<PAGE>
_________________________________________________________________
-----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
----------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to ___________
--------------
<TABLE>
<CAPTION>
I.R.S.
EMPLOYER
COMMISSION REGISTRANT; STATE OF INCORPORATION; IDENTIFICATION
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER NO.
----------- ----------------------------------- -------------
<C> <S> <C>
1-3525 American Electric Power Company, Inc. 13-4922640
(A New York Corporation)
1 Riverside Plaza
Columbus, Ohio 43215
Telephone (614) 223-1000
0-18135 AEP Generating Company 31-1033833
(An Ohio Corporation)
1 Riverside Plaza
Columbus, Ohio 43215
Telephone (614) 223-1000
1-3457 Appalachian Power Company 54-0124790
(A Virginia Corporation)
40 Franklin Road, S.W.
Roanoke, Virginia 24011
Telephone (703) 985-2300
1-2680 Columbus Southern Power Company 31-4154203
(An Ohio Corporation)
215 North Front Street
Columbus, Ohio 43215
Telephone (614) 464-7700
1-3570 Indiana Michigan Power Company 35-0410455
(An Indiana Corporation)
One Summit Square
P. O. Box 60
Fort Wayne, Indiana 46801
Telephone (219) 425-2111
1-6858 Kentucky Power Company 61-0247775
(A Kentucky Corporation)
1701 Central Avenue
Ashland, Kentucky 41101
Telephone (800) 572-1113
1-6543 Ohio Power Company 31-4271000
(An Ohio Corporation)
301 Cleveland Avenue, S.W.
Canton, Ohio 44702<PAGE>
Telephone (216) 456-8173
</TABLE>
---------------
AEP Generating Company, Columbus Southern Power Company and
Kentucky Power Company meet the conditions set forth in General
Instruction J(1)(a) and (b) of Form 10-K and are therefore filing
this Form 10-K with the reduced disclosure format specified in
General Instruction J(2) to such Form 10-K.
---------------
Indicate by check mark whether the registrants (1) have filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrants were required to
file such reports), and (2) have been subject to such filing
requirements for the past 90 days. Yes X . No X .
--- ---<PAGE>
<PAGE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
REGISTRANT TITLE OF EACH CLASS ON WHICH REGISTERED
---------- ------------------- ---------------------
<C> <S> <C>
AEP Generating
Company None
American Electric Common Stock,
Power Company, $6.50 par value ..... New York Stock
Inc. Exchange
Appalachian Power Cumulative Preferred Stock,
Company Voting, no par value:
4-1/2% ............ Philadelphia Stock
Exchange
4.50% ............. Philadelphia Stock
Exchange
7.40% ............. New York Stock
Exchange
Columbus Southern None
Power Company
Indiana Michigan Cumulative Preferred Stock,
Power Company Non-Voting, $100 par value:
4-1/8% ............ Chicago Stock Exchange
7.08% ............. New York Stock
Exchange
Kentucky Power None
Company
Ohio Power Cumulative Preferred Stock,
Company Voting, $100 par value:
7.60% ............. New York Stock
Exchange
7-6/10% ........... New York Stock
Exchange
8.04% ............. New York Stock
Exchange
</TABLE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K ((S)229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in the definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. X
----<PAGE>
<PAGE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
<TABLE>
<CAPTION>
REGISTRANT TITLE OF EACH CLASS
---------- -------------------
<S> <C>
AEP Generating Company None
American Electric Power
Company, Inc. None
Appalachian Power Company None
Columbus Southern Power Company None
Indiana Michigan Power Company None
Kentucky Power Company None
Ohio Power Company 4-1/2% Cumulative
Preferred Stock,
Voting, $100 par value
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE MARKET VALUE NUMBER OF SHARES
OF VOTING STOCK HELD OF COMMON STOCK
BY NON-AFFILIATES OF OUTSTANDING OF
THE REGISTRANTS AT THE REGISTRANTS AT
FEBRUARY 3, 1995 FEBRUARY 3, 1995
---------------------- ------------------
<S> <C> <C>
AEP Generating None 1,000
Company ($1,000 par value)
American Electric $6,621,000,000 185,235,000
Power Company, Inc. ($6.50 par value)
Appalachian Power $38,000,000 13,499,500
Company (no par value)
Columbus Southern None 16,410,426
Power Company (no par value)
Indiana Michigan None 1,400,000
Power Company (no par value)
Kentucky Power None 1,009,000
Company ($50 par value)
Ohio Power Company $129,000,000 27,952,473
(no par value)
</TABLE>
NOTE ON MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES
All of the common stock of AEP Generating Company, Appalachian
Power Company, Columbus Southern Power Company, Indiana Michigan<PAGE>
Power Company, Kentucky Power Company and Ohio Power Company is
owned by American Electric Power Company, Inc. (see Item 12
herein). The voting stock owned by non-affiliates of (i)
Appalachian Power Company consists of 553,848 shares of
Cumulative Preferred Stock, no par value; and (ii) Ohio Power
Company consists of 1,712,403 shares of Cumulative Preferred
Stock, $100 par value. Some of the series of Cumulative Preferred
Stock are not regularly traded. The aggregate market value of
the Cumulative Preferred Stock is based on the average of the
high and low prices on the closest trading date to February 3,
1995 for series traded on the New York or Philadelphia Stock
Exchange, or the most recent reported bid prices for those series
not recently traded. Where recent market price information was
not available with respect to a series, the market price for such
series is based on the price of a recently traded series with an
adjustment related to any difference in the current yields of the
two series.<PAGE>
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART OF FORM 10-K
INTO WHICH DOCUMENT
DESCRIPTION IS INCORPORATED
----------- -----------------
<S> <C>
Portions of Annual Reports of the following
companies for the fiscal year ended
December 31, 1994: Part II
AEP Generating Company
American Electric Power Company, Inc.
Appalachian Power Company
Columbus Southern Power Company
Indiana Michigan Power Company
Kentucky Power Company
Ohio Power Company
Portions of Proxy Statement of American
Electric Power Company, Inc., dated March 9,
1995, for Annual Meeting of Shareholders Part III
Portions of Information Statements of the
following companies for 1995 Annual Meeting
of Shareholders, to be filed within 120 days
after December 31, 1994: Part III
Appalachian Power Company
Ohio Power Company
</TABLE>
---------------
THIS COMBINED FORM 10-K IS SEPARATELY FILED BY AEP GENERATING
COMPANY, AMERICAN ELECTRIC POWER COMPANY, INC., APPALACHIAN POWER
COMPANY, COLUMBUS SOUTHERN POWER COMPANY, INDIANA MICHIGAN POWER
COMPANY, KENTUCKY POWER COMPANY AND OHIO POWER COMPANY.
INFORMATION CONTAINED HEREIN RELATING TO ANY INDIVIDUAL
REGISTRANT IS FILED BY SUCH REGISTRANT ON ITS OWN BEHALF. EXCEPT
FOR AMERICAN ELECTRIC POWER COMPANY, INC., EACH REGISTRANT MAKES
NO REPRESENTATION AS TO INFORMATION RELATING TO THE OTHER
REGISTRANTS.
________________________________________________________________
----------------------------------------------------------------<PAGE>
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
Glossary of Terms ....................................... i
Part I
Item 1. Business .................................... 1
Item 2. Properties .................................. 29
Item 3. Legal Proceedings ........................... 33
Item 4. Submission of Matters to a Vote of
Security Holders .......................... 35
Executive Officers of the Registrants ................. 35
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters ................. 38
Item 6. Selected Financial Data ...................... 38
Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition 38
Item 8. Financial Statements and Supplementary Data .. 39
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ..... 39
Part III
Item 10. Directors and Executive Officers of the
Registrants ................................ 40
Item 11. Executive Compensation ....................... 41
Item 12. Security Ownership of Certain Beneficial
Owners and Management ..................... 45
Item 13. Certain Relationships and Related
Transactions ............................... 45
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K .................... 46
Signatures .............................................. 48
Index to Financial Statement Schedules .................. S-1
Independent Auditors' Report ............................ S-2
Exhibit Index ........................................... E-1
/TABLE
<PAGE>
<PAGE>
GLOSSARY OF TERMS
When the following terms and abbreviations appear in the text
of this report, they have the meanings indicated below.
<TABLE>
<CAPTION>
TERM MEANING
---- -------
<C> <S>
AEGCo .................... AEP Generating Company, an electric
utility subsidiary of AEP.
AEP ...................... American Electric Power Company, Inc.
AEP System or the System . The American Electric Power System,
an integrated electric utility
system, owned and operated by AEP's
electric utility subsidiaries.
AFUDC .................... Allowance for funds used during
construction. Defined in regulatory
systems of accounts as the net cost
of borrowed funds used for
construction and a reasonable rate of
return on other funds when so used.
APCo ..................... Appalachian Power Company, an
electric utility subsidiary of AEP.
Buckeye .................. Buckeye Power, Inc., an unaffiliated
corporation.
CCD Group ................ CSPCo, CG&E and DP&L.
CG&E ..................... The Cincinnati Gas & Electric
Company, an unaffiliated utility
company.
Cook Plant ............... The Donald C. Cook Nuclear Plant,
owned by I&M.
CSPCo .................... Columbus Southern Power Company, an
electric utility subsidiary of AEP.
DOE ...................... United States Department of Energy.
DP&L ..................... The Dayton Power and Light Company,
an unaffiliated utility company.
Federal EPA .............. United States Environmental
Protection Agency.
FERC ..................... Federal Energy Regulatory Commission
(an independent commission within the
DOE).
I&M ...................... Indiana Michigan Power Company, an
electric utility subsidiary of AEP.
IURC ..................... Indiana Utility Regulatory
Commission.
KEPCo .................... Kentucky Power Company, an electric
utility subsidiary of AEP.
KPSC ..................... Kentucky Public Service Commission.
MPSC ..................... Michigan Public Service Commission.
NEIL ..................... Nuclear Electric Insurance Limited.
NPDES .................... National Pollutant Discharge
Elimination System.
NRC ...................... Nuclear Regulatory Commission.
Ohio EPA ................. Ohio Environmental Protection Agency.
OPCo ..................... Ohio Power Company, an electric
utility subsidiary of AEP.
OVEC ..................... Ohio Valley Electric Corporation, an
electric utility company in which AEP
and CSPCo own a 44.2% equity
interest.<PAGE>
PCB's .................... Polychlorinated biphenyls.
PFBC ..................... Pressurized fluidized-bed combustion,
a process in which sulfur is removed
during coal combustion and nitrogen
oxide formation is minimized.
PUCO ..................... The Public Utilities Commission of
Ohio.
PUHCA .................... Public Utility Holding Company Act of
1935, as amended.
RCRA ..................... Resource Conservation and Recovery
Act of 1976, as amended.
Rockport Plant ........... A generating plant, consisting of two
1,300,000-kilowatt coal-fired
generating units, near Rockport,
Indiana.
SEC ...................... Securities and Exchange Commission.
Service Corporation ...... American Electric Power Service
Corporation, a service subsidiary of
AEP.
TVA ...................... Tennessee Valley Authority.
VEPCo .................... Virginia Electric and Power Company,
an unaffiliated utility company.
Virginia SCC ............. State Corporation Commission of
Virginia.
West Virginia PSC ........ Public Service Commission of West
Virginia.
Zimmer or Zimmer Plant ... Wm. H. Zimmer Generating Station,
commonly owned by CSPCo, CG&E and
DP&L.
/TABLE
<PAGE>
<PAGE>
PART I ----------------------------------------------------------
Item 1. BUSINESS
-----------------------------------------------------------------
GENERAL
AEP was incorporated under the laws of the State of New York
in 1906 and reorganized in 1925. It is a public utility holding
company which owns, directly or indirectly, all of the
outstanding common stock of its operating electric utility
subsidiaries. Substantially all of the operating revenues of AEP
and its subsidiaries are derived from the furnishing of electric
service.
The service area of AEP's electric utility subsidiaries covers
portions of the states of Indiana, Kentucky, Michigan, Ohio,
Tennessee, Virginia and West Virginia. The generating and
transmission facilities of AEP's subsidiaries are physically
interconnected, and their operations are coordinated, as a single
integrated electric utility system. Transmission networks are
interconnected with extensive distribution facilities in the
territories served. At December 31, 1994, the subsidiaries of
AEP had a total of 19,660 employees. AEP, as such, has no
employees. The principal operating subsidiaries of AEP are:
APCo (organized in Virginia in 1926) is engaged in the
generation, purchase, transmission and distribution of
electric power to approximately 848,000 retail customers in
the southwestern portion of Virginia and southern West
Virginia, and in supplying electric power at wholesale to
other electric utility companies and municipalities in those
states and in Tennessee. At December 31, 1994, APCo and its
wholly owned subsidiaries had 4,637 employees. A generating
subsidiary of APCo, Kanawha Valley Power Company, which owns
and operates under Federal license three hydroelectric
generating stations located on Government lands adjacent to
Government-owned navigation dams on the Kanawha River in West
Virginia, sells its net output to APCo. Kanawha Valley Power
Company has requested regulatory approval to merge into APCo.
Among the principal industries served by APCo are coal mining,
primary metals, chemicals, textiles, paper, stone, clay,
glass, concrete products, rubber, plastic products and
furniture. In addition to its AEP System interconnections,
APCo also is interconnected with the following unaffiliated
utility companies: Carolina Power & Light Company, Duke Power
Company and VEPCo. A comparatively small part of the
properties and business of APCo is located in the northeastern
end of the Tennessee Valley. APCo has several points of
interconnection with TVA and has entered into agreements with
TVA under which APCo and TVA interchange and transfer electric
power over portions of their respective systems.
CSPCo (organized in Ohio in 1937, the earliest direct
predecessor company having been organized in 1883) is engaged
in the generation, purchase, transmission and distribution of
electric power to approximately 588,000 customers in Ohio, and
in supplying electric power at wholesale to other electric
utilities and to municipally owned distribution systems within
its service area. At December 31, 1994, CSPCo had 2,323
employees. CSPCo's service area is comprised of two areas in<PAGE>
Ohio, which include portions of twenty-five counties. One
area includes the City of Columbus and the other is a
predominantly rural area in south central Ohio. Approximately
80% of CSPCo's retail revenues are derived from the Columbus
area. Among the principal industries served are food
processing, chemicals, primary metals, electronic machinery
and paper products. In addition to its AEP System
interconnections, CSPCo also is interconnected with the
following unaffiliated utility companies: CG&E, DP&L and Ohio
Edison Company.
I&M (organized in Indiana in 1925) is engaged in the
generation, purchase, transmission and distribution of
electric power to approximately 531,000 customers in northern
and eastern Indiana and southwestern Michigan, and in
supplying electric power at wholesale to other electric
utility companies, rural electric cooperatives and
municipalities. At December 31, 1994, I&M had 3,817
employees. Among the principal industries served are primary
metals, transportation equipment, fabricated metal products,
electrical and electronic machinery, rubber and miscellaneous
plastic products and chemicals and allied products. Since
1975, I&M has leased and operated the assets of the municipal
system of the City of Fort Wayne, Indiana. In addition to its
AEP System interconnections, I&M also is interconnected with
the following unaffiliated utility companies: Central
Illinois Public Service Company, CG&E, Commonwealth Edison
Company, Consumers Power Company, Illinois Power Company,
Indianapolis Power & Light Company, Louisville Gas and
Electric Company, Northern Indiana Public Service Company, PSI
Energy Inc. and Richmond Power & Light Company.
KEPCo (organized in Kentucky in 1919) is engaged in the
generation, purchase, transmission and distribution of
electric power to approximately 163,000 customers in an area
in eastern Kentucky, and in supplying electric power at
wholesale to other utilities and municipalities in Kentucky.
At December 31, 1994, KEPCo had 823 employees. In addition to
its AEP System interconnections, KEPCo also is interconnected
with the following unaffiliated utility companies: Kentucky
Utilities Company and East Kentucky Power Cooperative Inc.
KEPCo is also interconnected with TVA.
Kingsport Power Company (organized in Virginia in 1917)
provides electric service to approximately 41,000 customers in
Kingsport and eight neighboring communities in northeastern
Tennessee. Kingsport Power Company has no generating
facilities of its own. It purchases electric power
distributed to its customers from APCo. At December 31, 1994,
Kingsport Power Company had 104 employees.
OPCo (organized in Ohio in 1907 and reincorporated in 1924)
is engaged in the generation, purchase, transmission and
distribution of electric power to approximately 662,000
customers in the northwestern, east central, eastern and
southern sections of Ohio, and in supplying electric power at
wholesale to other electric utility companies and
municipalities. At December 31, 1994, OPCo and its wholly
owned subsidiaries had 5,404 employees. Among the principal
industries served by OPCo are primary metals, rubber and
plastic products, stone, clay, glass and concrete products,
petroleum refining, chemicals and electrical and electronic
machinery. In addition to its AEP System interconnections,<PAGE>
OPCo also is interconnected with the following unaffiliated
utility companies: CG&E, The Cleveland Electric Illuminating
Company, DP&L, Duquesne Light Company, Kentucky Utilities
Company, Monongahela Power Company, Ohio Edison Company, The
Toledo Edison Company and West Penn Power Company.
Wheeling Power Company (organized in West Virginia in 1883
and reincorporated in 1911) provides electric service to
approximately 41,000 customers in northern West Virginia.
Wheeling Power Company has no generating facilities of its
own. It purchases electric power distributed to its customers
from OPCo. At December 31, 1994, Wheeling Power Company had
141 employees.
Another principal electric utility subsidiary of AEP is AEGCo,
which was organized in Ohio in 1982 as an electric generating
company. AEGCo sells power at wholesale to I&M, KEPCo and VEPCo.
AEGCo has no employees.
See Item 2 for information concerning the properties of the
subsidiaries of AEP.
The Service Corporation provides accounting, administrative,
computer, engineering, financial, legal and other services at
cost to the AEP System companies. The executive officers of AEP
are all employees of the Service Corporation.
REGULATION
General
AEP and its subsidiaries are subject to the broad regulatory
provisions of PUHCA administered by the SEC. The public utility
subsidiaries' retail rates and certain other matters are subject
to regulation by the public utility commissions of the states in
which they operate. Such subsidiaries are also subject to
regulation by the FERC under the Federal Power Act in respect of
rates for interstate sale at wholesale and transmission of
electric power, accounting and other matters and construction and
operation of hydroelectric projects. I&M is subject to
regulation by the NRC under the Atomic Energy Act of 1954, as
amended, with respect to the operation of the Cook Plant.
Possible Change to PUHCA
The provisions of PUHCA, administered by the SEC, regulate all
aspects of a registered holding company system, such as the AEP
System. PUHCA requires that the operations of a registered
holding company system be limited to a single integrated public
utility system and such other businesses as are incidental or
necessary to the operations of the system. In addition, PUHCA
governs, among other things, financings, sales or acquisitions of
assets and intra-system transactions.
On November 8, 1994, the SEC issued a release in which it
discussed the need to modernize PUHCA, particularly in light of
increasing competition in the electric utility industry (see
Competition). It also requested comments on a broad range of
issues, including whether PUHCA should be repealed or some of its
restrictions eliminated. AEP filed comments indicating its
belief that PUHCA is unnecessary and should be repealed. If
PUHCA is repealed or amended to remove some restrictions,
registered holding company systems, including the AEP System,<PAGE>
will be able to compete in the changing industry without the
constraints of PUHCA. Management of AEP believes that removal of
these constraints would be beneficial to the AEP System.
On December 28, 1994, the SEC also proposed revisions to its
rules governing transactions between associated companies in a
registered holding company system. PUHCA and the rules and
orders of the SEC currently require that these transactions be
performed at cost with limited exceptions. Over the years, the
AEP System has developed numerous affiliated service, sales and
construction relationships and, in some cases, invested
significant capital and developed significant operations in
reliance upon the ability to recover its full costs under these
provisions.
These proposed revisions to the rules would price transactions
governed by SEC rules at a market-based price if it is lower than
cost. Because prices charged in most AEP intra-system
transactions are governed by SEC orders relating specifically to
such transactions, not general SEC rules, the proposed revisions
would not apply to them. However, the SEC could modify or amend
the orders governing AEP intra-system transactions. In addition,
proposals have been made for Congress to repeal PUHCA or modify
its provisions governing intra-system transactions. The effect
of possible SEC revisions of these cost provisions or the repeal
or amendment of PUHCA on AEP's intra-system transactions depends
on whether the assurance of full cost recovery is eliminated
immediately or phased-in and whether it is eliminated for all
intra-system transactions or only some. If the cost recovery
assurance is eliminated immediately for all intra-system
transactions, it could have a material adverse effect on results
of operations and financial condition of AEP and OPCo.
Conflict of Regulation
Public utility subsidiaries of AEP can be subject to
regulation of the same subject matter by two or more
jurisdictions. In such situations, it is possible that the
decisions of such regulatory bodies may conflict or that the
decision of one such body may affect the cost of providing
service and so the rates in another jurisdiction. In a recent
case involving OPCo, the U.S. Court of Appeals for the District
of Columbia held that the determination of costs to be charged to
associated companies by the SEC under PUHCA precluded the FERC
from determining that such costs were unreasonable for ratemaking
purposes. The U.S. Supreme Court also has held that a state
commission may not conclude that a FERC approved wholesale power
agreement is unreasonable for state ratemaking purposes. Certain
actions that would overturn these decisions or otherwise affect
the jurisdiction of the SEC and FERC are under consideration by
the U.S. Congress and these regulatory bodies. Such conflicts of
jurisdiction often result in litigation and if resolved adversely
to a public utility subsidiary of AEP could have a material
adverse effect on the results of operations or financial
condition of such subsidiary or AEP.
CLASSES OF SERVICE
The principal classes of service from which the major electric
utility subsidiaries of AEP derive revenues and the amount of
such revenues (from kilowatt-hour sales) during the year ended
December 31, 1994 are as follows:<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AEP
AEGCo APCo CSPCo I&M KEPCo OPCo System (a)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Retail
Residential
Without Electric Heating . . $ -- $ 233,540 $ 305,189 $ 227,358 $ 42,613 $ 251,382 $1,079,865
With Electric Heating . . . . -- 312,508 109,086 107,523 58,047 132,799 755,577
Total Residential . . . . . -- 546,048 414,275 334,881 100,660 384,181 1,835,442
Commercial . . . . . . . . . . . -- 275,262 361,947 247,938 55,899 241,566 1,217,921
Industrial . . . . . . . . . . . -- 367,130 144,722 291,527 92,993 619,055 1,578,579
Miscellaneous . . . . . . . . . . -- 30,821 15,433 6,316 832 8,079 64,668
Total Retail . . . . . . . . -- 1,219,261 936,377 880,662 250,384 1,252,881 4,696,610
Wholesale (sales for resale) . . . 235,974 291,412 78,820 352,889 53,785 452,146 714,076
Total from KWH Sales . . . . 235,974 1,510,673 1,015,197 1,233,551 304,169 1,705,027 5,410,686
Provision for Revenue Refunds . . . -- 5,560 -- -- -- -- 5,560
Total Net of Provision for
Revenue Refunds . . . . . . 235,974 1,516,233 1,015,197 1,233,551 304,169 1,705,027 5,416,246
Other Operating Revenues . . . . . 67 19,267 15,954 17,758 3,274 33,699 88,424
Total Electric
Operating Revenues . . . . . $236,041 $1,535,500 $1,031,151 $1,251,309 $307,443 $1,738,726 $5,504,670
_______________
(a) Includes revenues of other subsidiaries not shown and elimination of intercompany transactions.
</TABLE>
AEP SYSTEM POWER POOL AND OFF-SYSTEM POWER SALES
AEP's electric utility subsidiaries operate their generating
plants and transmission lines as a single interconnected and
coordinated electric utility system. APCo, CSPCo, I&M, KEPCo and
OPCo are parties to the Interconnection Agreement, dated July 6,
1951, as amended (the Interconnection Agreement), defining how
they share the costs and benefits associated with the System's
generating plants. This sharing is based upon each company's
"member-load-ratio," which is calculated monthly on the basis of
each company's maximum peak demand in relation to the sum of the
maximum peak demands of all five companies during the preceding
12 months.
The following table shows the net credits or (charges)
allocated among the parties under the Interconnection Agreement
during the years ended December 31, 1992, 1993 and 1994:
<TABLE>
<CAPTION>
1992 1993 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
APCo ........................ $(243,000) $(260,000) $(254,000)
CSPCo ....................... (118,000) (141,000) (105,000)
I&M ......................... 71,000 183,000 107,000
KEPCo ....................... 26,000 1,000 12,000
OPCo ........................ 264,000 217,000 240,000
</TABLE>
In July 1994, APCo, CSPCo, I&M, KEPCo and OPCo entered into
the AEP System Interim Allowance Agreement (IAA). Reference is
made to Environmental and Other Matters -- Clean Air Act
Amendments of 1990 for a discussion of emission allowances. The<PAGE>
IAA provides for and governs the terms of the following allowance
transactions among the parties beginning January 1, 1995: (1) an
annual reallocation of certain allowances initially allocated by
the Federal EPA to OPCo's Gavin Plant; (2) transfer of allowances
associated with energy transactions among the members of the AEP
Power Pool; (3) a monthly cash settlement for allowances consumed
in connection with power sales to non-affiliated electric
utilities; and (4) transfers of allowances for current and future
period compliance. The IAA does not provide for the allocation
of costs and proceeds related to the sale or purchase of
allowances to or from non-affiliated companies. The IAA was
accepted by the FERC on December 30, 1994.
AEGCo, APCo, CSPCo, I&M, KEPCo and OPCo also sell electric
power on a wholesale basis to non-affiliated electric utilities.
Such sales are either made by the AEP System and then allocated
among APCo, CSPCo, I&M, KEPCo and OPCo based on member-load-
ratios or made by individual companies pursuant to various long-
term power agreements. The following table shows the amounts
contributed to operating income of the various companies from
such sales during the years ended December 31, 1992, 1993 and
1994:
<TABLE>
<CAPTION>
1992(A) 1993(A) 1994(A)
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
AEGCo (b) ................ $ 33,000 $ 32,500 $ 30,800
APCo (c) ................. 18,100 23,600 25,000
CSPCo (c) ................ 9,100 12,000 11,700
I&M (c)(d) ............... 31,300 35,300 34,600
KEPCo (c) ................ 3,700 4,900 4,800
OPCo (c) ................. 15,700 20,700 20,000
-------- -------- --------
Total System .......... $110,900 $129,000 $126,900
======== ======== ========
</TABLE>
---------------
(a) Such sales do not include wholesale sales to full/partial
requirement customers of AEP System companies. See the
discussion below.
(b) All amounts for AEGCo are from sales made pursuant to a
long-term power agreement. See AEGCo -- Unit Power
Agreements.
(c) All amounts, except for I&M, are from System sales which are
allocated among APCo, CSPCo, I&M, KEPCo and OPCo based upon
member-load-ratio. All System sales made in 1992, 1993 and
1994 were made on a short-term basis, except that
$11,500,000, $16,800,000 and $21,800,000, respectively, of
the contribution to operating income for the total System
were from long-term System sales.
(d) In addition to its allocation of System sales, the 1992,
1993 and 1994 amounts for I&M include $20,800,000,
$21,600,000 and $21,600,000 from a long-term agreement to
sell 250 megawatts of power scheduled to terminate in 2009.
The AEP System has long-term system agreements to sell 100
megawatts of electric power through 1997 and to sell at times up
to 200 megawatts of peaking power through March 1997 to
unaffiliated utilities. In addition, commencing January 1996,
the AEP System will be supplying 205 megawatts of electric power<PAGE>
to an unaffiliated utility for 15 years. The AEP System
continues to seek appropriate long-term wholesale power
agreements and will sell available power on a short-term basis.
The future results of operations of AEP and its operating
companies will be affected by their ability to make cost-
effective wholesale sales or, if such sales are reduced, their
ability to timely raise retail rates.
In addition to System sales, APCo, CSPCo, I&M, KEPCo and OPCo
serve wholesale customers that are full/partial requirement
customers. The aggregate maximum demand for these customers in
1994 was 485, 83, 420, 17 and 125 megawatts for APCo, CSPCo, I&M,
KEPCo and OPCo, respectively. Although the terms of the
contracts with these customers vary, they generally can be
terminated by the customer upon one to four years' notice.
In June 1993, certain municipal customers of APCo filed an
application with the FERC for transmission service in order to
reduce by 50 megawatts the power these customers purchase under
existing 10-year Electric Service Agreements (ESAs) and purchase
power from a third party. APCo maintains that its agreements
with these customers are full-requirements contracts which
preclude the customers from purchasing power from third parties.
On December 1, 1993, the administrative law judge issued an
initial decision that the ESAs are not full requirements
contracts and that the ESAs give these municipal wholesale
customers the option of substituting alternative sources of power
for energy purchased from APCo. On February 10, 1994, the FERC
issued an order affirming, in part, the administrative law
judge's initial decision. On May 24, 1994, APCo appealed the
February 10, 1994 order of the FERC to the U.S. Court of Appeals
for the District of Columbia Circuit. On July 1, 1994, the FERC
ordered the requested transmission service and granted a
complaint filed by the municipal customers directing certain
modifications to the ESAs in order to accommodate their power
purchases from the third party. On August 1, 1994, AEP System
companies filed petitions for rehearing of these FERC orders.
Effective August 1, 1994, these municipal customers reduced their
purchases by 40 megawatts. Certain of these customers also have
notified APCo that they intend to reduce their purchases by an
additional 21 megawatts effective February 1996.
AEP SYSTEM TRANSMISSION POOL AND OFF-SYSTEM TRANSMISSION
APCo, CSPCo, I&M, KEPCo and OPCo are parties to the
Transmission Agreement, dated April 1, 1984, as amended (the
Transmission Agreement), defining how they share the costs
associated with their relative ownership of the extra-high-
voltage transmission system (facilities rated 345 kv and above)
and certain facilities operated at lower voltages (138 kv and
above). Like the Interconnection Agreement, this sharing is
based upon each company's "member-load-ratio." See AEP System
Power Pool and Off-System Power Sales.
The following table shows the net credits or (charges)
allocated among the parties to the Transmission Agreement during
the years ended December 31, 1992, 1993 and 1994:
<TABLE>
<CAPTION>
1992 1993 1994
-------- -------- --------
(IN THOUSANDS)<PAGE>
<S> <C> <C> <C>
APCo ..................... $ (8,000) $ (3,200) $(10,200)
CSPCo .................... (29,900) (31,200) (30,100)
I&M ...................... 48,200 47,400 50,300
KEPCo .................... 4,200 3,800 4,300
OPCo ..................... (14,500) (16,800) (14,300)
</TABLE>
APCo, CSPCo, I&M, KEPCo, OPCo and other System companies also
provide transmission services for non-affiliated companies. The
following table shows the amounts contributed to operating income
of the various companies from such services during the years
ended December 31, 1992, 1993 and 1994:
<TABLE>
<CAPTION>
1992 1993 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
APCo ..................... $ 3,000 $ 2,900 $ 4,100
CSPCo .................... 2,500 2,500 3,100
I&M ...................... 6,500 7,700 6,700
KEPCo .................... 600 600 800
OPCo ..................... 10,000 9,900 15,700
------- ------- -------
Total System ............. $22,600 $23,600 $30,400
======= ======= =======
</TABLE>
The Energy Policy Act of 1992 amended the Federal Power Act to
authorize the FERC under certain conditions to order utilities
which own transmission facilities to provide wholesale
transmission services for other utilities and entities generating
electric power. Effective August 1, 1994 and under a FERC order,
the AEP System began to provide transmission services for 40
megawatts of power delivered to certain municipal customers of
APCo as discussed above under AEP System Power Pool and Off-
System Power Sales.
FERC Transmission Access Filing: On April 12, 1993, APCo,
CSPCo, I&M, KEPCo and OPCo and two other AEP System companies
filed a transmission tariff with the FERC under which these AEP
System companies would provide limited transmission service to
any "eligible utility." The tariff covers the terms and
conditions of the service, as well as the price which "eligible
utilities" pay to wheel power on the AEP transmission system,
regardless of the source of electric power generation. On
September 3, 1993, the FERC issued an order accepting the
transmission service tariff for filing, with the tariff becoming
effective on September 7, 1993, subject to refund. On May 11,
1994, the FERC issued an order on rehearing and indicated that an
open access tariff should offer third parties access to the
transmission system on the same or comparable basis, and under
the same or comparable terms and conditions, as the transmission
provider's access to its system.
On August 26, 1994, AEP System companies submitted to the FERC
their comparability filing supplementing the April 12 filing,
following the guidelines stated in the May 11 FERC ruling. They
indicated their willingness to offer network transmission service
under terms and conditions comparable to those enjoyed by members
of the AEP System. Network users could import and export power<PAGE>
through the network, with power deliveries occurring without
separate arrangements for each transmission delivery point.
Network users would participate in transmission planning and
share transmission costs proportionately. In addition, the
supplemental filing would expand the availability of point-to-
point transmission service, including permitting such services to
be offered at a discounted rate on an hourly, nondiscriminatory
basis. A FERC hearing began in February 1995 and was recessed
until April 24, 1995 for settlement discussions.
OVEC
AEP, CSPCo and several unaffiliated utility companies jointly
own OVEC, which supplies the power requirements of a uranium
enrichment plant near Portsmouth, Ohio owned by the DOE. The
aggregate equity participation of AEP and CSPCo in OVEC is 44.2%.
The DOE demand under OVEC's power agreement, which is subject to
change from time to time, is 1,878,000 kilowatts and is scheduled
to remain at about that level through the remaining term of the
contract. The proceeds from the sale of power by OVEC,
aggregating $308,000,000 in 1994, are designed to be sufficient
for OVEC to meet its operating expenses and fixed costs and to
provide a return on its equity capital. APCo, CSPCo, I&M and
OPCo, as sponsoring companies, are entitled to receive from OVEC,
and are obligated to pay for, the power not required by DOE in
proportion to their power participation ratios, which averaged
42.1% in 1994. The power agreement with DOE terminates on
December 31, 2005, subject to early termination by DOE on not
less than three years notice. The power agreement among OVEC and
the sponsoring companies expires by its terms on March 12, 2006.
BUCKEYE
Contractual arrangements among OPCo, Buckeye and other
investor-owned electric utility companies in Ohio provide for the
transmission and delivery, over facilities of OPCo and of other
investor-owned utility companies, of power generated by the two
units at the Cardinal Station owned by Buckeye and back-up power
to which Buckeye is entitled from OPCo under such contractual
arrangements, to facilities owned by 27 of the rural electric
cooperatives which operate in the State of Ohio at 299 delivery
points. Buckeye is entitled under such arrangements to receive,
and is obligated to pay for, the excess of its maximum one-hour
coincident peak demand plus a 15% reserve margin over the
1,226,500 kilowatts of capacity of the generating units which
Buckeye currently owns in the Cardinal Station. Such demand,
which occurred on January 18, 1994, was recorded at 1,146,933
kilowatts.
CERTAIN INDUSTRIAL CUSTOMERS
Ravenswood Aluminum Corporation and Ormet Corporation operate
major aluminum reduction plants in the Ohio River Valley at
Ravenswood, West Virginia, and in the vicinity of Hannibal, Ohio,
respectively. OPCo supplies all of the power requirements of
these plants pursuant to long-term contracts with such companies
which, subject to certain curtailment provisions, terminate in
1997 in the case of Ormet and 1998 in the case of Ravenswood.
The power requirements of such plants presently aggregate
approximately 880,000 kilowatts. OPCo is currently negotiating
with Ormet and Ravenswood regarding the extension of their
contracts. See Legal Proceedings for a discussion of litigation
involving Ormet.<PAGE>
AEGCO
Since its formation, AEGCo's business has consisted of the
ownership and financing of its 50% interest in the Rockport Plant
and, more recently, leasing of its 50% interest in Unit 2 of the
Rockport Plant. The operating revenues of AEGCo are derived from
the sale of capacity and energy associated with its interest in
the Rockport Plant to I&M, KEPCo and VEPCo, pursuant to unit
power agreements. Pursuant to these unit power agreements, AEGCo
is entitled to recover its full cost of service from the
purchasers and will be entitled to recover future increases in
such costs, including increases in fuel and capital costs. See
Unit Power Agreements. Pursuant to a capital funds agreement,
AEP has agreed to provide cash capital contributions, or in
certain circumstances subordinated loans, to AEGCo, to the extent
necessary to enable AEGCo, among other things, to provide its
proportionate share of funds required to permit continuation of
the commercial operation of the Rockport Plant and to perform all
of its obligations, covenants and agreements under, among other
things, all loan agreements, leases and related documents to
which AEGCo is or becomes a party. See Capital Funds Agreement.
Unit Power Agreements
A unit power agreement between AEGCo and I&M (the I&M Power
Agreement) provides for the sale by AEGCo to I&M of all the power
(and the energy associated therewith) available to AEGCo at the
Rockport Plant. I&M is obligated, whether or not power is
available from AEGCo, to pay as a demand charge for the right to
receive such power (and as an energy charge for any associated
energy taken by I&M) such amounts, as when added to amounts
received by AEGCo from any other sources, will be at least
sufficient to enable AEGCo to pay all its operating and other
expenses, including a rate of return on the common equity of
AEGCo as approved by FERC, currently 12.16%. The I&M Power
Agreement will continue in effect until the date that the last of
the lease terms of Unit 2 of the Rockport Plant has expired
unless extended in specified circumstances.
Pursuant to an assignment between I&M and KEPCo, and a unit
power agreement between KEPCo and AEGCo, AEGCo sells KEPCo 30% of
the power (and the energy associated therewith) available to
AEGCo from both units of the Rockport Plant. KEPCo has agreed to
pay to AEGCo in consideration for the right to receive such power
the same amounts which I&M would have paid AEGCo under the terms
of the I&M Power Agreement for such entitlement. The KEPCo unit
power agreement expires on December 31, 1999, unless extended.
A unit power agreement among AEGCo, I&M, VEPCo, and APCo
provides for, among other things, the sale of 70% of the power
and energy available to AEGCo from Unit 1 of the Rockport Plant
to VEPCo by AEGCo from January 1, 1987 through December 31, 1999.
VEPCo has agreed to pay to AEGCo in consideration for the right
to receive such power those amounts which I&M would have paid
AEGCo under the terms of the I&M Power Agreement for such
entitlement. Approximately 36% of AEGCo's operating revenue in
1994 was derived from its sales to VEPCo.
Capital Funds Agreement
AEGCo and AEP have entered into a capital funds agreement
pursuant to which, among other things, AEP has unconditionally
agreed to make cash capital contributions, or in certain<PAGE>
circumstances subordinated loans, to AEGCo to the extent
necessary to enable AEGCo to (i) maintain such an equity
component of capitalization as required by governmental
regulatory authorities, (ii) provide its proportionate share of
the funds required to permit commercial operation of the Rockport
Plant, (iii) enable AEGCo to perform all of its obligations,
covenants and agreements under, among other things, all loan
agreements, leases and related documents to which AEGCo is or
becomes a party (AEGCo Agreements), and (iv) pay all
indebtedness, obligations and liabilities of AEGCo (AEGCo
Obligations) under the AEGCo Agreements, other than indebtedness,
obligations or liabilities owing to AEP. The Capital Funds
Agreement will terminate after all AEGCo Obligations have been
paid in full.
INDUSTRY PROBLEMS
The electric utility industry, including the operating
subsidiaries of AEP, has encountered at various times in the last
15 years significant problems in a number of areas, including:
delays in and limitations on the recovery of fuel costs from
customers; proposed legislation, initiative measures and other
actions designed to prohibit construction and operation of
certain types of power plants under certain conditions and to
eliminate or reduce the extent of the coverage of fuel adjustment
clauses; inadequate rate increases and delays in obtaining rate
increases; jurisdictional disputes with state public utilities
commissions regarding the interstate operations of integrated
electric systems; requirements for additional expenditures for
pollution control facilities; increased capital and operating
costs; construction delays due, among other factors, to pollution
control and environmental considerations and to material,
equipment and fuel shortages; the economic effects on net income
(which when combined with other factors may be immediate and
adverse) associated with placing large generating units and
related facilities in commercial operation, including the
commencement at that time of substantial charges for
depreciation, taxes, maintenance and other operating expenses,
and the cessation of AFUDC with respect to such units;
uncertainties as to conservation efforts by customers and the
effects of such efforts on load growth; depressed economic
conditions in certain regions of the United States; increasingly
competitive conditions in the wholesale and retail markets;
proposals to deregulate certain portions of the industry, revise
the rules and responsibilities under which new generating
capacity is supplied and open access to an electric utility's
transmission system; and substantial increases in construction
costs and difficulties in financing due to high costs of capital,
uncertain capital markets, charter and indenture limitations
restricting conventional financing, and shortages of cash for
construction and other purposes.
SEASONALITY
Sales of electricity by the AEP System tend to increase and
decrease because of the use of electricity by residential and
commercial customers for cooling and heating and relative changes
in temperature.
FRANCHISES
The operating companies of the AEP System hold franchises to
provide electric service in various municipalities in their<PAGE>
service areas. These franchises have varying provisions and
expiration dates. In general, the operating companies consider
their franchises to be adequate for the conduct of their
business.
COMPETITION
Retail
The public utility subsidiaries of AEP generally have the
exclusive right to sell electric power at retail within their
service areas. However, they do compete with self-generation and
with distributors of alternative sources of energy, such as
natural gas, fuel oil and coal, within their service areas. The
primary factors in such competition are price, reliability of
service and the capacity of customers to utilize sources of
energy other than electric power. With respect to self-
generation, the public utility subsidiaries of AEP believe that
they maintain a favorable competitive position on the basis of
all of these factors. With respect to alternative sources of
energy, the public utility subsidiaries of AEP believe that the
reliability of their service and the limited ability of customers
to substitute other cost-effective sources for electric power
place them in a favorable competitive position, even though their
prices may be higher than the costs of some alternative sources
of energy.
Significant changes in the global economy in recent years have
led to increased price competition for industrial companies in
the United States, including those served by the AEP System.
Such industrial companies have requested price reductions from
their suppliers, including their suppliers of electric power. In
addition, industrial companies which are downsizing or
reorganizing often close a facility based upon its costs, which
may include, among other things, the cost of electric power. The
public utility subsidiaries of AEP cooperate with such customers
to meet their business needs through, for example, various off-
peak or interruptible supply options and believe that, as low
cost suppliers of electric power, they should be less likely to
be materially adversely affected by this competition and may be
benefitted by attracting new industrial customers to their
service territories.
