Exhibit 4(i)(i)(A)








                               GUARANTEE AGREEMENT

                                     BETWEEN

                       SOUTHWESTERN ELECTRIC POWER COMPANY
                                 (AS GUARANTOR)


                                       AND


                              THE BANK OF NEW YORK
                                  (AS TRUSTEE)

                                   DATED AS OF

                                SEPTEMBER 1, 2003

                            (SWEPCo CAPITAL TRUST I)


<PAGE>



                            CROSS-REFERENCE TABLE(1)




SECTION OF TRUST INDENTURE ACT                                       SECTION OF
OF 1939, AS AMENDED                                         GUARANTEE AGREEMENT
------------------------------                              -------------------
310(a)..................................................................4.01(a)
310(b)............................................................4.01(c), 2.08
310(c).............................................................Inapplicable
311(a)..................................................................2.02(b)
311(b)..................................................................2.02(b)
311(c).............................................................Inapplicable
312(a)..................................................................2.02(a)
312(b)..................................................................2.02(b)
313........................................................................2.03
314(a).....................................................................2.04
314(b).............................................................Inapplicable
314(c).....................................................................2.05
314(d).............................................................Inapplicable
314(e).........................................................1.01, 2.05, 3.02
314(f)...............................................................2.01, 3.02
315(a)..................................................................3.01(d)
315(b).....................................................................2.07
315(c).....................................................................3.01
315(d)..................................................................3.01(d)
315(e).............................................................Inapplicable
316(a)............................................................5.04(i), 2.06
316(b).....................................................................5.03
316(c).....................................................................2.02
317(a) ............................................................Inapplicable
317(b).............................................................Inapplicable
318(a)..................................................................2.01(b)
318(b).....................................................................2.01
318(c)..................................................................2.01(a)






---------------------------
(1)  This  Cross-Reference  Table  does  not  constitute  part of the  Guarantee
Agreement  and  shall  not  affect  the  interpretation  of any of its  terms or
provisions.


                                       i
<PAGE>



                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.01.    Definitions...................................................1

                                   ARTICLE II

                               TRUST INDENTURE ACT

SECTION 2.01.    Trust Indenture Act; Application..............................3

SECTION 2.02.    Lists of Holders of Securities................................4

SECTION 2.03.    Reports by the Trustee........................................4

SECTION 2.04.    Periodic Reports to Trustee...................................4

SECTION 2.05.    Evidence of Compliance with Conditions Precedent..............4

SECTION 2.06.    Events of Default; Waiver.....................................4

SECTION 2.07.    Event of Default; Notice......................................5

SECTION 2.08.    Conflicting Interests.........................................5

                                   ARTICLE III

                      POWERS, DUTIES AND RIGHTS OF TRUSTEE

SECTION 3.01.    Powers and Duties of the Trustee..............................5

SECTION 3.02.    Certain Rights of Trustee.....................................6

SECTION 3.03.    Compensation; Fees; Indemnity.................................8

                                   ARTICLE IV

                                     TRUSTEE

SECTION 4.01.    Trustee; Eligibility..........................................8

SECTION 4.02.    Appointment, Removal and Resignation of Trustee...............9


                                       ii
<PAGE>


                           TABLE OF CONTENTS (CONT'D)

                                                                            PAGE
                                                                            ----

                                    ARTICLE V

                                    GUARANTEE

SECTION 5.01.    Guarantee....................................................10

SECTION 5.02.    Waiver of Notice and Demand..................................10

SECTION 5.03.    Obligations Not Affected.....................................10

SECTION 5.04.    Rights of Holders............................................11

SECTION 5.05.    Guarantee of Payment.........................................11

SECTION 5.06.    Subrogation..................................................11

SECTION 5.07.    Independent Obligations......................................11

                                   ARTICLE VI

                                  SUBORDINATION

SECTION 6.01.    Subordination................................................12

                                   ARTICLE VII

                                   TERMINATION

SECTION 7.01.    Termination..................................................12

                                  ARTICLE VIII

                                  MISCELLANEOUS

SECTION 8.01.    Successors and Assigns.......................................12

SECTION 8.02.    Amendments...................................................12

SECTION 8.03.    Notices......................................................12

SECTION 8.04.    Benefit......................................................13

SECTION 8.05.    Interpretation...............................................13

SECTION 8.06.    Governing Law................................................14




                                      iii
<PAGE>


                                       15

                               GUARANTEE AGREEMENT

         This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of September
1, 2003, between  SOUTHWESTERN  ELECTRIC POWER COMPANY,  a Delaware  corporation
(the "Guarantor"),  and THE BANK OF NEW YORK, a New York banking corporation, as
trustee (the "Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred  Securities (as defined  herein) of SWEPCO CAPITAL
TRUST I, a Delaware statutory trust (the Trust").

