Materiality
We define issues material to our sustainability as those that: 1) have or may have a significant impact on the company’s finances or operations; 2) have or may have a significant impact on the environment or society, now or in the future; or 3) can substantially influence the assessments, decisions and actions of our stakeholders and shareholders. This report reflects those issues we consider material to our business. For the first time, internal auditors audited the printed report for reliability and consistency.

Our material issues:

Financial Performance – Our ability to manage business risks and to maintain a strong financial foundation allows us to deliver returns to our shareholders; provide safe, reliable electricity to our customers; and deliver broader economic, environmental and social benefits to society. Our business performance has direct impacts on our stakeholders and society that we take into account by ensuring that our business strategy and management systems systematically address material issues and risks, by measuring and reporting our performance with accuracy and transparency, and by holding ourselves accountable for the results.

Energy Security, Reliability & Growth – Our electric generation and delivery systems must be modern, reliable, and able to handle a diverse fuel supply as well as diverse technologies. They also must keep pace with customer demand. Collaboration with others is essential to create and maintain these systems and to ensure adequate and timely cost recovery.

Public Policy – We must actively engage legislators, regulators, policymakers and other stakeholders to ensure that public policy, laws and regulations enable us to continue to serve our customers, compensate our shareholders and pursue our vision for sustainability. We will continue to work with regulators and legislators on alternative regulatory solutions.

Environmental Performance – Although environmental laws and regulations are complex and changing, we are committed to compliance at all times. Our challenge is to achieve compliance, and go beyond compliance when we can, to reduce our impact on the environment and improve the economic well-being of our communities.

Global Climate Change – AEP has a major role to play in addressing global climate change, including bringing advanced coal and other technologies to commercial scale, securing access to large-scale renewables through transmission development and increasing energy efficiency through our gridSMARTSM initiative. Our company’s and our customers’ economic well-being requires us to work cooperatively with regulators and policymakers, our stakeholders, and our communities to reach a reasonable global solution that will protect the environment and foster economic growth.

Work Force – Protecting the safety and health of our employees and contractors and reducing the severity of work-related injuries and illnesses is a core value. We seek a skilled, diverse and highly motivated work force to support all aspects of our business.

Stakeholder Engagement – All of the material issues and risks we face and our well-being as a company increasingly depend on working closely with our stakeholders, disclosing our intentions, reporting on our performance and engaging in active and forthright dialogue.

Stakeholder Engagement
Stakeholder engagement is an increasingly important aspect of our business processes. We conducted or participated in seven stakeholder meetings during 2009 that provided us with insight and information related to a wide range of issues that are important to us and to our industry. These meetings helped to shape our reporting. Our discussions were candid and helped us identify strategies and actions. This year we focused more deeply on specific issues, such as the future of coal. For more information about our process and progress, see Stakeholder Engagement

Our primary stakeholders are:

• Shareholders, prospective investors and lenders
• Customers, large and small
• AEP employees and retirees
• Labor unions
• Local communities
• Federal and state legislators, regulators, policymakers and other elected leaders
• Prospective employees
• Suppliers and others doing business with AEP
• Nongovernment organizations
• Professionals in industry, government, labor and academia

Scope of This Report
This is our first integrated report, combining information about our financial performance with data on our environmental, social and governance performance. Information contained herein is largely based on calendar year 2009, with exceptions for some early 2010 data as noted. Supporting information can be found on our corporate website at www.AEP.com.

In 2009, per our commitment to stakeholders, we began reporting our progress twice a year. A full update is provided every spring. An update of key commitments is published to the Web in the fall.

Reporting Principles & Guidance
AEP follows the Global Reporting Initiative (GRI) reporting principles in terms of data quality, report content and organizational boundaries. We use the G3 guidelines as well as the GRI Electric Utility Sector Supplement for reporting on industry-specific information. Our report is reviewed by GRI. This year’s report, including web content, was validated as an Application Level A by GRI, which reflects the high level of transparency in our reporting.

For the third year in a row, SustainAbility, the company that facilitates our stakeholder meetings, identified strengths and weaknesses in our report. SustainAbility said that our report could be enhanced by a more precise description of our material issues, more consistency in data presentation and more information about how we are integrating sustainability and investor relations activities. This is valuable feedback, and we have attempted to provide greater clarity in this report around some of these issues.

For additional information about this report, the GRI information posted on the company's Web site or the company's sustainability initiatives, please contact us.