10/3/2005

AEP seeks permission to retire Conesville Units 1 and 2

COLUMBUS, Ohio, Oct. 3, 2005 – American Electric Power (NYSE: AEP) has notified PJM Interconnection (PJM) of its intention to formally retire Units 1 and 2 at the Conesville power plant in Conesville, Ohio, at the end of 2005.

The request follows a lengthy evaluation of the two 125-megawatt units following an outage that forced Unit 1 out of service in February.

The outage was caused by a major tubing failure in the unit’s boiler. After examination, maintenance crews determined that the unit’s boiler tubes were experiencing severe corrosion fatigue. Because Conesville Unit 2 is of a similar design and age, plant managers decided to also remove Unit 2 from service and inspect the boiler for similar problems. Unit 2 was also found to be suffering from severe corrosion fatigue.

After an extensive review, company engineers concluded that they could not guarantee the continued safe and reliable operation of the units without major repairs. However, the total cost to return the units to service – estimated to be $35 million – was deemed too high in relation to the units’ age, condition and projected contribution to profitability over the units’ remaining life.

Corrosion fatigue results from a combination of stresses including the cyclical nature of unit operation coupled with water chemistry and/or chemical cleaning processes. While corrosion fatigue is a common power plant issue, the seam-welded tubing in Conesville Units 1 and 2 is especially susceptible to the problem. These units are the only ones on the eastern AEP system that utilize seam-welded tubing in the boiler furnace. In that regard, the problem is unique to these specific units. Nonetheless, AEP, and many other utilities, continue to work with the Electric Power Research Institute (EPRI) to identify more effective means of addressing corrosion fatigue.

Conesville plant manager Mark Borman said that employees who normally work on the units have already been re-assigned to other positions on the plant’s four other units and that no layoffs or terminations are anticipated. “Nine of the 34 affected positions were vacant and the remaining employees are already working on other units,” he said. “My expectation is that we will adjust our overall plant complement over time through normal attrition, so there’s really no impact on employment or staffing.”

AEP is a member of the East Central Area Reliability Coordination Agreement (ECAR) and PJM Interconnection regional transmission organization. As a member of the PJM Interconnection, the regional transmission authority, AEP is required to provide PJM with a 90-day notice of any plans to deactivate a generating unit located in the PJM region. “We feel confident that the retirement of Conesville 1 and 2 will not have an adverse impact on the reliability of the PJM transmission system,” said William L. Sigmon, SVP-Fossil & Hydro Generation.

The retirements will reduce the company’s property tax payments to Coshocton County by approximately 9 percent. The Conesville Plant pays property taxes for all its property and facilities in Coshocton County of approximately $2.7 million annually. The retirement of Units 1 and 2 will reduce the company’s annual tax commitment by roughly $235,000. However, the reduction would occur over time. Property taxes are paid in arrears in Ohio. This will allow local taxing authorities time to investigate and identify funding alternatives and to take action to supplant the tax revenue generated by the Conesville units.

AEP’s Columbus Southern Power subsidiary expects to report a non-cash charge of approximately $39 million ($25 million after tax) in the third quarter of 2005 related to the units’ retirement. At this time, the company does not anticipate any impact on future cash expenditures resulting from this non-cash charge.

If PJM grants approval to move forward with the retirements, plant management will make an evaluation of all existing unit equipment. Any equipment that can be used on other Conesville units, or at other AEP plants, will be transferred and used. The company will sell any remaining equipment for scrap value.

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.
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These reports made by AEP and its registrant subsidiaries contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and 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; available sources and costs of fuels; 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; new legislation and government regulation including requirements for reduced emissions of sulfur, nitrogen, carbon and other substances; resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for 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 reduce its operation and maintenance costs; the success of disposing of investments that no longer match AEP’s corporate profile; AEP’s ability to sell assets at attractive prices and on other attractive terms; international and country-specific developments affecting foreign investments including the disposition of any current 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 on a point of 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 the establishment of a regional transmission structure; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP’s pension plan; prices for power that AEP generates and sells at wholesale; and 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 CONTACTS:
Melissa McHenry
Manager, Corporate Media Relations
614/716-1120

Vikki Michalski
Corporate Communications
AEP Ohio
614/883-7999

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