                           |

| Nine      Months Ended September 30, 2007         |   |   |   |   | $      | 879    |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 79     |   |   |   |   |   |
| Off-system      Sales                             |   |   | 73     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 22     |   |   |   |   |   |
| Other      Revenues                               |   |   | 27     |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 201    |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | 11     |   |   |   |   |   |
| Gain      on Dispositions of Assets, Net          |   |   | (18    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 23     |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (9     | )      |   |   |   |   |
| Carrying      Costs Income                        |   |   | 26     |   |   |   |   |   |
| Interest      Income                              |   |   | 25     |   |   |   |   |   |
| Other      Income, Net                            |   |   | 12     |   |   |   |   |   |
| Interest      and Other Charges                   |   |   | (54    | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 16     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (66    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30, 2008         |   |   |   |   |   | $      | 1,030  |   |

| · | Retail      Margins increased $79 million primarily due to the    following: |
|--------|------------------------------------------------------------------------------|
|   | ·                                                                       | A      $148 million increase related to net rate increases implemented in our      Ohio jurisdictions, a $39 million increase related to recovery of E&R      costs in Virginia and the construction financing costs rider in West      Virginia, a $20 million increase in base rates in Oklahoma and a $17      million increase in base rates in Texas. |
|   | ·                                                                       | A      $42 million increase related to increased usage by Ormet, an industrial      customer in Ohio.  See “Ormet” section of Note  3. |
|   | ·                                                                       | A      $37 million net increase due to adjustments recorded in the prior year      related to the 2007 Virginia base rate case which included a second      quarter 2007 provision for revenue refund. |
|   | ·                                                                       | A      $29 million increase due to coal contract amendments in    2008. |
|   | These      increases were partially offset by:                               |
|   | ·                                                                       | A      $164 million decrease related to increased fuel and consumable expenses in      Ohio.  CSPCo      and OPCo have applied for an active fuel clause in their Ohio ESP to be      effective January 1, 2009. |
|   | ·                                                                       | A      $65 million decrease in usage primarily due to a 22% decrease in cooling      degree days in our eastern region and      a 6% decrease in cooling degree days in our western      region. |
|   | ·                                                                       | A      $29 million increase in the sharing of off-system sales margins with      customers due      to an increase in total off-systemsales. |

| · | Margins      from Off-system Sales increased $73 million primarily due to higher      physical off-system sales in our eastern territory as the result of higher      volumes and higher prices, aided by additional generation available in      2008 due to fewer planned outages and lower internal load.  This      increase was partially offset by lower trading margins and the favorable      effects of a fuel reconciliation recorded in our western territory in the      third quarter of 2007. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission      Revenues increased $22 million primarily due to increased rates in the      ERCOT and SPP regions.                                                                                                                                                                                                                                                                                                                                                                                                  |
| · | Other      Revenues increased $27 million primarily due to increased third-party      engineering and construction work, an increase in pole attachment revenue      and the recording of an unfavorable provision for TCC for the refund of      bonded rates recorded in 2007.                                                                                                                                                                                                                                      |

| · | Other      Operation and Maintenance expenses decreased $11 million primarily due to      the following:                                                                                                                                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $77 million decrease related to the recording of NSR settlement costs in      September 2007.  We are evaluating methods to pursue recovery in all      of our affected jurisdictions. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $62 million decrease related to the deferral of Oklahoma storm restoration      costs in the first quarter of 2008, net of amortization, as a result of a      rate settlement to recover 2007 storm restorationcosts. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $19 million decrease in generation plant removal costs. |
|   | These      decreases were partially offset by:                                                                                                                                                                                                                                                                                                                        |
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $33 million increase in tree trimming, reliability and system improvement      expense. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $29 million increase in recoverable PJM expenses in  Ohio. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $23 million increase in generation plant operations and maintenance      expense. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $21 million increase in recoverable customer account expenses related to      the Universal Service Fund for Ohio customers who qualify for payment      assistance. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $16 million increase in storm restoration costs, primarily related to      Hurricanes Dolly, Gustav and Ike, which occurred in the third quarter of      2008. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $16 million increase in maintenance expense at the Cook    Plant. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                | A      $10 million increase related to the write-off of the unrecoverable      pre-construction costs for PSO’s cancelled Red Rock Generating Facility in      the first quarter of 2008. |
| · | Gain      on Disposition of Assets, Net decreased $18 million primarily due to the      expiration 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 $23 million primarily due to lower      commission-approved depreciation rates in Indiana, Michigan, Oklahoma and      Texas and lower Ohio regulatory asset amortization, partially offset by      higher depreciable property balances and prior year adjustments related to      the Virginia base rate case. |
| · | Taxes      Other Than Income Taxes increased $9 million primarily due to favorable      adjustments to property tax returns recorded in the prior      year.                                                                                                                                                                                                          |
| · | Carrying      Costs Income increased $26 million primarily due to increased carrying      cost income on cost deferrals in Virginia and Oklahoma.                                                                                                                                                                                                                     |
| · | Interest      Income increased $25 million primarily due to the favorable effect of      claims for refund filed with the IRS.                                                                                                                                                                                                                                        |
| · | Other      Income, Net increased $12 million primarily due to an increase in the      equity component of AFUDC as a result of new generation      projects.                                                                                                                                                                                                          |
| · | Interest      and Other Charges increased $54 million primarily due to additional debt      issued and higher interest rates on variable rate debt.                                                                                                                                                                                                                   |
| · | Income      Tax Expense increased $66 million due to an increase in pretax      income.                                                                                                                                                                                                                                                                               |

|                                                       |   | September      30, 2008 |   |   | December      31, 2007 |   |
|------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                                                       |   | ($      in millions)    |   |
| Long-term      Debt, including amounts due within one year |   | $                       | 16,007 |   |                   |   | 56.6 | %        |   | $ | 14,994 |   |   |   | 58.1 | % |
| Short-term      Debt                                       |   |                    | 1,302  |   |                   |   | 4.6 |   |   |   | 660 |   |   |   | 2.6 |   |
| Total      Debt                                            |   |                    | 17,309 |   |                   |   | 61.2 |   |   |   | 15,654 |   |   |   | 60.7 |   |
| Common      Equity                                         |   |                    | 10,917 |   |                   |   | 38.6 |   |   |   | 10,079 |   |   |   | 39.1 |   |
| Preferred      Stock                                       |   |                    | 61     |   |                   |   | 0.2 |   |   |   | 61 |   |   |   | 0.2 |   |
|                                                       |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Debt and Equity Capitalization                  |   | $                       | 28,287 |   |                   |   | 100.0 | % |   | $ | 25,794 |   |   |   | 100.0 | % |

|                                              |   | Amount             |   | Maturity |
|---------------------------------------------------|--------|--------------------|--------|----------|
|                                              |   | (in      millions) |   |     |
| Commercial      Paper Backup:                     |   |               |   |     |
| Revolving      Credit Facility                    |   | $                  | 1,500  |     | March      2011 |
| Revolving      Credit Facility                    |   |               | 1,454  | (a)      | April      2012 |
| Revolving      Credit Facility                    |   |               | 627    | (a)      | April      2011 |
| Revolving      Credit Facility                    |   |               | 338    | (a)      | April      2009 |
| Total                                             |   |               | 3,919  |     |   |
| Short-term      Investments                       |   |               | 490    |     |   |
| Cash      and Cash Equivalents                    |   |               | 338    |     |   |
| Total      Liquidity Sources                      |   |               | 4,747  |     |   |
| Less:      AEP Commercial Paper Outstanding       |   |               | 701    |     |   |
|         Cash Drawn on Credit Facilities |   |               | 591    |     |   |
|         Letters of Credit Drawn         |   |               | 439    |     |   |
|                                              |   |               |   |     |   |
| Net      Available Liquidity                      |   | $                  | 3,016  |     |   |

| (a) | Reduced      by Lehman Brothers Holdings Inc.’s commitment amount of $81 million      following its bankruptcy. |
|-----|-----------------------------------------------------------------------------------------------------------------------|

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

|                                                      | Nine      Months Ended |   |
|-----------------------------------------------------------|------------------------|--------|
|                                                      | September      30,     |   |
|                                                      | 2008                   |   | 2007 |   |
|                                                      | (in      millions)     |   |
| Cash      and Cash Equivalents at Beginning of Period     |                   | $      | 178 |   |   | $ | 301 |   |
| Net      Cash Flows from Operating Activities             |                   |   | 2,053 |   |   |   | 1,630 |   |
| Net      Cash Flows Used for Investing Activities         |                   |   | (3,061 | ) |   |   | (2,935 | ) |
| Net      Cash Flows from Financing Activities             |                   |   | 1,168 |   |   |   | 1,200 |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents |                   |   | 160 |   |   |   | (105 | ) |
| Cash      and Cash Equivalents at End of Period           |                   | $      | 338 |   |   | $ | 196 |   |

|                                                      | Nine      Months Ended |   |
|-----------------------------------------------------------|------------------------|--------|
|                                                      | September      30,     |   |
|                                                      | 2008                   |   | 2007 |   |
|                                                      | (in      millions)     |   |
| Net      Income                                           |                   | $      | 1,228 |   |   | $ | 858 |   |
| Less:  Discontinued      Operations, Net of Tax |                   |   | (1 | ) |   |   | (2 | ) |
| Income      Before Discontinued Operations                |                   |   | 1,227 |   |   |   | 856 |   |
| Depreciation      and Amortization                        |                   |   | 1,123 |   |   |   | 1,144 |   |
| Other                                                     |                   |   | (297 | ) |   |   | (370 | ) |
| Net      Cash Flows from Operating Activities             |                   | $      | 2,053 |   |   | $ | 1,630 |   |

|                                               | Nine      Months Ended |   |
|----------------------------------------------------|------------------------|--------|
|                                               | September      30,     |   |
|                                               | 2008                   |   | 2007 |   |
|                                               | (in      millions)     |   |
| Construction      Expenditures                     |                   | $      | (2,576 | ) |   | $ | (2,595 | ) |
| Purchases/Sales      of Investment Securities, Net |                   |   | (474 | ) |   |   | 217 |   |
| Acquisition      of Assets                         |                   |   | (97 | ) |   |   | (512 | ) |
| Proceeds      from Sales of Assets                 |                   |   | 83 |   |   |   | 78 |   |
| Other                                              |                   |   | 3 |   |   |   | (123 | ) |
| Net      Cash Flows Used for Investing Activities  |                   | $      | (3,061 | ) |   | $ | (2,935 | ) |

|                                          | Nine      Months Ended |   |
|-----------------------------------------------|------------------------|--------|
|                                          | September      30,     |   |
|                                          | 2008                   |   | 2007 |   |
|                                          | (in      millions)     |   |
| Issuance      of Common Stock                 |                   | $      | 106 |   |   | $ | 116 |   |
| Issuance/Retirement      of Debt, Net         |                   |   | 1,621 |   |   |   | 1,623 |   |
| Dividends      Paid on Common Stock           |                   |   | (494 | ) |   |   | (467 | ) |
| Other                                         |                   |   | (65 | ) |   |   | (72 | ) |
| Net      Cash Flows from Financing Activities |                   | $      | 1,168 |   |   | $ | 1,200 |   |

|                                                      | September      30,2008 |   | December      31,2007 |   |
|-----------------------------------------------------------|------------------------|--------|-----------------------|--------|
|                                                      | (in      millions)     |   |
| AEP      Credit Accounts Receivable Purchase Commitments  |                   | $      | 555                   |   |   | $ | 507 |   |
| Rockport      Plant Unit 2 Future Minimum Lease Payments  |                   |   | 2,142                 |   |   |   | 2,216 |   |
| Railcars      Maximum Potential Loss From Lease Agreement |                   |   | 26                    |   |   |   | 30 |   |

|       |   |            |   |               |   |               |   |               |   |           |   |            |   |                |    |        | Commercial |
|------------|--------|-----------------|--------|--------------------|--------|--------------------|--------|--------------------|--------|----------------|--------|-----------------|--------|---------------------|---------|-------------|------------|
|       |   |            |   |               |   | Total              |   |               |   |           |   |            |   |                | Nominal |        | Operation  |
| Operating  |   | Project         |   |               |   | Projected          |   |               |   |           |   |            |   |                | MW      |        | Date       |
| Company    |   | Name            |   | Location           |   | Cost      (a)      |   | CWIP      (b)      |   | Fuel      Type |   | Plant      Type |   | Capacity            |    | (Projected) |
|       |   |            |   |               |   | (in      millions) |   | (in      millions) |   |           |   |            |   |                |    |        |
| PSO        |   | Southwestern    | (c)    | Oklahoma           |   | $                  | 56     |               | $      | -              |   | Gas             |   | Simple-cycle        |    | 150         |       | 2008 |   |
| PSO        |   | Riverside       | (d)    | Oklahoma           |   |               | 58     |               |   | -              |   | Gas             |   | Simple-cycle        |    | 150         |       | 2008 |   |
| AEGCo      |   | Dresden         | (e)    | Ohio               |   |               | 309    | (h)                |   | 149            |   | Gas             |   | Combined-cycle      |    | 580         |       | 2010 | (h) |
| SWEPCo     |   | Stall           |   | Louisiana          |   |               | 378    |               |   | 158            |   | Gas             |   | Combined-cycle      |    | 500         |       | 2010 |   |
| SWEPCo     |   | Turk            | (f)    | Arkansas           |   |               | 1,522  | (f)                |   | 448            |   | Coal            |   | Ultra-supercritical |    | 600         | (f)        | 2012 |   |
| APCo       |   | Mountaineer     | (g)    | West      Virginia |   |               |   | (g)                |   |           |   | Coal            |   | IGCC                |    | 629         |       | (g) |   |
| CSPCo/OPCo |   | Great      Bend | (g)    | Ohio               |   |               |   | (g)                |   |           |   | Coal            |   | IGCC                |    | 629         |       | (g) |   |

| (a) | Amount      excludes AFUDC.                                                                                                                                                                                                                                                                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amount      includes AFUDC.                                                                                                                                                                                                                                                                                                                       |
| (c) | Southwestern      Units were placed in service on February 29, 2008.                                                                                                                                                                                                                                                                              |
| (d) | The      final Riverside Unit was placed in service on June 15,    2008.                                                                                                                                                                                                                                                                          |
| (e) | In      September 2007, AEGCo purchased the partially completed Dresden Plant from      Dresden Energy LLC, a subsidiary of Dominion Resources, Inc., for $85      million, which is included in the “Total Projected Cost” section      above.                                                                                       |
| (f) | SWEPCo      plans to own approximately 73%, or 440 MW, totaling $1.1 billion in      capital investment.  The increase in the cost estimate disclosed      in the 2007 Annual Report relates to cost escalations due to the delay in      receipt of permits and approvals.  See “Turk Plant” section      below. |
| (g) | Construction      of IGCC plants are pending necessary permits and regulatory      approval.  See “IGCC Plants” section below.                                                                                                                                                                                              |
| (h) | Projected      completion date of the Dresden Plant is currently under      review.  To the extent that the completion date is delayed, the      total projected cost of the Dresden Plant could  change.                                                                                                                               |

|     · | Requirements      under CAA to reduce emissions of SO2,      NOx, 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                                              |   | $                       | 246    |   |                         | $      | 52     |           |   | $      | 43                                          |   |   | $                                          | 341    |   |                     | $      | 25     |   |   | $ | (26 | ) |   | $ | 340 |   |
| Noncurrent      Assets                                           |   |                    | 164    |   |                         |   | 128    |           |   |   | 40                                          |   |   |                                       | 332    |   |                     |   | 6      |   |   |   | (24 | ) |   |   | 314 |   |
| Total      Assets                                                |   |                    | 410    |   |                         |   | 180    |           |   |   | 83                                          |   |   |                                       | 673    |   |                     |   | 31     |   |   |   | (50 | ) |   |   | 654 |   |
|                                                             |   |                    |   |   |                         |   |   |           |   |   |                                        |   |   |                                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Current      Liabilities                                         |   |                    | (209   | )      |                         |   | (65    | )              |   |   | (47                                         | )      |   |                                       | (321   | )      |                     |   | (18    | )      |   |   | 9 |   |   |   | (330 | ) |
| Noncurrent      Liabilities                                      |   |                    | (69    | )      |                         |   | (57    | )              |   |   | (43                                         | )      |   |                                       | (169   | )      |                     |   | (4     | )      |   |   | 8 |   |   |   | (165 | ) |
| Total      Liabilities                                           |   |                    | (278   | )      |                         |   | (122   | )              |   |   | (90                                         | )      |   |                                       | (490   | )      |                     |   | (22    | )      |   |   | 17 |   |   |   | (495 | ) |
|                                                             |   |                    |   |   |                         |   |   |           |   |   |                                        |   |   |                                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Total MTM Derivative Contract Net Assets      (Liabilities) |   | $                       | 132    |   |                         | $      | 58     |           |   | $      | (7                                          | )      |   | $                                          | 183    |   |                     | $      | 9      |   |   | $ | (33 | ) |   | $ | 159 |   |

|                                                                                                  |   | 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 |   |                    | (57    | )      |                   |   | 4      |           |   |   | 1      |   |   |   | (52 | ) |
| Fair      Value of New Contracts at Inception When Entered During the Period      (a)            |   |                    | 2      |   |                   |   | 17     |           |   |   | -      |   |   |   | 19 |   |
| Changes      in Fair Value Due to Valuation Methodology Changes on Forward Contracts      (b)         |   |                    | 3      |   |                   |   | 3      |           |   |   | 1      |   |   |   | 7 |   |
| Changes      in Fair Value Due to Market Fluctuations During the      Period (c)            |   |                    | 18     |   |                   |   | (9     | )              |   |   | (1     | )      |   |   | 8 |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions(d)                               |   |                    | 10     |   |                   |   | -      |           |   |   | -      |   |   |   | 10 |   |
| Total      MTM Risk Management Contract Net Assets (Liabilities) at September      30, 2008      |   | $                       | 132    |   |                   | $      | 58     |           |   | $      | (7     | )      |   |   | 183 |   |
| Net      Cash Flow and Fair Value Hedge Contracts                                                |   |                    |   |   |                   |   |   |           |   |   |   |   |   |   | 9 |   |
| Collateral      Deposits                                                                              |   |                    |   |   |                   |   |   |           |   |   |   |   |   |   | (33 | ) |
| Ending      Net Risk Management Assets at September 30, 2008                                          |   |                    |   |   |                   |   |   |           |   |   |   |   |   | $ | 159 |   |

| (a) | Reflects      fair value on long-term structured contracts which are typically with      customers that seek fixed pricing to limit their risk against fluctuating      energy prices.  The contract prices are valued against market      curves associated with the delivery location and delivery      term. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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 regulatoryassets/liabilities.             |

|                                                                                    |   | Remainder2008 |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | After2012      (f) |   |   | Total  |   |
|-----------------------------------------------------------------------------------------|--------|---------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------------------|--------|--------|--------|--------|
| Utility      Operations:                                                                |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |
| Level      1 (a)                                                                        |   | $             | (2     | )      |   | $      | (8     | )      |   | $      | -      |   |   | $      | -      |   |               | $      | -      |   |   | $ | - |   |   | $ | (10 | ) |
| Level      2 (b)                                                                        |   |          | 5      |   |   |   | 62     |   |   |   | 43     |   |   |   | 5      |   |               |   | 1      |   |   |   | - |   |   |   | 116 |   |
| Level      3 (c)                                                                        |   |          | (15    | )      |   |   | 2      |   |   |   | (6     | )      |   |   | 1      |   |               |   | 1      |   |   |   | - |   |   |   | (17 | ) |
| Total                                                                                   |   |          | (12    | )      |   |   | 56     |   |   |   | 37     |   |   |   | 6      |   |               |   | 2      |   |   |   | - |   |   |   | 89 |   |
|                                                                                    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Generation      and Marketing:                                                          |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Level      1 (a)                                                                        |   |          | (1     | )      |   |   | -      |   |   |   | -      |   |   |   | -      |   |               |   | -      |   |   |   | - |   |   |   | (1 | ) |
| Level      2 (b)                                                                        |   |          | (21    | )      |   |   | 2      |   |   |   | 11     |   |   |   | 12     |   |               |   | 11     |   |   |   | 20 |   |   |   | 35 |   |
| Level      3 (c)                                                                        |   |          | 5      |   |   |   | 2      |   |   |   | 3      |   |   |   | 2      |   |               |   | 2      |   |   |   | 10 |   |   |   | 24 |   |
| Total                                                                                   |   |          | (17    | )      |   |   | 4      |   |   |   | 14     |   |   |   | 14     |   |               |   | 13     |   |   |   | 30 |   |   |   | 58 |   |
|                                                                                    |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| 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)                                                                        |   |          | (3     | )      |   |   | (8     | )      |   |   | -      |   |   |   | -      |   |               |   | -      |   |   |   | - |   |   |   | (11 | ) |
| Level      2 (b)                                                                        |   |          | (17    | )      |   |   | 60     |   |   |   | 50     |   |   |   | 19     |   |               |   | 12     |   |   |   | 20 |   |   |   | 144 |   |
| Level      3 (c) (d)                                                                    |   |          | (10    | )      |   |   | 4      |   |   |   | (3     | )      |   |   | 3      |   |               |   | 3      |   |   |   | 10 |   |   |   | 7 |   |
| Total                                                                                   |   |          | (30    | )      |   |   | 56     |   |   |   | 47     |   |   |   | 22     |   |               |   | 15     |   |   |   | 30 |   |   |   | 140 |   |
| Dedesignated      Risk Management         Contracts (e)                       |   |          | 4      |   |   |   | 14     |   |   |   | 14     |   |   |   | 6      |   |               |   | 5      |   |   |   | - |   |   |   | 43 |   |
| Total      MTM Risk Management         Contract Net Assets (Liabilities) |   | $             | (26    | )      |   | $      | 70     |   |   | $      | 61     |   |   | $      | 28     |   |               | $      | 20     |   |   | $ | 30 |   |   | $ | 183 |   |

| (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 $30 million in individual periods beyond      2012.  $14 million of this mark-to-market value is in 2013, $8      million is in 2014, $3 million is in 2015, $2 million is in 2016 and $3      million is in 2017.                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

|                                                                                                                   |   | Power  |   |   | Interest      Rate andForeignCurrency |   |   | Total  |   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|---------------------------------------|--------|--------|--------|--------|
| Beginning      Balance in AOCI, December 31, 2007                                                                      |   | $      | (1     | )      |                                  | $      | (25    | )      |   | $ | (26 | ) |
| Changes      in Fair Value                                                                                             |   |   | 7      |   |                                  |   | (5     | )      |   |   | 2 |   |
| Reclassifications      from AOCI for Cash Flow  Hedges      Settled                                     |   |   | 2      |   |                                  |   | 3      |   |   |   | 5 |   |
| Ending      Balance in AOCI, September 30, 2008                                                                        |   | $      | 8      |   |                                  | $      | (27    | )      |   | $ | (19 | ) |
|                                                                                                                   |   |   |   |   |                                  |   |   |   |   |   |   |   |
| After      Tax Portion Expected to be Reclassified to     Earnings      During Next 12 Months |   | $      | 6      |   |                                  | $      | (5     | )      |   | $ | 1 |   |

| Counterparty      Credit Quality    |   | Exposure      Before Credit Collateral |   |   | Credit      Collateral |   |   | Net      Exposure |   |   | Number      of Counterparties >10% ofNet      Exposure |   |   | Net      Exposureof      Counterparties >10% |   |
|-------------------------------------|--------|----------------------------------------|--------|--------|------------------------|--------|--------|-------------------|--------|--------|-----------------------------------------------------------|--------|--------|-------------------------------------------------|--------|
| Investment      Grade               |   | $                                      | 626    |   |                   | $      | 42     |              |   | $      | 584                                                       |   |   |                                            | 2      |   |   | $ | 146 |   |
| Split      Rating                   |   |                                   | 14     |   |                   |   | -      |              |   |   | 14                                                        |   |   |                                            | 2      |   |   |   | 14 |   |
| Noninvestment      Grade            |   |                                   | 81     |   |                   |   | 8      |              |   |   | 73                                                        |   |   |                                            | 2      |   |   |   | 66 |   |
| No      External Ratings:           |   |                                   |   |   |                   |   |   |              |   |   |                                                      |   |   |                                            |   |   |   |   |   |   |
| Internal      Investment Grade      |   |                                   | 110    |   |                   |   | -      |              |   |   | 110                                                       |   |   |                                            | 2      |   |   |   | 77 |   |
| Internal      Noninvestment Grade   |   |                                   | 46     |   |                   |   | -      |              |   |   | 46                                                        |   |   |                                            | 2      |   |   |   | 40 |   |
| Total      as of September 30, 2008 |   | $                                      | 877    |   |                   | $      | 50     |              |   | $      | 827                                                       |   |   |                                            | 10     |   |   | $ | 343 |   |
|                                |   |                                   |   |   |                   |   |   |              |   |   |                                                      |   |   |                                            |   |   |   |   |   |   |
| Total      as of December 31, 2007  |   | $                                      | 673    |   |                   | $      | 42     |              |   | $      | 631                                                       |   |   |                                            | 6      |   |   | $ | 74 |   |

| Nine      Months EndedSeptember      30, 2008 |   | Twelve      Months EndedDecember      31, 2007 |
|-----------------------------------------------|--------|------------------------------------------------|
| (in      millions)                            |   | (in      millions)                             |
| End                                           |   | High                                           |   | Average |   | Low |   | End |   | High |   | Average |   | Low |
| $2                                            |   | $3                                             |   | $1 |   | $1 |   | $1 |   | $6 |   | $2 |   | $1 |

----

AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARYCOMPANIES

|                                                                                                             |   | Three      Months Ended |        |   | Nine      Months Ended |   |
|------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|--------|------------------------|--------|
|                                                                                                             |   | 2008                    |        |   | 2007                   |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                                                                         |   |                    |        |   |                   |   |   |   |   |   |   |   |
| Utility      Operations                                                                                          |   | $                       | 4,108       |   |                   | $      | 3,423 |   |   | $ | 10,318 |   |   | $ | 9,127 |   |
| Other                                                                                                            |   |                    | 83          |   |                   |   | 366 |   |   |   | 886 |   |   |   | 977 |   |
| TOTAL                                                                                                            |   |                    | 4,191       |   |                   |   | 3,789 |   |   |   | 11,204 |   |   |   | 10,104 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                                                         |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation                                                     |   |                    | 1,480       |   |                   |   | 1,099 |   |   |   | 3,513 |   |   |   | 2,853 |   |
| Purchased      Electricity for Resale                                                                            |   |                    | 394         |   |                   |   | 358 |   |   |   | 1,023 |   |   |   | 895 |   |
| Other      Operation and Maintenance                                                                             |   |                    | 1,010       |   |                   |   | 964 |   |   |   | 2,870 |   |   |   | 2,783 |   |
| Gain      on Disposition of Assets, Net                                                                          |   |                    | (6          | )      |                   |   | (2 | ) |   |   | (14 | ) |   |   | (28 | ) |
| Asset      Impairments and Other Related Charges                                                                 |   |                    | -           |   |                   |   | - |   |   |   | (255 | ) |   |   | - |   |
| Depreciation      and Amortization                                                                               |   |                    | 387         |   |                   |   | 381 |   |   |   | 1,123 |   |   |   | 1,144 |   |
| Taxes      Other Than Income Taxes                                                                               |   |                    | 189         |   |                   |   | 191 |   |   |   | 578 |   |   |   | 565 |   |
| TOTAL                                                                                                            |   |                    | 3,454       |   |                   |   | 2,991 |   |   |   | 8,838 |   |   |   | 8,212 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                                                                            |   |                    | 737         |   |                   |   | 798 |   |   |   | 2,366 |   |   |   | 1,892 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income:                                                                                               |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      and Investment Income                                                                              |   |                    | 14          |   |                   |   | 8 |   |   |   | 45 |   |   |   | 39 |   |
| Carrying      Costs Income                                                                                       |   |                    | 21          |   |                   |   | 14 |   |   |   | 64 |   |   |   | 38 |   |
| Allowance      For Equity Funds Used During Construction                                                         |   |                    | 11          |   |                   |   | 9 |   |   |   | 32 |   |   |   | 23 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INTEREST      AND OTHER CHARGES                                                                                  |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Expense                                                                                            |   |                    | 216         |   |                   |   | 216 |   |   |   | 670 |   |   |   | 615 |   |
| Preferred      Stock Dividend Requirements of Subsidiaries                                                       |   |                    | 1           |   |                   |   | 1 |   |   |   | 2 |   |   |   | 2 |   |
| TOTAL                                                                                                            |   |                    | 217         |   |                   |   | 217 |   |   |   | 672 |   |   |   | 617 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE, MINORITY         INTEREST EXPENSE AND      EQUITY EARNINGS |   |                    | 566         |   |                   |   | 612 |   |   |   | 1,835 |   |   |   | 1,375 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                                                                          |   |                    | 192         |   |                   |   | 205 |   |   |   | 608 |   |   |   | 443 |   |
| Minority      Interest Expense                                                                                   |   |                    | 1           |   |                   |   | 1 |   |   |   | 3 |   |   |   | 3 |   |
| Equity      Earnings of Unconsolidated Subsidiaries                                                              |   |                    | 1           |   |                   |   | 1 |   |   |   | 3 |   |   |   | 6 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE DISCONTINUED OPERATIONS AND        EXTRAORDINARY LOSS                               |   |                    | 374         |   |                   |   | 407 |   |   |   | 1,227 |   |   |   | 935 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| DISCONTINUED      OPERATIONS, NET OF TAX                                                                         |   |                    | -           |   |                   |   | - |   |   |   | 1 |   |   |   | 2 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE EXTRAORDINARY LOSS                                                                            |   |                    | 374         |   |                   |   | 407 |   |   |   | 1,228 |   |   |   | 937 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EXTRAORDINARY      LOSS, NET OF TAX                                                                              |   |                    | -           |   |                   |   | - |   |   |   | - |   |   |   | (79 | ) |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                                                                                  |   | $                       | 374         |   |                   | $      | 407 |   |   | $ | 1,228 |   |   | $ | 858 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED      AVERAGE NUMBER OF BASIC SHARES         OUTSTANDING                                  |   |                    | 402,286,779 |   |                   |   | 399,222,569 |   |   |   | 401,535,661 |   |   |   | 398,412,473 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC      EARNINGS PER SHARE                                                                                    |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Before Discontinued Operations and Extraordinary Loss                                                |   | $                       | 0.93        |   |                   | $      | 1.02 |   |   | $ | 3.06 |   |   | $ | 2.35 |   |
| Discontinued      Operations, Net of Tax                                                                         |   |                    | -           |   |                   |   | - |   |   |   | - |   |   |   | - |   |
| Income      Before Extraordinary Loss                                                                            |   |                    | 0.93        |   |                   |   | 1.02 |   |   |   | 3.06 |   |   |   | 2.35 |   |
| Extraordinary      Loss, Net of Tax                                                                              |   |                    | -           |   |                   |   | - |   |   |   | - |   |   |   | (0.20 | ) |
| TOTAL      BASIC EARNINGS PER SHARE                                                                              |   | $                       | 0.93        |   |                   | $      | 1.02 |   |   | $ | 3.06 |   |   | $ | 2.15 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED      AVERAGE NUMBER OF DILUTED SHARES  OUTSTANDING                                            |   |                    | 403,910,309 |   |                   |   | 400,215,911 |   |   |   | 402,925,534 |   |   |   | 399,552,630 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED      EARNINGS PER SHARE                                                                                  |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Before Discontinued Operations and Extraordinary Loss                                                |   | $                       | 0.93        |   |                   | $      | 1.02 |   |   | $ | 3.05 |   |   | $ | 2.34 |   |
| Discontinued      Operations, Net of Tax                                                                         |   |                    | -           |   |                   |   | - |   |   |   | - |   |   |   | 0.01 |   |
| Income      Before Extraordinary Loss                                                                            |   |                    | 0.93        |   |                   |   | 1.02 |   |   |   | 3.05 |   |   |   | 2.35 |   |
| Extraordinary      Loss, Net of Tax                                                                              |   |                    | -           |   |                   |   | - |   |   |   | - |   |   |   | (0.20 | ) |
| TOTAL      DILUTED EARNINGS PER SHARE                                                                            |   | $                       | 0.93        |   |                   | $      | 1.02 |   |   | $ | 3.05 |   |   | $ | 2.15 |   |
|                                                                                                             |   |                    |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| CASH      DIVIDENDS PAID PER SHARE                                                                               |   | $                       | 0.41        |   |                   | $      | 0.39 |   |   | $ | 1.23 |   |   | $ | 1.17 |   |

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

----

|                                                 |   | 2008   |   |   | 2007   |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| CURRENT      ASSETS                                  |   |   |   |   |   |   |
| Cash      and Cash Equivalents                       |   | $      | 338    |   |   | $      | 178 |   |
| Other      Temporary Investments                     |   |   | 670    |   |   |   | 365 |   |
| Accounts      Receivable:                            |   |   |   |   |   |   |   |   |
| Customers                                            |   |   | 805    |   |   |   | 730 |   |
| Accrued      Unbilled Revenues                       |   |   | 370    |   |   |   | 379 |   |
| Miscellaneous                                        |   |   | 71     |   |   |   | 60 |   |
| Allowance      for Uncollectible Accounts            |   |   | (59    | )      |   |   | (52 | ) |
| Total      Accounts Receivable                       |   |   | 1,187  |   |   |   | 1,117 |   |
| Fuel,      Materials and Supplies                    |   |   | 1,018  |   |   |   | 967 |   |
| Risk      Management Assets                          |   |   | 340    |   |   |   | 271 |   |
| Regulatory      Asset for Under-Recovered Fuel Costs |   |   | 240    |   |   |   | 11 |   |
| Margin      Deposits                                 |   |   | 67     |   |   |   | 47 |   |
| Prepayments      and Other                           |   |   | 124    |   |   |   | 70 |   |
| TOTAL                                                |   |   | 3,984  |   |   |   | 3,026 |   |
|                                                 |   |   |   |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                   |   |   |   |   |   |   |   |   |
| Electric:                                            |   |   |   |   |   |   |   |   |
| Production                                           |   |   | 20,948 |   |   |   | 20,233 |   |
| Transmission                                         |   |   | 7,734  |   |   |   | 7,392 |   |
| Distribution                                         |   |   | 12,561 |   |   |   | 12,056 |   |
| Other      (including nuclear fuel and coal mining)  |   |   | 3,633  |   |   |   | 3,445 |   |
| Construction      Work in Progress                   |   |   | 3,516  |   |   |   | 3,019 |   |
| Total                                                |   |   | 48,392 |   |   |   | 46,145 |   |
| Accumulated      Depreciation and Amortization       |   |   | 16,603 |   |   |   | 16,275 |   |
| TOTAL      - NET                                     |   |   | 31,789 |   |   |   | 29,870 |   |
|                                                 |   |   |   |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                         |   |   |   |   |   |   |   |   |
| Regulatory      Assets                               |   |   | 2,239  |   |   |   | 2,199 |   |
| Securitized      Transition Assets                   |   |   | 2,080  |   |   |   | 2,108 |   |
| Spent      Nuclear Fuel and Decommissioning Trusts   |   |   | 1,292  |   |   |   | 1,347 |   |
| Goodwill                                             |   |   | 76     |   |   |   | 76 |   |
| Long-term      Risk Management Assets                |   |   | 314    |   |   |   | 319 |   |
| Employee      Benefits and Pension Assets            |   |   | 479    |   |   |   | 486 |   |
| Deferred      Charges and Other                      |   |   | 785    |   |   |   | 888 |   |
| TOTAL                                                |   |   | 7,265  |   |   |   | 7,423 |   |
|                                                 |   |   |   |   |   |   |   |   |
| TOTAL      ASSETS                                    |   | $      | 43,038 |   |   | $      | 40,319 |   |

