American Electric Power’s

Approach to New Generation Needs

October 30, 2007

AEP: An Introduction

WindHydroNuclearNGCoal

1%310MW

2%870MW

8%2,200MW

16%6,800MW

73%25,600MW

AEP Facts at a Glance

Largest U.S. Electricity Generator and coal user

1. 5 Million Customers2. 11 States (7-East & 4-West)3. 36,000 MW Generation4. 75-80 MM tons of coal per year5. 39,000 Miles Transmission6. 210,000 Miles Distribution 7. 20,000 Employees8. US$ 12.6 Billion Revenue9. US$ 38 Billion in Assets

AEP Needs New Capacity

AEP needs newbaseload generating capacityin our eastern region by 2010,and western region by 2011

AEP has not added base load capacity since 1991

6,0006,000

4,0004,000

2,0002,000

00

Cap

acity

Def

icie

ncy

(MW

)

(1,000)(1,000)20052005 20072007 20092009 20112011 20132013

Eastern Retirements

Eastern W/O Retirements

Western (PSO & SWEPCO)

AEP’s Portfolio Approach to New Generation Additions

• Proposing two 600MW IGCC projects – Ohio and West Virginia

• Proposing two 600 MW ultrasupercritical PC units – Oklahoma and Arkansas

• Purchasing over 1100 MW in existing gas assets• Installing 640 MW in gas fired peaking units –

Oklahoma and Arkansas• Installing 500 MW gas fired combined cycle unit

– Louisiana• Purchasing over 1000 MW in wind energy (275

MW PPA in place)

Strategies to Meet Generation Needs

• Use technologies to provide for future GHG capture – facilities designed to incorporate future CCS

• Employ most efficient technologies to minimize GHG and other emissions

• Maintain a diversified approach – There is no one right answer

COALCOALAEP’s commitment to coal has been a basic element

of our generation strategy

We know coal It’s abundant, available and affordableIt’s important to the states we serveIt’s important to our nation

Coal Is Fundamental

U.S. Coal Capacity Additions

0123456789

1011121314151617181920

1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Source: U.S. Department of Energy NETL & Annual Energy Outlook 2005.

Cap

acity

Add

ed (G

Ws)

U.S. Coal Capacity Additions, 1940 U.S. Coal Capacity Additions, 1940 –– 20252025

20 YearMarket Trough

Industry Growth Trend Not Seen in

50 Years

Capacity Addition Levels Not Seen

in 40 Years

AEP’s Current Approach

• Integrated Gasification Combined Cycle (IGCC) for eastern applications– The best choice for the future in a carbon constrained

world– Based on the combination of an applicable

technology and an acceptable commercial deal• Ultra-Supercritical Pulverized Coal (USPC)

– Highest efficiency “conventional” coal application – Based on the lack of an acceptable IGCC solution for

western coal

Integrated Gasification Combined Cycle (IGCC)

AEP East

Generating Technology Options: Integrated Gasification Combined Cycle (IGCC) Plants

IGCC’s Promise

• Best emission characteristics among coal-based technologies– Greater potential to meet future emission requirements

• Most CO2 Capture-friendly coal technology• The technology of choice for bituminous coals

– Strategically important to the energy security and economies of many states and the U.S.

• Most efficient coal-based technology (when mature)• Feedstock & product flexibility (with added cost)

– Coal, petcoke, or biomass feedstocks– Electricity, steam, syngas, liquid fuels, or chemical products

Primary Sites

Mountaineer IGCC Plant

Coal Storage Area

Cooling Tower

Flare

Power Block

Coal Prep

Gasification

Coal Unloading Area

ASU

Gas Cleanup

Phased Approach to Project Development

• Minimize Project Risk Through a Staged Approach (increasing levels of definition)– Feasibility Study– Front End Engineering and Design– Engineering, Procurement and

Construction– Commercial Operation

AEP Functional Requirements

• Broad Fuel Supply– Central/Northern Appalachian– Illinois Basin– Pet Coke Blending

• Turndown– Must operate as a part of an electrical

power system• Competitive Thermal Performance• Meet air emission and water effluent

limits throughout operating regime

Regulatory Overview - Ohio

• Application made to Ohio Power Siting Board (OPSB) for Certificate of Convenience and Necessity – March 2006

– Certificate granted March 2007

Regulatory Overview - Ohio

• Filed for IGCC Rate Recovery – March 2005– Three-Phase Approach

• Direct recovery of development costs as expended (approved by OH PUCO in April 2006)

• Inclusion of Construction Work in Progress during EPC phase

• Recovery of direct costs post-COD with a return on our investment

• Phase one recovery appealed to Ohio Supreme Court– Oral arguments October 2007– Decision expected March 2008

Regulatory Overview –West Virginia/Virginia

• Certificate of Public Convenience and Necessity filed with West Virginia PSC – January 2006– Supplemental information package filed May

2006– Final testimony filed July 2007– Hearings scheduled December 2007– Order expected March 2008

