2/16/2005

AEP adopts new policy on senior executive severance benefits

COLUMBUS, Ohio, Feb. 16, 2005 - The board of directors for American Electric Power (NYSE: AEP) has adopted a policy directing the company to seek shareholder approval of any future severance agreements with senior executives that provide specified benefits in an amount exceeding 2.99 times the sum of the executive´s then-current annual base salary plus annual target bonus.

The action by AEP´s board follows AEP shareholder approval of a similar proposal presented at the company´s annual meeting in April 2004. Fifty-eight percent of shares voted were in favor of this proposal.

The organization submitting the April proposal, the International Brotherhood of Electrical Workers´ Pension Benefit Plan, "indicated that executive severance agreements have not been an issue at AEP but have become an issue at other companies," said Michael G. Morris, AEP´s chairman, president and chief executive officer. "We recognize the concern of our shareholders and have adopted a policy consistent with the April proposal."

AEP´s policy, already effective, would cover severance and separation benefits as well as other special benefits that are available to senior executives and not to other groups of employees. Items covered under the severance benefits cap generally include:

  • Cash severance and separation benefits based on a multiple of pay or a fixed sum, the present value of additional pension service credits and accelerated pension vesting

  • Special credits to the participant´s cash balance retirement plan account

  • Special additions to any deferred compensation plan

The text of the policy is available on AEP´s Corporate Governance web site, http://www.aep.com/investors/corporategovernance.

American Electric Power owns more than 36,000 megawatts of generating capacity in the United States and is the nation´s largest electricity generator. AEP is also one of the largest electric utilities in the United States, with more than 5 million customers linked to AEP’s 11-state electricity transmission and distribution grid. The company is based in Columbus, Ohio.

This report made by AEP and certain of its subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its registrant subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness of fuel suppliers and transporters; availability of generating capacity and the performance of AEP’s generating plants; the ability to recover regulatory assets and stranded costs in connection with deregulation; the ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon and other substances; resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for new investments and environmental compliance); oversight and/or investigation of the energy sector or its participants; resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp.); AEP´s ability to constrain its operation and maintenance costs; the success of disposing of investments that no longer match AEP´s business model; AEP´s ability to sell assets at acceptable prices and on other acceptable terms; international and country-specific developments affecting foreign investments including the disposition of any foreign investments; the economic climate and growth in AEP´s service territory and changes in market demand and demographic patterns; inflationary trends; AEP´s ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas, and other energy-related commodities; changes in the creditworthiness and number of participants in the energy trading market; changes in the financial markets, particularly those affecting the availability of capital and AEP´s ability to refinance existing debt at attractive rates; actions of rating agencies, including changes in the ratings of debt and preferred stock; volatility and changes in markets for electricity, natural gas, and other energy-related commodities; changes in utility regulation, including membership and integration in a regional transmission structure; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP´s pension and other postretirement benefit plans; prices for power that AEP generates and sells at wholesale; changes in technology and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.

MEDIA CONTACT:
Pat D. Hemlepp
Director, Corporate Media Relations
614/716-1620

ANALYSTS CONTACT:
Julie Sloat
Vice President, Investor Relations
614/716-2885

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