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

----

|                                                                                                 |   | 2008               |        |   | 2007   |   |
|------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------|--------|--------|
| CURRENT      LIABILITIES                                                                             |   | (in      millions) |        |
| Accounts      Payable                                                                                |   | $                  | 1,447       |   |   | $      | 1,324 |   |
| Short-term      Debt                                                                                 |   |               | 1,302       |   |   |   | 660 |   |
| Long-term      Debt Due Within One Year                                                              |   |               | 682         |   |   |   | 792 |   |
| Risk      Management Liabilities                                                                     |   |               | 330         |   |   |   | 240 |   |
| Customer      Deposits                                                                               |   |               | 288         |   |   |   | 301 |   |
| Accrued      Taxes                                                                                   |   |               | 564         |   |   |   | 601 |   |
| Accrued      Interest                                                                                |   |               | 235         |   |   |   | 235 |   |
| Other                                                                                                |   |               | 874         |   |   |   | 1,008 |   |
| TOTAL                                                                                                |   |               | 5,722       |   |   |   | 5,161 |   |
|                                                                                                 |   |               |        |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                                                          |   |               |        |   |   |   |   |   |
| Long-term      Debt                                                                                  |   |               | 15,325      |   |   |   | 14,202 |   |
| Long-term      Risk Management Liabilities                                                           |   |               | 165         |   |   |   | 188 |   |
| Deferred      Income Taxes                                                                           |   |               | 5,150       |   |   |   | 4,730 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits                                      |   |               | 2,827       |   |   |   | 2,952 |   |
| Asset      Retirement Obligations                                                                    |   |               | 1,090       |   |   |   | 1,075 |   |
| Employee      Benefits and Pension Obligations                                                       |   |               | 672         |   |   |   | 712 |   |
| Deferred      Gain on Sale and Leaseback – Rockport Plant Unit 2                               |   |               | 132         |   |   |   | 139 |   |
| Deferred      Credits and Other                                                                      |   |               | 977         |   |   |   | 1,020 |   |
| TOTAL                                                                                                |   |               | 26,338      |   |   |   | 25,018 |   |
|                                                                                                 |   |               |        |   |   |   |   |   |
| TOTAL      LIABILITIES                                                                               |   |               | 32,060      |   |   |   | 30,179 |   |
|                                                                                                 |   |               |        |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption                                  |   |               | 61          |   |   |   | 61 |   |
|                                                                                                 |   |               |        |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                                                          |   |               |        |   |   |   |   |   |
|                                                                                                 |   |               |        |   |   |   |   |   |
| COMMON      SHAREHOLDERS’ EQUITY                                                               |   |               |        |   |   |   |   |   |
| Common      Stock – $6.50 Par Value Per Share:                                  |   |               |        |   |   |   |   |   |
|                                                                                                 |   | 2008               |        |   | 2007   |   |   |   |   |   |   |   |   |   |
| Shares      Authorized                                                                               |   |               | 600,000,000 |   |   |   | 600,000,000 |   |   |   |   |   |   |   |   |   |
| Shares      Issued                                                                                   |   |               | 424,538,502 |   |   |   | 421,926,696 |   |   |   |   |   |   |   |   |   |
| (21,499,992      shares were held in treasury at September 30, 2008 and December      31, 2007) |   |               | 2,760       |   |   |   | 2,743 |   |
| Paid-in      Capital                                                                                 |   |               | 4,444       |   |   |   | 4,352 |   |
| Retained      Earnings                                                                               |   |               | 3,861       |   |   |   | 3,138 |   |
| Accumulated      Other Comprehensive Income (Loss)                                                   |   |               | (148        | )      |   |   | (154 | ) |
| TOTAL                                                                                                |   |               | 10,917      |   |   |   | 10,079 |   |
|                                                                                                 |   |               |        |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY                                                |   | $                  | 43,038      |   |   | $      | 40,319 |   |

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

----

|                                                                                                          |   | 2008   |   |   | 2007   |   |
|---------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                                     |   |   |   |   |   |   |
| Net      Income                                                                                               |   | $      | 1,228  |   |   | $      | 858 |   |
| Less:  Discontinued      Operations, Net of Tax                                                     |   |   | (1     | )      |   |   | (2 | ) |
| Income      Before Discontinued Operations                                                                    |   |   | 1,227  |   |   |   | 856 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities:                    |   |   |   |   |   |   |   |   |
| Depreciation      and Amortization                                                                            |   |   | 1,123  |   |   |   | 1,144 |   |
| Deferred      Income Taxes                                                                                    |   |   | 397    |   |   |   | 44 |   |
| Extraordinary      Loss, Net of Tax                                                                           |   |   | -      |   |   |   | 79 |   |
| Carrying      Costs Income                                                                                    |   |   | (64    | )      |   |   | (38 | ) |
| Allowance      for Equity Funds Used During Construction                                                      |   |   | (32    | )      |   |   | (23 | ) |
| Mark-to-Market      of Risk Management Contracts                                                              |   |   | 14     |   |   |   | (7 | ) |
| Amortization      of Nuclear Fuel                                                                             |   |   | 72     |   |   |   | 48 |   |
| Deferred      Property Taxes                                                                                  |   |   | 136    |   |   |   | 118 |   |
| Fuel      Over/Under-Recovery, Net                                                                            |   |   | (284   | )      |   |   | (133 | ) |
| Gain      on Sales of Assets and Equity Investments, Net                                                      |   |   | (14    | )      |   |   | (28 | ) |
| Change      in Other Noncurrent Assets                                                                        |   |   | (160   | )      |   |   | (64 | ) |
| Change      in Other Noncurrent Liabilities                                                                   |   |   | (74    | )      |   |   | 98 |   |
| Changes      in Certain Components of Working Capital:                                                        |   |   |   |   |   |   |   |   |
| Accounts      Receivable, Net                                                                                 |   |   | (69    | )      |   |   | (209 | ) |
| Fuel,      Materials and Supplies                                                                             |   |   | (49    | )      |   |   | (13 | ) |
| Margin      Deposits                                                                                          |   |   | (20    | )      |   |   | 39 |   |
| Accounts      Payable                                                                                         |   |   | 77     |   |   |   | (54 | ) |
| Customer      Deposits                                                                                        |   |   | (14    | )      |   |   | 36 |   |
| Accrued      Taxes, Net                                                                                       |   |   | (40    | )      |   |   | (119 | ) |
| Accrued      Interest                                                                                         |   |   | (5     | )      |   |   | 22 |   |
| Other      Current Assets                                                                                     |   |   | (43    | )      |   |   | (33 | ) |
| Other      Current Liabilities                                                                                |   |   | (125   | )      |   |   | (133 | ) |
| Net      Cash Flows from Operating Activities                                                                 |   |   | 2,053  |   |   |   | 1,630 |   |
|                                                                                                          |   |   |   |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                                     |   |   |   |   |   |   |   |   |
| Construction      Expenditures                                                                                |   |   | (2,576 | )      |   |   | (2,595 | ) |
| Change      in Other Temporary Investments, Net                                                               |   |   | 106    |   |   |   | (50 | ) |
| Purchases      of Investment Securities                                                                       |   |   | (1,386 | )      |   |   | (8,632 | ) |
| Sales      of Investment Securities                                                                           |   |   | 912    |   |   |   | 8,849 |   |
| Acquisitions      of Nuclear Fuel                                                                             |   |   | (99    | )      |   |   | (73 | ) |
| Acquisitions      of Assets                                                                                   |   |   | (97    | )      |   |   | (512 | ) |
| Proceeds      from Sales of Assets                                                                            |   |   | 83     |   |   |   | 78 |   |
| Other                                                                                                         |   |   | (4     | )      |   |   | - |   |
| Net      Cash Flows Used for Investing Activities                                                             |   |   | (3,061 | )      |   |   | (2,935 | ) |
|                                                                                                          |   |   |   |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                                     |   |   |   |   |   |   |   |   |
| Issuance      of Common Stock                                                                                 |   |   | 106    |   |   |   | 116 |   |
| Issuance      of Long-term Debt                                                                               |   |   | 2,561  |   |   |   | 1,924 |   |
| Change      in Short-term Debt, Net                                                                           |   |   | 642    |   |   |   | 569 |   |
| Retirement      of Long-term Debt                                                                             |   |   | (1,582 | )      |   |   | (870 | ) |
| Principal      Payments for Capital Lease Obligations                                                         |   |   | (76    | )      |   |   | (49 | ) |
| Dividends      Paid on Common Stock                                                                           |   |   | (494   | )      |   |   | (467 | ) |
| Other                                                                                                         |   |   | 11     |   |   |   | (23 | ) |
| Net      Cash Flows from Financing Activities                                                                 |   |   | 1,168  |   |   |   | 1,200 |   |
|                                                                                                          |   |   |   |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                                     |   |   | 160    |   |   |   | (105 | ) |
| Cash      and Cash Equivalents at Beginning of Period                                                         |   |   | 178    |   |   |   | 301 |   |
| Cash      and Cash Equivalents at End of Period                                                               |   | $      | 338    |   |   | $      | 196 |   |
|                                                                                                          |   |   |   |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                                                |   |   |   |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                                       |   | $      | 657    |   |   | $      | 549 |   |
| Net      Cash Paid for Income Taxes                                                                           |   |   | 126    |   |   |   | 363 |   |
| Noncash      Acquisitions Under Capital Leases                                                                |   |   | 47     |   |   |   | 59 |   |
| Noncash      Acquisition of Land/Mineral Rights                                                               |   |   | 42     |   |   |   | - |   |
| Construction      Expenditures Included in Accounts Payable at September 30,                                  |   |   | 373    |   |   |   | 265 |   |
| Acquisition      of Nuclear Fuel Included in Accounts Payable at September    30,                             |   |   | 66     |   |   |   | 1 |   |
| Noncash      Assumption of Liabilities Related to Acquisitions of Darby, Lawrenceburg      and Dresden Plants |   |   | -      |   |   |   | 8 |   |

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

----

|                                                                                                                 |   | Common      Stock |   |   |   |   |   |                 |   |   | Accumulated      |   |   |                                   |   |
|----------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|--------|--------|--------|----------------------|--------|--------|------------------|--------|--------|----------------------------------------|--------|
|                                                                                                                 |   | Shares            |   |   | Amount |   |   | Paid-in      Capital |   |   | RetainedEarnings |   |   | 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                                                                                        |   |              | 3      |   |   |   | 21     |                 |   |   | 95               |   |   |                                   |   |   |   |   |   |   |   |   | 116 |   |
| Common      Stock Dividends                                                                                          |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   | (467   | ) |   |   |   |   |   |   | (467 | ) |
| Other                                                                                                                |   |              |   |   |   |   |   |                 |   |   | 12               |   |   |                                   |   |   |   |   |   |   |   |   | 12 |   |
| TOTAL                                                                                                                |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   | 9,056 |   |
|                                                                                                                 |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                                                            |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive      Income (Loss), Net of Tax:                                              |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $6                                                                              |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   | (11 | ) |   |   | (11 | ) |
| Securities      Available for Sale, Net of Tax of $3                                                                 |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   | (5 | ) |   |   | (5 | ) |
| SFAS      158 Costs Established as a Regulatory Asset Related to the Reapplication      of SFAS 71, Net of Tax of $6 |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   | 11 |   |   |   | 11 |   |
| NET      INCOME                                                                                                      |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   | 858    |   |   |   |   |   |   |   | 858 |   |
| TOTAL COMPREHENSIVE INCOME                                                                                 |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   | 853 |   |
| SEPTEMBER      30, 2007                                                                                              |   |              | 421    |   |   | $      | 2,739  |                 |   | $      | 4,328            |   |   | $                                      | 3,070  |   |   | $ | (228 | ) |   | $ | 9,909 |   |
|                                                                                                                 |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   |   |   |
| 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                                                                                        |   |              | 3      |   |   |   | 17     |                 |   |   | 89               |   |   |                                   |   |   |   |   |   |   |   |   | 106 |   |
| Common      Stock Dividends                                                                                          |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   | (494   | ) |   |   |   |   |   |   | (494 | ) |
| Other                                                                                                                |   |              |   |   |   |   |   |                 |   |   | 3                |   |   |                                   |   |   |   |   |   |   |   |   | 3 |   |
| TOTAL                                                                                                                |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   | 9,683 |   |
|                                                                                                                 |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                                                            |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income      (Loss), Net of Tax:                                         |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $4                                                                              |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   | 7 |   |   |   | 7 |   |
| Securities      Available for Sale, Net of Tax of $5                                                                 |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   | (10 | ) |   |   | (10 | ) |
| Amortization      of Pension and OPEB Deferred Costs, Net of Tax of $5                                               |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   | 9 |   |   |   | 9 |   |
| NET      INCOME                                                                                                      |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   | 1,228  |   |   |   |   |   |   |   | 1,228 |   |
| TOTAL COMPREHENSIVE INCOME                                                                                 |   |              |   |   |   |   |   |                 |   |   |             |   |   |                                   |   |   |   |   |   |   |   |   | 1,234 |   |
| SEPTEMBER      30, 2008                                                                                              |   |              | 425    |   |   | $      | 2,760  |                 |   | $      | 4,444            |   |   | $                                      | 3,861  |   |   | $ | (148 | ) |   | $ | 10,917 |   |

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

----

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

----

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

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

|                                              |   | Three      Months Ended September 30,     |   |
|---------------------------------------------------|--------|-------------------------------------------|--------|
|                                              |   | 2008                                      |   |   | 2007 |   |
|                                              |   | (in      millions, except per share data) |   |
|                                              |   |                                      |   |   | $/share |   |   |   |   |   | $/share |   |
| Earnings      Applicable to Common Stock          |   | $                                         | 374    |   |   |   |   |   | $ | 407 |   |   |   |   |
|                                              |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      Number of Basic Shares Outstanding   |   |                                      | 402.3  |   |   | $ | 0.93 |   |   |   | 399.2 |   |   | $ | 1.02 |   |
| Average      Dilutive Effect of:                  |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performance      Share Units                      |   |                                      | 1.3    |   |   |   | - |   |   |   | 0.5 |   |   |   | - |   |
| Stock      Options                                |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.3 |   |   |   | - |   |
| Restricted      Stock Units                       |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Restricted      Shares                            |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Average      Number of Diluted Shares Outstanding |   |                                      | 403.9  |   |   | $ | 0.93 |   |   |   | 400.2 |   |   | $ | 1.02 |   |

|                                              |   | Nine      Months Ended September 30,      |   |
|---------------------------------------------------|--------|-------------------------------------------|--------|
|                                              |   | 2008                                      |   |   | 2007 |   |
|                                              |   | (in      millions, except per share data) |   |
|                                              |   |                                      |   |   | $/share |   |   |   |   |   | $/share |   |
| Earnings      Applicable to Common Stock          |   | $                                         | 1,228  |   |   |   |   |   | $ | 858 |   |   |   |   |
|                                              |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Average      Number of Basic Shares Outstanding   |   |                                      | 401.5  |   |   | $ | 3.06 |   |   |   | 398.4 |   |   | $ | 2.15 |   |
| Average      Dilutive Effect of:                  |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Performance      Share Units                      |   |                                      | 1.0    |   |   |   | (0.01 | ) |   |   | 0.6 |   |   |   | - |   |
| Stock      Options                                |   |                                      | 0.2    |   |   |   | - |   |   |   | 0.4 |   |   |   | - |   |
| Restricted      Stock Units                       |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Restricted      Shares                            |   |                                      | 0.1    |   |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
| Average      Number of Diluted Shares Outstanding |   |                                      | 402.9  |   |   | $ | 3.05 |   |   |   | 399.6 |   |   | $ | 2.15 |   |

|                                                                                                             |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------------|--------|
|                                                                                                             |   | 2008                                      |   |   | 2007                                     |   |   | 2008 |   |   | 2007 |   |
| Related      Party Transactions                                                                                  |   | (in      millions)                        |   |   | (in      millions)                       |   |
| AEP      Consolidated Revenues – Utility Operations:                                                       |   |                                      |   |   |                                     |   |   |   |   |   |   |   |
| Power      Pool Purchases – Ohio Valley Electric Corporation        (43.47% owned)                    |   | $                                         | (14    | )      |                                     | $      | (12 | ) |   | $ | (40 | ) |   | $ | (16 | ) |
| AEP      Consolidated Revenues – Other:                                                                    |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Ohio      Valley Electric Corporation – Barging and Other Transportation      Services (43.47% Owned) |   |                                      | 7      |   |                                     |   | 7 |   |   |   | 21 |   |   |   | 24 |   |
| AEP      Consolidated Expenses – Purchased Energy for Resale:                                              |   |                                      |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Ohio      Valley Electric Corporation (43.47% Owned)                                                             |   |                                      | 70     |   |                                     |   | 59 |   |   |   | 194 |   |   |   | 164 |   |
| Sweeny      Cogeneration Limited Partnership (a)                                                                 |   |                                      | -      |   |                                     |   | 27 |   |   |   | - |   |   |   | 86 |   |

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

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

| Assets      and Liabilities Measured at Fair Value on a Recurring Basis as of      September 30, 2008 |   |
|-------------------------------------------------------------------------------------------------------|--------|
|                                                                                                  |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |   | Other |   |   | Total |   |
| Assets:                                                                                               |   | (in      millions) |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents (a)                                                                    |   | $ | 271 |   |   | $ | - |   |   | $ | - |   |   | $ | 67 |   |   | $ | 338 |   |
|  Other      Temporary Investments:                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents (b)                                                                    |   | $ | 147 |   |   | $ | - |   |   | $ | - |   |   | $ | 22 |   |   | $ | 169 |   |
| Debt      Securities (c)                                                                              |   |   | - |   |   |   | 490 |   |   |   | - |   |   |   | - |   |   |   | 490 |   |
| Equity      Securities (d)                                                                            |   |   | 11 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 11 |   |
| TotalOther Temporary      Investments                                                                 |   | $ | 158 |   |   | $ | 490 |   |   | $ | - |   |   | $ | 22 |   |   | $ | 670 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Assets:                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Contracts (e)                                                                    |   | $ | 41 |   |   | $ | 2,423 |   |   | $ | 75 |   |   | $ | (1,959 | ) |   | $ | 580 |   |
| Cash      Flow and Fair Value Hedges (e)                                                              |   |   | 9 |   |   |   | 37 |   |   |   | - |   |   |   | (15 | ) |   |   | 31 |   |
| Dedesignated      Risk Management Contracts (f)                                                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 43 |   |   |   | 43 |   |
| Total      Risk Management Assets                                                                     |   | $ | 50 |   |   | $ | 2,460 |   |   | $ | 75 |   |   | $ | (1,931 | ) |   | $ | 654 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Spent      Nuclear Fuel and Decommissioning Trusts:                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and Cash Equivalents (g)                                                                    |   | $ | - |   |   | $ | 4 |   |   | $ | - |   |   | $ | 6 |   |   | $ | 10 |   |
| Debt      Securities (h)                                                                              |   |   | - |   |   |   | 837 |   |   |   | - |   |   |   | - |   |   |   | 837 |   |
| Equity      Securities (d)                                                                            |   |   | 445 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 445 |   |
| TotalSpent Nuclear Fuel and      Decommissioning Trusts                                               |   | $ | 445 |   |   | $ | 841 |   |   | $ | - |   |   | $ | 6 |   |   | $ | 1,292 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                                                                                     |   | $ | 924 |   |   | $ | 3,791 |   |   | $ | 75 |   |   | $ | (1,836 | ) |   | $ | 2,954 |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Liabilities:                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk      Management Contracts (e)                                                                    |   | $ | 52 |   |   | $ | 2,279 |   |   | $ | 68 |   |   | $ | (1,926 | ) |   | $ | 473 |   |
| Cash      Flow and Fair Value Hedges (e)                                                              |   |   | - |   |   |   | 37 |   |   |   | - |   |   |   | (15 | ) |   |   | 22 |   |
| Total      Risk Management Liabilities                                                                |   | $ | 52 |   |   | $ | 2,316 |   |   | $ | 68 |   |   | $ | (1,941 | ) |   | $ | 495 |   |

| (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      represent Variable Rate Demand Notes.                                                                                                                                                                                                                                                                                                                                     |
| (d) | Amounts      represent publicly traded equity securities.                                                                                                                                                                                                                                                                                                                                   |
| (e) | Amounts      in “Other” column primarily represent counterparty netting of risk      management contracts and associated cash collateral under FSP FIN      39-1.                                                                                                                                                                                                               |
| (f) | “Dedesignated      Risk Management Contracts” are contracts that were originally MTM but were      subsequently elected as normal under SFAS 133.  At the time of      the normal election, the MTM value was frozen and no longer fair      valued.  This will be amortized into Utility Operations Revenues      over the remaining life of the contract. |
| (g) | Amounts      in “Other” column primarily represent accrued interest receivables to/from      financial institutions.  Level 2 amounts primarily represent      investments in money market funds.                                                                                                                                                                     |
| (h) | Amounts      represent corporate, municipal and treasury  bonds.                                                                                                                                                                                                                                                                                                                            |

| Three      Months Ended September 30, 2008                                                                                                                                 |   | Net      Risk Management Assets (Liabilities) |   |   | Other      Temporary Investments |   |   | Investments      in Debt Securities |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------|----------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                                                                                                       |   | (in      millions)                            |   |
| Balance      as of July 1, 2008                                                                                                                                            |   | $                                             | (8     | )      |                             | $      | -      |                                |   | $ | - |   |
| Realized      (Gain) Loss Included in Earnings (or Changes in Net Assets)      (a)                                                                                         |   |                                          | 17     |   |                             |   | -      |                                |   |   | - |   |
| Unrealized      Gain (Loss) Included in Earnings (or Changes in Net      Assets)          Relating to Assets Still Held at the Reporting Date (a) |   |                                          | (7     | )      |                             |   | -      |                                |   |   | - |   |
| Realized      and Unrealized Gains (Losses) Included in Other      Comprehensive          Income                                                  |   |                                          | -      |   |                             |   | -      |                                |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                                                  |   |                                          | -      |   |                             |   | -      |                                |   |   | - |   |
| Transfers      in and/or out of Level 3 (b)                                                                                                                                |   |                                          | (10    | )      |                             |   | -      |                                |   |   | - |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                                        |   |                                          | 15     |   |                             |   | -      |                                |   |   | - |   |
| Balance      as of September 30, 2008                                                                                                                                      |   | $                                             | 7      |   |                             | $      | -      |                                |   | $ | - |   |

| Nine      Months Ended September 30, 2008                                                                                                                                  |   | Net      Risk Management Assets (Liabilities) |   |   | Other      Temporary Investments |   |   | Investments      in Debt Securities |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------|----------------------------------|--------|--------|-------------------------------------|--------|
|                                                                                                                                                                       |   | (in      millions)                            |   |
| Balance      as of January 1, 2008                                                                                                                                         |   | $                                             | 49     |   |                             | $      | -      |                                |   | $ | - |   |
| Realized      (Gain) Loss Included in Earnings (or Changes in Net Assets)      (a)                                                                                         |   |                                          | -      |   |                             |   | -      |                                |   |   | - |   |
| Unrealized      Gain (Loss) Included in Earnings (or Changes in Net      Assets)          Relating to Assets Still Held at the Reporting Date (a) |   |                                          | 4      |   |                             |   | -      |                                |   |   | - |   |
| Realized      and Unrealized Gains (Losses) Included in Other      Comprehensive          Income                                                  |   |                                          | -      |   |                             |   | -      |                                |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                                                  |   |                                          | -      |   |                             |   | (118   | )                                   |   |   | (17 | ) |
| Transfers      in and/or out of Level 3 (b)                                                                                                                                |   |                                          | (35    | )      |                             |   | 118    |                                |   |   | 17 |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (c)                                                                                                        |   |                                          | (11    | )      |                             |   | -      |                                |   |   | - |   |
| Balance      as of September 30, 2008                                                                                                                                      |   | $                                             | 7      |   |                             | $      | -      |                                |   | $ | - |   |

| (a) | Included      in revenues on our Condensed Consolidated Statements of      Income.                                                                                                                                                                                                                                                                                                  |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Transfers      in and/or out of Level 3” represent existing assets or liabilities that      were either previously categorized as a higher level for which the inputs      to the model became unobservable or assets and liabilities that were      previously classified as level 3 for which the lowest significant input      became observable during 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 regulatoryassets/liabilities.                                                                      |

| (a) | The      nature of the credit derivative.                                                              |
|-----|--------------------------------------------------------------------------------------------------------|
| (b) | The      maximum potential amount of future payments.                                                  |
| (c) | The      fair value of the credit derivative.                                                          |
| (d) | The      nature of any recourse provisions and any assets held as collateral or by      third parties. |

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

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

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

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

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

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

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

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

|                                       |                                  |   | Other      Postretirement             |   |
|--------------------------------------------|---------------------------------------|--------|---------------------------------------|--------|
|                                       | Pension      Plans                    |   | Benefit      Plans                    |   |
|                                       | Three      Months Ended September 30, |   | Three      Months Ended September 30, |   |
|                                       | 2008                                  |   | 2007                                  |   | 2008 |   | 2007 |   |
|                                       | (in      millions)                    |   |
| Service      Cost                          |                                  | $      | 25                                    |   |   | $ | 24 |   |   | $ | 10 |   |   | $ | 11 |   |
| Interest      Cost                         |                                  |   | 62                                    |   |   |   | 59 |   |   |   | 28 |   |   |   | 26 |   |
| Expected      Return on Plan Assets        |                                  |   | (84                                   | )      |   |   | (85 | ) |   |   | (27 | ) |   |   | (26 | ) |
| Amortization      of Transition Obligation |                                  |   | -                                     |   |   |   | - |   |   |   | 7 |   |   |   | 6 |   |
| Amortization      of Net Actuarial Loss    |                                  |   | 10                                    |   |   |   | 15 |   |   |   | 3 |   |   |   | 3 |   |
| Net      Periodic Benefit Cost             |                                  | $      | 13                                    |   |   | $ | 13 |   |   | $ | 21 |   |   | $ | 20 |   |

|                                       |                                 |   | Other      Postretirement            |   |
|--------------------------------------------|--------------------------------------|--------|--------------------------------------|--------|
|                                       | Pension      Plans                   |   | Benefit      Plans                   |   |
|                                       | Nine      Months Ended September 30, |   | Nine      Months Ended September 30, |   |
|                                       | 2008                                 |   | 2007                                 |   | 2008 |   | 2007 |   |
|                                       | (in      millions)                   |   |
| Service      Cost                          |                                 | $      | 75                                   |   |   | $ | 72 |   |   | $ | 31 |   |   | $ | 32 |   |
| Interest      Cost                         |                                 |   | 187                                  |   |   |   | 176 |   |   |   | 84 |   |   |   | 78 |   |
| Expected      Return on Plan Assets        |                                 |   | (252                                 | )      |   |   | (254 | ) |   |   | (83 | ) |   |   | (78 | ) |
| Amortization      of Transition Obligation |                                 |   | -                                    |   |   |   | - |   |   |   | 21 |   |   |   | 20 |   |
| Amortization      of Net Actuarial Loss    |                                 |   | 29                                   |   |   |   | 44 |   |   |   | 8 |   |   |   | 9 |   |
| Net      Periodic Benefit Cost             |                                 | $      | 39                                   |   |   | $ | 38 |   |   | $ | 61 |   |   | $ | 61 |   |

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

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

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

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

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

|                                                                               |   |                    |   | Nonutility      Operations     |   |                   |   |               |   |                         |   |
|------------------------------------------------------------------------------------|--------|-------------------------|--------|--------------------------------|--------|------------------------|--------|--------------------|--------|------------------------------|--------|
|                                                                               |   | Utility      Operations |   | AEP River Operations |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments |   | Consolidated |   |
|                                                                               |   | (in      millions)      |
| Three      Months Ended September 30, 2008                                    |   |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Revenues      from:                                                                |   |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| External      Customers                                                            |   | $                       | 4,108  |  (d)                      | $      | 160                    |   | $                  | 1      |                         | $      | (78 | ) | $ | - |   | $ | 4,191 |   |
| Other      Operating Segments                                                      |   |                    | (140   | )(d)                           |   | 7                      |   |               | 95     |                         |   | 83 |   |   | (45 | ) |   | - |   |
| Total      Revenues                                                                |   | $                       | 3,968  |                           | $      | 167                    |   | $                  | 96     |                         | $      | 5 |   | $ | (45 | ) | $ | 4,191 |   |
|                                                                               |   |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Income      (Loss) Before Discontinued Operations and Extraordinary      Loss |   | $                       | 357    |                           | $      | 11                     |   | $                  | 16     |                         | $      | (10 | ) | $ | - |   | $ | 374 |   |
| Discontinued      Operations, Net of Tax                                           |   |                    | -      |                           |   | -                      |   |               | -      |                         |   | -  |   |   | - |   |   | - |   |
| Net      Income (Loss)                                                             |   | $                       | 357    |                           | $      | 11                     |   | $                  | 16     |                         | $      | (10 | ) | $ | - |   | $ | 374 |   |

|                                            |   |                    |   | Nonutility      Operations     |   |                   |   |               |   |                         |   |
|-------------------------------------------------|--------|-------------------------|--------|--------------------------------|--------|------------------------|--------|--------------------|--------|------------------------------|--------|
|                                            |   | Utility      Operations |   | AEP River Operations |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments |   | Consolidated |   |
|                                            |   | (in      millions)      |
| Three      Months Ended September 30, 2007 |   |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Revenues      from:                             |   |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| External      Customers                         |   | $                       | 3,423  | (d)                            | $      | 134                    |   | $                  | 241    |                         | $      | (9 | ) | $ | - |   | $ | 3,789 |   |
| Other      Operating Segments                   |   |                    | 177    | (d)                            |   | 4                      |   |               | (161   | )                            |   | 19 |   |   | (39 | ) |   | - |   |
| Total      Revenues                             |   | $                       | 3,600  |                           | $      | 138                    |   | $                  | 80     |                         | $      | 10 |   | $ | (39 | ) | $ | 3,789 |   |
|                                            |   |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Net      Income (Loss)                          |   | $                       | 388    |                           | $      | 18                     |   | $                  | 3      |                         | $      | (2 | ) | $ | - |   | $ | 407 |   |

|                                                              |   |                    |   | Nonutility      Operations     |   |                   |   |               |   |                         |   |
|-------------------------------------------------------------------|--------|-------------------------|--------|--------------------------------|--------|------------------------|--------|--------------------|--------|------------------------------|--------|
|                                                              |   | Utility      Operations |   | AEP River Operations |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments |   | Consolidated |   |
|                                                              |   | (in      millions)      |
| Nine      Months Ended September 30, 2008                         |   |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Revenues      from:                                               |   |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| External      Customers                                           |   | $                       | 10,318 | (d)                            | $      | 442                    |   | $                  | 409    |                         | $      | 35 |   | $ | - |   | $ | 11,204 |   |
| Other      Operating Segments                                     |   |                    | 257    | (d)                            |   | 18                     |   |               | (143   | )                            |   | (17 | ) |   | (115 | ) |   | - |   |
| Total      Revenues                                               |   | $                       | 10,575 |                           | $      | 460                    |   | $                  | 266    |                         | $      | 18 |   | $ | (115 | ) | $ | 11,204 |   |
|                                                              |   |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Income      Before Discontinued Operations and Extraordinary Loss |   | $                       | 1,030  |                           | $      | 21                     |   | $                  | 43     |                         | $      | 133 |   | $ | - |   | $ | 1,227 |   |
| Discontinued      Operations, Net of Tax                          |   |                    | -      |                           |   | -                      |   |               | -      |                         |   | 1 |   |   | - |   |   | 1 |   |
| Net      Income                                                   |   | $                       | 1,030  |                           | $      | 21                     |   | $                  | 43     |                         | $      | 134 |   | $ | - |   | $ | 1,228 |   |

|                                                                        |                          |                    |   | Nonutility      Operations     |   |                   |   |               |   |                         |   |
|-----------------------------------------------------------------------------|-------------------------------|-------------------------|--------|--------------------------------|--------|------------------------|--------|--------------------|--------|------------------------------|--------|
|                                                                        |                          | Utility      Operations |   | AEP River Operations |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments |   | Consolidated |   |
|                                                                        |                          | (in      millions)      |
| Nine      Months Ended September 30, 2007                                   |                          |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Revenues      from:                                                         |                          |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
|                                                                        | External      Customers       |                    | $      | 9,127                          | (d)    | $                      | 367    |               | $      | 574                          |   | $ | 36 |   | $ | - |   | $ | 10,104 |   |
|                                                                        | Other      Operating Segments |                    |   | 460                            | (d)    |                   | 10     |               |   | (347                         | )      |   | (14 | ) |   | (109 | ) |   | - |   |
| Total      Revenues                                                         |                          | $                       | 9,587  |                           | $      | 377                    |   | $                  | 227    |                         |   | 22 |   |   | (109 | ) | $ | 10,104 |   |
|                                                                        |                          |                    |   |                           |   |                   |   |               |   |                         |   |   |   |   |   |   |   |   |   |
| Income      (Loss) Before Discontinued Operations and Extraordinary    Loss |                          | $                       | 879    |                           | $      | 40                     |   | $                  | 17     |                         | $      | (1 | ) | $ | - |   | $ | 935 |   |
| Discontinued      Operations, Net of Tax                                    |                          |                    | -      |                           |   | -                      |   |               | -      |                         |   | 2 |   |   | - |   |   | 2 |   |
| Extraordinary      Loss, Net of Tax                                         |                          |                    | (79    | )                              |   | -                      |   |               | -      |                         |   | - |   |   | - |   |   | (79 | ) |
| Net      Income                                                             |                          | $                       | 800    |                           | $      | 40                     |   | $                  | 17     |                         | $      | 1 |   | $ | - |   | $ | 858 |   |

|                                                      |   |                    |   | Nonutility      Operations     |   |                   |   |               |   |                            |   |
|-----------------------------------------------------------|--------|-------------------------|--------|--------------------------------|--------|------------------------|--------|--------------------|--------|---------------------------------|--------|
|                                                      |   | Utility      Operations |   | AEP River Operations |   | GenerationandMarketing |   | All      Other (a) |   | Reconciling      Adjustments(c) |   | Consolidated |   |
|                                                      |   | (in      millions)      |   |
| September      30, 2008                                   |   |                    |   |                           |   |                   |   |               |   |                            |   |   |   |   |   |   |   |   |   |
| Total      Property, Plant and Equipment                  |   | $                       | 47,699 |                           | $      | 316                    |   | $                  | 577    |                            | $      | 45 |   | $ | (245 | ) | $ | 48,392 |   |
| Accumulated      Depreciation and Amortization            |   |                    | 16,413 |                           |   | 69                     |   |               | 133    |                            |   | 8 |   |   | (20 | ) |   | 16,603 |   |
| Total      Property, Plant and Equipment – Net |   | $                       | 31,286 |                           | $      | 247                    |   | $                  | 444    |                            | $      | 37 |   | $ | (225 | ) | $ | 31,789 |   |
|                                                      |   |                    |   |                           |   |                   |   |               |   |                            |   |   |   |   |   |   |   |   |   |
| Total      Assets                                         |   | $                       | 41,322 |                           | $      | 380                    |   | $                  | 771    |                            | $      | 13,905  |   | $ | (13,340 | )(b) | $ | 43,038 |   |