The legislatures and/or the regulatory commissions in several
states have considered or are considering "retail wheeling"
which, in general terms, means the transmission by an electric
utility of energy produced by another entity over its
transmission and distribution system to a retail customer in such
utility's service territory. A requirement to transmit directly
to retail customers would have the result of permitting retail
customers to purchase electric power, at the election of such
customers, not only from the electric utility in whose service
area they are located but from any other electric utility or
independent power producer.
The MPSC began a proceeding on September 11, 1992 to
investigate a proposal by certain industrial companies for an
experiment in retail wheeling in certain service territories in
Michigan, not including those of I&M. On April 11, 1994, the
MPSC approved an experimental five-year retail wheeling program
and ordered Consumers Power Company and Detroit Edison Company,
unaffiliated utilities, to make transmission services available
to a group of industrial customers, to be limited to 60 megawatts<PAGE>
and 90 megawatts, respectively, of retail delivery capacity. The
MPSC remanded to the administrative law judge the issue of
determining appropriate rates and charges for retail delivery
service. The experiment seeks, as its goal, to determine whether
a retail wheeling program best serves the public interest in a
manner that promotes retail competition in a non-discriminatory
fashion. During the experiment, the MPSC will collect
information regarding the effects of retail wheeling. In August
1994, Detroit Edison filed a declaratory judgment complaint in
the U.S. District Court, Western District of Michigan,
challenging the jurisdiction of the MPSC to order retail
wheeling.
On April 15, 1994, the Ohio Energy Strategy Task Force
released its final report. The report contains seven broad
implementation strategies along with 53 specific initiatives to
be undertaken by government and the private sector. One strategy
recommends continuing to encourage competition in the electric
utility industry in a manner which maximizes benefits and
efficiencies for all customers. An initiative under this
strategy recommends facilitating informal roundtable discussions
on issues concerning competition in the electric utility industry
and promoting increased competitive options for Ohio businesses
that do not unduly harm the interests of utility company
shareholders or ratepayers. The PUCO has begun such discussions.
In addition, a retail wheeling bill was introduced in the Ohio
House of Representatives in February 1994.
Because adoption of retail wheeling would require resolution
of complex issues, such as who would pay for the unused
generating plant of the utility wheeling such power, it is not
clear what effects will flow from its adoption in any state.
However, if retail wheeling is adopted, the public utility
subsidiaries of AEP believe that they have a favorable
competitive position because of their relatively low costs.
Wholesale
The public utility subsidiaries of AEP, like the electric
industry generally, face increasing competition to sell available
power on a wholesale basis, primarily to other public utilities.
The Energy Policy Act of 1992 was designed, among other things,
to foster competition in the wholesale market (a) through
amendments to PUHCA, facilitating the ownership and operation of
generating facilities by "exempt wholesale generators" (which may
include independent power producers as well as affiliates of
electric utilities) and (b) through amendments to the Federal
Power Act, authorizing the FERC under certain conditions to order
utilities which own transmission facilities to provide wholesale
transmission services for other utilities and entities generating
electric power. The principal factors in competing for such
sales are price (including fuel costs), availability of capacity
and reliability of service. The public utility subsidiaries of
AEP believe that they maintain a favorable competitive position
on the basis of all of these factors. However, because of the
availability of capacity of other utilities and the lower fuel
prices in recent years, price competition has been, and is
expected for the next few years to be, particularly important.
Upon resolution of the issues regarding the transmission access
filing before the FERC (discussed under AEP System Transmission
Pool and Off-System Transmission), the public utility
subsidiaries of AEP expect to be able to satisfy FERC criteria to
obtain approval to sell wholesale power at market rates.<PAGE>
On June 29, 1994, the FERC issued a proposed rulemaking to
provide the regulatory framework for dealing with utility assets
that are stranded as a result of the transition to a competitive
electric industry. Stranded costs are those costs incurred by a
utility when a customer stops buying power from the utility and,
instead, purchases transmission services from that utility to
obtain power purchased from another supplier. If stranded costs
are not recovered from customers, the AEP System, like all
electric utilities, will be required by existing accounting
standards to recognize stranded investment losses. The write-off
of such stranded investment, which could include regulatory
assets, would materially adversely affect results of operations
and financial condition.
New Generation
When the AEP System needs new generation, the public utility
subsidiaries of AEP which wish to provide it may have to compete
with exempt wholesale generators, independent power producers and
other utilities. Although the specific guidelines for such
competition have not yet been developed and may vary from
jurisdiction to jurisdiction (see the discussion below),
significant factors will include price and reliability. AEP and
its subsidiaries believe that they can be competitive as to both
of these factors. However, no additional generating capacity is
expected to be needed by the AEP System until about the year
2000. See Construction and Financing Program.
Indiana: In August 1994, the IURC reissued a notice of
proposed rulemaking for integrated resource planning guidelines,
including consideration of resource bidding and independent power
producers, and for demand-side management.
Michigan: The MPSC has adopted guidelines governing the
acquisition of new capacity by large Michigan electric utilities.
The guidelines do not apply to I&M.
Ohio: On December 17, 1992, the PUCO issued an order
proposing rules for competitive bidding for new generating
capacity, including transmission access for winning bidders. The
proposed rules would establish a rebuttable presumption of
prudence where new generating capacity is acquired through
competitive bidding and provide other incentives to use
competitive bidding. The proposed rules also contain procedures
to ensure that bidders for a utility's new capacity will have
open access to certain transmission facilities and prohibit the
utility acquiring new capacity from withholding Clean Air Act
emission allowances from potential bidders. CSPCo and OPCo filed
comments on the proposed rules generally supporting promulgation
of rules governing competitive bidding but stating that the rules
should not address access to transmission facilities or emission
allowances, because existing federal laws address such concerns.
Virginia: The Virginia SCC has adopted minimum requirements
for any electric utility that elects to acquire new generation
through a bidding program. An electric utility is not required
to use the bidding process and may participate in the bidding
process.
West Virginia: On October 8, 1993, the West Virginia PSC
issued an order proposing rules that generally require electric
utilities to procure competitively all new sources of generation. <PAGE>
APCo and Wheeling Power Company filed comments stating that the
rules should not require competitive bidding and should permit
the utility to participate in the bidding process.
Possible Strategic Responses
In response to the competitive forces and regulatory changes
being faced by AEP and its public utility subsidiaries, as
discussed under this heading and under Regulation, AEP and its
public utility subsidiaries have from time to time considered,
and expect to continue to consider, various strategies designed
to enhance their competitive position and to increase their
ability to adapt to and anticipate changes in their utility
business. These strategies may include business combinations
with other companies, internal restructurings involving the
complete or partial separation of their wholesale and retail
businesses, acquisitions of related or unrelated businesses, and
additions to or dispositions of portions of their franchised
service territories. AEP and its public utility subsidiaries may
from time to time be engaged in preliminary discussions, either
internally or with third parties, regarding one or more of these
potential strategies. No assurances can be given as to whether
any potential transaction of the type described above may
actually occur, or as to its ultimate effect on the financial
condition or competitive position of AEP and its public utility
subsidiaries.
NEW BUSINESS DEVELOPMENT
AEP continues to consider new business opportunities,
particularly those which allow use of its expertise. These
endeavors began in 1982 and are conducted through AEP Energy
Services, Inc. (AEPES) and AEP Resources, Inc. (Resources).
Resources' primary business is development of, and investment
in, exempt wholesale generators, foreign utility companies,
qualifying cogeneration facilities and other power projects.
Resources currently does not have an interest in any power
projects. Resources, however, is involved in preliminary
development of some projects, has submitted jointly with a non-
affiliate a bid to provide power through an exempt wholesale
generator, and has entered into a letter of intent which may
result in the development of two 1,300-megawatt generating
stations in China. In addition, AEP and Resources have received
approval from the SEC under PUHCA to finance up to $300,000,000
for investment in exempt wholesale generators and foreign utility
companies.
AEPES offers consulting services using AEP System expertise
both domestically and internationally. AEPES contracts with
other public utilities, commercial concerns and government
agencies for the rendition of services and the licensing of
intellectual property.
These continuing efforts to invest in and develop new business
opportunities offer the potential of earning returns which may
exceed those of rate-regulated operations. However, they also
involve a higher degree of risk which must be carefully
considered and assessed. AEP may make substantial investments in
these and other new businesses.
CONSTRUCTION AND FINANCING PROGRAM<PAGE>
The AEP System companies are engaged in a continuing
construction program, involving assessment of needs, selection of
sites, design and acquisition of equipment, and installation of
the generating, transmission, distribution and other facilities
necessary to provide for growing demands for electric service.
At the present time, there are no specific commitments for new
capacity additions on the AEP System. Size, technology, type,
ownership (among AEP operating companies), means of acquisition
and precise timing of future capacity additions on the AEP System
have not yet been determined. However, AEP's current resource
plan indicates no need for new generation until about the year
2000. Initial future capacity additions will most likely be
short lead time, simple-cycle, gas-fired combustion turbines.
The current resource plan indicates no need for new coal-fired
baseload generation until sometime after the year 2005. The size
of any new coal-fired generation will most likely be
significantly smaller than the 1,300-megawatt units recently
added to the AEP System, to better match projected load growth.
From time to time, as the System companies have encountered the
industry problems described above, such companies also have
encountered limitations on their ability to secure the capital
necessary to finance construction expenditures.
The System construction program is reviewed continuously and
is revised from time to time in response to changes in estimates
of customer demand, business and economic conditions, the cost
and availability of capital, environmental requirements and other
factors. The extent and timing of construction expenditures and
the nature of future financing activities may be dependent on,
among other things, the timing and amount of additional rate
relief received. See Competition -- New Generation and Rates.
PFBC Projects
Tidd Plant: In November 1990, OPCo began operating a 70,000-
kilowatt PFBC demonstration plant at the deactivated Tidd Plant
on the Ohio River at Brilliant, Ohio. The Tidd Plant was built
and operated to demonstrate that the combined-cycle PFBC
technology is a cost-effective, reliable, and environmentally
superior alternative to conventional coal-fired electric power
generation with a flue-gas desulfurization system. Through
December 31, 1994, the Tidd Plant achieved 10,297 hours of coal-
fired operation while demonstrating the viability of the PFBC
process in the reduction of targeted sulfur dioxide and nitrogen
oxide emissions. See Environmental and Other Matters for
information regarding restrictions on sulfur dioxide and nitrogen
oxide emissions from coal-fired power plants in the AEP System.
The Tidd Plant operated for a four-year period, which is expected
to conclude not later than March 31, 1995. The plant is planned
to be deactivated at the conclusion of the test program.
Total Tidd Plant construction costs (including PFBC
development costs) and total Tidd operating costs incurred
through December 31, 1994 were $182,489,000 and $36,497,000,
respectively. At such date, OPCo had received funding from DOE
and the State of Ohio in the aggregate amounts of $65,232,000 and
$11,336,000, respectively, and had recovered $125,543,000 from
its retail customers.
PFBC Utility Demonstration Project: DOE is cost sharing with
APCo development of a 340,000-kilowatt commercial-size PFBC plant
adjacent to APCo's Mountaineer Plant in New Haven, West Virginia.
DOE has agreed to continue funding the design of the plant<PAGE>
through at least January 1996; however, the program can be
terminated sooner with mutual consent of the parties. The
present four-year effort to refine the PFBC design extends
through January 1996. The ultimate decision to proceed with the
construction of the commercial PFBC plant will hinge on the
confirmation of the need for new coal-fired baseload capacity,
the readiness of PFBC technology, and other applicable market
conditions.
Construction Expenditures
The following table shows the construction expenditures by
AEGCo, APCo, CSPCo, I&M, KEPCo, OPCo and the AEP System and their
respective consolidated subsidiaries during 1992, 1993 and 1994
and their current estimate of 1995 construction expenditures, in
each case including AFUDC but excluding nuclear fuel and other
assets acquired under leases. The construction expenditures for
the years 1992-1994 were applied, and it is anticipated that the
estimated construction expenditures for 1995 will be applied,
approximately as follows to construction of the following classes
of assets:
<TABLE>
<CAPTION>
1992 1993 1994 1995
Actual Actual Actual Estimate
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
AEGCO
Generating plant and facilities .. $ 3,600 $ 3,100 $ 3,900 $ 4,600
-------- -------- -------- --------
TOTAL ......................... $ 3,600 $ 3,100 $ 3,900 $ 4,600
======== ======== ======== ========
APCO
Generating plant and
facilities (a) ................ $ 34,400 $ 51,200 $ 65,600 $ 58,600
Transmission lines and facilities 54,200 36,700 38,700 38,300
Distribution lines and facilities 91,600 98,200 116,500 103,100
General plant and other facilities 11,500 4,800 9,500 14,600
-------- -------- -------- --------
TOTAL ......................... $191,700 $190,900 $230,300 $214,600
======== ======== ======== ========
CSPCO
Generating plant and facilities .. $ 21,900 $ 33,300 $ 24,800 $ 38,700
Transmission lines and facilities 11,600 10,100 3,600 9,000
Distribution lines and facilities 40,800 40,700 50,800 50,000
General plant and other facilities 1,100 2,200 2,300 10,200
-------- -------- -------- --------
TOTAL ......................... $ 75,400 $ 86,300 $ 81,500 $107,900
======== ======== ======== ========
I&M
Generating plant and facilities .. $ 66,400 $ 50,200 $ 49,700 $ 59,000
Transmission lines and facilities 17,300 10,100 20,300 30,300
Distribution lines and facilities 39,200 41,300 42,300 44,900
General plant and other facilities 3,500 6,700 2,200 7,300
-------- -------- -------- --------
TOTAL ......................... $126,400 $108,300 $114,500 $141,500
======== ======== ======== ========
KEPCO
Generating plant and facilities .. $ 4,100 $ 8,100 $ 22,600 $ 8,600
Transmission lines and facilities 8,700 6,700 6,400 8,500
Distribution lines and facilities 17,500 20,300 23,700 22,200
General plant and other facilities 1,500 0 500 4,300<PAGE>
-------- -------- -------- --------
TOTAL ......................... $ 31,800 $ 35,100 $ 53,200 $ 43,600
======== ======== ======== ========
OPCO
Generating plant and
facilities (b)(c) ............. $124,900 $112,700 $ 83,800 $ 35,900
Transmission lines and facilities 18,900 28,600 15,300 28,300
Distribution lines and facilities 42,800 46,000 45,200 48,000
General plant and other facilities 5,900 10,500 4,700 14,700
-------- -------- -------- --------
TOTAL ......................... $192,500 $197,800 $149,000 $126,900
======== ======== ======== ========
AEP SYSTEM (d)
Generating plant and
facilities (a)(b)(c) .......... $255,300 $258,600 $250,400 $205,400
Transmission lines and facilities 111,900 92,800 85,400 120,700
Distribution lines and facilities 237,700 252,300 286,900 276,100
General plant and other facilities 23,700 24,400 19,400 52,000
-------- -------- -------- --------
TOTAL ......................... $628,600 $628,100 $642,100 $654,200
======== ======== ======== ========
</TABLE>
----------
(a) Excludes expenditures for PFBC Utility Demonstration
Project. See PFBC Projects.
(b) Includes expenditures for Tidd Plant. See PFBC Projects.
(c) Excludes expenditures associated with flue-gas
desulfurization system which was constructed by a non-
affiliate at the Gavin Plant and is being leased by OPCo.
Actual expenditures for 1992, 1993 and 1994 and the current
estimate for 1995 are $93,653,000, $256,673,000,
$176,220,000 and $129,771,000, respectively. See
Environmental and Other Matters -- CAAA-AEP System
Compliance Plan.
(d) Includes expenditures of other subsidiaries not shown.
Reference is made to the footnotes to the financial statements
entitled Commitments and Contingencies incorporated by reference
in Item 8, for further information with respect to the
construction plans of AEP and its operating subsidiaries for the
next three years. If the System receives adequate rate relief in
future periods, and is able to finance additional construction
expenditures, and if the loads which are served by the System
increase above the levels currently projected, additional
expenditures may be incurred in subsequent years in amounts which
would be substantial but which cannot be accurately predicted at
this time.
Changes in construction schedules and costs, and in estimates
and projections of needs for additional facilities, as well as
variations from currently anticipated levels of net earnings,
Federal income and other taxes, and other factors affecting cash
requirements, may increase or decrease the estimates of capital
requirements for the System's construction program.
Proposed Transmission Facilities: On March 23, 1990, APCo and
VEPCo announced plans, subject to regulatory approval, for major
new transmission facilities. APCo will construct approximately
115 miles of 765,000-volt line from APCo's Wyoming station in
southern West Virginia to APCo's Cloverdale station near Roanoke,
Virginia. VEPCo will construct approximately 102 miles of
500,000-volt line from APCo's Joshua Falls station east of
Lynchburg, Virginia to VEPCo's Ladysmith station north of<PAGE>
Richmond, Virginia. The construction of the transmission lines
and related station improvements will provide needed
reinforcement for APCo's internal load, reinforce the ability to
exchange electric energy between the two companies and relieve
present constraints on the transmission of electric energy from
potential independent power producers in the APCo service area to
VEPCo. APCo's cost is estimated at $245,000,000 while VEPCo's
cost is estimated at $164,000,000. Completion of the project is
presently scheduled for 2000 but the actual service date will be
dependent upon the time necessary to meet various regulatory
requirements.
Hearings before the Virginia SCC were concluded in September
1993. A report was issued by the hearing examiner in December
1993 which recommended that the Virginia SCC grant APCo approval
to construct the proposed 765,000-volt line. A decision by the
Virginia SCC is pending.
APCo refiled with the West Virginia PSC in February 1993 its
application for certification. An application filed in June 1992
was withdrawn at the request of the West Virginia PSC to permit
additional time for review by the West Virginia PSC. The West
Virginia PSC rejected APCo's application for certification in May
1993, directing APCo to supplement its line siting information.
APCo intends to refile its application with the West Virginia
PSC. Hearings are expected to be held in late 1995 or early
1996, with a decision expected in 1996.
The Jefferson National Forest (JNF) is directing the
preparation of an Environmental Impact Statement (EIS) which will
be required prior to the granting of special use permits for
crossing Federal lands. The present schedule of the JNF calls
for completion of the draft EIS in October 1995 and the final EIS
in 1996.
Environmental Expenditures: Expenditures related to
compliance with air and water quality standards, included in the
gross additions to plant of the System, during 1992, 1993 and
1994 and the current estimate for 1995 are shown below.
Substantial expenditures in addition to the amounts set forth
below may be required by the System in future years in connection
with the modification and addition of facilities at generating
plants for environmental quality controls in order to comply with
air and water quality standards which may have been or may be
adopted.
<TABLE>
<CAPTION>
1992 1993 1994 1995
Actual Actual Actual Estimate
------ ------ ------ --------
(in thousands)
<S> <C> <C> <C> <C>
AEGCo ............... $ 0 $ 0 $ 0 $ 0
APCo (a) ............ 11,200 16,800 32,000 15,000
CSPCo ............... 6,500 15,800 13,700 12,100
I&M ................. 0 0 0 1,800
KEPCo ............... 100 1,000 9,500 3,300
OPCo (b)(c) ......... 61,600 31,600 8,000 300
------- ------- ------- -------
AEP System (a)(b)(c) $79,400 $65,200 $63,200 $32,500
======= ======= ======= =======
</TABLE>
---------------<PAGE>
(a) Excludes expenditures for PFBC Utility Demonstration
Project. See PFBC Projects.
(b) Includes expenditures for Tidd Plant which have been or are
expected to be funded through Federal/state grants and the
fuel clause mechanism. See PFBC Projects.
(c) Excludes expenditures associated with flue-gas
desulfurization system which was constructed by a non-
affiliate at the Gavin Plant and is being leased by OPCo.
Actual expenditures for 1992, 1993 and 1994 and the current
estimate for 1995 are $93,653,000, $256,673,000,
$176,220,000 and $129,771,000, respectively. See
Environmental and Other Matters -- CAAA-AEP System
Compliance Plan.
Financing
It has been the practice of AEP's operating subsidiaries to
finance current construction expenditures in excess of available
internally generated funds by initially issuing unsecured short-
term debt, principally commercial paper and bank loans, at times
up to levels authorized by regulatory agencies, and then to
reduce the short-term debt with the proceeds of subsequent sales
by such subsidiaries of long-term debt securities and preferred
stock, and cash capital contributions by AEP to the subsidiaries.
It has been the practice of AEP, in turn, to finance cash capital
contributions to the common stock equities of the operating
subsidiaries by issuing unsecured short-term debt, principally
commercial paper, and then to sell additional shares of Common
Stock of AEP for the purpose of retiring the short-term debt
previously incurred. In 1994, AEP issued 700,000 shares of
Common Stock pursuant to its Dividend Reinvestment and Stock
Purchase Plan. Although prevailing interest costs of short-term
bank debt and commercial paper generally have been lower than
prevailing interest costs of long-term debt securities, whenever
interest costs of short-term debt exceed costs of long-term debt,
the companies might be adversely affected by reliance on the use
of short-term debt to finance their construction and other
capital requirements.
During the period 1992-1994, external funds from financings
and capital contributions by AEP amounted, with respect to APCo,
CSPCo and KEPCo to approximately 37%, 1.6% and 37%, respectively,
of the aggregate construction expenditures shown above. During
this same period, the amount of funds used to retire long-term
and short-term debt and preferred stock of AEGCo, I&M and OPCo
exceeded the amount of funds from financings and capital
contributions by AEP.
The ability of AEP and its operating subsidiaries to issue
short-term debt is limited by regulatory restrictions and, in the
case of most of the operating subsidiaries, by provisions
contained in their charters and in certain debt and other
instruments. The approximate amounts of short-term debt which
the companies estimate that they were permitted to issue under
the most restrictive such restriction, at January 1, 1995, and
the respective amounts of short-term debt outstanding on that
date, on a corporate basis, are shown in the following
tabulation:
<TABLE>
<CAPTION>
TOTAL AEP
SHORT-TERM DEBT AEP AEGCO APCO CSPCO I&M KEPCO OPCO SYSTEM (A)<PAGE>
--------------- ---- ----- ---- ----- ---- ----- ---- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amount authorized .. $150 $40 $213 $163 $130 $100 $218 $1,080
==== === ==== ==== ==== ==== ==== ======
Amount outstanding:
Notes payable ... $ -- $ 7 $ -- $ -- $ -- $ 21 $ -- $ 43
Commercial paper 52 -- 120 -- 51 34 17 274
---- --- ---- ---- ---- ---- ---- ------
$ 52 $ 7 $120 $ -- $ 51 $ 55 $ 17 $ 317
==== === ==== ==== ==== ==== ==== ======
</TABLE>
(a) Includes short-term debt of other subsidiaries not shown.
Reference is made to the footnotes to the financial statements
incorporated by reference in Item 8 for further information with
respect to unused short-term bank lines of credit.
In order to issue additional long-term debt and preferred
stock, it is necessary for APCo, CSPCo, I&M, KEPCo and OPCo to
comply with earnings coverage requirements contained in their
respective mortgages, debenture indentures and charters. The
most restrictive of these provisions in each instance generally
requires (1) for the issuance of additional long-term debt by
APCo, I&M and OPCo, for purposes other than the refunding of
outstanding long-term debt securities, a minimum, before income
tax, earnings coverage of twice the pro forma annual interest
charges on long-term debt, (2) for the issuance of first mortgage
bonds by CSPCo and KEPCo for purposes other than the refunding of
outstanding first mortgage bonds, a minimum, before income tax,
earnings coverage of twice the pro forma annual interest charges
on first mortgage bonds and (3) for the issuance of additional
preferred stock by APCo, I&M and OPCo, a minimum, after income
tax, gross income coverage of one and one-half times pro forma
annual interest charges and preferred stock dividends, in each
case for a period of twelve consecutive calendar months within
the fifteen calendar months immediately preceding the proposed
new issue. In computing such coverages, the companies include as
a component of earnings revenues collected subject to refund
(where applicable) and, to the extent not limited by the
instrument under which the computation is made, AFUDC, including
amounts positioned and classified as an allowance for borrowed
funds used during construction. These coverage provisions have
from time to time restricted the ability of one or more of the
above subsidiaries of AEP to issue senior securities.
The respective long-term debt and preferred stock coverages of
APCo, CSPCo, I&M, KEPCo and OPCo under their respective debenture
indenture, mortgage and charter provisions, calculated on the
foregoing basis and in accordance with the respective amounts
then recorded in the accounts of the companies, assuming the
respective short-term debt of the companies at those dates were
to remain outstanding for a twelve-month period at the respective
rates of interest prevailing at those dates, were at least those
stated in the following table:
<TABLE>
<CAPTION>
December 31,
----------------------
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
APCo<PAGE>
Debt coverage .............. 3.50 3.62 3.10
Preferred stock coverage ... 1.99 2.04 1.65
CSPCo
Mortgage coverage .......... 2.16 2.91 3.64
I&M
Debt coverage .............. 3.55 4.59 5.08
Preferred stock coverage ... 2.06 2.48 2.74
KEPCo
Mortgage coverage .......... 3.34 2.19 2.60
OPCo
Debt coverage .............. 3.36 4.65 4.55
Preferred stock coverage ... 2.22 2.88 2.58
</TABLE>
Although certain other subsidiaries of AEP either are not
subject to any coverage restrictions or are not subject to
restrictions as constraining as those to which APCo, CSPCo, I&M,
KEPCo and OPCo are subject, their ability to finance substantial
portions of their construction programs may be subject to market
limitations and other constraints unless other assurances are
furnished.
AEP believes that the ability of its operating subsidiaries to
issue short- and long-term debt securities and preferred stock in
the amounts required to finance their respective construction
programs may depend upon the timely approval of rate increase
applications. If one or more of the operating subsidiaries are
unable to continue the issuance and sale of securities on an
orderly basis, such company or companies will be required to
consider the use of alternative financing arrangements, if
available, which may be more costly or the curtailment of
construction and other outlays.
AEP's subsidiaries have also utilized, and expect to continue
to utilize, additional financing arrangements, such as leasing
arrangements, including the leasing of utility assets, coal
mining and transportation equipment and facilities and nuclear
fuel. Pollution control revenue bonds have been used in the past
and may be used in the future in connection with the construction
of pollution control facilities; however, Federal tax law has
limited the utilization of this type of financing except for
purposes of certain financing of solid waste disposal facilities
and of certain refunding of outstanding pollution control revenue
bonds issued before August 16, 1986.
Shares of AEP Common Stock may be sold by AEP from time to
time at prices below the then current book value per share and
repurchased by AEP at prices above book value. Such sales or
purchases, if any, would have a dilutive effect on the book value
of then outstanding shares but are not expected to have a
material adverse effect on AEP's business including its future
financing plans or capabilities and pending construction
projects.
CONSERVATION AND LOAD MANAGEMENT
For some years, the AEP System has put in place a series of
customer programs for encouraging electric conservation and load
management (CLM). The CLM programs also are referred to in the
electric utility industry as "demand-side management" programs
(DSM) since they affect the demand for electricity as opposed to
electricity supply. The AEP System utilizes integrated resource
planning and has in place a detailed analysis procedure in which<PAGE>
effective demand-side and supply-side options are both considered
in order to determine the least cost approach to provide reliable
electric service for its customers, taking into account
environmental and other considerations. Recovery of demand-side
program expenditures through rates is being reviewed by AEP's
respective regulatory commissions.
RATES
General
In recent years the operating subsidiaries of AEP have filed a
series of rate increase applications with their respective state
commissions and the FERC and expect that they will continue to do
so as competitive conditions permit, whenever necessary, as
increases in operating, construction and capital costs exceed
increases in revenues resulting from previously granted rate
increases and increased customer demand.
All of the seven states served by the AEP System, as well as
the FERC, either permit the incorporation of fuel adjustment
clauses in a utility company's rates and tariffs, which are
designed to permit upward or downward adjustments in revenues to
reflect increases or decreases in fuel costs above or below the
designated base cost of fuel set forth in the particular rate or
tariff, or permit the inclusion of specified levels of fuel costs
as part of such rate or tariff.
AEP cannot predict the timing or probability of approvals
regarding applications for additional rate changes, the outcome
of action by regulatory commissions or courts with respect to
such matters, or the effect thereof on the earnings and business
of the AEP System.
APCo
FERC: On February 14, 1992, APCo filed with the FERC
applications for an increase in its wholesale rates to Kingsport
Power Company and non-affiliated customers in the amounts of
approximately $3,933,000 and $4,759,000, respectively. APCo
began collecting the rate increases, subject to refund, on
September 15, 1992. In addition, the Financial Accounting
Standards Board has issued Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions (SFAS 106), which requires
employers, beginning in 1993, to accrue for the costs of retiree
benefits other than pensions. These rates include the higher
level of SFAS 106 costs. On November 9, 1993, the administrative
law judge issued an initial decision recommending, among other
things, the higher level of postretirement benefits other than
pensions under SFAS 106. FERC action on APCo's applications is
pending.
Virginia: On June 27, 1994, the Virginia SCC issued a final
order granting APCo an increase in annual revenues of
$17,900,000. APCo had requested to increase its Virginia retail
rates by $31,400,000 annually and, on May 4, 1993, implemented
the rates, subject to refund, based on an interim order. As a
result of the final order, APCo made a revenue refund including
interest to its Virginia customers in August 1994 of $15,800,000.
As a result of certain significant fuel cost reductions, on
November 15, 1994, APCo implemented a net decrease in rates<PAGE>
charged to its Virginia retail customers of $13,200,000, subject
to final approval by the Virginia SCC. The net decrease
consisted of a $28,900,000 decrease in the fuel component of its
rates offset, in part, by an increase of $15,700,000 in base
rates. On December 19, 1994, the Virginia SCC issued an order
approving the decrease in the fuel factor component of rates.
APCo proposes in the base rate proceeding to amortize Virginia
deferred storm damage expenses of $23,900,000 related to two
major ice storms in February and March 1994 over a three-year
period, consistent with the amortization of previous storm damage
expense deferrals approved in a 1992 rate case. The ultimate
recovery of the entire deferred storm damage costs is subject to
Virginia SCC approval. If not approved, results of operations
could be adversely affected. A hearing has been scheduled to
begin in July 1995.
CSPCo
Zimmer Plant: The Zimmer Plant was placed in commercial
operation as a 1,300-megawatt coal-fired plant on March 30, 1991.
CSPCo owns 25.4% of the Zimmer Plant with the remainder owned by
two unaffiliated companies, CG&E (46.5%) and DP&L (28.1%).
Zimmer Plant -- Rate Recovery: In May 1992, the PUCO issued
an order providing for a phased-in rate increase of $123,000,000
for the Zimmer Plant to be implemented in three steps over a two-
year period and disallowed $165,000,000 of Zimmer Plant
investment. CSPCo appealed the PUCO ordered Zimmer disallowance
and phase-in plan to the Ohio Supreme Court. In November 1993,
the Supreme Court issued a decision on CSPCo's appeal affirming
the disallowance and finding that the PUCO did not have statutory
authority to order phased-in rates. The court instructed the
PUCO to fix rates to provide gross annual revenue in accordance
with the law and to provide a mechanism to recover the revenues
deferred under the phase-in order.
As a result of the ruling, 1993 net income was reduced by
$144,500,000 after tax to reflect the disallowance and in January
1994, the PUCO approved a 7.11% or $57,167,000 rate increase
effective February 1, 1994. The increase is comprised of a 3.72%
base rate increase and a temporary 3.39% surcharge, which will be
in effect until the phase-in plan deferrals are recovered,
estimated to be 1998. In 1994, $18,500,000 of net phase-in
deferrals were collected through the surcharge which reduced the
deferrals from $93,900,000 at December 31, 1993 to $75,400,000 at
December 31, 1994. In 1993 and 1992, $47,900,000 and
$46,000,000, respectively, were deferred under the phase-in plan.
The recovery of amounts deferred under the phase-in plan and the
increase in rates to the full rate level did not affect net
income.
From the in-service date of March 1991 until rates went into
effect in May 1992, deferred carrying charges of $43,000,000 were
recorded on the Zimmer Plant investment. Recovery of the
deferred carrying charges will be sought in the next PUCO base
rate proceeding in accordance with the PUCO accounting order that
authorized the deferral.
Other Ohio Regulatory Matters: Reference is made to
Environmental and Other Matters -- Clean Air Act Amendments of
1990 for a discussion of emission allowances. On March 25, 1993,
the PUCO issued its final guidelines concerning emission
allowances. The final guidelines state that the PUCO expects<PAGE>
that Ohio utilities will take advantage of the allowance trading
market, and encourages all trades that can be economically
justified. The final guidelines include the proposed guideline
that gains or losses on transactions involving emission
allowances created by rate base assets should generally flow
through to ratepayers. The final guidelines also provide that
allowance plans, procedures, practices, trading activity, and
associated costs should be reviewed annually in the electric fuel
component since the cost of these allowances are part of the
acquisition and delivery costs of fuel.
Reference is made to the caption Environmental and Other
Matters -- Clean Air Amendments of 1990 -- AEP System Compliance
Plan for information regarding AEP's compliance plan which has
been filed with the PUCO.
On September 3, 1992, the PUCO began an investigation into
incentive based ratemaking under Ohio's existing ratemaking
statutes. Joint comments were filed in November 1992 by CSPCo
and OPCo.
I&M
FERC: In October 1987, a wholesale customer filed a complaint
with the FERC for a refund based on the reasonableness of coal
costs pursuant to a seven-year contract, beginning in 1986, from
an unaffiliated supplier who has leased a Utah mining operation
from I&M. In February 1993, the FERC dismissed the complaint.
The wholesale customer has appealed the FERC order to the U.S.
Court of Appeals for the District of Columbia Circuit.
KEPCo
FERC: On October 28, 1993, KEPCo filed an application to
begin serving the City of Vanceburg as a full requirements
customer, effective January 1, 1994, which will yield annual
revenues of $1,448,000. On June 9, 1994, the FERC issued a
letter order accepting for filing KEPCo's application.
On July 24, 1992, the KPSC began an investigation into the
feasibility of implementing demand-side management cost recovery
and incentive mechanisms. A Kentucky law enacted in April 1994
provides the KPSC with authority to establish cost recovery
mechanisms outside of base rate cases. On July 14, 1994, the
KPSC issued an order stating that Kentucky utilities should
pursue cost-effective DSM.
OPCo
Reference is made to Rates -- CSPCo regarding generic
proceedings by the PUCO relating to emission allowance trading
and incentive-based ratemaking.
In April 1991, the municipal wholesale customers of OPCo filed
a complaint with the FERC seeking refunds back to 1982 for
alleged overcharges for certain affiliated fuel costs. The
complaint contends that the price of coal from two of OPCo's
affiliated mines violated the FERC's market price requirement for
affiliate coal pricing. In February 1993, the FERC issued an
order dismissing the complaint and, in January 1995, the U.S.
Court of Appeals for the Sixth Circuit affirmed the FERC's order,
ending the matter.<PAGE>
An application was filed by OPCo in July 1994 with the PUCO
seeking a $152,500,000 annual base retail rate increase to
recover, among other things, the costs associated with the Gavin
Plant's flue gas desulfurization systems (scrubbers). In
February 1995, OPCo and certain other parties to the proceeding
entered into a settlement agreement to resolve, among other
issues, the pending base rate case and the current electric fuel
component (EFC) proceeding. On March 23, 1995, the PUCO issued
an order approving the settlement agreement, with certain minor
exceptions. Under the terms of the settlement agreement,
effective March 23, 1995, base rates increase by $66,000,000
annually which includes recovery of the annual cost of the
scrubbers; the EFC rate is fixed at 1.465 cents per kwh from June
1, 1995 through November 30, 1998; OPCo is provided with the
opportunity to recover its Ohio jurisdictional share of the
investment in, and the liabilities and future shutdown costs of,
all affiliated mines as well as any fuel costs incurred above the
fixed rate; and OPCo may proceed with its Clean Air Act
Amendments of 1990 compliance plan as filed with the PUCO
(discussed under Environmental and Other Matters -- Clean Air Act
Amendments of 1990 -- AEP System Compliance Plan).
Based on a stipulation agreement approved by the PUCO in
November 1992, beginning December 1, 1994, the cost of coal
burned at the Gavin Plant is subject to a 15-year predetermined
price of $1.575 per million Btus with quarterly escalation
adjustments. As discussed above, the PUCO-approved settlement
agreement fixes the EFC factor at 1.465 cents per kwh for the
period June 1995 through November 1998. After November 2009, the
price that OPCo can recover for coal from its affiliated Meigs
mine which supplies the Gavin Plant will be limited to the lower
of cost or the then-current market price. The predetermined
Gavin Plant price agreement, in conjunction with the above-
referenced settlement agreement, provide OPCo with an opportunity
to recover any operating losses incurred under the predetermined
or fixed price, as well as its investment in, and liabilities and
closing costs associated with, its affiliated mining operations
attributable to its Ohio jurisdiction, to the extent the actual
cost of coal burned at the Gavin Plant is below the predetermined
price.
Based on the estimated future cost of coal burned at Gavin
Plant, management believes that the Ohio jurisdictional portion
of the investment in, and liabilities and closing costs of, the
affiliated mining operations will be recovered under the terms of
the predetermined price agreement.
In November 1992, the municipal wholesale customers of OPCo
filed a complaint with the SEC requesting an investigation of the
sale of the Martinka mining operation to an unaffiliated company
and an investigation into the pricing of OPCo's affiliated coal
purchases back to 1986. OPCo has filed a response with the SEC
seeking to dismiss this complaint.
FUEL SUPPLY
The following table shows the sources of power generated by
the AEP System:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Coal ...................... 90% 86% 93% 86% 91%
Nuclear ................... 9% 13% 6% 13% 8%<PAGE>
Hydroelectric and other ... 1% 1% 1% 1% 1%
</TABLE>
Variations in the generation of nuclear power are primarily
related to refueling outages and, in 1992, a forced outage at
Cook Plant Unit 2. See Cook Nuclear Plant.
Coal
The Clean Air Act Amendments of 1990 provide for the issuance
of annual allowance allocations covering sulfur dioxide emissions
at levels below historic emission levels for many coal-fired
generating units of the AEP System. Phase I of this program
began in 1995 and Phase II begins in 2000, with both phases
requiring significant changes in coal supplies and suppliers.
The full extent of such changes, particularly in regard to Phase
II, however, has not been determined. See Environmental and
Other Matters -- Air Pollution Control -- CAAA-AEP System
Compliance Plan for the current compliance plan.
In order to meet emission standards for existing and new
emission sources, the AEP System companies will, in any event,
have to obtain coal supplies, in addition to coal reserves now
owned by System companies, through the acquisition of additional
coal reserves and/or by entering into additional supply
agreements, either on a long-term or spot basis, at prices and
upon terms which cannot now be predicted.
No representation is made that any of the coal rights owned or
controlled by the System will, in future years, produce for the
System any major portion of the overall coal supply needed for
consumption at the coal-fired generating units of the System.
Although AEP believes that in the long run it will be able to
secure coal of adequate quality and in adequate quantities to
enable existing and new units to comply with emission standards
applicable to such sources, no assurance can be given that coal
of such quality and quantity will in fact be available. No
assurance can be given either that statutes or regulations
limiting emissions from existing and new sources will not be
further revised in future years to specify lower sulfur contents
than now in effect or other restrictions. See Environmental and
Other Matters herein.
The FERC has adopted regulations relating, among other things,
to the circumstances under which, in the event of fuel
emergencies or shortages, it might order electric utilities to
generate and transmit electric energy to other regions or systems
experiencing fuel shortages, and to rate-making principles by
which such electric utilities would be compensated. In addition,
the Federal Government is authorized, under prescribed
conditions, to allocate coal and to require the transportation
thereof, for the use of power plants or major fuel-burning
installations.
System companies have developed programs to conserve coal
supplies at System plants which involve, on a progressive basis,
limitations on sales of power and energy to neighboring
utilities, appeals to customers for voluntary limitations of
electric usage to essential needs, curtailment of sales to
certain industrial customers, voltage reductions and, finally,
mandatory reductions in cases where current coal supplies fall
below minimum levels. Such programs have been filed and reviewed
with officials of Federal and state agencies and, in some cases,<PAGE>
the state regulatory agency has prescribed actions to be taken
under specified circumstances by System companies, subject to the
jurisdiction of such agencies.
The mining of coal reserves is subject to Federal requirements
with respect to the development and operation of coal mines, and
to state and Federal regulations relating to land reclamation and
environmental protection, including Federal strip mining
legislation enacted in August 1977. Continual evaluation and
study is given to possible closure of existing coal mines and
divestiture or acquisition of coal properties in light of Federal
and state environmental and mining laws and regulations which may
affect the System's need for or ability to mine such coal.
Western coal purchased by System companies is transported by
rail to a terminal on the Ohio River for transloading to barges
for delivery to generating stations on the river. Subsidiaries
of AEP lease approximately 3,763 coal hopper cars to be used in
unit train movements, as well as 14 towboats, 295 jumbo barges
and 185 standard barges. Subsidiaries of AEP also own or lease
coal transfer facilities at various locations on the river.
The System generating companies procure coal from coal
reserves which are owned or mined by subsidiaries of AEP, and
through purchases pursuant to long-term contracts, or on a spot
purchase basis, from unaffiliated producers. The following table
shows the amount of coal delivered to the AEP System during the
past five years, the proportion of such coal which was obtained
either from coal-mining subsidiaries, from unaffiliated suppliers
under long-term contracts or through spot or short-term
purchases, and the average delivered price of spot coal purchased
by System companies:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total coal delivered to
AEP operated plants
(thousands of tons) ...... 52,087 45,232 44,738 40,561 49,024
Sources (percentage):
Subsidiaries ............. 25% 28% 25% 20% 15%
Long-term contracts ...... 58% 62% 65% 66% 65%
Spot or short-term
purchases ............. 17% 10% 10% 14% 20%
Average price per ton of
spot-purchased coal ...... $26.75 $25.40 $23.88 $23.55 $23.00
</TABLE>
The average cost of coal consumed during the past
five years by all AEP System companies, AEGCo, APCo, CSPCo, I&M,
KEPCo and OPCo is shown in the following tables:
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
Dollars per ton
<S> <C> <C> <C> <C> <C>
AEP System Companies ....... $35.23 $35.16 $34.31 $33.57 $33.95
AEGCo ...................... 21.05 20.65 20.11 17.74 18.59
APCo ....................... 39.77 41.99 43.00 42.65 39.89<PAGE>
CSPCo ...................... 37.01 35.18 33.87 33.87 32.80
I&M ........................ 27.18 25.57 24.23 23.80 22.85
KEPCo ...................... 30.71 31.38 30.24 27.08 26.83
OPCo ....................... 40.13 40.18 38.36 38.12 41.10
<CAPTION>
Cents per Million Btu's
AEP System Companies ....... 158.10 158.88 154.41 150.89 152.41
AEGCo ...................... 126.21 123.33 120.90 107.71 112.06
APCo ....................... 160.94 169.48 173.05 173.32 161.37
CSPCo ...................... 159.83 152.55 143.94 143.66 140.45
I&M ........................ 143.43 139.16 135.11 129.39 123.62
KEPCo ...................... 129.72 132.25 126.92 113.90 113.40
OPCo ....................... 171.10 171.65 163.89 161.25 173.51
</TABLE>
The coal supplies at AEP System plants vary from time to time
depending on various factors, including customers' usage of
electric energy, space limitations, the rate of consumption at
particular plants, labor unrest and weather conditions which may
interrupt deliveries. At December 31, 1994, the System's coal
inventory was approximately 65 days of normal System usage. This
estimate assumes that the total supply would be utilized by
increasing or decreasing generation at particular plants.