• Rate Adjustment Filing made with Virginia SCCJuly 2007– Order expected April 2008

Permitting Activities

• Air Permitting

– Extensive modeling conducted for both Ohio and West Virginia for all phases of operation including startup/shutdown and steady state

– Applications filed in both states October 2, 2006

Permitting Activities

• US Corps of Engineers permit application for Ohio submitted May 2006

• Landfill permit for Ohio to be submitted later this year

• NPDES (wastewater) permit applications to be submitted to fit state regulatory schedules

Ultra-Supercritical (USPC) Pulverized Coal

AEP West

Higher Pressure/Temperature –Better Plant Efficiency

• Sub-Critical Boiler designs – Water boiling to steam with pressures < ‘critical point’

• Super-critical steam cycles – Water to steam without boiling. Pressure > 3208psi

• Critical Point – 3208psi/705°F• Ultra-Supercritical steam cycle – Steam

temperatures > 1100°F as defined by EPRI

History of Super-Critical Units

• First super-critical (SC) unit – AEP Philo Unit 6. COD – 1956; 125 MW with steam conditions of 4500psi/1150°F/1050°F/1000°F double-reheat

• Largest SC units – AEP 1300 MW series• World-wide population – Over 200 units• Typical steam pressures – 3350 to 4200 psi• Typical steam temps – 1000 to 1050°F

Why USPC?

• Best efficiency of direct combustion applications– Least fuel consumed– Lowest emissions, including carbon dioxide

• Acceptable IGCC technical solutions exist– But not in combination with commercial

solution

IGCC / USPC / SPC / Sub-Critical PC Efficiency Comparison

CO2 Emissions varywith Heat Rate & Coal Rank

0.85

0.90

0.95

1.00

1.05

1.10

8500 9000 9500 10000 10500

Net Unit Heat Rate (Full Load), Btu/kwh

CO

2 Em

issi

ons,

Ton

s/M

WH

Bituminous

Sub Bituminous

Lignite

Figures for Supercritical and Subcritical are for existing units w /environmental control retrof its.

Recent Ultra-Supercritical Units World-wide

Power PlantElectric Power

CompanyRated Output

(MW)MS Pressure

(psi) Steam Temp (F) CommissioningUS:Eddystone 1 Philadelphia Electric Co 325 4700 1120/1050/1050 1959

Japan:Noshino 2 Tohoko 600 3495 1050/1100 1994Haranomaci #1 Tohoko 100 3553 1050/1100 1997Matsuura #2 EPDC 100 3495 1100/1100 1997Nanoa-Ohta #2 Hokuriku 740 3495 1100/1100 1998Haranomaci #2 Tohoko 1000 3553 1112/1112 1998Misumi #1 Tongoho 1000 3553 1112/1112 1998Tachibana-wan Kyushyu 700 3495 1050/1100 2000Tachibana-wan #1 EPDC 1050 3626 1112/1130 2000Tsuruga #2 Hokuriku 700 3495 1100/1100 2000Reihoku #2 Kyushyu 700 3495 1100/1100 2000Tachibana-wan #2 EPDC 1050 3626 1112/1130 2001Hatachinaka 1 Tokyo Electric 1000 3553 1112/1112 2002Isogo 1 EPDC 1050 3626 1112/1130 2002Maizuni 1 Kansai 900 3495 1100/1100 2003Maizuni 2 Kansai 900 3495 1100/1100 2003

Europe:Avedore - 530 4350 1076/1112 2000Niederaussem - 1000 4061 1076/1112 2003

Low NOx Burners

Typical USC Arrangement (PRB Fuel)

Activated Carbon Injection

AEP’s Ultra-Supercritical Proposals

• Red Rock - 600 MW plant fueled by PRB in OK– Managed by OG&E, OMPA as minority partner– Located at OG&E’s Sooner Station– COD 2012

• John W. Turk – 600 MW plant fueled by PRB in SW Arkansas– Several likely minority partners– Greenfield, located in Hempstead County– COD 2011

Regulatory Status - Oklahoma

• Application filed with OCC Jan 2007• Air permit filed with ODEQ Dec 2006

• OCC issued order denying application October 11, 2007– Found need for capacity in 2012– Did not demonstrate that Red Rock was the

most reasonable alternative

Regulatory Status - Arkansas

• Application with APSC Dec 2006– Final arguments 10/22/2007– Order expected by year end

• Air permit application made with ADEQ Aug 2006– Air permit expected February 2008

Conclusions

• AEP committed to IGCC for Ohio/West Virginia– Regulatory filings made– Permitting progressing– Transmission Interconnection progressing

• AEP must have a degree of regulatory certainty in order to proceed

Conclusions• AEP solutions for western jurisdictions and fuels

not the same– Technologies are available– Missing commercial deal - guarantees

• Price • Schedule• Performance

• Absent such commercial assurances and until utility IGCC is more mature, AEP intends to use most efficient pulverized coal application available - USPC