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

| (a)    | All      Other includes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Parent’s      guarantee revenue received from affiliates, investment income, interest      income and interest expense and other nonallocated  costs. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Forward      natural gas contracts that were not sold with our natural gas pipeline and      storage operations in 2004 and 2005.  These contracts are      financial derivatives which will gradually liquidate and completely expire      in 2011. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | The      first quarter 2008 cash settlement of a purchase power and sale agreement      with TEM related to the Plaquemine Cogeneration Facility which was sold in      the fourth quarter of 2006.  The cash settlement of $255 million      ($163 million, net of tax) is included in Net Income. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Revenue      sharing related to the Plaquemine CogenerationFacility. |
| (b)    | Reconciling      Adjustments for Total Assets primarily include the elimination of      intercompany advances to affiliates and intercompany accounts receivable      along with the elimination of AEP’s investments in subsidiary      companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (c)    | Includes      eliminations due to an intercompany capital lease.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (d)    | PSO      and SWEPCo transferred certain existing ERCOT energy marketing contracts      to AEP Energy Partners, Inc. (AEPEP) (Generation and Marketing segment)      and entered into intercompany financial and physical purchase and sales      agreements with AEPEP.  As a result, we reported third-party net      purchases or sales activity for these energy marketing contracts as      Revenues from External Customers for the Utility Operations      segment.  This is offset by the Utility Operations segment’s      related net sales (purchases)  for these contracts to AEPEP in      Revenues from Other Operating Segments of $(95) million and $161 million      for the three months ended September 30, 2008 and 2007, respectively, and      $143 million and $347 million for the nine months ended September 30, 2008      and 2007, respectively.  The Generation and Marketing segment      also reports these purchase or sales contracts with Utility Operations as      Revenues from Other OperatingSegments. |

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

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

|                                   |   | September      30, |   |   | December      31, |   |
|----------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
| Type      of Debt                      |   | 2008               |   |   | 2007              |   |
|                                   |   | (in      millions) |   |
| Senior      Unsecured Notes            |   | $                  | 11,186 |   |              | $      | 9,905 |   |
| Pollution      Control Bonds           |   |               | 1,817  |   |              |   | 2,190 |   |
| First      Mortgage Bonds              |   |               | -      |   |              |   | 19 |   |
| Notes      Payable                     |   |               | 244    |   |              |   | 311 |   |
| Securitization      Bonds              |   |               | 2,132  |   |              |   | 2,257 |   |
| Junior      Subordinated Debentures    |   |               | 315    |   |              |   | - |   |
| Notes      Payable To Trust            |   |               | 113    |   |              |   | 113 |   |
| Spent      Nuclear Fuel Obligation (a) |   |               | 264    |   |              |   | 259 |   |
| Other      Long-term Debt              |   |               | 2      |   |              |   | 2 |   |
| Unamortized      Discount (net)        |   |               | (66    | )      |              |   | (62 | ) |
| Total      Long-term Debt Outstanding  |   |               | 16,007 |   |              |   | 14,994 |   |
| Less      Portion Due Within One Year  |   |               | 682    |   |              |   | 792 |   |
| Long-term      Portion                 |   | $                  | 15,325 |   |              | $      | 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 $297 million and $285 million at September      30, 2008 and December 31, 2007, respectively, are included in Spent      Nuclear Fuel and Decommissioning Trusts on our Condensed Consolidated      Balance Sheets. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Company              |   | Type      of Debt                   |   | Principal      Amount |   | Interest      Rate |     | Due      Date |
|----------------------|--------|-------------------------------------|--------|-----------------------|--------|--------------------|----------|---------------|
|                 |   |                                |   | (in      millions)    |   | (%)                |     |          |
| Issuances:           |   |                                |   |                  |   |               |     |          |
| AEP                  |   | Junior      Subordinated Debentures |   | $                     | 315    |               | 8.75     |          | 2063 |
| APCo                 |   | Pollution      Control Bonds        |   |                  | 40     |               | 4.85     |          | 2019 |
| APCo                 |   | Pollution      Control Bonds        |   |                  | 30     |               | 4.85     |          | 2019 |
| APCo                 |   | Pollution      Control Bonds        |   |                  | 75     |               | Variable |          | 2036 |
| APCo                 |   | Pollution      Control Bonds        |   |                  | 50     |               | Variable |          | 2036 |
| APCo                 |   | Senior      Unsecured Notes         |   |                  | 500    |               | 7.00     |          | 2038 |
| CSPCo                |   | Senior      Unsecured Notes         |   |                  | 350    |               | 6.05     |          | 2018 |
| I&M              |   | Pollution      Control Bonds        |   |                  | 25     |               | Variable |          | 2019 |
| I&M              |   | Pollution      Control Bonds        |   |                  | 52     |               | Variable |          | 2021 |
| I&M              |   | Pollution      Control Bonds        |   |                  | 40     |               | 5.25     |          | 2025 |
| OPCo                 |   | Pollution      Control Bonds        |   |                  | 50     |               | Variable |          | 2014 |
| OPCo                 |   | Pollution      Control Bonds        |   |                  | 50     |               | Variable |          | 2014 |
| OPCo                 |   | Pollution      Control Bonds        |   |                  | 65     |               | Variable |          | 2036 |
| OPCo                 |   | Senior      Unsecured Notes         |   |                  | 250    |               | 5.75     |          | 2013 |
| SWEPCo               |   | Pollution      Control Bonds        |   |                  | 41     |               | 4.50     |          | 2011 |
| SWEPCo               |   | Senior      Unsecured Notes         |   |                  | 400    |               | 6.45     |          | 2019 |
|                 |   |                                |   |                  |   |               |     |          |   |
| Non-Registrant:      |   |                                |   |                  |   |               |     |          |   |
| TCC                  |   | Pollution      Control Bonds        |   |                  | 41     |               | 5.625    |          | 2017 |
| TCC                  |   | Pollution      Control Bonds        |   |                  | 120    |               | 5.125    |          | 2030 |
| TNC                  |   | Senior      Unsecured Notes         |   |                  | 30     |               | 5.89     |          | 2018 |
| TNC                  |   | Senior      Unsecured Notes         |   |                  | 70     |               | 6.76     |          | 2038 |
| Total      Issuances |   |                                |   | $                     | 2,594  | (a)                |     |          |   |

|     (a) |          Amount indicated on statement of cash flows of $2,561 million is net of      issuance costs and premium ordiscount. |
|-----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

|  Company                                 |   | Type      of Debt            |   | Principal      Amount Paid |      | Interest      Rate |     | Due      Date |
|-----------------------------------------------|--------|------------------------------|--------|----------------------------|-----------|--------------------|----------|---------------|
|                                          |   |                         |   | (in      millions)         |      | (%)                |     |          |
| Retirements      and Principal Payments:      |   |                         |   |                       |      |               |     |          |
| APCo                                          |   | Senior      Unsecured Notes  |   | $                          | 200  |               | 3.60     |          | 2008 |
| APCo                                          |   | Pollution      Control Bonds |   |                       | 40   |               | Variable |          | 2019 |
| APCo                                          |   | Pollution      Control Bonds |   |                       | 30   |               | Variable |          | 2019 |
| APCo                                          |   | Pollution      Control Bonds |   |                       | 18   |               | Variable |          | 2021 |
| APCo                                          |   | Pollution      Control Bonds |   |                       | 50   |               | Variable |          | 2036 |
| APCo                                          |   | Pollution      Control Bonds |   |                       | 75   |               | Variable |          | 2037 |
| CSPCo                                         |   | Senior      Unsecured Notes  |   |                       | 60   |               | 6.55     |          | 2008 |
| CSPCo                                         |   | Senior      Unsecured Notes  |   |                       | 52   |               | 6.51     |          | 2008 |
| CSPCo                                         |   | Pollution      Control Bonds |   |                       | 48   |               | Variable |          | 2038 |
| CSPCo                                         |   | Pollution      Control Bonds |   |                       | 44   |               | Variable |          | 2038 |
| I&M                                       |   | Pollution      Control Bonds |   |                       | 45   |               | Variable |          | 2009 |
| I&M                                       |   | Pollution      Control Bonds |   |                       | 25   |               | Variable |          | 2019 |
| I&M                                       |   | Pollution      Control Bonds |   |                       | 52   |               | Variable |          | 2021 |
| I&M                                       |   | Pollution      Control Bonds |   |                       | 50   |               | Variable |          | 2025 |
| I&M                                       |   | Pollution      Control Bonds |   |                       | 50   |               | Variable |          | 2025 |
| I&M                                       |   | Pollution      Control Bonds |   |                       | 40   |               | Variable |          | 2025 |
| OPCo                                          |   | Notes      Payable           |   |                       | 1    |               | 6.81     |          | 2008 |
| OPCo                                          |   | Notes      Payable           |   |                       | 12   |               | 6.27     |          | 2009 |
| OPCo                                          |   | Pollution      Control Bonds |   |                       | 50   |               | Variable |          | 2014 |
| OPCo                                          |   | Pollution      Control Bonds |   |                       | 50   |               | Variable |          | 2016 |
| OPCo                                          |   | Pollution      Control Bonds |   |                       | 50   |               | Variable |          | 2022 |
| OPCo                                          |   | Pollution      Control Bonds |   |                       | 35   |               | Variable |          | 2022 |
| OPCo                                          |   | Pollution      Control Bonds |   |                       | 65   |               | Variable |          | 2036 |
| PSO                                           |   | Pollution      Control Bonds |   |                       | 34   |               | Variable |          | 2014 |
| SWEPCo                                        |   | Pollution      Control Bonds |   |                       | 41   |               | Variable |          | 2011 |
| SWEPCo                                        |   | Notes      Payable           |   |                       | 2    |               | Variable |          | 2008 |
| SWEPCo                                        |   | Notes      Payable           |   |                       | 3    |               | 4.47     |          | 2011 |
|                                          |   |                         |   |                       |      |               |     |          |   |
| Non-Registrant:                               |   |                         |   |                       |      |               |     |          |   |
| AEP      Subsidiaries                         |   | Notes      Payable           |   |                       | 4    |               | 5.88     |          | 2011 |
| AEP      Subsidiaries                         |   | Notes      Payable           |   |                       | 10   |               | Variable |          | 2017 |
| AEGCo                                         |   | Senior      Unsecured Notes  |   |                       | 7    |               | 6.33     |          | 2037 |
| AEPSC                                         |   | Notes      Payable           |   |                       | 34   |               | 9.60     |          | 2008 |
| TCC                                           |   | First      Mortgage Bonds    |   |                       | 19   |               | 7.125    |          | 2008 |
| TCC                                           |   | Securitization      Bonds    |   |                       | 29   |               | 5.01     |          | 2008 |
| TCC                                           |   | Securitization      Bonds    |   |                       | 21   |               | 5.56     |          | 2010 |
| TCC                                           |   | Securitization      Bonds    |   |                       | 75   |               | 4.98     |          | 2010 |
| TCC                                           |   | Pollution      Control Bonds |   |                       | 41   |               | Variable |          | 2015 |
| TCC                                           |   | Pollution      Control Bonds |   |                       | 60   |               | Variable |          | 2028 |
| TCC                                           |   | Pollution      Control Bonds |   |                       | 60   |               | Variable |          | 2028 |
| Total      Retirements and Principal Payments |   |                         | $      | 1,582                 |      |               |     |          |

|                                                  |   | September      30, 2008 |            | December      31, 2007 |    |
|-------------------------------------------------------|--------|-------------------------|-----------------|------------------------|---------|
|                                                  |   | Outstanding             |            | Interest               |    | Outstanding |   | Interest |   |
|                                                  |   | Amount                  |            | Rate                   |    | Amount |   | Rate |   |
| Type      of Debt                                     |   | (in      thousands)     |            |                   |    | (in      thousands) |   |   |   |
| Commercial      Paper – AEP                     |   | $                       | 701,416    |                   | 3.25%   | (a) | $ | 659,135  |   | 5.54%  | (a) |
| Commercial      Paper – JMG (b)                 |   |                    | -          |                   | -  |   |   | 701  |   | 5.35%  | (a) |
| Line      of Credit – Sabine Mining Company (c) |   |                    | 9,520      |                   | 7.75%   | (a) |   | 285  |   | 5.25%  | (a) |
| Line      of Credit – AEP (e)                   |   |                    | 590,700    |                   | 3.4813% | (d) |   | -  |   | -  |   |
| Total                                                 |   | $                       | 1,301,636  |                   |    |   | $ | 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.                                                                         |
| (d) | Rate      based on 1-month LIBOR.  In October 2008, this rate was      converted to 4.55% based on prime.                                                                                                                                 |
| (e) | In      October 2008, we borrowed an additional $1.4 billion at 4.55% based on      prime.                                                                                                                                                          |

----

----

| Third      Quarter of 2007                        |   |   |   |   | $      | 24     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (9     | )      |   |   |   |   |
| Off-system      Sales                             |   |   | 8      |   |   |   |   |   |
| Other                                             |   |   | 1      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | -      |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | 26     |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | (10    | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (1     | )      |   |   |   |   |
| Carrying      Costs Income                        |   |   | 3      |   |   |   |   |   |
| Other      Income                                 |   |   | 2      |   |   |   |   |   |
| Interest      Expense                             |   |   | (2     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 18     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (3     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Third      Quarter of 2008                        |   |   |   |   |   | $      | 39     |   |

| · | Retail      Margins decreased $9 million primarily due to an increase in sharing of      off-system sales margins with customers and higher capacity settlement      expenses under the Interconnection Agreement.  These unfavorable      effects were partially offset by the impact of the Virginia base rate      order issued in May 2007 which included a 2007 provision for revenue      refund in addition to an increase in the recovery of E&R costs in      Virginia. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Margins      from Off-system Sales increased $8 million primarily due to increased      physical sales margins driven by higher prices, partially offset by lower      trading margins.                                                                                                                                                                                                                                                                                                        |

| · | Other      Operation and Maintenance expenses decreased $26 million primarily due to      the following:                                                                                                                                                                                                                                                                                                  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                    | A      $26 million decrease resulting from a settlement agreement in the third      quarter 2007 related to alleged violations of the NSR provisions of the      CAA.  The $26 million represents APCo’s allocation of the      settlement. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                    | A      $9 million decrease related to the establishment of a regulatory asset in      the third quarter 2008 for Virginia’s share of previously expended NSR      settlement costs.  See “Virginia E&R Cost Recovery Filing”      section of Note 3. |
|   | These      decreases were partially offset by:                                                                                                                                                                                                                                                                                                                                                            |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                    | A      $6 million increase in employee-related expenses. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                    | A      $5 million increase in overhead line maintenance expense primarily due to      right-of-way clearing. |
| · | Depreciation      and Amortization expenses increased $10 million primarily due to a $6      million increase in the amortization of carrying charges and depreciation      expense that are being collected through the Virginia E&R surcharges      and a $3 million increase in depreciation expense primarily from the      installation of environmental upgrades at the Mountaineer      Plant. |
| · | Carrying      Costs Income increased $3 million due to an increase in Virginia E&R      deferrals.                                                                                                                                                                                                                                                                                                    |
| · | Income      Tax Expense increased $3 million primarily due to an increase in pretax      book income, partially offset by changes in certain book/tax differences      accounted for on a flow-throughbasis.                                                                                                                                                                                              |

| Nine      Months Ended September 30, 2007         |   |   |   |   | $      | 98     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 19     |   |   |   |   |   |
| Off-system      Sales                             |   |   | 32     |   |   |   |   |   |
| Other                                             |   |   | 1      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 52     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | 12     |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | (44    | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (5     | )      |   |   |   |   |
| Carrying      Costs Income                        |   |   | 16     |   |   |   |   |   |
| Other      Income                                 |   |   | 7      |   |   |   |   |   |
| Interest      Expense                             |   |   | (17    | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (31    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 2      |   |
|                                              |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30, 2008         |   |   |   |   |   | $      | 121    |   |

| · | Retail      Margins increased $19 million primarily due to the impact of the Virginia      base rate order issued in May 2007 which included a 2007 provision for      revenue refund in addition to an increase in the recovery of E&R costs      in Virginia and construction financing costs in West      Virginia.  These increases were partially offset by an increase      in sharing of off-system sales margins with customers and higher capacity      settlement expenses under the InterconnectionAgreement. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Margins      from Off-system Sales increased $32 million primarily due to increased      physical sales margins driven by higher prices, partially offset by lower      trading margins.                                                                                                                                                                                                                                                                                                                                               |

| · | Other      Operation and Maintenance expenses decreased $12 million primarily due to      the following:                                                                                                                                                                                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                          | A      $26 million decrease resulting from a settlement agreement in the third      quarter 2007 related to alleged violations of the NSR provisions of the      CAA.  The $26 million represents APCo’s allocation of the      settlement. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                          | A      $9 million decrease related to the establishment of a regulatory asset in      the third quarter 2008 for Virginia’s share of previously expended NSR      settlement costs.  See “Virginia E&R Cost Recovery Filing”      section of Note 3. |
|   | These      decreases were partially offset by:                                                                                                                                                                                                                                                                                                                                  |
|   | ·                                                                                                                                                                                                                                                                                                                                                                          | A      $7 million increase in employee-related expenses. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                          | A      $10 million increase in overhead line maintenance expense due to      right-of-way clearing and storm damage. |
| · | Depreciation      and Amortization expenses increased $44 million primarily due to $22      million in favorable adjustments made in the second quarter 2007 for      APCo’s Virginia base rate order and a $15 million increase in amortization      of carrying charges and depreciation expense that are being collected      through the Virginia E&R surcharges. |
| · | Taxes      Other Than Income Taxes increased $5 million primarily due to favorable      franchise tax return adjustments recorded in 2007.                                                                                                                                                                                                                                      |
| · | Carrying      Costs Income increased $16 million due to an increase in Virginia E&R      deferrals.                                                                                                                                                                                                                                                                         |
| · | Other      Income increased $7 million primarily due to higher interest income      related to a tax refund in 2008 and other tax  adjustments.                                                                                                                                                                                                                                 |
| · | Interest      Expense increased $17 million primarily due to a $26 million increase in      interest expense from long-term debt issuances, partially offset by a $7      million decrease in interest expense primarily related to interest on the      Virginia provision for refund recorded in the second quarter of      2007.                                             |
| · | Income      Tax Expense decreased $2 million primarily due to a decrease in state      income taxes and changes in certain book/tax differences accounted for on      a flow-through basis, partially offset by an increase in pretax book      income.                                                                                                                         |

|                       | 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                             |   |                | 208,445  |   |   |   | 221,534 |   |
| Investing      Activities                             |   |                | (472,029 | )      |   |   | (570,019 | ) |
| Financing      Activities                             |   |                | 263,376  |   |   |   | 347,436 |   |
| Net      Decrease in Cash and Cash Equivalents        |   |                | (208     | )      |   |   | (1,049 | ) |
| Cash      and Cash Equivalents at End of Period       |   | $                   | 1,987    |   |   | $      | 1,269 |   |

|                         |   | Principal           |          | Interest |     | Due    |
|------------------------------|--------|---------------------|---------------|----------|----------|--------|
| Type      of Debt            |   | Amount              |          | Rate     |     | Date   |
|                         |   | (in      thousands) |          | (%)      |     |   |
| Pollution      Control Bonds |   | $                   | 40,000   |     | 4.85     |   | 2019 |
| Pollution      Control Bonds |   |                | 30,000   |     | 4.85     |   | 2019 |
| Pollution      Control Bonds |   |                | 75,000   |     | Variable |   | 2036 |
| Pollution      Control Bonds |   |                | 50,275   |     | Variable |   | 2036 |
| Senior      Unsecured Notes  |   |                | 500,000  |     | 7.00     |   | 2038 |

|                         |   | Principal           |          | Interest |     | Due    |
|------------------------------|--------|---------------------|---------------|----------|----------|--------|
| Type      of Debt            |   | Amount      Paid    |          | Rate     |     | Date   |
|                         |   | (in      thousands) |          | (%)      |     |   |
| Pollution      Control Bonds |   | $                   | 40,000   |     | Variable |   | 2019 |
| Pollution      Control Bonds |   |                | 30,000   |     | Variable |   | 2019 |
| Pollution      Control Bonds |   |                | 17,500   |     | Variable |   | 2021 |
| Pollution      Control Bonds |   |                | 50,275   |     | Variable |   | 2036 |
| Pollution      Control Bonds |   |                | 75,000   |     | Variable |   | 2037 |
| Senior      Unsecured Notes  |   |                | 200,000  |     | 3.60     |   | 2008 |
| Other                        |   |                | 11       |     | 13.718   |   | 2026 |

----

|                                                        |   |          |    |   | Cash      Flow  |   |   |       |   |   |       |   |   |   |   |
|-------------------------------------------------------------|--------|---------------|---------|--------|-----------------|--------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
|                                                        |   | MTM      Risk |    |   | &           |   |   | DETM       |   |   |       |   |   |   |   |
|                                                        |   | Management    |    |   | Fair      Value |   |   | Assignment |   |   | Collateral |   |   |   |   |
|                                                        |   | Contracts     |    |   | Hedges          |   |   | (a)        |   |   | Deposits   |   |   | Total  |   |
| Current      Assets                                         |   | $             | 81,386  |   |            | $      | 4,104  |       |   | $      | -          |   |   | $      | (3,532 | ) |   | $ | 81,958 |   |
| Noncurrent      Assets                                      |   |          | 58,881  |   |            |   | 1,036  |       |   |   | -          |   |   |   | (4,718 | ) |   |   | 55,199 |   |
| Total      MTM Derivative Contract Assets                   |   |          | 140,267 |   |            |   | 5,140  |       |   |   | -          |   |   |   | (8,250 | ) |   |   | 137,157 |   |
|                                                        |   |          |    |   |            |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |
| Current      Liabilities                                    |   |          | (69,529 | )      |            |   | (2,996 | )          |   |   | (3,127     | )      |   |   | 547    |   |   |   | (75,105 | ) |
| Noncurrent      Liabilities                                 |   |          | (29,631 | )      |            |   | -      |       |   |   | (3,194     | )      |   |   | 50     |   |   |   | (32,775 | ) |
| Total      MTM Derivative Contract Liabilities              |   |          | (99,160 | )      |            |   | (2,996 | )          |   |   | (6,321     | )      |   |   | 597    |   |   |   | (107,880 | ) |
|                                                        |   |          |    |   |            |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $             | 41,107  |   |            | $      | 2,144  |       |   | $      | (6,321     | )      |   | $      | (7,653 | ) |   | $ | 29,277 |   |

| (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                 |   |   | (13,569 | )      |
| 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)                          |   |   | 564     |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                        |   |   | (165    | )      |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                   |   |   | 8,407   |   |
| Total      MTM Risk Management Contract Net Assets                                                                    |   |   | 41,107  |   |
| Net      Cash Flow & Fair Value Hedge Contracts                                                                   |   |   | 2,144   |   |
| DETM      Assignment (e)                                                                                              |   |   | (6,321  | )      |
| Collateral      Deposits                                                                                              |   |   | (7,653  | )      |
| Ending      Net Risk Management Assets at September 30, 2008                                                          |   | $      | 29,277  |   |

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

|                                                                  |   | Remainder |   |   |   |   |   |   |   |   |   |   |   |   |   |   | After  |   |   |   |   |
|-----------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                  |   | 2008      |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | 2012   |   |   | Total  |   |
| Level      1 (a)                                                      |   | $         | (998   | )      |   | $      | (2,295 | )      |   | $      | (21    | )      |   | $      | -      |   |   | $      | -      |   |   | $ | - |   |   | $ | (3,314 | ) |
| Level      2 (b)                                                      |   |      | 1,480  |   |   |   | 18,258 |   |   |   | 12,918 |   |   |   | 1,662  |   |   |   | 485    |   |   |   | - |   |   |   | 34,803 |   |
| Level      3 (c)                                                      |   |      | (3,850 | )      |   |   | 666    |   |   |   | (1,881 | )      |   |   | 272    |   |   |   | 152    |   |   |   | - |   |   |   | (4,641 | ) |
| Total                                                                 |   |      | (3,368 | )      |   |   | 16,629 |   |   |   | 11,016 |   |   |   | 1,934  |   |   |   | 637    |   |   |   | - |   |   |   | 26,848 |   |
| Dedesignated      Risk Management Contracts (d)                       |   |      | 1,403  |   |   |   | 4,720  |   |   |   | 4,681  |   |   |   | 1,823  |   |   |   | 1,632  |   |   |   | - |   |   |   | 14,259 |   |
| Total      MTM Risk Management Contract Net Assets (Liabilities) |   | $         | (1,965 | )      |   | $      | 21,349 |   |   | $      | 15,697 |   |   | $      | 3,757  |   |   | $      | 2,269  |   |   | $ | - |   |   | $ | 41,107 |   |

| (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.                                                                                                                                                                                                                                                                                                                                                                    |

|                                                          |   |   |        |   | Interest |   |        | Foreign  |   |   |     |
|---------------------------------------------------------------|--------|--------|-------------|--------|----------|--------|-------------|----------|--------|--------|----------|
|                                                          |   | Power  |        |   | Rate     |   |        | Currency |   |   | Total    |
| Beginning      Balance in AOCI December 31, 2007              |   | $      | 783    |   |     | $      | (6,602)     |     |   | $      | (125)    |   |   | $ | (5,944) |
| Changes      in Fair Value                                    |   |   | 670    |   |     |   | (3,114)     |     |   |   | 68  |   |   |   | (2,376) |
| Reclassifications      from AOCI for Cash Flow Hedges Settled |   |   | (118)       |   |     |   | 1,231  |     |   |   | 5   |   |   |   | 1,118  |
| Ending      Balance in AOCI September 30, 2008                |   | $      | 1,335  |   |     | $      | (8,485)     |     |   | $      | (52)     |   |   | $ | (7,202) |

| Nine      Months EndedSeptember      30, 2008 |   |   |   |    | Twelve      Months EndedDecember      31, 2007 |
|-----------------------------------------------|--------|--------|--------|---------|------------------------------------------------|
| (in      thousands)                           |   |   |   |    | (in      thousands)                            |
| End                                           |   | High   |   | Average |                                           | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $725                                          |   | $1,096 |   | $416    |                                           | $161 |   |   |   |   | $455 |   | $2,328 |   | $569 |   | $117 |

----

|                                                                                                   |   | Three      Months Ended |    |   | Nine      Months Ended |   |
|--------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|------------------------|--------|
|                                                                                                   |   | 2008                    |    |   | 2007                   |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                                                               |   |                    |    |   |                   |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution                                                |   | $                       | 719,295 |   |                   | $      | 639,830 |   |   | $ | 1,926,841 |   |   | $ | 1,740,565 |   |
| Sales      to AEP Affiliates                                                                           |   |                    | 74,632  |   |                   |   | 64,099 |   |   |   | 262,230 |   |   |   | 181,015 |   |
| Other                                                                                                  |   |                    | 4,906   |   |                   |   | 2,647 |   |   |   | 12,186 |   |   |   | 8,134 |   |
| TOTAL                                                                                                  |   |                    | 798,833 |   |                   |   | 706,576 |   |   |   | 2,201,257 |   |   |   | 1,929,714 |   |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                                               |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation                                           |   |                    | 220,955 |   |                   |   | 200,702 |   |   |   | 554,022 |   |   |   | 535,906 |   |
| Purchased      Electricity for Resale                                                                  |   |                    | 71,075  |   |                   |   | 47,430 |   |   |   | 167,205 |   |   |   | 117,708 |   |
| Purchased      Electricity from AEP Affiliates                                                         |   |                    | 219,595 |   |                   |   | 171,288 |   |   |   | 595,433 |   |   |   | 443,519 |   |
| Other      Operation                                                                                   |   |                    | 66,316  |   |                   |   | 94,190 |   |   |   | 210,262 |   |   |   | 236,944 |   |
| Maintenance                                                                                            |   |                    | 51,292  |   |                   |   | 49,708 |   |   |   | 161,371 |   |   |   | 146,875 |   |
| Depreciation      and Amortization                                                                     |   |                    | 62,364  |   |                   |   | 51,864 |   |   |   | 186,528 |   |   |   | 142,100 |   |
| Taxes      Other Than Income Taxes                                                                     |   |                    | 24,319  |   |                   |   | 23,561 |   |   |   | 72,414 |   |   |   | 67,811 |   |
| TOTAL                                                                                                  |   |                    | 715,916 |   |                   |   | 638,743 |   |   |   | 1,947,235 |   |   |   | 1,690,863 |   |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                                                                  |   |                    | 82,917  |   |                   |   | 67,833 |   |   |   | 254,022 |   |   |   | 238,851 |   |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                                                           |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                                                                   |   |                    | 1,945   |   |                   |   | 510 |   |   |   | 7,541 |   |   |   | 1,539 |   |
| Carrying      Costs Income                                                                             |   |                    | 11,924  |   |                   |   | 8,701 |   |   |   | 38,921 |   |   |   | 22,817 |   |
| Allowance      for Equity Funds Used During Construction                                               |   |                    | 2,130   |   |                   |   | 1,084 |   |   |   | 6,278 |   |   |   | 5,442 |   |
| Interest      Expense                                                                                  |   |                    | (47,385 | )      |                   |   | (44,980 | ) |   |   | (138,644 | ) |   |   | (121,758 | ) |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                                                                  |   |                    | 51,531  |   |                   |   | 33,148 |   |   |   | 168,118 |   |   |   | 146,891 |   |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                                                                |   |                    | 12,516  |   |                   |   | 9,090 |   |   |   | 47,508 |   |   |   | 49,325 |   |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE EXTRAORDINARY LOSS                                                                  |   |                    | 39,015  |   |                   |   | 24,058 |   |   |   | 120,610 |   |   |   | 97,566 |   |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Extraordinary      Loss – Reapplication of Regulatory Accounting for Generation, Net of      Tax |   |                    | -       |   |                   |   | - |   |   |   | - |   |   |   | (78,763 | ) |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                                                                        |   |                    | 39,015  |   |                   |   | 24,058 |   |   |   | 120,610 |   |   |   | 18,803 |   |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements Including Capital StockExpense                              |   |                    | 238     |   |                   |   | 238 |   |   |   | 714 |   |   |   | 714 |   |
|                                                                                                   |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                                                               |   | $                       | 38,777  |   |                   | $      | 23,820 |   |   | $ | 119,896 |   |   | $ | 18,089 |   |

| The      common stock of APCo is wholly-owned byAEP. |
|------------------------------------------------------|

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

----

|                                                                                                                          |   | Common      Stock |    |   | Paid-in      Capital |   |      | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|-------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|-----------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
| DECEMBER      31, 2006                                                                                                        |   | $                 | 260,458 |   |                 | $      | 1,024,994 |                   |   | $      | 805,513                                            |   |   | $      | (54,791 | ) |   | $ | 2,036,174 |   |
|                                                                                                                          |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                                                                              |   |              |    |   |                 |   |      |                   |   |   | (2,685                                             | )      |   |   |    |   |   |   | (2,685 | ) |
| Common      Stock Dividends                                                                                                   |   |              |    |   |                 |   |      |                   |   |   | (25,000                                            | )      |   |   |    |   |   |   | (25,000 | ) |
| Preferred      Stock Dividends                                                                                                |   |              |    |   |                 |   |      |                   |   |   | (600                                               | )      |   |   |    |   |   |   | (600 | ) |
| Capital      Stock Expense                                                                                                    |   |              |    |   |                 |   | 117       |                   |   |   | (114                                               | )      |   |   |    |   |   |   | 3 |   |
| TOTAL                                                                                                                         |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 2,007,892 |   |
|                                                                                                                          |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                                     |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss), Net of Taxes:                                                                         |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $539                                                                                     |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | (1,000  | ) |   |   | (1,000 | ) |
| SFAS      158 Costs Established as a Regulatory Asset Related to the Reapplication      of SFAS 71, Net of Tax of $6,055 |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | 11,245  |   |   |   | 11,245 |   |
| NET      INCOME                                                                                                               |   |              |    |   |                 |   |      |                   |   |   | 18,803                                             |   |   |   |    |   |   |   | 18,803 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                                               |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 29,048 |   |
|                                                                                                                          |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2007                                                                                                       |   | $                 | 260,458 |   |                 | $      | 1,025,111 |                   |   | $      | 795,917                                            |   |   | $      | (44,546 | ) |   | $ | 2,036,940 |   |
|                                                                                                                          |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| 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                                                                                         |   |              |    |   |                 |   | 175,000   |                   |   |   |                                               |   |   |   |    |   |   |   | 175,000 |   |
| Preferred      Stock Dividends                                                                                                |   |              |    |   |                 |   |      |                   |   |   | (599                                               | )      |   |   |    |   |   |   | (599 | ) |
| Capital      Stock Expense                                                                                                    |   |              |    |   |                 |   | 115       |                   |   |   | (115                                               | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                                                                         |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 2,253,966 |   |
|                                                                                                                          |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                                                     |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income (Loss), Net of Taxes:                                                                         |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of      $677                                   |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | (1,258  | ) |   |   | (1,258 | ) |
| Amortization      of Pension and OPEB Deferred Costs, Net of Tax of $1,346                                                    |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   | 2,499   |   |   |   | 2,499 |   |
| NET      INCOME                                                                                                               |   |              |    |   |                 |   |      |                   |   |   | 120,610                                            |   |   |   |    |   |   |   | 120,610 |   |
| TOTAL      COMPREHENSIVE INCOME                                                                                               |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   | 121,851 |   |
|                                                                                                                          |   |              |    |   |                 |   |      |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2008                                                                                                       |   | $                 | 260,458 |   |                 | $      | 1,200,264 |                   |   | $      | 949,041                                            |   |   | $      | (33,946 | ) |   | $ | 2,375,817 |   |

