American Electric Power Company Transmission Formula Rate AEP Appalachian Transmission Co., Inc. AEP Indiana Michigan Transmission Co., Inc. AEP Kentucky Transmission Co., Inc. AEP Ohio Transmission Co., Inc. AEP West Virginia Transmission Co., Inc. Annual Formula Rate Update June 2012 1 True-up Process • Annual update for the Rate Year beginning July 1, 2012 through June 30, 2013 • True-up – – – Rates effective July 1, 2010 (billed January – June 2011) -$0.41/MW Day Rates effective July 1, 2011 (billed July – December 2011) -$1.36/MW Day Trued-up to Actual 2011 Cost Data with Average ending Ratebase Balances (2010-2011) -- $0.68/MW Day 2 Regulatory Changes • • July 2011 FERC issued an order approving the internal corporate reorganization consummated on December 31, 2011 under which Columbus Southern Power Company (“CSP”) merged into Ohio Power Company (“Reorganization Transaction”). March 2012 AEP submitted for filing amendments to Attachment H-20 of the PJM Interconnection L.L.C. (“PJM”) Open Access Transmission Tariff (“PJM Tariff”) to incorporate proposed revisions to incorporate changes necessitated by the internal corporate reorganization. 3 Status of State Regulatory Process • West Virginia Transco: • • Issued an order on June 5, 2012--W Va Commission would approve with certain modifications – current evaluation in process. Appalachian Transco: Va Transco has been approved to enter into limited service agreements with AEPSC and APCo. Kentucky Transco: Awaiting final order by the KPSC. 4 Annual Update 2012 • • • • http://www.aep.com/about/codeofconduct/ OASIS/TariffFilings/ Docket No. ER10-355-000, AEPTCo FERC Formula Rate Filing • • • • • • • • • Annual Update 2012 - AEPTCo PJM Notice of Annual Filing (PDF) Formula Rate Update AEP Transmission Companies Summary (DOC) ATRR Summary of AEP Transmission Companies (XLS) Appalachian Transmission Company (XLS) Indiana Michigan Transmission Company (XLS) Kentucky Transmission Company (XLS) Ohio Transmission Company (XLS) West Virginia Transmission Company (XLS) TransCo NITS Attachment C (XLS) FERC Exclusion of State Formation Costs (XLS) ADIT TransCo Detail (XLS) 5 Summary of Rates Charge Point-to Point Rate $/MW Month Schedule 12 AEP East Zone Network Service Peak Load July 1, 2012 July 1, 2011 2011 FERC Form 1 (projected plant 2012) 2010 FERC Form 1 (projected plant 2011) Change $90.92 $36.75 $54.17 $2,199,548 N/A $2,199,548 24,530.8 MW 23,492.3 MW 1,038.5MW 6 Primary Drivers Change in Rate • Increased capital spend in Ohio • 4% increase in the East Zone Network Service Peak Load 7 Revenue Requirement used to calculate the Existing Zonal ATRR for PJM OATT TransCo's Revenue Requirement $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Virginia 2011 Projected 2012 Projected $153,300 $111,736 $1,222,638 $2,787,822 KPCo $117,182 $146,026 OPCo I&M $10,020,532 $27,235,255 West Virginia $183,347 $123,356 East Transco's $11,696,999 $30,404,195 Calendar Year 8 Gross Plant Investment – 2011 Projected vs. 2011 Actual Average Balance Gross Plant Investment Gross Plant Investment InvestmentRequirement $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 Virginia I&M 2011 Projected 2011 True-Up $0 $0 $7,632,533 $4,029,966 KPCo $0 $0 OPCo $77,934,167 $38,518,862 West Virginia East Transco's $0 $0 $85,566,700 $42,548,828 Calendar Year 9 2012 Projected Capital Spend TransCo's Projected Plant Growth $200,000,000 $180,000,000 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 