         WHEREAS,  pursuant  to an Amended and  Restated  Trust  Agreement  (the
"Trust Agreement"),  dated as of September 1, 2003, among the Trustee, the other
Trustees named therein,  Southwestern Electric Power Company, as Depositor,  and
the holders of undivided  beneficial  interests in the assets of the Trust,  the
Trust is  issuing as of October  1,  2003,  $110,000,000  aggregate  liquidation
amount of its Flexible Trust Preferred  Securities (the "Preferred  Securities")
representing preferred undivided beneficial interests in the assets of the Trust
and having the terms set forth in the Trust Agreement;

         WHEREAS,  the Preferred  Securities will be issued by the Trust and the
proceeds thereof will be used to purchase the Junior Subordinated Debentures (as
defined  in the Trust  Agreement)  of the  Guarantor,  which will be held by the
Trust as trust assets; and

         WHEREAS,  as  incentive  for the  Holders  to  purchase  the  Preferred
Securities,  the Guarantor desires to irrevocably and unconditionally  agree, to
the extent set forth herein,  to pay to the Holders the  Guarantee  Payments (as
defined  herein) and to make certain other  payments on the terms and conditions
set forth herein.

         NOW,   THEREFORE,   in  consideration  of  the  payment  for  Preferred
Securities  by each  Holder (as  defined  herein)  thereof,  which  payment  the
Guarantor hereby agrees shall benefit the Guarantor,  the Guarantor executes and
delivers  this  Guarantee  Agreement for the benefit of the Holders from time to
time of the Common Securities (as defined herein) and the Preferred Securities.

                                   ARTICLE I

                                   DEFINITIONS

         SECTION 1.01.  DEFINITIONS.  As used in this Guarantee  Agreement,  the
terms set forth below shall,  unless the context  otherwise  requires,  have the
following  meanings.  Capitalized  or  otherwise  defined  terms  used  but  not
otherwise  defined herein shall have the meanings  assigned to such terms in the
Trust Agreement as in effect on the date hereof.

         "Affiliate" of any specified  Person means any other Person directly or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control  with  such  specified  Person.  For the  purposes  of this  definition,
"control"  when used with  respect to any  specified  Person  means the power to
direct the  management  and  policies of such  Person,  directly or  indirectly,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms  "controlling" and "controlled"  have meanings  correlative to the
foregoing.

<PAGE>

         "Common Securities" means the securities  representing common undivided
beneficial interests in the assets of the Trust.

         "Event of Default"  means a failure by the  Guarantor to perform any of
its payment  obligations under this Guarantee  Agreement or to perform any other
obligations if such default remains unremedied for 30 days.

         "Guarantee   Payments"   shall   mean   the   following   payments   or
distributions,  without  duplication,  with respect to the Common Securities and
the Preferred Securities,  to the extent not paid or made by or on behalf of the
Trust: (i) any accrued and unpaid  distributions that are required to be paid on
such Common  Securities  and  Preferred  Securities  to the extent the Trust has
funds on hand  available  therefor  to make such  payment;  (ii) the  redemption
price,  including all accrued and unpaid distributions to the date of redemption
(the "Redemption  Price"),  with respect to the Common  Securities and Preferred
Securities  called for  redemption by the Trust to the extent that the Trust has
funds on hand available therefor sufficient to make such payment; and (iii) upon
a voluntary or involuntary  dissolution,  winding-up or liquidation of the Trust
(other  than  in  connection  with  the  distribution  of  Junior   Subordinated
Debentures to the holders of Trust  Securities  or the  redemption of all of the
Preferred Securities), the lesser of (a) the aggregate of the liquidation amount
and all accumulated and unpaid  distributions  on the Common  Securities and the
Preferred  Securities to the date of payment,  to the extent the Trust has funds
on hand available therefor,  and (b) the amount of assets of the Trust remaining
available for  distribution  to Holders in  liquidation  of the Trust (in either
case, the "Liquidation Distribution").

         "Holder" shall mean any holder,  as registered on the books and records
of the Trust,  of any Common  Securities  and  Preferred  Securities;  provided,
however,  that in determining whether the holders of the requisite percentage of
Preferred  Securities  have  given  any  request,   notice,  consent  or  waiver
hereunder,  "Holder"  shall not include the  Guarantor  or any  Affiliate of the
Guarantor.

         "Indenture"  means the Subordinated  Indenture dated as of September 1,
2003, between the Guarantor,  as Junior  Subordinated  Debenture Issuer, and The
Bank  of  New  York,  as  trustee,  as the  same  may be  modified,  amended  or
supplemented in accordance with the applicable provisions thereof,  including by
the First Supplemental Indenture dated as of October 1, 2003, by and between the
Guarantor and The Bank of New York, as trustee.

         "Majority in liquidation  amount of Preferred  Securities" means a vote
by Holder(s) of Preferred Securities, voting separately as a class, of more than
50% of the  liquidation  amount of all Preferred  Securities  outstanding at the
time of determination.

         "Officers'  Certificate"  means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer,  the  Secretary  or an Assistant  Secretary,  of the  Guarantor,  and
delivered to the Trustee.  Any Officers'  Certificate  delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:


                                       2
<PAGE>


                  (a) a  statement  that  each  officer  signing  the  Officers'
         Certificate  has read the  covenant or  condition  and the  definitions
         relating thereto;

                  (b)  a  brief  statement  of  the  nature  and  scope  of  the
         examination  or  investigation  undertaken by each officer in rendering
         the Officers' Certificate;

                  (c)  a  statement   that  each  such  officer  has  made  such
         examination  or  investigation  as,  in  such  officer's  opinion,   is
         necessary to enable such  officer to express an informed  opinion as to
         whether or not such covenant or condition has been complied with; and

                  (d) a  statement  as to  whether,  in the opinion of each such
         officer, such condition or covenant has been complied with.