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

----

|                                                 |   | 2008   |      |   | 2007   |   |
|------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                  |   |   |      |   |   |   |
| Cash      and Cash Equivalents                       |   | $      | 1,987     |   |   | $      | 2,195 |   |
| Accounts      Receivable:                            |   |   |      |   |   |   |   |   |
| Customers                                            |   |   | 204,692   |   |   |   | 176,834 |   |
| Affiliated      Companies                            |   |   | 96,277    |   |   |   | 113,582 |   |
| Accrued      Unbilled Revenues                       |   |   | 43,333    |   |   |   | 38,397 |   |
| Miscellaneous                                        |   |   | 1,923     |   |   |   | 2,823 |   |
| Allowance      for Uncollectible Accounts            |   |   | (16,224   | )      |   |   | (13,948 | ) |
| Total      Accounts Receivable                       |   |   | 330,001   |   |   |   | 317,688 |   |
| Fuel                                                 |   |   | 80,853    |   |   |   | 82,203 |   |
| Materials      and Supplies                          |   |   | 74,552    |   |   |   | 76,685 |   |
| Risk      Management Assets                          |   |   | 81,958    |   |   |   | 62,955 |   |
| Regulatory      Asset for Under-Recovered Fuel Costs |   |   | 90,111    |   |   |   | - |   |
| Prepayments      and Other                           |   |   | 60,431    |   |   |   | 16,369 |   |
| TOTAL                                                |   |   | 719,893   |   |   |   | 558,095 |   |
|                                                 |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                   |   |   |      |   |   |   |   |   |
| Electric:                                            |   |   |      |   |   |   |   |   |
| Production                                           |   |   | 3,655,253 |   |   |   | 3,625,788 |   |
| Transmission                                         |   |   | 1,739,018 |   |   |   | 1,675,081 |   |
| Distribution                                         |   |   | 2,453,323 |   |   |   | 2,372,687 |   |
| Other                                                |   |   | 362,985   |   |   |   | 351,827 |   |
| Construction      Work in Progress                   |   |   | 947,101   |   |   |   | 713,063 |   |
| Total                                                |   |   | 9,157,680 |   |   |   | 8,738,446 |   |
| Accumulated      Depreciation and Amortization       |   |   | 2,662,328 |   |   |   | 2,591,833 |   |
| TOTAL      - NET                                     |   |   | 6,495,352 |   |   |   | 6,146,613 |   |
|                                                 |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                         |   |   |      |   |   |   |   |   |
| Regulatory      Assets                               |   |   | 712,001   |   |   |   | 652,739 |   |
| Long-term      Risk Management Assets                |   |   | 55,199    |   |   |   | 72,366 |   |
| Deferred      Charges and Other                      |   |   | 179,054   |   |   |   | 191,871 |   |
| TOTAL                                                |   |   | 946,254   |   |   |   | 916,976 |   |
|                                                 |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                    |   | $      | 8,161,499 |   |   | $      | 7,621,684 |   |

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

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 93,558    |   |   | $      | 275,257 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
| General                                                             |   |                | 290,320   |   |   |   | 241,871 |   |
| Affiliated      Companies                                           |   |                | 105,647   |   |   |   | 106,852 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 150,016   |   |   |   | 239,732 |   |
| Risk      Management Liabilities                                    |   |                | 75,105    |   |   |   | 51,708 |   |
| Customer      Deposits                                              |   |                | 51,243    |   |   |   | 45,920 |   |
| Accrued      Taxes                                                  |   |                | 34,154    |   |   |   | 58,519 |   |
| Accrued      Interest                                               |   |                | 68,110    |   |   |   | 41,699 |   |
| Other                                                               |   |                | 98,950    |   |   |   | 139,476 |   |
| TOTAL                                                               |   |                | 967,103   |   |   |   | 1,201,034 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 2,873,980 |   |   |   | 2,507,567 |   |
| Long-term      Debt – Affiliated                              |   |                | 100,000   |   |   |   | 100,000 |   |
| Long-term      Risk Management Liabilities                          |   |                | 32,775    |   |   |   | 47,357 |   |
| Deferred      Income Taxes                                          |   |                | 1,073,269 |   |   |   | 948,891 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 509,068   |   |   |   | 505,556 |   |
| Deferred      Credits and Other                                     |   |                | 211,735   |   |   |   | 211,495 |   |
| TOTAL                                                               |   |                | 4,800,827 |   |   |   | 4,320,866 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 5,767,930 |   |   |   | 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                                                |   |                | 1,200,264 |   |   |   | 1,025,149 |   |
| Retained      Earnings                                              |   |                | 949,041   |   |   |   | 831,612 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (33,946   | )      |   |   | (35,187 | ) |
| TOTAL                                                               |   |                | 2,375,817 |   |   |   | 2,082,032 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 8,161,499 |   |   | $      | 7,621,684 |   |

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

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 120,610  |   |   | $      | 18,803 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                         |   |   | 186,528  |   |   |   | 142,100 |   |
| Deferred      Income Taxes                                                                 |   |   | 111,297  |   |   |   | 32,021 |   |
| Extraordinary      Loss, Net of Tax                                                        |   |   | -        |   |   |   | 78,763 |   |
| Carrying      Costs Income                                                                 |   |   | (38,921  | )      |   |   | (22,817 | ) |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (6,278   | )      |   |   | (5,442 | ) |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | 7,450    |   |   |   | (1,949 | ) |
| Change      in Other Noncurrent Assets                                                     |   |   | (24,670  | )      |   |   | (9,185 | ) |
| Change      in Other Noncurrent Liabilities                                                |   |   | (12,565  | )      |   |   | 27,247 |   |
| Changes      in Certain Components of Working Capital:                                     |   |   |     |   |   |   |   |   |
| Accounts      Receivable, Net                                                              |   |   | (12,313  | )      |   |   | (87 | ) |
| Fuel,      Materials and Supplies                                                          |   |   | 3,483    |   |   |   | (11,387 | ) |
| Accounts      Payable                                                                      |   |   | 41,869   |   |   |   | (38,724 | ) |
| Accrued      Taxes, Net                                                                    |   |   | (51,208  | )      |   |   | (9,990 | ) |
| Accrued      Interest                                                                      |   |   | 26,411   |   |   |   | 28,596 |   |
| Fuel      Over/Under-Recovery, Net                                                         |   |   | (113,748 | )      |   |   | 35,770 |   |
| Other      Current Assets                                                                  |   |   | (17,202  | )      |   |   | (21,483 | ) |
| Other      Current Liabilities                                                             |   |   | (12,298  | )      |   |   | (20,702 | ) |
| Net      Cash Flows from Operating Activities                                              |   |   | 208,445  |   |   |   | 221,534 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (487,797 | )      |   |   | (537,930 | ) |
| Change      in Other Cash Deposits, Net                                                    |   |   | (18      | )      |   |   | (29 | ) |
| Change      in Advances to Affiliates, Net                                                 |   |   | -        |   |   |   | (38,573 | ) |
| Proceeds      from Sales of Assets                                                         |   |   | 15,786   |   |   |   | 6,713 |   |
| Other                                                                                      |   |   | -        |   |   |   | (200 | ) |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (472,029 | )      |   |   | (570,019 | ) |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Capital      Contribution from Parent                                                      |   |   | 175,000  |   |   |   | - |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 686,512  |   |   |   | 568,778 |   |
| Change      in Advances from Affiliates, Net                                               |   |   | (181,699 | )      |   |   | (34,975 | ) |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (412,786 | )      |   |   | (125,009 | ) |
| Retirement      of Cumulative Preferred Stock                                              |   |   | -        |   |   |   | (9 | ) |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (3,052   | )      |   |   | (3,316 | ) |
| Amortization      of Funds from Amended Coal Contract                                      |   |   | -        |   |   |   | (32,433 | ) |
| Dividends      Paid on Common Stock                                                        |   |   | -        |   |   |   | (25,000 | ) |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (599     | )      |   |   | (600 | ) |
| Net      Cash Flows from Financing Activities                                              |   |   | 263,376  |   |   |   | 347,436 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Decrease in Cash and Cash Equivalents                                             |   |   | (208     | )      |   |   | (1,049 | ) |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 2,195    |   |   |   | 2,318 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 1,987    |   |   | $      | 1,269 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 110,349  |   |   | $      | 86,199 |   |
| Net      Cash Paid (Received) for Income Taxes                                             |   |   | (26,330  | )      |   |   | 6,688 |   |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 1,246    |   |   |   | 2,738 |   |
| Construction      Expenditures Included in Accounts Payable at September 30,               |   |   | 112,376  |   |   |   | 90,315 |   |

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

----

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

----

----

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES

| Third      Quarter of 2007                        |   |   |   |   | $      | 85     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (4     | )      |   |   |   |   |
| Off-system      Sales                             |   |   | 5      |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 1      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 2      |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (2     | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (3     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (3     | )      |   |   |   |   |
| Interest      Expense                             |   |   | (1     | )      |   |   |   |   |
| Other      Income                                 |   |   | 2      |   |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (7     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 2      |   |
|                                              |   |   |   |   |   |   |   |   |
| Third      Quarter of 2008                        |   |   |   |   |   | $      | 82     |   |

| · | Retail      Margins decreased $4 million primarily due to:                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                  | A      $23 million decrease in residential and commercial revenue primarily due      to a 12% decrease in cooling degree days and the outages caused by the      remnants of Hurricane Ike. |
|   | ·                                                                                                                                                                                  | A      $20 million decrease related to increased fuel, allowance and consumables      expenses.  CSPCo and OPCo have applied for an active fuel clause in      their Ohio ESP to be effective January 1, 2009. |
|   | ·                                                                                                                                                                                  | A      $4 million increase in capacity settlement charges under the      Interconnection Agreement due to a change in relative peak      demands. |
|   | These      decreases were partially offset by a $44 million increase related to a net      increase in rates implemented.                                                               |
| · | Margins      from Off-system Sales increased $5 million primarily due to increased      physical sales margins driven by higher prices, partially offset by lower      trading margins. |

| ·       | Other      Operation and Maintenance expenses increased $2 million due      to:                                                                                                                                                                                                                       |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·  | A      $9 million increase in recoverable PJM costs.                                                                                                                                                                                                                                                  |
| ·  | A      $4 million increase in recoverable customer account expenses related to      the Universal Service Fund for customers who qualify for payment      assistance.                                                                                                                                 |
| ·  | A      $3 million increase in employee-related expenses.                                                                                                                                                                                                                                              |
|         | These      increases were partially offset by a $15 million decrease resulting from a      settlement agreement in the third quarter 2007 related to alleged      violations of the NSR provisions of the CAA.  The $15 million      represents CSPCo’s allocation of the settlement. |
| ·       | Depreciation      and Amortization increased $3 million primarily due to a greater      depreciation base related to environmental improvements placed in      service.                                                                                                                               |
| ·       | Taxes      Other Than Income Taxes increased $3 million due to property tax      adjustments.                                                                                                                                                                                                         |
| ·       | Income      Tax Expense decreased $2 million primarily due to a decrease in pretax      book income.                                                                                                                                                                                                  |

| Nine      Months Ended September 30, 2007         |   |   |   |   | $      | 212    |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | 36     |   |   |   |   |   |
| Off-system      Sales                             |   |   | 24     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 3      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 63     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (45    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 1      |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (12    | )      |   |   |   |   |
| Interest      Expense                             |   |   | (6     | )      |   |   |   |   |
| Other      Income                                 |   |   | 5      |   |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (57    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (4     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30, 2008         |   |   |   |   |   | $      | 214    |   |

| · | Retail      Margins increased $36 million primarily due to:                                                                                                                              |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                   | A      $106 million increase related to a net increase in rates      implemented. |
|   | ·                                                                                                                                                                                   | A      $35 million decrease in capacity settlement charges related to CSPCo’s      Unit Power Agreement (UPA) for AEGCo’s Lawrenceburg Plant, which began in      May 2007, and to the April 2007 acquisition of the Darby      Plant. |
|   | ·                                                                                                                                                                                   | A      $15 million increase in industrial revenue related to higher usage by      Ormet. |
|   | These      increases were partially offset by:                                                                                                                                           |
|   | ·                                                                                                                                                                                   | A      $59 million decrease related to increased fuel, allowance and consumables      expenses.  CSPCo and OPCo have applied for an active fuel clause in      their Ohio ESP to be effective January 1, 2009. |
|   | ·                                                                                                                                                                                   | A      $35 million decrease in residential and commercial revenue primarily due      to a 16% decrease in cooling and a 6% decrease in heating degree      days. |
| · | Margins      from Off-system Sales increased $24 million primarily due to increased      physical sales margins driven by higher prices, partially offset by lower      trading margins. |

| · | Other      Operation and Maintenance expenses increased $45 million primarily due      to:                                                                                                                                                                                                            |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                | A      $17 million increase in recoverable PJM expenses. |
|   | ·                                                                                                                                                                                                                                                                                                | A      $13 million increase in expenses related to CSPCo’s UPA for AEGCo’s      Lawrenceburg Plant which began in May 2007. |
|   | ·                                                                                                                                                                                                                                                                                                | A      $10 million increase in steam plant maintenance expenses primarily related      to work performed at the Conesville Plant. |
|   | ·                                                                                                                                                                                                                                                                                                | A      $9 million increase in recoverable customer account expenses related to      the Universal Service Fund for customers who qualify for payment      assistance. |
|   | ·                                                                                                                                                                                                                                                                                                | A      $4 million increase in boiler plant removal expenses primarily related to      work performed at the Conesville Plant. |
|   | These      increases were partially offset by a $15 million decrease resulting from a      settlement agreement in the third quarter 2007 related to alleged      violations of the NSR provisions of the CAA.  The $15 million      represents CSPCo’s allocation of the settlement. |
| · | Taxes      Other Than Income Taxes increased $12 million due to property tax      adjustments.                                                                                                                                                                                                        |
| · | Interest      Expense increased $6 million due to increased long-term      borrowings.                                                                                                                                                                                                                |
| · | Other      Income increased $5 million primarily due to interest income on federal      tax refunds.                                                                                                                                                                                                  |
| · | Income      Tax Expense increased $4 million primarily due to an increase in pretax      book income and state income taxes.                                                                                                                                                                          |

----

----

|                                                         |   | Three      Months Ended |    |   | Nine      Months Ended |   |
|--------------------------------------------------------------|--------|-------------------------|---------|--------|------------------------|--------|
|                                                         |   | 2008                    |    |   | 2007                   |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                     |   |                    |    |   |                   |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $                       | 633,325 |   |                   | $      | 553,518 |   |   | $ | 1,638,705 |   |   | $ | 1,446,632 |   |
| Sales      to AEP Affiliates                                 |   |                    | 29,032  |   |                   |   | 52,331 |   |   |   | 111,553 |   |   |   | 110,700 |   |
| Other                                                        |   |                    | 1,426   |   |                   |   | 1,292 |   |   |   | 4,121 |   |   |   | 3,743 |   |
| TOTAL                                                        |   |                    | 663,783 |   |                   |   | 607,141 |   |   |   | 1,754,379 |   |   |   | 1,561,075 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                     |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |                    | 112,566 |   |                   |   | 103,560 |   |   |   | 283,946 |   |   |   | 255,764 |   |
| Purchased      Electricity for Resale                        |   |                    | 63,441  |   |                   |   | 49,619 |   |   |   | 150,637 |   |   |   | 113,765 |   |
| Purchased      Electricity from AEP Affiliates               |   |                    | 139,017 |   |                   |   | 107,386 |   |   |   | 343,699 |   |   |   | 278,715 |   |
| Other      Operation                                         |   |                    | 87,358  |   |                   |   | 83,625 |   |   |   | 245,379 |   |   |   | 207,300 |   |
| Maintenance                                                  |   |                    | 23,039  |   |                   |   | 24,250 |   |   |   | 80,705 |   |   |   | 73,537 |   |
| Depreciation      and Amortization                           |   |                    | 50,373  |   |                   |   | 47,589 |   |   |   | 146,668 |   |   |   | 147,332 |   |
| Taxes      Other Than Income Taxes                           |   |                    | 44,533  |   |                   |   | 41,382 |   |   |   | 130,078 |   |   |   | 117,760 |   |
| TOTAL                                                        |   |                    | 520,327 |   |                   |   | 457,411 |   |   |   | 1,381,112 |   |   |   | 1,194,173 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                        |   |                    | 143,456 |   |                   |   | 149,730 |   |   |   | 373,267 |   |   |   | 366,902 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                 |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                         |   |                    | 1,515   |   |                   |   | 166 |   |   |   | 5,457 |   |   |   | 782 |   |
| Carrying      Costs Income                                   |   |                    | 1,566   |   |                   |   | 1,261 |   |   |   | 4,870 |   |   |   | 3,492 |   |
| Allowance      for Equity Funds Used During Construction     |   |                    | 745     |   |                   |   | 738 |   |   |   | 2,165 |   |   |   | 2,130 |   |
| Interest      Expense                                        |   |                    | (21,127 | )      |                   |   | (19,530 | ) |   |   | (57,612 | ) |   |   | (51,193 | ) |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |                    | 126,155 |   |                   |   | 132,365 |   |   |   | 328,147 |   |   |   | 322,113 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                      |   |                    | 44,493  |   |                   |   | 46,911 |   |   |   | 113,939 |   |   |   | 109,656 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                              |   |                    | 81,662  |   |                   |   | 85,454 |   |   |   | 214,208 |   |   |   | 212,457 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Capital      Stock Expense                                   |   |                    | 39      |   |                   |   | 39 |   |   |   | 118 |   |   |   | 118 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                     |   | $                       | 81,623  |   |                   | $      | 85,415 |   |   | $ | 214,090 |   |   | $ | 212,339 |   |

| The      common stock of CSPCo is wholly-owned byAEP. |
|-------------------------------------------------------|

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

----

|                                                                     |   | 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                                              |   |              |   |   |                 |   |    |                   |   |   | (90,000                                            | )      |   |   |    |   |   |   | (90,000 | ) |
| Capital      Stock Expense and Other                                     |   |              |   |   |                 |   | 118     |                   |   |   | (118                                               | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 962,995 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Loss, Net of Taxes:                             |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $1,231                              |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | (2,285  | ) |   |   | (2,285 | ) |
| NET      INCOME                                                          |   |              |   |   |                 |   |    |                   |   |   | 212,457                                            |   |   |   |    |   |   |   | 212,457 |   |
| TOTAL      COMPREHENSIVE INCOME                                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 210,172 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2007                                                  |   | $                 | 41,026 |   |                 | $      | 580,310 |                   |   | $      | 576,104                                            |   |   | $      | (24,273 | ) |   | $ | 1,173,167 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| 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                                              |   |              |   |   |                 |   |    |                   |   |   | (87,500                                            | )      |   |   |    |   |   |   | (87,500 | ) |
| Capital      Stock Expense                                               |   |              |   |   |                 |   | 118     |                   |   |   | (118                                               | )      |   |   |    |   |   |   | - |   |
| TOTAL                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,075,366 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:                      |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $582                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 1,080   |   |   |   | 1,080 |   |
| Amortization      of Pension and OPEB Deferred Costs, Net of Tax of $456 |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 846     |   |   |   | 846 |   |
| NET      INCOME                                                          |   |              |   |   |                 |   |    |                   |   |   | 214,208                                            |   |   |   |    |   |   |   | 214,208 |   |
| TOTAL      COMPREHENSIVE INCOME                                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 216,134 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2008                                                  |   | $                 | 41,026 |   |                 | $      | 580,467 |                   |   | $      | 686,875                                            |   |   | $      | (16,868 | ) |   | $ | 1,291,500 |   |

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

----

|                                           |   | 2008   |      |   | 2007   |   |
|------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                            |   |   |      |   |   |   |
| Cash      and Cash Equivalents                 |   | $      | 1,956     |   |   | $      | 1,389 |   |
| Other      Cash Deposits                       |   |   | 31,964    |   |   |   | 53,760 |   |
| Advances      to Affiliates                    |   |   | 21,833    |   |   |   | - |   |
| Accounts      Receivable:                      |   |   |      |   |   |   |   |   |
| Customers                                      |   |   | 65,581    |   |   |   | 57,268 |   |
| Affiliated      Companies                      |   |   | 27,933    |   |   |   | 32,852 |   |
| Accrued      Unbilled Revenues                 |   |   | 24,078    |   |   |   | 14,815 |   |
| Miscellaneous                                  |   |   | 11,256    |   |   |   | 9,905 |   |
| Allowance      for Uncollectible Accounts      |   |   | (2,814    | )      |   |   | (2,563 | ) |
| Total      Accounts Receivable                 |   |   | 126,034   |   |   |   | 112,277 |   |
| Fuel                                           |   |   | 30,081    |   |   |   | 35,849 |   |
| Materials      and Supplies                    |   |   | 34,979    |   |   |   | 36,626 |   |
| Emission      Allowances                       |   |   | 7,884     |   |   |   | 16,811 |   |
| Risk      Management Assets                    |   |   | 40,842    |   |   |   | 33,558 |   |
| Prepayments      and Other                     |   |   | 31,984    |   |   |   | 9,960 |   |
| TOTAL                                          |   |   | 327,557   |   |   |   | 300,230 |   |
|                                           |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT             |   |   |      |   |   |   |   |   |
| Electric:                                      |   |   |      |   |   |   |   |   |
| Production                                     |   |   | 2,317,357 |   |   |   | 2,072,564 |   |
| Transmission                                   |   |   | 568,380   |   |   |   | 510,107 |   |
| Distribution                                   |   |   | 1,600,323 |   |   |   | 1,552,999 |   |
| Other                                          |   |   | 211,475   |   |   |   | 198,476 |   |
| Construction      Work in Progress             |   |   | 322,885   |   |   |   | 415,327 |   |
| Total                                          |   |   | 5,020,420 |   |   |   | 4,749,473 |   |
| Accumulated      Depreciation and Amortization |   |   | 1,758,415 |   |   |   | 1,697,793 |   |
| TOTAL      - NET                               |   |   | 3,262,005 |   |   |   | 3,051,680 |   |
|                                           |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                   |   |   |      |   |   |   |   |   |
| Regulatory      Assets                         |   |   | 204,203   |   |   |   | 235,883 |   |
| Long-term      Risk Management Assets          |   |   | 30,268    |   |   |   | 41,852 |   |
| Deferred      Charges and Other                |   |   | 125,071   |   |   |   | 181,563 |   |
| TOTAL                                          |   |   | 359,542   |   |   |   | 459,298 |   |
|                                           |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                              |   | $      | 3,949,104 |   |   | $      | 3,811,208 |   |

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

----

|                                                            |   | 2008                |      |   | 2007   |   |
|-----------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                        |   | (in      thousands) |      |
| Advances      from Affiliates                                   |   | $                   | -         |   |   | $      | 95,199 |   |
| Accounts      Payable:                                          |   |                |      |   |   |   |   |   |
| General                                                         |   |                | 145,733   |   |   |   | 113,290 |   |
| Affiliated      Companies                                       |   |                | 53,532    |   |   |   | 65,292 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated   |   |                | -         |   |   |   | 112,000 |   |
| Risk      Management Liabilities                                |   |                | 37,331    |   |   |   | 28,237 |   |
| Customer      Deposits                                          |   |                | 29,995    |   |   |   | 43,095 |   |
| Accrued      Taxes                                              |   |                | 153,391   |   |   |   | 179,831 |   |
| Other                                                           |   |                | 84,432    |   |   |   | 96,892 |   |
| TOTAL                                                           |   |                | 504,414   |   |   |   | 733,836 |   |
|                                                            |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                     |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                       |   |                | 1,343,491 |   |   |   | 1,086,224 |   |
| Long-term      Debt – Affiliated                          |   |                | 100,000   |   |   |   | 100,000 |   |
| Long-term      Risk Management Liabilities                      |   |                | 18,061    |   |   |   | 27,419 |   |
| Deferred      Income Taxes                                      |   |                | 447,465   |   |   |   | 437,306 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits |   |                | 155,332   |   |   |   | 165,635 |   |
| Deferred      Credits and Other                                 |   |                | 88,841    |   |   |   | 96,511 |   |
| TOTAL                                                           |   |                | 2,153,190 |   |   |   | 1,913,095 |   |
|                                                            |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                          |   |                | 2,657,604 |   |   |   | 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                                            |   |                | 580,467   |   |   |   | 580,349 |   |
| Retained      Earnings                                          |   |                | 686,875   |   |   |   | 561,696 |   |
| Accumulated      Other Comprehensive Income (Loss)              |   |                | (16,868   | )      |   |   | (18,794 | ) |
| TOTAL                                                           |   |                | 1,291,500 |   |   |   | 1,164,277 |   |
|                                                            |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDER’S EQUITY           |   | $                   | 3,949,104 |   |   | $      | 3,811,208 |   |

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

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 214,208  |   |   | $      | 212,457 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                         |   |   | 146,668  |   |   |   | 147,332 |   |
| Deferred      Income Taxes                                                                 |   |   | 8,981    |   |   |   | (13,959 | ) |
| Carrying      Costs Income                                                                 |   |   | (4,870   | )      |   |   | (3,492 | ) |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (2,165   | )      |   |   | (2,130 | ) |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | 5,326    |   |   |   | 1,321 |   |
| Deferred      Property Taxes                                                               |   |   | 65,763   |   |   |   | 57,890 |   |
| Change      in Other Noncurrent Assets                                                     |   |   | (7,942   | )      |   |   | (29,199 | ) |
| Change      in Other Noncurrent Liabilities                                                |   |   | (4,081   | )      |   |   | 2,713 |   |
| Changes      in Certain Components of Working Capital:                                     |   |   |     |   |   |   |   |   |
| Accounts      Receivable, Net                                                              |   |   | (13,757  | )      |   |   | (13,040 | ) |
| Fuel,      Materials and Supplies                                                          |   |   | 7,415    |   |   |   | (2,332 | ) |
| Accounts      Payable                                                                      |   |   | (2,650   | )      |   |   | (13,336 | ) |
| Customer      Deposits                                                                     |   |   | (13,100  | )      |   |   | 10,212 |   |
| Accrued      Taxes, Net                                                                    |   |   | (26,358  | )      |   |   | (44,295 | ) |
| Other      Current Assets                                                                  |   |   | (13,178  | )      |   |   | (1,490 | ) |
| Other      Current Liabilities                                                             |   |   | (14,018  | )      |   |   | 8,817 |   |
| Net      Cash Flows from Operating Activities                                              |   |   | 346,242  |   |   |   | 317,469 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (304,175 | )      |   |   | (246,130 | ) |
| Change      in Other Cash Deposits, Net                                                    |   |   | 21,796   |   |   |   | (44,360 | ) |
| Change      in Advances to Affiliates, Net                                                 |   |   | (21,833  | )      |   |   | - |   |
| Acquisition      of Darby Plant                                                            |   |   | -        |   |   |   | (102,032 | ) |
| Proceeds      from Sales of Assets                                                         |   |   | 1,287    |   |   |   | 1,016 |   |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (302,925 | )      |   |   | (391,506 | ) |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 346,407  |   |   |   | 44,257 |   |
| Change      in Advances from Affiliates, Net                                               |   |   | (95,199  | )      |   |   | 122,347 |   |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (204,245 | )      |   |   | - |   |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (2,213   | )      |   |   | (2,191 | ) |
| Dividends      Paid on Common Stock                                                        |   |   | (87,500  | )      |   |   | (90,000 | ) |
| Net      Cash Flows from (Used for) Financing Activities                                   |   |   | (42,750  | )      |   |   | 74,413 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Increase in Cash and Cash Equivalents                                             |   |   | 567      |   |   |   | 376 |   |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 1,389    |   |   |   | 1,319 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 1,956    |   |   | $      | 1,695 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 57,004   |   |   | $      | 53,464 |   |
| Net      Cash Paid for Income Taxes                                                        |   |   | 53,682   |   |   |   | 93,709 |   |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 1,374    |   |   |   | 1,900 |   |
| Construction      Expenditures Included in Accounts Payable at September 30,               |   |   | 51,997   |   |   |   | 34,630 |   |
| Noncash      Assumption of Liabilities Related to Acquisition of Darby      Plant          |   |   | -        |   |   |   | 2,339 |   |

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

----

|                                                      | FootnoteReference |
|-----------------------------------------------------------|-------------------|
|                                                      |              |
| Significant      Accounting Matters                       | Note      1       |
| New      Accounting Pronouncements and Extraordinary Item | Note      2       |
| Rate      Matters                                         | Note      3       |
| Commitments,      Guarantees and Contingencies            | Note      4       |
| 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

| Third      Quarter of 2007                        |   |   |   |   | $      | 49     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (16    | )      |   |   |   |   |
| FERC      Municipals and Cooperatives             |   |   | (2     | )      |   |   |   |   |
| Off-system      Sales                             |   |   | 4      |   |   |   |   |   |
| Other                                             |   |   | 10     |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | (4     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (2     | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 4      |   |   |   |   |   |
| Other      Income                                 |   |   | (1     | )      |   |   |   |   |
| Interest      Expense                             |   |   | (2     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (1     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 2      |   |
|                                              |   |   |   |   |   |   |   |   |
| Third      Quarter of 2008                        |   |   |   |   |   | $      | 46     |   |

| · | Retail      Margins decreased $16 million primarily due to lower retail sales      reflecting weather conditions as cooling degree days decreased at      least 12% in both the Indiana and Michigan    jurisdictions.                                                                                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Margins      from Off-system Sales increased $4 million primarily due to increased      physical sales margins driven by higher prices, partially offset by lower      trading margins.                                                                                                                                                                                                                 |
| · | Other      revenues increased $10 million primarily due to increased River      Transportation Division (RTD) revenues for barging      services.  RTD’s related expenses which offset the RTD revenue      increase are included in Other Operation on the Condensed Consolidated      Statements of Income resulting in earning only a return approved under a      regulatory order. |

| · | Other      Operation and Maintenance expenses increased $2 million primarily due to      higher operation and maintenance expenses for RTD of $11 million caused by      increased barging activity and increased cost of fuel in 2008, partially      offset by a $9 million decrease in coal-fired plant operation      expenses.  A settlement agreement related to alleged violations      of the NSR provisions of the CAA, of which $14 million was allocated to      I&M, increased 2007 Other Operation and Maintenance      expenses. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization expense decreased $4 million primarily due to reduced      depreciation rates reflecting longer estimated lives for Cook and Tanners      Creek Plants.  Depreciation rates were reduced for the FERC and      Michigan jurisdictions in October 2007.  See “Michigan      Depreciation Study Filing” section of Note 4 in the 2007 Annual      Report.                                                                                                                                   |
| · | Income      Tax Expense decreased $2 million primarily due to a decrease in pretax      book income.                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

| Nine      Months Ended September 30, 2007         |   |   |   |    |   | $      | 109    |    |
|---------------------------------------------------|--------|--------|--------|---------|--------|--------|--------|---------|
|                                              |   |   |   |    |   |   |   |    |
| Changes      in Gross Margin:                     |   |   |   |    |   |   |   |    |
| Retail      Margins                               |   |   | (19    | )  |   |   |   |    |
| FERC      Municipals and Cooperatives             |   |   | 4      |    |   |   |   |    |
| Off-system      Sales                             |   |   | 18     |    |   |   |   |    |
| Transmission      Revenues                        |   |   | (2     | )  |   |   |   |    |
| Other                                             |   |   | 31     |    |   |   |   |    |
| Total      Change in Gross Margin                 |   |   |   |    |   |   | 32     |    |
|                                              |   |   |   |    |   |   |   |    |
| Changes      in Operating Expenses and Other:     |   |   |   |    |   |   |   |    |
| Other      Operation and Maintenance              |   |   | (24    | )  |   |   |   |    |
| Depreciation      and Amortization                |   |   | 50     |    |   |   |   |    |
| Taxes      Other Than Income Taxes                |   |   | (3     | )  |   |   |   |    |
| Total      Change in Operating Expenses and Other |   |   |   |    |   |   | 23     |    |
|                                              |   |   |   |    |   |   |   |    |
| Income      Tax Expense                           |   |   |   |    |   |   | (13    | )  |
|                                              |   |   |   |    |   |   |   |    |
| Nine      Months Ended September 30, 2008         |   |   |   |    |   | $      | 151    |    |

| · | Retail      Margins decreased $19 million primarily due to lower retail sales      reflecting weather conditions as cooling degree days decreased at      least 19% in both the Indiana and Michigan    jurisdictions.                                                                                                                                 |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Margins      from Off-system Sales increased $18 million primarily due to increased      physical sales margins driven by higher prices, partially offset by lower      trading margins.                                                                                                                                                                         |
| · | Other      revenues increased $31 million primarily due to increased RTD revenues for      barging services.  RTD’s related expenses which offset the RTD      revenue increase are included in Other Operation on the Condensed      Consolidated Statements of Income resulting in earning only a return      approved under regulatory order. |

| · | Other Operation      and Maintenance expenses increased $24 million primarily due to higher      operation and maintenance expenses for RTD of $31 million caused by      increased barging activity and increased cost of fuel and an increase in      nuclear operation and maintenance expenses of $16      million.  Lower coal-fired plant operation and maintenance      expenses of $18 million, including the NSR settlement, and a $5 million      decrease in accretion expense partially offset the    increases. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Depreciation      and Amortization expense decreased $50 million primarily due to the      reduced depreciation rates in all jurisdictions.  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 $13 million primarily due to an increase in pretax      book income and a decrease in amortization of investment tax credits,      partially offset by changes in certain book/tax differences accounted for      on a flow-through basis.                                                                                                                                                                                                                                                                |

----

----

|                                                         |   | Three      Months Ended |    |   | Nine      Months Ended |   |
|--------------------------------------------------------------|--------|-------------------------|---------|--------|------------------------|--------|
|                                                         |   | 2008                    |    |   | 2007                   |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                     |   |                    |    |   |                   |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $                       | 513,548 |   |                   | $      | 478,907 |   |   | $ | 1,370,158 |   |   | $ | 1,286,223 |   |
| Sales      to AEP Affiliates                                 |   |                    | 72,295  |   |                   |   | 56,262 |   |   |   | 232,734 |   |   |   | 186,653 |   |
| Other      – Affiliated                                |   |                    | 31,792  |   |                   |   | 16,250 |   |   |   | 84,268 |   |   |   | 43,488 |   |
| Other      – Nonaffiliated                             |   |                    | 3,388   |   |                   |   | 7,757 |   |   |   | 13,659 |   |   |   | 21,718 |   |
| TOTAL                                                        |   |                    | 621,023 |   |                   |   | 559,176 |   |   |   | 1,700,819 |   |   |   | 1,538,082 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                     |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |                    | 141,563 |   |                   |   | 103,740 |   |   |   | 351,300 |   |   |   | 290,507 |   |
| Purchased      Electricity for Resale                        |   |                    | 39,427  |   |                   |   | 26,580 |   |   |   | 87,351 |   |   |   | 63,830 |   |
| Purchased      Electricity from AEP Affiliates               |   |                    | 112,060 |   |                   |   | 96,451 |   |   |   | 296,559 |   |   |   | 249,755 |   |
| Other      Operation                                         |   |                    | 136,875 |   |                   |   | 129,439 |   |   |   | 381,928 |   |   |   | 367,483 |   |
| Maintenance                                                  |   |                    | 52,573  |   |                   |   | 58,502 |   |   |   | 156,402 |   |   |   | 146,657 |   |
| Depreciation      and Amortization                           |   |                    | 31,822  |   |                   |   | 35,604 |   |   |   | 95,301 |   |   |   | 145,801 |   |
| Taxes      Other Than Income Taxes                           |   |                    | 19,992  |   |                   |   | 19,704 |   |   |   | 60,236 |   |   |   | 56,936 |   |
| TOTAL                                                        |   |                    | 534,312 |   |                   |   | 470,020 |   |   |   | 1,429,077 |   |   |   | 1,320,969 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                        |   |                    | 86,711  |   |                   |   | 89,156 |   |   |   | 271,742 |   |   |   | 217,113 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                 |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income                                            |   |                    | 880     |   |                   |   | 1,986 |   |   |   | 4,621 |   |   |   | 4,273 |   |
| Interest      Expense                                        |   |                    | (20,629 | )      |                   |   | (18,312 | ) |   |   | (56,977 | ) |   |   | (57,744 | ) |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |                    | 66,962  |   |                   |   | 72,830 |   |   |   | 219,386 |   |   |   | 163,642 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                      |   |                    | 21,326  |   |                   |   | 23,706 |   |   |   | 68,348 |   |   |   | 55,020 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                              |   |                    | 45,636  |   |                   |   | 49,124 |   |   |   | 151,038 |   |   |   | 108,622 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                   |   |                    | 85      |   |                   |   | 85 |   |   |   | 255 |   |   |   | 255 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                     |   | $                       | 45,551  |   |                   | $      | 49,039 |   |   | $ | 150,783 |   |   | $ | 108,367 |   |