The following tabulation shows the total consumption during
1994 of the coal-fired generating units of AEP's principal
operating subsidiaries, coal requirements of these units over the
remainder of their useful lives and the average sulfur content of
coal delivered in 1994 to these units. Reference is made to
Environmental and Other Matters for information concerning
current emissions limitations in the AEP System's various
jurisdictions and the effects of the Clean Air Act Amendments.
<TABLE>
<CAPTION>
ESTIMATED
TOTAL REQUIREMENTS AVERAGE SULFUR CONTENT
CONSUMPTION FOR REMAINDER OF DELIVERED COAL
DURING 1994 OF USEFUL LIVES ----------------------------
(IN THOUSANDS (IN MILLIONS POUNDS OF SO/2/
OF TONS) OF TONS)(A) BY WEIGHT PER MILLION BTU'S
------------- --------------- --------- -----------------
<S> <C> <C> <C> <C>
AEGCo (b) ..... 5,377 258 0.3% 0.7
APCo .......... 9,455 406 0.7% 1.2
CSPCo (c) ..... 6,137 253 3.2% 5.5
I&M (d) ....... 6,865 295 0.6% 1.3
KEPCo ......... 2,315 89 1.3% 2.1
OPCo .......... 17,613 627 2.5% 4.1
</TABLE>
---------------
(a) Preliminary estimates of the effects of the Clean Air Act
Amendments of 1990 are included.
(b) Reflects AEGCo's 50% interest in the Rockport Plant.
(c) Includes coal requirements for CSPCo's interest in Beckjord,
Stuart and Zimmer Plants.
(d) Includes I&M's 50% interest in the Rockport Plant.
AEGCo: See Fuel Supply -- I&M for a discussion of the coal
supply for the Rockport Plant.<PAGE>
APCo: APCo, or its subsidiaries formerly engaged in coal
mining, control coal reserves in the State of West Virginia which
contain approximately 42,000,000 tons of clean recoverable coal,
ranging in sulfur content between 1.0% and 3.5% sulfur by weight
(weighted average, 2.6% sulfur by weight).
Substantially all of the coal consumed at APCo's generating
plants is obtained from unaffiliated suppliers under long-term
contracts or on a spot purchase basis.
The average sulfur content by weight of the coal received by
APCo at its generating stations approximated 0.7% during 1994,
whereas the maximum sulfur content permitted, for emission
standard purposes, for existing plants in the regions in which
APCo's generating stations are located ranged between 0.78% and
2% by weight depending in some circumstances on the calorific
value of the coal which can be obtained for some generating
stations.
CSPCo: CSPCo owns an undivided one-half interest in
24,000,000 tons of clean recoverable deep-mineable coal in the
State of Ohio which is located in the vicinity of its
decommissioned Poston Plant and has an average sulfur content of
2.4% by weight. Peabody Coal Company (Peabody), which owns the
remaining one-half interest, has the right to mine and sell all
of the jointly owned coal to any party on terms negotiated by
Peabody. CSPCo has an option and right of first refusal
(exercisable within a specified period after tender by Peabody)
which will permit it to purchase this coal on the same terms as
those of any contract which Peabody may negotiate with a third
party. In the event that CSPCo does not exercise such right, it
is entitled to receive a royalty on the coal from this reserve
which Peabody sells to others. However, in such a case, this
coal will not be available for CSPCo's use.
CSPCo also owns coal reserves in eastern and southeastern Ohio
which contain approximately 46,000,000 tons of clean recoverable
coal with a sulfur content of approximately 4.5% sulfur by weight
and reserves that contain approximately 10,000,000 tons of clean
recoverable coal with a sulfur content of approximately 2.4%
sulfur by weight.
CSPCo has a coal supply agreement with an unaffiliated
supplier for the delivery of 1,272,000 tons of coal per year
through March 1999. Such coal contains approximately 4% sulfur
by weight and is washed to improve its quality and consistency
for use principally at Unit 4 of the Conesville Plant.
CSPCo has been informed by CG&E and DP&L that, with respect to
the CCD Group units partly owned but not operated by CSPCo,
sufficient coal has been contracted for or is believed to be
available for the approximate lives of the respective units
operated by them. Under the terms of the operating agreements
with respect to CCD Group units, each operating company is
contractually responsible for obtaining the needed fuel.
I&M: I&M has acquired surface ownership interest in lands in
Wyoming which, it is estimated, are underlaid by approximately
730,000,000 tons of clean recoverable coal with an average sulfur
content by weight of approximately 0.5%. Federal and state coal
leases which would provide the rights and authorization to
extract this coal have not been obtained. I&M is attempting to
sell its interest in these lands.<PAGE>
I&M has entered into coal supply agreements with unaffiliated
suppliers pursuant to which the suppliers are delivering low
sulfur coal from surface mines in Wyoming, principally for
consumption by the Rockport Plant. Under these agreements, the
suppliers will sell to I&M, for consumption by I&M at the
Rockport Plant or consignment to other System companies, coal
with an average sulfur content not exceeding 1.2 pounds of sulfur
dioxide per million Btu's of heat input. A contract with
remaining deliveries of 72,500,000 tons expires on December 31,
2014 and a contract with remaining deliveries of 60,000,000 tons
expires on December 31, 2004.
I&M or its subsidiaries own or control coal reserves in Carbon
County, Utah, which are estimated to contain 227,000,000 tons of
clean recoverable coal with an average sulfur content by weight
of approximately 0.5% sulfur. In 1986, I&M and its two
subsidiaries signed agreements under which certain of such coal
rights, land, and related mining and preparation equipment and
facilities were leased or subleased on a long-term basis to
unaffiliated interests. In 1993, the remainder of those land and
coal rights containing approximately 108,000,000 tons of clean
recoverable coal were leased on a long-term basis to unaffiliated
interests. Mining operations in Carbon County formerly conducted
by I&M were suspended in 1984.
KEPCo: Substantially all of the coal consumed at KEPCo's Big
Sandy Plant is obtained from unaffiliated suppliers under long-
term contracts or on a spot purchase basis. KEPCo has entered
into coal supply agreements with unaffiliated suppliers pursuant
to which KEPCo will receive approximately 2,718,000 tons of coal
in 1995. To the extent that KEPCo has additional coal
requirements, it may purchase coal from the spot market and/or
suppliers under contract to supply other System companies.
OPCo: OPCo and certain of its coal-mining subsidiaries own or
control coal reserves in the State of Ohio which contain
approximately 218,000,000 tons of clean recoverable coal, which
ranges in sulfur content between 3.4% and 4.5% sulfur by weight
(weighted average, 3.8%), which can be recovered based upon
existing mining plans and projections and employing current
mining practices and techniques. OPCo and certain of its mining
subsidiaries own an additional 113,000,000 tons of clean
recoverable coal in Ohio which ranges in sulfur content between
2.4% and 3.4% sulfur by weight (weighted average 2.7%). Recovery
of this coal would require substantial development.
OPCo and certain of its coal-mining subsidiaries also own or
control coal reserves in the State of West Virginia which contain
approximately 107,000,000 tons of clean recoverable coal ranging
in sulfur content between 1.4% and 3.3% sulfur by weight
(weighted average, 2.0%) of which approximately 30,000,000 tons
can be recovered based upon existing mining plans and projections
and employing current mining practices and techniques.
Nuclear
I&M has made commitments to meet certain of the nuclear fuel
requirements of the Cook Plant. The nuclear fuel cycle consists
of the mining and milling of uranium ore to uranium concentrates;
the conversion of uranium concentrates to uranium hexafluoride;
the enrichment of uranium hexafluoride; the fabrication of fuel
assemblies; the utilization of nuclear fuel in the reactor; and
the reprocessing or other disposition of spent fuel. Steps<PAGE>
currently are being taken, based upon the planned fuel cycles for
the Cook Plant, to review and evaluate I&M's requirements for the
supply of nuclear fuel beyond the existing contractual
commitments shown in the following table. I&M has made and will
make purchases of uranium in various forms in the spot market
until it decides that deliveries under long-term supply contracts
are warranted. The following table shows the year through which
contracts have been entered into to provide the requirements of
the units for the various segments of the nuclear fuel cycle.
<TABLE>
<CAPTION>
URANIUM
CONCENTRATES CONVERSION ENRICHMENT (1) FABRICATION REPROCESSING (2)
------------ ---------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Unit 1 .... --- --- 2000 1998 ---
Unit 2 .... --- --- 2000 1998 ---
</TABLE>
---------------
1) I&M has a requirements-type contract with DOE. I&M has
partially terminated the contract, subject to revocation of
the termination, so that it may procure enrichment services
cost-effectively from the spot market. I&M also has a
contract with Cogema, Inc. for the supply of enrichment
services through 1995, depending on market conditions.
2) No reprocessing facility in the United States currently is
in operation. I&M has contracted for reprocessing services
at a facility on which construction has been halted. Lack
of reprocessing services has resulted in the need to
increase on-site storage capacity for spent fuel.
For purposes of the storage of high-level radioactive waste in
the form of spent nuclear fuel, I&M has completed modifications
to its spent nuclear fuel storage pool to permit normal
operations through 2010.
I&M's costs of nuclear fuel consumed do not assume any
residual or salvage value for residual plutonium and uranium.
Nuclear Waste and Decommissioning
The Nuclear Waste Policy Act of 1982, as amended, establishes
Federal responsibility for the permanent off-site disposal of
spent nuclear fuel and high-level radioactive waste. Disposal
costs are paid by fees assessed against owners of nuclear plants
and deposited into the Nuclear Waste Fund created by the Act. In
1983, I&M entered into a contract with DOE for the disposal of
spent nuclear fuel. Under terms of the contract, for the
disposal of nuclear fuel consumed after April 6, 1983 by I&M's
Cook Plant, I&M is paying to the fund a fee of one mill per
kilowatt-hour, which I&M is currently recovering from customers.
For the disposal of nuclear fuel consumed prior to April 7, 1983,
I&M must pay the U.S. Treasury a fee estimated at approximately
$71,964,000, exclusive of interest of $82,013,000 at December 31,
1994. This amount has been recorded as long-term debt with an
offsetting regulatory asset. The regulatory asset at December
31, 1994 of $8,400,000 is being amortized as rate recovery
occurs. Because of the current uncertainties surrounding DOE's
program to provide for permanent disposal of spent nuclear fuel,
I&M has not yet paid any of this fee. At December 31, 1994,
funds collected from customers to dispose of spent nuclear fuel
and related earnings totaled $145,600,000.<PAGE>
On June 20, 1994, a group of 14 unaffiliated utilities owning
and operating nuclear plants and a group of states each filed a
petition for review in the U.S. Court of Appeals for the District
of Columbia Circuit requesting that the court issue a declaration
that the Nuclear Waste Policy Act of 1982 imposes on DOE an
unconditional obligation to begin acceptance of spent nuclear
fuel and high level radioactive waste by January 31, 1998. DOE
has indicated in its Notice of Inquiry of May 25, 1994 that its
preliminary view is that it has no statutory obligation to begin
to accept spent nuclear fuel beginning in 1998 in the absence of
an operational repository.
Studies completed in 1994 estimate decommissioning and low-
level radioactive waste disposal costs to range from $634,000,000
to $988,000,000 in 1993 dollars. The wide range is caused by
variables in assumptions, including the estimated length of time
spent nuclear fuel must be stored at the Cook Plant subsequent to
ceasing operations, which depends on future developments in the
federal government's spent nuclear fuel disposal program. I&M is
recovering decommissioning costs in its three rate-making
jurisdictions based on at least the lower end of the range in the
most recent respective decommissioning study available at the
time of the rate proceeding (the study range utilized in the
Indiana and Michigan rate cases was $588,000,000 to $1.102
billion in 1991 dollars). I&M records decommissioning costs in
other operation expense and records a noncurrent liability equal
to the decommissioning cost recovered in rates which was
$26,000,000 in 1994, $13,000,000 in 1993 and $12,000,000 in 1992.
At December 31, 1994, I&M had recognized a decommissioning
liability of $212,000,000. I&M will continue to reevaluate
periodically the cost of decommissioning and to seek regulatory
approval to revise its rates as necessary.
Funds recovered through the rate-making process for disposal
of spent nuclear fuel consumed prior to April 7, 1983 and for
nuclear decommissioning have been segregated and deposited in
external funds for the future payment of such costs. Trust fund
earnings decrease the amount to be recovered from ratepayers.
The ultimate cost of radiological decommissioning may be
materially different from the amounts derived from the estimates
contained in the site-specific study as a result of (a) the type
of decommissioning plan selected, (b) the escalation of various
cost elements (including, but not limited to, general inflation),
(c) the further development of regulatory requirements governing
decommissioning, (d) limited experience to date in
decommissioning such facilities and (e) the technology available
at the time of decommissioning differing significantly from that
assumed in these studies. Accordingly, management is unable to
provide assurance that the ultimate cost of decommissioning the
Cook Plant will not be significantly greater than current
projections.
In 1994, the Financial Accounting Standards Board (FASB) added
Accounting for Nuclear Decommissioning Liabilities to its agenda.
Among the topics to be studied by the FASB is the question of
when future decommissioning liabilities should be recognized.
I&M and the electric utility industry accrue such costs over the
service life of their nuclear facilities as recovered in rates.
A new requirement from the FASB could cause the annual provisions
for decommissioning to increase should the estimate of the
remaining unaccrued decommissioning costs be greater than the
regulators' allowed recovery level. Management believes that the<PAGE>
industry's life of the plant accrual accounting method is
appropriate and should be accepted by the FASB. Until the FASB
completes its study and reaches a conclusion, the impact, if any,
on results of operations and financial condition cannot be
determined.
The Low-Level Waste Policy Act of 1980 (LLWPA) mandates that
the responsibility for the disposal of low-level waste rests with
the individual states. Low-level radioactive waste consists
largely of ordinary trash and other items that have come in
contact with radioactive materials. To facilitate this approach,
the LLWPA authorized states to enter into regional compacts for
low-level waste disposal subject to Congressional approval. The
LLWPA also specified that, beginning in 1986, approved compacts
may prohibit the importation of low-level waste from other
regions, thereby providing a strong incentive for states to enter
into compacts. As 1986 approached it became apparent that no new
disposal facilities would be operational, and enforcement of the
LLWPA would leave no disposal capacity for the majority of the
low-level waste generated in the United States. Congress,
therefore, passed the Low-Level Waste Policy Amendments Act of
1985. Michigan was a member of the Midwest Compact, but its
membership was revoked in 1991. Michigan is responsible for
developing a disposal site for the low-level waste generated in
Michigan.
In 1990, Nevada, South Carolina and Washington, the three
states with operating disposal sites, determined that Michigan
was out of compliance with milestones established by the LLWPA
which were designed to force development of new disposal sites by
the end of 1992. Failure of a state or compact region to have met
a milestone could result in denial of access to operating sites
for waste generators within the state. Since November 1990, the
Cook Plant has been denied access to these operating sites. The
Cook Plant's low-level radioactive waste is currently being
stored on-site. I&M has an on-site radioactive material storage
facility at the Cook Plant for temporary preshipment storage of
the plant's low-level radioactive waste. The facility can hold
as much low-level waste as the Cook Plant is expected to produce
through approximately 2001, and the building could be expanded to
accommodate the storage of such waste through approximately 2017.
Currently, the Cook Plant produces less than 7,000 cubic feet of
low-level waste annually.
In 1994, Michigan amended its law regarding disposal sites to
provide for allowing a volunteer to host a facility. Although
progress has been made, the site selection process is very long
and management is unable to predict when a permanent disposal
site for Michigan low-level waste will be available.
Energy Policy Act -- Nuclear Fees
The Energy Policy Act of 1992 (Energy Act), contains a
provision to fund the decommissioning and decontamination of
DOE's existing uranium enrichment facilities from a combination
of sources including assessments against electric utilities which
purchased enrichment services from DOE facilities. I&M's
remaining estimated liability is $48,598,000, subject to
inflation adjustments, and is payable in annual assessments over
the next 12 years. I&M recorded a regulatory asset concurrent
with the recording of the liability. The payments are being
recorded and recovered as fuel expense.<PAGE>
ENVIRONMENTAL AND OTHER MATTERS
AEP's subsidiaries are subject to regulation by Federal, state
and local authorities with regard to air and water-quality
control and other environmental matters, and are subject to
zoning and other regulation by local authorities.
It is expected that costs related to environmental
requirements will eventually be reflected in the rates of AEP's
operating subsidiaries and that, in the long term, AEP's
operating subsidiaries will be able to provide for such
environmental controls as are required. However, some customers
may curtail or cease operations as a consequence of higher energy
costs. There can be no assurance that all such costs will be
recovered.
Except as noted herein, AEP's subsidiaries which own or
operate generating facilities generally are in compliance with
pollution control laws and regulations.
Air Pollution Control
Clean Air Act Amendments of 1990: For the AEP System,
compliance with the Clean Air Act Amendments of 1990 (CAAA) is
requiring substantial expenditures for which management is
seeking recovery through increases in the rates of AEP's
operating subsidiaries. OPCo is incurring a major portion of
such costs. There can be no assurance that all such costs will
be recovered. See Construction and Financing Program --
Construction Expenditures.
The CAAA create an emission allowance program pursuant to
which utilities are authorized to emit a designated quantity of
sulfur dioxide, measured in tons per year, on a system wide or
aggregate basis. A utility or utility system will be deemed to
operate in compliance with the legislation if its aggregate
annual emissions do not exceed the total number of allowances
that are allocated to the utility or utility system by the
federal government and net acquisitions through purchases.
Effective January 1, 2000, the legislation establishes a maximum
national aggregate ceiling on allowances allocated to fossil
fuel-fired units larger than 25 megawatts. The allowance cap is
set at 8.95 million tons.
Emission reductions are required by virtue of the
establishment of annual allowance allocations at a level below
historical emission levels for many utility units. For units
that emitted sulfur dioxide above a rate of 2.5 pounds per
million Btu heat input in 1985, the CAAA establish sulfur dioxide
allowance limitations (caps or ceilings on emissions) premised
upon sulfur dioxide emissions at a rate of 2.5 pounds per million
Btu heat input as of the Phase I deadline of January 1, 1995.
The following AEP System units are Phase I-affected units: I&M's
Breed Plant and Tanners Creek Unit 4; CSPCo's Beckjord Unit 6,
Conesville Units 1-4 and Picway Unit 5; and OPCo's Gavin Units 1-
2, Muskingum River Units 1-5, Cardinal Unit 1, Mitchell Units 1-2
and Kammer Units 1-3.
The CAAA contemplate four general methods of compliance: (i)
fuel switching; (ii) technological methods of control such as
scrubbers; (iii) capacity utilization adjustments; and (iv)
acquisition of allowances to cover anticipated emissions levels.
The AEP System permit application and compliance plan filings<PAGE>
reflect, to some extent, each method of compliance.
On January 11, 1993, Federal EPA published final regulations
in the Federal Register which cover the Acid Rain Permit Program,
Allowance System, Continuous Emission Monitoring, Excess
Emissions Penalties and Offset Plans and Appeal Procedures.
These regulations included allocation of allowances for Phase I
sources. On March 12, 1993, several environmental groups, the
State of New York and a number of utilities (including APCo,
CSPCo, I&M, KEPCo and OPCo) filed petitions in the U.S. Court of
Appeals for the District of Columbia Circuit seeking a review of
the regulations. The parties have settled a number of issues,
including those relating to Substitution Unit, Compensation Unit
and Reduced Utilization plans. Oral argument has not been
scheduled for the remaining issues. Phase I permits have been
issued for all Phase I-affected units in the AEP System.
All fossil fuel-fired generating units with capacity greater
than 25 megawatts are affected in Phase II of the acid rain
control program. All Phase II-affected units are allocated
allowances with which compliance must be accomplished beginning
January 1, 2000. The basis for Phase II allowance allocation
depends on 1985 sulfur dioxide emission rates -- if a unit
emitted sulfur dioxide in 1985 at a rate in excess of 1.2 pounds
per million Btu heat input, the allowance allocation is premised
upon an emission rate of 1.2 pounds as of the Phase II deadline
of January 1, 2000; if a unit emitted sulfur dioxide in 1985 at a
rate of less than 1.2 pounds, the allowance allocation is in most
instances premised upon the actual 1985 emission rate.
The acid rain title also contains provisions concerning
nitrogen oxides emissions. In March 1994, Federal EPA issued
final regulations governing nitrogen oxides emissions from
tangentially fired and dry bottom wall-fired boilers at Phase I
units. These regulations were appealed to the U.S. Court of
Appeals for the District of Columbia Circuit by APCo, CSPCo,
I&M, KEPCo and OPCo and a group of unaffiliated utilities based
on the failure of Federal EPA to correctly define low NOx burner
technology. On November 29, 1994, the court remanded the rules
to Federal EPA. On December 16, 1994, OPCo and CSPCo filed
appeals seeking the suspension of NOx limits contained in acid
rain permits for Conesville, Picway and Mitchell plants pending
the reissuance of NOx regulations. On February 7, 1995, Federal
EPA published a notice in the Federal Register advising that the
NOx limitations contained in the permits for these plants were
suspended pending the remanded rulemaking.
For wet bottom wall-fired boilers, cyclone boilers, units
applying cell burner technology and all other types of boilers,
emission limitations comparable in cost to the controls
applicable to tangentially fired boilers and non-cell burner dry
bottom wall-fired boilers are to be adopted no later than January
1, 1997. The 1997 nitrogen oxides emission limitations are
required to be met by Phase II-affected sources as of January 1,
2000.
The CAAA contain additional provisions, other than the acid
rain title, which could require reductions in emissions of
nitrogen oxides from fossil fuel-fired power plants. Title I,
dealing generally with nonattainment of ambient air quality
standards, establishes a tiered system for classifying degrees of
nonattainment with air quality standards for ozone and mandates
that Federal EPA in cooperation with the states issue, within 240<PAGE>
days of enactment, ozone "attainment" or "nonattainment"
designations for airsheds throughout the country. Depending upon
the severity of nonattainment within a given nonattainment area,
reductions in nitrogen oxides emissions from fossil fuel-fired
power plants may be required as part of a state's plan for
achieving attainment with ozone air quality standards. The
deadlines for submission of new state plans and the
accomplishment of mandated emission reductions, as well as the
nature of stationary source nitrogen oxides control requirements,
also depend upon the severity of a given airshed's nonattainment.
While ozone nonattainment is largely restricted to urban areas,
several AEP System generating stations could be determined to be
affecting ozone concentrations and may therefore eventually be
required to reduce nitrogen oxides emissions pursuant to Title I.
In addition, certain environmental organizations and northeastern
states have filed comments with Federal EPA contending that NOx
emissions from the midwest must be reduced in order to achieve
the National Ambient Air Quality Standard for ozone in the
northeast. Plants currently located in areas being evaluated for
imposition of additional emission controls include Zimmer and
Beckjord Unit 6 (both partially owned by CSPCo), I&M's Tanners
Creek Plant, KEPCo's Big Sandy Plant, OPCo's Gavin Plant and
APCo's Amos, Sporn, Kanawha River and Mountaineer plants. On
February 25, 1994, the West Virginia Division of Environmental
Protection issued a consent order for APCo's Amos Units 1 and 2,
requiring reductions in nitrogen oxides emissions from these
units after June 1, 1995. The reduction in nitrogen oxides
emissions will be less than that required under Title IV of the
CAAA but will be required at an earlier time. On September 6,
1994, Federal EPA officially redesignated Putnam, Wood and
Kanawha counties to ozone attainment. West Virginia does not
plan to impose NOx reduction requirements under Title I of the
CAAA as part of its ozone maintenance plan in any of the five
former moderate ozone non-attainment counties, barring any other
mandate from Federal EPA to do so.
Utility boilers are potentially subject to additional control
requirements under Title III of the CAAA governing hazardous air
pollutant emissions. Federal EPA is directed to conduct studies
concerning the potential public health impacts of pollutants
identified by the legislation as hazardous in connection with
their emission from electric utility steam generating units.
Federal EPA was required to report the results of this study to
Congress by November 1993 and is required to regulate emissions
of these pollutants from electric utility steam generating units
if it is determined that such regulation is necessary and
appropriate, based on the results of the study. Federal EPA
informed Congress that completion of this study has been delayed
significantly beyond the November 1993 deadline. Federal EPA has
received a court order to complete the study and submit it by
November 1995. Additionally, Federal EPA is directed to study
the deposition of hazardous pollutants to the Great Lakes, the
Chesapeake Bay, Lake Champlain and other coastal waters. As part
of this assessment, Federal EPA is authorized to adopt
regulations by November 1995 to prevent serious adverse effects
to public health and serious or widespread environmental effects.
It is possible that emissions from electric utility generating
units may be regulated under this water body deposition
assessment program.
The CAAA expand the enforcement authority of the Federal
government by increasing the range of civil and criminal
penalties for violations of the Clean Air Act and enhancing<PAGE>
administrative civil provisions, adding a citizens suit provision
and imposing a national operating permit system, emission fee
program and enhanced monitoring, record keeping and reporting
requirements for existing and new sources.
CAAA-AEP System Compliance Plan: In 1992, the PUCO approved a
systemwide Phase I CAAA compliance plan. The AEP System's
compliance plan centers around the compliance method selected for
OPCo's two-unit 2,600-megawatt Gavin Plant which has emitted
about 25% of the System's total sulfur dioxide emissions. Under
an Ohio law, utilities could obtain advance PUCO approval of a
least-cost compliance plan which would be deemed prudent in
subsequent PUCO rate proceedings.
The PUCO approved least-cost plan set forth compliance
measures for the System's affected generating units, which
included (i) installing leased flue gas desulfurization equipment
(scrubbers) to burn Ohio high-sulfur coal at Gavin and (ii)
designating Gavin's coal supply sources to include the affiliated
Meigs mine at a reduced operating capacity and under
predetermined prices, new long-term contracts with unaffiliated
sources and spot market purchases.
Pursuant to a settlement agreement approved by the PUCO in
connection with OPCo's rate case discussed in Rates -- OPCo, the
PUCO reaffirmed its approval of the compliance plan, which does
not seek to fuel switch Cardinal Unit 1 or Muskingum River Units
1-4 to low-sulfur coal at the beginning of Phase I of the CAAA.
Under the terms of the compliance plan, OPCo's Muskingum River
Unit 5 has been switched to low-sulfur coal. CSPCo's Conesville
Units 1-3 are being modified to enable these units to burn coal
or natural gas to comply. Actual fuel choice will depend on the
cost and availability of gas. Although the compliance plan
originally contemplated that CSPCo's Picway Unit 5 also would be
modified to enable this unit to burn coal or natural gas to
comply, this proposed modification has been indefinitely
deferred. Beckjord Unit 6 (owned with CG&E and DP&L) has been
switched to moderate sulfur coal. I&M's Tanners Creek Unit 4 has
also been switched to moderate sulfur coal and I&M's Breed Plant
was retired in 1994. Eight additional units are subject to Phase
I rules, but no operating or fuel changes are planned, because
they will hold allowances sufficient for compliance. Fuel
switching is planned for Muskingum River Units 1-4 in 2000 and
Cardinal Unit 1 in 2001 for Phase II compliance.
Since the approved plan reflects fuel switching to comply at
OPCo's Muskingum River Plant and Cardinal Unit 1, mining
operations at OPCo's wholly-owned coal-mining subsidiaries,
Central Ohio Coal Company and Windsor Coal Company, could be shut
down resulting in substantial costs. Central Ohio Coal Company
and Windsor Coal Company supply coal to Muskingum River Plant and
Cardinal Plant, respectively. Central Ohio Coal Company reduced
its operating level by approximately 50% in 1994. Windsor Coal
Company has also reduced its operating level to comply with the
CAAA.
As a result of the aforementioned PUCO approval of OPCo's
least-cost compliance plan, OPCo entered into an agreement in
1992 for construction and lease of the Gavin Plant scrubbers with
JMG Funding, Limited Partnership (JMG), an unaffiliated entity.
Management currently expects that the cost of the leased
scrubbers will be approximately $675,000,000. See Construction
and Financing Program -- Construction Expenditures. The<PAGE>
scrubbers on Gavin Units 1 and 2 commenced operation in December
1994 and March 1995, respectively.
On March 15, 1995, OPCo began to lease the scrubbers from JMG.
The lease term is for 34 years, subject to certain termination
provisions. OPCo may purchase the scrubbers during the last 19
years of the lease term and may renew the lease for an additional
20 years.
Rent will be payable quarterly and will reflect, among other
factors, amortization of the final cost of the scrubbers and the
costs of JMG's equity and debt capital. OPCo's rental obligation
under the lease has been pledged by JMG as security for the debt
portion of its financing.
Recovery of compliance costs is being and will be sought
through the rate-making process. The aforementioned OPCo
settlement agreement provides, among other things, for OPCo to
recover the annual lease cost of the scrubbers and other
compliance costs and provides OPCo with an opportunity to recover
its Ohio jurisdictional share of its investment in and the
liabilities and closing costs of the affiliated Central Ohio and
Windsor mining operations to the extent the actual cost of coal
burned at the Gavin Plant is below a predetermined price. AEP
intends to also seek timely recovery of all compliance costs,
including mine shutdown costs, from its non-Ohio jurisdictional
customers. There can be no assurance that regulators will
provide for recovery of all CAAA compliance costs. Compliance
with the CAAA, including potential mine closure costs, could have
an adverse effect on results of operations and possibly financial
condition unless the costs can be recovered from ratepayers
and/or from asset dispositions.
Global Climate Change: Increasing concentrations of
"greenhouse gases," including carbon dioxide (CO/2/), in the
atmosphere have led to concerns about the potential for the
earth's climate to change. As a result of the AEP System's
historical practice of using low-cost indigenous coal supplies to
produce electricity, AEP System power plants are significant
sources of CO/2/ emissions. The proponents of the theory of
global climate change maintain that the increasing concentrations
of man-made greenhouse gases will cause some of the sun's energy
that is normally radiated back into space to be trapped in the
atmosphere and that, as a result, the global temperature will
increase. Management is working to support further efforts to
properly study the issue of global climate change to define the
extent, if any, to which it poses a threat to the environment
before new restrictions are imposed. Management is concerned
that new laws may be passed or new regulations promulgated
without sufficient scientific study and support.
At the Earth Summit in Rio de Janeiro, Brazil in June 1992,
over 150 nations, including the United States, signed a global
climate change treaty. Each country that ratifies the treaty
commits itself to a process of achieving the aim of reducing
greenhouse gas emissions, including CO/2/, to their 1990 level by
the year 2000. On October 7, 1992, the U.S. Senate ratified the
treaty. The treaty went into effect on March 21, 1994.
In accordance with the obligations set forth in the global
climate change treaty, on April 21, 1993, President Clinton
committed the United States to reducing greenhouse gas emissions
to 1990 levels by the year 2000. On October 19, 1993, the<PAGE>
President unveiled the Administration's Climate Change Action
Plan for meeting this emission reduction target. The plan
emphasizes reductions in fossil fuel use, the largest source of
CO/2/ emissions, primarily through reliance on voluntary energy
efficiency programs and voluntary partnerships between the
Federal government and U.S. industry. One such collaboration is
between the electric utility industry and DOE. Known as the
Utility Climate Challenge, this initiative is intended to
identify voluntary, cost-effective measures to reduce, avoid or
sequester future greenhouse gas emissions. AEP System companies
joined with nearly 800 investor-owned, municipal, rural electric
cooperative and Federal utilities in a voluntary agreement signed
with DOE on April 20, 1994 that is intended to lead to reductions
in future greenhouse gas emissions through cost-effective
actions. On February 3, 1995, the AEP System entered into the
Climate Challenge Participation Accord with DOE. The Accord
contains a wide diversity of supply-side, demand-side and forest
management/tree planting activities that will be undertaken on
the AEP System between now and the year 2000.
Since the AEP System is a major emitter of carbon dioxide, its
financial condition and results of operations could be materially
adversely affected by the imposition of severe command-and-
control limitations on carbon dioxide emissions if the compliance
costs incurred are not fully recovered from ratepayers. In
addition, any such severe program to stabilize or reduce carbon
dioxide emissions could impose substantial costs on industry and
society and seriously erode the economic base that AEP's
operations serve.
Ohio: On July 29, 1988, Federal EPA issued a notice of
violation alleging that OPCo's Muskingum River Plant operated in
violation of Ohio EPA's regulation governing visible emissions
during 1987. At a November 1988 enforcement conference pursuant
to Clean Air Act Section 113, OPCo representatives presented
evidence to Federal EPA indicating that the notice of violation
was not supported by factual evidence nor by law. Federal EPA
has yet to take further action.
West Virginia: The West Virginia Air Pollution Control
Commission promulgated sulfur dioxide limitations which Federal
EPA approved in February 1978. The emission limitations for the
Mitchell Plant have been approved by Federal EPA for primary
ambient air quality (health-related) standards only. The West
Virginia Air Pollution Control Commission is obliged to reanalyze
sulfur dioxide emission limits for the Mitchell Plant with
respect to secondary ambient air quality (welfare-related)
standards. Because the Clean Air Act provides no specific
deadline for approval of emission limits to achieve secondary
ambient air quality standards, it is not certain when Federal EPA
will take dispositive action regarding the Mitchell Plant.
West Virginia has also had a request to increase the sulfur
dioxide emission limitation for Kammer pending before Federal EPA
for many years, although the change has not been acted upon by
Federal EPA. On August 4, 1994, however, Federal EPA issued a
Notice of Violation to OPCo alleging that Kammer Plant was
operating in violation of the applicable federally enforceable
sulfur dioxide emission limit. See Item 3. Legal Proceedings --
Kammer Plant. A portion of the Notice of Violation relating to
compliance has been resolved and separate proceedings have been
initiated by OPCo with both the West Virginia Division of
Environmental Protection and Region III, Federal EPA in an effort<PAGE>
to obtain approval for utilization of the existing fuel supply
beyond September 1, 1995. The outcome of this initiative cannot
be predicted at this time.
Stack Height Regulations: On June 27, 1985, Federal EPA
issued stack height regulations pursuant to an order of the
United States Court of Appeals for the District of Columbia
Circuit. These regulations were appealed by a number of states,
environmental groups and investor-owned electric utilities
(including APCo, CSPCo, I&M, KEPCo and OPCo), along with three
electric utility trade associations. OPCo also filed a separate
petition for review to raise issues unique to its Kammer Plant.
Various petitions for reconsideration filed with and denied by
Federal EPA were also appealed. This litigation was consolidated
into a single case.
On January 22, 1988, the U.S. Court of Appeals issued a
decision in part upholding the June 1985 stack height rules and
remanding certain of the June 1985 rules to Federal EPA for
further consideration. With respect to Kammer Plant, the January
1988 court decision rejected OPCo's appeal, holding that Federal
EPA acted lawfully in revoking stack height credit previously
granted for Kammer Plant in October 1982. As discussed above,
OPCo is in the process of initiating administrative proceedings
under the 1985 stack height rules with the State of West Virginia
and Federal EPA in an effort to preserve stack height credit for
Kammer Plant.
While it is not possible to state with particularity the
ultimate impact of the final rules on AEP System operations, at
present it appears that the most likely AEP System plants at
which the final rules could possibly result in substantially more
stringent emission limitations are CSPCo's Conesville Plant,
AEGCo's and I&M's Rockport Plant, I&M's Tanners Creek Plant and
OPCo's Gavin and Kammer plants. Gavin and Rockport plants were
not affected by Federal EPA's stack height rules as issued in
June 1985. However, the provision exempting these plants was
remanded to Federal EPA in the January 1988 court decision.
Accordingly, the ultimate impact of the stack height rules on
Gavin and Rockport plants will not be known until Federal EPA
completes administrative proceedings on remand and reissues final
stack height rules. OPCo and AEGCo and I&M intend to participate
in the remand rulemaking affecting Gavin and Rockport plants,
respectively.
State air pollution control agencies will be required to
implement the stack height rules by revising emission limitations
for sources subject to the rules and submitting such revisions to
Federal EPA.
On June 1, 1989, Ohio EPA adopted a rule concerning CSPCo's
Conesville Plant in response to Federal EPA's stack height rules
adopted in 1985. Under Federal EPA policy published in January
1988, emission reductions required by the stack height rules may
be obtained at plants other than the plant directly affected by
the rules, and thereafter credited to the directly affected
plant. Under Ohio EPA's June 1 rule, the sulfur dioxide emission
limitations for Conesville Units 5 and 6 remain at 1.2 pounds
sulfur dioxide per million Btu heat input as long as the emission
rate at CSPCo's retired Poston Units 1-4 remains at 0.0 pounds
sulfur dioxide per million Btu heat input. Federal EPA has yet
to take action concerning Ohio EPA's June 1 rule.<PAGE>
Administrative Developments Regarding Sulfur Dioxide: On
November 15, 1994, Federal EPA published a notice in the Federal
Register proposing to retain the present 24-hour national ambient
air quality standard for sulfur dioxide. Federal EPA also sought
comment on the need to adopt additional regulations to address
short-term exposures to sulfur dioxide. Federal EPA is
soliciting comments on three alternatives, including the adoption
of a short-term standard averaged over a five-minute period.
Adoption of any of these proposed approaches could require
substantial reductions in sulfur dioxide emissions from the
System's coal-fired generating plants which would entail
substantial capital and operating costs. In a related action,
Federal EPA, on March 7, 1995, proposed requirements for
implementing strategies to reduce short-term (five-minute) peak
concentrations of sulfur dioxide in order to reduce health risks
to exercising asthmatics. The effect on AEP operations of
Federal EPA's proposed risk-based targeting strategies for
further regulating sulfur dioxide emissions, if finalized, cannot
be predicted, but may be significant.
Life Extension: On July 21, 1992, Federal EPA published final
regulations in the Federal Register governing application of new
source rules to generating plant repairs and pollution control
projects undertaken to comply with the Clean Air Act Amendments
of 1990. Generally, the rule provides that plants undertaking
pollution control projects will not trigger new source review
requirements. The Natural Resource Defense Council and a group
of utilities, including five AEP System companies, have filed
petitions in the U.S. Court of Appeals for the District of
Columbia Circuit seeking a review of the regulations.
Water Pollution Control
Under the Clean Water Act, effluent limitations requiring
application of the best available technology economically
achievable are to be applied, and those limitations require that
no pollutants be discharged if Federal EPA finds elimination of
such discharges is technologically and economically achievable.
The Clean Water Act provides citizens with a cause of action
to enforce compliance with its pollution control requirements.
Since 1982, many such actions against NPDES permit holders have
been filed. To date, no AEP System plants have been named in
such actions.
All System Plants are operating with NPDES permits. Under
EPA's regulations, operation under an expired NPDES permit is
authorized provided an application is filed at least 180 days
prior to expiration. Renewal applications are being prepared or
have been filed for renewal of NPDES permits which expire in
1995.
The NPDES permits generally require that certain thermal
impact study programs be undertaken. These studies have been
completed for all System plants. Thermal variances are in effect
for all plants with once-through cooling water. Recently renewed
thermal variances for Conesville and Muskingum River plants were
more stringent in their controls, but the cost impacts are not
expected to be significant.
Certain mining operations conducted by System companies as
discussed under Fuel Supply are also subject to Federal and state
water pollution control requirements, which may entail<PAGE>
substantial expenditures for control facilities, not included at
present in the System's construction cost estimates set forth
herein. See Item 3. Legal Proceedings -- Meigs Mine with respect
to litigation regarding certain discharges from OPCo's Meigs 31
mine.
The Federal Water Quality Act of 1987 requires states to adopt
stringent water quality standards for a large category of toxic
pollutants and to identify specialized control measures for
dischargers to waters where water quality standards are not being
met. Implementation of these provisions could result in
significant costs to the AEP System if biological monitoring
requirements and water quality-based effluent limits are placed
in NPDES permits.
In March 1995, Federal EPA finalized a set of rules which
establish minimum water quality standards, anti-degradation
policies and implementation procedures for more stringently
controlling releases of toxic pollutants into the Great Lakes
system. This regulatory package is called the Great Lakes Water
Quality Initiative (GLWQI). The most direct compliance cost
impact could be related to I&M's Cook Plant. Management cannot
presently determine whether the GLWQI would have a significant
adverse impact on AEP operations. The significance of such
impact will depend on the outcome of Federal EPA's policy on
intake credits and site specific variables as well as Michigan's
implementation strategy. If Indiana and Ohio eventually adopt
the GLWQI criteria for statewide application, AEP System plants
located in those states could also be affected.
Hazardous Substances and Wastes
Section 311 of the Clean Water Act imposes substantial
penalties for spills of Federal EPA-listed hazardous substances
into water and for failure to report such spills. The
Comprehensive Environmental Response, Compensation, and Liability
Act expanded the reporting requirements to cover the release of
hazardous substances generally into the environment, including
water, land and air. AEP's subsidiaries store and use some of
these hazardous substances, including PCB's contained in certain
capacitors and transformers, but the occurrence and ramifications
of a spill or release of such substances cannot be predicted.
The Comprehensive Environmental Response, Compensation, and
Liability Act provides governmental agencies with the authority
to require clean-up of hazardous waste sites and releases of
hazardous substances into the environment. Since liability under
this Act is strict and can be applied retroactively, AEP System
companies which previously disposed of PCB-containing electrical
equipment and other hazardous substances may be required to
participate in remedial activities at such disposal sites should
environmental problems result. AEP System companies are
presently identified as parties responsible for clean-up at
eight federal sites, including I&M at four sites, KEPCo at one
site, OPCo at two sites and Wheeling Power Company at one site.
I&M also has been named as a party responsible for clean-up at
one state site. The companies' share of clean-up costs, however,
is not expected to be significant. AEP System companies,
including I&M and OPCo, also have been named as defendants in
contribution lawsuits for two additional sites.