         "Person"  means  any  individual,  corporation,   partnership,  limited
liability  company,  joint  venture,  trust,   unincorporated   organization  or
government or any agency or political subdivision thereof.

         "Responsible  Officer"  means,  with respect to the  Trustee,  any vice
president, any assistant vice president, the secretary, any assistant secretary,
the treasurer,  any assistant treasurer, any senior trust officer, trust officer
or  assistant  trust  officer  or  any  other  officer  of the  Corporate  Trust
Department  of the Trustee  customarily  performing  functions  similar to those
performed by any of the above designated  officers and also means,  with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred  because  of that  officer's  knowledge  of and  familiarity  with  the
particular subject.

         "Successor   Trustee"   means  a  successor   Trustee   possessing  the
qualifications to act as Trustee under Section 4.01.

         "The Bank of New York" means The Bank of New York,  a New York  banking
corporation.

         "Trust  Indenture  Act"  means  the  Trust  Indenture  Act of 1939,  as
amended.

         "Trustee" means The Bank of New York until a Successor Trustee has been
appointed  and has  accepted  such  appointment  pursuant  to the  terms of this
Guarantee Agreement and thereafter means each such Successor Trustee.

                                   ARTICLE II

                               TRUST INDENTURE ACT

SECTION 2.01.     TRUST INDENTURE ACT; APPLICATION.
                  --------------------------------

         (a) This Guarantee  Agreement is subject to the provisions of the Trust
Indenture  Act that are  required  to be part of this  Guarantee  Agreement  and
shall, to the extent applicable, be governed by such provisions; and


                                       3
<PAGE>

         (b) If and to the extent that any provision of this Guarantee Agreement
limits,  qualifies or conflicts  with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

         SECTION 2.02. LISTS OF HOLDERS OF SECURITIES.
                       ------------------------------

         (a) The Guarantor shall furnish or cause to be furnished to the Trustee
(a) semiannually,  not later than April 1 and October 1 in each year, a list, in
such form as the Trustee may reasonably  require,  of the names and addresses of
the Holders  ("List of Holders") as of a date not more than 15 days prior to the
time such list is  furnished,  and (b) at such other  times as the  Trustee  may
request in  writing,  within 30 days after the receipt by the  Guarantor  of any
such request,  a List of Holders as of a date not more than 15 days prior to the
time such list is furnished; provided that, the Guarantor shall not be obligated
to provide  such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Trustee by the Guarantor or at
any time the Trustee is the Securities Registrar under the Trust Agreement.  The
Trustee may destroy any List of Holders  previously  given to it on receipt of a
new List of Holders.

         (b) The  Trustee  shall  comply  with its  obligations  under  Sections
311(a), 311(b) and 312(b) of the Trust Indenture Act.

         SECTION  2.03.  REPORTS BY THE TRUSTEE.  Within 60 days after May 15 of
each year  commencing  May 15, 2004, the Trustee shall provide to the Holders of
the Preferred  Securities  such reports as are required by Section 313(a) of the
Trust  Indenture Act, if any, in the form and in the manner  provided by Section
313 of the Trust  Indenture  Act.  The Trustee  shall also comply with the other
requirements of Section 313 of the Trust Indenture Act.

         SECTION 2.04. PERIODIC REPORTS TO TRUSTEE.  The Guarantor shall provide
to the Trustee such  documents,  reports and  information as required by Section
314 of the Trust  Indenture  Act (if any) in the form,  in the manner and at the
times  required by Section 314 of the Trust  Indenture  Act, and shall  provide,
within  120 days  after  the end of each of its  fiscal  years,  the  compliance
certificate required by Section 314(a)(4) of the Trust Indenture Act in the form
and  in  the  manner  required  by  such  Section.  Delivery  of  such  reports,
information and documents to the Trustee is for informational  purposes only and
the Trustee's  receipt of such  reports,  information  and  documents  shall not
constitute   constructive  notice  of  any  information   contained  therein  or
determinable from information contained therein.

         SECTION 2.05.  EVIDENCE OF COMPLIANCE  WITH CONDITIONS  PRECEDENT.  The
Guarantor  shall  provide to the Trustee such  evidence of  compliance  with any
conditions  precedent,  if  any,  provided  for  in  this  Guarantee  Agreement,
including an Officers'  Certificate and an opinion of counsel that relate to any
of the  matters  set forth in Section  314(c) of the Trust  Indenture  Act.  Any
certificate  or opinion  required to be given by an officer  pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.

         SECTION 2.06. EVENTS OF DEFAULT;  WAIVER.  The Holders of a Majority in
liquidation amount of Preferred Securities may, by vote, on behalf of all of the
Holders, waive any past Event of Default and its consequences. Upon such waiver,
any such Event of Default shall cease

                                       4
<PAGE>

to exist,  and any Event of Default  arising  therefrom  shall be deemed to have
been cured,  for every purpose of this Guarantee  Agreement,  but no such waiver
shall extend to any  subsequent  or other  default or Event of Default or impair
any right consequent thereon.

