A significant portion of our investment capital will go to our transmission business in 2012 and beyond because transmission offers great potential for earnings growth, shareholder return and customer service, both short term and long term.

We have a two-fold plan: Create near-term expansion through our new AEP transmission companies (Transcos) and invest in long-term joint ventures with other electric utilities to develop new transmission facilities across the United States.

We operate Transcos in Indiana, Michigan, Ohio and Oklahoma and are engaged in regulatory activities necessary to initiate operations in Arkansas, Kentucky, Louisiana, Virginia and West Virginia. The Transcos can separately raise capital and are able to build new transmission without affecting the balance sheet or credit ratings of the operating companies. This organizational design provides long-term benefits to customers by relieving our operating companies of the burden of incurring debt for those projects, thus preserving debt issuance capacity for other system needs while, at the same time, facilitating the completion of transmission system improvements by the Transcos.

We expect the Transcos to invest approximately $350 million in 2012 and to grow to more than $2 billion in assets during the next four years. With Federal Energy Regulatory Commission (FERC) approved formula rates that adjust annually, these investments support the transmission needs of the operating companies, providing additional reliability and efficiency while delivering stable earnings and shareholder value.

Our longer-term strategy includes pursuing joint ventures with partners to build new transmission lines within and outside of our service territory. These partnerships allow us to leverage both expertise and financial assets. We expect to invest approximately $116 million in 2012 to support construction and other expenditures of these projects. Many of them will modernize the grid and improve reliability, alleviate congested power corridors and facilitate the development of renewable generation.

Here are the key joint venture projects we are engaged in across the United States:
Electric Transmission Texas (ETT) is a joint venture between subsidiaries of AEP and MidAmerican Energy Holdings Co., which operates in Electric Reliability Council of Texas (ERCOT) and is an operating utility with a growing rate base. ETT has been assigned approximately $1.5 billion in Competitive Renewable Energy Zone projects in Texas that support the state’s commitment to renewable energy. These involve seven double-circuit 345-kV transmission lines, eight major transmission stations and other equipment. The 427-mile project received approval from state regulators in Texas. An additional $1.6 billion in new projects are scheduled between now and 2020, to build 822 miles of transmission lines and 28 substations.

Electric Transmission America (ETA) is a 50/50 joint venture between a subsidiary of MidAmerican Energy and AEP to develop electric transmission in North America outside of ERCOT.

In 2011, ETA, AEP and Exelon Corp. formed RITELine to develop a 420-mile, 765-kV extra-high voltage (EHV) transmission line that will extend from the Indiana/Ohio border west through Indiana to Henry County, Ill. The estimated $1.6 billion project will be built in phases between 2015 and 2019, depending on the timing of regulatory approvals.

ETA also formed a joint venture with MidAmerican Energy in 2011 to develop and build the 180-mile Midwest Power Transmission (MPT) project. This 765-kV EHV transmission line will run from Henry County, Ill., to Louisa County, Iowa, and then to Buchanan County, Iowa. The cost is estimated at $650 million and the line is expected to be operational by 2019.

Both MPT and RITELine are needed to strengthen the Midwest transmission system, improve overall system reliability and establish the infrastructure needed to provide access to renewable sources of energy.

In April 2010, SPP  approved the Prairie Wind 345-kV double-circuit transmission lines, running from a new substation in Wichita, Kan., to a new substation northeast of Medicine Lodge, Kan. and then south to the Kansas/Oklahoma border. This line is needed to enhance the delivery of electricity in Kansas and to support the state’s expansion of renewable energy. In June 2011, the Kansas Corporation Commission approved the route, and engineering, permitting and siting activities began shortly thereafter. The new line is expected to be in service by the end of 2014 and will cost approximately $225 million. Prairie Wind is a joint venture of ETA and Westar Energy.

Pioneer Transmission is a joint venture between AEP and Duke Energy. In December 2011, the Greentown to New Reynolds segment of Pioneer Transmission’s project was approved as a multivalue project (MVP) by the Midwest Independent Transmission System Operator (MISO) and included in the 2011 Transmission Expansion Plan. The MVPs will collectively enhance regional reliability, improve market efficiency, enable public policy mandates and facilitate the integration of new generating resources, such as renewable energy, with the electric transmission grid.

Pioneer will begin engineering, permitting and siting activities on the 66-mile, 765-kV transmission line in Indiana in 2012. Greentown-New Reynolds is part of a larger, 240-mile transmission project in Indiana originally proposed in 2008 that would extend from Duke Energy’s Greentown substation to AEP’s Rockport substation, near Evansville, Ind. The total cost of the broader project is estimated at $950 million.

In February 2012, Pioneer filed a complaint with FERC to resolve an ownership and investment dispute between Pioneer Transmission and Northern Indiana Public Service Company (NIPSCo).

In early 2011 PJM Interconnection, the Mid-Atlantic grid operator, suspended the 275-mile Potomac Appalachian Transmission Highline (PATH) 765-kV line to allow more time for PJM to conduct additional analysis on the need for the project. .