We actively participate in the political process to advance our long-term business interests and the interests of our customers, employees, shareholders and other stakeholders. We also lobby and work for what we believe is in the best interests of our communities and the nation. We maintain five political action committees (PACs) – one for federal issues and separate state PACs in Michigan, Ohio, Texas and Virginia. Approximately 30 percent of the employees eligible to participate in one of our PACs do so. AEP’s federal PAC, the AEP Committee for Responsible Government, contributed $510,555 to candidates for public office in 2011 and received about $628,000 from employees. Pursuant to federal and state laws, AEP is permitted to pay expenses of operating its PACs.

In 2011, we spent about $11 million on internal and external lobbying activities at the state and federal level. This includes dues to trade or national associations for which a portion is used for lobbying. We maintain an office in Washington, D.C., to address issues involving federal legislation and regulation. Each of our operating companies has lobbyists who work in their respective state capitals.

Although we have received requests from some shareholders to end our membership in certain organizations that have lobbied against climate change legislation in 2009 and environmental regulations more recently, we have declined to do so. Some of our membership dues are designated for lobbying activities, and we understand why advocates have asked us to withdraw on that basis.

We belong to or participate in many state, local and national organizations, including the Edison Electric Institute, the Business Roundtable and the National Association of Manufacturers (NAM). We do so for a variety of reasons, including staying current on issues, learning business best practices from our peers, and strengthening our relationships with our customers, many of whom are also members.

From time to time, many, if not most, of the organizations to which we belong reach conclusions or take positions with which we disagree. If we feel strongly enough, we voice our disagreement and work to change the organization’s position. Sometimes our views prevail, sometimes they do not. Many times we are able to reach some sort of compromise.

We believe that, as a general rule, it is more beneficial to AEP to remain involved, even if we occasionally disagree, than to withdraw. We believe that we can be far more effective in shaping the policies of the organizations from within, rather than withdrawing.

We are firm believers in transparency and participating actively in public debate. That belief is based on our deeply held cultural value of collaboration, which we practice both internally and externally. We believe that open, candid discussion and a good-faith attempt to reach common ground is the best way to do business.