Regulations issued by Federal EPA under the Toxic Substances
Control Act govern the use, distribution and disposal of PCBs,
including PCBs in electrical equipment. Deadlines for removing<PAGE>
certain PCB-containing electrical equipment from service have
been met.
In addition to handling hazardous substances, the System
companies generate solid waste associated with the combustion of
coal, the vast majority of which is fly ash, bottom ash and flue
gas desulfurization wastes. These wastes presently are
considered to be non-hazardous under RCRA and applicable state
law and the wastes are treated and disposed in surface
impoundments or landfills in accordance with state permits or
authorization or beneficially utilized. As required by RCRA, EPA
evaluated whether high volume coal combustion wastes (such as fly
ash, bottom ash and flue gas desulfurization wastes) should be
regulated as hazardous waste. In August, 1993 EPA issued a
regulatory determination that such high volume coal combustion
wastes should not be regulated as hazardous waste. For low
volume coal combustion wastes, such as metal and boiler cleaning
wastes, Federal EPA will gather additional information and make a
regulatory determination by April 1998. Until that time, these
low volume wastes are provisionally excluded from regulation
under the hazardous waste provisions of RCRA. All presently
generated hazardous waste is being disposed of at permitted off-
site facilities in compliance with applicable Federal and state
laws and regulations. For System facilities which generate such
wastes, System companies have filed the requisite notices and are
complying with RCRA and applicable state regulations for
generators. Nuclear waste produced at the Cook Plant is excluded
from regulation under RCRA.
Federal EPA's technical requirements for underground storage
tanks containing petroleum will require retrofitting or
replacement of an appreciable number of tanks. Compliance costs
for tank replacement and site remediation have not been
significant to date.
Electric and Magnetic Fields (EMF)
EMF is found everywhere there is electricity. Electric fields
are created by the presence of electric charges. Magnetic fields
are produced by the flow of those charges. This means that EMF is
created by electricity flowing in transmission and distribution
lines, or being used in household wiring and appliances.
A number of studies in the past several years have examined
the possibility of adverse health effects from EMF. While some
of the epidemiological studies have indicated some association
between exposure to EMF and health effects, the majority of
studies have indicated no such association. The epidemiological
studies that have received the most public attention reflect a
weak correlation between surrogate or indirect estimates of EMF
exposure and certain cancers. Studies using direct measurements
of EMF exposure show no such association.
There were three epidemiological studies of EMF and utility
workers published from 1993 through early 1995 -- each with
results that contradicted the others. One reported a weak
association between EMF and a type of adult leukemia, but not
brain cancer; while another reported a weak association with
brain cancer, but not leukemia. However, the third found no
evidence of increased deaths from cancer, including leukemia and
brain cancer. A conclusion cannot be drawn from these three
studies. The researchers are collaborating to reexamine their
data collection techniques, exposure assessments, and statistical<PAGE>
analyses to possibly reconcile their conflicting findings by
looking at the three studies together.
In addition, the research has not shown any causal
relationship between EMF exposure and cancer, or any other
adverse health effects. Additional studies, which are intended
to provide a better understanding of the subject, are continuing.
Federal EPA is currently studying whether exposure to EMF is
associated with cancer in humans. In 1990, Federal EPA issued a
draft report on EMF, received interagency review and public
comment, and is in the process of preparing its final report. A
December 1992 brochure from Federal EPA, Questions And Answers
About Electric And Magnetic Fields (EMFs), states at page 3, "The
bottom line is that there is no established cause and effect
relationship between EMF exposure and cancer or other disease."
The Energy Policy Act of 1992 established a coordinated
Federal EMF research program. The program funding is $65,000,000
over five years, half of which is to be provided by private
parties including utilities. AEP has committed to contribute
$446,571 over the five-year period.
AEP's participation is a continuation of its efforts to
support further research and to communicate with its customers
and employees about this issue. Its operating company
subsidiaries provide their residential customers with information
and field measurements on request, although there is no
scientific basis for interpreting such measurements.
A number of lawsuits based on EMF-related grounds have been
filed in recent years against electric utilities. A suit was
filed on May 23, 1990 against I&M involving claims that EMF from
a 345 KV transmission line caused adverse health effects. No
specific amount has been requested for damages in this case and
no trial date has been set.
Some states have enacted regulations to limit the strength of
magnetic fields at the edge of transmission line rights-of-way.
No state which the AEP System serves has done so. In March 1993,
The Ohio Power Siting Board issued its amended rules providing
for additional consideration of the possible effects of EMF in
the certification of electric transmission facilities. Under the
amended EMF rules, persons seeking approval to build electric
transmission lines have to provide estimates of EMF from
transmission lines under a variety of conditions. In addition,
applicants are required to address possible health effects and
discuss the consideration of design alternatives with respect to
EMF.
In April 1993, the State of Indiana enacted a law which
provides that the IURC shall determine, based on the
preponderance of evidence in the scientific literature, whether
rules are necessary to protect the public health from EMF. If
the IURC determines that such rules are necessary, the IURC is
required to adopt rules that reasonably protect the public health
from EMF.
Management cannot predict the ultimate impact of the question
of EMF exposure and adverse health effects. If further research
shows that EMF exposure contributes to increased risk of cancer
or other health problems, or if the courts conclude that EMF
exposure harms individuals and that utilities are liable for<PAGE>
damages, or if states limit the strength of magnetic fields to
such a level that the current electricity delivery system must be
significantly changed, then the results of operation and
financial condition of AEP and its operating subsidiaries could
be materially adversely affected unless these costs can be
recovered from rate payers.
RESEARCH AND DEVELOPMENT
AEP and its subsidiaries are involved in a number of research
projects which are directed toward developing more efficient
methods of burning coal, reducing the contaminants resulting from
combustion of coal, and improving the efficiency and reliability
of power transmission, distribution and utilization, including
load management. See Construction and Financing Program -- PFBC
Projects.
AEP System operating companies have elected to join the
Electric Power Research Institute (EPRI), a nonprofit
organization that manages research and development on behalf of
the U.S. electric utility industry. EPRI, founded in 1973,
manages technical research and development programs for its
members to improve power production, delivery and use.
Approximately 700 utilities are members. EPRI has agreed to a
membership program with AEP whereby dues will be phased in from
1994 through 1996. AEP's operating companies are seeking
recovery of these dues through rates, which recovery is
anticipated to closely relate to each company's membership date.
Total research and development expenditures by AEP and its
subsidiaries were approximately $7,700,000 for the year ended
December 31, 1994, $13,800,000 for the year ended December 31,
1993 and $14,200,000 for the year ended December 31, 1992,
including $2,200,000, $10,900,000 and $12,000,000, respectively,
for Tidd Plant and related PFBC costs. 1994 expenditures also
included $3,200,000 for EPRI dues.
Item 2. PROPERTIES
-----------------------------------------------------------------
At December 31, 1994, subsidiaries of AEP owned (or leased
where indicated) generating plants with the net power
capabilities (winter rating) shown in the following table:
<TABLE>
<CAPTION>
NET
KILOWATT
OWNER, PLANT TYPE AND NAME LOCATION (NEAR) CAPABILITY
-------------------------- --------------- ------------
<S> <C> <C>
AEP Generating Company:
Steam -- Coal-Fired:
Rockport Plant (AEGCo share) Rockport, Indiana 1,300,000(a)
----------
Appalachian Power Company:
Steam -- Coal-Fired:
John E. Amos, Units 1 & 2 St. Albans, West Virginia 1,600,000
John E. Amos, Unit 3 (APCo share) St. Albans, West Virginia 433,000(b)
Clinch River Carbo, Virginia 705,000
Glen Lyn Glen Lyn, Virginia 335,000
Kanawha River Glasgow, West Virginia 400,000
Mountaineer New Haven, West Virginia 1,300,000<PAGE>
Philip Sporn, Units 1 & 3 New Haven, West Virginia 308,000
Hydroelectric -- Conventional:
Buck Ivanhoe, Virginia 10,000
Byllesby Byllesby, Virginia 20,000
Claytor Radford, Virginia 76,000
Leesville Leesville, Virginia 40,000
Niagara Roanoke, Virginia 3,000
Reusens Lynchburg, Virginia 12,000
Hydroelectric -- Pumped Storage:
Smith Mountain Penhook, Virginia 565,000
----------
5,807,000
----------
Columbus Southern Power Company:
Steam -- Coal-Fired:
Beckjord, Unit 6 New Richmond, Ohio 53,000(c)
Conesville, Units 1-3, 5 & 6 Coshocton, Ohio 1,165,000
Conesville, Unit 4 Coshocton, Ohio 339,000(c)
Picway, Unit 5 Columbus, Ohio 100,000
Stuart, Units 1-4 Aberdeen, Ohio 608,000(c)
Zimmer Moscow, Ohio 330,000(c)
----------
2,595,000
----------
Indiana Michigan Power Company:
Steam -- Coal-Fired:
Rockport Plant (I&M share) Rockport, Indiana 1,300,000(a)
Tanners Creek Lawrenceburg, Indiana 995,000
Steam -- Nuclear:
Donald C. Cook Bridgman, Michigan 2,110,000
Gas Turbine:
Fourth Street Fort Wayne, Indiana 18,000(d)
Hydroelectric -- Conventional:
Berrien Springs Berrien Springs, Michigan 3,000
Buchanan Buchanan, Michigan 2,000
Constantine Constantine, Michigan 1,000
Elkhart Elkhart, Indiana 1,000
Mottville Mottville, Michigan 1,000
Twin Branch Mishawaka, Indiana 3,000
----------
4,434,000
----------
Kanawha Valley Power Company:
Hydroelectric -- Conventional:
London Montgomery, West Virginia 16,000(e)
Marmet Marmet, West Virginia 16,000(e)
Winfield Winfield, West Virginia 19,000(e)
----------
51,000
----------
Kentucky Power Company:
Steam -- Coal-Fired:
Big Sandy Louisa, Kentucky 1,060,000
----------
Ohio Power Company:
Steam -- Coal-Fired:
John E. Amos, Unit 3 (OPCo share) St. Albans, West Virginia 867,000(b)
Cardinal, Unit 1 Brilliant, Ohio 600,000
General James M. Gavin Cheshire, Ohio 2,600,000(f)
Kammer Captina, West Virginia 630,000
Mitchell Captina, West Virginia 1,600,000
Steam -- Coal-Fired:
Muskingum River Beverly, Ohio 1,425,000<PAGE>
Philip Sporn, Units 2, 4 & 5 New Haven, West Virginia 742,000
Hydroelectric -- Conventional:
Racine Racine, Ohio 48,000
----------
8,512,000
----------
Total Generating Capability 23,759,000
==========
Summary:
Total Steam --
Coal-Fired 20,795,000
Nuclear 2,110,000
Total Hydroelectric --
Conventional 271,000
Pumped Storage 565,000
Other 18,000
----------
Total Generating Capability 23,759,000
==========
</TABLE>
---------------
(a) Unit 1 of the Rockport Plant is owned one-half by AEGCo and
one-half by I&M. Unit 2 of the Rockport Plant is leased
one-half by AEGCo and one-half by I&M. The leases terminate
in 2022 unless extended.
(b) Unit 3 of the John E. Amos Plant is owned one-third by APCo
and two-thirds by OPCo.
(c) Represents CSPCo's ownership interest in generating units
owned in common with CG&E and DP&L.
(d) Leased from the City of Fort Wayne, Indiana. Since 1975,
I&M has leased and operated the assets of the municipal
system of the City of Fort Wayne, Indiana under a 35-year
lease with a provision for an additional 15-year extension
at the election of I&M.
(e) Kanawha Valley Power Company has requested regulatory
approval to merge into APCo.
(f) The scrubber facilities at the Gavin Plant are leased. The
lease terminates in 2029 unless extended or terminated
earlier.
See Item 1 under Fuel Supply, for information concerning coal
reserves owned or controlled by subsidiaries of AEP.
The following table sets forth the total circuit miles of
transmission and distribution lines of the AEP System, APCo,
CSPCo, I&M, KEPCo and OPCo and that portion of the total
representing 765,000-volt lines:
<TABLE>
<CAPTION>
TOTAL CIRCUIT MILES
OF TRANSMISSION AND CIRCUIT MILES OF
DISTRIBUTION LINES 765,000-VOLT LINES
------------------- ------------------
<S> <C> <C>
AEP System (a) ...... 124,251(b) 2,022
APCo ................ 48,532 641
CSPCo (a) ........... 14,050 ---
I&M ................. 20,688 614
KEPCo ............... 9,854 258
OPCo ................ 28,082 509
</TABLE>
---------------<PAGE>
(a) Includes 766 miles of 345,000-volt jointly owned lines.
(b) Includes lines of other AEP System companies not shown.
TITLES
The AEP System's electric generating stations are generally
located on lands owned in fee simple. The greater portion of the
transmission and distribution lines of the System has been
constructed over lands of private owners pursuant to easements or
along public highways and streets pursuant to appropriate
statutory authority. The rights of the System in the realty on
which its facilities are located are considered by it to be
adequate for its use in the conduct of its business. Minor
defects and irregularities customarily found in title to
properties of like size and character may exist, but such defects
and irregularities do not materially impair the use of the
properties affected thereby. System companies generally have the
right of eminent domain whereby they may, if necessary, acquire,
perfect or secure titles to or easements on privately-held lands
used or to be used in their utility operations.
Substantially all the physical properties of APCo, CSPCo, I&M,
KEPCo and OPCo are subject to the lien of the mortgage and deed
of trust securing the first mortgage bonds of each such company.
SYSTEM TRANSMISSION LINES AND FACILITY SITING
Legislation in the states of Indiana, Kentucky, Michigan,
Ohio, Virginia, and West Virginia requires prior approval of
sites of generating facilities and/or routes of high-voltage
transmission lines. Delays and additional costs in constructing
facilities have been experienced as a result of proceedings
conducted pursuant to such statutes, as well as in proceedings in
which operating companies have sought to acquire rights-of-way
through condemnation, and such proceedings may result in
additional delays and costs in future years.
PEAK DEMAND
The AEP System is interconnected through 119 high-voltage
transmission interconnections with 29 neighboring electric
utility systems. The all-time and 1994 one-hour peak System
demand was 25,940,000 kilowatts (which included 7,314,000
kilowatts of scheduled deliveries to unaffiliated systems which
the System might, on appropriate notice, have elected not to
schedule for delivery) and occurred on June 17, 1994. The net
dependable capacity to serve the System load on such date,
including power available under contractual obligations, was
23,457,000 kilowatts. The all-time and 1994 one-hour internal
peak demand was 19,236,000 kilowatts and occurred on January 19,
1994. The net dependable capacity to serve the System load on
such date, including power dedicated under contractual
arrangements, was 23,995,000 kilowatts. The all-time one-hour
integrated and internal net system peak demands and 1994 peak
demands for AEP's generating subsidiaries are shown in the
following tabulation:
<TABLE>
<CAPTION>
ALL-TIME ONE-HOUR INTEGRATED 1994 ONE-HOUR INTEGRATED
NET SYSTEM PEAK DEMAND NET SYSTEM PEAK DEMAND
---------------------------- --------------------------
(IN THOUSANDS)<PAGE>
NUMBER OF NUMBER OF
KILOWATTS DATE KILOWATTS DATE
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
APCo .......... 8,203 January 19, 1994 8,203 January 19, 1994
CSPCo ......... 4,172 June 17, 1994 4,172 June 17, 1994
I&M ........... 5,027 June 17, 1994 5,027 June 17, 1994
KEPCo ......... 1,575 January 19, 1994 1,575 January 19, 1994
OPCo .......... 7,291 June 17, 1994 7,291 June 17, 1994
<CAPTION>
ALL-TIME ONE-HOUR INTEGRATED 1994 ONE-HOUR INTEGRATED
NET INTERNAL PEAK DEMAND NET INTERNAL PEAK DEMAND
---------------------------- ---------------------------
(IN THOUSANDS)
NUMBER OF NUMBER OF
KILOWATTS DATE KILOWATTS DATE
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
APCo .......... 6,887 January 19, 1994 6,887 January 19, 1994
CSPCo ......... 3,179 June 20, 1994 3,179 June 20, 1994
I&M ........... 3,605 June 16, 1994 3,605 June 16, 1994
KEPCo ......... 1,363 February 9, 1995 1,309 January 19, 1994
OPCo .......... 5,436 January 21, 1994 5,436 January 21, 1994
</TABLE>
HYDROELECTRIC PLANTS
Licenses for hydroelectric plants, issued under the Federal
Power Act, reserve to the United States the right to take over
the project at the expiration of the license term, to issue a new
license to another entity, or to relicense the project to the
existing licensee. In the event that a project is taken over by
the United States or licensed to a new licensee, the Federal
Power Act provides for payment to the existing licensee of its
"net investment" plus severance damages. Licenses for six System
hydroelectric plants expired in 1993 and applications for new
licenses for these plants were filed in 1991. The existing
licenses for these plants were extended on an annual basis and
will be renewed automatically until new licenses are issued. No
competing license applications were filed. Four new licenses were
issued in 1994.
COOK NUCLEAR PLANT
Unit 1 of the Cook Plant, which was placed in commercial
operation in 1975, has a nominal net electric rating of 1,020,000
kilowatts. Unit 1's availability factor was 71.0% during 1994
and 100% during 1993. Unit 2, of slightly different design, has
a nominal net electrical rating of 1,090,000 kilowatts and was
placed in commercial operation in 1978. Unit 2's availability
factor was 54.3% during 1994 and 96.6% during 1993. The
availability of Units 1 and 2 was affected in 1994 by outages to
refuel.
Units 1 and 2 are licensed by the NRC to operate at 100% of
rated thermal power to October 25, 2014 and December 23, 2017,
respectively.
Costs associated with the operation, maintenance and
retirement of nuclear plants have continued to increase and
become less predictable, in large part due to changing regulatory
requirements and safety standards and experience gained in the<PAGE>
construction and operation of nuclear facilities. I&M may also
incur costs and experience reduced output at its Cook Plant
because of the design criteria prevailing at the time of
construction and the age of the plant's systems and equipment.
In addition, for economic or other reasons, operation of the Cook
Plant for the full term of its now assumed life cannot be
assured. Nuclear industry-wide and Cook Plant initiatives have
contributed to slowing the growth of operating and maintenance
costs. However, the ability of I&M to obtain adequate and timely
recovery of costs associated with the Cook Plant, including
replacement power and retirement costs, is not assured.
Nuclear Incident Liability
The Price-Anderson Act limits public liability for a nuclear
incident at any licensed reactor in the United States to $8.9
billion. I&M has insurance coverage for liability from a nuclear
incident at its Cook Plant. Such coverage is provided through a
combination of private liability insurance, with the maximum
amount available of $200,000,000, and mandatory participation for
the remainder of the $8.9 billion liability, in an industry
retrospective deferred premium plan which would, in case of a
nuclear incident, assess all licensees of nuclear plants in the
U.S. Under the deferred premium plan, I&M could be assessed up
to $158,600,000 payable in annual installments of $20,000,000 in
the event of a nuclear incident at Cook or any other nuclear
plant in the U.S. There is no limit on the number of incidents
for which I&M could be assessed these sums.
I&M also has property damage, decontamination and
decommissioning insurance for loss resulting from damage to the
Cook Plant facilities in the amount of $3.6 billion. Energy
Insurance Bermuda (EIB), Nuclear Mutual Limited (NML) and Nuclear
Electric Insurance Limited (NEIL) provide $2.75 billion of
coverage and nuclear insurance pools provide the remainder. If
EIB's, NML's and NEIL's losses exceed their available resources,
I&M would be subject to a total retrospective premium assessment
of up to $34,000,000. NRC regulations require that, in the event
of an accident, whenever the estimated costs of reactor
stabilization and site decontamination exceed $100,000,000, the
insurance proceeds must be used, first, to return the reactor to,
and maintain it in, a safe and stable condition and, second, to
decontaminate the reactor and reactor station site in accordance
with a plan approved by the NRC. The insurers then would
indemnify I&M for property damage up to $3.35 billion less any
amounts used for stabilization and decontamination. The
remaining $250,000,000, as provided by NEIL (reduced by any
stabilization and decontamination expenditures over $3.35
billion), would cover decommissioning costs in excess of funds
already collected for decommissioning. See Fuel Supply --
Nuclear Waste.
NEIL's extra-expense program provides insurance to cover extra
costs resulting from a prolonged accidental outage of a nuclear
unit. I&M's policy insures against such increased costs up to
approximately $3,500,000 per week (starting 21 weeks after the
outage) for one year, $2,800,000 per week for the second and
third years, or 80% of those amounts per unit if both units are
down for the same reason. If NEIL's losses exceed its available
resources, I&M would be subject to a total retrospective premium
assessment of up to $7,900,000.
POTENTIAL UNINSURED LOSSES<PAGE>
Some potential losses or liabilities may not be insurable or
the amount of insurance carried may not be sufficient to meet
potential losses and liabilities, including liabilities relating
to damage to the Cook Plant and costs of replacement power in the
event of a nuclear incident at the Cook Plant. Future losses or
liabilities which are not completely insured, unless allowed to
be recovered through rates, could have a material adverse effect
on results of operation and the financial condition of AEP, I&M
and other AEP System companies.
Item 3. LEGAL PROCEEDINGS
-----------------------------------------------------------------
In February 1990, the Supreme Court of Indiana overturned an
order of the IURC, affirmed by the Indiana Court of Appeals,
which had awarded I&M the right to serve a General Motors
Corporation light truck manufacturing facility located in Fort
Wayne. In August 1990, the IURC issued an order transferring the
right to serve the GM facility to an unaffiliated local
distribution utility. In October 1990, the local distribution
utility sued I&M in Indiana under a provision of Indiana law that
allows the local distribution utility to seek damages equal to
the gross revenues received by a utility that renders retail
service in the designated service territory of another utility.
On November 30, 1992, the DeKalb Circuit Court granted I&M's
motion for summary judgment to dismiss the local distribution
utility's complaint. The local distribution utility has appealed
the decision to the Indiana Court of Appeals. I&M received
revenues of approximately $29,000,000 from serving the GM
facility. It is not clear whether the plaintiffs claim will be
upheld on appeal because the service was rendered in accordance
with an IURC order I&M believed in good faith to be valid.
On April 4, 1991, then Secretary of Labor Lynn Martin
announced that the U.S. Department of Labor (DOL) had issued a
total of 4,710 citations to operators of 847 coal mines who
allegedly submitted respirable dust sampling cassettes that had
been altered so as to remove a portion of the dust. The
cassettes were submitted in compliance with DOL regulations which
require systematic sampling of airborne dust in coal mines and
submission of the entire cassettes (which include filters for
collecting dust particulates) to the Mine Safety and Health
Administration (MSHA) for analysis. The amount of dust contained
on the cassette's filter determines an operator's compliance with
respirable dust standards under the law. OPCo's Meigs No. 2,
Meigs No. 31, Martinka, and Windsor Coal mines received 16, 3, 15
and 2 citations, respectively. MSHA has assessed civil penalties
totalling $56,900 for all these citations. OPCo's samples in
question involve about 1 percent of the 2,500 air samples that
OPCo submitted over a 20-month period from 1989 through 1991 to
the DOL. OPCo is contesting the citations before the Federal
Mine Safety and Health Review Commission. An administrative
hearing was held before an administrative law judge with respect
to all affected coal operators. On July 20, 1993, the
administrative law judge rendered a decision in this case holding
that the Secretary of Labor failed to establish that the presence
of a "white center" on the dust sampling filter indicated
intentional alteration. In the case of an unaffiliated mine, the
administrative law judge ruled on April 20, 1994, that there was
not an intentional alteration of the dust sampling filter. The
Secretary of Labor has appealed to the Mine Safety and Health
Review Commission the July 20, 1993 and April 20, 1994
administrative law judge decisions. All remaining cases,<PAGE>
including the citations involving OPCo's mines, have been stayed.
On October 4, 1993, I&M was served with a complaint issued by
Region V, Federal EPA which alleged violations by Breed Plant of
the Clean Water Act and proposed a penalty of $70,000, which
demand was subsequently reduced to $40,000.
On September 30, 1994, Federal EPA served APCo and Global
Power Company, an independent contractor retained by APCo, with a
complaint alleging violations of the Clean Air Act. The
complaint is based on alleged violations of the National Emission
Standard for Asbestos related to an asbestos abatement project at
APCo's Kanawha River Plant. The complaint seeks a civil
administrative penalty of $167,500. On October 27, 1994, APCo
and Global jointly filed an answer to this complaint and
requested both a formal hearing and informal settlement
conference.
On February 28, 1994, Ormet Corporation filed a complaint in
the U.S. District Court, Northern District of West Virginia,
against AEP, OPCo, the Service Corporation and two of its
employees, Federal EPA and the Administrator of Federal EPA.
Ormet is the operator of a major aluminum reduction plant in Ohio
and is a customer of OPCo. See Certain Industrial Contracts.
Pursuant to the Clean Air Act Amendments of 1990, OPCo received
sulfur dioxide emission allowances for its Kammer Plant. See
Environmental and Other Matters. Ormet's complaint seeks a
declaration that it is the owner of approximately 89% of the
Phase I and Phase II allowances issued for use by the Kammer
Plant. On May 2, 1994, AEP, OPCo and AEP Service Corporation and
its two employee defendants filed a motion seeking to dismiss the
complaint filed by Ormet Corporation. On May 2, 1994, the
Federal EPA defendants also filed a motion to dismiss. OPCo
believes that since it is the owner and operator of Kammer Plant
and Ormet is a contract power customer, Ormet is not entitled to
any of the allowances attributable to the Kammer Plant.
See Item 1 for a discussion of certain environmental and rate
matters.
Meigs Mine -- On July 11, 1993, water from an adjoining sealed
and abandoned mine owned by Southern Ohio Coal Company (SOCCo), a
mining subsidiary of OPCo, entered Meigs 31 mine, one of two
mines currently being operated by SOCCo. Ohio EPA approved a
plan to pump water from the mine to certain Ohio River
tributaries under stringent conditions for biological and water
quality monitoring and restoring the streams after pumping. On
July 30, pumping commenced in accordance with the Ohio EPA
approved plan and, after all water was removed from the mine, the
mine was returned to service in February 1994.
In April 1994, the U.S. Court of Appeals for the Sixth Circuit
reversed the judgement of the U.S. District Court for the
Southern District of Ohio which had granted a preliminary
injunction to SOCCo preventing Federal EPA and the Federal Office
of Surface Mining, Reclamation and Enforcement (OSM) from
interfering with the removal of water from SOCCo's Meigs 31 mine.
The West Virginia Division of Environmental Protection (West
Virginia DEP) had proposed fining SOCCo $1,800,000 for violations
of West Virginia Water Quality Standards and permitting
requirements alleged to have resulted from the release of mine
water into the Ohio River. As a result of the West Virginia DEP<PAGE>
proposing to fine SOCCo, SOCCo filed an action on June 1, 1994 in
the U.S. District Court for the Southern District of West
Virginia seeking a determination that the state of West Virginia
has no jurisdiction to impose penalties with respect to the mine
water discharges. On July 27, 1994, West Virginia filed an
answer to SOCCo's complaint disputing SOCCo's entitlement to a
declaratory judgement and asserting a counterclaim seeking an
award of $2,550,000 in civil penalties, reimbursement of
monitoring costs and compensation for unspecified natural
resources damage. On October 27, 1994, SOCCo filed a motion for
summary judgement or alternatively to dismiss West Virginia's
counterclaim.
SOCCo is currently negotiating a resolution of federal and
West Virginia claims. The resolution of these legal actions is
not expected to have a material adverse impact on results of
operations.
Kammer Plant -- In August 1994, Federal EPA issued a Notice of
Violation (NOV) to OPCo alleging that its Kammer Plant has been
operating in violation of applicable federally enforceable air
pollution control requirements for sulfur dioxide since January
1, 1989. The Clean Air Act provides that Federal EPA may
commence a civil action for injunctive relief and/or civil
penalties of up to $25,000 per day for each day of violation. On
November 15, 1994, a civil complaint containing the allegations
included in the NOV was filed by Federal EPA against OPCo in the
U.S. District Court for the Northern District of West Virginia.
At that time, a consent decree entered into by Federal EPA and
OPCo specifying compliance by the Kammer Plant with the federally
enforceable sulfur dioxide emission limit by September 1, 1995
was lodged with the court. On January 23, 1995, the consent
decree was entered by the court.
The portion of the NOV relating to penalties will be addressed
independently. At this time, management is unable to estimate
the amount of any civil penalties that may be imposed by Federal
EPA. It is not anticipated that the ultimate resolution of this
matter will have a material adverse impact on results of
operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------------
AEP, APCO, I&M AND OPCO. None.
AEGCO, CSPCO AND KEPCO. Omitted pursuant to Instruction
J(2)(c).
--------------------
EXECUTIVE OFFICERS OF THE REGISTRANTS
AEP
The following persons are, or may be deemed, executive
officers of AEP. Their ages are given as of March 15, 1995.
<TABLE>
<CAPTION>
NAME AGE OFFICE (A)
------ --- ------------
<C> <C> <S>
E. Linn Draper, Jr. ... 53 Chairman of the Board, President and Chief<PAGE>
Executive Officer of AEP and of the Service
Corporation
Peter J. DeMaria ...... 60 Treasurer of AEP; Executive Vice President-
Administration and Chief Accounting Officer of
the Service Corporation
William J. Lhota ...... 55 Executive Vice President of the Service
Corporation
Charles A. Ebetino, Jr. 42 Senior Vice President-Fuel Supply of the Service
Corporation
Gerald P. Maloney ..... 62 Vice President and Secretary of AEP; Executive
Vice President-Chief Financial Officer of the
Service Corporation
James J. Markowsky .... 50 Executive Vice President-Engineering &
Construction of the Service Corporation
</TABLE>
----------
(a) All of the executive officers listed above have been
employed by the Service Corporation or System companies in
various capacities (AEP, as such, has no employees) during
the past five years, except E. Linn Draper, Jr. who was
Chairman of the Board, President and Chief Executive Officer
of Gulf States Utilities Company from 1987 until 1992 when
he joined AEP and the Service Corporation. All of the above
officers are appointed annually for a one-year term by the
board of directors of AEP, the board of directors of the
Service Corporation, or both, as the case may be.
APCO
The names of the executive officers of APCo, the positions
they hold with APCo, their ages as of March 15, 1995, and a brief
account of their business experience during the past five years
appears below. The directors and executive officers of APCo are
elected annually to serve a one-year term.
<TABLE>
<CAPTION>
NAME AGE POSITION (A) PERIOD
------ --- ------------ ------
<C> <C> <S> <C>
E. Linn Draper, Jr. ... 53 Director 1992-Present
Chairman of the Board and Chief
Executive Officer 1993-Present
Vice President 1992-1993
Chairman of the Board, President
and Chief Executive Officer of
AEP and the Service Corporation 1993-Present
President of AEP 1992-1993
President and Chief Operating
Officer of the Service
Corporation 1992-1993
Chairman of the Board, President
and Chief Executive Officer of
Gulf States Utilities Company 1987-1992
Joseph H. Vipperman ... 54 Director 1985-Present
President and Chief Operating
Officer 1990-Present
Executive Vice President 1989-1990
Peter J. DeMaria ...... 60 Director 1988-Present
Vice President 1991-Present
Treasurer 1978-Present
Treasurer of AEP 1978-Present
Executive Vice President-<PAGE>
Administration and Chief
Accounting Officer of the
Service Corporation 1984-Present
Treasurer of the Service
Corporation 1989-1990
William J. Lhota 55 Director 1990-Present
Vice President 1989-Present
Executive Vice President of
the Service Corporation 1993-Present
Executive Vice President-
Operations of the Service
Corporation 1989-1993
Gerald P. Maloney ..... 62 Director and Vice President 1970-Present
Vice President of AEP 1974-Present
Secretary of AEP 1994-Present
Executive Vice President-Chief
Financial Officer of the
Service Corporation 1991-Present
Senior Vice President-Finance of
the Service Corporation 1974-1990
James J. Markowsky .... 50 Director 1993-Present
Executive Vice President-
Engineering and Construction
of the Service Corporation 1993-Present
Senior Vice President and Chief
Engineer of the Service
Corporation 1988-1993
Charles A. Ebetino, Jr. 42 Senior Vice President-Fuel Supply
of the Service Corporation 1993-Present
Vice President-Fuel Procurement
and Transportation of the
Service Corporation 1990-1993
Managing Director-Coal Procurement
of the Service Corporation 1986-1990
</TABLE>
---------------
(a) Positions are with APCo unless otherwise indicated.
OPCO
The names of the executive officers of OPCo, the positions
they hold with OPCo, their ages as of March 15, 1995, and a brief
account of their business experience during the past five years
appear below. The directors and executive officers of OPCo are
elected annually to serve a one-year term.
<TABLE>
<CAPTION>
NAME AGE POSITION (A) PERIOD
------ --- ------------ ------
<C> <C> <S> <C>
E. Linn Draper, Jr. ... 53 Director 1992-Present
Chairman of the Board and Chief
Executive Officer 1993-Present
Vice President 1992-1993
Chairman of the Board, President
and Chief Executive Officer of
AEP and the Service Corporation 1993-Present
President of AEP 1992-1993
President and Chief Operating
Officer of the Service
Corporation 1992-1993
Chairman of the Board, President<PAGE>
and Chief Executive Officer of
Gulf States Utilities Company 1987-1992
Carl A. Erikson ....... 44 Director, President and Chief
Operating Officer 1993-Present
Vice President 1990-1992
President and Chief Operating
Officer of CSPCo 1993-Present
Vice President of the Service
Corporation and Executive
Assistant to E. Linn Draper, Jr. 1992-1994
Assistant to Executive Vice
President-Operations of the
Service Corporation 1989-1990
Peter J. DeMaria ...... 60 Director and Treasurer 1978-Present
Vice President 1991-Present
Treasurer of AEP 1978-Present
Executive Vice President-
Administration and Chief
Accounting Officer of the
Service Corporation 1984-Present
Treasurer of the Service
Corporation 1989-1990
William J. Lhota ...... 55 Director and Vice President 1989-Present
Executive Vice President of the
Service Corporation 1993-Present
Executive Vice President-
Operations of the Service
Corporation 1989-1993
Gerald P. Maloney ..... 62 Director 1973-Present
Vice President 1970-Present
Vice President of AEP 1974-Present
Secretary of AEP 1994-Present
Executive Vice President-Chief
Financial Officer of the
Service Corporation 1991-Present
Senior Vice President-Finance of
the Service Corporation 1974-1990
James J. Markowsky .... 50 Director 1989-Present
Executive Vice President-
Engineering and Construction
of the Service Corporation 1993-Present
Senior Vice President and Chief
Engineer of the Service
Corporation 1988-1993
Charles A. Ebetino, Jr. 42 Senior Vice President-Fuel Supply
of the Service Corporation 1993-Present
Vice President-Fuel Procurement
and Transportation of the
Service Corporation 1990-1993
Managing Director-Coal Procurement
of the Service Corporation 1986-1990
</TABLE>
---------------
(a) Positions are with OPCo unless otherwise indicated.<PAGE>
PART II ---------------------------------------------------------
Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
-----------------------------------------------------------------
AEP. AEP Common Stock is traded principally on the New York
Stock Exchange. The following table sets forth for the calendar
periods indicated the high and low sales prices for the Common
Stock as reported on the New York Stock Exchange Composite Tape
and the amount of cash dividends paid per share of Common Stock.
<TABLE>
<CAPTION>
PER SHARE
-----------------
MARKET PRICE
-----------------
QUARTER ENDED HIGH LOW DIVIDEND(1)
------------- -------- ------- -----------
<S> <C> <C> <C>
March 1993 ............ $37 $32 $.60
June 1993 ............. 38-1/2 33-3/8 .60
September 1993 ........ 40-3/8 37-1/4 .60
December 1993 ......... 39-5/8 34-5/8 .60
March 1994 ............ 37-3/8 29-7/8 .60
June 1994 ............. 32-7/8 27-1/4 .60
September 1994 ........ 31-3/4 28 .60
December 1994 ......... 33-5/8 30-1/8 .60
</TABLE>
---------------
(1) See Note 5 of the Notes to the Consolidated Financial
Statements of AEP for information regarding restrictions on
payment of dividends.
At December 31, 1994, AEP had approximately 183,000
shareholders of record.
AEGCO, APCO, CSPCO, I&M, KEPCO AND OPCO. The information
required by this item is not applicable as the common stock of
all these companies is held solely by AEP.
Item 6. SELECTED FINANCIAL DATA
-----------------------------------------------------------------
AEGCO. Omitted pursuant to Instruction J(2)(a).
AEP. The information required by this item is incorporated
herein by reference to the material under Selected Consolidated
Financial Data in the AEP 1994 Annual Report (for the fiscal year
ended December 31, 1994).
APCO. The information required by this item is incorporated
herein by reference to the material under Selected Consolidated
Financial Data in the APCo 1994 Annual Report (for the fiscal
year ended December 31, 1994).
CSPCO. Omitted pursuant to Instruction J(2)(a).
I&M. The information required by this item is incorporated
herein by reference to the material under Selected Consolidated
Financial Data in the I&M 1994 Annual Report (for the fiscal year
ended December 31, 1994).<PAGE>
KEPCO. Omitted pursuant to Instruction J(2)(a).
OPCO. The information required by this item is incorporated
herein by reference to the material under Selected Consolidated
Financial Data in the OPCo 1994 Annual Report (for the fiscal
year ended December 31, 1994).
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
-----------------------------------------------------------------
AEGCO. Omitted pursuant to Instruction J(2)(a). Management's
narrative analysis of the results of operations and other
information required by Instruction J(2)(a) is incorporated
herein by reference to the material under Management's Narrative
Analysis of Results of Operations in the AEGCo 1994 Annual Report
(for the fiscal year ended December 31, 1994).
AEP. The information required by this item is incorporated
herein by reference to the material under Management's Discussion
and Analysis of Results of Operations and Financial Condition in
the AEP 1994 Annual Report (for the fiscal year ended December
31, 1994).
APCO. The information required by this item is incorporated
herein by reference to the material under Management's Discussion
and Analysis of Results of Operations and Financial Condition in
the APCo 1994 Annual Report (for the fiscal year ended December
31, 1994).
CSPCO. Omitted pursuant to Instruction J(2)(a). Management's
narrative analysis of the results of operations and other
information required by Instruction J(2)(a) is incorporated
herein by reference to the material under Management's Narrative
Analysis of Results of Operations in the CSPCo 1994 Annual Report
(for the fiscal year ended December 31, 1994).
I&M. The information required by this item is incorporated
herein by reference to the material under Management's Discussion
and Analysis of Results of Operations and Financial Condition in
the I&M 1994 Annual Report (for the fiscal year ended December
31, 1994).
KEPCO. Omitted pursuant to Instruction J(2)(a). Management's
narrative analysis of the results of operations and other
information required by Instruction J(2)(a) is incorporated
herein by reference to the material under Management's Narrative
Analysis of Results of Operations in the KEPCo 1994 Annual Report
(for the fiscal year ended December 31, 1994).
OPCO. The information required by this item is incorporated
herein by reference to the material under Management's Discussion
and Analysis of Results of Operations and Financial Condition in
the OPCo 1994 Annual Report (for the fiscal year ended December
31, 1994).
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-----------------------------------------------------------------
AEGCO. The information required by this item is incorporated
herein by reference to the financial statements and supplementary
data described under Item 14 herein.<PAGE>
AEP. The information required by this item is incorporated
herein by reference to the financial statements and supplementary
data described under Item 14 herein.
APCO. The information required by this item is incorporated
herein by reference to the financial statements and supplementary
data described under Item 14 herein.
CSPCO. The information required by this item is incorporated
herein by reference to the financial statements and supplementary
data described under Item 14 herein.
I&M. The information required by this item is incorporated
herein by reference to the financial statements and supplementary
data described under Item 14 herein.
KEPCO. The information required by this item is incorporated
herein by reference to the financial statements and supplementary
data described under Item 14 herein.
OPCO. The information required by this item is incorporated
herein by reference to the financial statements and supplementary
data described under Item 14 herein.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------------------------------------
AEGCO, AEP, APCO, CSPCO, I&M, KEPCO AND OPCO. None.<PAGE>
<PAGE>
PART III --------------------------------------------------------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
-----------------------------------------------------------------
AEGCO. Omitted pursuant to Instruction J(2)(c).
AEP. The information required by this item is incorporated
herein by reference to the material under Nominees for Director
and Share Ownership of Directors and Executive Officers of the
definitive proxy statement of AEP, dated March 9, 1995, for the
1995 annual meeting of shareholders. Reference also is made to
the information under the caption Executive Officers of the
Registrants in Part I of this report.
APCO. The information required by this item is incorporated
herein by reference to the material under Election of Directors
of the definitive information statement of APCo for the 1995
annual meeting of stockholders, to be filed within 120 days after
December 31, 1994. Reference also is made to the information
under the caption Executive Officers of the Registrants in Part I
of this report.
CSPCO. Omitted pursuant to Instruction J(2)(c).
I&M. The names of the directors and executive officers of
I&M, the positions they hold with I&M, their ages as of March 15,
1995, and a brief account of their business experience during the
past five years appear below. The directors and executive
officers of I&M are elected annually to serve a one-year term.