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

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

----

|                                                                     |   | 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                                              |   |              |   |   |                 |   |    |                   |   |   | (30,000                                            | )      |   |   |    |   |   |   | (30,000 | ) |
| Preferred      Stock Dividends                                           |   |              |   |   |                 |   |    |                   |   |   | (255                                               | )      |   |   |    |   |   |   | (255 | ) |
| Gain      on Reacquired Preferred Stock                                  |   |              |   |   |                 |   | 1       |                   |   |   |                                               |   |   |   |    |   |   |   | 1 |   |
| TOTAL                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,259,512 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Loss, Net of Taxes:                             |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $941                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | (1,747  | ) |   |   | (1,747 | ) |
| NET      INCOME                                                          |   |              |   |   |                 |   |    |                   |   |   | 108,622                                            |   |   |   |    |   |   |   | 108,622 |   |
| TOTAL      COMPREHENSIVE INCOME                                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 106,875 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2007                                                  |   | $                 | 56,584 |   |                 | $      | 861,291 |                   |   | $      | 465,310                                            |   |   | $      | (16,798 | ) |   | $ | 1,366,387 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| 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                                              |   |              |   |   |                 |   |    |                   |   |   | (56,250                                            | )      |   |   |    |   |   |   | (56,250 | ) |
| Preferred      Stock Dividends                                           |   |              |   |   |                 |   |    |                   |   |   | (255                                               | )      |   |   |    |   |   |   | (255 | ) |
| TOTAL                                                                    |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,327,796 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:                           |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $967                                |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 1,795   |   |   |   | 1,795 |   |
| Amortization      of Pension and OPEB Deferred Costs, Net of Tax of $178 |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   | 331     |   |   |   | 331 |   |
| NET      INCOME                                                          |   |              |   |   |                 |   |    |                   |   |   | 151,038                                            |   |   |   |    |   |   |   | 151,038 |   |
| TOTAL      COMPREHENSIVE INCOME                                          |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 153,164 |   |
|                                                                     |   |              |   |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2008                                                  |   | $                 | 56,584 |   |                 | $      | 861,291 |                   |   | $      | 576,634                                            |   |   | $      | (13,549 | ) |   | $ | 1,480,960 |   |

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

----

|                                                      |   | 2008   |      |   | 2007   |   |
|-----------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                       |   |   |      |   |   |   |
| Cash      and Cash Equivalents                            |   | $      | 1,328     |   |   | $      | 1,139 |   |
| Accounts      Receivable:                                 |   |   |      |   |   |   |   |   |
| Customers                                                 |   |   | 82,788    |   |   |   | 70,995 |   |
| Affiliated      Companies                                 |   |   | 77,640    |   |   |   | 92,018 |   |
| Accrued      Unbilled Revenues                            |   |   | 21,028    |   |   |   | 16,207 |   |
| Miscellaneous                                             |   |   | 2,010     |   |   |   | 1,335 |   |
| Allowance      for Uncollectible Accounts                 |   |   | (3,200    | )      |   |   | (2,711 | ) |
| Total      Accounts Receivable                            |   |   | 180,266   |   |   |   | 177,844 |   |
| Fuel                                                      |   |   | 46,745    |   |   |   | 61,342 |   |
| Materials      and Supplies                               |   |   | 143,245   |   |   |   | 141,384 |   |
| Risk      Management Assets                               |   |   | 40,215    |   |   |   | 32,365 |   |
| Accrued      Tax Benefits                                 |   |   | 1,004     |   |   |   | 4,438 |   |
| Prepayments      and Other                                |   |   | 35,829    |   |   |   | 11,091 |   |
| TOTAL                                                     |   |   | 448,632   |   |   |   | 429,603 |   |
|                                                      |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                        |   |   |      |   |   |   |   |   |
| Electric:                                                 |   |   |      |   |   |   |   |   |
| Production                                                |   |   | 3,512,424 |   |   |   | 3,529,524 |   |
| Transmission                                              |   |   | 1,100,255 |   |   |   | 1,078,575 |   |
| Distribution                                              |   |   | 1,262,017 |   |   |   | 1,196,397 |   |
| Other      (including nuclear fuel and coal mining)       |   |   | 655,257   |   |   |   | 626,390 |   |
| Construction      Work in Progress                        |   |   | 173,062   |   |   |   | 122,296 |   |
| Total                                                     |   |   | 6,703,015 |   |   |   | 6,553,182 |   |
| Accumulated      Depreciation, Depletion and Amortization |   |   | 3,000,898 |   |   |   | 2,998,416 |   |
| TOTAL      - NET                                          |   |   | 3,702,117 |   |   |   | 3,554,766 |   |
|                                                      |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                              |   |   |      |   |   |   |   |   |
| Regulatory      Assets                                    |   |   | 251,451   |   |   |   | 246,435 |   |
| Spent      Nuclear Fuel and Decommissioning Trusts        |   |   | 1,291,986 |   |   |   | 1,346,798 |   |
| Long-term      Risk Management Assets                     |   |   | 29,518    |   |   |   | 40,227 |   |
| Deferred      Charges and Other                           |   |   | 118,574   |   |   |   | 128,623 |   |
| TOTAL                                                     |   |   | 1,691,529 |   |   |   | 1,762,083 |   |
|                                                      |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                         |   | $      | 5,842,278 |   |   | $      | 5,746,452 |   |

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

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 224,071   |   |   | $      | 45,064 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
| General                                                             |   |                | 177,480   |   |   |   | 184,435 |   |
| Affiliated      Companies                                           |   |                | 64,970    |   |   |   | 61,749 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 50,000    |   |   |   | 145,000 |   |
| Risk      Management Liabilities                                    |   |                | 36,802    |   |   |   | 27,271 |   |
| Customer      Deposits                                              |   |                | 26,957    |   |   |   | 26,445 |   |
| Accrued      Taxes                                                  |   |                | 60,111    |   |   |   | 60,995 |   |
| Obligations      Under Capital Leases                               |   |                | 43,626    |   |   |   | 43,382 |   |
| Other                                                               |   |                | 133,267   |   |   |   | 130,232 |   |
| TOTAL                                                               |   |                | 817,284   |   |   |   | 724,573 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 1,377,115 |   |   |   | 1,422,427 |   |
| Long-term      Risk Management Liabilities                          |   |                | 17,585    |   |   |   | 26,348 |   |
| Deferred      Income Taxes                                          |   |                | 382,374   |   |   |   | 321,716 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 693,981   |   |   |   | 789,346 |   |
| Asset      Retirement Obligations                                   |   |                | 886,278   |   |   |   | 852,646 |   |
| Deferred      Credits and Other                                     |   |                | 178,621   |   |   |   | 215,617 |   |
| TOTAL                                                               |   |                | 3,535,954 |   |   |   | 3,628,100 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 4,353,238 |   |   |   | 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                                              |   |                | 576,634   |   |   |   | 483,499 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (13,549   | )      |   |   | (15,675 | ) |
| TOTAL                                                               |   |                | 1,480,960 |   |   |   | 1,385,699 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 5,842,278 |   |   | $      | 5,746,452 |   |

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

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 151,038  |   |   | $      | 108,622 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                         |   |   | 95,301   |   |   |   | 145,801 |   |
| Deferred      Income Taxes                                                                 |   |   | 47,565   |   |   |   | (9,235 | ) |
| Amortization      of Incremental Nuclear Refueling Outage Expenses, Net                    |   |   | 834      |   |   |   | 14,450 |   |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (967     | )      |   |   | (2,726 | ) |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | 4,876    |   |   |   | 3,046 |   |
| Amortization      of Nuclear Fuel                                                          |   |   | 72,453   |   |   |   | 48,360 |   |
| Change      in Other Noncurrent Assets                                                     |   |   | 5,678    |   |   |   | 17,163 |   |
| Change      in Other Noncurrent Liabilities                                                |   |   | 38,568   |   |   |   | 33,995 |   |
| Changes      in Certain Components of Working Capital:                                     |   |   |     |   |   |   |   |   |
| Accounts      Receivable, Net                                                              |   |   | (2,422   | )      |   |   | 34,569 |   |
| Fuel,      Materials and Supplies                                                          |   |   | 12,736   |   |   |   | 14,584 |   |
| Accounts      Payable                                                                      |   |   | 16,549   |   |   |   | (27,015 | ) |
| Accrued      Taxes, Net                                                                    |   |   | 2,550    |   |   |   | 41,243 |   |
| Other      Current Assets                                                                  |   |   | (24,736  | )      |   |   | (4,595 | ) |
| Other      Current Liabilities                                                             |   |   | 1,393    |   |   |   | 3,150 |   |
| Net      Cash Flows from Operating Activities                                              |   |   | 421,416  |   |   |   | 421,412 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (221,538 | )      |   |   | (191,110 | ) |
| Purchases      of Investment Securities                                                    |   |   | (413,538 | )      |   |   | (561,509 | ) |
| Sales      of Investment Securities                                                        |   |   | 362,773  |   |   |   | 505,620 |   |
| Acquisitions      of Nuclear Fuel                                                          |   |   | (99,110  | )      |   |   | (73,112 | ) |
| Proceeds      from Sales of Assets and Other                                               |   |   | 3,376    |   |   |   | 670 |   |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (368,037 | )      |   |   | (319,441 | ) |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 115,225  |   |   |   | - |   |
| Change      in Advances from Affiliates, Net                                               |   |   | 179,007  |   |   |   | (66,939 | ) |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (262,000 | )      |   |   | - |   |
| Retirement      of Cumulative Preferred Stock                                              |   |   | -        |   |   |   | (2 | ) |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (28,917  | )      |   |   | (3,954 | ) |
| Dividends      Paid on Common Stock                                                        |   |   | (56,250  | )      |   |   | (30,000 | ) |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (255     | )      |   |   | (255 | ) |
| Net      Cash Flows Used for Financing Activities                                          |   |   | (53,190  | )      |   |   | (101,150 | ) |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Increase in Cash and Cash Equivalents                                             |   |   | 189      |   |   |   | 821 |   |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 1,139    |   |   |   | 1,369 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 1,328    |   |   | $      | 2,190 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 57,086   |   |   | $      | 49,628 |   |
| Net      Cash Paid for Income Taxes                                                        |   |   | 7,482    |   |   |   | 14,395 |   |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 3,279    |   |   |   | 5,847 |   |
| Construction      Expenditures Included in Accounts Payable at September 30,               |   |   | 26,150   |   |   |   | 23,935 |   |
| Acquisition      of Nuclear Fuel Included in Accounts Payable at September    30,          |   |   | 66,127   |   |   |   | 691 |   |

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

----

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

----

----

OHIO POWER COMPANY CONSOLIDATED

| Third      Quarter of 2007                        |   |   |   |   | $      | 75     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (48    | )      |   |   |   |   |
| Off-system      Sales                             |   |   | 11     |   |   |   |   |   |
| Other                                             |   |   | 3      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | (34    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (2     | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | 12     |   |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | (1     | )      |   |   |   |   |
| Other      Income                                 |   |   | 2      |   |   |   |   |   |
| Interest      Expense                             |   |   | (4     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 7      |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 8      |   |
|                                              |   |   |   |   |   |   |   |   |
| Third      Quarter of 2008                        |   |   |   |   |   | $      | 56     |   |

| · | Retail      Margins decreased $48 million primarily due to the    following:                                                                                                             |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                   | A      $57 million decrease related to increased fuel and consumables      expenses.  CSPCo and OPCo have applied for an active fuel clause in      their Ohio ESP to be effective January 1, 2009. |
|   | ·                                                                                                                                                                                   | An      $8 million decrease in residential revenue primarily due to an 18%      decrease in cooling degree days and the outages caused by the remnants of      Hurricane Ike. |
|   | These      decreases were partially offset by:                                                                                                                                           |
|   | ·                                                                                                                                                                                   | A      $17 million increase related to a net increase in rates      implemented. |
|   | ·                                                                                                                                                                                   | A      $10 million increase in capacity settlements under the Interconnection      Agreement related to an increase in an affiliate’speak. |
| · | Margins      from Off-system Sales increased $11 million primarily due to increased      physical sales margins driven by higher prices, partially offset by lower      trading margins. |
| · | Other      revenues increased $3 million primarily due to increased gains on sales of      emission allowances.                                                                          |

| · | Other      Operation and Maintenance expenses increased $2 million primarily due      to:                                                                                                                                                                                                                                                                                                                                |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                   | A      $6 million increase in recoverable PJM expenses. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                   | A      $4 million increase in employee-related expenses. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                   | A      $4 million increase in recoverable customer account expenses related to      the Universal Service Fund for customers who qualify for payment      assistance. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                   | A      $3 million increase in operation and maintenance expenses related to      service restoration expenses from the remnants of Hurricane      Ike. |
|   | ·                                                                                                                                                                                                                                                                                                                                                                                                                   | A      $2 million increase in plant maintenance expenses. |
|   | These      increases were partially offset by a $17 million decrease resulting from a      settlement agreement in the third quarter 2007 related to alleged      violations of the NSR provisions of the CAA.  The $17 million      represents OPCo’s allocation of the settlement.                                                                                                                     |
| · | Depreciation      and Amortization expense decreased $12 million primarily due to an $18      million decrease in amortization as a result of completion of amortization      of regulatory assets in December 2007, partially offset by a $5 million      increase in depreciation related to environmental improvements placed in      service at the Cardinal Plant in 2008 and the Mitchell Plant in July      2007. |
| · | Interest      Expense increased $4 million primarily due to a decrease in the debt      component of AFUDC as a result of Mitchell Plant and Cardinal Plant      environmental improvements placed in service and higher interest rates on      variable rate debt.                                                                                                                                                      |
| · | Income      Tax Expense decreased $8 million primarily due to a decrease in pretax      book income.                                                                                                                                                                                                                                                                                                                     |

| Nine      Months Ended September 30, 2007         |   |   |   |   | $      | 229    |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      Margins                               |   |   | (55    | )      |   |   |   |   |
| Off-system      Sales                             |   |   | 34     |   |   |   |   |   |
| Other                                             |   |   | 12     |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | (9     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | 8      |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | 42     |   |   |   |   |   |
| Carrying      Costs Income                        |   |   | 1      |   |   |   |   |   |
| Other      Income                                 |   |   | 6      |   |   |   |   |   |
| Interest      Expense                             |   |   | (20    | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 37     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (10    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30, 2008         |   |   |   |   |   | $      | 247    |   |

| · | Retail      Margins decreased $55 million primarily due to the    following:                                                                                             |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                   | A      $105 million decrease related to increased fuel and consumables      expenses.  CSPCo and OPCo have applied for an active fuel clause in      their Ohio ESP to be effective January 1, 2009. |
|   | ·                                                                                                                                                                   | A      $9 million decrease in residential revenues primarily due to a 21%      decrease in cooling degree days. |
|   | These      decreases were partially offset by:                                                                                                                           |
|   | ·                                                                                                                                                                   | A      $42 million increase related to a net increase in rates      implemented. |
|   | ·                                                                                                                                                                   | A      $29 million increase related to coal contract amendments in      2008. |
|   | ·                                                                                                                                                                   | A      $17 million increase in capacity settlements under the Interconnection      Agreement related to an increase in an affiliate’speak. |
| · | Margins      from Off-system Sales increased $34 million primarily due to increased      physical sales margins driven by higher prices and higher trading      margins. |
| · | Other      revenues increased $12 million primarily due to increased gains on sales      of emission allowances.                                                         |

| · | Other      Operation and Maintenance expenses decreased $8 million primarily due      to:                                                                                                                                                                                                                            |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                                                                               | A      $20 million decrease in removal expenses related to planned outages at the      Gavin and Mitchell Plants during 2007. |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $17 million decrease resulting from a settlement agreement in the third      quarter 2007 related to alleged violations of the NSR provisions of the      CAA.  The $17 million represents OPCo’s allocation of the      settlement. |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $7 million decrease in overhead line maintenance  expenses. |
|   | These      decreases were partially offset by:                                                                                                                                                                                                                                                                       |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $13 million increase in recoverable PJM expenses. |
|   | ·                                                                                                                                                                                                                                                                                                               | An      $11 million increase in recoverable customer account expenses related to      the Universal Service Fund for customers who qualify for payment      assistance. |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $7 million increase in maintenance expenses from planned and forced      outages at various plants. |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $4 million increase in employee-related expenses. |
| · | Depreciation      and Amortization decreased $42 million primarily dueto:                                                                                                                                                                                                                                            |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $53 million decrease in amortization as a result of completion of      amortization of regulatory assets in December 2007. |
|   | ·                                                                                                                                                                                                                                                                                                               | A      $6 million decrease due to the amortization of IGCC pre-construction      costs, which ended in the second quarter of 2007.  The      amortization of IGCC pre-construction costs was offset by a corresponding      increase in Retail Margins in 2007. |
|   | These      decreases were partially offset by a $19 million increase in depreciation      related to environmental improvements placed in service at the Cardinal      Plant in 2008 and the Mitchell Plant in 2007.                                                                                                 |
| · | Interest      Expense increased $20 million primarily due to a decrease in the debt      component of AFUDC as a result of Mitchell Plant and Cardinal Plant      environmental improvements placed in service, the issuance of additional      long-term debt and higher interest rates on variable rate      debt. |
| · | Income      Tax Expense increased $10 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                             |   |                | 434,295  |   |   |   | 402,980 |   |
| Investing      Activities                             |   |                | (486,678 | )      |   |   | (743,260 | ) |
| Financing      Activities                             |   |                | 54,805   |   |   |   | 351,381 |   |
| Net      Increase in Cash and Cash Equivalents        |   |                | 2,422    |   |   |   | 11,101 |   |
| Cash      and Cash Equivalents at End of Period       |   | $                   | 9,088    |   |   | $      | 12,726 |   |

|                         |   | Principal           |          | Interest |     | Due    |
|------------------------------|--------|---------------------|---------------|----------|----------|--------|
| Type      of Debt            |   | Amount              |          | Rate     |     | Date   |
|                         |   | (in      thousands) |          | (%)      |     |   |
| Pollution      Control Bonds |   | $                   | 50,000   |     | Variable |   | 2014 |
| Pollution      Control Bonds |   |                | 50,000   |     | Variable |   | 2014 |
| Pollution      Control Bonds |   |                | 65,000   |     | Variable |   | 2036 |
| Senior      Unsecured Notes  |   |                | 250,000  |     | 5.75     |   | 2013 |

|                                     |   | Principal           |         | Interest |     | Due    |
|------------------------------------------|--------|---------------------|--------------|----------|----------|--------|
| Type      of Debt                        |   | Amount      Paid    |         | Rate     |     | Date   |
|                                     |   | (in      thousands) |         | (%)      |     |   |
| Notes      Payable – Nonaffiliated |   | $                   | 1,463   |     | 6.81     |   | 2008 |
| Notes      Payable – Nonaffiliated |   |                | 12,000  |     | 6.27     |   | 2009 |
| Pollution      Control Bonds             |   |                | 50,000  |     | Variable |   | 2014 |
| Pollution      Control Bonds             |   |                | 50,000  |     | Variable |   | 2016 |
| Pollution      Control Bonds             |   |                | 50,000  |     | Variable |   | 2022 |
| Pollution      Control Bonds             |   |                | 35,000  |     | Variable |   | 2022 |
| Pollution      Control Bonds             |   |                | 65,000  |     | Variable |   | 2036 |

----

|                                                        |   | MTM      Risk Management Contracts |    |   | Cash      Flow &Fair      Value Hedges |   |   | DETM      Assignment (a) |   |   |  CollateralDeposits |   |   | Total  |   |
|-------------------------------------------------------------|--------|------------------------------------|---------|--------|--------------------------------------------|--------|--------|--------------------------|--------|--------|--------------------------|--------|--------|--------|--------|
| Current      Assets                                         |   | $                                  | 77,357  |   |                                       | $      | 2,245  |                     |   | $      | -                        |   |   | $      | (2,466 | ) |   | $ | 77,136 |   |
| Noncurrent      Assets                                      |   |                               | 48,369  |   |                                       |   | 720    |                     |   |   | -                        |   |   |   | (3,281 | ) |   |   | 45,808 |   |
| Total      MTM Derivative Contract Assets                   |   |                               | 125,726 |   |                                       |   | 2,965  |                     |   |   | -                        |   |   |   | (5,747 | ) |   |   | 122,944 |   |
|                                                        |   |                               |    |   |                                       |   |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Current      Liabilities                                    |   |                               | (67,432 | )      |                                       |   | (3,170 | )                        |   |   | (2,174                   | )      |   |   | 620    |   |   |   | (72,156 | ) |
| Noncurrent      Liabilities                                 |   |                               | (24,105 | )      |                                       |   | -      |                     |   |   | (2,222                   | )      |   |   | 36     |   |   |   | (26,291 | ) |
| Total      MTM Derivative Contract Liabilities              |   |                               | (91,537 | )      |                                       |   | (3,170 | )                        |   |   | (4,396                   | )      |   |   | 656    |   |   |   | (98,447 | ) |
|                                                        |   |                               |    |   |                                       |   |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $                                  | 34,189  |   |                                       | $      | (205   | )                        |   | $      | (4,396                   | )      |   | $      | (5,091 | ) |   | $ | 24,497 |   |

| (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                 |   |   | (8,565 | )      |
| Fair      Value of New Contracts at Inception When Entered During the Period      (a)                                 |   |   | 1,154  |   |
| 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)                          |   |   | 1,026  |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                        |   |   | 13,061 |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                   |   |   | (2,671 | )      |
| Total      MTM Risk Management Contract Net Assets                                                                    |   |   | 34,189 |   |
| Net      Cash Flow & Fair Value Hedge Contracts                                                                   |   |   | (205   | )      |
| DETM      Assignment (e)                                                                                              |   |   | (4,396 | )      |
| Collateral      Deposits                                                                                              |   |   | (5,091 | )      |
| Ending      Net Risk Management Assets at September 30, 2008                                                          |   | $      | 24,497 |   |

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

|                                                                  |   | Remainder |   |   |   |   |   |   |   |   |   |   |   |   |   |   | After  |   |   |   |   |
|-----------------------------------------------------------------------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                  |   | 2008      |   |   | 2009   |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | 2012   |   |   | Total  |   |
| Level      1 (a)                                                      |   | $         | (695   | )      |   | $      | (1,596 | )      |   | $      | (15    | )      |   | $      | -      |   |   | $      | -      |   |   | $ | - |   |   | $ | (2,306 | ) |
| Level      2 (b)                                                      |   |      | 310    |   |   |   | 16,487 |   |   |   | 12,052 |   |   |   | 724    |   |   |   | 338    |   |   |   | - |   |   |   | 29,911 |   |
| Level      3 (c)                                                      |   |      | (2,788 | )      |   |   | 462    |   |   |   | (1,303 | )      |   |   | 189    |   |   |   | 107    |   |   |   | - |   |   |   | (3,333 | ) |
| Total                                                                 |   |      | (3,173 | )      |   |   | 15,353 |   |   |   | 10,734 |   |   |   | 913    |   |   |   | 445    |   |   |   | - |   |   |   | 24,272 |   |
| Dedesignated      Risk Management Contracts (d)                       |   |      | 976    |   |   |   | 3,282  |   |   |   | 3,256  |   |   |   | 1,268  |   |   |   | 1,135  |   |   |   | - |   |   |   | 9,917 |   |
| Total      MTM Risk Management Contract Net Assets (Liabilities) |   | $         | (2,197 | )      |   | $      | 18,635 |   |   | $      | 13,990 |   |   | $      | 2,181  |   |   | $      | 1,580  |   |   | $ | - |   |   | $ | 34,189 |   |

| (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.                                                                                                                                                                                                                                                                                                                                                                    |

| Cash      Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)      (AOCI) on the Condensed Consolidated Balance  Sheet |
|------------------------------------------------------------------------------------------------------------------------------------------|

|                                                          |   |   |   |   |               |   |   | Foreign  |   |   |   |   |
|---------------------------------------------------------------|--------|--------|--------|--------|--------------------|--------|--------|----------|--------|--------|--------|--------|
|                                                          |   | Power  |   |   | Interest      Rate |   |   | Currency |   |   | Total  |   |
| Beginning      Balance in AOCI December 31, 2007              |   | $      | (756   | )      |               | $      | 2,167  |     |   | $      | (254   | )      |   | $ | 1,157 |   |
| Changes      in Fair Value                                    |   |   | 431    |   |               |   | (903   | )        |   |   | 68     |   |   |   | (404 | ) |
| Reclassifications      from AOCI for Cash Flow Hedges Settled |   |   | 859    |   |               |   | 160    |     |   |   | 10     |   |   |   | 1,029 |   |
| Ending      Balance in AOCI September 30, 2008                |   | $      | 534    |   |               | $      | 1,424  |     |   | $      | (176   | )      |   | $ | 1,782 |   |

| Nine      Months Ended  |   |   |   |    | Twelve      Months Ended |
|-------------------------|--------|--------|--------|---------|--------------------------|
| September      30, 2008 |   |   |   |    | December      31, 2007   |
| (in      thousands)     |   |   |   |    | (in      thousands)      |
| End                     |   | High   |   | Average |                     | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $901                    |   | $1,284 |   | $447    |                     | $132 |   |   |   |   | $325 |   | $2,054 |   | $490 |   | $90 |

----

|                                                         |   | Three      Months Ended |    |   | Nine      Months Ended |   |
|--------------------------------------------------------------|--------|-------------------------|---------|--------|------------------------|--------|
|                                                         |   | 2008                    |    |   | 2007                   |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                     |   |                    |    |   |                   |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $                       | 600,841 |   |                   | $      | 543,404 |   |   | $ | 1,672,203 |   |   | $ | 1,516,383 |   |
| Sales      to AEP Affiliates                                 |   |                    | 245,830 |   |                   |   | 205,193 |   |   |   | 739,077 |   |   |   | 564,292 |   |
| Other      - Affiliated                                      |   |                    | 5,759   |   |                   |   | 5,749 |   |   |   | 17,545 |   |   |   | 16,604 |   |
| Other      - Nonaffiliated                                   |   |                    | 4,584   |   |                   |   | 3,397 |   |   |   | 12,738 |   |   |   | 10,838 |   |
| TOTAL                                                        |   |                    | 857,014 |   |                   |   | 757,743 |   |   |   | 2,441,563 |   |   |   | 2,108,117 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                     |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |                    | 359,341 |   |                   |   | 254,310 |   |   |   | 928,465 |   |   |   | 653,941 |   |
| Purchased      Electricity for Resale                        |   |                    | 56,142  |   |                   |   | 33,178 |   |   |   | 129,874 |   |   |   | 85,900 |   |
| Purchased      Electricity from AEP Affiliates               |   |                    | 48,867  |   |                   |   | 43,147 |   |   |   | 116,540 |   |   |   | 92,858 |   |
| Other      Operation                                         |   |                    | 98,653  |   |                   |   | 102,850 |   |   |   | 280,494 |   |   |   | 292,809 |   |
| Maintenance                                                  |   |                    | 51,791  |   |                   |   | 45,663 |   |   |   | 159,706 |   |   |   | 155,428 |   |
| Depreciation      and Amortization                           |   |                    | 72,180  |   |                   |   | 84,400 |   |   |   | 211,919 |   |   |   | 253,455 |   |
| Taxes      Other Than Income Taxes                           |   |                    | 49,019  |   |                   |   | 47,506 |   |   |   | 146,534 |   |   |   | 146,211 |   |
| TOTAL                                                        |   |                    | 735,993 |   |                   |   | 611,054 |   |   |   | 1,973,532 |   |   |   | 1,680,602 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                        |   |                    | 121,021 |   |                   |   | 146,689 |   |   |   | 468,031 |   |   |   | 427,515 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                 |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                         |   |                    | 2,252   |   |                   |   | 108 |   |   |   | 6,910 |   |   |   | 992 |   |
| Carrying      Costs Income                                   |   |                    | 3,936   |   |                   |   | 3,644 |   |   |   | 12,159 |   |   |   | 10,779 |   |
| Allowance      for Equity Funds Used During Construction     |   |                    | 555     |   |                   |   | 590 |   |   |   | 1,801 |   |   |   | 1,607 |   |
| Interest      Expense                                        |   |                    | (39,964 | )      |                   |   | (36,262 | ) |   |   | (116,199 | ) |   |   | (95,927 | ) |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |                    | 87,800  |   |                   |   | 114,769 |   |   |   | 372,702 |   |   |   | 344,966 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                      |   |                    | 31,601  |   |                   |   | 39,507 |   |   |   | 125,782 |   |   |   | 116,103 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                              |   |                    | 56,199  |   |                   |   | 75,262 |   |   |   | 246,920 |   |   |   | 228,863 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                   |   |                    | 183     |   |                   |   | 183 |   |   |   | 549 |   |   |   | 549 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                     |   | $                       | 56,016  |   |                   | $      | 75,079 |   |   | $ | 246,371 |   |   | $ | 228,314 |   |

| The      common stock of OPCo is wholly-owned byAEP. |
|------------------------------------------------------|

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

----

|                                                                       |   | 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                                             |   |              |    |   |                 |   |    |                   |   |   | (549                                               | )      |   |   |    |   |   |   | (549 | ) |
| TOTAL                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 2,002,413 |   |
|                                                                       |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                  |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Loss, Net of Taxes:                               |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $1,878                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | (3,486  | ) |   |   | (3,486 | ) |
| NET      INCOME                                                            |   |              |    |   |                 |   |    |                   |   |   | 228,863                                            |   |   |   |    |   |   |   | 228,863 |   |
| TOTAL      COMPREHENSIVE INCOME                                            |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 225,377 |   |
|                                                                       |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2007                                                    |   | $                 | 321,201 |   |                 | $      | 536,639 |                   |   | $      | 1,430,199                                          |   |   | $      | (60,249 | ) |   | $ | 2,227,790 |   |
|                                                                       |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| 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                                             |   |              |    |   |                 |   |    |                   |   |   | (549                                               | )      |   |   |    |   |   |   | (549 | ) |
| TOTAL                                                                      |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 2,288,322 |   |
|                                                                       |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                  |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:                        |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $337                                  |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 625     |   |   |   | 625 |   |
| Amortization      of Pension and OPEB Deferred Costs, Net of Tax of $1,136 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 2,110   |   |   |   | 2,110 |   |
| NET      INCOME                                                            |   |              |    |   |                 |   |    |                   |   |   | 246,920                                            |   |   |   |    |   |   |   | 246,920 |   |
| TOTAL      COMPREHENSIVE INCOME                                            |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 249,655 |   |
|                                                                       |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2008                                                    |   | $                 | 321,201 |   |                 | $      | 536,640 |                   |   | $      | 1,713,942                                          |   |   | $      | (33,806 | ) |   | $ | 2,537,977 |   |

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

----

|                                           |   | 2008   |      |   | 2007   |   |
|------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                            |   |   |      |   |   |   |
| Cash      and Cash Equivalents                 |   | $      | 9,088     |   |   | $      | 6,666 |   |
| Advances      to Affiliates                    |   |   | 39,758    |   |   |   | - |   |
| Accounts      Receivable:                      |   |   |      |   |   |   |   |   |
| Customers                                      |   |   | 93,951    |   |   |   | 104,783 |   |
| Affiliated      Companies                      |   |   | 105,503   |   |   |   | 119,560 |   |
| Accrued      Unbilled Revenues                 |   |   | 24,947    |   |   |   | 26,819 |   |
| Miscellaneous                                  |   |   | 11,551    |   |   |   | 1,578 |   |
| Allowance      for Uncollectible Accounts      |   |   | (3,555    | )      |   |   | (3,396 | ) |
| Total      Accounts Receivable                 |   |   | 232,397   |   |   |   | 249,344 |   |
| Fuel                                           |   |   | 146,332   |   |   |   | 92,874 |   |
| Materials      and Supplies                    |   |   | 104,924   |   |   |   | 108,447 |   |
| Risk      Management Assets                    |   |   | 77,136    |   |   |   | 44,236 |   |
| Prepayments      and Other                     |   |   | 38,372    |   |   |   | 18,300 |   |
| TOTAL                                          |   |   | 648,007   |   |   |   | 519,867 |   |
|                                           |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT             |   |   |      |   |   |   |   |   |
| Electric:                                      |   |   |      |   |   |   |   |   |
| Production                                     |   |   | 5,937,723 |   |   |   | 5,641,537 |   |
| Transmission                                   |   |   | 1,101,463 |   |   |   | 1,068,387 |   |
| Distribution                                   |   |   | 1,442,047 |   |   |   | 1,394,988 |   |
| Other                                          |   |   | 379,242   |   |   |   | 318,805 |   |
| Construction      Work in Progress             |   |   | 683,404   |   |   |   | 716,640 |   |
| Total                                          |   |   | 9,543,879 |   |   |   | 9,140,357 |   |
| Accumulated      Depreciation and Amortization |   |   | 3,084,683 |   |   |   | 2,967,285 |   |
| TOTAL      - NET                               |   |   | 6,459,196 |   |   |   | 6,173,072 |   |
|                                           |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                   |   |   |      |   |   |   |   |   |
| Regulatory      Assets                         |   |   | 324,260   |   |   |   | 323,105 |   |
| Long-term      Risk Management Assets          |   |   | 45,808    |   |   |   | 49,586 |   |
| Deferred      Charges and Other                |   |   | 207,562   |   |   |   | 272,799 |   |
| TOTAL                                          |   |   | 577,630   |   |   |   | 645,490 |   |
|                                           |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                              |   | $      | 7,684,833 |   |   | $      | 7,338,429 |   |

