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# AEP Places Carbon Capture Commercialization On Hold, Citing Uncertain Status OfClimate Policy, Weak Economy

COLUMBUS, Ohio, July 14, 2011 -American Electric Power (NYSE: AEP) is terminating its cooperative agreement with the U.S. Department of Energy and placing its plans to advance carbon dioxide capture and storage (CCS) technology to commercial scale on hold, citing the current uncertain status of U.S. climate policy and the continued weak economy as contributors to the decision. "We are placing the project on hold until economic and policy conditions create a viable path forward," said Michael G. Morris, AEP chairman and chief executive officer. "With the help ofAlstom, the Department of Energy and other partners, we have advanced CCS technology more than any other power generator with our successful two-year project to validate the technology. But atthis time it doesn't make economic sense to continue work on the commercial-scale CCS project beyond the current engineering phase. "We are clearly in a classic 'which comes first?' situation," Morris said. "The commercialization ofthis technology is vital if owners ofcoal-fueled generation are to comply with potential future climate regulations without prematurely retiring efficient, cost-effective generating capacity

. But as a regulated utility, it is impossible to gain regulatory approval to recover our share ofthe costs for validating and deploying the technology withoutfederal requirements to reduce greenhouse gas emissions already in place. The uncertainty also makes it difficultto attract partners to help fund the industry's share." In 2009, AEP was selected by the Department of Energy (DOE) to receive funding of up to $334 million through the Clean Coal Power Initiativeto pay part ofthe costs for installation of a commercial-scale CCS system atAEP's Mountaineer coal-fueled power plant in New Haven, W.Va. The system would capture at least 90 percent ofthe carbon dioxide (C02) from 235 megawatts ofthe plant's 1,300 megawatts ofcapacity. The captured C02, approximately 1.5 million metrictons peryear, would be treated and compressed, then injected into suitable geologicformations for permanent storage approximately 1.5 miles below the surface. Plans were for the projectto be completed in four phases, with the system to begin commercial operation in 2015

. AEP has informed the DOE that itwill complete the first phase ofthe project (front-end engineering and design, development ofan environmental impact statement and development ofa detailed Phase II and Phase Ill schedule) but will not move to the second phase. DOE's share ofthe cost for completion ofthe first phase is expected to be approximately $16 million, halfthe expenses that qualify underthe DOE agreement. AEP and partner Alstom began operating a smaller-scale validation ofthe technology in October 2009 atthe Mountaineer Plant, the first fully-integrated capture and storage facility in the world

.That system captured up to 90 percent ofthe C02 from a slipstream offlue gas equivalentto 20 megawatts ofgenerating capacity and injected it into suitable geologicformations for permanent storage approximately 1

.5 miles belowthe surface. The validation

## project, which received no federal funds, was closed as planned in May after meeting project goals. Between October2009 and May 2011, the life ofthe validation project, the CCS system operated more than 6,500 hours, captured more than 50,000 metric tons ofC02 and permanently stored more than 37,000 metric tons ofC02. "The lessons we learned from the validation projectwere incorporated into the Phase Iengineering for the commercial-scale project," Morris said.
American Electric Power is one ofthe largest electric utilities in the United States, delivering electricity to morethan 5 million customers in 11 states. AEP ranks among the nation's largest generators ofelectricity, owning nearly 38,000 megawatts ofgenerating capacity in the U.S. AEP also ownsthe nation's largest electricitytransmission system, a nearly 39,000-mile networkthat includes more 765-kilovolt extra-high voltage transmission lines than all other U.S
.transmission systems combined. AEP's transmission system directly or indirectly serves about 10 percentofthe electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S
. states and eastern Canada, and approximately 11 percent ofthe electricity demand in ERCOT, thetransmission system thatcovers much ofTexas. AEP's utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and WestVirginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company ofOklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and eastTexas). AEP's headquarters are in Columbus, Ohio.

This report made by American Electric Power and its Registrant Subsidiaries containsforward-looking statementswithin the meaning ofSection 21 E ofthe Securities ExchangeAct of 1934. Although AEP and each of its Registrant Subsidiaries believethattheir expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among thefactors that could cause actual results to differ materially from those in theforward-looking statements are: the economic climate and growth in, or contraction within, AEP's serviceterritory and changes in marketdemand and demographic patterns; inflationary or deflationary interestrate trends; volatility in thefinancial markets, particularly developments affecting the availability ofcapital on reasonableterms and developments impairing AEP's abilitytofinance new capital projects and refinance existing debt at attractive rates; the availability and cost offunds to finance working capital and capital needs, particularly during periodswhen thetime lag between incurring costs and recovery is long and the costs are material; electric load and customer growth; weatherconditions, including storms, and AEP's ability to recover significant storm restoration coststhrough applicable rate mechanisms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance offuel suppliers and transporters; availability ofnecessary generating capacity and the performance ofAEP's generating plants; AEP's abilityto recover Indiana Michigan Power's Donald C. Cook Nuclear Plant Unit 1 restoration coststhrough warranty, insurance and the regulatory process; AEP's ability to recover regulatory assets and stranded costs in connection with deregulation; AEP's abilityto recover increases in fuel and otherenergy coststhrough regulated or competitive electric rates; AEP's abilityto build or acquire generating capacity, including theTurk Plant, and transmission line facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recoverthose costs (including the costs ofprojectsthat are cancelled) through applicable rate cases or competitive rates; new legislation, litigation and government regulation, including requirementsfor reduced emissions ofsulfur, nitrogen, mercury, carbon, soot orparticulate matter and other substances or additional regulation offly ash and similar combustion productsthat could impactthe continued operation and costrecovery ofAEP's plants; timing and resolution ofpending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery ofnew investments in generation, distribution and transmission service and environmental compliance); resolution oflitigation (including AEP's dispute with Bank ofAmerica); AEP's ability to constrain operation and maintenance costs; AEP's abilityto develop and execute a strategybased on a view regarding prices ofelectricity, natural gas and otherenergy-related commodities; changes in the creditworthiness ofthe counterparties with whom AEP has contractual arrangements, including participants in the energytrading market; actions ofrating agencies, including changes in the ratings ofdebt; volatility and changes in marketsfor electricity, natural gas, coal, nuclearfuel and other energy-related commodities; changes in utility regulation, including the implementation ofelectric security plans and related regulation in Ohio and the allocation ofcosts within regional transmission organizations, including PJM and SPP; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact ofvolatility in the capital markets on thevalue ofthe investments held by AEP's pension, other postretirement benefit plans and nuclear decommissioning trust and the impact on future funding requirements; prices and demand for powerthatAEP generates and sells at wholesale; changes in technology, particularly with respectto new, developing or alternative sources ofgeneration; and otherrisks and unforeseen events, including wars, the effects ofterrorism (including increased security costs), embargoes and other catastrophic events.



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