73986--3/1/2006--OHIO_POWER

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{gas, price, oil}

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General Risks of Our Regulated Operations We may not be able to recover the costs of our substantial planned investment in capital improvements and additions. Our request for rate recovery of additional costs may not be approved in Virginia. Our request for rate recovery of additional costs may not be approved in West Virginia. Our request for rate recovery of additional costs may not be approved in Kentucky. We may not be able to recover all of our fuel costs in Indiana. The rates that SWEPCo may charge its customers may be reduced. seeks to recover for fuel costs is currently being reviewed. The internal allocation of AEP System off-system sales margins has been challenged. The base rates that certain of our utilities charge are currently capped or frozen. Certain of our revenues and results of operations are subject to risks that are beyond our control. We are exposed to nuclear generation risk. The different regional power markets in which we compete or will compete in the future have changing transmission regulatory structures, which could affect our performance in these regions. The amount we charge third parties for using our transmission facilities may be reduced and not recovered. Rate regulation may delay or deny full recovery of costs. We operate in a non-uniform and fluid regulatory environment. At times, demand for power could exceed our supply capacity Risks Related to Market, Economic or Financial Volatility Downgrades in our credit ratings could negatively affect our ability to access capital and/or to operate our power trading businesses. AEP has no income or cash flow apart from dividends paid or other obligations due it from its subsidiaries. Our operating results may fluctuate on a seasonal and quarterly basis Parties we have engaged to provide construction materials or services may fail to perform their obligations, which could harm our results of operations. Changes in commodity prices may increase our cost of producing power or decrease the amount we receive from selling power, harming our financial performance In certain jurisdictions, we have limited ability to pass on our fuel costs to our customers. We are exposed to losses resulting from the bankruptcy of Enron Corp. Risks Relating To State Restructuring We may be required to serve former large industrial or commercial customers in Ohio at rates that are below market. Some laws and regulations governing restructuring in Virginia have not yet been interpreted or adopted and could harm our business, operating results and financial condition. There is uncertainty as to our recovery of stranded costs resulting from industry restructuring in Texas. Collection of our revenues in Texas is concentrated in a limited number of REPs. Risks Related to Owning and Operating Generation Assets and Selling Power Our costs of compliance with environmental laws are significant, and the cost of compliance with future environmental laws could harm our cash flow and profitability. Governmental authorities may assess penalties on us if it is determined that we have not complied with environmental laws and regulations. Our revenues and results of operations from selling power are subject to market risks that are beyond our control. Our power trading (including coal, gas and e and power marketing) and risk management policies cannot eliminate the risk associated with these activities. Our financial performance may be adversely affected if we are unable to operate our pooled electric generating facilities successfully. Parties with whom we have contracts may fail to perform their obligations, which could harm our results of operations. We are contractually required to operate a power generation facility that may indirectly force us to sell the facility s excess energy at a loss. We rely on electric transmission facilities that we do not own or control. If these facilities do not provide us with adequate transmission capacity, we may not be able to deliver our wholesale electric power to the purchasers of our power. We do not fully hedge against price changes in commodities.

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73986--3/1/2006--OHIO_POWER_CO