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

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | -         |   |   | $      | 101,548 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
| General                                                             |   |                | 187,803   |   |   |   | 141,196 |   |
| Affiliated      Companies                                           |   |                | 132,195   |   |   |   | 137,389 |   |
| Short-term      Debt – Nonaffiliated                          |   |                | -         |   |   |   | 701 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 119,225   |   |   |   | 55,188 |   |
| Risk      Management Liabilities                                    |   |                | 72,156    |   |   |   | 40,548 |   |
| Customer      Deposits                                              |   |                | 24,002    |   |   |   | 30,613 |   |
| Accrued      Taxes                                                  |   |                | 130,211   |   |   |   | 185,011 |   |
| Accrued      Interest                                               |   |                | 37,704    |   |   |   | 41,880 |   |
| Other                                                               |   |                | 151,044   |   |   |   | 149,658 |   |
| TOTAL                                                               |   |                | 854,340   |   |   |   | 883,732 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 2,682,247 |   |   |   | 2,594,410 |   |
| Long-term      Debt – Affiliated                              |   |                | 200,000   |   |   |   | 200,000 |   |
| Long-term      Risk Management Liabilities                          |   |                | 26,291    |   |   |   | 32,194 |   |
| Deferred      Income Taxes                                          |   |                | 957,441   |   |   |   | 914,170 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 150,794   |   |   |   | 160,721 |   |
| Deferred      Credits and Other                                     |   |                | 242,084   |   |   |   | 229,635 |   |
| TOTAL                                                               |   |                | 4,258,857 |   |   |   | 4,131,130 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 5,113,197 |   |   |   | 5,014,862 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Minority      Interest                                              |   |                | 17,032    |   |   |   | 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                                              |   |                | 1,713,942 |   |   |   | 1,469,717 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (33,806   | )      |   |   | (36,541 | ) |
| TOTAL                                                               |   |                | 2,537,977 |   |   |   | 2,291,017 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 7,684,833 |   |   | $      | 7,338,429 |   |

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

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 246,920  |   |   | $      | 228,863 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                         |   |   | 211,919  |   |   |   | 253,455 |   |
| Deferred      Income Taxes                                                                 |   |   | 45,424   |   |   |   | 3,938 |   |
| Carrying      Costs Income                                                                 |   |   | (12,159  | )      |   |   | (10,779 | ) |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (1,801   | )      |   |   | (1,607 | ) |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | (2,028   | )      |   |   | (3,894 | ) |
| Deferred      Property Taxes                                                               |   |   | 63,867   |   |   |   | 54,036 |   |
| Change      in Other Noncurrent Assets                                                     |   |   | (52,788  | )      |   |   | (20,275 | ) |
| Change      in Other Noncurrent Liabilities                                                |   |   | 9,300    |   |   |   | 8,026 |   |
| Changes      in Certain Components of Working Capital:                                     |   |   |     |   |   |   |   |   |
| Accounts      Receivable, Net                                                              |   |   | 16,947   |   |   |   | (32,723 | ) |
| Fuel,      Materials and Supplies                                                          |   |   | (48,197  | )      |   |   | (1,245 | ) |
| Accounts      Payable                                                                      |   |   | 45,252   |   |   |   | (59,925 | ) |
| Accrued      Taxes, Net                                                                    |   |   | (56,936  | )      |   |   | (19,997 | ) |
| Other      Current Assets                                                                  |   |   | (14,333  | )      |   |   | (11,784 | ) |
| Other      Current Liabilities                                                             |   |   | (17,092  | )      |   |   | 16,891 |   |
| Net      Cash Flows from Operating Activities                                              |   |   | 434,295  |   |   |   | 402,980 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (453,405 | )      |   |   | (751,161 | ) |
| Change      in Advances to Affiliates, Net                                                 |   |   | (39,758  | )      |   |   | - |   |
| Proceeds      from Sales of Assets                                                         |   |   | 6,872    |   |   |   | 7,924 |   |
| Other                                                                                      |   |   | (387     | )      |   |   | (23 | ) |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (486,678 | )      |   |   | (743,260 | ) |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 412,389  |   |   |   | 461,324 |   |
| Change      in Short-term Debt, Net – Nonaffiliated                                  |   |   | (701     | )      |   |   | 895 |   |
| Change      in Advances from Affiliates, Net                                               |   |   | (101,548 | )      |   |   | (95,940 | ) |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (263,463 | )      |   |   | (8,927 | ) |
| Retirement      of Cumulative Preferred Stock                                              |   |   | -        |   |   |   | (2 | ) |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (4,636   | )      |   |   | (5,420 | ) |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (549     | )      |   |   | (549 | ) |
| Other                                                                                      |   |   | 13,313   |   |   |   | - |   |
| Net      Cash Flows from Financing Activities                                              |   |   | 54,805   |   |   |   | 351,381 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Increase in Cash and Cash Equivalents                                             |   |   | 2,422    |   |   |   | 11,101 |   |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 6,666    |   |   |   | 1,625 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 9,088    |   |   | $      | 12,726 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 112,321  |   |   | $      | 85,851 |   |
| Net      Cash Paid for Income Taxes                                                        |   |   | 61,051   |   |   |   | 61,459 |   |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 2,018    |   |   |   | 1,620 |   |
| Noncash      Acquisition of Coal Land Rights                                          |   |   | 41,600   |   |   |   | - |   |
| Construction      Expenditures Included in Accounts Payable at September 30,               |   |   | 25,839   |   |   |   | 42,055 |   |

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

----

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

----

----

PUBLIC SERVICE COMPANY OF OKLAHOMA

| Third      Quarter of 2007                        |   |   |   |   | $      | 37     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins          |   |   | (6     | )      |   |   |   |   |
| Transmission      Revenues                        |   |   | 3      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | (3     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (11    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (3     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | 2      |   |   |   |   |   |
| Other      Income                                 |   |   | (1     | )      |   |   |   |   |
| Carrying      Costs Income                        |   |   | 3      |   |   |   |   |   |
| Interest      Expense                             |   |   | (1     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (11    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | 5      |   |
|                                              |   |   |   |   |   |   |   |   |
| Third      Quarter of 2008                        |   |   |   |   |   | $      | 28     |   |

| · | Retail      and Off-system Sales Margins decreased $6 million primarily due to a      decrease in retail sales margins mainly due to an 11% decrease in cooling      degree days, partially offset by base rate adjustments. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission      Revenues increased $3 million primarily due to higher rates within      SPP.                                                                                                                               |

| · | Other      Operation and Maintenance expenses increased $11 million primarily due      to:                                                                                                                  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                      | A      $4 million increase primarily associated with outside services and      employee-related expenses. |
|   | ·                                                                                                                                                                                                      | A      $2 million increase in overhead line expenses. |
|   | ·                                                                                                                                                                                                      | A      $1 million increase in transmission expense primarily due to higher rates      within SPP. |
|   | ·                                                                                                                                                                                                      | A      $1 million increase in expense for the June 2008storms. |
| · | Depreciation      and Amortization expenses increased $3 million primarily due to an      increase in the amortization of the Lawton Settlement regulatory      assets.                                     |
| · | Taxes      Other Than Income Taxes decreased $2 million primarily due to decreases in      real property tax and decreases in state sales and use  tax.                                                     |
| · | Carrying      Costs Income increased $3 million primarily due to the new peaking units      and to deferred ice storms costs.  See “Oklahoma 2007 Ice      Storms” section of Note 3. |
| · | Income      Tax Expense decreased $5 million primarily due to a decrease in pretax      book income.                                                                                                        |

| Nine      Months Ended September 30, 2007         |   |   |   |   | $      | 22     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins          |   |   | 16     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 7      |   |   |   |   |   |
| Other                                             |   |   | 11     |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 34     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (24    | )      |   |   |   |   |
| Deferral      of Ice Storm Costs                  |   |   | 72     |   |   |   |   |   |
| Depreciation      and Amortization                |   |   | (8     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | 1      |   |   |   |   |   |
| Other      Income                                 |   |   | 2      |   |   |   |   |   |
| Carrying      Costs Income                        |   |   | 7      |   |   |   |   |   |
| Interest      Expense                             |   |   | (7     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | 43     |   |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (30    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30, 2008         |   |   |   |   |   | $      | 69     |   |

| · | Retail      and Off-system Sales Margins increased $16 million primarily due to an      increase in retail sales margins resulting from base rate adjustments      during the year, partially offset by a 5% decrease in cooling degree      days. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission      Revenues increased $7 million primarily due to higher rates within      SPP.                                                                                                                                                     |
| · | Other      revenues increased $11 million primarily due to an increase related to the      recognition of the sale of SO2      allowances.  See “Oklahoma 2007 Ice Storms” section of Note      3.                           |

| · | Other      Operation and Maintenance expenses increased $24 million primarily due      to:                                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                              | A      $12 million increase in production expenses primarily due to a $10 million      write-off of pre-construction costs related to the cancelled Red Rock      Generating Facility.  See “Red Rock Generating Facility” section      of Note 3. |
|   | ·                                                                                                                                                                                                                                                              | A      $10 million increase due to amortization of the deferred 2007 ice storm      costs. |
|   | ·                                                                                                                                                                                                                                                              | A      $7 million increase in transmission expense primarily due to higher rates      within SPP. |
|   | ·                                                                                                                                                                                                                                                              | A      $6 million increase in administrative and general expenses, primarily      associated with outside services and employee-related      expenses. |
|   | ·                                                                                                                                                                                                                                                              | A      $3 million increase in expense for the June 2008storms. |
|   | ·                                                                                                                                                                                                                                                              | A      $2 million increase in distribution maintenance expense due to increased      vegetation management activities. |
|   | These      increases were partially offset by:                                                                                                                                                                                                                      |
|   | ·                                                                                                                                                                                                                                                              | A      $12 million decrease for the costs of the January 2007 ice      storm. |
|   | ·                                                                                                                                                                                                                                                              | A      $10 million decrease primarily to true-up actual December ice storm costs      to the 2007 estimated accrual. |
| · | Deferral      of Ice Storm Costs in 2008 of $72 million results from an OCC order      approving recovery of ice storm costs related to ice storms in January and      December 2007.  See “Oklahoma 2007 Ice Storms” section of Note      3. |
| · | Depreciation      and Amortization expenses increased $8 million primarily due to an      increase related to the amortization of the Lawton Settlement regulatory      assets.                                                                                     |
| · | Other      Income increased $2 million primarily due to an increase in the equity      component of AFUDC.                                                                                                                                                          |
| · | Carrying      Costs Income increased $7 million due to the new peaking units and      deferred ice storm costs.  See “Oklahoma 2007 Ice Storms”      section of Note 3.                                                                       |
| · | Interest      Expense increased $7 million primarily due to a $12 million increase in      interest expense from long-term borrowings, partially offset by a $4      million decrease in interest expense from short-term      borrowings.                          |
| · | Income      Tax Expense increased $30 million primarily due to an increase in pretax      book income.                                                                                                                                                              |

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

|                                                      |   | 2008                |     |   | 2007   |   |
|-----------------------------------------------------------|--------|---------------------|----------|--------|--------|--------|
|                                                      |   | (in      thousands) |     |
| Cash      and Cash Equivalents at Beginning of Period     |   | $                   | 1,370    |   |   | $      | 1,651 |   |
| Cash      Flows from (Used for):                          |   |                |     |   |   |   |   |   |
| Operating      Activities                                 |   |                | 42,386   |   |   |   | 62,042 |   |
| Investing      Activities                                 |   |                | (161,523 | )      |   |   | (231,916 | ) |
| Financing      Activities                                 |   |                | 120,011  |   |   |   | 169,713 |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents |   |                | 874      |   |   |   | (161 | ) |
| Cash      and Cash Equivalents at End of Period           |   | $                   | 2,244    |   |   | $      | 1,490 |   |

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

----

|                                                        |   |          |    |   |       |   |   |       |   |   |   |   |
|-------------------------------------------------------------|--------|---------------|---------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
|                                                        |   | MTM      Risk |    |   | DETM       |   |   |       |   |   |   |   |
|                                                        |   | Management    |    |   | Assignment |   |   | Collateral |   |   |   |   |
|                                                        |   | Contracts     |    |   | (a)        |   |   | Deposits   |   |   | Total  |   |
| Current      Assets                                         |   | $             | 25,165  |   |       | $      | -      |       |   | $      | (448   | )      |   | $ | 24,717 |   |
| Noncurrent      Assets                                      |   |          | 2,703   |   |       |   | -      |       |   |   | (51    | )      |   |   | 2,652 |   |
| Total      MTM Derivative Contract Assets                   |   |          | 27,868  |   |       |   | -      |       |   |   | (499   | )      |   |   | 27,369 |   |
|                                                        |   |          |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Current      Liabilities                                    |   |          | (25,508 | )      |       |   | (110   | )          |   |   | 40     |   |   |   | (25,578 | ) |
| Noncurrent      Liabilities                                 |   |          | (1,891  | )      |       |   | (112   | )          |   |   | 7      |   |   |   | (1,996 | ) |
| Total      MTM Derivative Contract Liabilities              |   |          | (27,399 | )      |       |   | (222   | )          |   |   | 47     |   |   |   | (27,574 | ) |
|                                                        |   |          |    |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $             | 469     |   |       | $      | (222   | )          |   | $      | (452   | )      |   | $ | (205 | ) |

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

| Total      MTM Risk Management Contract Net Assets at December 31,    2007                                            |   | $      | 6,981  |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (Gain)      Loss from Contracts Realized/Settled During the Period and Entered in a      Prior Period                 |   |   | (6,988 | )      |
| 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)                          |   |   | 20     |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                        |   |   | (104   | )      |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                   |   |   | 560    |   |
| Total      MTM Risk Management Contract Net Assets                                                                    |   |   | 469    |   |
| DETM      Assignment (e)                                                                                              |   |   | (222   | )      |
| Collateral      Deposits                                                                                              |   |   | (452   | )      |
| Ending      Net Risk Management Assets (Liabilities) at September 30,    2008                                         |   | $      | (205   | )      |

| (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      Statements of Income.  These net gains (losses) are recorded as      regulatory assets/liabilities.                                                                                                                                                          |
| (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) |   | $             | 316    |   |   | $      | (250   | )      |   | $      | -    |   |   | $      | -      |   |      | $      | -      |   |   | $ | - |   |   | $ | 66 |   |
| Level      2 (b) |   |          | 50     |   |   |   | 1,134  |   |   |   | 511  |   |   |   | (85    | )      |      |   | -      |   |   |   | - |   |   |   | 1,610 |   |
| Level      3 (c) |   |          | (1,208 | )      |   |   | -      |   |   |   | 1    |   |   |   | -      |   |      |   | -      |   |   |   | - |   |   |   | (1,207 | ) |
| Total            |   | $             | (842   | )      |   | $      | 884    |   |   | $      | 512  |   |   | $      | (85    | )      |      | $      | -      |   |   | $ | - |   |   | $ | 469 |   |

| (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.                                                                                                                                                                                                                         |

| Cash      Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)      (AOCI) on the Condensed BalanceSheet |
|---------------------------------------------------------------------------------------------------------------------------|

|                                                                    |   | Interest      Rate |   |
|-------------------------------------------------------------------------|--------|--------------------|--------|
| Beginning      Balance in AOCI December 31, 2007                        |   | $                  | (887   | ) |
| Changes      in Fair Value                                              |   |               | -      |   |
| Reclassifications      from AOCI for Cash Flow Hedges      Settled |   |               | 137    |   |
| Ending      Balance in AOCI September 30, 2008                          |   | $                  | (750   | ) |

| Nine      Months Ended September 30, 2008 |   |   |   |    | Twelve      Months Ended December 31, 2007 |
|-------------------------------------------|--------|--------|--------|---------|--------------------------------------------|
| (in      thousands)                       |   |   |   |    | (in      thousands)                        |
| End                                       |   | High   |   | Average |                                       | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $69                                       |   | $164   |   | $45     |                                       | $8 |   |   |   |   | $13 |   | $189 |   | $53 |   | $5 |

----

|                                                         |   | Three      Months Ended |    |   | Nine      Months Ended |   |
|--------------------------------------------------------------|--------|-------------------------|---------|--------|------------------------|--------|
|                                                         |   | 2008                    |    |   | 2007                   |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                     |   |                    |    |   |                   |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution      |   | $                       | 518,182 |   |                   | $      | 433,737 |   |   | $ | 1,194,737 |   |   | $ | 1,028,637 |   |
| Sales      to AEP Affiliates                                 |   |                    | 32,286  |   |                   |   | 12,737 |   |   |   | 89,988 |   |   |   | 53,605 |   |
| Other                                                        |   |                    | 781     |   |                   |   | 1,562 |   |   |   | 2,858 |   |   |   | 2,746 |   |
| TOTAL                                                        |   |                    | 551,249 |   |                   |   | 448,036 |   |   |   | 1,287,583 |   |   |   | 1,084,988 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                     |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation |   |                    | 288,027 |   |                   |   | 182,680 |   |   |   | 584,769 |   |   |   | 438,828 |   |
| Purchased      Electricity for Resale                        |   |                    | 77,834  |   |                   |   | 75,875 |   |   |   | 230,432 |   |   |   | 213,429 |   |
| Purchased      Electricity from AEP Affiliates               |   |                    | 15,169  |   |                   |   | 16,216 |   |   |   | 53,944 |   |   |   | 48,679 |   |
| Other      Operation                                         |   |                    | 51,432  |   |                   |   | 44,030 |   |   |   | 152,617 |   |   |   | 127,382 |   |
| Maintenance                                                  |   |                    | 27,530  |   |                   |   | 24,128 |   |   |   | 87,772 |   |   |   | 89,390 |   |
| Deferral      of Ice Storm Costs                             |   |                    | 69      |   |                   |   | - |   |   |   | (71,610 | ) |   |   | - |   |
| Depreciation      and Amortization                           |   |                    | 27,192  |   |                   |   | 24,430 |   |   |   | 78,079 |   |   |   | 70,128 |   |
| Taxes      Other Than Income Taxes                           |   |                    | 7,839   |   |                   |   | 10,007 |   |   |   | 29,265 |   |   |   | 30,191 |   |
| TOTAL                                                        |   |                    | 495,092 |   |                   |   | 377,366 |   |   |   | 1,145,268 |   |   |   | 1,018,027 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                        |   |                    | 56,157  |   |                   |   | 70,670 |   |   |   | 142,315 |   |   |   | 66,961 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                 |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income                                            |   |                    | 34      |   |                   |   | 1,086 |   |   |   | 4,004 |   |   |   | 2,294 |   |
| Carrying      Costs Income                                   |   |                    | 3,183   |   |                   |   | - |   |   |   | 6,945 |   |   |   | - |   |
| Interest      Expense                                        |   |                    | (13,713 | )      |                   |   | (12,381 | ) |   |   | (43,179 | ) |   |   | (36,549 | ) |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE                        |   |                    | 45,661  |   |                   |   | 59,375 |   |   |   | 110,085 |   |   |   | 32,706 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                      |   |                    | 17,917  |   |                   |   | 22,804 |   |   |   | 40,815 |   |   |   | 10,266 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                              |   |                    | 27,744  |   |                   |   | 36,571 |   |   |   | 69,270 |   |   |   | 22,440 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                   |   |                    | 53      |   |                   |   | 53 |   |   |   | 159 |   |   |   | 159 |   |
|                                                         |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                |   | $                       | 27,691  |   |                   | $      | 36,518 |   |   | $ | 69,111 |   |   | $ | 22,281 |   |

| The      common stock of PSO is wholly-owned byAEP. |
|-----------------------------------------------------|

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

----

|                                                     |   | 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                    |   |              |    |   |                 |   | 60,000  |                   |   |   |                                               |   |   |   |   |   |   |   | 60,000 |   |
| Preferred      Stock Dividends                           |   |              |    |   |                 |   |    |                   |   |   | (159                                               | )      |   |   |   |   |   |   | (159 | ) |
| TOTAL                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 644,893 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:           |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $74                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 137    |   |   |   | 137 |   |
| NET      INCOME                                          |   |              |    |   |                 |   |    |                   |   |   | 22,440                                             |   |   |   |   |   |   |   | 22,440 |   |
| TOTAL      COMPREHENSIVE INCOME                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 22,577 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| SEPTEMBER      30, 2007                                  |   | $                 | 157,230 |   |                 | $      | 290,016 |                   |   | $      | 221,157                                            |   |   | $      | (933   | ) |   | $ | 667,470 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| DECEMBER      31, 2007                                   |   | $                 | 157,230 |   |                 | $      | 310,016 |                   |   | $      | 174,539                                            |   |   | $      | (887   | ) |   | $ | 640,898 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $596             |   |              |    |   |                 |   |    |                   |   |   | (1,107                                             | )      |   |   |   |   |   |   | (1,107 | ) |
| Capital      Contribution from Parent                    |   |              |    |   |                 |   | 30,000  |                   |   |   |                                               |   |   |   |   |   |   |   | 30,000 |   |
| Preferred      Stock Dividends                           |   |              |    |   |                 |   |    |                   |   |   | (159                                               | )      |   |   |   |   |   |   | (159 | ) |
| TOTAL                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 669,632 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Other Comprehensive      Income, Net      of Taxes: |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $74                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 137    |   |   |   | 137 |   |
| NET      INCOME                                          |   |              |    |   |                 |   |    |                   |   |   | 69,270                                             |   |   |   |   |   |   |   | 69,270 |   |
| TOTAL      COMPREHENSIVE INCOME                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   | 69,407 |   |
|                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |   |   |   |   |   |   |
| SEPTEMBER      30, 2008                                  |   | $                 | 157,230 |   |                 | $      | 340,016 |                   |   | $      | 242,543                                            |   |   | $      | (750   | ) |   | $ | 739,039 |   |

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

----

|                                                 |   | 2008   |      |   | 2007   |   |
|------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                  |   |   |      |
| Cash      and Cash Equivalents                       |   | $      | 2,244     |   |   | $      | 1,370 |   |
| Advances      to Affiliates                          |   |   | -         |   |   |   | 51,202 |   |
| Accounts      Receivable:                            |   |   |      |   |   |   |   |   |
| Customers                                            |   |   | 42,023    |   |   |   | 74,330 |   |
| Affiliated      Companies                            |   |   | 72,627    |   |   |   | 59,835 |   |
| Miscellaneous                                        |   |   | 9,716     |   |   |   | 10,315 |   |
| Allowance      for Uncollectible Accounts            |   |   | (28       | )      |   |   | - |   |
| Total      Accounts Receivable                       |   |   | 124,338   |   |   |   | 144,480 |   |
| Fuel                                                 |   |   | 26,547    |   |   |   | 19,394 |   |
| Materials      and Supplies                          |   |   | 47,419    |   |   |   | 47,691 |   |
| Risk      Management Assets                          |   |   | 24,717    |   |   |   | 33,308 |   |
| Accrued      Tax Benefits                            |   |   | 13,040    |   |   |   | 31,756 |   |
| Regulatory      Asset for Under-Recovered Fuel Costs |   |   | 35,495    |   |   |   | - |   |
| Margin      Deposits                                 |   |   | 426       |   |   |   | 8,980 |   |
| Prepayments      and Other                           |   |   | 18,385    |   |   |   | 18,137 |   |
| TOTAL                                                |   |   | 292,611   |   |   |   | 356,318 |   |
|                                                 |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                   |   |   |      |   |   |   |   |   |
| Electric:                                            |   |   |      |   |   |   |   |   |
| Production                                           |   |   | 1,252,804 |   |   |   | 1,110,657 |   |
| Transmission                                         |   |   | 601,518   |   |   |   | 569,746 |   |
| Distribution                                         |   |   | 1,437,156 |   |   |   | 1,337,038 |   |
| Other                                                |   |   | 253,886   |   |   |   | 241,722 |   |
| Construction      Work in Progress                   |   |   | 77,392    |   |   |   | 200,018 |   |
| Total                                                |   |   | 3,622,756 |   |   |   | 3,459,181 |   |
| Accumulated      Depreciation and Amortization       |   |   | 1,191,777 |   |   |   | 1,182,171 |   |
| TOTAL      - NET                                     |   |   | 2,430,979 |   |   |   | 2,277,010 |   |
|                                                 |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                         |   |   |      |   |   |   |   |   |
| Regulatory      Assets                               |   |   | 186,216   |   |   |   | 158,731 |   |
| Long-term      Risk Management Assets                |   |   | 2,652     |   |   |   | 3,358 |   |
| Deferred      Charges and Other                      |   |   | 59,369    |   |   |   | 48,454 |   |
| TOTAL                                                |   |   | 248,237   |   |   |   | 210,543 |   |
|                                                 |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                    |   | $      | 2,971,827 |   |   | $      | 2,843,871 |   |

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

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | 125,029   |   |   | $      | - |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
| General                                                             |   |                | 98,541    |   |   |   | 189,032 |   |
| Affiliated      Companies                                           |   |                | 74,420    |   |   |   | 80,316 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 50,000    |   |   |   | - |   |
| Risk      Management Liabilities                                    |   |                | 25,578    |   |   |   | 27,118 |   |
| Customer      Deposits                                              |   |                | 39,498    |   |   |   | 41,477 |   |
| Accrued      Taxes                                                  |   |                | 35,282    |   |   |   | 18,374 |   |
| Regulatory      Liability for Over-Recovered Fuel Costs             |   |                | -         |   |   |   | 11,697 |   |
| Other                                                               |   |                | 46,703    |   |   |   | 57,708 |   |
| TOTAL                                                               |   |                | 495,051   |   |   |   | 425,722 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 834,798   |   |   |   | 918,316 |   |
| Long-term      Risk Management Liabilities                          |   |                | 1,996     |   |   |   | 2,808 |   |
| Deferred      Income Taxes                                          |   |                | 530,293   |   |   |   | 456,497 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 316,521   |   |   |   | 338,788 |   |
| Deferred      Credits and Other                                     |   |                | 48,867    |   |   |   | 55,580 |   |
| TOTAL                                                               |   |                | 1,732,475 |   |   |   | 1,771,989 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 2,227,526 |   |   |   | 2,197,711 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 5,262     |   |   |   | 5,262 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – $15 Par Value Per Share:                  |   |                |      |   |   |   |   |   |
| Authorized      – 11,000,000 Shares                           |   |                |      |   |   |   |   |   |
| Issued      – 10,482,000 Shares                               |   |                |      |   |   |   |   |   |
| Outstanding      – 9,013,000 Shares                           |   |                | 157,230   |   |   |   | 157,230 |   |
| Paid-in      Capital                                                |   |                | 340,016   |   |   |   | 310,016 |   |
| Retained      Earnings                                              |   |                | 242,543   |   |   |   | 174,539 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (750      | )      |   |   | (887 | ) |
| TOTAL                                                               |   |                | 739,039   |   |   |   | 640,898 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 2,971,827 |   |   | $      | 2,843,871 |   |

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

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 69,270   |   |   | $      | 22,440 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                         |   |   | 78,079   |   |   |   | 70,128 |   |
| Deferred      Income Taxes                                                                 |   |   | 70,856   |   |   |   | 23,220 |   |
| Deferral      of Ice Storm Costs                                                           |   |   | (71,610  | )      |   |   | - |   |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (1,840   | )      |   |   | (649 | ) |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | 6,973    |   |   |   | 7,120 |   |
| Change      in Other Noncurrent Assets                                                     |   |   | 9,920    |   |   |   | (17,754 | ) |
| Change      in Other Noncurrent Liabilities                                                |   |   | (34,426  | )      |   |   | (31,165 | ) |
| Changes      in Certain Components of Working Capital:                                     |   |   |     |   |   |   |   |   |
| Accounts      Receivable, Net                                                              |   |   | 21,846   |   |   |   | (31,617 | ) |
| Fuel,      Materials and Supplies                                                          |   |   | (6,881   | )      |   |   | (2,110 | ) |
| Margin      Deposits                                                                       |   |   | 8,554    |   |   |   | 26,461 |   |
| Accounts      Payable                                                                      |   |   | (81,228  | )      |   |   | 10,226 |   |
| Accrued      Taxes, Net                                                                    |   |   | 35,624   |   |   |   | 19,725 |   |
| Fuel      Over/Under-Recovery, Net                                                         |   |   | (47,192  | )      |   |   | (8,260 | ) |
| Other      Current Assets                                                                  |   |   | (1,676   | )      |   |   | 177 |   |
| Other      Current Liabilities                                                             |   |   | (13,883  | )      |   |   | (25,900 | ) |
| Net      Cash Flows from Operating Activities                                              |   |   | 42,386   |   |   |   | 62,042 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (214,319 | )      |   |   | (235,089 | ) |
| Change      in Advances to Affiliates, Net                                                 |   |   | 51,202   |   |   |   | - |   |
| Other                                                                                      |   |   | 1,594    |   |   |   | 3,173 |   |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (161,523 | )      |   |   | (231,916 | ) |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Capital      Contribution from Parent                                                      |   |   | 30,000   |   |   |   | 60,000 |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | -        |   |   |   | 12,488 |   |
| Change      in Advances from Affiliates, Net                                               |   |   | 125,029  |   |   |   | 111,169 |   |
| Retirement      of Long-term Debt – Affiliated                                       |   |   | (33,700  | )      |   |   | (12,660 | ) |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (1,159   | )      |   |   | (1,125 | ) |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (159     | )      |   |   | (159 | ) |
| Net      Cash Flows from Financing Activities                                              |   |   | 120,011  |   |   |   | 169,713 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                  |   |   | 874      |   |   |   | (161 | ) |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 1,370    |   |   |   | 1,651 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 2,244    |   |   | $      | 1,490 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 39,739   |   |   | $      | 34,427 |   |
| Net      Cash Received for Income Taxes                                                    |   |   | 44,559   |   |   |   | 18,004 |   |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 403      |   |   |   | 600 |   |
| Construction      Expenditures Included in Accounts Payable at September 30,               |   |   | 12,251   |   |   |   | 16,358 |   |

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

----

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

----

----

SOUTHWESTERN ELECTRIC POWER COMPANYCONSOLIDATED

| Third      Quarter of 2007                        |   |   |   |   | $      | 44     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins (a)      |   |   | 11     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 3      |   |   |   |   |   |
| Other                                             |   |   | 3      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 17     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (15    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (1     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | 4      |   |   |   |   |   |
| Other      Income                                 |   |   | 5      |   |   |   |   |   |
| Interest      Expense                             |   |   | (7     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (14    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Third      Quarter of 2008                        |   |   |   |   |   | $      | 47     |   |

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

| · | Retail      and Off-system Sales Margins increased $11 million primarily due to an      increase in wholesale fuel recovery.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission      Revenues increased $3 million due to higher rates in the SPP      region.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| · | Other      revenues increased $3 million primarily due to an increase in revenues      from coal deliveries from SWEPCo’s mining subsidiary, Dolet Hills Lignite      Company, LLC, to Cleco Corporation, a nonaffiliated entity.  The      increase in coal deliveries was the result of planned and forced outages      during 2007 at the Dolet Hills Generating Station, which is jointly-owned      by SWEPCo and Cleco Corporation.  The increased revenue from      coal deliveries was offset by a corresponding increase in Other Operation      and Maintenance expenses from mining operations as discussed      below. |

| · | Other      Operation and Maintenance expenses increased $15 million primarily due to      the following:                                                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                                   | A      $14 million increase in distribution expenses primarily due to storm      restoration expenses for Hurricanes Ike and Gustav.  SWEPCo intends      to pursue the recovery of these expenses. |
|   | ·                                                                                                                                                                                                                                                   | A      $3 million increase in expense for coal deliveries from SWEPCo’s mining      subsidiary, Dolet Hills Lignite Company, LLC.  The increased      expenses for coal deliveries were offset by a corresponding increase in      revenues from mining operations as discussed above. |
| · | Taxes      Other Than Income Taxes decreased $4 million primarily due to a $3 million      decrease in state and local franchise tax from refunds related to prior      years.                                                                           |
| · | Other      Income increased $5 million primarily due to higher nonaffiliated interest      income resulting from the fuel under-recovery balance, the Texas state      franchise refund and the Utility Money Pool.                                      |
| · | Interest      Expense increased $7 million primarily due to a $10 million increase      related to higher long-term debt outstanding, partially offset by a $3      million increase in the debt component of AFUDC due to new generation      projects. |

| Nine      Months Ended September 30, 2007         |   |   |   |   | $      | 55     |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                              |   |   |   |   |   |   |   |
| Changes      in Gross Margin:                     |   |   |   |   |   |   |   |
| Retail      and Off-system Sales Margins (a)      |   |   | 38     |   |   |   |   |   |
| Transmission      Revenues                        |   |   | 7      |   |   |   |   |   |
| Other                                             |   |   | -      |   |   |   |   |   |
| Total      Change in Gross Margin                 |   |   |   |   |   |   | 45     |   |
|                                              |   |   |   |   |   |   |   |   |
| Changes      in Operating Expenses and Other:     |   |   |   |   |   |   |   |   |
| Other      Operation and Maintenance              |   |   | (33    | )      |   |   |   |   |
| Depreciation      and Amortization                |   |   | (5     | )      |   |   |   |   |
| Taxes      Other Than Income Taxes                |   |   | 5      |   |   |   |   |   |
| Other      Income                                 |   |   | 8      |   |   |   |   |   |
| Interest      Expense                             |   |   | (8     | )      |   |   |   |   |
| Total      Change in Operating Expenses and Other |   |   |   |   |   |   | (33    | ) |
|                                              |   |   |   |   |   |   |   |   |
| Income      Tax Expense                           |   |   |   |   |   |   | (1     | ) |
|                                              |   |   |   |   |   |   |   |   |
| Nine      Months Ended September 30, 2008         |   |   |   |   |   | $      | 66     |   |