<TABLE>
<CAPTION>
NAME AGE POSITION (A)(B)(C) PERIOD
------ --- ------------------ ----------
<C> <C> <S> <C>
E. Linn Draper, Jr. ... 53 Director 1992-Present
Chairman of the Board and Chief
Executive Officer 1993-Present
Vice President 1992-1993
Chairman of the Board, President
and Chief Executive Officer of
AEP and of the Service
Corporation 1993-Present
President of AEP 1992-1993
President and Chief Operating
Officer of the Service
Corporation 1992-1993
Chairman of the Board, President
and Chief Executive Officer of
Gulf States Utilities Company 1987-1992
Richard C. Menge ...... 59 Director 1976-Present
President and Chief Operating
Officer 1989-Present
Mark A. Bailey ........ 42 Director and Vice President 1989-Present
Peter J. DeMaria ...... 60 Director 1992-Present
Vice President 1991-Present
Treasurer 1978-Present
Treasurer of AEP 1978-Present
Executive Vice President-
Administration and Chief<PAGE>
Accounting Officer of the
Service Corporation 1984-Present
Treasurer of the Service
Corporation 1989-1990
William N. D'Onofrio .. 47 Director and Vice President 1984-Present
William J. Lhota ...... 55 Director and Vice President 1989-Present
Executive Vice President of the
Service Corporation 1993-Present
Executive Vice President-
Operations of the Service
Corporation 1989-1993
Gerald P. Maloney ..... 62 Director 1978-Present
Vice President 1970-Present
Vice President of AEP 1974-Present
Secretary of AEP 1994-Present
Executive Vice President-Chief
Financial Officer of the
Service Corporation 1991-Present
Senior Vice President-Finance of
the Service Corporation 1974-1990
James J. Markowsky ... 50 Director 1995-Present
Vice President 1993-Present
Executive Vice President-
Engineering & Construction of
the Service Corporation 1993-Present
Senior Vice President and Chief
Engineer of the Service
Corporation 1988-1993
A. H. Potter .......... 47 Director 1994-Present
Transmission and Distribution
Director 1987-Present
D. M. Trenary ......... 58 Director 1994-Present
Indiana Region Manager 1994-Present
Division Manager 1989-1994
W. E. Walters ......... 47 Director 1991-Present
Michiana Region Manager 1994-Present
Executive Assistant to President 1987-1994
Charles A. Ebetino, Jr. 42 Senior Vice President-Fuel Supply
of the Service Corporation 1993-Present
Vice President-Fuel Procurement
& Transportation of the
Service Corporation 1990-1993
Managing Director-Coal Procurement
of the Service Corporation 1986-1990
</TABLE>
(a) Positions are with I&M unless otherwise indicated.
(b) Dr. Draper is a director of VECTRA Technologies, Inc., Mr.
Lhota is a director of Huntington Bancshares Incorporated
and Mr. Menge is a director of Fort Wayne National
Corporation.
(c) Drs. Draper and Markowsky and Messrs. DeMaria, Lhota and
Maloney are directors of AEGCo, APCo, CSPCo, KEPCo and OPCo.
Dr. Draper and Messrs. DeMaria and Maloney are also
directors of AEP.
KEPCO. Omitted pursuant to Instruction J(2)(c).
OPCO. The information required by this item is incorporated
herein by reference to the material under the heading Election of
Directors of the definitive information statement of OPCo for the
1995 annual meeting of shareholders, to be filed within 120 days
after December 31, 1994. Reference also is made to the
information under the caption Executive Officers of the<PAGE>
Registrants in Part I of this report.
Item 11. EXECUTIVE COMPENSATION
-----------------------------------------------------------------
AEGCO. Omitted pursuant to Instruction J(2)(c).
AEP. The information required by this item is incorporated
herein by reference to the material under Compensation of
Directors, Executive Compensation and the performance graph of
the definitive proxy statement of AEP, dated March 9, 1995, for
the 1995 annual meeting of shareholders.
APCO. The information required by this item is incorporated
herein by reference to the material under Executive Compensation
of the definitive information statement of APCo for the 1995
annual meeting of stockholders, to be filed within 120 days after
December 31, 1994.
CSPCO. Omitted pursuant to Instruction J(2)(c).
KEPCO. Omitted pursuant to Instruction J(2)(c).<PAGE>
OPCO. The information required by this item is incorporated
herein by reference to the material under Executive Compensation
of the definitive information statement of OPCo for the 1995
annual meeting of shareholders, to be filed within 120 days after
December 31, 1994.
I&M. Certain executive officers of I&M are employees of the
Service Corporation. The salaries of these executive officers
are paid by the Service Corporation and a portion of their
salaries has been allocated and charged to I&M. The following
table shows for 1994, 1993 and 1992 the compensation earned from
all AEP System companies by the chief executive officer and four
other most highly compensated executive officers (as defined by
regulations of the SEC) of I&M at December 31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
___________________ __________________
PAYOUTS ALL OTHER
SALARY BONUS ------------------ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) LTIP PAYOUTS($)(2) ($)(3)
--------------------------- ---- ------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
E. LINN DRAPER, JR. -- chairman of the board and 1994 620,000 209,436 137,362 29,385
and chief executive officer of I&M; chairman of 1993 538,333 148,742 18,180
the board, president and chief executive officer 1992 395,833 8,730 63,700
of AEP and the Service Corporation; chairman
and chief executive officer of other AEP System
subsidiaries
PETER J. DEMARIA -- vice president, treasurer and 1994 305,000 103,029 59,032 18,750
director of I&M; treasurer and director of AEP; 1993 280,000 77,364 17,811
executive vice president -- administration and 1992 273,000 6,021 15,576
chief accounting officer and director of the
Service Corporation; vice president, treasurer
and director of other AEP System subsidiaries
G. P. MALONEY -- vice president and director of 1994 300,000 101,340 58,094 19,745
I&M; vice president, secretary and director of 1993 269,000 74,325 18,000
AEP; executive vice president -- chief financial 1992 261,000 5,757 17,036
officer and director of the Service Corporation;
vice president and director of other AEP System
subsidiaries
WILLIAM J. LHOTA -- vice president and director of 1994 280,000 94,584 54,409 19,185
I&M; executive vice president and director of the 1993 249,000 68,799 17,160
Service Corporation; vice president and director 1992 230,000 5,073 15,116
of other AEP System subsidiaries
JAMES J. MARKOWSKY -- vice president and director 1994 267,000 90,193 51,930 14,755
of I&M; executive vice president -- engineering 1993 247,000 65,259 11,165
and construction and director of the Service 1992 219,000 4,497 7,020
Corporation; vice president and director of
other AEP System subsidiaries
</TABLE>
---------------
(1) Reflects payments under the Management Incentive
Compensation Plan (MICP). Amounts for 1994 are estimates
but should not change significantly. For 1994 and 1993,
these amounts include both cash paid and a portion deferred
in the form of restricted stock units. These units are paid
out in cash after three years based on the price of AEP
Common Stock at that time. Dividend equivalents are paid<PAGE>
during the three-year period. At December 31, 1994, the
deferred amounts (included in the above table) and accrued
dividends for Dr. Draper, Messrs. DeMaria, Maloney and Lhota
and Dr. Markowsky were equivalent to 2,204, 1,109, 1,080,
1,004 and 956 units having values of $72,456, $36,458,
$35,505, $33,006 and $31,428, respectively, based upon a
$32-7/8 per share closing price of AEP's Common Stock as
reported on the New York Stock Exchange. For 1992, MICP
payments were made entirely in cash.
(2) Reflects payments under the Performance Share Incentive Plan
(which became effective January 1, 1994) for the one-year
transition performance period ending December 31, 1994. Dr.
Draper, Messrs. DeMaria, Maloney and Lhota and Dr. Markowsky
received 2,050, 881, 867, 812 and 775 shares of AEP Common
Stock, respectively, representing one-half of their
payments. See the discussion below for additional
information.
(3) For 1994, includes (i) employer matching contributions under
the AEP System Employees Savings Plan: $4,500 for each of
the named executive officers; (ii) employer matching
contributions under the AEP System Supplemental Savings Plan
(which became effective January 1, 1994), a non-qualified
plan designed to supplement the AEP Savings Plan: Dr.
Draper, $14,100; Mr. DeMaria, $4,650; Mr. Maloney, $4,500;
Mr. Lhota, $3,900; and Dr. Markowsky, $3,510; and (iii)
subsidiary companies director fees: Dr. Draper, $10,785;
Mr. DeMaria, $9,600; Mr. Maloney, $10,745; Mr. Lhota,
$10,785; and Dr. Markowsky, $6,745.
Long-Term Incentive Plans -- Awards In 1994
Each of the awards set forth below constitutes a grant of
performance share units, which represent units equivalent to
shares of AEP Common Stock, pursuant to AEP's Performance Share
Incentive Plan. Since it is not possible to predict future
dividends and the price of AEP Common Stock, credits of
performance share units in amounts equal to the dividends that
would have been paid if the performance share units were granted
in the form of shares of AEP Common Stock are not included in the
table.
The ability to earn performance share units is tied to
achieving specified levels of total shareowner return (TSR)
relative to the S&P Electric Utility Index. Notwithstanding AEP's
TSR ranking, no performance share units are earned unless AEP
shareowners realize a positive TSR over the relevant three-year
performance period. The Human Resources Committee may, at its
discretion, reduce the number of performance share units
otherwise earned. In accordance with the performance goals
established for the periods set forth below, the threshold,
target and maximum awards are equal to 25%, 100% and 200%,
respectively, of the performance share units held. No payment
will be made for performance below the threshold.
Payment of awards earned for the one-year transition
performance period ending December 31, 1994 were made 50% in cash
and 50% in AEP Common Stock. For subsequent performance periods,
payments of earned awards are deferred in the form of restricted
stock units (equivalent to shares of AEP Common Stock) until the
officer has met the equivalent stock ownership target. Once
officers meet and maintain their respective targets, they may
elect either to continue to defer or to receive further earned
awards in cash and/or AEP Common Stock.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS OF
PERFORMANCE SHARE UNITS UNDER
PERFORMANCE NON-STOCK PRICE-BASED PLAN
NUMBER OF PERIOD UNTIL -----------------------------
PERFORMANCE MATURATION THRESHOLD TARGET MAXIMUM
NAME SHARE UNITS OR PAYOUT (#) (#) (#)
---------------------- ----------- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C>
E. L. Draper, Jr. .... 2,235 1994 (1) (1) (1)
4,470 1994-1995 1,118 4,470 8,940
6,705 1994-1996 1,676 6,705 13,410
P. J. DeMaria ......... 960 1994 (1) (1) (1)
1,920 1994-1995 480 1,920 3,840
2,885 1994-1996 721 2,885 5,770
G. P. Maloney ......... 945 1994 (1) (1) (1)
1,890 1994-1995 473 1,890 3,780
2,840 1994-1996 710 2,840 5,680
W. J. Lhota ........... 885 1994 (1) (1) (1)
1,770 1994-1995 443 1,770 3,540
2,650 1994-1996 663 2,650 5,300
J. J. Markowsky ....... 845 1994 (1) (1) (1)
1,690 1994-1995 423 1,690 3,380
2,525 1994-1996 631 2,525 5,050
</TABLE>
---------------
(1) For the 1994 transition performance period, the actual
number of performance share units earned was: Dr. Draper
4,100; Mr. DeMaria 1,761; Mr. Maloney 1,734; Mr. Lhota
1,624; and Dr. Markowsky 1,550 (see Summary Compensation
Table for the cash value of these payouts).
Retirement Benefits
The American Electric Power System Retirement Plan provides
pensions for all employees of AEP System companies (except for
employees covered by certain collective bargaining agreements),
including the executive officers of I&M. The Retirement Plan is
a noncontributory defined benefit plan.
The following table shows the approximate annual annuities
under the Retirement Plan that would be payable to employees in
certain higher salary classifications, assuming retirement at age
65 after various periods of service. The amounts shown in the
table are the straight life annuities payable under the Plan
without reduction for the joint and survivor annuity. Retirement
benefits listed in the table are not subject to any deduction for
Social Security or other offset amounts. The retirement annuity
is reduced 3% per year in the case of retirement between ages 60
and 62 and further reduced 6% per year in the case of retirement
between ages 55 and 60. If an employee retires after age 62,
there is no reduction in the retirement annuity.
Pension Plan Table
<TABLE>
<CAPTION>
YEARS OF ACCREDITED SERVICE
HIGHEST AVERAGE --------------------------------------------------------------
ANNUAL EARNINGS 15 20 25 30 35 40<PAGE>
--------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$250,000 ...... $ 58,065 $ 77,420 $ 96,775 $116,130 $135,485 $152,110
350,000 ...... 82,065 109,420 136,775 164,130 191,485 214,760
450,000 ...... 106,065 141,720 176,775 212,130 247,485 277,410
600,000 ...... 142,065 189,420 236,775 284,130 331,485 371,385
750,000 ...... 178,065 237,420 296,775 356,130 415,485 465,360
</TABLE>
Compensation upon which retirement benefits are
based consists of the average of the 36 consecutive months of the
employee's highest salary, as listed in the Summary Compensation
Table, out of the employee's most recent 10 years of service.
As of December 31, 1994, the number of full years of service
credited under the Retirement Plan to each of the executive
officers of the Company named in the Summary Compensation Table
were as follows: Dr. Draper, two years; Mr. DeMaria, 35 years;
Mr. Maloney, 39 years; Mr. Lhota, 30 years; and Dr. Markowsky,
23 years.
Dr. Draper's employment agreement described below provides him
with a supplemental retirement annuity that credits him with 24
years of service in addition to his years of service credited
under the Retirement Plan less his actual pension entitlement
under the Retirement Plan and any pension entitlements from prior
employers.
AEP has determined to pay supplemental retirement benefits to
23 AEP System employees (including Messrs. DeMaria, Maloney and
Lhota and Dr. Markowsky) whose pensions may be adversely affected
by amendments to the Retirement Plan made as a result of the Tax
Reform Act of 1986. Such payments, if any, will be equal to any
reduction occurring because of such amendments. Assuming
retirement in 1995 of the executive officers named in the Summary
Compensation Table, none would be eligible to receive
supplemental benefits.
AEP made available a voluntary deferred-compensation program
in 1982 and 1986, which permitted certain executive employees of
AEP System companies to defer receipt of a portion of their
salaries. Under this program, an executive was able to defer up
to 10% or 15% annually (depending on the terms of the program
offered), over a four-year period, of his or her salary, and
receive supplemental retirement or survivor benefit payments over
a 15-year period. The amount of supplemental retirement payments
received is dependent upon the amount deferred, age at the time
the deferral election was made, and number of years until the
executive retires. The following table sets forth, for the
executive officers named in the Summary Compensation Table, the
amounts of annual deferrals and, assuming retirement at age 65,
annual supplemental retirement payments under the 1982 and 1986
programs.
<TABLE>
<CAPTION>
1982 PROGRAM 1986 PROGRAM
--------------------------- --------------------------
ANNUAL ANNUAL AMOUNT OF ANNUAL ANNUAL AMOUNT OF
AMOUNT SUPPLEMENTAL AMOUNT SUPPLEMENTAL
DEFERRED RETIREMENT DEFERRED RETIREMENT
(4-YEAR PAYMENT (4-YEAR PAYMENT
NAME PERIOD) (15-YEAR PERIOD) PERIOD) (15-YEAR PERIOD)<PAGE>
---- -------- ---------------- -------- ----------------
<S> <C> <C> <C> <C>
P. J. DeMaria ...... $10,000 $52,000 $13,000 $53,300
G. P. Maloney ...... 15,000 67,500 16,000 56,400
</TABLE>
Employment Agreement
Dr. Draper has a contract with AEP and the Service Corporation
which provides for his employment for an initial term from no
later than March 15, 1992 until March 15, 1997. Dr. Draper
commenced his employment with AEP and the Service Corporation on
March 1, 1992. AEP or the Service Corporation may terminate the
contract at any time and, if this is done for reasons other than
cause and other than as a result of Dr. Draper's death or
permanent disability, the Service Corporation must pay Dr.
Draper's then base salary through March 15, 1997, less any
amounts received by Dr. Draper from other employment.
---------------
Directors of I&M receive a fee of $100 for each meeting of the
Board of Directors attended in addition to their salaries.
---------------
The AEP System is an integrated electric utility system and,
as a result, the member companies of the AEP System have
contractual, financial and other business relationships with the
other member companies, such as participation in the AEP System
savings and retirement plans and tax returns, sales of
electricity, transportation and handling of fuel, sales or
rentals of property and interest or dividend payments on the
securities held by the companies' respective parents.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
-----------------------------------------------------------------
AEGCO. Omitted pursuant to Instruction J(2)(c).
AEP. The information required by this item is incorporated
herein by reference to the material under Share Ownership of
Directors and Executive Officers of the definitive proxy
statement of AEP, dated March 9, 1995, for the 1995 annual
meeting of shareholders.
APCO. The information required by this item is incorporated
herein by reference to the material under Share Ownership of
Directors and Executive Officers in the definitive information
statement of APCo for the 1995 annual meeting of stockholders, to
be filed within 120 days after December 31, 1994.
CSPCO. Omitted pursuant to Instruction J(2)(c).
I&M. All 1,400,000 outstanding shares of Common Stock, no par
value, of I&M are directly and beneficially held by AEP. Holders
of the Cumulative Preferred Stock of I&M generally have no voting
rights, except with respect to certain corporate actions and in
the event of certain defaults in the payment of dividends on such
shares.
The table below shows the number of shares of AEP Common Stock<PAGE>
that were beneficially owned, directly or indirectly, as of
December 31, 1994, by each director and nominee of I&M and each
of the executive officers of I&M named in the summary
compensation table, and by all directors and executive officers
of I&M as a group. It is based on information provided to I&M by
such persons. No such person owns any shares of any series of the
Cumulative Preferred Stock of I&M. Unless otherwise noted, each
person has sole voting power and investment power over the number
of shares of AEP Common Stock set forth opposite his name.
Fractions of shares have been rounded to the nearest whole share.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP (A)
------------------------
<S> <C>
Mark A. Bailey ............ 1,050
Peter J. DeMaria .......... 6,105(b)(c)
William N. D'Onofrio ...... 3,811(b)
E. Linn Draper, Jr. ....... 1,492(b)
William J. Lhota .......... 7,414(b)(c)
Gerald P. Maloney ......... 4,249(b)(c)
James J. Markowsky ........ 4,861(b)
Richard C. Menge .......... 3,011(b)
A. H. Potter .............. 2,795(b)
D. M. Trenary ............. 206
W. E. Walters ............. 4,242
All directors and executive
officers as a group
(12 persons) ............ 127,621(c)(d)
</TABLE>
---------------
(a) The amounts include shares held by the trustee of the AEP
Employees Savings Plan, over which directors, nominees and
executive officers have voting power, but the
investment/disposition power is subject to the terms of such
Plan, as follows: Mr. Bailey, 1,005 shares; Mr. DeMaria,
2,398 shares; Mr. D'Onofrio, 3,251 shares; Mr. Lhota, 5,986
shares; Mr. Maloney, 2,464 shares; Mr. Menge, 2,925 shares;
Mr. Potter, 2,741 shares; Mr. Trenary, 165 shares; Mr.
Walters, 4,197 shares; and all directors and executive
officers as a group, 33,608 shares. Messrs. Bailey's,
DeMaria's, D'Onofrio's, Lhota's, Maloney's, Menge's,
Potter's, Trenary's and Walter's holdings include 44, 83,
59, 60, 85, 62, 41, 41 and 45 shares, respectively; and the
holdings of all directors and executive officers as a group
include 633 shares, each held by the trustee of the AEP
Employee Stock Ownership Plan, over which shares such
persons have sole voting power, but the
investment/disposition power is subject to the terms of such
Plan.
(b) Includes shares with respect to which such directors,
nominees and executive officers share voting and investment
power as follows: Mr. DeMaria, 3,624 shares; Mr. D'Onofrio,
500 shares; Dr. Draper, 124 shares; Mr. Lhota, 1,368 shares;
Mr. Maloney, 1,700 shares; Mr. Menge, 24 shares; and Mr.
Potter, 13 shares; and all directors and executive officers
as a group, 4,956 shares. Mr. DeMaria disclaims beneficial
ownership of 2,392 shares.
(c) 85,231 shares in the American Electric Power System
Educational Trust Fund, over which Messrs. DeMaria, Lhota
and Maloney share voting and investment power as trustees<PAGE>
(they disclaim beneficial ownership of such shares), are not
included in their individual totals, but are included in the
group total.
(d) Represents less than 1 percent of the total number of shares
outstanding on December 31, 1994.
KEPCO. Omitted pursuant to Instruction J(2)(c).
OPCO. The information required by this item is incorporated
herein by reference to the material under Share Ownership of
Directors and Executive Officers in the definitive information
statement of OPCo for the 1995 annual meeting of shareholders, to
be filed within 120 days after December 31, 1994.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-----------------------------------------------------------------
AEP. The information required by this item is incorporated
herein by reference to the material under Transactions With
Management of the definitive proxy statement of AEP, dated March
9, 1995, for the 1995 annual meeting of shareholders.
APCO, I&M AND OPCO. None.
AEGCO, CSPCO, AND KEPCO. Omitted pursuant to Instruction
J(2)(c).<PAGE>
<PAGE>
PART IV --------------------------------------------------------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
-----------------------------------------------------------------
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
<S> <C>
1. Financial Statements: PAGE
----
The following financial statements have been incorporated herein by
reference pursuant to Item 8.
AEGCo:
Independent Auditors' Report; Statements of Income for the years
ended December 31, 1994, 1993 and 1992; Statements of Retained
Earnings for the years ended December 31, 1994, 1993 and 1992;
Statements of Cash Flows for the years ended December 31, 1994,
1993 and 1992; Balance Sheets as of December 31, 1994 and 1993;
Notes to Financial Statements.
AEP and its subsidiaries consolidated:
Consolidated Statements of Income for the years ended December 31,
1994, 1993 and 1992; Consolidated Statements of Retained
Earnings for the years ended December 31, 1994, 1993 and 1992;
Consolidated Balance Sheets as of December 31, 1994 and 1993;
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992; Notes to Consolidated
Financial Statements; Schedule of Consolidated Cumulative
Preferred Stocks of Subsidiaries at December 31, 1994 and 1993;
Schedule of Consolidated Long-term Debt of Subsidiaries at
December 31, 1994 and 1993; Independent Auditors' Report.
APCo:
Independent Auditors' Report; Consolidated Statements of Income
for the years ended December 31, 1994, 1994 and 1993;
Consolidated Balance Sheets as of December 31, 1994 and 1993;
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992; Consolidated Statements of
Retained Earnings for the years ended December 31, 1994, 1993
and 1992; Notes to Consolidated Financial Statements.
CSPCo:
Independent Auditors' Report; Consolidated Statements of Income
for the years ended December 31, 1994, 1993 and 1992;
Consolidated Balance Sheets as of December 31, 1994 and 1993;
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992; Consolidated Statements of
Retained Earnings for the years ended December 31, 1994, 1993
and 1992; Notes to Consolidated Financial Statements.
I&M:
Independent Auditors' Report; Consolidated Statements of Income
for the years ended December 31, 1994, 1993 and 1992;
Consolidated Balance Sheets as of December 31, 1994 and 1993;
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992; Consolidated Statements of
Retained Earnings for the years ended December 31, 1994, 1993<PAGE>
and 1992; Notes to Consolidated Financial Statements.
KEPCo:
Independent Auditors' Report; Statements of Income for the years
ended December 31, 1994, 1993 and 1992; Statements of Retained
Earnings for the years ended December 31, 1994, 1993 and 1992;
Balance Sheets as of December 31, 1994 and 1993; Statements of
Cash Flows for the years ended December 31, 1994, 1993 and
1992; Notes to Financial Statements.
OPCo:
Consolidated Statements of Income for the years ended December 31,
1994, 1993 and 1992; Consolidated Balance Sheets as of December
31, 1994 and 1993; Consolidated Statements of Cash Flows for
the years ended December 31, 1994, 1993 and 1992; Consolidated
Statements of Retained Earnings for the years ended December
31, 1994, 1993 and 1992; Notes to Consolidated Financial
Statements; Independent Auditors' Report.
2. Financial Statement Schedules:
Financial Statement Schedules are listed in the Index to Financial
Statement Schedules (Certain schedules have been omitted because
the required information is contained in the notes to financial
statements or because such schedules are not required or are not
applicable.) S-1
Independent Auditors' Report S-2
3. Exhibits:
Exhibits for AEGCo, AEP, APCo, CSPCo, I&M, KEPCo and OPCo are listed
in the Exhibit Index and are incorporated herein by reference E-1
</TABLE>
(b) No Reports on Form 8-K were filed during the quarter ended
December 31, 1994.<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED
COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING
REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF.
AEP Generating Company
By: /s/ G. P. Maloney
----------------------------
(G. P. MALONEY, VICE PRESIDENT)
Date: March 23, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE
DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL
BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE
ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE
--------- ----- ----
(I) PRINCIPAL EXECUTIVE OFFICER:
*E. Linn Draper, Jr. President, Chief
Executive Officer
and Director
(II) PRINCIPAL FINANCIAL OFFICER:
/s/ G. P. Maloney Vice President March 23, 1995
----------------------- and Director
(G. P. MALONEY)
(III) PRINCIPAL ACCOUNTING OFFICER:
/s/ P. J. DeMaria Vice President, March 23, 1995
----------------------- Treasurer and
(P. J. DEMARIA) Director
(IV) A MAJORITY OF THE DIRECTORS:
*Henry Fayne
*John R. Jones, III
*Wm. J. Lhota
*James J. Markowsky
*By: /s/ G. P. Maloney March 23, 1995
-----------------------
(G. P. MALONEY, ATTORNEY-IN-FACT)<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED.
American Electric Power Company, Inc.
By: /s/ G. P. Maloney
----------------------------
(G. P. MALONEY, VICE PRESIDENT)
Date: March 23, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
(I) PRINCIPAL EXECUTIVE OFFICER:
*E. Linn Draper, Jr. Chairman of the
Board, President,
Chief Executive
Officer and
Director
(II) PRINCIPAL FINANCIAL OFFICER:
/s/ G. P. Maloney Vice President, March 23, 1995
----------------------- Secretary and
(G. P. MALONEY) Director
(III) PRINCIPAL ACCOUNTING OFFICER:
/s/ P. J. DeMaria Treasurer and March 23, 1995
----------------------- Director
(P. J. DEMARIA)
(IV) A MAJORITY OF THE DIRECTORS:
*Robert M. Duncan
*Arthur G. Hansen
*Lester A. Hudson, Jr.
*Angus E. Peyton
*Toy F. Reid
*Donald G. Smith
*Linda Gillespie Stuntz
*Morris Tanenbaum
*Ann Haymond Zwinger
*By: /s/ G. P. Maloney March 23, 1995
-----------------------
(G. P. MALONEY, ATTORNEY-IN-FACT)<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED
COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING
REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF.
Appalachian Power Company
By: /s/ G. P. Maloney
----------------------------
(G. P. MALONEY, VICE PRESIDENT)
Date: March 23, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE
DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL
BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE
ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE
--------- ----- ----
(I) PRINCIPAL EXECUTIVE OFFICER:
*E. Linn Draper, Jr. Chairman of the
Board, Chief
Executive Officer
and Director
(II) PRINCIPAL FINANCIAL OFFICER:
/s/ G. P. Maloney Vice President March 23, 1995
----------------------- and Director
(G. P. MALONEY)
(III) PRINCIPAL ACCOUNTING OFFICER:
/s/ P. J. DeMaria Vice President, March 23, 1995
----------------------- Treasurer and
(P. J. DEMARIA) Director
(IV) A MAJORITY OF THE DIRECTORS:
*Henry Fayne
*Luke M. Feck
*Wm. J. Lhota
*James J. Markowsky
*J. H. Vipperman
*By: /s/ G. P. Maloney March 23, 1995
-----------------------
(G. P. MALONEY, ATTORNEY-IN-FACT)<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED
COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING
REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF.
Columbus Southern Power Company
By: /s/ G. P. Maloney
----------------------------
(G. P. MALONEY, VICE PRESIDENT)
Date: March 23, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE
DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL
BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE
ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE
--------- ----- ----
(I) PRINCIPAL EXECUTIVE OFFICER:
*E. Linn Draper, Jr. Chairman of the
Board, Chief
Executive Officer
and Director
(II) PRINCIPAL FINANCIAL OFFICER:
/s/ G. P. Maloney Vice President March 23, 1995
----------------------- and Director
(G. P. MALONEY)
(III) PRINCIPAL ACCOUNTING OFFICER:
/s/ P. J. DeMaria Vice President, March 23, 1995
----------------------- Treasurer and
(P. J. DEMARIA) Director
(IV) A MAJORITY OF THE DIRECTORS:
*C. A. Erikson
*Henry Fayne
*Wm. J. Lhota
*James J. Markowsky
*By: /s/ G. P. Maloney March 23, 1995
-----------------------
(G. P. MALONEY, ATTORNEY-IN-FACT)<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED
COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING
REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF.
Indiana Michigan Power Company
By: /s/ G. P. Maloney
----------------------------
(G. P. MALONEY, VICE PRESIDENT)
Date: March 23, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE
DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL
BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE
ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE
--------- ----- ----
(I) PRINCIPAL EXECUTIVE OFFICER:
*E. Linn Draper, Jr. Chairman of the
Board, Chief
Executive Officer
and Director
(II) PRINCIPAL FINANCIAL OFFICER:
/s/ G. P. Maloney Vice President March 23, 1995
----------------------- and Director
(G. P. MALONEY)
(III) PRINCIPAL ACCOUNTING OFFICER:
/s/ P. J. DeMaria Vice President, March 23, 1995
----------------------- Treasurer and
(P. J. DEMARIA) Director
(IV) A MAJORITY OF THE DIRECTORS:
*Mark A. Bailey
*W. N. D'Onofrio
*Wm. J. Lhota
*James J. Markowsky
*Richard C. Menge
*A. H. Potter
*D. M. Trenary
*W. E. Walters
*By: /s/ G. P. Maloney March 23, 1995
-----------------------
(G. P. MALONEY, ATTORNEY-IN-FACT)<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED
COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING
REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF.
Kentucky Power Company
By: /s/ G. P. Maloney
----------------------------
(G. P. MALONEY, VICE PRESIDENT)
Date: March 23, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE
DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL
BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE
ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE
--------- ----- ----
(I) PRINCIPAL EXECUTIVE OFFICER:
*E. Linn Draper, Jr. Chairman of the
Board, Chief
Executive Officer
and Director
(II) PRINCIPAL FINANCIAL OFFICER:
/s/ G. P. Maloney Vice President March 23, 1995
----------------------- and Director
(G. P. MALONEY)
(III) PRINCIPAL ACCOUNTING OFFICER:
/s/ P. J. DeMaria Vice President, March 23, 1995
----------------------- Treasurer and
(P. J. DEMARIA) Director
(IV) A MAJORITY OF THE DIRECTORS:
*C. R. Boyle, III
*Wm. J. Lhota
*James J. Markowsky
*Ronald A. Petti
*By: /s/ G. P. Maloney March 23, 1995
-----------------------
(G. P. MALONEY, ATTORNEY-IN-FACT)<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED
THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED. THE SIGNATURE OF THE UNDERSIGNED
COMPANY SHALL BE DEEMED TO RELATE ONLY TO MATTERS HAVING
REFERENCE TO SUCH COMPANY AND ANY SUBSIDIARIES THEREOF.
Ohio Power Company
By: /s/ G. P. Maloney
----------------------------
(G. P. MALONEY, VICE PRESIDENT)
Date: March 23, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE
DATES INDICATED. THE SIGNATURE OF EACH OF THE UNDERSIGNED SHALL
BE DEEMED TO RELATE ONLY TO MATTERS HAVING REFERENCE TO THE
ABOVE-NAMED COMPANY AND ANY SUBSIDIARIES THEREOF.
SIGNATURE TITLE DATE
--------- ----- ----
(I) PRINCIPAL EXECUTIVE OFFICER:
*E. Linn Draper, Jr. Chairman of the
Board, Chief
Executive Officer
and Director
(II) PRINCIPAL FINANCIAL OFFICER:
/s/ G. P. Maloney Vice President March 23, 1995
----------------------- and Director
(G. P. MALONEY)
(III) PRINCIPAL ACCOUNTING OFFICER:
/s/ P. J. DeMaria Vice President, March 23, 1995
----------------------- Treasurer and
(P. J. DEMARIA) Director
(IV) A MAJORITY OF THE DIRECTORS:
*C. A. Erikson
*Henry Fayne
*Wm. J. Lhota
*James J. Markowsky
*By: /s/ G. P. Maloney March 23, 1995
-----------------------
(G. P. MALONEY, ATTORNEY-IN-FACT)<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE
----
<C> <C> <S> <C>
INDEPENDENT AUDITORS' REPORT .............................. S-2
The following financial statement schedules for the years ended
December 31, 1994, 1993 and 1992 are included in this report on
the pages indicated.
</TABLE>
<TABLE>
<CAPTION>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
<C> <C> <S> <C>
Schedule II -- Valuation and Qualifying Accounts and
Reserves S-3
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
Schedule II -- Valuation and Qualifying Accounts and
Reserves S-3
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
Schedule II -- Valuation and Qualifying Accounts and
Reserves S-3
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
Schedule II -- Valuation and Qualifying Accounts and
Reserves S-4
KENTUCKY POWER COMPANY
Schedule II -- Valuation and Qualifying Accounts and
Reserves S-4
OHIO POWER COMPANY AND SUBSIDIARIES
Schedule II -- Valuation and Qualifying Accounts and
Reserves S-4<PAGE>
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
American Electric Power Company, Inc. and Subsidiaries:
We have audited the consolidated financial statements of
American Electric Power Company, Inc. and its subsidiaries and
the financial statements of certain of its subsidiaries, listed
in Item 14 herein, as of December 31, 1994 and 1993, and for each
of the three years in the period ended December 31, 1994, and
have issued our reports thereon dated February 21, 1995; such
financial statements and reports are included in your respective
1994 Annual Report to Shareowners and are incorporated herein by
reference. Our audits also included the financial statement
schedules of American Electric Power Company, Inc. and its
subsidiaries and of certain of its subsidiaries, listed in Item
14. These financial statement schedules are the responsibility
of the respective Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such
financial statement schedules, when considered in relation to the
corresponding basic financial statements taken as a whole,
present fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche
Deloitte & Touche LLP
Columbus, Ohio
February 21, 1995<PAGE>
<PAGE>
<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
(in thousands)
<S> <C> <C> <C> <C> <C>
Deducted from Assets:
Accumulated Provision for
Uncollectible Accounts:
Year Ended December 31, 1994. . . . . . . . . . . . $ 4,048 $20,265 $(3,556)(a) $16,701(b) $ 4,056
Year Ended December 31, 1993. . . . . . . . . . . . $ 7,287 $14,237 $ 4,163(a) $21,639(b) $ 4,048
Year Ended December 31, 1992. . . . . . . . . . . . $ 9,599 $12,888 $ 4,096(a) $19,296(b) $ 7,287
(a) Recoveries on accounts previously written off.
(b) Uncollectible accounts written off.
</TABLE>
<TABLE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
(in thousands)
<S> <C> <C> <C> <C> <C>
Deducted from Assets:
Accumulated Provision for
Uncollectible Accounts:
Year Ended December 31, 1994. . . . . . . . . . . . . $ 1,344 $2,297 $ 596(a) $3,407(b) $ 830
Year Ended December 31, 1993. . . . . . . . . . . . . $ 724 $3,392 $ 627(a) $3,399(b) $ 1,344
Year Ended December 31, 1992. . . . . . . . . . . . . $ 987 $1,810 $ 672(a) $2,745(b) $ 724
(a) Recoveries on accounts previously written off.
(b) Uncollectible accounts written off.
</TABLE>
<TABLE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period <PAGE>
(in thousands)
<S> <C> <C> <C> <C> <C>
Deducted from Assets:
Accumulated Provision for
Uncollectible Accounts:
Year Ended December 31, 1994. . . . . . . . . $ 991 $ 6,181 $2,778(a) $8,182(b) $1,768
Year Ended December 31, 1993. . . . . . . . . $1,332 $ 4,167 $2,106(a) $6,614(b) $ 991
Year Ended December 31, 1992. . . . . . . . . $1,134 $ 4,593 $1,981(a) $6,376(b) $1,332
(a) Recoveries on accounts previously written off.
(b) Uncollectible accounts written off.
/TABLE
<PAGE>
<PAGE>
<TABLE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
(in thousands)
<S> <C> <C> <C> <C> <C>
Deducted from Assets:
Accumulated Provision for
Uncollectible Accounts:
Year Ended December 31, 1994. . . . . . . . . . . . $ 504 $ 774 $ 707(a) $ 1,864(b) $ 121
Year Ended December 31, 1993. . . . . . . . . . . . $562 $1,380 $ 624(a) $ 2,062(b) $ 504
Year Ended December 31, 1992. . . . . . . . . . . . $629 $1,736 $ 650(a) $ 2,453(b) $ 562
(a) Recoveries on accounts previously written off.
(b) Uncollectible accounts written off.
</TABLE>
<TABLE>
KENTUCKY POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
(in thousands)
<S> <C> <C> <C> <C> <C>
Deducted from Assets:
Accumulated Provision for
Uncollectible Accounts:
Year Ended December 31, 1994. . . . . . . . . . . . . $ 208 $ 600 $ 84(a) $ 632(b) $ 260
Year Ended December 31, 1993. . . . . . . . . . . . . $ 248 $ 390 $ 179(a) $ 609(b) $ 208
Year Ended December 31, 1992. . . . . . . . . . . . . $ 352 $ 630 $ 106(a) $ 840(b) $ 248
(a) Recoveries on accounts previously written off.
(b) Uncollectible accounts written off.
</TABLE>
<TABLE>
OHIO POWER COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of <PAGE>
Description of Period Expenses Accounts Deductions Period
(in thousands)
<S> <C> <C> <C> <C> <C>
Deducted from Assets:
Accumulated Provision for
Uncollectible Accounts:
Year Ended December 31, 1994. . . . . . . . . . . . $ 960 $10,087 $(7,785)(a) $ 2,243(b) $ 1,019
Year Ended December 31, 1993. . . . . . . . . . . . $ 4,353 $ 4,812 $ 549(a) $ 8,754(b) $ 960
Year Ended December 31, 1992. . . . . . . . . . . . $ 4,815 $ 4,084 $ 618(a) $ 5,164(b) $ 4,353
(a) Recoveries on accounts previously written off.
(b) Uncollectible accounts written off.
/TABLE
<PAGE>
<PAGE>
EXHIBIT INDEX
Certain of the following exhibits, designated with an
asterisk(*), are filed herewith. The exhibits not so designated
have heretofore been filed with the Commission and, pursuant to
17 C.F.R. Section 201.24 and Section 240.12b-32, are incorporated
herein by reference to the documents indicated in brackets
following the descriptions of such exhibits. Exhibits, designated
with a dagger (+), are management contracts or compensatory plans
or arrangements required to be filed as an exhibit to this form
pursuant to Item 14(c) of this report.
AEGCO
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3(a) -- Copy of Articles of Incorporation of AEGCo [Registration
Statement on Form 10 for the Common Shares of AEGCo,
File No. 0-18135, Exhibit 3(a)].
3(b) -- Copy of the Code of Regulations of AEGCo [Registration
Statement on Form 10 for the Common Shares of AEGCo,
File No. 0-18135, Exhibit 3(b)].
10(a) -- Copy of Capital Funds Agreement dated as of December 30,
1988 between AEGCo and AEP [Registration Statement No.
33-32752, Exhibit 28(a)].
10(b)(1) -- Copy of Unit Power Agreement dated as of March 31, 1982
between AEGCo and I&M, as amended [Registration
Statement No. 33-32752, Exhibits 28(b)(1)(A) and
28(b)(1)(B)].
10(b)(2) -- Copy of Unit Power Agreement, dated as of August 1,
1984, among AEGCo, I&M and KEPCo [Registration Statement
No. 33-32752, Exhibit 28(b)(2)].
10(b)(3) -- Copy of Agreement, dated as of October 1, 1984, among
AEGCo, I&M, APCo and Virginia Electric and Power Company
[Registration Statement No. 33-32752, Exhibit 28(b)(3)].
10(c) -- Copy of Lease Agreements, dated as of December 1, 1989,
between AEGCo and Wilmington Trust Company, as amended
[Registration Statement No. 33-32752, Exhibits
28(c)(1)(C), 28(c)(2)(C), 28(c)(3)(C), 28(c)(4)(C),
28(c)(5)(C) and 28(c)(6)(C); Annual Report on Form 10-K
of AEGCo for the fiscal year ended December 31, 1993,
File No. 0-18135, Exhibits 10(c)(1)(B), 10(c)(2)(B),
10(c)(3)(B), 10(c)(4)(B), 10(c)(5)(B) and 10(c)(6)(B)].
*13 -- Copy of those portions of the AEGCo 1994 Annual Report
(for the fiscal year ended December 31, 1994) which are
incorporated by reference in this filing.
*24 -- Power of Attorney.
*27 -- Financial Data Schedules.
AEP++
3(a) -- Copy of Restated Certificate of Incorporation of AEP,
dated April 26, 1978 [Registration Statement No. 2-
62778, Exhibit 2(a)].
3(b)(1) -- Copy of Certificate of Amendment of the Restated
Certificate of Incorporation of AEP, dated April 23,
1980 [Registration Statement No. 33-1052, Exhibit 4(b)].
3(b)(2) -- Copy of Certificate of Amendment of the Restated
Certificate of Incorporation of AEP, dated April 28,<PAGE>
1982 [Registration Statement No. 33-1052, Exhibit 4(c)].
3(b)(3) -- Copy of Certificate of Amendment of the Restated
Certificate of Incorporation of AEP, dated April 25,
1984 [Registration Statement No. 33-1052, Exhibit 4(d)].
3(b)(4) -- Copy of Certificate of Change of the Restated
Certificate of Incorporation of AEP, dated July 5, 1984
[Registration Statement No. 33-1052, Exhibit 4(e)].
3(b)(5) -- Copy of Certificate of Amendment of the Restated
Certificate of Incorporation of AEP, dated April 27,
1988 [Registration Statement No. 33-1052, Exhibit 4(f)].
3(c) -- Composite copy of the Restated Certificate of
Incorporation of AEP, as amended [Registration Statement
No. 33-1052, Exhibit 4(g)].
3(d) -- Copy of By-Laws of AEP, as amended through July 26, 1989
[Annual Report on Form 10-K of AEP for the fiscal year
ended December 31, 1989, File No. 1-3525, Exhibit 3(d)].
10(a) -- Interconnection Agreement, dated July 6, 1951, among
APCo, CSPCo, KEPCo, OPCo and I&M and with the Service
Corporation, as amended [Registration Statement No. 2-
52910, Exhibit 5(a); Registration Statement No. 2-61009,
Exhibit 5(b); and Annual Report on Form 10-K of AEP for
the fiscal year ended December 31, 1990, File No. 1-
3525, Exhibit 10(a)(3)].
10(b) -- Copy of Transmission Agreement, dated April 1, 1984,
among APCo, CSPCo, I&M, KEPCo, OPCo and with the Service
Corporation as agent, as amended [Annual Report on Form
10-K of AEP for the fiscal year ended December 31, 1985,
File No. 1-3525, Exhibit 10(b); and Annual Report on
Form 10-K of AEP for the fiscal year ended December 31,
1988, File No. 1-3525, Exhibit 10(b)(2)].
+10(c)(1) -- AEP Deferred Compensation Agreement for certain
executive officers [Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1985, File No. 1-
3525, Exhibit 10(e)].