2010 Projected 2011 Projected 2012 Projected APTCo $7,500,000 $0 $0 IMTCo $3,720,000 $3,128,014 $18,325,850 KTCo $0 $0 $0 OHTCo $12,959,861 $74,770,454 $170,448,460 WTCo $5,635,000 $0 $0 TOTAL $29,814,861 $77,898,468 $188,774,310 Calendar Year 10 Revenue Requirement For PJM Socialized ‘Schedule 12’ Investment Company/Project Investment $ In-Service RTEP Revenue Requirement $ I&M/ Jefferson 765kv line 5,231,516 2012 655,786 OPC/ Lima Sterling 6,809,196 2012 747,660 OPC/ WapakonetaWest Moulton 3,359,043 2011 386,386 11 Summary Comparison 2011 Projected – 2011 True-up RATE BASE Line 1 2 3 4 5 REVENUE REQUIREMENT 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) Virginia $153,300 $111,993 ($41,307) -26.95% 6 7 8 9 10 GROSS INVESTMENT 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) Virginia 11 12 13 14 15 NET INVESTMENT 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) Virginia 16 17 18 19 20 21 22 23 24 25 I&M $1,222,638 $804,737 ($417,901) -34.18% KPCo $117,182 $138,961 $21,779 18.59% OPCo $10,020,532 $5,047,043 ($4,973,489) -49.63% West Virginia $183,347 $121,707 ($61,640) -33.62% East Transco's $11,696,999 $6,224,441 ($5,472,558) -46.79% OPCo $77,934,167 $38,518,862 ($39,415,305) -50.58% West Virginia $0 $0 $0 0.00% East Transco's $85,566,700 $42,548,828 ($43,017,872) -50.27% $0 $0 $0 0.00% OPCo $77,646,358 $38,413,947 ($39,232,411) -50.53% West Virginia $0 $0 $0 0.00% East Transco's $85,238,005 $42,428,864 ($42,809,141) -50.22% I&M $7,632,533 $4,029,966 ($3,602,567) -47.20% KPCo I&M $7,591,647 $4,014,917 ($3,576,730) -47.11% KPCo $0 $0 $0 0.00% WORKING CAPITAL 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) Virginia $607 $43 ($564) -92.92% I&M $1,857 $16,278 $14,421 776.58% KPCo $451 $73 ($378) -83.81% OPCo $1,424 $33,778 $32,354 2272.05% West Virginia $1,063 $39 ($1,024) -96.33% East Transco's $5,402 $50,211 $44,809 829.49% RATE BASE Virginia $136,951 $76,511 ($60,440) -44.13% I&M $7,570,943 $3,307,550 ($4,263,393) -56.31% KPCo ($28,732) ($25,977) $2,755 -9.59% OPCo $80,351,996 $29,062,757 ($51,289,239) -63.83% West Virginia $98,343 $53,038 ($45,305) -46.07% East Transco's $88,129,501 $32,473,879 ($55,655,622) -63.15% 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) $0 $0 $0 0.00% $0 $0 $0 0.00% 12 Summary Comparison 2011 Projected – 2011 True-up (cont.) EXPENSES Line 1 2 3 4 5 Line 6 7 8 9 10 Line 11 12 13 14 15 Line 16 17 18 19 20 O&M EXPENSE Virginia $109,685 $82,995 ($26,690) -24.33% I&M $216,036 $289,312 $73,276 33.92% KPCo $93,556 $121,867 $28,311 30.26% OPCo $187,276 $1,277,242 $1,089,966 582.01% West Virginia $144,210 $95,590 ($48,620) -33.71% East Transco's $750,763 $1,867,006 $1,116,243 148.68% Virginia $26,809 $20,106 ($6,703) -25.00% I&M $67,866 $72,806 $4,940 7.28% KPCo $26,802 $20,101 ($6,701) -25.00% OPCo $314,593 $264,172 ($50,421) -16.03% West Virginia $26,769 $20,076 ($6,693) -25.00% East Transco's $462,839 $397,261 ($65,578) -14.17% TAXES OTHER THAN INCOME 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) Virginia I&M KPCo $350 $0 ($350) -100.00% OPCo $0 $64,669 $64,669 West Virginia $50 $0 ($50) -100.00% East Transco's $400 $260,328 $259,928 64982.00% INCOME TAXES Virginia $4,961 $2,471 ($2,490) -50.19% I&M $283,921 $100,404 ($183,517) -64.64% KPCo ($1,041) ($827) $214 -20.56% OPCo $2,568,975 $871,229 ($1,697,746) -66.09% West Virginia $3,813 $1,590 ($2,223) -58.30% East Transco's $2,860,629 $974,867 ($1,885,762) -65.92% 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) DEPRECIATION 