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

| · | Retail      and Off-system Sales Margins increased $38 million primarily due to higher      fuel recovery resulting from an $18 million refund provision booked in      2007 pursuant to an unfavorable ALJ ruling in the Texas Fuel      Reconciliation proceeding.  In addition, an increase of $10      million in wholesale revenue and lower purchase power capacity of $4      million was reflected in 2008.                                                                                                                                                                                                                                                                                                                                                            |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Transmission      Revenues increased $7 million due to higher rates in the SPP      region.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | While      Other revenues in total were unchanged, there was a $12 million decrease      in gains on sales of emission allowances.  This decrease was      offset by an $11 million increase in revenue from coal deliveries from      SWEPCo’s mining subsidiary, Dolet Hills Lignite Company, LLC, to Cleco      Corporation, a nonaffiliated entity.  The increase in coal      deliveries was the result of planned and forced outages during 2007 at the      Dolet Hills Generating Station, which is jointly-owned by SWEPCo and Cleco      Corporation.  The increased revenue from coal deliveries was      offset by a corresponding increase in Other Operation and Maintenance      expenses from mining operations as discussed  below. |

| · | Other      Operation and Maintenance expenses increased $33 million primarily due to      the following:                                                                                                                                           |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ·                                                                                                                                                                                                                                             | A      $12 million increase in distribution expenses primarily due to storm      restoration expenses from Hurricanes Ike and Gustav.  SWEPCo intends      to pursue the recovery of these expenses. |
|   | ·                                                                                                                                                                                                                                             | A      $14 million increase in expenses for coal deliveries from SWEPCo’s mining      subsidiary, Dolet Hills Lignite Company, LLC.  The increased      expenses for coal deliveries were offset by a corresponding increase in      revenues from mining operations as discussed above. |
| · | Depreciation      and Amortization increased $5 million primarily due to higher depreciable      asset balances.                                                                                                                                   |
| · | Taxes      Other Than Income Taxes decreased $5 million primarily due to a decrease      in state and local franchise tax from refunds related to prior      years.                                                                                |
| · | Other      Income increased $8 million primarily due to higher nonaffiliated interest      income and an increase in the equity component of AFUDC as a result of new      generation projects.                                                    |
| · | Interest      Expense increased $8 million primarily due to a $17 million increase from      higher long-term debt outstanding, partially offset by a $7 million      increase in the debt component of AFUDC due to new generation      projects. |
| · | Income      Tax Expense increased $1 million primarily due to an increase in pretax      book income, partially offset by state income taxes and changes in certain      book/tax differences accounted for on a flow-through  basis.              |

|                       | 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                                 |   |                | 130,250  |   |   |   | 180,146 |   |
| Investing      Activities                                 |   |                | (619,487 | )      |   |   | (353,001 | ) |
| Financing      Activities                                 |   |                | 490,247  |   |   |   | 172,089 |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents |   |                | 1,010    |   |   |   | (766 | ) |
| Cash      and Cash Equivalents at End of Period           |   | $                   | 2,752    |   |   | $      | 1,852 |   |

|                         |   | PrincipalAmount     |          | Interest |   | Due    |
|------------------------------|--------|---------------------|---------------|----------|--------|--------|
| Type      of Debt            |   |                | Rate          |     | Date   |
|                         |   | (in      thousands) |          | (%)      |   |   |
| Senior      Unsecured Notes  |   | $                   | 400,000  |     | 6.45   |   | 2019 |
| Pollution      Control Bonds |   |                | 41,135   |     | 4.50   |   | 2011 |

|                                     |   | PrincipalAmount      Paid |         | Interest |     | Due    |
|------------------------------------------|--------|---------------------------|--------------|----------|----------|--------|
| Type      of Debt                        |   |                      | Rate         |     | Date     |
|                                     |   | (in      thousands)       |         | (%)      |     |   |
| Notes      Payable – Nonaffiliated |   | $                         | 1,500   |     | Variable |   | 2008 |
| Notes      Payable – Nonaffiliated |   |                      | 3,304   |     | 4.47     |   | 2011 |
| Pollution      Control Bonds             |   |                      | 41,135  |     | Variable |   | 2011 |

----

|                                                        |   | MTM      Risk Management Contracts |    |   | Cash      Flow &Fair      Value Hedges |   |   | DETM      Assignment (a) |   |   |  CollateralDeposits |   |   | Total  |   |
|-------------------------------------------------------------|--------|------------------------------------|---------|--------|--------------------------------------------|--------|--------|--------------------------|--------|--------|--------------------------|--------|--------|--------|--------|
| Current      Assets                                         |   | $                                  | 30,804  |   |                                       | $      | -      |                     |   | $      | -                        |   |   | $      | (528   | ) |   | $ | 30,276 |   |
| Noncurrent      Assets                                      |   |                               | 3,561   |   |                                       |   | -      |                     |   |   | -                        |   |   |   | (60    | ) |   |   | 3,501 |   |
| Total      MTM Derivative Contract Assets                   |   |                               | 34,365  |   |                                       |   | -      |                     |   |   | -                        |   |   |   | (588   | ) |   |   | 33,777 |   |
|                                                        |   |                               |    |   |                                       |   |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Current      Liabilities                                    |   |                               | (31,197 | )      |                                       |   | (90    | )                        |   |   | (130                     | )      |   |   | 60     |   |   |   | (31,357 | ) |
| Noncurrent      Liabilities                                 |   |                               | (2,406  | )      |                                       |   | (93    | )                        |   |   | (132                     | )      |   |   | 9      |   |   |   | (2,622 | ) |
| Total      MTM Derivative Contract Liabilities              |   |                               | (33,603 | )      |                                       |   | (183   | )                        |   |   | (262                     | )      |   |   | 69     |   |   |   | (33,979 | ) |
|                                                        |   |                               |    |   |                                       |   |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |
| Total      MTM Derivative Contract Net Assets (Liabilities) |   | $                                  | 762     |   |                                       | $      | (183   | )                        |   | $      | (262                     | )      |   | $      | (519   | ) |   | $ | (202 | ) |

| (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                      |   |   | (8,169 | )      |
| 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)                               |   |   | 103    |   |
| Changes      in Fair Value Due to Market Fluctuations During the Period    (c)                                             |   |   | 106    |   |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (d)                                                        |   |   | 591    |   |
| Total      MTM Risk Management Contract Net Assets                                                                         |   |   | 762    |   |
| Net      Cash Flow & Fair Value Hedge Contracts                                                                        |   |   | (183   | )      |
| DETM      Assignment (e)                                                                                                   |   |   | (262   | )      |
| Collateral      Deposits                                                                                                   |   |   | (519   | )      |
| Ending      Net Risk Management Assets (Liabilities) at September 30,    2008                                              |   | $      | (202   | )      |

| (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.                                                                                                                                             |
| (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) |   | $             | 372    |   |   | $      | (294   | )      |   | $      | -    |   |   | $      | -      |   |      | $      | -      |   |   | $ | - |   |   | $ | 78 |   |
| Level      2 (b) |   |          | 10     |   |   |   | 1,467  |   |   |   | 757  |   |   |   | (122   | )      |      |   | -      |   |   |   | - |   |   |   | 2,112 |   |
| Level      3 (c) |   |          | (1,429 | )      |   |   | -      |   |   |   | 1    |   |   |   | -      |   |      |   | -      |   |   |   | - |   |   |   | (1,428 | ) |
| Total            |   | $             | (1,047 | )      |   | $      | 1,173  |   |   | $      | 758  |   |   | $      | (122   | )      |      | $      | -      |   |   | $ | - |   |   | $ | 762 |   |

| (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                                                   |   |               | -      |   |            |   | (204   | )      |   |   | (204 | ) |
| Reclassifications      from AOCI for Cash      Flow Hedges Settled |   |               | 621    |   |            |   | (544   | )      |   |   | 77 |   |
| Ending      Balance in AOCI September 30, 2008                               |   | $                  | (6,029 | )      |            | $      | (119   | )      |   | $ | (6,148 | ) |

| Nine      Months EndedSeptember      30, 2008 |   |   |   |    | Twelve      Months EndedDecember      31, 2007 |
|-----------------------------------------------|--------|--------|--------|---------|------------------------------------------------|
| (in      thousands)                           |   |   |   |    | (in      thousands)                            |
| End                                           |   | High   |   | Average |                                           | Low |   |   |   |   | End |   | High |   | Average |   | Low |
| $101                                          |   | $220   |   | $64     |                                           | $11 |   |   |   |   | $17 |   | $245 |   | $75 |   | $7 |

----

|                                                                        |   | Three      Months Ended |    |   | Nine      Months Ended |   |
|-----------------------------------------------------------------------------|--------|-------------------------|---------|--------|------------------------|--------|
|                                                                        |   | 2008                    |    |   | 2007                   |   |   | 2008 |   |   | 2007 |   |
| REVENUES                                                                    |   |                    |    |   |                   |   |   |   |   |   |   |   |
| Electric      Generation, Transmission and Distribution                     |   | $                       | 500,484 |   |                   | $      | 445,169 |   |   | $ | 1,232,017 |   |   | $ | 1,101,703 |   |
| Sales      to AEP Affiliates                                                |   |                    | 11,508  |   |                   |   | 2,839 |   |   |   | 42,692 |   |   |   | 35,491 |   |
| Other                                                                       |   |                    | 471     |   |                   |   | 502 |   |   |   | 1,164 |   |   |   | 1,437 |   |
| TOTAL                                                                       |   |                    | 512,463 |   |                   |   | 448,510 |   |   |   | 1,275,873 |   |   |   | 1,138,631 |   |
|                                                                        |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                    |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Fuel      and Other Consumables Used for Electric Generation                |   |                    | 197,474 |   |                   |   | 141,837 |   |   |   | 462,282 |   |   |   | 379,818 |   |
| Purchased      Electricity for Resale                                       |   |                    | 50,449  |   |                   |   | 73,438 |   |   |   | 145,097 |   |   |   | 182,806 |   |
| Purchased      Electricity from AEP Affiliates                              |   |                    | 36,170  |   |                   |   | 22,282 |   |   |   | 108,542 |   |   |   | 61,284 |   |
| Other      Operation                                                        |   |                    | 64,377  |   |                   |   | 59,759 |   |   |   | 186,713 |   |   |   | 163,746 |   |
| Maintenance                                                                 |   |                    | 33,694  |   |                   |   | 23,205 |   |   |   | 88,854 |   |   |   | 79,265 |   |
| Depreciation      and Amortization                                          |   |                    | 35,842  |   |                   |   | 34,605 |   |   |   | 108,875 |   |   |   | 103,395 |   |
| Taxes      Other Than Income Taxes                                          |   |                    | 12,623  |   |                   |   | 16,767 |   |   |   | 45,747 |   |   |   | 50,298 |   |
| TOTAL                                                                       |   |                    | 430,629 |   |                   |   | 371,893 |   |   |   | 1,146,110 |   |   |   | 1,020,612 |   |
|                                                                        |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING      INCOME                                                       |   |                    | 81,834  |   |                   |   | 76,617 |   |   |   | 129,763 |   |   |   | 118,019 |   |
|                                                                        |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Income (Expense):                                                |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      Income                                                        |   |                    | 5,417   |   |                   |   | 518 |   |   |   | 7,834 |   |   |   | 1,999 |   |
| Allowance      for Equity Funds Used During Construction                    |   |                    | 4,152   |   |                   |   | 3,681 |   |   |   | 10,167 |   |   |   | 7,634 |   |
| Interest      Expense                                                       |   |                    | (22,659 | )      |                   |   | (15,966 | ) |   |   | (57,071 | ) |   |   | (48,691 | ) |
|                                                                        |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME      BEFORE INCOME TAX EXPENSE AND MINORITY INTEREST    EXPENSE |   |                    | 68,744  |   |                   |   | 64,850 |   |   |   | 90,693 |   |   |   | 78,961 |   |
|                                                                        |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      Tax Expense                                                     |   |                    | 20,353  |   |                   |   | 19,811 |   |   |   | 21,717 |   |   |   | 20,879 |   |
| Minority      Interest Expense                                              |   |                    | 976     |   |                   |   | 919 |   |   |   | 2,870 |   |   |   | 2,733 |   |
|                                                                        |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| NET      INCOME                                                             |   |                    | 47,415  |   |                   |   | 44,120 |   |   |   | 66,106 |   |   |   | 55,349 |   |
|                                                                        |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Preferred      Stock Dividend Requirements                                  |   |                    | 58      |   |                   |   | 58 |   |   |   | 172 |   |   |   | 172 |   |
|                                                                        |   |                    |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS      APPLICABLE TO COMMON STOCK                                    |   | $                       | 47,357  |   |                   | $      | 44,062 |   |   | $ | 65,934 |   |   | $ | 55,177 |   |

| The      common stock of SWEPCo is wholly-owned byAEP. |
|--------------------------------------------------------|

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

----

|                                                                     |   | Common      Stock |    |   | Paid-in      Capital |   |    | Retained      Earnings |   |   | Accumulated      Other Comprehensive Income (Loss) |   |   | Total  |    |
|--------------------------------------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|---------|------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|---------|
| DECEMBER      31, 2006                                                   |   | $                 | 135,660 |   |                 | $      | 245,003 |                   |   | $      | 459,338                                            |   |   | $      | (18,799 | ) |   | $ | 821,202 |   |
|                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| FIN      48 Adoption, Net of Tax                                         |   |              |    |   |                 |   |    |                   |   |   | (1,642                                             | )      |   |   |    |   |   |   | (1,642 | ) |
| Capital      Contribution from Parent                                    |   |              |    |   |                 |   | 55,000  |                   |   |   |                                               |   |   |   |    |   |   |   | 55,000 |   |
| Preferred      Stock Dividends                                           |   |              |    |   |                 |   |    |                   |   |   | (172                                               | )      |   |   |    |   |   |   | (172 | ) |
| TOTAL                                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 874,388 |   |
|                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other      Comprehensive Income, Net of Taxes:                           |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $90                                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 168     |   |   |   | 168 |   |
| NET      INCOME                                                          |   |              |    |   |                 |   |    |                   |   |   | 55,349                                             |   |   |   |    |   |   |   | 55,349 |   |
| TOTAL      COMPREHENSIVE INCOME                                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 55,517 |   |
|                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2007                                                  |   | $                 | 135,660 |   |                 | $      | 300,003 |                   |   | $      | 512,873                                            |   |   | $      | (18,631 | ) |   | $ | 929,905 |   |
|                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| DECEMBER      31, 2007                                                   |   | $                 | 135,660 |   |                 | $      | 330,003 |                   |   | $      | 523,731                                            |   |   | $      | (16,439 | ) |   | $ | 972,955 |   |
|                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| EITF      06-10 Adoption, Net of Tax of $622                             |   |              |    |   |                 |   |    |                   |   |   | (1,156                                             | )      |   |   |    |   |   |   | (1,156 | ) |
| SFAS      157 Adoption, Net of Tax of $6                                 |   |              |    |   |                 |   |    |                   |   |   | 10                                                 |   |   |   |    |   |   |   | 10 |   |
| Capital      Contribution from Parent                                    |   |              |    |   |                 |   | 100,000 |                   |   |   |                                               |   |   |   |    |   |   |   | 100,000 |   |
| Preferred      Stock Dividends                                           |   |              |    |   |                 |   |    |                   |   |   | (172                                               | )      |   |   |    |   |   |   | (172 | ) |
| TOTAL                                                                    |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 1,071,637 |   |
|                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Other Comprehensive Income      (Loss), Net      of Taxes:          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| Cash      Flow Hedges, Net of Tax of $69                                 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | (127    | ) |   |   | (127 | ) |
| Amortization      of Pension and OPEB Deferred Costs, Net of Tax of $380 |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   | 706     |   |   |   | 706 |   |
| NET      INCOME                                                          |   |              |    |   |                 |   |    |                   |   |   | 66,106                                             |   |   |   |    |   |   |   | 66,106 |   |
| TOTAL      COMPREHENSIVE INCOME                                          |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   | 66,685 |   |
|                                                                     |   |              |    |   |                 |   |    |                   |   |   |                                               |   |   |   |    |   |   |   |   |   |
| SEPTEMBER      30, 2008                                                  |   | $                 | 135,660 |   |                 | $      | 430,003 |                   |   | $      | 588,519                                            |   |   | $      | (15,860 | ) |   | $ | 1,138,322 |   |

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

----

|                                                 |   | 2008   |      |   | 2007   |   |
|------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| CURRENT      ASSETS                                  |   |   |      |   |   |   |
| Cash      and Cash Equivalents                       |   | $      | 2,752     |   |   | $      | 1,742 |   |
| Advances      to Affiliates                          |   |   | 195,628   |   |   |   | - |   |
| Accounts      Receivable:                            |   |   |      |   |   |   |   |   |
| Customers                                            |   |   | 32,619    |   |   |   | 91,379 |   |
| Affiliated      Companies                            |   |   | 42,876    |   |   |   | 33,196 |   |
| Miscellaneous                                        |   |   | 12,781    |   |   |   | 10,544 |   |
| Allowance      for Uncollectible Accounts            |   |   | (135      | )      |   |   | (143 | ) |
| Total      Accounts Receivable                       |   |   | 88,141    |   |   |   | 134,976 |   |
| Fuel                                                 |   |   | 89,408    |   |   |   | 75,662 |   |
| Materials      and Supplies                          |   |   | 51,565    |   |   |   | 48,673 |   |
| Risk      Management Assets                          |   |   | 30,276    |   |   |   | 39,850 |   |
| Regulatory      Asset for Under-Recovered Fuel Costs |   |   | 81,907    |   |   |   | 5,859 |   |
| Margin      Deposits                                 |   |   | 600       |   |   |   | 10,650 |   |
| Prepayments      and Other                           |   |   | 38,406    |   |   |   | 28,147 |   |
| TOTAL                                                |   |   | 578,683   |   |   |   | 345,559 |   |
|                                                 |   |   |      |   |   |   |   |   |
| PROPERTY,      PLANT AND EQUIPMENT                   |   |   |      |   |   |   |   |   |
| Electric:                                            |   |   |      |   |   |   |   |   |
| Production                                           |   |   | 1,756,486 |   |   |   | 1,743,198 |   |
| Transmission                                         |   |   | 771,747   |   |   |   | 737,975 |   |
| Distribution                                         |   |   | 1,364,596 |   |   |   | 1,312,746 |   |
| Other                                                |   |   | 698,764   |   |   |   | 631,765 |   |
| Construction      Work in Progress                   |   |   | 735,226   |   |   |   | 451,228 |   |
| Total                                                |   |   | 5,326,819 |   |   |   | 4,876,912 |   |
| Accumulated      Depreciation and Amortization       |   |   | 1,996,531 |   |   |   | 1,939,044 |   |
| TOTAL      - NET                                     |   |   | 3,330,288 |   |   |   | 2,937,868 |   |
|                                                 |   |   |      |   |   |   |   |   |
| OTHER      NONCURRENT ASSETS                         |   |   |      |   |   |   |   |   |
| Regulatory      Assets                               |   |   | 120,858   |   |   |   | 133,617 |   |
| Long-term      Risk Management Assets                |   |   | 3,501     |   |   |   | 4,073 |   |
| Deferred      Charges and Other                      |   |   | 93,126    |   |   |   | 67,269 |   |
| TOTAL                                                |   |   | 217,485   |   |   |   | 204,959 |   |
|                                                 |   |   |      |   |   |   |   |   |
| TOTAL      ASSETS                                    |   | $      | 4,126,456 |   |   | $      | 3,488,386 |   |

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

----

|                                                                |   | 2008                |      |   | 2007   |   |
|---------------------------------------------------------------------|--------|---------------------|-----------|--------|--------|--------|
| CURRENT      LIABILITIES                                            |   | (in      thousands) |      |
| Advances      from Affiliates                                       |   | $                   | -         |   |   | $      | 1,565 |   |
| Accounts      Payable:                                              |   |                |      |   |   |   |   |   |
| General                                                             |   |                | 163,540   |   |   |   | 152,305 |   |
| Affiliated      Companies                                           |   |                | 41,010    |   |   |   | 51,767 |   |
| Short-term      Debt – Nonaffiliated                          |   |                | 9,519     |   |   |   | 285 |   |
| Long-term      Debt Due Within One Year – Nonaffiliated       |   |                | 117,809   |   |   |   | 5,906 |   |
| Risk      Management Liabilities                                    |   |                | 31,357    |   |   |   | 32,629 |   |
| Customer      Deposits                                              |   |                | 34,989    |   |   |   | 37,473 |   |
| Accrued      Taxes                                                  |   |                | 60,052    |   |   |   | 26,494 |   |
| Regulatory      Liability for Over-Recovered Fuel Costs             |   |                | -         |   |   |   | 22,879 |   |
| Other                                                               |   |                | 94,559    |   |   |   | 76,554 |   |
| TOTAL                                                               |   |                | 552,835   |   |   |   | 407,857 |   |
|                                                                |   |                |      |   |   |   |   |   |
| NONCURRENT      LIABILITIES                                         |   |                |      |   |   |   |   |   |
| Long-term      Debt – Nonaffiliated                           |   |                | 1,424,395 |   |   |   | 1,141,311 |   |
| Long-term      Debt – Affiliated                              |   |                | 50,000    |   |   |   | 50,000 |   |
| Long-term      Risk Management Liabilities                          |   |                | 2,622     |   |   |   | 3,334 |   |
| Deferred      Income Taxes                                          |   |                | 407,149   |   |   |   | 361,806 |   |
| Regulatory      Liabilities and Deferred Investment Tax Credits     |   |                | 331,985   |   |   |   | 334,014 |   |
| Deferred      Credits and Other                                     |   |                | 214,153   |   |   |   | 210,725 |   |
| TOTAL                                                               |   |                | 2,430,304 |   |   |   | 2,101,190 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES                                              |   |                | 2,983,139 |   |   |   | 2,509,047 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Minority      Interest                                              |   |                | 298       |   |   |   | 1,687 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Cumulative      Preferred Stock Not Subject to Mandatory Redemption |   |                | 4,697     |   |   |   | 4,697 |   |
|                                                                |   |                |      |   |   |   |   |   |
| Commitments      and Contingencies (Note 4)                         |   |                |      |   |   |   |   |   |
|                                                                |   |                |      |   |   |   |   |   |
| COMMON      SHAREHOLDER’S EQUITY                              |   |                |      |   |   |   |   |   |
| Common      Stock – Par Value – $18 Per Share:          |   |                |      |   |   |   |   |   |
| Authorized      – 7,600,000 Shares                            |   |                |      |   |   |   |   |   |
| Outstanding      – 7,536,640 Shares                           |   |                | 135,660   |   |   |   | 135,660 |   |
| Paid-in      Capital                                                |   |                | 430,003   |   |   |   | 330,003 |   |
| Retained      Earnings                                              |   |                | 588,519   |   |   |   | 523,731 |   |
| Accumulated      Other Comprehensive Income (Loss)                  |   |                | (15,860   | )      |   |   | (16,439 | ) |
| TOTAL                                                               |   |                | 1,138,322 |   |   |   | 972,955 |   |
|                                                                |   |                |      |   |   |   |   |   |
| TOTAL      LIABILITIES AND SHAREHOLDERS’ EQUITY               |   | $                   | 4,126,456 |   |   | $      | 3,488,386 |   |

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

----

|                                                                                       |   | 2008   |     |   | 2007   |   |
|--------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| OPERATING      ACTIVITIES                                                                  |   |   |     |   |   |   |
| Net      Income                                                                            |   | $      | 66,106   |   |   | $      | 55,349 |   |
| Adjustments      to Reconcile Net Income to Net Cash Flows from Operating      Activities: |   |   |     |   |   |   |   |   |
| Depreciation      and Amortization                                                         |   |   | 108,875  |   |   |   | 103,395 |   |
| Deferred      Income Taxes                                                                 |   |   | 37,162   |   |   |   | (17,863 | ) |
| Provision      for Fuel Disallowance                                                       |   |   | -        |   |   |   | 24,074 |   |
| Allowance      for Equity Funds Used During Construction                                   |   |   | (10,167  | )      |   |   | (7,634 | ) |
| Mark-to-Market      of Risk Management Contracts                                           |   |   | 7,905    |   |   |   | 7,864 |   |
| Deferred      Property Taxes                                                               |   |   | (9,315   | )      |   |   | (9,172 | ) |
| Change      in Other Noncurrent Assets                                                     |   |   | 9,104    |   |   |   | 10,170 |   |
| Change      in Other Noncurrent Liabilities                                                |   |   | (17,015  | )      |   |   | (7,134 | ) |
| Changes      in Certain Components of Working Capital:                                     |   |   |     |   |   |   |   |   |
| Accounts      Receivable, Net                                                              |   |   | 46,835   |   |   |   | 47,992 |   |
| Fuel,      Materials and Supplies                                                          |   |   | (16,665  | )      |   |   | (11,572 | ) |
| Margin      Deposits                                                                       |   |   | 10,050   |   |   |   | 29,986 |   |
| Accounts      Payable                                                                      |   |   | (34,819  | )      |   |   | (21,603 | ) |
| Accrued      Taxes, Net                                                                    |   |   | 29,271   |   |   |   | 25,556 |   |
| Fuel      Over/Under-Recovery, Net                                                         |   |   | (98,928  | )      |   |   | (26,891 | ) |
| Other      Current Assets                                                                  |   |   | (3,121   | )      |   |   | (687 | ) |
| Other      Current Liabilities                                                             |   |   | 4,972    |   |   |   | (21,684 | ) |
| Net      Cash Flows from Operating Activities                                              |   |   | 130,250  |   |   |   | 180,146 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Construction      Expenditures                                                             |   |   | (424,092 | )      |   |   | (353,107 | ) |
| Change      in Advances to Affiliates, Net                                                 |   |   | (195,628 | )      |   |   | - |   |
| Other                                                                                      |   |   | 233      |   |   |   | 106 |   |
| Net      Cash Flows Used for Investing Activities                                          |   |   | (619,487 | )      |   |   | (353,001 | ) |
|                                                                                       |   |   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |   |     |   |   |   |   |   |
| Capital      Contribution from Parent                                                      |   |   | 100,000  |   |   |   | 55,000 |   |
| Issuance      of Long-term Debt – Nonaffiliated                                      |   |   | 437,113  |   |   |   | 247,496 |   |
| Change      in Short-term Debt, Net – Nonaffiliated                                  |   |   | 9,234    |   |   |   | 8,754 |   |
| Change      in Advances from Affiliates, Net                                               |   |   | (1,565   | )      |   |   | (33,096 | ) |
| Retirement      of Long-term Debt – Nonaffiliated                                    |   |   | (45,939  | )      |   |   | (100,460 | ) |
| Principal      Payments for Capital Lease Obligations                                      |   |   | (8,424   | )      |   |   | (5,433 | ) |
| Dividends      Paid on Cumulative Preferred Stock                                          |   |   | (172     | )      |   |   | (172 | ) |
| Net      Cash Flows from Financing Activities                                              |   |   | 490,247  |   |   |   | 172,089 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| Net      Increase (Decrease) in Cash and Cash Equivalents                                  |   |   | 1,010    |   |   |   | (766 | ) |
| Cash      and Cash Equivalents at Beginning of Period                                      |   |   | 1,742    |   |   |   | 2,618 |   |
| Cash      and Cash Equivalents at End of Period                                            |   | $      | 2,752    |   |   | $      | 1,852 |   |
|                                                                                       |   |   |     |   |   |   |   |   |
| SUPPLEMENTARY      INFORMATION                                                             |   |   |     |   |   |   |   |   |
| Cash      Paid for Interest, Net of Capitalized Amounts                                    |   | $      | 44,255   |   |   | $      | 44,662 |   |
| Net      Cash Paid (Received) for Income Taxes                                             |   |   | (20,835  | )      |   |   | 37,479 |   |
| Noncash      Acquisitions Under Capital Leases                                             |   |   | 21,807   |   |   |   | 19,567 |   |
| Construction      Expenditures Included in Accounts Payable at September 30,               |   |   | 94,837   |   |   |   | 41,978 |   |

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

----

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

----

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

----

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

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

| APCo                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|-------------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                            |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                         |   | (in      thousands) |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)              |   | $                   | 7,275  |   |         | $      | 553,289 |         |   | $      | 5,005  |   |   | $      | (447,811 | ) |   | $ | 117,758 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 10,120  |         |   |   | -      |   |   |   | (4,980   | ) |   |   | 5,140 |   |
| Dedesignated      Risk Management Contracts (b) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 14,259   |   |   |   | 14,259 |   |
| Total      Risk Management Assets               |   | $                   | 7,275  |   |         | $      | 563,409 |         |   | $      | 5,005  |   |   | $      | (438,532 | ) |   | $ | 137,157 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:               |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 10,589 |   |         | $      | 518,486 |         |   | $      | 9,646  |   |   | $      | (440,158 | ) |   | $ | 98,563 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 7,976   |         |   |   | -      |   |   |   | (4,980   | ) |   |   | 2,996 |   |
| DETM      Assignment (c)                        |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 6,321    |   |   |   | 6,321 |   |
| Total      Risk Management Liabilities          |   | $                   | 10,589 |   |         | $      | 526,462 |         |   | $      | 9,646  |   |   | $      | (438,817 | ) |   | $ | 107,880 |   |

| CSPCo                                           |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|-------------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                            |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                         |   | (in      thousands) |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Other      Cash Deposits (e)                    |   | $                   | 31,002 |   |         | $      | -       |         |   | $      | -      |   |   | $      | 962      |   |   | $ | 31,964 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Assets:                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 4,083  |   |         | $      | 286,118 |         |   | $      | 2,811  |   |   | $      | (232,301 | ) |   | $ | 60,711 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 5,189   |         |   |   | -      |   |   |   | (2,795   | ) |   |   | 2,394 |   |
| Dedesignated      Risk Management Contracts (b) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 8,005    |   |   |   | 8,005 |   |
| Total      Risk Management Assets               |   | $                   | 4,083  |   |         | $      | 291,307 |         |   | $      | 2,811  |   |   | $      | (227,091 | ) |   | $ | 71,110 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Total      Assets                               |   | $                   | 35,085 |   |         | $      | 291,307 |         |   | $      | 2,811  |   |   | $      | (226,129 | ) |   | $ | 103,074 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:               |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 5,945  |   |         | $      | 266,791 |         |   | $      | 5,406  |   |   | $      | (227,981 | ) |   | $ | 50,161 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 4,477   |         |   |   | -      |   |   |   | (2,795   | ) |   |   | 1,682 |   |
| DETM      Assignment (c)                        |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 3,549    |   |   |   | 3,549 |   |
| Total      Risk Management Liabilities          |   | $                   | 5,945  |   |         | $      | 271,268 |         |   | $      | 5,406  |   |   | $      | (227,227 | ) |   | $ | 55,392 |   |

| I&M                                                 |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |
|---------------------------------------------------------|--------|---------------------|---------|--------|--------------|--------|-----------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                                    |   | Level      1        |    |   | Level      2 |   |      | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                                 |   | (in      thousands) |    |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |
| Risk      Management Assets:                            |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)                      |   | $                   | 3,952   |   |         | $      | 283,053   |         |   | $      | 2,721  |   |   | $      | (230,057 | ) |   | $ | 59,669 |   |
| Cash      Flow and Fair Value Hedges (a)                |   |                | -       |   |         |   | 5,022     |         |   |   | -      |   |   |   | (2,705   | ) |   |   | 2,317 |   |
| Dedesignated      Risk Management Contracts (b)         |   |                | -       |   |         |   | -         |         |   |   | -      |   |   |   | 7,747    |   |   |   | 7,747 |   |
| Total      Risk Management Assets                       |   | $                   | 3,952   |   |         | $      | 288,075   |         |   | $      | 2,721  |   |   | $      | (225,015 | ) |   | $ | 69,733 |   |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Spent      Nuclear Fuel and Decommissioning Trusts:     |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Cash      and Cash Equivalents (d)                      |   | $                   | -       |   |         | $      | 3,523     |         |   | $      | -      |   |   | $      | 6,328    |   |   | $ | 9,851 |   |
| Debt      Securities (f)                                |   |                | -       |   |         |   | 837,141   |         |   |   | -      |   |   |   | -        |   |   |   | 837,141 |   |
| Equity      Securities (g)                              |   |                | 444,994 |   |         |   | -         |         |   |   | -      |   |   |   | -        |   |   |   | 444,994 |   |
| TotalSpent Nuclear Fuel and      Decommissioning Trusts |   | $                   | 444,994 |   |         | $      | 840,664   |         |   | $      | -      |   |   | $      | 6,328    |   |   | $ | 1,291,986 |   |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Total      Assets                                       |   | $                   | 448,946 |   |         | $      | 1,128,739 |         |   | $      | 2,721  |   |   | $      | (218,687 | ) |   | $ | 1,361,719 |   |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                            |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                                    |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:                       |   |                |    |   |         |   |      |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)                      |   | $                   | 5,754   |   |         | $      | 264,220   |         |   | $      | 5,234  |   |   | $      | (225,884 | ) |   | $ | 49,324 |   |
| Cash      Flow and Fair Value Hedges (a)                |   |                | -       |   |         |   | 4,333     |         |   |   | -      |   |   |   | (2,705   | ) |   |   | 1,628 |   |
| DETM      Assignment (c)                                |   |                | -       |   |         |   | -         |         |   |   | -      |   |   |   | 3,435    |   |   |   | 3,435 |   |
| Total      Risk Management Liabilities                  |   | $                   | 5,754   |   |         | $      | 268,553   |         |   | $      | 5,234  |   |   | $      | (225,154 | ) |   | $ | 54,387 |   |

| OPCo                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|-------------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                            |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                         |   | (in      thousands) |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Other      Cash Deposits (e)                    |   | $                   | 3,116  |   |         | $      | -       |         |   | $      | -      |   |   | $      | 2,164    |   |   | $ | 5,280 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Assets:                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 5,059  |   |         | $      | 582,635 |         |   | $      | 3,476  |   |   | $      | (481,108 | ) |   | $ | 110,062 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 6,428   |         |   |   | -      |   |   |   | (3,463   | ) |   |   | 2,965 |   |
| Dedesignated      Risk Management Contracts (b) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 9,917    |   |   |   | 9,917 |   |
| Total      Risk Management Assets               |   | $                   | 5,059  |   |         | $      | 589,063 |         |   | $      | 3,476  |   |   | $      | (474,654 | ) |   | $ | 122,944 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Total      Assets                               |   | $                   | 8,175  |   |         | $      | 589,063 |         |   | $      | 3,476  |   |   | $      | (472,490 | ) |   | $ | 128,224 |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                                    |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                            |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:               |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)              |   | $                   | 7,365  |   |         | $      | 552,724 |         |   | $      | 6,809  |   |   | $      | (476,017 | ) |   | $ | 90,881 |   |
| Cash      Flow and Fair Value Hedges (a)        |   |                | -      |   |         |   | 6,633   |         |   |   | -      |   |   |   | (3,463   | ) |   |   | 3,170 |   |
| DETM      Assignment (c)                        |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 4,396    |   |   |   | 4,396 |   |
| Total      Risk Management Liabilities          |   | $                   | 7,365  |   |         | $      | 559,357 |         |   | $      | 6,809  |   |   | $      | (475,084 | ) |   | $ | 98,447 |   |

| PSO                                      |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                     |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                  |   | (in      thousands) |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)       |   | $                   | 3,743  |   |         | $      | 141,674 |         |   | $      | 3,803  |   |   | $      | (121,851 | ) |   | $ | 27,369 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | -        |   |   |   | - |   |
| Total      Risk Management Assets        |   | $                   | 3,743  |   |         | $      | 141,674 |         |   | $      | 3,803  |   |   | $      | (121,851 | ) |   | $ | 27,369 |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:        |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)       |   | $                   | 3,677  |   |         | $      | 140,064 |         |   | $      | 5,010  |   |   | $      | (121,399 | ) |   | $ | 27,352 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | -        |   |   |   | - |   |
| DETM      Assignment (c)                 |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 222      |   |   |   | 222 |   |
| Total      Risk Management Liabilities   |   | $                   | 3,677  |   |         | $      | 140,064 |         |   | $      | 5,010  |   |   | $      | (121,177 | ) |   | $ | 27,574 |   |

| SWEPCo                                   |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
|------------------------------------------|--------|---------------------|--------|--------|--------------|--------|---------|--------------|--------|--------|--------|--------|--------|--------|----------|
|                                     |   | Level      1        |   |   | Level      2 |   |    | Level      3 |   |   | Other  |   |   | Total  |     |
| Assets:                                  |   | (in      thousands) |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Assets:             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |
| Risk      Management Contracts (a)       |   | $                   | 4,412  |   |         | $      | 177,218 |         |   | $      | 4,481  |   |   | $      | (152,334 | ) |   | $ | 33,777 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | 44      |         |   |   | -      |   |   |   | (44      | ) |   |   | - |   |
| Total      Risk Management Assets        |   | $                   | 4,412  |   |         | $      | 177,262 |         |   | $      | 4,481  |   |   | $      | (152,378 | ) |   | $ | 33,777 |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Liabilities:                             |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
|                                     |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Liabilities:        |   |                |   |   |         |   |    |         |   |   |   |   |   |   |     |   |   |   |   |   |
| Risk      Management Contracts (a)       |   | $                   | 4,334  |   |         | $      | 175,106 |         |   | $      | 5,909  |   |   | $      | (151,815 | ) |   | $ | 33,534 |   |
| Cash      Flow and Fair Value Hedges (a) |   |                | -      |   |         |   | 227     |         |   |   | -      |   |   |   | (44      | ) |   |   | 183 |   |
| DETM      Assignment (c)                 |   |                | -      |   |         |   | -       |         |   |   | -      |   |   |   | 262      |   |   |   | 262 |   |
| Total      Risk Management Liabilities   |   | $                   | 4,334  |   |         | $      | 175,333 |         |   | $      | 5,909  |   |   | $      | (151,597 | ) |   | $ | 33,979 |   |