+10(c)(2) -- Amendment to AEP Deferred Compensation Agreement for
certain executive officers [Annual Report on Form 10-K
of AEP for the fiscal year ended December 31, 1986, File
No. 1-3525, Exhibit 10(d)(2)].
+10(d) -- AEP Deferred Compensation Agreement for directors, as
amended, effective October 24, 1984 [Annual Report on
Form 10-K of AEP for the fiscal year ended December 31,
1984, File No. 1-3525, Exhibit 10(e)].
+10(e) -- AEP Accident Coverage Insurance Plan for directors
[Annual Report on Form 10-K of AEP for the fiscal year
ended December 31, 1985, File No. 1-3525, Exhibit
10(g)].
+10(f) -- AEP Retirement Plan for directors [Annual Report on Form
10-K of AEP for the fiscal year ended December 31, 1986,
File No. 1-3525, Exhibit 10(g)].
+10(g)(1)(A) -- Excess Benefits Plan [Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1993, File No. 1-
3525, Exhibit 10(g)(1)(A)].
+10(g)(1)(B) -- Guaranty by AEP of the Service Corporation Excess
Benefits Plan [Annual Report on Form 10-K of AEP for the
fiscal year ended December 31, 1990, File No. 1-3525,
Exhibit 10(h)(1)(B)].
+10(g)(2) -- AEP System Supplemental Savings Plan (Non-Qualified)
[Annual Report on Form 10-K of AEP for the fiscal year
ended December 31, 1993, File No. 1-3525, Exhibit
10(g)(2)].
+10(g)(3) -- Service Corporation Umbrella Trust for Executives
[Annual Report on Form 10-K of AEP for the fiscal year
ended December 31, 1993, File No. 1-3525, Exhibit<PAGE>
10(g)(3)].
+10(h)(1) -- Employment Agreement between E. Linn Draper, Jr. and AEP
and the Service Corporation [Annual Report on Form 10-K
of AEGCo for the fiscal year ended December 31, 1991,
File No. 0-18135, Exhibit 10(g)(3)].
*+10(i)(1) -- AEP Management Incentive Compensation Plan.
*+10(i)(2) -- American Electric Power System Performance Share
Incentive Plan, as Amended and Restated through January
1, 1995.
10(j) -- Copy of Lease Agreements, dated as of December 1, 1989,
between AEGCo or I&M and Wilmington Trust Company, as
amended [Registration Statement No. 33-32752, Exhibits
28(c)(1)(C), 28(c)(2)(C), 28(c)(3)(C), 28(c)(4)(C),
28(c)(5)(C) and 28(c)(6)(C); Registration Statement No.
33-32753, Exhibits 28(a)(1)(C), 28(a)(2)(C),
28(a)(3)(C), 28(a)(4)(C), 28(a)(5)(C) and 28(a)(6)(C);
and Annual Report on Form 10-K of AEGCo for the fiscal
year ended December 31, 1993, File No. 0-18135, Exhibits
10(c)(1)(B), 10(c)(2)(B), 10(c)(3)(B), 10(c)(4)(B),
10(c)(5)(B) and 10(c)(6)(B); Annual Report on Form 10-K
of I&M for the fiscal year ended December 31, 1993, File
No. 1-3570, Exhibits 10(e)(1)(B), 10(e)(2)(B),
10(e)(3)(B), 10(e)(4)(B), 10(e)(5)(B) and 10(e)(6)(B)].
10(k)(1) -- Copy of Agreement for Lease, dated as of September 17,
1992, between JMG Funding, Limited Partnership and OPCo
[Annual Report on Form 10-K of OPCo for the fiscal year
ended December 31, 1992, File No. 1-6543, Exhibit
10(l)].
10(k)(2) -- Lease Agreement between Ohio Power Company and JMG
Funding, Limited, dated January 20, 1995 [Annual Report
on Form 10-K of OPCo for the fiscal year ended December
31, 1994, File No. 1-6543, Exhibit 10(l)(2)].
10(l) -- Interim Allowance Agreement, dated July 28, 1994, among
APCo, CSPCo, I&M, KEPCo, OPCo and the Service
Corporation [Annual Report on Form 10-K of APCo for the
fiscal year ended December 31, 1994, File No. 1-3457,
Exhibit 10(d)].
*13 -- Copy of those portions of the AEP 1994 Annual Report
(for the fiscal year ended December 31, 1994) which are
incorporated by reference in this filing.
*21 -- List of subsidiaries of AEP.
*23 -- Consent of Deloitte & Touche LLP.
*24 -- Power of Attorney.
*27 -- Financial Data Schedules.
APCO++
3(a) -- Copy of Restated Articles of Incorporation of APCo, and
amendments thereto to November 4, 1993 [Registration
Statement No. 33-50163, Exhibit 4(a); Registration
Statement No. 33-53805, Exhibits 4(b) and 4(c)].
*3(b) -- Copy of Articles of Amendment to the Restated Articles
of Incorporation of APCo, dated June 6, 1994.
*3(c) -- Composite copy of the Restated Articles of Incorporation
of APCo, as amended.
3(d) -- Copy of By-Laws of APCo [Annual Report on Form 10-K of
APCo for the fiscal year ended December 31, 1990, File
No. 1-3457 Exhibit 3(d)].
4(a) -- Copy of Mortgage and Deed of Trust, dated as of December
1, 1940, between APCo and Bankers Trust Company and R.
Gregory Page, as Trustees, as amended and supplemented
[Registration Statement No. 2-7289, Exhibit 7(b);
Registration Statement No. 2-19884, Exhibit 2(1);
Registration Statement No. 2-24453, Exhibit 2(n);<PAGE>
Registration Statement No. 2-60015, Exhibits 2(b)(2),
2(b)(3), 2(b)(4), 2(b)(5), 2(b)(6), 2(b)(7), 2(b)(8),
2(b)(9), 2(b)(10), 2(b)(12), 2(b)(14), 2(b)(15),
2(b)(16), 2(b)(17), 2(b)(18), 2(b)(19), 2(b)(20),
2(b)(21), 2(b)(22), 2(b)(23), 2(b)(24), 2(b)(25),
2(b)(26), 2(b)(27) and 2(b)(28); Registration Statement
No. 2-64102, Exhibit 2(b)(29); Registration Statement
No. 2-66457, Exhibits (2)(b)(30) and 2(b)(31);
Registration Statement No. 2-69217, Exhibit 2(b)(32);
Registration Statement No. 2-86237, Exhibit 4(b);
Registration Statement No. 33-11723, Exhibit 4(b);
Registration Statement No. 33-17003, Exhibit 4(a)(ii),
Registration Statement No. 33-30964, Exhibit 4(b);
Registration Statement No. 33-40720, Exhibit 4(b);
Registration Statement No. 33-45219, Exhibit 4(b);
Registration Statement No. 33-46128, Exhibits 4(b) and
4(c); Registration Statement No. 33-53410, Exhibit 4(b);
Registration Statement No. 33-59834, Exhibit 4(b);
Registration Statement No. 33-50229, Exhibits 4(b) and
4(c); Annual Report on Form 10-K of APCo for the fiscal
year ending December 31, 1993, File No. 1-3457, Exhibit
4(b)].
*4(b) -- Copy of Indentures Supplemental, dated August 15, 1994,
October 1, 1994 and March 1, 1995, to Mortgage and Deed
of Trust.
10(a)(1) -- Copy of Power Agreement, dated October 15, 1952, between
OVEC and United States of America, acting by and through
the United States Atomic Energy Commission, and,
subsequent to January 18, 1975, the Administrator of the
Energy Research and Development Administration, as
amended [Registration Statement No. 2-60015, Exhibit
5(a); Registration Statement No. 2-63234, Exhibit
5(a)(1)(B); Registration Statement No. 2-66301, Exhibit
5(a)(1)(C); Registration Statement No. 2-67728, Exhibit
5(a)(1)(D); Annual Report on Form 10-K of APCo for the
fiscal year ended December 31, 1989, File No. 1-3457,
Exhibit 10(a)(1)(F); and Annual Report on Form 10-K of
APCo for the fiscal year ended December 31, 1992, File
No. 1-3457, Exhibit 10(a)(1)(B)].
10(a)(2) -- Copy of Inter-Company Power Agreement, dated as of July
10, 1953, among OVEC and the Sponsoring Companies, as
amended [Registration Statement No. 2-60015, Exhibit
5(c); Registration Statement No. 2-67728, Exhibit
5(a)(3)(B); and Annual Report on Form 10-K of APCo for
the fiscal year ended December 31, 1992, File No. 1-
3457, Exhibit 10(a)(2)(B)].
10(a)(3) -- Copy of Power Agreement, dated July 10, 1953, between
OVEC and Indiana-Kentucky Electric Corporation, as
amended [Registration Statement No. 2-60015, Exhibit
5(e)].
10(b) -- Copy of Interconnection Agreement, dated July 6, 1951,
among APCo, CSPCo, KEPCo, OPCo and I&M and with the
Service Corporation, as amended [Registration Statement
No. 2-52910, Exhibit 5(a); Registration Statement No. 2-
61009, Exhibit 5(b); Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1990, File No. 1-
3525, Exhibit 10(a)(3)].
10(c) -- Copy of Transmission Agreement, dated April 1, 1984,
among APCo, CSPCo, I&M, KEPCo, OPCo and with the Service
Corporation as agent, as amended [Annual Report on Form
10-K of AEP for the fiscal year ended December 31, 1985,
File No. 1-3525, Exhibit 10(b); Annual Report on Form
10-K of AEP for the fiscal year ended December 31, 1988,<PAGE>
File No. 1-3525, Exhibit 10(b)(2)].
*10(d) -- Copy of AEP System Interim Allowance Agreement, dated
July 28, 1994, among APCo, CSPCo, I&M, KEPCo, OPCo and
the Service Corporation.
+10(e)(1) -- AEP Deferred Compensation Agreement for certain
executive officers [Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1985, File No. 1-
3525, Exhibit 10(e)].
+10(e)(2) -- Amendment to AEP Deferred Compensation Agreement for
certain executive officers [Annual Report on Form 10-K
of AEP for the fiscal year ended December 31, 1986, File
No. 1-3525, Exhibit 10(d)(2)].
+10(f)(1) -- Management Incentive Compensation Plan [Annual Report on
Form 10-K of AEP for the fiscal year ended December 31,
1994, File No. 1-3525, Exhibit 10(i)(1)].
+10(f)(2) -- American Electric Power System Performance Share
Incentive Plan [Annual Report on Form 10-K of AEP for
the fiscal year ended December 31, 1994, File No. 1-
3525, Exhibit 10(i)(2)].
+10(g)(1) -- Excess Benefits Plan [Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1993, File No. 1-
3525, Exhibit 10(g)(1)(A)].
+10(g)(2) -- AEP System Supplemental Savings Plan (Non-Qualified)
[Annual Report on Form 10-K of AEP for the fiscal year
ended December 31, 1993, File No. 1-3525, Exhibit
10(g)(2)].
+10(g)(3) -- Umbrella Trust for Executives [Annual Report on Form
10-K of AEP for the fiscal year ended December 31, 1993,
File No. 1-3525, Exhibit 10(g)(3)].
+10(h)(1) -- Employment Agreement between E. Linn Draper, Jr. and AEP
and the Service Corporation [Annual Report on Form 10-K
of AEGCo for the fiscal year ended December 31, 1991,
File No. 0-18135, Exhibit 10(g)(3)].
*12 -- Statement re: Computation of Ratios.
*13 -- Copy of those portions of the APCo 1994 Annual Report
(for the fiscal year ended December 31, 1994) which are
incorporated by reference in this filing.
21 -- List of subsidiaries of APCo [Annual Report on Form 10-K
of AEP for the fiscal year ended December 31, 1994, File
No. 1-3525, Exhibit 21].
*23 -- Consent of Deloitte & Touche LLP.
*24 -- Power of Attorney.
*27 -- Financial Data Schedules.
CSPCO++
3(a) -- Copy of Amended Articles of Incorporation of CSPCo, as
amended to March 6, 1992 [Registration Statement No. 33-
53377, Exhibit 4(a)].
*3(b) -- Copy of Certificate of Amendment to Amended Articles of
Incorporation of CSPCo, dated May 19, 1994.
*3(c) -- Composite copy of Amended Articles of Incorporation of
CSPCo, as amended.
3(d) -- Copy of Code of Regulations and By-Laws of CSPCo [Annual
Report on Form 10-K of CSPCo for the fiscal year ended
December 31, 1987, File No. 1-2680, Exhibit 3(d)].
4(a) -- Copy of Indenture of Mortgage and Deed of Trust, dated
September 1, 1940, between CSPCo and City Bank Farmers
Trust Company (now Citibank, N.A.), as trustee, as
supplemented and amended [Registration Statement No. 2-
59411, Exhibits 2(B) and 2(C); Registration Statement
No. 2-80535, Exhibit 4(b); Registration Statement No. 2-
87091, Exhibit 4(b); Registration Statement No. 2-93208,
Exhibit 4(b); Registration Statement No. 2-97652,<PAGE>
Exhibit 4(b); Registration Statement No. 33-7081,
Exhibit 4(b); Registration Statement No. 33-12389,
Exhibit 4(b); Registration Statement No. 33-19227,
Exhibits 4(b), 4(e), 4(f), 4(g) and 4(h); Registration
Statement No. 33-35651, Exhibit 4(b); Registration
Statement No. 33-46859, Exhibits 4(b) and 4(c);
Registration Statement No. 33-50316, Exhibits 4(b) and
4(c); Registration Statement No. 33-60336, Exhibits
4(b), 4(c) and 4(d); Registration Statement No. 33-
50447, Exhibits 4(b) and 4(c); Annual Report on Form 10-
K of CSPCo for the fiscal year ended December 31, 1993,
File No. 1-2680, Exhibit 4(b)].
10(a)(1) -- Copy of Power Agreement, dated October 15, 1952, between
OVEC and United States of America, acting by and through
the United States Atomic Energy Commission, and,
subsequent to January 18, 1975, the Administrator of the
Energy Research and Development Administration, as
amended [Registration Statement No. 2-60015, Exhibit
5(a); Registration Statement No. 2-63234, Exhibit
5(a)(1)(B); Registration Statement No. 2-66301, Exhibit
5(a)(1)(C); Registration Statement No. 2-67728, Exhibit
5(a)(1)(B); Annual Report on Form 10-K of APCo for the
fiscal year ended December 31, 1989, File No. 1-3457,
Exhibit 10(a)(1)(F); and Annual Report on Form 10-K of
APCo for the fiscal year ended December 31, 1992, File
No. 1-3457, Exhibit 10(a)(1)(B)].
10(a)(2) -- Copy of Inter-Company Power Agreement, dated July 10,
1953, among OVEC and the Sponsoring Companies, as
amended [Registration Statement No. 2-60015, Exhibit
5(c); Registration Statement No. 2-67728, Exhibit
5(a)(3)(B); and Annual Report on Form 10-K of APCo for
the fiscal year ended December 31, 1992, File No. 1-
3457, Exhibit 10(a)(2)(B)].
10(a)(3) -- Copy of Power Agreement, dated July 10, 1953, between
OVEC and Indiana-Kentucky Electric Corporation, as
amended [Registration Statement No. 2-60015, Exhibit
5(e)].
10(b) -- Copy of Interconnection Agreement, dated July 6, 1951,
among APCo, CSPCo, KEPCo, OPCo and I&M and the Service
Corporation, as amended [Registration Statement No. 2-
52910, Exhibit 5(a); Registration Statement No. 2-61009,
Exhibit 5(b); and Annual Report on Form 10-K of AEP for
the fiscal year ended December 31, 1990, File No. 1-
3525, Exhibit 10(a)(3)].
10(c) -- Copy of Transmission Agreement, dated April 1, 1984,
among APCo, CSPCo, I&M, KEPCo, OPCo, and with the
Service Corporation as agent, as amended [Annual Report
on Form 10-K of AEP for the fiscal year ended December
31, 1985, File No. 1-3525, Exhibit 10(b); and Annual
Report on Form 10-K of AEP for the fiscal year ended
December 31, 1988, File No. 1-3525, Exhibit 10(b)(2)].
10(d) -- Copy of Interim Allowance Agreement [Annual Report on
Form 10-K of APCo for the fiscal year ended December 31,
1994, File No. 1-3457, Exhibit 10(d)].
*12 -- Statement re: Computation of Ratios.
*13 -- Copy of those portions of the CSPCo 1994 Annual Report
(for the fiscal year ended December 31, 1994) which are
incorporated by reference in this filing.
21 -- List of subsidiaries of CSPCo [Annual Report on Form 10-
K of AEP for the fiscal year ended December 31, 1994,
File No. 1-3525, Exhibit 21].
*23 -- Consent of Deloitte & Touche LLP.
*24 -- Power of Attorney.<PAGE>
*27 -- Financial Data Schedules.
I&M++
3(a) -- Copy of the Amended Articles of Acceptance of I&M and
amendments thereto [Annual Report on Form 10-K of I&M
for fiscal year ended December 31, 1993, File No. 1-
3570, Exhibit 3(a)].
3(b) -- Composite Copy of the Amended Articles of Acceptance of
I&M, as amended [Annual Report on Form 10-K of I&M for
fiscal year ended December 31, 1993, File No. 1-3570,
Exhibit 3(b)].
3(c) -- Copy of the By-Laws of I&M [Annual Report on Form 10-K
of I&M for the fiscal year ended December 31, 1990, File
No 1-3570, Exhibit 3(d)].
4(a) -- Copy of Mortgage and Deed of Trust, dated as of June 1,
1939, between I&M and Irving Trust Company (now The Bank
of New York) and various individuals, as Trustees, as
amended and supplemented [Registration Statement No. 2-
7597, Exhibit 7(a); Registration Statement No. 2-60665,
Exhibits 2(c)(2), 2(c)(3), 2(c)(4), 2(c)(5), 2(c)(6),
2(c)(7), 2(c)(8), 2(c)(9), 2(c)(10), 2(c)(11), 2(c)(12),
2(c)(13), 2(c)(14), 2(c)(15), (2)(c)(16), and 2(c)(17);
Registration Statement No. 2-63234, Exhibit 2(b)(18);
Registration Statement No. 2-65389, Exhibit 2(a)(19);
Registration Statement No. 2-67728, Exhibit 2(b)(20);
Registration Statement No. 2-85016, Exhibit 4(b);
Registration Statement No. 33-5728, Exhibit 4(c);
Registration Statement No. 33-9280, Exhibit 4(b);
Registration Statement No. 33-11230, Exhibit 4(b);
Registration Statement No. 33-19620, Exhibits 4(a)(ii),
4(a)(iii), 4(a)(iv) and 4(a)(v); Registration Statement
No. 33-46851, Exhibits 4(b)(i), 4(b)(ii) and 4(b)(iii);
Registration Statement No. 33-54480, Exhibits 4(b)(i)
and 4(b)(ii); Registration Statement No. 33-60886,
Exhibit 4(b)(i); Registration Statement No. 33-50521,
Exhibits 4(b)(i), 4(b)(ii) and 4(b)(iii); Annual Report
on Form 10-K of I&M for fiscal year ended December 31,
1993, File No. 1-3570, Exhibit 4(b)].
*4(b) -- Copy of Indenture Supplemental dated May 1, 1994 to
Mortgage and Deed of Trust.
10(a)(1) -- Copy of Power Agreement, dated October 15, 1952, between
OVEC and United States of America, acting by and through
the United States Atomic Energy Commission, and,
subsequent to January 18, 1975, the Administrator of the
Energy Research and Development Administration, as
amended [Registration Statement No. 2-60015, Exhibit
5(a); Registration Statement No. 2-63234, Exhibit
5(a)(1)(B); Registration Statement No. 2-66301, Exhibit
5(a)(1)(C); Registration Statement No. 2-67728, Exhibit
5(a)(1)(D); Annual Report on Form 10-K of APCo for the
fiscal year ended December 31, 1989, File No. 1-3457,
Exhibit 10(a)(1)(F); and Annual Report on Form 10-K of
APCo for the fiscal year ended December 31, 1992, File
No. 1-3457, Exhibit 10(a)(1)(B)].
10(a)(2) -- Copy of Inter-Company Power Agreement, dated as of July
10, 1953, among OVEC and the Sponsoring Companies, as
amended [Registration Statement No. 2-60015, Exhibit
5(c); Registration Statement No. 2-67728, Exhibit
5(a)(3)(B); Annual Report on Form 10-K of APCo for the
fiscal year ended December 31, 1992, File No. 1-3457,
Exhibit 10(a)(2)(B)].
10(a)(3) -- Copy of Power Agreement, dated July 10, 1953, between
OVEC and Indiana-Kentucky Electric Corporation, as<PAGE>
amended [Registration Statement No. 2-60015, Exhibit
5(e)].
10(b) -- Copy of Interconnection Agreement, dated July 6, 1951,
between APCo, CSPCo, KEPCo, I&M, and OPCo and with the
Service Corporation, as amended [Registration Statement
No. 2-52910, Exhibit 5(a); Registration Statement No. 2-
61009, Exhibit 5(b); and Annual Report on Form 10-K of
AEP for the fiscal year ended December 31, 1990, File
No. 1-3525, Exhibit 10(a)(3)].
10(c) -- Copy of Transmission Agreement, dated April 1, 1984,
among APCo, CSPCo, I&M, KEPCo, OPCo and with the Service
Corporation as agent, as amended [Annual Report on Form
10-K of AEP for the fiscal year ended December 31, 1985,
File No. 1-3525, Exhibit 10(b); and Annual Report on
Form 10-K of AEP for the fiscal year ended December 31,
1988, File No. 1-3525, Exhibit 10(b)(2)].
10(d) -- Copy of Interim Allowance Agreement [Annual Report on
Form 10-K of APCo for the fiscal year ended December 31,
1994, File No. 1-3457, Exhibit 10(d)].
10(e) -- Copy of Nuclear Material Lease Agreement, dated as of
December 1, 1990, between I&M and DCC Fuel Corporation
[Annual Report on Form 10-K of I&M for the fiscal year
ended December 31, 1993, File No. 1-3570, Exhibit
10(d)].
10(f) -- Copy of Lease Agreements, dated as of December 1, 1989,
between I&M and Wilmington Trust Company, as amended
[Registration Statement No. 33-32753, Exhibits
28(a)(1)(C), 28(a)(2)(C), 28(a)(3)(C), 28(a)(4)(C),
28(a)(5)(C) and 28(a)(6)(C); Annual Report on Form 10-K
of I&M for the fiscal year ended December 31, 1993, File
No. 1-3570, Exhibits 10(e)(1)(B), 10(e)(2)(B),
10(e)(3)(B), 10(e)(4)(B), 10(e)(5)(B) and 10(e)(6)(B)].
*12 -- Statement re: Computation of Ratios
*13 -- Copy of those portions of the I&M 1994 Annual Report
(for the fiscal year ended December 31, 1994) which are
incorporated by reference in this filing.
21 -- List of subsidiaries of I&M [Annual Report on Form 10-K
of AEP for the fiscal year ended December 31, 1994, File
No. 1-3525, Exhibit 21].
*23 -- Consent of Deloitte & Touche LLP.
*24 -- Power of Attorney.
*27 -- Financial Data Schedules.
KEPCO
3(a) -- Copy of Restated Articles of Incorporation of KEPCo
[Annual Report on Form 10-K of KEPCo for the fiscal year
ended December 31, 1991, File No. 1-6858, Exhibit 3(a)].
*3(b) -- Copy of By-Laws of KEPCo.
4(a) -- Copy of Mortgage and Deed of Trust, dated May 1, 1949,
between KEPCo and Bankers Trust Company, as supplemented
and amended [Registration Statement No. 2-65820,
Exhibits 2(b)(1), 2(b)(2), 2(b)(3), 2(b)(4), 2(b)(5),
and 2(b)(6); Registration Statement No. 33-39394,
Exhibits 4(b) and 4(c); Registration Statement No. 33-
53226, Exhibits 4(b) and 4(c); Registration Statement
No. 33-61808, Exhibits 4(b) and 4(c), Registration
Statement No. 33-53007, Exhibits 4(b), 4(c) and 4(d)].
10(a) -- Copy of Interconnection Agreement, dated July 6, 1951,
among APCo, CSPCo, KEPCo, I&M and OPCo and with the
Service Corporation, as amended [Registration Statement
No. 2-52910, Exhibit 5(a); Registration Statement No. 2-
61009, Exhibit 5(b); and Annual Report on Form 10-K of
AEP for the fiscal year ended December 31, 1990, File<PAGE>
No. 1-3525, Exhibit 10(a)(3)].
10(b) -- Copy of Transmission Agreement, dated April 1, 1984,
among APCo, CSPCo, I&M, KEPCo, OPCo and with the Service
Corporation as agent, as amended [Annual Report on Form
10-K of AEP for the fiscal year ended December 31, 1985,
File No. 1-3525, Exhibit 10(b); and Annual Report on
Form 10-K of AEP for the fiscal year ended December 31,
1988, File No. 1-3525, Exhibit 10(b)(2)].
10(c) -- Copy of Interim Allowance Agreement [Annual Report on
Form 10-K of APCo for the fiscal year ended December 31,
1994, File No. 1-3457, Exhibit 10(d)].
*12 -- Statement re: Computation of Ratios.
*13 -- Copy those portions of the KEPCo 1994 Annual Report (for
the fiscal year ended December 31, 1994) which are
incorporated by reference in this filing.
*23 -- Consent of Deloitte & Touche LLP.
*24 -- Power of Attorney.
*27 -- Financial Data Schedules.
OPCO++
3(a) -- Copy of Amended Articles of Incorporation of OPCo, and
amendments thereto to December 31, 1993 [Registration
Statement No. 33-50139, Exhibit 4(a); Annual Report on
Form 10-K of OPCo for the fiscal year ended December 31,
1993, File No. 1-6543, Exhibit 3(b)].
*3(b) -- Certificate of Amendment to Amended Articles of
Incorporation of OPCo, dated May 3, 1994.
*3(c) -- Composite copy of the Amended Articles of Incorporation
of OPCo, as amended.
3(d) -- Copy of Code of Regulations of OPCo [Annual Report on
Form 10-K of OPCo for the fiscal year ended December 31,
1990, File No. 1-6543, Exhibit 3(d)].
4(a) -- Copy of Mortgage and Deed of Trust, dated as of October
1, 1938, between OPCo and Manufacturers Hanover Trust
Company (now Chemical Bank), as Trustee, as amended and
supplemented [Registration Statement No. 2-3828, Exhibit
B-4; Registration Statement No. 2-60721, Exhibits
2(c)(2), 2(c)(3), 2(c)(4), 2(c)(5), 2(c)(6), 2(c)(7),
2(c)(8), 2(c)(9), 2(c)(10), 2(c)(11), 2(c)(12),
2(c)(13), 2(c)(14), 2(c)(15), 2(c)(16), 2(c)(17),
2(c)(18), 2(c)(19), 2(c)(20), 2(c)(21), 2(c)(22),
2(c)(23), 2(c)(24), 2(c)(25), 2(c)(26), 2(c)(27),
2(c)(28), 2(c)(29), 2(c)(30), and 2(c)(31); Registration
Statement No. 2-83591, Exhibit 4(b); Registration
Statement No. 33-21208, Exhibits 4(a)(ii), 4(a)(iii) and
4(a)(vi); Registration Statement No. 33-31069, Exhibit
4(a)(ii); Registration Statement No. 33-44995, Exhibit
4(a)(ii); Registration Statement No. 33-59006, Exhibits
4(a)(ii), 4(a)(iii) and 4(a)(iv); Registration Statement
No. 33-50373, Exhibits 4(a)(ii), 4(a)(iii) and 4(a)(iv);
Annual Report on Form 10-K of OPCo for the fiscal year
ended December 31, 1993, File No. 1-6543, Exhibit 4(b)].
10(a)(1) -- Copy of Power Agreement, dated October 15, 1952, between
OVEC and United States of America, acting by and through
the United States Atomic Energy Commission, and,
subsequent to January 18, 1975, the Administrator of the
Energy Research and Development Administration, as
amended [Registration Statement No. 2-60015, Exhibit
5(a); Registration Statement No. 2-63234, Exhibit
5(a)(1)(B); Registration Statement No. 2-66301, Exhibit
5(a)(1)(C); Registration Statement No. 2-67728, Exhibit
5(a)(1)(D); Annual Report on Form 10-K of APCo for the
fiscal year ended December 31, 1989, File No. 1-3457,<PAGE>
Exhibit 10(a)(1)(F); Annual Report on Form 10-K of APCo
for the fiscal year ended December 31, 1992, File No. 1-
3457, Exhibit 10(a)(1)(B)].
10(a)(2) -- Copy of Inter-Company Power Agreement, dated July 10,
1953, among OVEC and the Sponsoring Companies, as
amended [Registration Statement No. 2-60015, Exhibit
5(c); Registration Statement No. 2-67728, Exhibit
5(a)(3)(B); Annual Report on Form 10-K of APCo for the
fiscal year ended December 31, 1992, File No. 1-3457,
Exhibit 10(a)(2)(B)].
10(a)(3) -- Copy of Power Agreement, dated July 10, 1953, between
OVEC and Indiana-Kentucky Electric Corporation, as
amended [Registration Statement No. 2-60015, Exhibit
5(e)].
10(b) -- Copy of Interconnection Agreement, dated July 6, 1951,
between APCo, CSPCo, KEPCo, I&M and OPCo and with the
Service Corporation, as amended [Registration Statement
No. 2-52910, Exhibit 5(a); Registration Statement No. 2-
61009, Exhibit 5(b); Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1990, File 1-
3525, Exhibit 10(a)(3)].
10(c) -- Copy of Transmission Agreement, dated April 1, 1984,
among APCo, CSPCo, I&M, KEPCo, OPCo and with the Service
Corporation as agent [Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1985, File No. 1-
3525, Exhibit 10(b); Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1988, File No. 1-
3525, Exhibit 10(b)(2)].
10(d) -- Copy of Interim Allowance Agreement [Annual Report on
Form 10-K of APCo for the fiscal year ended December 31,
1994, File No. 1-3457, Exhibit 10(d)].
10(e) -- Copy of Agreement, dated June 18, 1968, between OPCo and
Kaiser Aluminum & Chemical Corporation (now known as
Ravenswood Aluminum Corporation) and First Supplemental
Agreement thereto [Registration Statement No. 2-31625,
Exhibit 4(c); Annual Report on Form 10-K of OPCo for the
fiscal year ended December 31, 1986, File No. 1-6543,
Exhibit 10(d)(2)].
10(f) -- Copy of Power Agreement, dated November 16, 1966,
between OPCo and Ormet Generating Corporation and First
Supplemental Agreement thereto [Annual Report on Form
10-K of OPCo for the fiscal year ended December 31,
1993, File No. 1-6543, Exhibit 10(e)].
10(g) -- Copy of Amendment No. 1, dated October 1, 1973, to
Station Agreement dated January 1, 1968, among OPCo,
Buckeye and Cardinal Operating Company, and amendments
thereto [Annual Report on Form 10-K of OPCo for the
fiscal year ended December 31, 1993, File No. 1-6543,
Exhibit 10(f)].
+10(h)(1) -- AEP Deferred Compensation Agreement for certain
executive officers [Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1985, File No. 1-
3525, Exhibit 10(e)].
+10(h)(2) -- Amendment to AEP Deferred Compensation Agreement for
certain executive officers [Annual Report on Form 10-K
of AEP for the fiscal year ended December 31, 1986, File
No. 1-3525, Exhibit 10(d)(2)].
+10(i)(1) -- Management Incentive Compensation Plan [Annual Report on
Form 10-K of AEP for the fiscal year ended December 31,
1994, File No. 1-3525, Exhibit 10(i)(1)].
+10(i)(2) -- American Electric Power System Performance Share
Incentive Plan, as Amended and Restated through January
1, 1995 [Annual Report on Form 10-K of AEP for the<PAGE>
fiscal year ended December 31, 1994, File No. 1-3525,
Exhibit 10(i)(2)].
+10(j)(1) -- Excess Benefits Plan [Annual Report on Form 10-K of AEP
for the fiscal year ended December 31, 1993, File No. 1-
3525, Exhibit 10(g)(1)(A)].
+10(j)(2) -- AEP System Supplemental Savings Plan (Non-Qualified)
[Annual Report on Form 10-K of AEP for the fiscal year
ended December 31, 1993, File No. 1-3525, Exhibit
10(g)(2)].
+10(j)(3) -- Umbrella Trust for Executives [Annual Report on Form
10-K of AEP for the fiscal year ended December 31, 1993,
File No. 1-3525, Exhibit 10(g)(3)].
+10(k)(1) -- Employment Agreement between E. Linn Draper, Jr. and AEP
and the Service Corporation [Annual Report on Form 10-K
of AEGCo for the fiscal year ended December 31, 1991,
File No. 0-18135, Exhibit 10(g)(2)].
10(l)(1) -- Agreement for Lease dated as of September 17, 1992
between JMG Funding, Limited Partnership and OPCo
[Annual Report on Form 10-K of OPCo for the fiscal year
ended December 31, 1992, File No. 1-6543, Exhibit
10(l)].
*10(l)(2) -- Lease Agreement dated January 20, 1995 between OPCo and
JMG Funding, Limited Partnership, and amendment thereto
(confidential treatment requested).
*12 -- Statement re: Computation of Ratios.
*13 -- Copy of those portions of the OPCo 1994 Annual Report
(for the fiscal year ended December 31, 1994) which are
incorporated by reference in this filing.
21 -- List of subsidiaries of OPCo [Annual Report on Form 10-K
of AEP for the fiscal year ended December 31, 1994, File
No. 1-3525, Exhibit 21].
*23 -- Consent of Deloitte & Touche LLP.
*24 -- Power of Attorney.
*27 -- Financial Data Schedules.
</TABLE>
---------------
++Certain instruments defining the rights of holders of long-term
debt of the registrants included in the financial statements of
registrants filed herewith have been omitted because the total
amount of securities authorized thereunder does not exceed 10% of
the total assets of registrants. The registrants hereby agree to
furnish a copy of any such omitted instrument to the SEC upon
request.<PAGE>
<PAGE>
Exhibit 3(b)
APPALACHIAN POWER COMPANY
ARTICLES OF AMENDMENT
to the
RESTATED ARTICLES OF INCORPORATION, AS AMENDED
1. The name of the corporation is APPALACHIAN POWER
COMPANY.
2. The amendment is to create a new Series of 300,000
shares of Cumulative Preferred Stock, without par value,
consisting of shares of such Cumulative Preferred Stock with
designation, description and terms as follows:
(a) The distinctive serial designation of such series
shall be "6.85% Cumulative Preferred Stock".
(b) The annual dividend rate for such series shall be
6.85% per share per annum, which dividend shall be calculat-
ed, per share, at such percentage multiplied by $100, and
the date from which dividends on all shares of said series
issued prior to the record date for the dividend payable
August 1, 1994, shall be cumulative, shall be the date of
original issuance of the shares of such series.
(c) Such series shall not be subject to redemption
except as provided in subparagraph (e) below.
(d) The preferential amounts to which the holders of
shares of such series shall be entitled upon any voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation shall be $100 per share, plus accrued and unpaid
dividends.
(e)(1) A sinking fund shall be established for the
retirement of the shares of such series. So long as there
shall remain outstanding any shares of such series, the
Corporation shall, to the extent not prohibited by law, on
August 1 of each year commencing with the year 2000, redeem
as and for a sinking fund requirement, 60,000 shares of the
6.85% Cumulative Preferred Stock at a sinking fund redemp-
tion price of $100 per share plus accrued unpaid dividends
to the date of redemption. The sinking fund requirement
shall be cumulative so that if on any such August 1 the
sinking fund requirement shall not have been met, then such
sinking fund requirement, to the extent not met, shall
become an additional sinking fund requirement for the next
succeeding August 1 on which such redemption may be
effected.
(2) The Corporation shall have the non-cumulative
option, on any sinking fund date as provided in subparagraph
(e)(1), to redeem at the sinking fund redemption price of
$100 per share plus accrued and unpaid dividends to the date
of redemption up to an additional 60,000 shares of such
series. No redemption made pursuant to this subparagraph
(e)(2) shall be deemed to fulfill any sinking fund redemp-
tion established pursuant to subparagraph (e)(1).
(3) The Corporation shall be entitled, at its
election, to credit against the sinking fund requirement due
on August 1 of any year pursuant to subparagraph (e)(1)
shares of such series theretofore purchased or otherwise
acquired by the Corporation (other than pursuant to the
option provided by subparagraph (e)(2)) and not previously
credited against any such sinking fund requirement.
(f) The shares of such series shall not have any
rights to convert the same into and/or purchase stock of any
other series or class or any other securities, or have any
special rights other than those specified herein.
3. The amendment was adopted on June 2, 1994.
4. The amendment was duly adopted by the Board of
Directors of the Corporation without shareholder action and
shareholder action was not required.
5. The amendment, and the certificate issued by the
Virginia State Corporation Commission related thereto, shall be
effective on June 14, 1994.
APPALACHIAN POWER COMPANY
By__/s/ Jeffrey D. Cross_
(Jeffrey D. Cross)
Assistant Secretary
June 6, 1994
</PAGE>
2<PAGE>
<PAGE>
Exhibit 3(c)
[COMPOSITE]
RESTATED ARTICLES OF INCORPORATION
OF
APPALACHIAN POWER COMPANY
(a Virginia Public Service Corporation)
ARTICLE I
NAME
The name of the Corporation is:
APPALACHIAN POWER COMPANY
ARTICLE II
PURPOSE
The purpose of the Corporation is to conduct business as a
public service company for the generation, transmission,
distribution and sale of electricity within and without the
Commonwealth of Virginia, with all the rights, powers and
privileges of such companies conferred by the constitution and
laws of the Commonwealth of Virginia as they now or may hereafter
exist. The Corporation shall have the power to conduct any
business in any place, other than the Commonwealth of Virginia,
authorized or permitted by the laws thereof.
ARTICLE III
Directors
The number of Directors shall be fixed by the By-Laws. In
the absence of a By-Law establishing the number of Directors, the
number of Directors shall be ten.
ARTICLE IV
Common Stock
The Corporation shall have authority to issue 30,000,000
shares of Common Stock without par value. No holder of Common
Stock shall have any pre-emptive right to acquire unissued shares
of the Corporation or to acquire any securities convertible into
or exchangeable for such shares or to acquire any options,
warrants or rights to purchase such shares.<PAGE>
ARTICLE V
Cumulative Preferred Stock
The Corporation shall have authority to issue 8,000,000
shares of Cumulative Preferred Stock without par value, except
that the aggregate involuntary liquidation price for all shares
of Cumulative Preferred Stock outstanding may not exceed
$300,000,000.
Subject to the provisions of the following paragraphs (1)
through (11) hereof, the Board of Directors is hereby empowered
to cause the Cumulative Preferred Stock to be issued in series
with such variations as may be determined by the Board of
Directors prior to the issue thereof.
(1) The shares of the Cumulative Preferred Stock of
different series may vary as to:
(a) the distinctive serial designations;
(b) the rate of dividends and the dates from
which dividends shall be cumulative as provided in
paragraph (2);
(c) the price or prices at and the terms and
conditions on which such shares may be redeemed;
(d) the amount or amounts payable upon such
shares in event of involuntary liquidation;
(e) the amount or amounts payable upon such
shares in event of voluntary liquidation;
(f) sinking fund provisions (if any) for the
redemption or purchase of such shares; and
(g) the terms and conditions (if any) on which
such shares may be converted.
The shares of all series of the Cumulative Preferred Stock
shall in all other respects be equal, except for the right
to vote as provided herein. No shares of the Cumulative
Preferred Stock shall be entitled to any right of partici-
pation.
(2) The holders of each series of the Cumulative Pre-
ferred Stock at the time outstanding shall be entitled to
receive, but only when and as declared by the Board of
Directors, out of funds legally available for the payment of
dividends, cumulative preferential dividends, at the annual
dividend rate for the particular series fixed therefor as
herein provided, payable quarter-yearly on the first days of
February, May, August and November in each year, to
stockholders of record on the respective dates, not
exceeding fifty (50) days and not less than ten (10) days
preceding such dividend payment dates, fixed for the purpose
by the Board of Directors. The shares of any series of
2<PAGE>
Cumulative Preferred Stock issued by the Corporation prior
to June 1, 1977, for which the annual dividend rate is
designated as a specified percentage per annum, shall be
entitled to receive such dividends, calculated, per share,
at the percentage specified for such series multiplied by
$100. No dividends shall be declared on any series of the
Cumulative Preferred Stock in respect of any quarter-yearly
dividend period unless there shall likewise be declared on
all shares of all series of the Cumulative Preferred Stock
at the time outstanding, like proportionate dividends,
ratably, in proportion to the respective annual dividend
rates fixed therefor, in respect of the same quarter-yearly
dividend period, to the extent that such shares are entitled
to receive dividends for such quarter-yearly dividend
period. The dividends on shares of all series of the
Cumulative Preferred Stock shall be cumulative. Dividends
on shares of any series shall be cumulative from the date or
dates fixed by the Board of Directors, or, if not so fixed,
from the date of the initial issuance of such shares. All
dividends declared payable to the holders of record of the
Cumulative Preferred Stock of any series as of a date on
which shares of the Cumulative Preferred Stock of such
series are owned by the Corporation shall be deemed to have
been paid in respect of such shares owned by the Corporation
on such date. Unless dividends on all outstanding shares of
each series of the Cumulative Preferred Stock, at the annual
dividend rate and from the dates for accumulation thereof
fixed as herein provided shall have been paid for all past
quarter-yearly dividend periods, but without interest on
cumulative dividends, no dividends shall be paid or declared
and no other distribution shall be made on the Common Stock,
and no Common Stock shall be purchased or otherwise acquired
for value by the Corporation. The holders of the Cumulative
Preferred Stock of any series shall not be entitled to
receive any dividends thereon other than the dividends
referred to in this paragraph (2).