         SECTION 2.07. EVENT OF DEFAULT; NOTICE.
                       ------------------------

         (a) The Trustee shall,  within 90 days after the occurrence of an Event
of Default,  transmit by mail,  first class  postage  prepaid,  to the  Holders,
notices of all Events of Default  actually  known to the  Trustee,  unless  such
defaults  have been cured  before the giving of such notice,  provided  that the
Trustee  shall be  protected  in  withholding  such notice if and so long as the
board of directors,  the executive committee,  or a trust committee of directors
and/or  Responsible  Officers of the Trustee in good faith  determines  that the
withholding of such notice is in the interests of the Holders.

         (b) The Trustee  shall not be deemed to have  knowledge of any Event of
Default unless the Trustee shall have received written notice,  or a Responsible
Officer  charged  with the  administration  of the Trust  Agreement  shall  have
obtained written notice, of such Event of Default.

         SECTION  2.08.  CONFLICTING  INTERESTS.  The Trust  Agreement  shall be
deemed to be specifically described in this Guarantee Agreement for the purposes
of clause (i) of the first  proviso  contained  in  Section  310(b) of the Trust
Indenture Act.

                                  ARTICLE III

                      POWERS, DUTIES AND RIGHTS OF TRUSTEE

         SECTION 3.01. POWERS AND DUTIES OF THE TRUSTEE.
                       --------------------------------

         (a)  This  Guarantee  Agreement  shall be held by the  Trustee  for the
benefit of the  Holders,  and the  Trustee  shall not  transfer  this  Guarantee
Agreement to any Person except the Trustee  shall assign  rights  hereunder to a
Holder to the extent such  assignment  is  necessary to exercise  such  Holder's
rights  pursuant to Section 5.04 or to a Successor  Trustee upon  acceptance  by
such  Successor  Trustee of its  appointment  to act as Successor  Trustee.  The
right,  title  and  interest  of the  Trustee  shall  automatically  vest in any
Successor  Trustee,  and such vesting and  cessation of title shall be effective
whether or not conveyancing  documents have been executed and delivered pursuant
to the appointment of such Successor Trustee.

         (b) If an Event of Default has occurred and is continuing,  the Trustee
shall enforce this Guarantee Agreement for the benefit of the Holders.

         (c) The  Trustee,  before the  occurrence  of any Event of Default  and
after the curing or waiving  of all  Events of Default  that may have  occurred,
shall  undertake  to perform only such duties as are  specifically  set forth in
this  Guarantee  Agreement,  and no  implied  covenants  shall be read into this
Guarantee  Agreement  against  the  Trustee.  In case an  Event of  Default  has
occurred  (that has not been  cured or waived  pursuant  to Section  2.06),  the
Trustee  shall  exercise  such of the  rights  and  powers  vested in it by this
Guarantee Agreement, and use the same degree



                                       5
<PAGE>

of care and skill in its exercise thereof, as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.

         (d) No  provision  of this  Guarantee  Agreement  shall be construed to
relieve  the  Trustee  from  liability  for its own  negligent  action,  its own
negligent failure to act, or its own willful misconduct, except that:

              (i)  prior to the occurrence of any Event of Default and after the
         curing or waiving of all such Events of Default that may have occurred:

                       (A)   the duties and  obligations of the Trustee shall be
                             determined solely by the express provisions of this
                             Guarantee  Agreement,  and the Trustee shall not be
                             liable  except for the  performance  of such duties
                             and  obligations as are  specifically  set forth in
                             this Guarantee Agreement; and

                       (B)   in the  absence  of bad  faith  on the  part of the
                             Trustee,  the Trustee may conclusively  rely, as to
                             the truth of the statements and the  correctness of
                             the   opinions   expressed   therein,    upon   any
                             certificates  or opinions  furnished to the Trustee
                             and   conforming  to  the   requirements   of  this
                             Guarantee  Agreement;  but in the  case of any such
                             certificates  or  opinions  that  by any  provision
                             hereof are specifically required to be furnished to
                             the Trustee,  the Trustee  shall be under a duty to
                             examine the same to  determine  whether or not they
                             conform  to  the  requirements  of  this  Guarantee
                             Agreement;

              (ii) the  Trustee  shall not be liable  for any error of  judgment
         made in good faith by a Responsible  Officer of the Trustee,  unless it
         shall be proved that the  Trustee was  negligent  in  ascertaining  the
         pertinent facts upon which such judgment was made;

              (iii) the Trustee  shall not be liable with  respect to any action
         taken or omitted to be taken by it in good faith in accordance with the
         direction  of the  Holders of a Majority in  liquidation  amount of the
         Preferred  Securities  relating  to  the  time,  method  and  place  of
         conducting any proceeding for any remedy  available to the Trustee,  or
         exercising  any trust or power  conferred  upon the Trustee  under this
         Guarantee Agreement; and

              (iv) no provision of this  Guarantee  Agreement  shall require the
         Trustee  to expend or risk its own funds or  otherwise  incur  personal
         financial  liability in the  performance of any of its duties or in the
         exercise  of any of its rights or  powers,  if the  Trustee  shall have
         reasonable  grounds for  believing  that the repayment of such funds or
         liability  is not  reasonably  assured  to it under  the  terms of this
         Guarantee   Agreement  or  adequate  indemnity  against  such  risk  or
         liability is not reasonably assured to it.