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) $0 $0 $0 0.00% $0 $195,659 $195,659 13 Summary Comparison 2011 Projected – 2011 True-up (cont.) RETURN ON RATE BASE Line 1 2 3 4 5 RETURN ON RATE BASE 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) Virginia $11,845 $6,420 ($5,425) -45.80% I&M $654,815 $277,546 ($377,269) -57.61% KPCo ($2,485) ($2,180) $305 -12.27% OPCo $6,949,689 $2,438,742 ($4,510,947) -64.91% West Virginia $8,506 $4,451 ($4,055) -47.67% East Transco's $7,622,370 $2,724,979 ($4,897,391) -64.25% 6 7 8 9 10 WACC ON RATE BASE 2011 Projected 2011 True-Up True-Up Inc/(Dec) Percentage Inc/(Dec) Virginia 8.65% 8.39% -0.26% -2.98% I&M KPCo 8.65% 8.39% -0.26% -2.97% OPCo 8.65% 8.39% -0.26% -2.98% West Virginia 8.65% 8.39% -0.26% -2.97% East Transco's 8.65% 8.39% -0.26% -2.98% 8.65% 8.39% -0.26% -2.98% 14 NITS True-Up FERC Case No. ER10-355 PJM AEP Formula Rate Interest Calculation on True-Up of NITS Revenue Requirement AEP Zone MW Billing Determinant Days in Month (A) (B) January-11 23,492.30 31 February-11 23,492.30 28 March-11 23,492.30 31 April-11 23,492.30 30 May-11 23,492.30 31 June-11 23,492.30 30 July-11 23,492.30 31 August-11 23,492.30 31 September-11 23,492.30 30 October-11 23,492.30 31 November-11 23,492.30 30 December-11 23,492.30 31 Year by Month Ended: Projected MW Day Rate (C) 0.41 0.41 0.41 0.41 0.41 0.41 1.36 1.36 1.36 1.36 1.36 1.36 Revenues as Billed (D)=(A)*(B)*(C ) 296,839 268,113 296,839 287,264 296,839 287,264 993,421 993,421 961,375 993,421 961,375 993,421 365 True-Up MW Day Revenues @ Rate True-Rate (E) (F)=(A)*(B)*(E) 0.68 495,582 0.68 447,622 0.68 495,582 0.68 479,595 0.68 495,582 0.68 479,595 0.68 495,582 0.68 495,582 0.68 479,595 0.68 495,582 0.68 479,595 0.68 495,582 0.68 7,629,594 Refund Interest Excess (Under) Average of Excess Prior Quarter Rate per Part Collections at Cumulative Excess (Under) Collections Cumulative Refund Basis of Interest 18 FRC Sec Quarter End (Under) Collection During Quarter (Note 1) (Surcharge) Accrual 35.19a (G)=(D)-(F) (H)=Quaterly Total (I)=Quarterly Average (J)=Prior Quarter (N) (K)=(I)+(J) (L) (198,743) (179,509) (198,743) (576,994) (192,331) (192,331) 3.25% (192,331) (198,743) (192,331) (583,405) (194,468) (578,557) (773,026) 3.25% 497,839 497,839 481,780 1,477,459 492,486 (1,168,244) (675,757) 3.25% 497,839 481,780 497,839 1,477,459 492,486 303,724 796,210 3.25% 1,794,518 Quarterly Interest (M)=(K)*(L) Cumulative Refund (Surcharge) (N)=(H)+(J)+(M) (1,563) (578,557) (6,281) (1,168,244) (5,491) 303,724 6,469 1,787,652 (6,866) 1,787,652 5,835,076 Interest Accrual From End of True-up Calendar Year Until Beginning Of Rate Year Accrual Balance @ 12/31/2011 First Quarter Rate Accrual For First Quarter 1,787,652 3.25% Accrual Balance @ 3/31/2012 Second Quarter Rate Accrual For Second Quarter 1,802,177 3.25% Refund (Surcharge) Balance @ 6/30/2012 Interest To Accrue During Rate Year Starting 7/1/2012 (See Note 2) Note 1: The Quarterly Average reflects in the calculation of interest the delay in recepit of cash due to timing of invoicing. Total to be Refunded (Surcharged) During Rate Year, Including Interest Note 2: Calculation of rate year interest assumes refund will be made ratably over rate year at the interest rate pursuant to 18 C.F.R. 35.19a in effect during quarter preceding the Rate Year. One Twelfth of Refund (Surcharge) Amount During Rate Year 14,525 14,643 1,816,820 32,142 1,848,962 156,806 15 Questions ? 16