To Our Stakeholders:

AEP committed to providing a mid-year update on the key commitments in our 2009 Corporate Sustainability Report. This update focuses on those areas that AEP is most frequently asked about by our stakeholders. Because our report is published in April, this update covers actions and results of key indicators through Sept. 30, 2009.

Climate change has been a key focus of Congress this year. Following months of negotiations, the American Clean Energy and Security Act was passed by the U.S. House of Representatives in June. The U.S. Senate has drafted its own bill – the Clean Energy Jobs & American Power Act – that will eventually be debated in the full Senate. AEP has publicly supported an economy-wide cap-and-trade approach to climate change and supports the House bill (also known as the Waxman-Markey bill) and we are working with congressional leaders and others on the Senate version. To understand why AEP is supporting a legislative solution versus regulatory actions to address climate change, please read the public statement (PDF) we published in September.

As predicted in our Corporate Sustainability Report, 2009 has been a challenging year financially for AEP. The economic recession has resulted in declining demand for electricity, as companies have cut back production and some have closed, and customers have reduced their consumption. In response, AEP has carefully controlled costs and reduced capital investments. We are cautiously optimistic about the future but are preparing for another difficult year in 2010.

Our operational performance this year has been mixed. Our greatest failure was the death of an employee early this year in an event involving a drag line at the Dolet Hills Lignite Co. in Louisiana. We tried to learn from the accident to prevent similar injuries in the future for those working on the drag line, but the loss of life is a human tragedy that we must work harder to prevent in the future. In addition, a contractor working for AEP was fatally injured this year. We are working with our contractors to improve their safety and health performance because this, too, is unacceptable.

On the environmental front, we have been challenged. We have received five enforcement actions from regulatory agencies (see chart for details). We will continue to work toward our goal of zero enforcement actions and learn from our mistakes.

One issue that has affected AEP – as it has many Americans and others around the world – is the H1N1 flu virus. We emphasized policies to keep employees who are sick from coming to work, and fine-tuned plans for handling a widespread outbreak. Like others, we are concerned about this health threat and are working with health officials locally and nationally to ensure we are prepared and that our employees are informed, prepared and can stay home if they are ill.

Some significant technology milestones have occurred this year:

• AEP formally commissioned the world’s first fully integrated project to both capture and store carbon dioxide (CO₂) from a coal-fired power plant. This is a significant milestone in the effort to reduce CO₂ emissions from the combustion of fossil fuels. The Mountaineer carbon capture and storage demonstration project, which began capturing CO₂ Sept. 1 and storing it Oct. 2, is designed to capture at least 100,000 metric tons of CO₂ annually.

  We applied for federal stimulus funding to scale up the Alstom chilled ammonia technology to 235 MW at the Mountaineer Plant. The proposed commercial-scale demonstration will capture and geologically store approximately 1.5 million metric tons of CO₂ per year.

• Electric Transmission Texas LLC (ETT) completed a contract with NGK-Lock, Inc., for a state-of-the-art, sodium sulfur 4-megawatt NAS battery system, which will be installed in Presidio, Texas. ETT is a joint venture between AEP and MidAmerican Energy Holdings Co. This NAS battery will be the first in Texas and the largest in the United States. It represents part of a $67 million overall commitment by ETT to improve transmission reliability in Presidio and surrounding areas. The battery will be completed in early 2010.

We recently announced plans to form a new transmission company, or Transco, to establish a vehicle for much of AEP’s future on-system, wholly owned transmission investment. We will seek state utility status for the Transco in those states that require this designation and will join PJM and the Southwest Power Pool as a transmission owner. This move is a key component of our national transmission strategy.

Finally, we are pleased to share with you our intent to publish our first integrated sustainability and financial performance report next year on our sustainability performance and its linkage to our financial performance. This report will combine our glossy Annual Report to Shareholders with our Corporate Sustainability Report. Few companies are doing this today but it is the future of reporting and we are excited to be on the cutting edge. This report will be supported by a separate sustainability web site, which will come online later this year.

Thank you for your continued interest in American Electric Power. I hope you find this mid-year update useful. Please contact us if you questions or concerns.

Michael G. Morris
Chairman, President & CEO

2009 AEP Mid-Year Update of Key Commitments (PDF)