         SECTION 3.02. CERTAIN RIGHTS OF TRUSTEE.
                        -------------------------

         (a)  Subject to the provisions of Section 3.01:

              (i) the Trustee may conclusively rely and shall be fully protected
         in acting or refraining from acting upon any  resolution,  certificate,
         statement,  instrument,  opinion,  report, notice, request,  direction,
         consent,  order, bond, debenture,  note, other evidence of



                                       6
<PAGE>

         indebtedness  or other paper or  document  believed by it to be genuine
         and to have been  signed,  sent or  presented  by the  proper  party or
         parties;

              (ii) any  direction or act of the Guarantor  contemplated  by this
         Guarantee  Agreement  shall be  sufficiently  evidenced by an Officers'
         Certificate;

              (iii) whenever, in the administration of this Guarantee Agreement,
         the  Trustee  shall  deem it  desirable  that a  matter  be  proved  or
         established before taking,  suffering or omitting any action hereunder,
         the Trustee (unless other evidence is herein  specifically  prescribed)
         may, in the absence of bad faith on its part,  request and rely upon an
         Officers'  Certificate  which,  upon receipt of such request,  shall be
         promptly delivered by the Guarantor;

              (iv) the Trustee may consult with counsel or other  experts of its
         choice,  and the  written  advice or opinion  of such  counsel or other
         experts  shall be full and complete  authorization  and  protection  in
         respect of any action  taken,  suffered or omitted by it  hereunder  in
         good faith and in accordance with such advice or opinion;  such counsel
         may be  counsel  to the  Guarantor  or any of its  Affiliates  and  may
         include any of its  employees;  the Trustee shall have the right at any
         time  to  seek  instructions  concerning  the  administration  of  this
         Guarantee Agreement from any court of competent jurisdiction;

              (v) the Trustee  shall be under no  obligation  to exercise any of
         the rights or powers  vested in it by this  Guarantee  Agreement at the
         request or  direction  of any Holder,  unless  such  Holder  shall have
         provided to the Trustee such  adequate  security and indemnity as would
         satisfy a reasonable  person in the position of the Trustee against the
         costs,   expenses   (including   attorneys'   fees  and  expenses)  and
         liabilities that might be incurred by it in complying with such request
         or direction, including such reasonable advances as may be requested by
         the Trustee; provided that nothing contained in this Section 3.02(a)(v)
         shall be taken to relieve the Trustee,  upon the occurrence of an Event
         of Default,  of its obligation to exercise the rights and powers vested
         in it by this Guarantee Agreement;

              (vi) the Trustee shall not be bound to make any investigation into
         the facts or matters stated in any resolution,  certificate, statement,
         instrument,  opinion,  report,  notice,  request,  direction,  consent,
         order, bond,  debenture,  note, other evidence of indebtedness or other
         paper or document,  but the Trustee,  in its discretion,  may make such
         further inquiry or  investigation  into such facts or matters as it may
         see fit;

              (vii)  the  Trustee  may  execute  any of  the  trusts  or  powers
         hereunder  or perform  any duties  hereunder  either  directly or by or
         through  agents or attorneys,  and the Trustee shall not be responsible
         for any  misconduct  or negligence on the part of any agent or attorney
         appointed with due care by it hereunder;

              (viii) whenever in the administration of this Guarantee  Agreement
         the  Trustee  shall  deem it  desirable  to receive  instructions  with
         respect to  enforcing  any  remedy or right or taking any other  action
         hereunder,  the Trustee (i) may request  instructions from the Holders,
         (ii) may  refrain  from  enforcing  such remedy or right or taking such
         other

                                       7
<PAGE>

         action  until  such  instructions  are  received,  and  (iii)  shall be
         protected in acting in accordance with such instructions;

              (ix)  the  Trustee  shall  not be  liable  for any  action  taken,
         suffered,  or omitted  to be taken by it in good  faith and  reasonably
         believed by it to be authorized  or within the  discretion or rights or
         powers conferred upon it by this Guarantee Agreement; and

              (x) the rights, privileges,  protections,  immunities and benefits
         given to the Trustee,  including , without limitation, its rights to be
         indemnified,  are extended to, and shall be enforceable by, the Trustee
         in each of its  respective  capacities  hereunder,  and to each  agent,
         custodian and other Person employed to act hereunder.

         (b) No provision of this Guarantee  Agreement shall be deemed to impose
any duty or obligation on the Trustee to perform any act or acts or exercise any
right, power, duty or obligation  conferred or imposed on it in any jurisdiction
in which it shall be illegal,  or in which the Trustee shall be  unqualified  or
incompetent in accordance  with  applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power or
authority available to the Trustee shall be construed to be a duty.