(3) The Corporation, by action of its Board of
Directors, may redeem the whole or any part of any series of
the Cumulative Preferred Stock, at any time or from time to
time, by paying in cash the redemption price of the shares
of the particular series fixed therefor as herein provided,
together with a sum in the case of each share of each series
so to be redeemed, computed at the annual dividend rate for
the series of which the particular share is a part from the
date from which dividends on such share became cumulative to
the date fixed for such redemption, less the aggregate of
the dividends theretofore or on such redemption date paid
thereon. Notice of every such redemption shall be given by
publication at least once in one daily newspaper printed in
the English language and of general circulation in Roanoke,
Virginia, and in one daily newspaper printed in the English
language and of general circulation in the Borough of
Manhattan, The City of New York, the first publication in
such newspapers to be at least thirty (30) days and not more
than ninety (90) days prior to the date fixed for such
redemption. At least thirty (30) days' and not more than
ninety (90) days' previous notice of every such redemption
3<PAGE>
shall also be mailed to the holders of record of the shares
of the Cumulative Preferred Stock so to be redeemed, at
their respective addresses as the same shall appear on the
books of the Corporation; but no failure to mail such notice
nor any defect therein or in the mailing thereof shall
affect the validity of the proceedings for the redemption of
any shares of the Cumulative Preferred Stock so to be
redeemed. In case of the redemption of a part only of any
series of the Cumulative Preferred Stock at the time
outstanding, the Corporation shall select by lot, or in such
other manner as the Board of Directors may determine, the
shares so to be redeemed. The Board of Directors shall have
full power and authority, subject to the limitations and
provisions herein contained, to prescribe the manner in
which, and the terms and conditions upon which, the shares
of the Cumulative Preferred Stock shall be redeemed from
time to time. If such notice of redemption shall have been
duly given by publication, and if on or before the
redemption date specified in such notice all funds necessary
for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds, in
trust for the account of the holders of the shares to be
redeemed, so as to be and continue to be available therefor,
then, notwithstanding that any certificate for such shares
so called for redemption shall not have been surrendered for
cancellation, from and after the date fixed for redemption,
the shares represented thereby shall no longer be deemed
outstanding, the right to receive dividends thereon shall
cease to accrue and all rights with respect to such shares
so called for redemption shall forthwith on such redemption
date cease and terminate, except only the right of the
holders thereof to receive, out of the funds so set aside in
trust, the amount payable upon redemption thereof, without
interest; provided, however, that the Corporation may, after
giving notice by publication of any such redemption as
hereinbefore provided or after giving to the bank or trust
company hereinafter referred to irrevocable authorization to
give such notice by publication, and at any time prior to
the redemption date specified in such notice, deposit in
trust, for the account of the holders of the shares to be
redeemed, funds necessary for such redemption with a bank or
trust company in good standing, organized under the laws of
the United States of America or of the State of New York,
doing business in the Borough of Manhattan, The City of New
York, and having capital, surplus and undivided profits
aggregating at least $50,000,000, or organized under the
laws of the Commonwealth of Virginia, doing business in the
City of Richmond, Virginia, and having capital, surplus and
undivided profits aggregating at least $10,000,000,
designated in such notice of redemption, and, upon such
deposit in trust, all shares with respect to which such
deposit shall have been made shall no longer be deemed to be
outstanding, and all rights with respect to such shares
shall forthwith cease and terminate, except only the right
of the holders thereof to receive, out of the funds so
deposited in trust, from and after the date of such deposit,
the amount payable upon the redemption thereof, without
interest. Nothing herein contained shall limit any right of
4<PAGE>
the Corporation to purchase or otherwise acquire any shares
of the Cumulative Preferred Stock; provided, however, that
the Corporation shall not, if and when dividends payable on
the Cumulative Preferred Stock shall be in default, purchase
or otherwise acquire for value any shares of the Cumulative
Preferred Stock (except by redemption of all outstanding
shares of each series of the Cumulative Preferred Stock)
unless such purchase or acquisition shall have been ordered,
approved, or permitted by the Securities and Exchange
Commission or any successor commission under the provisions
of the Public Utility Holding Company Act of 1935 as at the
time in effect.
(4) Before any amount shall be paid to, or any assets
distributed among, the holders of the Common Stock upon any
liquidation, dissolution or winding up of the Corporation,
and after paying or providing for the payment of all
creditors of the Corporation, the holders of each series of
the Cumulative Preferred Stock at the time outstanding shall
be entitled to be paid in cash the amount for the particular
series fixed therefor as herein provided, together with a
sum in the case of each such share of each series, computed
at the annual dividend rate for the series of which the
particular share is a part, from the date from which
dividends on such share became cumulative to the date fixed
for the payment of such distributive amount, less the
aggregate of the dividends theretofore or on such date paid
thereon; but no payments on account of such distributive
amounts shall be made to the holders of any series of the
Cumulative Preferred Stock unless there shall likewise be
paid at the same time to the holders of each other series of
the Cumulative Preferred Stock at the time outstanding like
proportionate distributive amounts, ratably, in proportion
to the full distributive amounts to which they are
respectively entitled as herein provided. The holders of
the Cumulative Preferred Stock of any series shall not be
entitled to receive any amounts with respect thereto upon
any liquidation, dissolution or winding up of the
Corporation other than the amounts referred to in this
paragraph. Neither the consolidation or merger of the
Corporation with any other corporation or corporations, nor
the sale or transfer by the Corporation of all or any part
of its assets, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation.
(5) Whenever the full dividends on all series of the
Cumulative Preferred Stock at the time outstanding for all
past quarter-yearly dividend periods shall have been paid or
declared and set apart for payment, then, subject to the
provisions of subparagraph (7)(B)(c) hereof, such dividends
(payable in cash, stock or otherwise) as may be determined
by the Board of Directors may be declared and paid on the
Common Stock, but only out of funds legally available for
the payment of dividends; provided, however, that so long as
any shares of the Cumulative Preferred Stock of any series
are outstanding, the Corporation shall not declare or pay
any dividends on the Common Stock of the Corporation except
as follows:
5<PAGE>
(a) If and so long as the Common Stock Equity at
the end of the calendar month immediately preceding the
date on which a dividend on the Common Stock is
declared is, or as a result of such dividend would
become, less than 20% of total capitalization, the
Corporation shall not declare such dividends in an
amount which, together with all other dividends on the
Common Stock paid within the year ending with and
including the date on which such dividend is payable,
exceeds 50% of the net income of the Corporation
available for dividends on the Common Stock for the
twelve full calendar months immediately preceding the
calendar month in which such dividends are declared,
except in an amount not exceeding the aggregate of
dividends on the Common Stock which could have been,
but have not been, declared under this clause (a); and
(b) If and so long as the Common Stock Equity at
the end of the calendar month immediately preceding the
date on which a dividend on the Common Stock is
declared is, or as a result of such dividend would
become, less than 25% but not less than 20% of total
capitalization, the Corporation shall not declare such
dividends in an amount which, together with all other
dividends on the Common Stock paid within the year
ending with and including the date on which such
dividend is payable, exceeds 75% of the net income of
the Corporation available for dividends on the Common
Stock for the twelve full calendar months immediately
preceding the calendar month in which such dividends
are declared, except in an amount not exceeding the
aggregate of dividends on the Common Stock which could
have been, but have not been, declared under clause (a)
above and this clause (b).
(c) At any time when the Common Stock Equity is
25% or more of total capitalization, the Corporation
may not declare dividends on shares of the Common Stock
which would reduce the Common Stock Equity below 25% of
total capitalization, except to the extent provided in
clauses (a) and (b) above.
For purposes of this paragraph (5):
(i) The term "Common Stock" shall mean any
stock of the Corporation ranking junior to the
Cumulative Preferred Stock as to dividends or
assets; the term "dividends" shall mean any
dividend or distribution on the Common Stock
(other than in shares of Common Stock) or any
purchase or acquisition for value of any shares of
Common Stock; and the term "Common Stock Equity"
shall mean the aggregate of the par value of, or
stated capital represented by, the outstanding
shares of Common Stock, all earned surplus and
capital surplus, and any premiums on the Common
Stock then carried on the books of the
Corporation, less
6<PAGE>
(I) the excess, if any, of the
aggregate amount payable on involuntary
liquidation of the Corporation upon all
outstanding shares of the Cumulative
Preferred Stock of the Corporation of all
series (including any stock of the
Corporation ranking prior to or on a parity
with the Cumulative Preferred Stock) over the
sum of the aggregate stated capital
attributable to such shares and any premiums
thereon;
(II) any amounts on the books of the
Corporation known, or estimated if not known,
to represent the excess, if any, of recorded
value over original cost of used or useful
utility plant; and
(III) any intangible items set forth on
the asset side of the balance sheet of the
Corporation as the result of accounting
convention, such as unamortized debt discount
and expense; provided, however, that no
deductions shall be required to be made in
respect of items referred to in subdivision
(II) and (III) of this subparagraph (i) in
cases in which such items are being amortized
or are provided for, or are being provided
for, by reserves.
(ii) The term "total capitalization" shall
mean the aggregate of
(I) the principal amount of all
outstanding indebtedness of the Corporation
maturing more than twelve months after the
date of issue thereof, and
(II) the stated capital represented by,
and any premiums carried on the books of the
Corporation in respect of, the outstanding
shares of all classes of the capital stock of
the Corporation, earned surplus and capital
surplus, less any amounts required to be
deducted pursuant to subdivisions (II) and
(III) of subparagraph (i) above in the
determination of Common Stock Equity.
(6) In the event of any liquidation, dissolution or
winding up of the Corporation, all assets and funds of the
Corporation remaining after paying or providing for the
payment of all creditors of the Corporation and after paying
or providing for the payment to the holders of shares of all
series of the Cumulative Preferred Stock of the full
distributive amounts to which they are respectively entitled
as herein provided, shall be divided among and paid to the
holders of the Common Stock according to their respective
rights and interests.
7<PAGE>
(7)(A) So long as any shares of the Cumulative
Preferred Stock of any series are outstanding, the
Corporation shall not, without the consent (given by vote at
a meeting called for that purpose) of the holders of more
than two-thirds of the total number of votes which holders
of the outstanding shares of the Cumulative Preferred Stock
of all series are entitled to cast:
(a) Increase the total authorized amount of the
Cumulative Preferred Stock; or
(b) Create or authorize any series of stock
(other than a series of the Cumulative Preferred Stock)
ranking prior to or on a parity with Cumulative
Preferred Stock as to assets or dividends, or create or
authorize any obligation or security convertible into
shares of stock of any such series, or issue any shares
of any such stock ranking prior to the Cumulative
Preferred Stock (other than upon the conversion of any
such convertible obligation or security), or issue any
such convertible obligation or security, more than
twelve months in the case of any such issuance after
the date as of which the Corporation was empowered to
create or authorize such prior ranking stock or such
convertible obligation or security; or
(c) Amend, alter, change or repeal any of the
express terms of the Cumulative Preferred Stock or of
any series of the Cumulative Preferred Stock then
outstanding in a manner prejudicial to the holders
thereof; provided, however, that if any such amendment,
alteration, change or repeal would be prejudicial to
the holders of one or more, but not all, of the series
of the Cumulative Preferred Stock at the time
outstanding, such consent of the holders of two-thirds
of the total number of votes which holders of the
shares of each series prejudicially affected are
entitled to cast shall be required.
(B) So long as any shares of the Cumulative
Preferred Stock of any series are outstanding, the
Corporation shall not, without the consent (given by vote at
a meeting called for that purpose) of the holders of a
majority of the total number of votes which holders of the
outstanding shares of the Cumulative Preferred Stock of all
series are entitled to cast, unless the consent of the
holders of shares having some greater proportion of the
total vote is required:
(a) Merge or consolidate with or into any other
corporation or corporations, or sell or otherwise
dispose of all or substantially all of its assets,
unless such merger, consolidation, sale or disposition,
or the issuance and assumption of all securities to be
issued or assumed in connection with any such
transaction, shall have been ordered, approved, or
permitted by the Securities and Exchange Commission or
any successor commission under the provisions of the
8<PAGE>
Public Utility Holding Company Act of 1935 as at the
time in effect; provided that the provisions of this
clause (a) shall not apply to a purchase or other
acquisition by the Corporation of franchises or assets
of another corporation in any manner which does not
involve a merger or consolidation; or
(b) Issue or assume any evidences of
indebtedness, secured or unsecured, other than bonds or
other securities representing indebtedness of the
character described hereafter in (1), (2), (3), (4),
(5) and (6) of this clause (b), for purposes other than
the refunding or renewing of outstanding evidences of
indebtedness theretofore issued or assumed by the
Corporation resulting in equal or longer maturities or
redeeming or otherwise retiring all outstanding shares
of the Cumulative Preferred Stock, if, immediately
after such issue or assumption, (I) the total principal
amount of all such indebtedness issued or assumed by
the Corporation and then outstanding (including the
evidences of indebtedness then to be issued or assumed)
would exceed twenty per centum (20%) of the aggregate
of (i) the total principal amount of all bonds or other
securities representing indebtedness of the character
described hereafter in (1), (2), (3), (4), (5) and (6)
of this clause (b), issued or assumed by the
Corporation and then to be outstanding, and (ii) the
stated capital and surplus of the Corporation as then
to be stated on the books of account of the
Corporation, unless such evidences of indebtedness are
(1) bonds of the Corporation issued under the Mortgage
of the Corporation to Bankers Trust Company and R.
Gregory Page, as Trustees, dated as of December 1, 1940
(hereinafter referred to as the "bonds of the
Corporation"), or (2) any bonds issued under a new
mortgage replacing said Mortgage, dated as of December
1, 1940, or (3) any bonds issued under any other new
mortgage of the Corporation provided that said
Mortgage, dated as of December 1, 1940, or any mortgage
replacing it, shall have been irrevocably closed
against the authentication of additional bonds
thereunder, or (4) any indebtedness secured by bonds of
the Corporation or by bonds issued under any such new
mortgage, in either case in a principal amount not in
excess of the principal amount of such pledged bonds,
or (5) any indebtedness secured by bonds issued under a
mortgage existing at the time of acquisition on
property acquired by the Corporation, whether by
consolidation, merger, exchange, purchase, lease, or in
any other way whatsoever, provided that said mortgage,
or any mortgage replacing it, shall be irrevocably
closed against the authentication of additional bonds
thereunder, or (6) obligations to pay the purchase
price of material or equipment made in the ordinary
course of the Corporation's business, or (II) the total
outstanding principal amount of all unsecured notes,
debentures or other securities representing unsecured
debt of the Corporation (other than obligations of the
9<PAGE>
character described in (6) of this clause (b)) would
thereby exceed twenty per centum (20%) of the aggregate
of (i) the total principal amount of all bonds or other
secured indebtedness of the Corporation, and (ii) the
stated capital and surplus of the Corporation as then
to be stated on the books of account of the
Corporation, or (III) the total outstanding principal
amount of all unsecured notes, debentures or other
securities representing unsecured indebtedness of the
Corporation (other than obligations of the character
described in (6) of this clause (b) of maturities of
less than 10 years would thereby exceed then per centum
(10%) of the aggregate of (i) the total principal
amount of all bonds or other secured indebtedness of
the Corporation, and (ii) the stated capital and
surplus of the Corporation as then to be stated on the
books of account of the Corporation; provided that, for
the purposes of this clause (b) only, the payment due
upon the maturity of unsecured debt having an original
single maturity of 10 or more years or the payment due
upon the final maturity of any unsecured serial debt
which had original maturities of 10 or more years shall
not be regarded as unsecured debt of a maturity of less
than 10 years until such payment shall be required to
be made within 3 years; or
(c) Issue any additional shares, or reissue any
reacquired shares, of Cumulative Preferred Stock or of
any other class of stock ranking on a parity with the
outstanding shares of the Cumulative Preferred Stock as
to dividends or assets for any purpose other than to
refinance an amount of outstanding Cumulative Preferred
Stock, or stock ranking prior to or on a parity with
the Cumulative Preferred Stock as to dividends or
assets, having an aggregate involuntary liquidation
price equal to the aggregate involuntary liquidation
price of such issued or reissued shares, unless
(i) the net income of the Corporation,
determined in accordance with generally accepted
accounting principles to be available for the
payment of dividends for a period of twelve
consecutive calendar months within the fifteen
calendar months immediately preceding the calendar
month of such issuance, is equal to at least twice
the annual dividend requirements on the Cumulative
Preferred Stock (including dividend requirements
on any class of stock ranking prior to or on a
parity with the shares to be issued as to
dividends or assets), which will be outstanding
immediately after the issuance of such shares;
(ii) the gross income of the Corporation for
said period, determined in accordance with
generally accepted accounting principles (but in
any event after all taxes including taxes based on
income), is equal to at least one and one-half
times the aggregate of the annual interest charges
10<PAGE>
on indebtedness of the Corporation (excluding
interest charges on indebtedness to be retired by
the application of the proceeds from the issuance
of such shares) and the annual dividend require-
ments on the Cumulative Preferred Stock (including
dividend requirements on any class of stock
ranking prior to or on a parity with the shares to
be issued as to dividends or assets), which will
be outstanding immediately after the issuance of
such shares; and
(iii) the aggregate of the Common Stock
Equity (the words "Common Stock" and "Common Stock
Equity" having, for the purposes of this subpara-
graph (7)(B)(c), the respective meanings defined
in paragraph (5)(i) hereof) is at least equal to
the aggregate amount payable in connection with an
involuntary liquidation of the Corporation with
respect to all shares of the Cumulative Preferred
Stock and all shares of stock, if any, ranking
prior thereto or on a parity therewith as to
dividends or assets, which will be outstanding
immediately after the issuance of such shares of
Cumulative Preferred Stock or stock ranking prior
to or on a parity therewith.
If for the purposes of meeting the require-
ments of subdivision (iii) of clause (c), it shall
have been necessary to take into consideration any
earned surplus of the Corporation, the Corporation
shall not thereafter pay any dividends on or make
any distributions in respect of, or purchase or
otherwise acquire for value, Common Stock which
would result in reducing the Common Stock Equity
to an amount less than the amount payable on
involuntary liquidation of the Corporation with
respect to all shares of the Cumulative Preferred
Stock and all shares ranking prior to or on a
parity with the Cumulative Preferred Stock as to
dividends or assets, at the time outstanding.
If during the period as of which gross income
is to be determined for the purposes set forth in
clause (c), the amount, if any, required to be
expended by the Corporation for property additions
pursuant to a renewal and replacement fund or
similar fund established under its mortgage
indenture shall exceed the amount deducted in the
determination of such gross income on account of
depreciation and amortization of electric plant
acquisition adjustments, such excess shall also be
deducted in determining such gross income.
(8) No holder of Cumulative Preferred Stock shall
have any pre-emptive right to acquire unissued shares
of the Corporation or to acquire any securities
convertible into or exchangeable for such shares or to
11<PAGE>
acquire any options, warrants or rights to purchase
such shares.
(9)(A) Every holder of any series of Cumulative
Preferred Stock issued by the Corporation prior to June
1, 1977, shall be entitled to vote together with the
holders of the Common Stock (every holder of Common
Stock having one vote for each share of stock held) for
the election of Directors and upon all other matters,
except as otherwise provided in this paragraph (9) or
in para-graph (7) hereof or as otherwise required by
law. Every holder of any series of Cumulative
Preferred Stock issued by the Corporation on or after
June 1, 1977, shall be entitled to vote only as
provided in paragraph (7), as provided in subparagraphs
(B) through (F) of this para-graph (9) or as otherwise
required by law.
(B) On any matter on which the holders of any
series of the Cumulative Preferred Stock shall be
entitled to vote, each share shall entitle the holder
thereof to a vote equal to the fraction of which the
involuntary liquidation price fixed for such share as
herein provided is the numerator and $100 is the
denominator.
(C) If and when dividends payable on the
Cumulative Preferred Stock shall be in default in an
amount equivalent to four (4) full quarter-yearly
dividends on all shares of all series of the Cumulative
Preferred Stock at the time outstanding, and until all
dividends in default on the Cumulative Preferred Stock
shall have been paid, the holders of all shares of the
Cumulative Preferred Stock, voting separately as one
class, shall be entitled to elect the smallest number
of Directors necessary to constitute a majority of the
full Board of Directors, and the holders of the Common
Stock, voting separately as a class, shall be entitled
to elect the remaining Directors of the Corporation.
The terms of office of all persons who may be Directors
of the Corporation at the time shall terminate upon the
election of a majority of the Board of Directors by the
holders of the Cumulative Preferred Stock, whether or
not the holders of the Common Stock shall then have
elected the remaining Directors of the Corporation.
(D) If and when all dividends then in default
on the Cumulative Preferred Stock at the time
outstanding shall be paid (and such dividends shall be
declared and paid out of any funds legally available
therefor as soon as reasonably practicable), the
Cumulative Preferred Stock shall thereupon be divested
of any special right with respect to the election of
Directors provided in subparagraph (C) hereof, and the
voting power of the Cumulative Preferred Stock and the
Common Stock shall revert to the status existing before
the occurrence of such default; but always subject to
the same provisions for vesting such special rights in
12<PAGE>
the Cumulative Preferred Stock in case of further like
default or defaults in dividends thereon. Upon the
termination of any such special right upon payment of
all accumulated and defaulted dividends on such stock,
the terms of office of all persons who may have been
elected Directors of the Corporation by vote of the
holders of the Cumulative Preferred Stock, as a class,
pursuant to such special right shall forthwith
terminate.
(E) In case of any vacancy in the Board of
Directors occurring among the Directors elected by the
holders of the Cumulative Preferred Stock, as a class,
pursuant to subparagraph (C) hereof, the holders of the
Cumulative Preferred Stock then outstanding and
entitled to vote may elect a successor to hold office
for the unexpired term of the Director whose place
shall be vacant. In case of a vacancy in the Board of
Directors occurring among the Directors elected by the
holders of the Common Stock, as a class, pursuant to
subparagraph (C) hereof, the holders of the Common
Stock then out-standing and entitled to vote may elect
a successor to hold office for the unexpired term of
the Director whose place shall be vacant. In all other
cases, any vacancy occurring among the Directors shall
be filled by the vote of a majority of the remaining
Directors.
(F) Whenever the holders of the Cumulative
Preferred Stock, as a class, become entitled to elect
Directors of the Corporation pursuant to either sub-
paragraph (C) or (E) hereof, or whenever the holders of
the Common Stock, as a class, become entitled to elect
Directors of the Corporation pursuant to either sub-
paragraph (C) or (E) hereof, a meeting of the holders
of the Cumulative Preferred Stock or of the Common
Stock, as the case may be, shall be held at any time
thereafter upon call by the holders of shares of the
Cumulative Preferred Stock or of the Common Stock, as
the case may be, entitling them to cast at least 1,000
votes for such purpose, or upon call by the Secretary
of the Corporation at the request in writing of any
stockholder addressed to him at the principal office of
the Corporation. At all meetings of stockholders held
for the purpose of electing Directors during such times
as the holders of shares of the Cumulative Preferred
Stock shall have the special right, voting separately
as one class, to elect Directors pursuant to either
subparagraph (C) or (E) hereof, the presence in person
or by proxy of the holders of a majority of the
outstanding shares of the Common Stock shall be
required to constitute a quorum of such class for the
election of Directors, and the presence in person or by
proxy of the holders of a majority of the total number
of votes which holders of the outstanding shares of all
series of the Cumulative Preferred Stock are entitled
to cast shall be required to constitute a quorum of
such class for the election of Directors; provided,
13<PAGE>
however, that the absence of a quorum of the holders of
stock of either such class shall not prevent the
election at any such meeting or adjournment thereof of
Directors by the other such class if the necessary
quorum of the holders of stock of such other class is
present in person or by proxy at such meeting; and
provided further that in the absence of a quorum of the
holders of stock of either such class, the holders of a
majority of the votes which holders of the stock of
such class who are present in person or by proxy are
entitled to cast shall have power to adjourn the
election of the Directors to be elected by such class
from time to time without notice other than
announcement at the meeting until the holders of the
requisite number of shares of such class shall be
present in person or by proxy.
(G) Except when some mandatory provision of
law shall be controlling and except as otherwise
provided in clause (c) of paragraph (7)(A) hereof and,
as regards the special rights of any series of the
Cumulative Preferred Stock, as provided in the terms
determined for such series, whenever shares of two or
more series of the Cumulative Preferred Stock are
outstanding, no particular series of the Cumulative
Preferred Stock shall be entitled to vote as a separate
series on any matter and all shares of the Cumulative
Preferred Stock of all series shall be deemed to
constitute but one class for any purpose for which a
vote of the stockholders of the Corporation by classes
may now or hereafter be required.
(10) The Corporation may, at any time and from
time to time, issue and dispose of any of the
authorized and unissued shares of the Cumulative
Preferred Stock and Common Stock for such consideration
as may be fixed by the Board of Directors, subject to
any provisions of law then applicable, and subject to
the provisions of any resolutions of the stockholders
of the Corporation relating to the issue and
disposition of such shares; provided, however, that, in
the case of the Cumulative Preferred Stock, such
consideration shall have a value not less than the
aggregate preferential amount, fixed as herein
provided, payable upon such shares in the event of
involuntary liquidation.
(11) As of June 1, 1977, 1,079,307 shares of the
Cumulative Preferred Stock are issued and designated in
series; and the Corporation has determined and fixed
the designations, descriptions and terms of such series
as follows:
DIVISION A
4-1/2% Cumulative Preferred Stock
14<PAGE>
300,000 shares of Cumulative Preferred Stock are
designated "4-1/2% Cumulative Preferred Stock." The
description and terms of the shares of such series, and
the respects in which they shall vary from other shares
of Cumulative Preferred Stock, are as follows:
(a) The annual dividend rate for such series
shall be 4-1/2% per annum;
(b) The redemption price for such series shall be
$110 per share;
(c) The amounts which shall be paid to the
holders of shares of such series upon any liquidation,
dissolution or winding up of the Corporation shall be
$110 per share, upon any voluntary
liquidation, dissolution or winding up of the
Corporation, except that if such voluntary
liquidation, dissolution or winding up of the
Corporation shall have been approved by the vote
in favor thereof of the holders of a majority of
the total number of shares of the 4-1/2%
Cumulative Preferred Stock then out-standing,
given at a meeting called for that purpose, the
amount so payable on such voluntary liquidation,
dissolution, or winding up shall be $100 per
share; or
$100 per share, in the event of any
involuntary liquidation, dissolution or winding up
of the Corporation;
(d) There shall not be any sinking fund provided
for the purchase or redemption of shares of the 4-1/2%
Cumulative Preferred Stock; and
(e) The shares of the 4-1/2% Cumulative Preferred
Stock shall not have any rights to convert the same
into and/or purchase stock of any other series or class
or other securities, or any special rights other than
those specified herein.
DIVISION B
4.50% Cumulative Preferred Stock
29,307 shares of Cumulative Preferred Stock are
designated "4.50% Cumulative Preferred Stock." The
description and terms of the shares of such series, and the
respects in which they shall vary from other shares of
Cumulative Preferred Stock, are as follows:
(a) The annual dividend rate for such series
shall be 4.50% per annum;
(b) The regular redemption price for such series
shall be $102 per share; the shares of such series
15<PAGE>
shall be redeemable for the sinking fund provided for
such series, or for any other sinking fund applicable
to the shares of such series, at $100 per share
(hereinafter referred to as the "sinking fund
redemption price");
(c) The amounts which shall be paid to the
holders of shares of such series upon any liquidation,
dissolution or winding up of the Corporation shall be:
$104 per share upon any voluntary
liquidation, dissolution or winding up of the
Corporation, except that if such voluntary
liquidation, dissolution or winding up of the
Corporation shall have been approved by the vote
in favor thereof of the holders of a majority of
the total number of shares of such series then
outstanding given at a meeting called for that
purpose, the amount so payable on such voluntary
liquidation, dissolution or winding up shall be
$100 per share; or
$100 per share upon any involuntary
liquidation, dissolution or winding up of the
Corporation;
(d) There shall be a sinking fund for the benefit
of the shares of such series. So long as there shall
remain outstanding any shares of such series, the
Corporation, after the full dividends on all series of
the Cumulative Preferred Stock at the time outstanding
for all past quarter-yearly dividend periods shall have
been paid or declared and set apart for payment, shall,
on or before November 30 in each year, set aside out of
funds legally available therefor as the sinking fund
requirement for such year an amount in cash sufficient
to redeem, at the sinking fund redemption price
provided in (b) above, two per cent (2%) of the maximum
number of shares of the 4.50% Cumulative Preferred
Stock which shall theretofore have been issued and
outstanding at any one time (75,000 shares), provided,
however, that against the sinking fund requirement for
any calendar year the Corporation may credit an amount
equal to the sinking fund redemption price in respect
of any shares of such series which it may have
purchased for retirement or redeemed otherwise than
through the sinking fund and not theretofore credited
against any sinking fund require-ment. Unless the
sinking fund requirement for such series for all past
sinking fund periods shall have been set aside, no
dividends shall be paid or declared and no other
distribution shall be made on the Common Stock, and no
Common Stock shall be purchased or otherwise acquired
for value by the Corporation. The Corporation may
apply any cash set aside for sinking fund purposes to
the purchase or redemption and cancellation of shares
of such series. Any balance of cash so set aside
remaining after 90 days from November 30th of each year
16<PAGE>
shall be applied promptly to the redemption and
cancellation of shares of such series. All shares to
be redeemed through the sinking fund shall be selected
by lot in such manner as the Board of Directors of the
Corporation may determine. Notwithstanding the
foregoing, the cancellation of shares of such series so
purchased or redeemed shall not retire such shares or
decrease capital except upon compliance with the
provisions of Section 13.1-63 of the Code of Virginia
as at the time in effect; and
(e) The shares of such series shall not have any
rights to convert the same into and/or purchase stock
of any other series or class or other securities, or
any special rights other than those specified herein.
DIVISION C
8.12% Cumulative Preferred Stock
300,000 shares of Cumulative Preferred Stock are
designated "8.12% Cumulative Preferred Stock." The
description and terms of the shares of such series, and the
respects in which they shall vary from other shares of
Cumulative Preferred Stock, are as follows:
(a) The annual dividend rate for such series
shall be 8.12% per annum;
(b) The redemption price for such series shall be
$107.59 per share prior to September 1, 1981; $105.56
per share on and after September 1, 1981 but prior to
September 1, 1986; $103.53 per share on and after
September 1, 1986 but prior to September 1, 1991; and
$102.31 per share on September 1, 1991 and thereafter;
(c) The preferential amounts to which the holders
of shares of such series shall be entitled upon any
liquidation, dissolution or winding up of the
Corporation shall be the redemption price in effect at
the date of any voluntary liquidation, dissolution or
winding up of the Corporation; or $100 per share, in
the event of any involuntary liquidation, dissolution
or winding up of the Corporation;
(d) There shall not be any sinking fund provided
for the purchase or redemption of shares of such
series; and
(e) The shares of such series shall not have any
rights to convert the same into and/or purchase stock
of any other series or class or any other securities,
or any special rights other than those specified
herein.
17<PAGE>
DIVISION D
7.40% Cumulative Preferred Stock
250,000 shares of Cumulated Preferred Stock are
designated "7.40% Cumulative Preferred Stock." The
description and terms of the shares of such series, and the
respects in which they shall vary from other shares of
Cumulative Preferred Stock, are as follows:
(a) The annual dividend rate for such series
shall be 7.40% per annum;
(b) The redemption price for such series shall be
$106.92 per share prior to February 1, 1982; $105.07
per share on and after February 1, 1982 but prior to
February 1, 1987; $103.22 per share on and after
February 1, 1987 but prior to February 1, 1992; and
$102.11 per share on February 1, 1992 and thereafter;
(c) The preferential amounts to which the holders
of shares of such series shall be entitled upon any
liquidation, dissolution or winding up of the
Corporation shall be the redemption price in effect at
the date of any voluntary liquidation, dissolution or
winding up of the Corporation; or $100 per share, in
the event of any involuntary liquidation, dissolution
or winding up of the Corporation;
(d) There shall not be any sinking fund provided
for the purchase or redemption of shares of such
series; and
(e) The shares of such series shall not have any
rights to convert the same into and/or purchase stock
of any other series or class or any other securities,
or any special rights other than those specified
herein.
DIVISION E
8.52% Cumulative Preferred Stock
200,000 shares of Cumulative Preferred Stock are
designated "8.52% Cumulative Preferred Stock." The
description and terms of the shares of such series, and the
respects in which they shall vary from other shares of
Cumulative Preferred Stock, are as follows:
(a) The annual dividend rate for such series
shall be 8.52% per annum;
(b) The redemption price for such series shall be
$109.52 per share prior to March 1, 1979; $107.39 per
share on and after March 1, 1979 but prior to March 1,
1984; $105.26 per share on and after March 1, 1984 but
prior to March 1, 1989; $103.13 per share on and after
March 1, 1989 but prior to March 1, 1994; and $101.86
18<PAGE>
per share on March 1, 1994 and thereafter, provided,
however, that no share of such series shall be redeemed
prior to March 1, 1979 if such redemption is for the
purpose or in anticipation of refunding such share,
directly or indirectly, through the incurring of debt,
or through the issuance of capital stock ranking
equally with or prior to the shares of said series as
to dividends or assets, if such debt has an effective
interest cost to the Corporation (computed in
accordance with generally accepted financial practice),
or such capital stock has an effective dividend cost to
the Corporation (so computed) of less than 8.52% per
annum;
(c) The preferential amounts to which the holders
of shares of such series shall be entitled upon any
liquidation, dissolution or winding up of the
Corporation shall be the redemption price in effect at
the date of any voluntary liquidation, dissolution or
winding up of the Corporation; or $100 per share, in
the event of any voluntary liquidation, dissolution or
winding up of the Corporation;
(d) There shall not be any sinking fund provided
for the purchase or redemption of shares of such
series; and
(e) The shares of such series shall not have any
rights to convert the same into and/or purchase stock
of any other series or class or any other securities,
or any special rights other than those specified
herein.
DIVISION F
9% Cumulative Preferred Stock
600,000 shares of Cumulative Preferred Stock are
designated "9% Cumulative Preferred Stock." The description
and terms of the shares of such series, and the respects in
which they shall vary from other shares of Cumulative
Preferred Stock, are as follows:
(a) The distinctive serial designation of such
series shall be "9% Cumulative Preferred Stock";
(b) The annual dividend rate for such series
shall be 9% per share per annum, which dividend shall
be calculated, per share, at such percentage multiplied
by $100, and the date from which dividends on all
shares of said series issued prior to the record date
for the dividend payable November 1, 1987, shall be
cumulative, shall be the date of issuance of the shares
of such series;
(c) The regular redemption price for such series
shall be $109.00 per share on or prior to August 31,
1992 and thereafter shall be as follows:
19<PAGE>
If Redeemed Regular
During 12 Months Redemption
Period Ending Price
August 31 Per Share
1993 $106.75
1994 106.30
1995 105.85
1996 105.40
1997 104.95
1998 104.50
1999 104.05
2000 103.60
2001 103.15
2002 102.70
2003 102.25
2004 101.80
2005 101.35
2006 100.90
2007 100.45
and thereafter the regular redemption price per share
of such series shall be $100 per share; provided,
however, that no share of such series shall be redeemed
prior to September 1, 1992 if such redemption is for
the purpose or in anticipation of refunding such share,
directly or indirectly, through the incurring of debt,
or through the issuance of capital stock ranking
equally with or prior to the shares of said series as
to dividends or assets, if such debt has an effective
interest cost to the Corporation (computed in
accordance with generally accepted financial practice),
or such capital stock has an effective dividend cost to
the Corporation (so computed) of less than 9.10% per
annum;
(d) The preferential amounts to which the holders
of shares of such series shall be entitled upon any
liquidation, dissolution or winding up of the
Corporation shall be the redemption price in effect at
the date of any voluntary liquidation, dissolution or
winding up of the Corporation; or $100 per share, in
the event of any involuntary liquidation, dissolution
or winding up of the Corporation;
(e)(1) A sinking fund shall be established for
the retirement of the shares of such series. So long
as there shall remain outstanding any shares of such
series, the Corporation shall, to the extent permitted
by law on November 1 in each year commencing with the
year 1992, redeem as and for a sinking fund
requirement, out of funds legally available therefor, a
number of shares equal to 5% of the total number of
shares classified as 9% Cumulative Preferred Stock in
these Articles of Amendment at a redemption price of
$100 per share. The sinking fund requirement shall be
cumulative so that if on any such November 1 the
sinking fund requirement shall not have been met, then
20<PAGE>
such sinking fund requirement, to the extent not met,
shall become an additional sinking fund requirement for
the next succeeding November 1 on which such redemption
may be effected.
(2) The Corporation shall have the non-
cumulative option, on any sinking fund date as provided
in subparagraph (e)(1) hereof, to redeem at a
redemption price of $100 per share, an additional
number of shares equal to 5% of the total number of
shares classified as 9% Cumulative Preferred Stock in
these Articles of Amendment. No redemption made
pursuant to this subparagraph (e)(2) shall be deemed to
fulfill any sinking fund requirement established
pursuant to subparagraph (e)(1).
(3) The Corporation shall be entitled, at its
election, to credit against the sinking fund
requirement due on November 1 of any year pursuant to
subparagraph (e)(1) shares of such series theretofore
purchased or otherwise acquired by the Corporation and
not previously credited against any sinking fund
requirement.
(f) The shares of such series shall not have any
rights to convert the same into and/or purchase stock
of any other series or class or any other securities,
or any special rights other than those specified
herein.
DIVISION G
7.80% Cumulative Preferred Stock
500,000 shares of Cumulative Preferred Stock are
designated "7.80% Cumulative Preferred Stock." The
description and terms of the shares of such series, and the
respects in which they shall vary from other shares of
Cumulative Preferred Stock, are as follows:
(a) The distinctive serial designation of such
series shall be "7.80% Cumulative Preferred Stock".
(b) The annual dividend rate for such series
shall be 7.80% per share per annum, which dividend
shall be calculated, per share, at such percentage
multiplied by $100, and the date from which dividends
on all shares of said series issued prior to the record
date for the dividend payable May 1, 1992, shall be
cumulative, shall be the date of initial issuance of
the shares of such series.
(c) The regular redemption price for such series
shall be $107.80 per share on or prior to March 31,
1997 and thereafter shall be as follows:
Regular
Redemption
21<PAGE>
Price
Redemption Date (Dates Inclusive) Per Share
April 1, 1997 to March 31, 1998 $105.20
April 1, 1998 to March 31, 1999 104.68
April 1, 1999 to March 31, 2000 104.16
April 1, 2000 to March 31, 2001 103.64
April 1, 2001 to March 31, 2002 103.12
April 1, 2002 to March 31, 2003 102.60
April 1, 2003 to March 31, 2004 102.08
April 1, 2004 to March 31, 2005 101.56
April 1, 2005 to March 31, 2006 101.04
April 1, 2006 to March 31, 2007 100.52
and thereafter the regular redemption price per share
shall be $100 per share, plus an amount in each case
equal to accrued unpaid dividends to the date of
redemption; provided, however, that no share of such
series shall be redeemed prior to April 1, 1997 if such
redemption is for the purpose or in anticipation of
refunding such share, directly or indirectly, through
the incurring of debt, or through the issuance of
shares of capital stock ranking equally with or prior
to the shares of said series as to dividends or assets,
if such debt has an effective interest cost to the
Corporation (computed in accordance with generally
accepted financial practice), or such shares of capital
stock have an effective dividend cost to the
Corporation (so computed), of less than 7.88% per
annum.
(d) The preferential amounts to which the holders
of shares of such series shall be entitled upon any
liquidation, dissolution or winding up of the
Corporation shall be the regular redemption price in
effect at the date of any voluntary liquidation,
dissolution or winding up of the Corporation; or $100
per share, in the event of any involuntary liquidation,
dissolution or winding up of the Corporation.
(e)(1) A sinking fund shall be established for the
retirement of the shares of such series. So long as there
shall remain outstanding any shares of such series, the
Corporation shall, to the extent permitted by law, on May 1
in each year commencing with the year 1998, redeem as and
for a sinking fund requirement, out of funds legally
available therefor, a number of shares equal to 5% of the
total number of shares initially classified as 7.80%
Cumulative Preferred Stock in these Articles of Amendment at
a sinking fund redemption price of $100 per share plus
accrued unpaid dividends to the date of redemption. The
sinking fund requirement shall be cumulative so that if on
any such May 1 the sinking fund requirement shall not have
been met, then such sinking fund requirement, to the extent
not met, shall become an additional sinking fund requirement
for the next succeeding May 1 on which such redemption may
be effected.
22<PAGE>
(2) The Corporation shall have the non-cumulative
option, on any sinking fund date as provided in subparagraph
(e)(1) hereof, to redeem at a sinking fund redemption price
of $100 per share, an additional number of shares equal to
not more than 5% of the total number of shares initially
classified as 7.80% Cumulative Preferred Stock in these
Articles of Amendment. No redemption made pursuant to this
subparagraph (e)(2) shall be deemed to fulfill any sinking
fund requirement established pursuant to subparagraph
(e)(1).
(3) The Corporation shall be entitled, at its
election, to credit against the sinking fund requirement due
on May 1 of any year pursuant to subparagraph (e)(1) shares
of such series theretofore purchased or otherwise acquired
by the Corporation and not previously credited against any
such sinking fund requirement.
(f) The shares of such series shall not have any
rights to convert the same into and/or purchase stock of any
other series or class or any other securities, or any
special rights other than those specified herein.
DIVISION H
5.92% Cumulative Preferred Stock
600,000 shares of Cumulative Preferred Stock are
designated "5.92% Cumulative Preferred Stock." The
description and terms of the shares of such series, and the
respects in which they shall vary from other shares of
Cumulative Preferred Stock, are as follows:
(a) The distinctive serial designation of such series
shall be "5.92% Cumulative Preferred Stock".
(b) The annual dividend rate for such series shall be
5.92% per share per annum, which dividend shall be
calculated, per share, at such percentage multiplied by
$100, and the date from which dividends on all shares of
said series issued prior to the record date for the dividend
payable February 1, 1994, shall be cumulative, shall be the
date of initial issuance of the shares of such series.
(c) Such series shall not be subject to redemption
prior to October 1, 2003; the regular redemption price for
shares of such series shall be $100 per share on or after
October 1, 2003, plus an amount equal to accrued and unpaid
dividends to the date of redemption.
(d) The preferential amounts to which the holders of
shares of such series shall be entitled upon any voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation shall be $100 per share, plus accrued and unpaid
dividends.
(e)(1) A sinking fund shall be established for the
retirement of the shares of such series. So long as there
23<PAGE>
shall remain outstanding any shares of such series, the
Corporation shall, to the extent not prohibited by law, on
November 1, 2003, and on each November 1 thereafter to and
including November 1, 2007, redeem as and for a sinking fund
requirement, a number of shares equal to 5% of the total
number of shares initially classified as 5.92% Cumulative
Preferred Stock in these Articles of Amendment at a sinking
fund redemption price of $100 per share plus accrued unpaid
dividends to the date of redemption. The remaining shares
of such series outstanding on November 1, 2008 will be
redeemed as a final sinking fund requirement, to the extent
not prohibited by law, on such date at a sinking fund
redemption price of $100 per share plus accrued and unpaid
dividends to the date of redemption. The sinking fund
requirement shall be cumulative so that if on any such
November 1 the sinking fund requirement shall not have been
met, then such sinking fund requirement, to the extent not
met, shall become an additional sinking fund requirement for
the next succeeding November 1 on which such redemption may
be effected.