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

| Three      Months Ended September 30, 2008                                                                                               |   | APCo                |    |   | CSPCo  |   |    | I&M |   |   | OPCo    |   |   | PSO    |    |   | SWEPCo |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|--------|--------|--------|---------|---------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|
|                                                                                                                                     |   | (in      thousands) |    |
| Balance      as of July 1, 2008                                                                                                          |   | $                   | (18,560 | )      |   | $      | (11,122 | )       |   | $      | (10,675 | )      |   | $      | (13,245 | )      |   | $      | (23 | ) |   | $ | (45 | ) |
| Realized      (Gain) Loss Included in Earnings (or Changes in Net Assets)      (a)                                                  |   |                | 4,466   |   |   |   | 2,670   |    |   |   | 2,561   |   |   |   | 3,287   |   |   |   | 4 |   |   |   | 13 |   |
| Unrealized      Gain (Loss) Included in Earnings (or Changes in Net Assets) Relating to      Assets Still Held at the Reporting Date (a) |   |                | -       |   |   |   | (1,317  | )       |   |   | -       |   |   |   | (1,574  | )      |   |   | - |   |   |   | 26 |   |
| Realized      and Unrealized Gains (Losses) Included in Other Comprehensive      Income                                                  |   |                | -       |   |   |   | -       |    |   |   | -       |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                |   |                | -       |   |   |   | -       |    |   |   | -       |   |   |   | -       |   |   |   | - |   |   |   | - |   |
| Transfers      in and/or out of Level 3 (b)                                                                                              |   |                | 5,595   |   |   |   | 3,360   |    |   |   | 3,228   |   |   |   | 3,914   |   |   |   | (1,249 | ) |   |   | (1,471 | ) |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (c)                                                                      |   |                | 3,858   |   |   |   | 3,814   |    |   |   | 2,373   |   |   |   | 4,285   |   |   |   | 61 |   |   |   | 49 |   |
| Balance      as of September 30, 2008                                                                                                    |   | $                   | (4,641  | )      |   | $      | (2,595  | )       |   | $      | (2,513  | )      |   | $      | (3,333  | )      |   | $      | (1,207 | ) |   | $ | (1,428 | ) |

| Nine      Months Ended September 30, 2008                                                                                                |   | APCo                |   |    | CSPCo  |   |   | I&M |   |   | OPCo   |   |   | PSO    |   |   | SWEPCo |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                     |   | (in      thousands) |   |
| Balance      as of January 1, 2008                                                                                                       |   | $                   | (697   | )       |   | $      | (263   | )       |   | $      | (280   | )      |   | $      | (1,607 | )      |   | $      | (243 | ) |   | $ | (408 | ) |
| Realized      (Gain) Loss Included in Earnings (or Changes in Net Assets)      (a)                                                  |   |                | 332    |    |   |   | 88     |    |   |   | 105    |   |   |   | 1,063  |   |   |   | 170 |   |   |   | 290 |   |
| Unrealized      Gain (Loss) Included in Earnings (or Changes in Net Assets) Relating to      Assets Still Held at the Reporting Date (a) |   |                | -      |    |   |   | 190    |    |   |   | -      |   |   |   | 126    |   |   |   | - |   |   |   | 56 |   |
| Realized      and Unrealized Gains (Losses) Included in Other Comprehensive      Income                                                  |   |                | -      |    |   |   | -      |    |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Purchases,      Issuances and Settlements                                                                                                |   |                | -      |    |   |   | -      |    |   |   | -      |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| Transfers      in and/or out of Level 3 (b)                                                                                              |   |                | (731   | )  |   |   | (454   | )       |   |   | (430   | )      |   |   | (244   | )      |   |   | (1,249 | ) |   |   | (1,472 | ) |
| Changes      in Fair Value Allocated to Regulated Jurisdictions (c)                                                                      |   |                | (3,545 | )       |   |   | (2,156 | )       |   |   | (1,908 | )      |   |   | (2,671 | )      |   |   | 115 |   |   |   | 106 |   |
| Balance      as of September 30, 2008                                                                                                    |   | $                   | (4,641 | )       |   | $      | (2,595 | )       |   | $      | (2,513 | )      |   | $      | (3,333 | )      |   | $      | (1,207 | ) |   | $ | (1,428 | ) |

| (a) | Included      in revenues on the Condensed Statements of Income.                                                                                                                                                                                                                                                                                                                    |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | “Transfers      in and/or out of Level 3” represent existing assets or liabilities that      were either previously categorized as a higher level for which the inputs      to the model became unobservable or assets and liabilities that were      previously classified as level 3 for which the lowest significant input      became observable during 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.                                                                                  |

|    |   | 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 |   |

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

| (a) | The      nature of the credit derivative.                                                              |
|-----|--------------------------------------------------------------------------------------------------------|
| (b) | The      maximum potential amount of future payments.                                                  |
| (c) | The      fair value of the credit derivative.                                                          |
| (d) | The      nature of any recourse provisions and any assets held as collateral or by      third parties. |

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

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

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

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

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

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

|    | September      30, 2008 |   |
|---------|-------------------------|--------|
|    | Cash      Collateral    |   | Cash      Collateral |   |
|    | Received                |   | Paid |   |
|    | Netted      Against     |   | Netted      Against |   |
|    | Risk      Management    |   | Risk      Management |   |
|    | Assets                  |   | Liabilities |   |
|    | (in      thousands)     |   |
| APCo    |                    | $      | 8,250 |   |   | $ | 597 |   |
| CSPCo   |                    |   | 4,631 |   |   |   | 311 |   |
| I&M |                    |   | 4,482 |   |   |   | 309 |   |
| OPCo    |                    |   | 5,747 |   |   |   | 656 |   |
| PSO     |                    |   | 499 |   |   |   | 47 |   |
| SWEPCo  |                    |   | 588 |   |   |   | 69 |   |

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

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

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

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

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

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

| The      Comprehensive Environmental Response Compensation and Liability Act      (Superfund) and State Remediation – Affecting  I&M |
|------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

|                                       |                                  |   | Other      Postretirement             |   |
|--------------------------------------------|---------------------------------------|--------|---------------------------------------|--------|
|                                       | Pension      Plans                    |   | Benefit      Plans                    |   |
|                                       | Three      Months Ended September 30, |   | Three      Months Ended September 30, |   |
|                                       | 2008                                  |   | 2007                                  |   | 2008 |   | 2007 |   |
|                                       | (in      millions)                    |   |
| Service      Cost                          |                                  | $      | 25                                    |   |   | $ | 24 |   |   | $ | 10 |   |   | $ | 11 |   |
| Interest      Cost                         |                                  |   | 62                                    |   |   |   | 59 |   |   |   | 28 |   |   |   | 26 |   |
| Expected      Return on Plan Assets        |                                  |   | (84                                   | )      |   |   | (85 | ) |   |   | (27 | ) |   |   | (26 | ) |
| Amortization      of Transition Obligation |                                  |   | -                                     |   |   |   | - |   |   |   | 7 |   |   |   | 6 |   |
| Amortization      of Net Actuarial Loss    |                                  |   | 10                                    |   |   |   | 15 |   |   |   | 3 |   |   |   | 3 |   |
| Net      Periodic Benefit Cost             |                                  | $      | 13                                    |   |   | $ | 13 |   |   | $ | 21 |   |   | $ | 20 |   |

|                                       |                                 |   | Other      Postretirement            |   |
|--------------------------------------------|--------------------------------------|--------|--------------------------------------|--------|
|                                       | Pension      Plans                   |   | Benefit      Plans                   |   |
|                                       | Nine      Months Ended September 30, |   | Nine      Months Ended September 30, |   |
|                                       | 2008                                 |   | 2007                                 |   | 2008 |   | 2007 |   |
|                                       | (in      millions)                   |   |
| Service      Cost                          |                                 | $      | 75                                   |   |   | $ | 72 |   |   | $ | 31 |   |   | $ | 32 |   |
| Interest      Cost                         |                                 |   | 187                                  |   |   |   | 176 |   |   |   | 84 |   |   |   | 78 |   |
| Expected      Return on Plan Assets        |                                 |   | (252                                 | )      |   |   | (254 | ) |   |   | (83 | ) |   |   | (78 | ) |
| Amortization      of Transition Obligation |                                 |   | -                                    |   |   |   | - |   |   |   | 21 |   |   |   | 20 |   |
| Amortization      of Net Actuarial Loss    |                                 |   | 29                                   |   |   |   | 44 |   |   |   | 8 |   |   |   | 9 |   |
| Net      Periodic Benefit Cost             |                                 | $      | 39                                   |   |   | $ | 38 |   |   | $ | 61 |   |   | $ | 61 |   |

|    |                                  |   | Other      Postretirement             |   |
|---------|---------------------------------------|--------|---------------------------------------|--------|
|    | Pension      Plans                    |   | Benefit      Plans                    |   |
|    | Three      Months Ended September 30, |   | Three      Months Ended September 30, |   |
|    | 2008                                  |   | 2007                                  |   | 2008 |   | 2007 |   |
| Company | (in      thousands)                   |   |
| APCo    |                                  | $      | 834                                   |   |   | $ | 841 |   |   | $ | 3,797 |   |   | $ | 3,560 |   |
| CSPCo   |                                  |   | (351                                  | )      |   |   | (258 | ) |   |   | 1,545 |   |   |   | 1,491 |   |
| I&M |                                  |   | 1,821                                 |   |   |   | 1,900 |   |   |   | 2,496 |   |   |   | 2,530 |   |
| OPCo    |                                  |   | 318                                   |   |   |   | 362 |   |   |   | 2,908 |   |   |   | 2,802 |   |
| PSO     |                                  |   | 509                                   |   |   |   | 425 |   |   |   | 1,420 |   |   |   | 1,431 |   |
| SWEPCo  |                                  |   | 935                                   |   |   |   | 747 |   |   |   | 1,411 |   |   |   | 1,420 |   |

|    |                                 |   | Other      Postretirement            |   |
|---------|--------------------------------------|--------|--------------------------------------|--------|
|    | Pension      Plans                   |   | Benefit      Plans                   |   |
|    | Nine      Months Ended September 30, |   | Nine      Months Ended September 30, |   |
|    | 2008                                 |   | 2007                                 |   | 2008 |   | 2007 |   |
| Company | (in      thousands)                  |   |
| APCo    |                                 | $      | 2,503                                |   |   | $ | 2,525 |   |   | $ | 11,196 |   |   | $ | 10,680 |   |
| CSPCo   |                                 |   | (1,049                               | )      |   |   | (773 | ) |   |   | 4,542 |   |   |   | 4,473 |   |
| I&M |                                 |   | 5,462                                |   |   |   | 5,700 |   |   |   | 7,342 |   |   |   | 7,591 |   |
| OPCo    |                                 |   | 957                                  |   |   |   | 1,088 |   |   |   | 8,541 |   |   |   | 8,405 |   |
| PSO     |                                 |   | 1,525                                |   |   |   | 1,273 |   |   |   | 4,194 |   |   |   | 4,292 |   |
| SWEPCo  |                                 |   | 2,806                                |   |   |   | 2,240 |   |   |   | 4,163 |   |   |   | 4,258 |   |

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

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

|       |   |                         |   | Principal           |          | Interest |     | Due    |
|------------|--------|------------------------------|--------|---------------------|---------------|----------|----------|--------|
| Company    |   | Type      of Debt            |   | Amount              |          | Rate     |     | Date   |
|       |   |                         |   | (in      thousands) |          | (%)      |     |   |
| Issuances: |   |                         |   |                |          |     |     |   |   |
| APCo       |   | Pollution      Control Bonds |   | $                   | 40,000   |     | 4.85     |   | 2019 |
| APCo       |   | Pollution      Control Bonds |   |                | 30,000   |     | 4.85     |   | 2019 |
| APCo       |   | Pollution      Control Bonds |   |                | 75,000   |     | Variable |   | 2036 |
| APCo       |   | Pollution      Control Bonds |   |                | 50,275   |     | Variable |   | 2036 |
| APCo       |   | Senior      Unsecured Notes  |   |                | 500,000  |     | 7.00     |   | 2038 |
| CSPCo      |   | Senior      Unsecured Notes  |   |                | 350,000  |     | 6.05     |   | 2018 |
| I&M    |   | Pollution      Control Bonds |   |                | 25,000   |     | Variable |   | 2019 |
| I&M    |   | Pollution      Control Bonds |   |                | 52,000   |     | Variable |   | 2021 |
| I&M    |   | Pollution      Control Bonds |   |                | 40,000   |     | 5.25     |   | 2025 |
| OPCo       |   | Pollution      Control Bonds |   |                | 50,000   |     | Variable |   | 2014 |
| OPCo       |   | Pollution      Control Bonds |   |                | 50,000   |     | Variable |   | 2014 |
| OPCo       |   | Pollution      Control Bonds |   |                | 65,000   |     | Variable |   | 2036 |
| OPCo       |   | Senior      Unsecured Notes  |   |                | 250,000  |     | 5.75     |   | 2013 |
| SWEPCo     |   | Pollution      Control Bonds |   |                | 41,135   |     | 4.50     |   | 2011 |
| SWEPCo     |   | Senior      Unsecured Notes  |   |                | 400,000  |     | 6.45     |   | 2019 |

|                                     |   |                         |   | Principal           |                | Interest     |     | Due    |
|------------------------------------------|--------|------------------------------|--------|---------------------|---------------------|--------------|----------|--------|
| Company                                  |   | Type      of Debt            |   | Amount      Paid    |                | Rate         |     | Date   |
|                                     |   |                         |   | (in      thousands) |                | (%)          |     |   |
| Retirements      and Principal Payments: |   |                         |   |                |                |         |     |   |   |
| APCo                                     |   | Pollution      Control Bonds |   | $                   | 40,000         |         | Variable |   | 2019 |
| APCo                                     |   | Pollution      Control Bonds |   |                | 30,000    |    | Variable |   | 2019 |
| APCo                                     |   | Pollution      Control Bonds |   |                | 17,500         |         | Variable |   | 2021 |
| APCo                                     |   | Pollution      Control Bonds |   |                | 50,275         |         | Variable |   | 2036 |
| APCo                                     |   | Pollution      Control Bonds |   |                | 75,000    |    | Variable |   | 2037 |
| APCo                                     |   | Senior      Unsecured Notes  |   |                | 200,000   |         | 3.60     |   | 2008 |
| APCo                                     |   | Other                        |   |                | 11                  |         | 13.718   |   | 2026 |
| CSPCo                                    |   | Pollution      Control Bonds |   |                | 48,550         |         | Variable |   | 2038 |
| CSPCo                                    |   | Pollution      Control Bonds |   |                | 43,695    |         | Variable |   | 2038 |
| CSPCo                                    |   | Senior      Unsecured Notes  |   |                | 52,000              |         | 6.51     |   | 2008 |
| CSPCo                                    |   | Senior      Unsecured Notes  |   |                | 60,000    |         | 6.55     |   | 2008 |
| I&M                                  |   | Pollution      Control Bonds |   |                | 45,000              |         | Variable |   | 2009 |
| I&M                                  |   | Pollution      Control Bonds |   |                | 25,000    |         | Variable |   | 2019 |
| I&M                                  |   | Pollution      Control Bonds |   |                | 52,000    |         | Variable |   | 2021 |
| I&M                                  |   | Pollution      Control Bonds |   |                | 50,000    |         | Variable |   | 2025 |
| I&M                                  |   | Pollution      Control Bonds |   |                | 40,000    |         | Variable |   | 2025 |
| I&M                                  |   | Pollution      Control Bonds |   |                | 50,000              |         | Variable |   | 2025 |
| OPCo                                     |   | Pollution      Control Bonds |   |                | 50,000    |         | Variable |   | 2014 |
| OPCo                                     |   | Pollution      Control Bonds |   |                | 50,000    |         | Variable |   | 2016 |
| OPCo                                     |   | Pollution      Control Bonds |   |                | 50,000    |         | Variable |   | 2022 |
| OPCo                                     |   | Pollution      Control Bonds |   |                | 35,000    |         | Variable |   | 2022 |
| OPCo                                     |   | Pollution      Control Bonds |   |                | 65,000    |         | Variable |   | 2036 |
| OPCo                                     |   | Notes      Payable           |   |                | 1,463               |         | 6.81     |   | 2008 |
| OPCo                                     |   | Notes      Payable           |   |                | 12,000              |         | 6.27     |   | 2009 |
| PSO                                      |   | Pollution      Control Bonds |   |                | 33,70               |         | Variable |   | 2014 |
| SWEPCo                                   |   | Pollution      Control Bonds |   |                | 41,135              |         | Variable |   | 2011 |
| SWEPCo                                   |   | Notes      Payable           |   |                | 1,500               |         | Variable |   | 2008 |
| SWEPCo                                   |   | Notes      Payable           |   |                | 3,304               |         | 4.47     |   | 2011 |

|    |   |                |         | Remarketed      at    |   |                |   | Remarketed      at    |   |               |                | Remains      at    |   |               |
|---------|--------|---------------------|--------------|-----------------------|--------|---------------------|--------|-----------------------|--------|--------------------|---------------------|--------------------|--------|--------------------|
|    |   |                |         | Fixed      Rates      |   |                |   | Variable      Rates   |   | Variable      Rate |                | Auction      Rate  |   | Held      by       |
|    |   |                |         | During      the First |   | Fixed      Rate at  |   | During      the First |   | at                 |                | at                 |   | Trustee      at    |
|    |   | Retired      in     |         | Nine      Months of   |   | September      30,  |   | Nine      Months of   |   | September      30, |                | September      30, |   | September      30, |
|    |   | 2008                |         | 2008                  |   | 2008                |   | 2008                  |   | 2008               |                | 2008               |   | 2008               |
| Company |   | (in      thousands) |         |                  |   | (in      thousands) |   |                  |   |               | (in      thousands) |
| APCo    |   | $                   | -       |                  | $      | 30,000         |   | 4.85%                 |   | $                  | 75,000         |               |   | 8.00%              |   | $ | -  |   | $ | 17,500  |
| APCo    |   |                | -       |                  |   | 40,000         |   | 4.85%                 |   |               | 50,275         |               |   | 8.05%              |   |   | -  |   |   | -  |
| CSPCo   |   |                | -       |                  |   | 56,000         |   | 5.10%                 |   |               | -              |               |   | -                  |   |   | -  |   |   | 92,245  |
| CSPCo   |   |                | -       |                  |   | 44,500         |   | 4.85%                 |   |               | -              |               |   | -                  |   |   | -  |   |   | -  |
| I&M |   |                | 45,000  |                  |   | 40,000         |   | 5.25%                 |   |               | 52,000         |               |   | 7.75%              |   |   | -  |   |   | 100,000  |
| I&M |   |                | -       |                  |   | -              |   | -                     |   |               | 25,000         |               |   | 8.25%              |   |   | -  |   |   | -  |
| OPCo    |   |                | -       |                  |   | -              |   | -                     |   |               | 65,000         |               |   | 6.50%              |   |   | 218,000  |   |   | 85,000  |
| OPCo    |   |                | -       |                  |   | -              |   | -                     |   |               | 50,000         |               |   | 7.83%              |   |   | -  |   |   | -  |
| OPCo    |   |                | -       |                  |   | -              |   | -                     |   |               | 50,000         |               |   | 7.50%              |   |   | -  |   |   | -  |
| PSO     |   |                | -       |                  |   | -              |   | -                     |   |               | -              |               |   | -                  |   |   | -  |   |   | 33,700  |
| SWEPCo  |   |                | -       |                  |   | 81,700         |   | 4.95%                 |   |               | -              |               |   | -                  |   |   | 53,500  |   |   | -  |
| SWEPCo  |   |                | -       |                  |   | 41,135         |   | 4.50%                 |   |               | -              |               |   | -                  |   |   | -  |   |   | -  |
|    |   |                |         |                  |   |                |   |                  |   |               |                |               |   |               |   |   |   |   |   |   |
| Total   |   | $                   | 45,000  |                  | $      | 333,335        |   |                  |   | $                  | 367,275        |               |   |               |   | $ | 271,500  |   | $ | 328,445  |

|    |   |                |   |            |   |              |   |               |   | Loans                   |   |       |   |
|---------|--------|---------------------|--------|-----------------|--------|-------------------|--------|--------------------|--------|-------------------------|--------|------------|--------|
|    |   | Maximum             |   | Maximum         |   | Average           |   | Average            |   | (Borrowings)            |   | Authorized |   |
|    |   | Borrowings          |   | Loans      to   |   | Borrowings        |   | Loans      to      |   | to/from      Utility    |   | Short-Term |   |
|    |   | from      Utility   |   | Utility         |   | from      Utility |   | Utility      Money |   | Money      Pool as of   |   | Borrowing  |   |
|    |   | Money      Pool     |   | Money      Pool |   | Money      Pool   |   | Pool               |   | September      30, 2008 |   | Limit      |   |
| Company |   | (in      thousands) |   |
| APCo    |   |                | $      | 307,226         |   |              | $      | 269,987            |   |                    | $      | 188,985    |   |   | $ | 187,192 |   |   | $ | (93,558 | ) |   | $ | 600,000 |   |
| CSPCo   |   |                |   | 238,172         |   |              |   | 150,358            |   |                    |   | 157,569    |   |   |   | 53,962 |   |   |   | 21,833 |   |   |   | 350,000 |   |
| I&M |   |                |   | 345,064         |   |              |   | -                  |   |                    |   | 195,582    |   |   |   | - |   |   |   | (224,071 | ) |   |   | 500,000 |   |
| OPCo    |   |                |   | 415,951         |   |              |   | 82,486             |   |                    |   | 174,840    |   |   |   | 64,127 |   |   |   | 39,758 |   |   |   | 600,000 |   |
| PSO     |   |                |   | 149,278         |   |              |   | 59,384             |   |                    |   | 72,688     |   |   |   | 29,811 |   |   |   | (125,029 | ) |   |   | 300,000 |   |
| SWEPCo  |   |                |   | 168,495         |   |              |   | 300,525            |   |                    |   | 87,426     |   |   |   | 219,159 |   |   |   | 195,628 |   |   |   | 350,000 |   |

|                       |   | Nine      Months Ended September 30, |   |
|----------------------------|--------|--------------------------------------|--------|
|                       |   | 2008                                 |   |   | 2007 |   |
| Maximum      Interest Rate |   |                                 | 5.37   | % |   |   | 5.94 | % |
| Minimum      Interest Rate |   |                                 | 2.91   | % |   |   | 5.30 | % |

|    |   | Average      Interest Rate for Funds |   |   | Average      Interest Rate for Funds |   |
|---------|--------|--------------------------------------|--------|--------|--------------------------------------|--------|
|    |   | Borrowed      from                   |   |   | Loaned      to                       |   |
|    |   | the      Utility Money Pool for the  |   |   | the      Utility Money Pool for the  |   |
|    |   | Nine      Months Ended September 30, |   |   | Nine      Months Ended September 30, |   |
|    |   | 2008                                 |   |   | 2007                                 |   |   | 2008 |   |   | 2007 |   |
| Company |   |                                 |   |   |                                 |   |   |   |   |   |   |   |
| APCo    |   |                                 | 3.62   | %      |                                 |   | 5.41 | % |   |   | 3.25 | % |   |   | 5.84 | % |
| CSPCo   |   |                                 | 3.66   | %      |                                 |   | 5.48 | % |   |   | 2.99 | % |   |   | 5.39 | % |
| I&M |   |                                 | 3.19   | %      |                                 |   | 5.38 | % |   |   | - | % |   |   | 5.84 | % |
| OPCo    |   |                                 | 3.24   | %      |                                 |   | 5.39 | % |   |   | 3.62 | % |   |   | 5.43 | % |
| PSO     |   |                                 | 3.04   | %      |                                 |   | 5.47 | % |   |   | 4.53 | % |   |   | - | % |
| SWEPCo  |   |                                 | 3.36   | %      |                                 |   | 5.54 | % |   |   | 3.01 | % |   |   | 5.34 | % |

|    |   |                                                  |   | September      30, 2008 |        | December      31, 2007 |
|---------|--------|-------------------------------------------------------|--------|-------------------------|-------------|------------------------|
|    |   |                                                  |   | Outstanding             |        | Interest               |   | Outstanding |   | Interest |
|    |   | Type      of Debt                                     |   | Amount                  |        | Rate      (a)          |   | Amount |   | Rate      (a) |
| Company |   |                                                  |   | (in      thousands)     |        |                   |   | (in      thousands) |   |   |
| OPCo    |   | Commercial      Paper – JMG (b)                 |   | $                       | -      |                   | -% |   | $ | 701  |   | 5.35% |
| SWEPCo  |   | Line      of Credit – Sabine Mining Company (c) |   |                    | 9,520  |                   | 7.75% |   |   | 285  |   | 5.25% |

| (a) | Weighted      average rate.                                                                                                     |
|-----|---------------------------------------------------------------------------------------------------------------------------------|
| (b) | This      commercial paper is specifically associated with the Gavin Scrubber and is      backed by a separate credit facility. |
| (c) | Sabine      Mining Company is consolidated under FIN46R.                                                                        |

----

COMBINEDMANAGEMENT’S DISCUSSION AND ANALYSIS OF REGISTRANTSUBSIDIARIES

|    |   |                 |   |                 |   | LOC      Amount         |   |
|---------|--------|----------------------|--------|----------------------|--------|-------------------------|--------|
|    |   |                 |   |                 |   | Outstanding             |   |
|    |   |                 |   |                 |   | Against                 |   |
|    |   | $650      million    |   | $350      million    |   | $650      million       |   |
|    |   | Credit      Facility |   | Credit      Facility |   | Agreement      at       |   |
|    |   | Borrowing/LOCLimit   |   | Borrowing/LOCLimit   |   | September      30, 2008 |   |
| Company |   | (in      millions)   |   |
| APCo    |   |                 | $      | 300                  |   |                    | $      | 150 |   |   | $ | 127 |   |
| CSPCo   |   |                 |   | 230                  |   |                    |   | 120 |   |   |   | - |   |
| I&M |   |                 |   | 230                  |   |                    |   | 120 |   |   |   | 78 |   |
| OPCo    |   |                 |   | 400                  |   |                    |   | 200 |   |   |   | 167 |   |
| PSO     |   |                 |   | 65                   |   |                    |   | 35 |   |   |   | - |   |
| SWEPCo  |   |                 |   | 230                  |   |                    |   | 120 |   |   |   | - |   |

|    |   |               |   | Remarketed      at  |   |                    |   |                    |   |
|---------|--------|--------------------|--------|---------------------|--------|-------------------------|--------|-------------------------|--------|
|    |   |               |   | Fixed      or       |   | Remains      in         |   | Held                    |   |
|    |   | Retired            |   | Variable      Rates |   | Auction      Rate at    |   | by      Trustee at      |   |
|    |   | in      2008       |   | During      2008    |   | September      30, 2008 |   | September      30, 2008 |   |
| Company |   | (in      millions) |   |
| APCo    |   |               | $      | -                   |   |                    | $      | 195                     |   |   | $ | - |   |   | $ | 18 |   |
| CSPCo   |   |               |   | -                   |   |                    |   | 101                     |   |   |   | - |   |   |   | 92 |   |
| I&M |   |               |   | 45                  |   |                    |   | 117                     |   |   |   | - |   |   |   | 100 |   |
| OPCo    |   |               |   | -                   |   |                    |   | 165                     |   |   |   | 218 |   |   |   | 85 |   |
| PSO     |   |               |   | -                   |   |                    |   | -                       |   |   |   | - |   |   |   | 34 |   |
| SWEPCo  |   |               |   | -                   |   |                    |   | 123                     |   |   |   | 54 |   |   |   | - |   |

|       |   |            |   |               |   |               |   |               |   |           |   |            |   |                |    |        | Commercial |
|------------|--------|-----------------|--------|--------------------|--------|--------------------|--------|--------------------|--------|----------------|--------|-----------------|--------|---------------------|---------|-------------|------------|
|       |   |            |   |               |   | Total              |   |               |   |           |   |            |   |                | Nominal |        | Operation  |
| Operating  |   | Project         |   |               |   | Projected          |   |               |   |           |   |            |   |                | MW      |        | Date       |
| Company    |   | Name            |   | Location           |   | Cost      (a)      |   | CWIP      (b)      |   | Fuel      Type |   | Plant      Type |   | Capacity            |    | (Projected) |
|       |   |            |   |               |   | (in      millions) |   | (in      millions) |   |           |   |            |   |                |    |        |
| PSO        |   | Southwestern    | (c)    | Oklahoma           |   | $                  | 56     |               | $      | -              |   | Gas             |   | Simple-cycle        |    | 150         |       | 2008 |
| PSO        |   | Riverside       | (d)    | Oklahoma           |   |               | 58     |               |   | -              |   | Gas             |   | Simple-cycle        |    | 150         |       | 2008 |
| AEGCo      |   | Dresden         | (e)    | Ohio               |   |               | 309    | (e)                |   | 149            |   | Gas             |   | Combined-cycle      |    | 580         |       | 2010(h) |
| SWEPCo     |   | Stall           |   | Louisiana          |   |               | 378    |               |   | 158            |   | Gas             |   | Combined-cycle      |    | 500         |       | 2010 |
| SWEPCo     |   | Turk            | (f)    | Arkansas           |   |               | 1,522  | (f)                |   | 448            |   | Coal            |   | Ultra-supercritical |    | 600         | (f)        | 2012 |
| APCo       |   | Mountaineer     | (g)    | West      Virginia |   |               |   | (g)                |   |           |   | Coal            |   | IGCC                |    | 629         |       | (g) |
| CSPCo/OPCo |   | Great      Bend | (g)    | Ohio               |   |               |   | (g)                |   |           |   | Coal            |   | IGCC                |    | 629         |       | (g) |

| (a) | Amount      excludes AFUDC.                                                                                                                                                                                                                                                                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | Amount      includes AFUDC.                                                                                                                                                                                                                                                                                                                       |
| (c) | Southwestern      Units were placed in service on February 29, 2008.                                                                                                                                                                                                                                                                              |
| (d) | The      final Riverside Unit was placed in service on June 15,    2008.                                                                                                                                                                                                                                                                          |
| (e) | In      September 2007, AEGCo purchased the partially completed Dresden plant from      Dresden Energy LLC, a subsidiary of Dominion Resources, Inc., for $85      million, which is included in the “Total Projected Cost” section      above.                                                                                       |
| (f) | SWEPCo      plans to own approximately 73%, or 440 MW, totaling $1.1 billion in      capital investment.  The increase in the cost estimate disclosed      in the 2007 Annual Report relates to cost escalations due to the delay in      receipt of permits and approvals.  See “Turk Plant” section      below. |
| (g) | Construction      of IGCC plants are pending necessary permits and regulatory      approval.  See “IGCC Plants” section below.                                                                                                                                                                                              |
| (h) | Projected      completion date of the Dresden Plant is currently under      review.  To the extent that the completion date is delayed, the      total projected cost of the Dresden Plant could  change.                                                                                                                               |

| · | Requirements      under the CAA to reduce emissions of SO2,      NOx, 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 |
|--------------------------------|--------|------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------|
| 07/01/08      – 07/31/08 |   |                                     | -      |                                  | $      | -      |                                                                                       |   |                                                                                                                   | - |   | $ | - |
| 08/01/08      – 08/31/08 |   |                                     | -      |                                  |   | -      |                                                                                       |   |                                                                                                                   | - |   |   | - |
| 09/01/08      – 09/30/08 |   |                                     | -      |                                  |   | -      |                                                                                       |   |                                                                                                                   | - |   |   | - |

| 10(a)      – Second Amended and Restated $1.5 Billion Credit Agreement, dated as of      March 31, 2008, among AEP, the banks, financial institutions and other      institutional lenders listed on the signatures pages thereof, and JPMorgan      Chase Bank, N.A., as AdministrativeAgent. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10(b)      – Second Amended and Restated $1.5 Billion Credit Agreement, dated as of      March 31, 2008, among AEP, the banks, financial institutions and other      institutional lenders listed on the signatures pages thereof, and Barclays      Bank plc, as Administrative Agent. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10(c)      – $650 Million Credit Agreement, dated as of April 4, 2008. among AEP,      TCC, TNC, APCo, CSPCo, I&M, KPCo, OPCo, PSO and SWEPCo, the Initial      Lenders named therein, the Swingline Bank party thereto, the LC Issuing      Banks party thereto, and JPMorgan Chase Bank, N.A., as Administrative      Agent. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10(d)      – Amendment, dated as of April 25, 2008, to $650 Million Credit Agreement,      among AEP, TCC, TNC, APCo, CSPCo, I&M, KPCo, OPCo, PSO and SWEPCo, the      Initial Lenders named therein, the Swingline Bank party thereto, the LC      Issuing Banks party thereto, and JPMorgan Chase Bank, N.A., as      Administrative Agent. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10(e)      – $350 Million Credit Agreement, dated as of April 4, 2008, among AEP,      TCC, TNC, APCo, CSPCo, I&M, KPCo, OPCo, PSO and SWEPCo, the Initial      Lenders named therein, the Swingline Bank party thereto, the LC Issuing      Banks party thereto, and JPMorgan Chase Bank, N.A., as Administrative      Agent. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10(f)      – Amendment, dated as of April 25, 2008, to $350 Million Credit      Agreement, among AEP, TCC, TNC, APCo, CSPCo, I&M, KPCo, OPCo, PSO      and SWEPCo, the Initial Lenders named therein, the Swingline Bank party      thereto, the LC Issuing Banks party thereto, and JPMorgan Chase Bank,      N.A., as Administrative Agent. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32(a)      – Certification of Chief Executive Officer Pursuant to Section 1350 of      Chapter 63 of Title 18 of the United States  Code. |
|-------------------------------------------------------------------------------------------------------------------------------------------------|

| 32(b)      – Certification of Chief Financial Officer Pursuant to Section 1350 of      Chapter 63 of Title 18 of the United States  Code. |
|-------------------------------------------------------------------------------------------------------------------------------------------------|

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SIGNATURE