         SECTION 3.03. COMPENSATION; FEES; INDEMNITY. The Guarantor agrees:
                       -----------------------------

         (a) to pay to the Trustee from time to time reasonable compensation for
all services rendered by the Trustee hereunder (which  compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust);

         (b) except as otherwise  expressly  provided  herein,  to reimburse the
Trustee upon request for all  reasonable  expenses,  disbursements  and advances
incurred  or made by the  Trustee  in  accordance  with  any  provision  of this
Guarantee Agreement (including the reasonable  compensation and the expenses and
disbursements of its agents and counsel), except any such expense,  disbursement
or advance as may be attributable to its negligence or bad faith; and

         (c) to  indemnify  the Trustee  for,  and to hold the Trustee  harmless
against, any and all loss, damage, claims, liability or expense incurred without
negligence or bad faith on its part,  arising out of or in  connection  with the
acceptance or  administration of this Guarantee  Agreement,  including the costs
and expenses of defending  itself  against any claim or liability in  connection
with the exercise or performance of any of its powers or duties hereunder.

         The  provisions of this Section 3.03 shall survive the  termination  of
this Guarantee Agreement.

                                   ARTICLE IV

                                     TRUSTEE

         SECTION 4.01. TRUSTEE; ELIGIBILITY.
                       --------------------

         (a) There shall at all times be a Trustee which shall:


                                       8
<PAGE>


              (i) not be an Affiliate of the Guarantor; and

              (ii) be a corporation  organized and doing business under the laws
         of the United States of America or any State or Territory thereof or of
         the District of Columbia,  or a corporation or Person  permitted by the
         Securities and Exchange  Commission to act as an institutional  trustee
         under the Trust Indenture Act,  authorized  under such laws to exercise
         corporate  trust  powers,  having a combined  capital and surplus of at
         least 50 million U.S. dollars ($50,000,000), and subject to supervision
         or examination by Federal,  State,  Territorial or District of Columbia
         authority.  If such corporation publishes reports of condition at least
         annually,  pursuant to law or to the requirements of the supervising or
         examining  authority  referred to above, then, for the purposes of this
         Section   4.01(a)(ii),   the  combined  capital  and  surplus  of  such
         corporation  shall be deemed to be its combined  capital and surplus as
         set forth in its most recent report of condition so published.

         (b) If at any time the  Trustee  shall  cease to be  eligible to so act
under Section 4.01(a),  the Trustee shall  immediately  resign in the manner and
with the effect set out in Section 4.02(c).

         (c) If the Trustee  has or shall  acquire  any  "conflicting  interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and
Guarantor  shall in all respects comply with the provisions of Section 310(b) of
the  Trust  Indenture  Act,  subject  to the  rights  of the  Trustee  under the
penultimate paragraph thereof.

         SECTION 4.02. APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEE.
                       -----------------------------------------------

         (a) Subject to Section 4.02(b), the Trustee may be appointed or removed
without cause at any time by the Guarantor.

         (b) The Trustee shall not be removed until a Successor Trustee has been
appointed and has accepted such  appointment by written  instrument  executed by
such Successor Trustee and delivered to the Guarantor.

         (c) The Trustee appointed to office shall hold office until a Successor
Trustee  shall have been  appointed  or until its  removal or  resignation.  The
Trustee may resign from office (without need for prior or subsequent accounting)
by an  instrument  in writing  executed  by the  Trustee  and  delivered  to the
Guarantor, which resignation shall not take effect until a Successor Trustee has
been  appointed  and has accepted  such  appointment  by  instrument  in writing
executed  by such  Successor  Trustee and  delivered  to the  Guarantor  and the
resigning Trustee.

         (d) If no  Successor  Trustee  shall have been  appointed  and accepted
appointment  as provided in this Section  4.02 within 60 days after  delivery to
the  Guarantor  of an  instrument  of  resignation,  the  resigning  Trustee may
petition  any court of competent  jurisdiction  for  appointment  of a Successor
Trustee. Such court may thereupon,  after prescribing such notice, if any, as it
may deem proper, appoint a Successor Trustee.




                                       9
<PAGE>


                                   ARTICLE V

                                    GUARANTEE

         SECTION 5.01 GUARANTEE.  The Guarantor  irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of  amounts  theretofore  paid by or on behalf of the  Trust),  as and when due,
regardless of any defense,  right of set-off or counterclaim which the Guarantor
may have or assert  against any Person,  other than the defense of payment.  The
Guarantor's  obligation  to make a Guarantee  Payment may be satisfied by direct
payment of the  required  amounts by the  Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders.

         SECTION 5.02. WAIVER OF NOTICE AND DEMAND.  The Guarantor hereby waives
notice of acceptance of this  Guarantee  Agreement and of any liability to which
it applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Trust or any other Person before proceeding against
the  Guarantor,  protest,  notice of nonpayment,  notice of dishonor,  notice of
redemption and all other notices and demands.

