More Challenges for Big More Challenges for Big CoalCoal

Tim Light

Senior Vice President

Fuel, Emissions, and Logistics

Southern Coals Conference

March 5, 2009

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“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

This presentation contains forward-looking statements, which are subject to risks and uncertainties. These factors include electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels andperformance of fuel suppliers and transporters; availability of generating capacity and performance of generating plants; the ability to recover regulatory assets and stranded costs in connection with deregulation; the ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; the ability to build or acquire generating capacity (including our ability to obtainany necessary regulatory approval and permits) when needed at acceptable prices and terms and to recover those costs (including thecosts of projects that are cancelled) through applicable rate cases or competitive rates; new legislation, litigation and governmentregulation, 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 otherrecovery 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 maintenancecosts; the economic climate and growth or contraction in our service territory and changes in market demand and demographicpatterns; 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 developand execute a strategy based on a view regarding prices of electricity, natural gas, coal, nuclear fuel and other energy relatedcommodities; changes in the creditworthiness of the counterparties with whom we have contractual arrangements, includingparticipants in the energy trading market; actions of rating agencies, including changes in the ratings of debt; volatility and changes inmarkets for electricity, natural gas and other energy-related commodities; changes in utility regulation, including the implementation ofthe recently-passed utility law in Ohio and the allocation of costs within regional transmission organizations; accountingpronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value ofthe investments held by our pension, other postretirement benefit plans and nuclear decommissioning trust and the impact on futurefunding requirements; prices for power 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 or terrorism (includingincreased security costs), embargoes and other catastrophic events; and other factors discussed in the reports, including Forms 10-K and 10-Q, filed from time to time by the company with the SEC.

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Coal/Lignite

66%

Nat. Gas/Oil

23%

Nuclear

6%Pumped Storage/

Hydro/Wind

5%AEP’s Generation

Fleet

38,721 MW Capacity

Company Overview

5.1 million customers in 11 statesIndustry-leading size and scale of

assets:Asset Size

IndustryRank

Domestic Generation ~38,700 MW # 2Transmission ~39,000 miles # 1Distribution ~213,000 miles # 1

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Coal Procurement – 2009 Projected

Coal Stats:

98+% contracted for 2009

Avg. delivered price ~ $47/ton in 2008

Projecting 15% increase in 2009 ~ $52/ton

AEP burns ~ 77 million tons of coal per year

AEP West

AEP East

Total AEP System

Northern Appalachia

30%

Powder River Basin 35%

Central Appalachia

26%

Lignite 6%Colorado/Utah 2%Illinois Basin 1%

Northern Appalachia

39%

Illinois Basin 1%Colorado/Utah

3%Powder River Basin 23%

Central Appalachia

34%

Powder River Basin 75%

Lignite 25%

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Controlled Assets

Approximately 9,100 Railcars - owned & leased Approximately 2,800 Barges - commercial & captive 82 Boats - commercial & captive Cook Coal Terminal with an annual transload capacity of

approximately 18 Million Tons Alliance Railcar Maintenance Facility maintains

approximately 7,000 railcars annually Dolet Hills Lignite Company with approximately 3.3 Million

tons production annually Conesville Coal Preparation Plant with approximately 2

Million tons processed annually Central Coal Lab with approximately 28,000 samples

processed annually

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The New Administration—Energy and the Environment

Energy Legislation -- A First Priority For electric utilities: Federal RPS likely

Climate Legislation -- Also a Priority Passage is complex

Further Air Emissions Requirements -- SO2, NOx, and Hg???

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The Coal Gap(Electric Perspectives – 3rd Quarter 2008 Survey)

69% of those surveyed think of climate change as fact

72% of these believe the matter is urgent

Coal only accounts for ~20% of power generation

Climate change can be addressed through renewables and energy efficiency, and

2/3 think climate change can be addressed

“without serious negative consequences”

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Our Position On Climate Change

The scientific community, led largely by the Intergovernmental Panel on Climate Change, has provided scientific evidence that human activity has contributed to global warming. AEP is helping to lead the discussion nationally and internationally to find a reasonable, achievable approach and enact federal energy policy that is realistic in time frame and does “not” seriously harm the U.S. economy. We also are developing advanced coal technologies so that “coal” can continue to be the important energy resource it is today. We support the adoption of an economy wide, cap-and-trade greenhouse gas reduction program that allows us to provide reliable, reasonably priced electricity to our customers and that fosters the international participation that is necessary to make meaningful progress.

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0

500

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1990 1995 2000 2005 2010 2015 2020 2025 2030

U.S

. Ele

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c S

ecto

rC

O2 E

mis

sio

ns

(mill

ion

met

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s)

EIA Base Case 2007

A Portfolio is Needed and CCS is Key

Technology EIA 2007 Reference Target

Efficiency Load Growth ~ +1.5%/yr Load Growth ~ +1.1%/yr

Renewables 30 GWe by 2030 70 GWe by 2030

Nuclear Generation 12.5 GWe by 2030 64 GWe by 2030

Advanced Coal GenerationNo Existing Plant Upgrades

40% New Plant Efficiency by 2020–2030

150 GWe Plant Upgrades

46% New Plant Efficiency by 2020; 49% in 2030

CCS None Widely Deployed After 2020

PHEV None10% of New Vehicle Sales by 2017;

+2%/yr Thereafter

DER < 0.1% of Base Load in 2030 5% of Base Load in 2030

Achieving all targets is aggressive, but potentially feasible

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AEP’s GHG Reduction Portfolio

Renewables(e.g. 800 Mw of Existing Wind

1000 Mw New Wind PPA by 2011Biomass Co-firing)

Offsets & GHG Markets(e.g. Chicago Climate Exchange,

Forest Preservation and Tree Planting,Methane Capture from Livestock,

2.5 MM CO2eTons/yr by 2011 Goal)

New Technology:Clean Coal/CCS

(e.g. Chilled Ammonia Retrofit, IGCC)

Efficiency(e.g. Coal Plant Heat Rate Improvements

DSM and Energy Efficiency)

AEP is investing in a portfolio of GHG reduction alternatives

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The Challenge: CCS is Expensive

CCS w/ Geologic Sequestration

Other renewable, advanced geothermal and/or solar

Carbon Capture for Enhanced Oil Recovery

New Biomass Generation

Dispatch of additional gas vs. inefficient coal

Biomass Co-firing

Forestry

New Wind

Nuclear

Energy Efficiency

Methane Offsets

$/ton CO2e

$0

$50+

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Key Points

Expected federal environmental policy will require further emissions reductions from existing and future coal and natural gas fired power plants

No silver bullet – Portfolio mix of resources will be required to satisfy future energy needs

Carbon capture and storage and enhanced oil and natural gas recovery are critically needed technologies for baseload generation to comply with anticipated federal CO2 emissions reduction requirements

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Mind the Gap !!!