         SECTION 5.03. OBLIGATIONS NOT AFFECTED. The obligation of the Guarantor
to make the Guarantee Payments under this Guarantee Agreement shall in no way be
affected or impaired by reason of the happening  from time to time of any of the
following:

         (a) the release or waiver,  by  operation of law or  otherwise,  of the
performance  or  observance  by the Trust of any  express or implied  agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;

         (b) the  extension  of time for the  payment by the Trust of all or any
portion of the Distributions,  Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred  Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred  Securities  (other than an extension of time for
payment of Distributions,  Redemption Price,  Liquidation  Distribution or other
sum payable that results from the  extension of any interest  payment  period on
the Junior Subordinated Debentures permitted by the Indenture);

         (c) any  failure,  omission,  delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred  Securities,  or
any action on the part of the Trust  granting  indulgence  or  extension  of any
kind;

         (d) the voluntary or involuntary liquidation,  dissolution, sale of any
collateral, receivership,  insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization,  arrangement, composition or readjustment of debt of,
or other similar  proceedings  affecting,  the Trust or any of the assets of the
Trust;

         (e) any  invalidity  of, or  defect or  deficiency  in,  the  Preferred
Securities;

         (f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or


                                       10
<PAGE>


         (g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable  discharge or defense of a guarantor,  it being the intent of
this Section  5.03 that the  obligations  of the  Guarantor  hereunder  shall be
absolute and unconditional under any and all circumstances.

         There  shall be no  obligation  of the  Holders  to give  notice to, or
obtain  consent of, the  Guarantor  with respect to the  happening of any of the
foregoing.

         SECTION 5.04. RIGHTS OF HOLDERS.  The Guarantor expressly  acknowledges
that: (i) this Guarantee Agreement will be deposited with the Trustee to be held
for the benefit of the  Holders;  (ii) the Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in
liquidation  amount of the  Preferred  Securities  have the right to direct  the
time,  method and place of conducting any proceeding for any remedy available to
the Trustee in respect of this  Guarantee  Agreement or exercising  any trust or
power  conferred upon the Trustee under this Guarantee  Agreement;  and (iv) any
Holder may  institute  a legal  proceeding  directly  against the  Guarantor  to
enforce its rights under this Guarantee  Agreement,  without first instituting a
legal proceeding  against or requesting or directing that action be taken by the
Trustee or any other  Person;  it being  understood  and intended that no one or
more of such Holders shall have any right in any manner whatsoever by virtue of,
or by availing of, any provision of this Guarantee Agreement to affect,  disturb
or prejudice  the rights of any other of such Holders or to obtain or to seek to
obtain  priority or preference  over any other of such Holders or to enforce any
right under this Guarantee  Agreement,  except in the manner herein provided and
for the equal and ratable benefit of all of such Holders.

         SECTION 5.05. GUARANTEE OF PAYMENT.  This Guarantee Agreement creates a
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged  except  by  payment  of the  Guarantee  Payments  in  full  (without
duplication) or upon the distribution of Junior  Subordinated  Debentures to the
Holders in exchange for all of the Preferred Securities.

         SECTION 5.06. SUBROGATION. The Guarantor shall be subrogated to all (if
any) rights of the Holders  against the Trust in respect of any amounts  paid to
the Holders by the Guarantor under this Guarantee Agreement;  provided, however,
that the  Guarantor  shall not  (except  to the  extent  required  by  mandatory
provisions  of law) be entitled to enforce or exercise  any rights  which it may
acquire  by  way  of  subrogation  or  any  indemnity,  reimbursement  or  other
agreement,  in all cases as a result of payment under this Guarantee  Agreement,
if, at the time of any such payment,  any amounts of Guarantee  Payments are due
and unpaid under this  Guarantee  Agreement.  If any amount shall be paid to the
Guarantor in violation of the preceding  sentence,  the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.

         SECTION 5.07. INDEPENDENT OBLIGATIONS.  The Guarantor acknowledges that
its  obligations  hereunder are independent of the obligations of the Trust with
respect to the Preferred  Securities  and that the Guarantor  shall be liable as
principal and as debtor  hereunder to make  Guarantee  Payments  pursuant to the
terms of this Guarantee  Agreement  notwithstanding  the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.


                                       11
<PAGE>

                                   ARTICLE VI

                                  SUBORDINATION

         SECTION 6.01.  SUBORDINATION.  This Guarantee Agreement will constitute
an unsecured  obligation  of the  Guarantor  and will rank (i)  subordinate  and
junior in right of payment to all other liabilities of the Guarantor,  including
the Junior Subordinated Debentures, except those obligations or liabilities made
pari passu or subordinate  by their terms;  (ii) pari passu with the most senior
preferred or preference  stock now or hereafter issued by the Guarantor and with
any guarantee  now or hereafter  entered into by the Guarantor in respect of any
preferred or preference securities of any Affiliate of the Guarantor;  and (iii)
senior to all common stock of the Guarantor.

                                  ARTICLE VII

                                   TERMINATION

         SECTION 7.01. TERMINATION. This Guarantee Agreement shall terminate and
be of no further force and effect upon: (i) full payment of the Redemption Price
of all  Preferred  Securities;  (ii) the  distribution  of  Junior  Subordinated
Debentures  to the Holders in exchange for all of the Preferred  Securities;  or
(iii) full payment of the amounts payable in accordance with the Trust Agreement
upon  liquidation of the Trust.  Notwithstanding  the foregoing,  this Guarantee
Agreement will continue to be effective or will be  reinstated,  as the case may
be, if at any time any Holder must restore payment of any sums paid with respect
to Preferred Securities or under this Guarantee Agreement.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         SECTION 8.01.  SUCCESSORS  AND ASSIGNS.  All  guarantees and agreements
contained  in this  Guarantee  Agreement  shall  bind the  successors,  assigns,
receivers,  trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders of the Preferred  Securities then outstanding.  Except in
connection  with  a  consolidation,   merger,  conveyance,  transfer,  or  lease
involving the Guarantor that is permitted under Article Eleven of the Indenture,
the Guarantor shall not assign its obligations hereunder.

         SECTION 8.02.  AMENDMENTS.  Except with respect to any changes which do
not materially  adversely affect the rights of Holders (in which case no consent
of Holders will be required),  this Guarantee Agreement may only be amended with
the prior  approval of the Holders of a Majority  in  liquidation  amount of the
Preferred  Securities.  The  provisions  of  Article  VI of the Trust  Agreement
concerning meetings of Holders shall apply to the giving of such approval.

         SECTION  8.03.  NOTICES.  Any  notice,  request or other  communication
required or permitted to be given hereunder shall be in writing,  duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:


                                       12
<PAGE>

         (a) if given to the  Guarantor,  to the address set forth below or such
other  address  as the  Guarantor  may give  notice  of to the  Trustee  and the
Holders:

                  Southwestern Electric Power Company
                  1 Riverside Plaza
                  Columbus, Ohio 43215
                  Facsimile No.: (614) 716-1687
                  Attn:  Treasurer

         (b) if given to the Trust, in care of the Trustee, or to the Trustee at
the Trust's (and the Trustee's) address set forth below or such other address as
the Trustee on behalf of the Trust may give notice to the Holders:

                  SWEPCo Capital Trust I
                  c/o  The Bank of New York
                  101 Barclay Street - 8W
                  New York, NY  10286
                  Facsimile No.:  (212) 815-5707
                  Attn:  Corporate Trust Administration

         (c) if given to any  Holder,  at the address set forth on the books and
records of the Trust.

         All notices  hereunder shall be deemed to have been given when received
in person,  telecopied  with receipt  confirmed,  or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered  because of a changed  address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

         SECTION  8.04.  BENEFIT.  This  Guarantee  Agreement  is solely for the
benefit  of the  Holders  and,  subject to Section  3.01(a),  is not  separately
transferable from the Preferred Securities.

         SECTION 8.05. INTERPRETATION.  In this Guarantee Agreement,  unless the
context otherwise requires:

         (a) capitalized terms used in this Guarantee  Agreement but not defined
in the preamble hereto have the respective  meanings assigned to them in Section
1.01;

         (b) a term defined  anywhere in this  Guarantee  Agreement has the same
meaning throughout;

         (c) all  references to "the  Guarantee  Agreement"  or "this  Guarantee
Agreement" are to this Guarantee Agreement as modified,  supplemented or amended
from time to time;

         (d) all references in this Guarantee Agreement to Articles and Sections
are to  Articles  and  Sections of this  Guarantee  Agreement  unless  otherwise
specified;



                                       13
<PAGE>


         (e) a term defined in the Trust Indenture Act has the same meaning when
used in this  Guarantee  Agreement  unless  otherwise  defined in this Guarantee
Agreement or unless the context otherwise requires;

         (f) a reference to the singular includes the plural and vice versa; and

         (g) the masculine, feminine or neuter genders used herein shall include
the masculine, feminine and neuter genders.

         SECTION 8.06. GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED  AND  INTERPRETED  IN ACCORDANCE  WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK. THE GUARANTOR HEREBY IRREVOCABLY  SUBMITS TO THE JURISDICTION
OF THE UNITED STATES  DISTRICT  COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK AND
ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK IN
ANY  ACTION,  SUIT  OR  PROCEEDING  BROUGHT  AGAINST  IT  AND  RELATED  TO OR IN
CONNECTION  WITH  THIS  GUARANTEE  AGREEMENT  OR THE  TRANSACTIONS  CONTEMPLATED
THEREBY,  AND TO THE EXTENT  PERMITTED BY APPLICABLE  LAW, THE GUARANTOR  HEREBY
WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION,  AS A DEFENSE OR  OTHERWISE IN
ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE  JURISDICTION  OF SUCH COURTS,  THAT THE SUIT,  ACTION OR  PROCEEDING  IS
BROUGHT  IN AN  INCONVENIENT  FORUM,  THAT THE  VENUE  OF THE  SUIT,  ACTION  OR
PROCEEDING IS IMPROPER,  OR THAT THIS GUARANTEE AGREEMENT OR ANY DOCUMENT OR ANY
INSTRUMENT  REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF MAY NOT BE LITIGATED
IN OR BY SUCH COURTS.  THE GUARANTOR  AGREES THAT SERVICE OF PROCESS MAY BE MADE
UPON IT BY CERTIFIED OR REGISTERED  MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN
THIS GUARANTEE AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK.

         This instrument may be executed in any number of counterparts,  each of
which so executed shall be deemed to be an original,  but all such  counterparts
shall together constitute but one and the same instrument.







                                       14
<PAGE>


         THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.

                                         SOUTHWESTERN ELECTRIC POWER COMPANY



                                         By:
                                            ----------------------------------
                                            Name:     Wendy G. Hargus
                                            Title:    Assistant Treasurer



                                         THE BANK OF NEW YORK



                                         By:
                                            ----------------------------------
                                            Name:
                                            Title:







                                       15