(2) The Corporation shall be entitled, at its
election, to credit against the sinking fund requirement due
on November 1 of any year pursuant to subparagraph (e)(1)
shares of such series theretofore purchased or otherwise
acquired by the Corporation and not previously credited
against any such sinking fund requirement.
(f) The shares of such series shall not have any
rights to convert the same into and/or purchase stock of any
other series or class or any other securities, or any
special rights other than those specified herein.
DIVISION I
5.90% Cumulative Preferred Stock
500,000 shares of Cumulative Preferred Stock are
designated "5.90% Cumulative Preferred Stock." The
description and terms of the shares of such series, and the
respects in which they shall vary from other shares of
Cumulative Preferred Stock, are as follows:
(a) The distinctive serial designation of such series
shall be "5.90% Cumulative Preferred Stock".
(b) The annual dividend rate for such series shall be
5.90% per share per annum, which dividend shall be
calculated, per share, at such percentage multiplied by
$100, and the date from which dividends on all shares of
said series issued prior to the record date for the dividend
payable February 1, 1994, shall be cumulative, shall be the
date of initial issuance of the shares of such series.
(c) Such series shall not be subject to redemption
prior to November 1, 2003; the regular redemption price for
shares of such series shall be $100 per share on or after
24<PAGE>
November 1, 2003, plus an amount equal to accrued and unpaid
dividends to the date of redemption.
(d) The preferential amounts to which the holders of
shares of such series shall be entitled upon any voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation shall be $100 per share, plus accrued and unpaid
dividends.
(e)(1) A sinking fund shall be established for the
retirement of the shares of such series. So long as there
shall remain outstanding any shares of such series, the
Corporation shall, to the extent not prohibited by law, on
November 1, 2003, and on each November 1 thereafter to and
including November 1, 2007, redeem as and for a sinking fund
requirement, a number of shares equal to 5% of the total
number of shares initially classified as 5.90% Cumulative
Preferred Stock in these Articles of Amendment at a sinking
fund redemption price of $100 per share plus accrued unpaid
dividends to the date of redemption. The remaining shares
of such series outstanding on November 1, 2008 will be
redeemed as a final sinking fund requirement, to the extent
not prohibited by law, on such date at a sinking fund
redemption price of $100 per share plus accrued and unpaid
dividends to the date of redemption. The sinking fund
requirement shall be cumulative so that if on any such
November 1 the sinking fund requirement shall not have been
met, then such sinking fund requirement, to the extent not
met, shall become an additional sinking fund requirement for
the next succeeding November 1 on which such redemption may
be effected.
(2) The Corporation shall be entitled, at its
election, to credit against the sinking fund requirement due
on November 1 of any year pursuant to subparagraph (e)(1)
shares of such series theretofore purchased or otherwise
acquired by the Corporation and not previously credited
against any such sinking fund requirement.
(f) The shares of such series shall not have any
rights to convert the same into and/or purchase stock of any
other series or class or any other securities, or any
special rights other than those specified herein.
DIVISION J
6.85% Cumulative Preferred Stock
300,000 shares of Cumulative Preferred Stock, without par
value, are designated "6.85% Cumulative Preferred Stock,"
consisting of shares of such Cumulative Preferred Stock with
designation, description and terms as follows:
(a) The distinctive serial designation of such series
shall be "6.85% Cumulative Preferred Stock".
(b) The annual dividend rate for such series shall be
6.85% per share per annum, which dividend shall be
25<PAGE>
calculated, per share, at such percentage multiplied by
$100, and the date from which dividends on all shares of
said series issued prior to the record date for the dividend
payable August 1, 1994, shall be cumulative, shall be the
date of original issuance of the shares of such series.
(c) Such series shall not be subject to redemption
except as provided in subparagraph (e) below.
(d) The preferential amounts to which the holders of
shares of such series shall be entitled upon any voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation shall be $100 per share, plus accrued and unpaid
dividends.
(e)(1) A sinking fund shall be established for the
retirement of the shares of such series. So long as there
shall remain outstanding any shares of such series, the
Corporation shall, to the extent not prohibited by law, on
August 1 of each year commencing with the year 2000, redeem
as and for a sinking fund requirement, 60,000 shares of the
6.85% Cumulative Preferred Stock at a sinking fund
redemption price of $100 per share plus accrued unpaid
dividends to the date of redemption. The sinking fund
requirement shall be cumulative so that if on any such
August 1 the sinking fund requirement shall not have been
met, then such sinking fund requirement, to the extent not
met, shall become an additional sinking fund requirement for
the next succeeding August 1 on which such redemption may be
effected.
(2) The Corporation shall have the non-cumulative
option, on any sinking fund date as provided in subparagraph
(e)(1), to redeem at the sinking fund redemption price of
$100 per share plus accrued and unpaid dividends to the date
of redemption up to an additional 60,000 shares of such
series. No redemption made pursuant to this subparagraph
(e)(2) shall be deemed to fulfill any sinking fund
redemption established pursuant to subparagraph (e)(1).
(3) The Corporation shall be entitled, at its
election, to credit against the sinking fund requirement due
on August 1 of any year pursuant to subparagraph (e)(1)
shares of such series theretofore purchased or otherwise
acquired by the Corporation (other than pursuant to the
option provided by subparagraph (e)(2)) and not previously
credited against any such sinking fund requirement.
(f) The shares of such series shall not have any
rights to convert the same into and/or purchase stock of any
other series or class or any other securities, or have any
special rights other than those specified herein.
</PAGE>
26<PAGE>
<PAGE>
Exhibit 4(b)
[CONFORMED COPY]
Indenture Supplemental
TO
Mortgage and Deed of Trust
(Dated as of December 1, 1940)
Executed by
APPALACHIAN POWER COMPANY
formerly Appalachian Electric Power Company
TO
BANKERS TRUST COMPANY,
As Trustee
Dated as of August 15, 1994
$21,000,000 First Mortgage Bonds,
Designated Secured Medium Term Notes,
7.70% Series due September 1, 2004<PAGE>
TABLE OF CONTENTS*
PAGE
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS
Execution of Mortgage. . . . . . . . . . . . . . . . . . 1
Execution of supplemental indentures . . . . . . . . . . 1
Termination of Individual Trustee. . . . . . . . . . . . 1
Provision for issuance of bonds in one or more series. . 1
Right to execute supplemental indenture. . . . . . . . . 2
First Mortgage Bonds heretofore issued . . . . . . . . . 2
Issue of new First Mortgage Bonds of the 54th Series . . 3
First 1994 Supplemental Indenture . . . . . . . . . . . 3
Compliance with legal requirements . . . . . . . . . . . 4
GRANTING CLAUSES. . . . . . . . . . . . . . . . . . . . . . . 4
DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . 4
APPURTENANCES, ETC. . . . . . . . . . . . . . . . . . . . . . 4
HABENDUM. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PRIOR LEASEHOLD ENCUMBRANCES. . . . . . . . . . . . . . . . . 5
GRANT IN TRUST. . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 1. Supplement to Original Indenture by adding
Section 20AAA. . . . . . . . . . . . . . . . . 6
SECTION 2. Initial Issuance of the Bonds of the 54th Series. 9
SECTION 3. Provision for record date for meetings
of Bondholders . . . . . . . . . . . . . . . . 9
SECTION 4. Original Indenture and First 1994 Supplemental
Indenture same instrument. . . . . . . . . . . 9
SECTION 5. Limitation of rights. . . . . . . . . . . . . . . 9
SECTION 6. Execution in counterparts . . . . . . . . . . . . 9
i<PAGE>
*The Table of Contents shall not be deemed to be any part of the
Indenture Supplemental to Mortgage and Deed of Trust.
ii<PAGE>
PAGE
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES AND SEALS. . . . . . . . . . . . . . . . . . . . . 10
ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . 12
SCHEDULE I. . . . . . . . . . . . . . . . . . . . . . . . . . I-1
iii<PAGE>
SUPPLEMENTAL INDENTURE, dated as of the fifteenth day of
August in the year One Thousand Nine Hundred and Ninety-four,
made and entered into by and between APPALACHIAN POWER COMPANY, a
corporation of the Commonwealth of Virginia, the corporate title
of which was, prior to April 17, 1958, APPALACHIAN ELECTRIC POWER
COMPANY (hereinafter sometimes called the "Company"), a
transmitting utility (as such term is defined in Section 46-9-
105(1)(n) of the West Virginia Code), party of the first part,
and BANKERS TRUST COMPANY, a corporation of the State of New York
(hereinafter sometimes called the "Corporate Trustee" or
"Trustee"), as Trustee, party of the second part.
WHEREAS, the Company has heretofore executed and delivered
its Mortgage and Deed of Trust (hereinafter sometimes referred to
as the "Mortgage"), dated as of December 1, 1940, to the Trustee
for the security of all bonds of the Company outstanding
thereunder, and by said Mortgage conveyed to the Trustee, upon
certain trusts, terms and conditions, and with and subject to
certain provisos and covenants therein contained, all and
singular the property, rights and franchises which the Company
then owned or should thereafter acquire, excepting any property
expressly excepted by the terms of the Mortgage; and
WHEREAS, the Company has heretofore executed and delivered
to the Trustee supplements and indentures supplemental to the
Mortgage, dated as of December 1, 1943, December 2, 1946,
December 1, 1947, March 1, 1950, June 1, 1951, October 1, 1952,
December 1, 1953, March 1, 1957, May 1, 1958, October 2, 1961,
April 1, 1962, June 1, 1965, September 2, 1968, December 1, 1968,
October 1, 1969, June 1, 1970, October 1, 1970, September 1,
1971, February 1, 1972, December 1, 1972, July 1, 1973, March 1,
1974, April 1, 1975, May 1, 1975, December 1, 1975, April 1,
1976, September 1, 1976, November 1, 1977, May 1, 1979, August 1,
1979, February 1, 1980, November 1, 1980, April 1, 1982, October
1, 1983, February 1, 1987, September 1, 1987, November 1, 1989,
December 1, 1990, August 1, 1991, February 1, 1992, May 1, 1992,
August 1, 1992, November 15, 1992, April 15, 1993, May 15, 1993,
October 1, 1993 and November 1, 1993 (hereinafter referred to as
the "Fourth 1993 Supplemental Indenture"), respectively, amending
and supplementing the Mortgage in certain respects (the Mortgage,
as so amended and supplemented, being hereinafter called the
"Original Indenture") and conveying to the Trustee, upon certain
trusts, terms and conditions, and with and subject to certain
provisos and covenants therein contained, certain property rights
and property therein described; and
WHEREAS, effective October 7, 1988, pursuant to Section 115
of the Original Indenture, the Individual Trustee resigned and
all powers of the Individual Trustee then terminated, as did the
Individual Trustee's right, title or interest in and to the trust
estate, and without appointment of a new trustee as successor to
the Individual Trustee, all the right, title and powers of the
Trustee thereupon devolved upon the Corporate Trustee and its
successors alone; and<PAGE>
WHEREAS, the Original Indenture provides that bonds issued
thereunder may be issued in one or more series and further
provides that, with respect to each series, the rate or rates of
interest, the date or dates of maturity, the dates for the
payment of interest, the terms and rates of optional redemption,
and other terms and conditions not inconsistent with the Original
Indenture may be established, prior to the issue of bonds of such
series, by an indenture supplemental to the Original Indenture;
and
WHEREAS, Section 132 of the Original Indenture provides that
any power, privilege or right expressly or impliedly reserved to
or in any way conferred upon the Company by any provision of the
Original Indenture, whether such power, privilege or right is in
any way restricted or is unrestricted, may be in whole or in part
waived or surrendered or subjected to any restriction if at the
time unrestricted or to additional restriction if already
restricted, and that the Company may enter into any further
covenants, limitations or restrictions for the benefit of any one
or more series of bonds issued under the Original Indenture and
provide that a breach thereof shall be equivalent to a default
under the Original Indenture, or the Company may cure any
ambiguity or correct or supplement any defective or inconsistent
provisions contained in the Original Indenture or in any
indenture supplemental to the Original Indenture, by an
instrument in writing, executed and acknowledged, and that the
Trustee is authorized to join with the Company in the execution
of any such instrument or instruments; and
WHEREAS, the Company has heretofore issued, in accordance
with the provisions of the Mortgage, as amended and supplemented
as of the respective dates thereof, bonds of the series (which
are outstanding), entitled and designated as hereinafter set
forth, in the respective original aggregate principal amounts
indicated:
Series Amount
First Mortgage Bonds, 7-1/2% Series due 1998. . . $45,000,000
First Mortgage Bonds, 7.00% Series due 1999. . . 30,000,000
First Mortgage Bonds, 7-5/8% Series due 2002. . . 50,000,000
First Mortgage Bonds, 7.95% Series due 2002. . . 60,000,000
First Mortgage Bonds, 7.38% Series due 2002. . . 50,000,000
First Mortgage Bonds, 7.40% Series due 2002. . . 30,000,000
First Mortgage Bonds, 7-1/2% Series due 2002. . . 70,000,000
First Mortgage Bonds, 6.65% Series due 2003. . . 40,000,000
First Mortgage Bonds, 6.85% Series due 2003. . . 30,000,000
First Mortgage Bonds, 6.00% Series due 2003. . . 30,000,000
First Mortgage Bonds, 9-1/8% Series due 2019. . . 50,000,000
First Mortgage Bonds, 9-7/8% Series due 2020. . . 50,000,000
First Mortgage Bonds, 9.35% Series due 2021. . . 50,000,000
First Mortgage Bonds, 8.75% Series due 2022. . . 50,000,000
2<PAGE>
First Mortgage Bonds, 8.70% Series due 2022. . . 40,000,000
First Mortgage Bonds, 8.43% Series due 2022. . . 50,000,000
First Mortgage Bonds, 8.50% Series due 2022. . . 70,000,000
First Mortgage Bonds, 7.80% Series due 2023. . . 40,000,000
First Mortgage Bonds, 7.90% Series due 2023. . . 30,000,000
First Mortgage Bonds, 7.15% Series due 2023. . . 30,000,000
First Mortgage Bonds, 7.125% Series due 2024. . . 50,000,000
and
WHEREAS, the Company, by appropriate corporate action in
conformity with the terms of the Original Indenture, has duly
determined to create a series of bonds under the Original
Indenture to be designated as "First Mortgage Bonds, Designated
Secured Medium Term Notes, 7.70% Series due September 1, 2004"
(hereinafter sometimes referred to as the "bonds of the 54th
Series"); and
WHEREAS, each of the bonds of the 54th Series is to be
substantially in the form set forth in Schedule I to this
Supplemental Indenture (hereinafter sometimes referred to as the
"First 1994 Supplemental Indenture"); and
WHEREAS, the Company, in the exercise of the powers and
authorities conferred upon and reserved to it under and by virtue
of the provisions of the Original Indenture, and pursuant to
resolutions of its Board of Directors, has duly resolved and
determined to make, execute and deliver to the Trustee a
supplemental indenture, in the form hereof, for the purposes
herein provided; and
WHEREAS, all conditions and requirements necessary to make
this First 1994 Supplemental Indenture a valid, binding and legal
instrument in accordance with its terms, have been done,
performed and fulfilled, and the execution and delivery thereof
have been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That Appalachian Power Company, in consideration of the
premises and of the purchase and acceptance of the bonds by the
holders thereof and of the sum of One Dollar ($1.00) and other
good and valuable consideration paid to it by the Trustee at or
before the ensealing and delivery of these presents, the receipt
whereof is hereby acknowledged, and in order to secure the
payment of both the principal of and interest and premium, if
any, on the bonds from time to time issued under and secured by
the Original Indenture and this First 1994 Supplemental
Indenture, according to their tenor and effect, and the
performance of all the provisions of the Original Indenture and
this First 1994 Supplemental Indenture (including any further
indenture or indentures supplemental to the Original Indenture
3<PAGE>
and any modification or alteration made as in the Original
Indenture provided) and of said bonds, has granted, bargained,
sold, released, conveyed, transferred, mortgaged, pledged, set
over and confirmed, and by these presents does grant, bargain,
sell, release, convey, assign, transfer, mortgage, pledge, set
over and confirm unto Bankers Trust Company, as Trustee, and to
its respective successor or successors in the trust hereby
created, and to its and their assigns, all the following
described properties of the Company, that is to say:
All property, real, personal and mixed, tangible and
intangible, and all franchises owned by the Company on the date
of the execution hereof, acquired since the execution of the
Fourth 1993 Supplemental Indenture (except any hereinafter
expressly excepted from the lien and operation of this First 1994
Supplemental Indenture).
TOGETHER WITH all and singular the tenements, hereditaments
and appurtenances belonging or in anywise appertaining to the
aforesaid property or any part thereof, with the reversion and
reversions, remainder and remainders and (subject to the
provisions of Section 63 of the Original Indenture) the tolls,
rents, revenues, issues, earnings, income, product and profits
thereof and all the estate, right, title and interest and claim
whatsoever, at law as well as in equity, which the Company now
has or may hereafter acquire in and to the aforesaid property and
franchises and every part and parcel thereof.
Provided that, in addition to the reservations and
exceptions herein elsewhere contained, the following are not and
are not intended to be now or hereafter granted, bargained, sold,
released, conveyed, assigned, transferred, mortgaged, pledged,
set over or confirmed hereunder and are hereby expressly excepted
from the lien and operation of the Original Indenture and this
First 1994 Supplemental Indenture, viz.: (1) cash, shares of
stock, and obligations (including bonds, notes and other
securities) not hereinafter or in the Original Indenture
specifically pledged, deposited or delivered hereunder or
thereunder or hereinafter or therein covenanted so to be; (2) any
goods, wares, merchandise, equipment, materials or supplies
acquired for the purpose of sale or resale in the usual course of
business or for consumption in the operation of any properties of
the Company and automobiles and trucks; (3) all judgments,
accounts, and choses in action, the proceeds of which the Company
is not obligated as hereinafter provided or as provided in the
Original Indenture to deposit with the Trustee hereunder and
thereunder; provided, however, that the property and rights
expressly excepted from the lien and operation of the Original
Indenture and this First 1994 Supplemental Indenture in the above
subdivisions (2) and (3) shall (to the extent permitted by law)
cease to be so excepted, in the event that the Trustee or a
receiver or trustee shall enter upon and take possession of the
4<PAGE>
mortgaged and pledged property in the manner provided in Article
XIV of the Original Indenture by reason of the occurrence of a
completed default, as defined in said Article XIV.
TO HAVE AND TO HOLD all such properties, real, personal and
mixed, granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed by the
Company as aforesaid, or intended so to be, unto the Trustee and
its successors in the trust;
SUBJECT, HOWEVER, to the reservations, exceptions,
conditions, limitations and restrictions contained in the several
deeds, leases, servitudes, franchises and contracts or other
instruments through which the Company acquired and/or claims
title to and/or enjoys the use of the aforesaid properties; and
subject also to encumbrances of the character defined in Section
6 of the Original Indenture as "excepted encumbrances" in so far
as the same may attach to any of the property embraced herein.
Inasmuch as the Company holds certain of said lands, rights
of way and other property under leases, power agreements and
other contracts which provide that the Company's interest therein
shall not be mortgaged without the consent of the respective
lessors or other parties to said agreements and contracts, and
such lessors and parties have either given such consent or have
waived the requirement of such consent, it is hereby expressly
agreed and made a condition upon which this First 1994
Supplemental Indenture is executed and delivered, that the lien
of this First 1994 Supplemental Indenture and the estate, rights
and remedies of the Trustee hereunder, and the rights and
remedies of the holders of the bonds secured hereby and by the
Original Indenture in so far as they may affect such lands,
rights of way and other property now held or to be hereafter
acquired by the Company under such leases, contracts or
agreements, shall be subject and subordinate in all respects to
the rights and remedies of the respective lessors or other
parties thereto.
And it is hereby expressly covenanted and agreed as follows:
(a) That the rights of the Trustee hereunder, and of
every person or corporation whatsoever claiming by reason of
this First 1994 Supplemental Indenture any right, title or
interest, legal or equitable, in the property covered by any
such lease, power agreement or other contract, are and at
all times hereafter shall be subject in the same manner and
degree as the rights of the Company might or would at all
times be subject, had this First 1994 Supplemental Indenture
not been made, to all terms, provisions, conditions,
covenants, stipulations, and agreements, and to all
exceptions, reservations, limitations, restrictions, and
5<PAGE>
forfeitures contained in any such lease, power agreement or
other contract;
(b) That any right, claim, condition or forfeiture
which might at any time be asserted against the party in
possession under the provisions of any such lease, power
agreement or other contract, had this First 1994
Supplemental Indenture not been made, may be asserted with
the same force and effect against any and all persons or
corporations at any time claiming any right, title or
interest in any such property under or by reason of this
First 1994 Supplemental Indenture or of any bond hereby and
by the Original Indenture secured; and
(c) That such consent or waiver of the requirement of
such consent given by the lessor under any such lease or
party to any such power agreement or other contract is
intended and shall be construed to be solely for the purpose
of permitting the Company to mortgage its property generally
without violating the express covenant contained in such
lease, power agreement or other contract, and that such
consent or waiver of the requirement of such consent confers
upon the Trustee hereunder and the holders of bonds secured
hereby and by the Original Indenture no rights in addition
to such as they would have had, respectively, if such
consent or waiver of the requirement of such consent had not
been given.
IN TRUST NEVERTHELESS, upon the terms and trusts in the
Original Indenture and this First 1994 Supplemental Indenture set
forth, for the equal and pro rata benefit and security of those
who shall hold the bonds and coupons issued and to be issued
hereunder and under the Original Indenture, in accordance with
the terms of the Original Indenture and of this First 1994
Supplemental Indenture, without preference, priority or
distinction as to lien of any of said bonds or coupons over any
other thereof by reason of priority in the time of issuance or
negotiation thereof, or otherwise howsoever, subject, however, to
the conditions, provisions and covenants set forth in the
Original Indenture and in this First 1994 Supplemental Indenture.
AND THIS INDENTURE FURTHER WITNESSETH:
That in further consideration of the premises and for the
considerations aforesaid, the Company, for itself and it
successors and assigns, hereby covenants and agrees to and with
the Trustee, and its successor or successors in such trust, under
the Original Indenture, as follows:
Section 1. The Original Indenture is hereby supplemented by
adding immediately after Section 20ZZ, a new Section 20AAA, as
follows:
6<PAGE>
SECTION 20AAA. The Company hereby creates a fifty-
fourth series of bonds to be issued under and secured by
this Indenture, to be designated and to be distinguished
from the bonds of all other series by the title "First
Mortgage Bonds, Designated Secured Medium Term Notes, 7.70%
Series due September 1, 2004" (herein sometimes referred to
as the "bonds of the 54th Series"). The form of the bonds
of the 54th Series shall be substantially as set forth in
Schedule I to the First 1994 Supplemental Indenture.
Bonds of the 54th Series shall mature on the date
specified in their title. Unless otherwise determined by
the Company, the bonds of the 54th Series shall be issued in
fully registered form without coupons in denominations of
$1,000 and in integral multiples thereof; the principal of
and premium (if any) and interest on each said bond to be
payable at the office or agency of the Company in the
Borough of Manhattan, The City of New York, in lawful money
of the United States of America, provided that at the option
of the Company interest may be mailed to registered owners
of the bonds at their respective addresses that appear on
the register thereof; and the rate of interest shall be the
rate per annum specified in the title thereof, payable semi-
annually on the first days of May and November of each year
(commencing November 1, 1994) and on their maturity date.
The person in whose name any bond of the 54th Series is
registered at the close of business on any record date (as
hereinbelow defined) with respect to any regular semi-annual
interest payment date (other than interest payable upon
redemption) shall be entitled to receive the interest
payable on such interest payment date notwithstanding the
cancellation of such bond of the 54th Series upon any
registration of transfer or exchange thereof (including any
exchange effected as an incident to a partial redemption
thereof) subsequent to the record date and prior to such
interest payment date, except, if and to the extent that the
Company shall default in the payment of the interest due on
such interest payment date, then the registered owners of
bonds of the 54th Series on such record date shall have no
further right to or claim in respect of such defaulted
interest as such registered owners on such record date, and
the persons entitled to receive payment of any defaulted
interest thereafter payable or paid on any bonds of the 54th
Series shall be the registered owners of such bonds of the
54th Series (or any bond or bonds issued, directly or after
intermediate transactions upon transfer or exchange or in
substitution thereof) on the date of payment of such
defaulted interest. Interest payable upon redemption or
maturity shall be payable to the person to whom the
principal is paid. The term "record date" as used in this
Section 20AAA, and in the form of the bonds of the 54th
7<PAGE>
Series, with respect to any regular semi-annual interest
payment date (other than interest payable upon redemption)
applicable to the bonds of the 54th Series, shall mean the
April 15 next preceding a May 1 interest payment date or the
October 15 next preceding a November 1 interest payment
date, as the case may be, or, if such April 15 or October 15
is not a Business Day (as defined hereinbelow), the next
preceding Business Day. The term "Business Day" with
respect to any bond of the 54th Series shall mean any day,
other than a Saturday or Sunday, which is not a day on which
banking institutions or trust companies in The City of New
York, New York or the city in which is located any office or
agency maintained for the payment of principal of or
premium, if any, or interest on such bond of the 54th Series
are authorized or required by law, regulation or executive
order to remain closed.
Every registered bond of the 54th Series shall be dated
the date of authentication ("Issue Date") and shall bear
interest computed on the basis of a 360-day year consisting
of twelve 30-day months from its Issue Date or from the
latest semi-annual interest payment date to which interest
has been paid on the bonds of the 54th Series preceding the
Issue Date, unless such Issue Date be an interest payment
date to which interest is being paid on the bonds of the
54th Series, in which case it shall bear interest from its
Issue Date or unless the Issue Date be the record date for
the interest payment date first following the date of
original issuance of bonds of the 54th Series (the "Original
Issue Date"), or a date prior to such record date, then from
the Original Issue Date; provided that, so long as there is
no existing default in the payment of interest on said
bonds, the owner of any bond authenticated by the Corporate
Trustee between the record date for any regular semi-annual
interest payment date and such interest payment date shall
not be entitled to the payment of the interest due on such
interest payment date (other than interest payable upon
redemption) and shall have no claim against the Company with
respect thereto; provided further, that, if and to the
extent the Company shall default in the payment of the
interest due on such interest payment date, then any such
bond shall bear interest from the May 1 or November 1, as
the case may be, next preceding its Issue Date, to which
interest has been paid or, if the Company shall be in
default with respect to the interest payment date first
following the Original Issue Date, then from the Original
Issue Date.
If any semi-annual interest payment date, redemption
date, or the maturity date is not a Business Day, payment of
amounts due on such date may be made on the next succeeding
Business Day, and, if such payment is made or duly provided
8<PAGE>
for on such Business Day, no interest shall accrue on such
amounts for the period from and after such interest payment
date, redemption date or the maturity date, as the case may
be, to such Business Day.
Notwithstanding the provisions of Section 14 of this
Indenture, the bonds of the 54th Series shall be executed on
behalf of the Company by its Chairman of the Board, by its
President or by one of its Vice Presidents or by one of its
officers designated by the Board of Directors of the Company
for such purpose, whose signature may be a facsimile, and
its corporate seal shall be thereunto affixed or printed
thereon and attested by its Secretary or one of its
Assistant Secretaries, and the provisions of the penultimate
sentence of said Section 14 shall be applicable to such
bonds of the 54th Series.
The bonds of the 54th Series are not redeemable prior
to their maturity.
The Company shall not be required to make transfers or
exchanges of bonds of the 54th Series for a period of
fifteen days next preceding any selection of bonds of the
54th Series to be redeemed or to make transfers or exchanges
of any bonds of the 54th Series designated in whole or in
part for redemption. Notwithstanding the provisions of
Section 12 of this Indenture, the Company shall not be
required to make transfers or exchanges of bonds of the 54th
Series for a period of fifteen days next preceding any
interest payment date.
Registered bonds of the 54th Series shall be
transferable upon presentation and surrender thereof, for
cancellation, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, and at such
other office or agency of the Company as the Company may
from time to time designate, by the registered owners
thereof, in person or by duly authorized attorney, in the
manner and upon payment, if required by the Company, of the
charges prescribed in this Indenture. In the manner and
upon payment, if required by the Company, of the charges
prescribed in this Indenture, registered bonds of the 54th
Series may be exchanged for a like aggregate principal
amount of registered bonds of the 54th Series of other
authorized denominations, upon presentation and surrender
thereof, for cancellation, at the office or agency of the
Company in the Borough of Manhattan, The City of New York,
or at such other office or agency of the Company as the
Company may from time to time designate.
Section 2. Initial Issuance of the Bonds of the 54th Series:
9<PAGE>
In accordance with and upon compliance with such provisions
of the Original Indenture as shall be selected for such purpose
by the officers of the Company duly authorized to take such
action, bonds of the 54th Series, in an aggregate principal
amount not exceeding $21,000,000, shall forthwith be executed by
the Company and delivered to the Trustee and shall be
authenticated by the Trustee and delivered to or upon the order
of the Company (without awaiting the filing and recording of this
First 1994 Supplemental Indenture except to the extent required
by subdivision (10) of Section 29 of the Original Indenture).
Section 3. At any meeting of bondholders held as provided for
in Article XX of the Original Indenture at which owners of bonds
of the 54th Series are entitled to vote, all owners of bonds of
the 54th Series at the time of such meeting shall be entitled to
vote thereat; provided, however, that the Trustee may, and upon
request of the Company or of a majority of the bondowners of the
54th Series, shall, fix a day not exceeding ninety days preceding
the date for which the meeting is called as a record date for the
determination of owners of bonds of the 54th Series, entitled to
notice of and to vote at such meeting and any adjournment thereof
and only such registered owners who shall have been such
registered owners on the date so fixed, and who are entitled to
vote such bonds of the 54th Series at the meeting, shall be
entitled to receive notice of such meeting.
Section 4. As supplemented by this First 1994 Supplemental
Indenture, the Original Indenture is in all respects ratified and
confirmed and the Original Indenture and this First 1994
Supplemental Indenture shall be read, taken and construed as one
and the same instrument. The bonds of the 54th Series are the
original debt secured by this First 1994 Supplemental Indenture
and the Original Indenture, and this First 1994 Supplemental
Indenture and the Original Indenture shall be, and shall be
deemed to be, the original lien instrument securing the bonds of
the 54th Series.
Section 5. Nothing contained in this First 1994 Supplemental
Indenture shall, or shall be construed to, confer upon any person
other than the owners of bonds issued under the Original
Indenture and this First 1994 Supplemental Indenture, the Company
and the Trustee, any right to avail themselves of any benefit of
any provision of the Original Indenture or of this First 1994
Supplemental Indenture.
Section 6. This First 1994 Supplemental Indenture may be
simultaneously executed in several counterparts and all such
counterparts executed and delivered, each as an original, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, APPALACHIAN POWER COMPANY, party of the
first part, has caused this instrument to be signed in its name
10<PAGE>
and behalf by its President, a Vice President or an Assistant
Treasurer, and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary, and BANKERS
TRUST COMPANY, party of the second part, in token of its
acceptance hereof, has caused this instrument to be signed in its
name and behalf by a Vice President or an Assistant Vice
President and its corporate seal to be hereunto affixed and
attested by its Secretary, an Assistant Secretary or an Assistant
Treasurer. Executed and delivered as of the date and year first
above written.
APPALACHIAN POWER COMPANY
[SEAL]
By: /s/ B. M. Barber
B. M. Barber
Assistant Treasurer
Attest:
/s/ Jeffrey D. Cross
Jeffrey D. Cross
Assistant Secretary
In the presence of:
/s/ T. G. Berkemeyer
T. G. Berkemeyer
/s/ A. A. Pena
A. A. Pena
11<PAGE>
BANKERS TRUST COMPANY
[SEAL]
By /s/ Robert Caporale
Robert Caporale
Vice President
Attest:
/s/ Scott Thiel
Scott Thiel
Assistant Treasurer
Executed by BANKERS TRUST COMPANY
in the presence of:
/s/ M. Waters
M. Waters
/s/ Denise Mitchell
Denise Mitchell
12<PAGE>
STATE OF OHIO )
) SS:
COUNTY OF FRANKLIN )
On this 22nd day of August, 1994, personally appeared before
me, a Notary Public within and for said County in the State
aforesaid, B. M. BARBER and JEFFREY D. CROSS, to me known and
known to me to be respectively an Assistant Treasurer and
Assistant Secretary of APPALACHIAN POWER COMPANY, one of the
corporations named in and which executed the foregoing
instrument, who severally acknowledged that they did sign and
seal said instrument as such Assistant Treasurer and Assistant
Secretary for and on behalf of said corporation and that the same
is their free act and deed as such Assistant Treasurer and
Assistant Secretary, respectively, and the free and corporate act
and deed of said corporation.
In Witness Whereof, I have hereunto set my hand and notarial
seal this 22nd day of August, 1994.
[Notarial Seal]
/s/ Mary M. Soltesz
MARY M. SOLTESZ
Notary Public, State of Ohio
My Commission Expires July 12, 1999
13<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
I, PATRICIA M. CARILLO, a Notary Public, duly qualified,
commissioned and sworn, and acting in and for the County and
State aforesaid, hereby certify that on this 23rd day of August,
1994:
ROBERT CAPORALE and SCOTT THIEL, whose names are signed to
the writing above, bearing a date as of the 15th day of August,
1994, as Vice President and Assistant Treasurer, respectively, of
BANKERS TRUST COMPANY, have this day acknowledged the same before
me in my County aforesaid.
ROBERT CAPORALE, who signed the writing above and hereto
annexed for BANKERS TRUST COMPANY, a corporation, bearing a date
as of the 15th day of August, 1994, has this day in my said
County before me acknowledged the said writing to be the act and
deed of said corporation.
Before me appeared ROBERT CAPORALE and SCOTT THIEL to me
personally known, who, being by me duly sworn, did say that they
are Vice President and Assistant Treasurer, respectively, of
BANKERS TRUST COMPANY, and that the seal affixed to said
instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed in behalf of said
corporation, by authority of its Board of Directors and said
ROBERT CAPORALE acknowledged said instrument to be the free act
and deed of said corporation.
SCOTT THIEL personally came before me this day and
acknowledged that he is an Assistant Treasurer of BANKERS TRUST
COMPANY, a corporation, and that by authority duly given and as
the act of the corporation, the foregoing instrument was signed
in its name by an Assistant Treasurer, sealed with its corporate
seal, and attested by himself as an Assistant Treasurer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County and State of New York, this 23rd day
of August, 1994.
/s/ Patricia M. Carillo
PATRICIA M. CARILLO
Notary Public, State of New York
No. 41-4747732
Qualified in Queens County
Certificate filed in New York
County
Commission expires May 31, 1995
[SEAL]
14<PAGE>
The foregoing instrument was prepared by Jeffrey D. Cross,
1 Riverside Plaza, Columbus, Ohio 43215.
15<PAGE>
I-1
SCHEDULE I
APPALACHIAN POWER COMPANY
FIRST MORTGAGE BOND, DESIGNATED
SECURED MEDIUM TERM NOTE, 7.70%
SERIES DUE SEPTEMBER 1, 2004
Bond No.
Original Issue Date: August 30, 1994
Principal Amount:
Semi-annual Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
CUSIP No: 03774B AS2
APPALACHIAN POWER COMPANY, a corporation of the Commonwealth
of Virginia (hereinafter called the "Company"), for value
received, hereby promises to pay to ____________, or registered
assigns, the Principal Amount set forth above on the maturity
date specified in the title of this bond in lawful money of the
United States of America, at the office or agency of the Company
in the Borough of Manhattan, The City of New York, and to pay to
the registered owner hereof interest on said sum from the date of
authentication of this bond (herein called the "Issue Date") or
latest semi-annual interest payment date to which interest has
been paid on the bonds of this series preceding the Issue Date,
unless the Issue Date be an interest payment date to which
interest is being paid, in which case from the Issue Date or
unless the Issue Date be the record date for the interest payment
date first following the Original Issue Date set forth above or a
date prior to such record date, then from the Original Issue Date
(or, if the Issue Date is between the record date for any
interest payment date and such interest payment date, then from
such interest payment date, provided, however, that if and to the
extent that the Company shall default in the payment of the
interest due on such interest payment date, then from the next
preceding semi-annual interest payment date to which interest has
been paid on the bonds of this series, or if such interest
payment date is the interest payment date first following the
Original Issue Date set forth above, then from the Original Issue
Date), until the principal hereof shall have become due and
payable, at the rate per annum specified in the title of this
bond, payable on May 1 and November 1 of each year (commencing
November 1, 1994) and on the maturity date specified in the title
of this bond; provided that, at the option of the Company, such
interest may be paid by check, mailed to the registered owner of
this bond at such owner's address appearing on the register
hereof.<PAGE>
I-2
This bond is one of a duly authorized issue of bonds of the
Company, issuable in series, and is one of a series known as its
First Mortgage Bonds, of the series designated in its title, all
bonds of all series issued and to be issued under and equally
secured (except in so far as any sinking fund, established in
accordance with the provisions of the Mortgage hereinafter
mentioned, may afford additional security for the bonds of any
particular series and except as provided in Section 73 of the
Mortgage) by a Mortgage and Deed of Trust (herein, together with
all indentures supplemental thereto, called the Mortgage), dated
as of December 1, 1940, executed by APPALACHIAN ELECTRIC POWER
COMPANY (the corporate title of which was changed to APPALACHIAN
POWER COMPANY) to BANKERS TRUST COMPANY, as Trustee, to which
Mortgage reference is made for a description of the property
mortgaged and pledged, the nature and extent of the security, the
rights of the holders of the bonds and of the Trustee in respect
thereof, the duties and immunities of the Trustee, and the terms
and conditions upon which the bonds are secured. With the
consent of the Company and to the extent permitted by and as
provided in the Mortgage, the rights and obligations of the
Company and/or of the holders of the bonds and/or coupons and/or
the terms and provisions of the Mortgage and/or of any
instruments supplemental thereto may be modified or altered by
affirmative vote of the holders of at least seventy-five per
centum (75%) in principal amount of the bonds affected by such
modification or alteration, then outstanding under the Mortgage
(excluding bonds disqualified from voting by reason of the
Company's interest therein as provided in the Mortgage); provided
that, without the consent of the owner hereof no such
modification or alteration shall permit the extension of the
maturity of the principal of or interest on this bond or the
reduction in the rate of interest hereon or any other
modification in the terms of payment of such principal or
interest or the creation of a lien on the mortgaged and pledged
property ranking prior to or on a parity with the lien of the
Mortgage or the deprivation of the owner hereof of a lien upon
such property or reduce the above percentage.
As provided in said Mortgage, said bonds may be for various
principal sums and are issuable in series, which may mature at
different times, may bear interest at different rates and may
otherwise vary as therein provided, and this bond is one of a
series entitled "First Mortgage Bonds, Designated Secured Medium
Term Notes, 7.70% Series due September 1, 2004 (herein called
"bonds of the 54th Series") created by an Indenture Supplemental
to Mortgage and Deed of Trust dated as of August 15, 1994 (the
"First 1994 Supplemental Indenture"), as provided for in said
Mortgage.
The interest payable on any May 1 or November 1 (other than
interest payable upon redemption) will, subject to certain<PAGE>
I-3
exceptions provided in said First 1994 Supplemental Indenture, be
paid to the person in whose name this bond is registered at the
close of business on the record date, which shall be the April 15
or October 15, as the case may be, next preceding such interest
payment date, or, if such April 15 or October 15 is not a
Business Day (as hereinbelow defined), the next preceding
Business Day. Interest payable upon redemption or maturity shall
be payable to the person to whom the principal is paid. The term
"Business Day" means any day, other than a Saturday or Sunday,
which is not a day on which banking institutions or trust
companies in The City of New York, New York or the city in which
is located any office or agency maintained for the payment of
principal or premium, if any, or interest on bonds of the 54th
Series are authorized or required by law, regulation or executive
order to remain closed.
If any semi-annual interest payment date, redemption date or
the maturity date is not a Business Day, payment of amounts due
on such date may be made on the next succeeding Business Day,
and, if such payment is made or duly provided for on such
Business Day, no interest shall accrue on such amounts for the
period from and after such interest payment date, redemption date
or the maturity date, as the case may be, to such Business Day.
The Company and the Trustee may deem and treat the person in
whose name this bond is registered as the absolute owner hereof
for the purpose of receiving payment of or on account of
principal or (subject to the provisions hereof) interest hereon
and for all other purposes and the Company and the Trustee shall
not be affected by any notice to the contrary.
The Company shall not be required to make transfers or
exchanges of bonds of the 54th Series for a period of fifteen
days next preceding any interest payment date, or next preceding
any selection of bonds of the 54th Series to be redeemed, and the
Company shall not be required to make transfers or exchanges of
any bonds of the 54th Series designated for redemption in whole
or in part.
The bonds of the 54th Series are not redeemable by the
Company prior to their maturity.
The principal hereof may be declared or may become due prior
to the express date of the maturity hereof on the conditions, in
the manner and at the time set forth in the Mortgage, upon the
occurrence of a completed default as in the Mortgage provided.
This bond is transferable as prescribed in the Mortgage by
the registered owner hereof in person, or by his duly authorized
attorney, at the office or agency of the Company in the Borough
of Manhattan, The City of New York, and at such other office or<PAGE>
I-4
agency of the Company as the Company may designate, upon
surrender and cancellation of this bond and upon payment, if the
Company shall require it, of the transfer charges prescribed in
the Mortgage, and, thereupon, a new registered bond or bonds of
authorized denominations of the same series for a like principal
amount will be issued to the transferee in exchange herefor as
provided in the Mortgage. In the manner and upon payment, if the
Company shall require it, of the charges prescribed in the
Mortgage, registered bonds of the 54th Series may be exchanged
for a like aggregate principal amount of registered bonds of
other authorized denominations of the same series, upon
presentation and surrender thereof, for cancellation, at the
office or agency of the Company in the Borough of Manhattan, The
City of New York, or at such other office or agency of the
Company as the Company may from time to time designate.
No recourse shall be had for the payment of the principal of
or interest on this bond against any incorporator or any past,
present or future stockholder, officer or director, as such, of
the Company or of any successor corporation, either directly or
through the Company or any successor corporation, under any rule
of law, statute or constitution or by the enforcement of any
assessment or otherwise, all such liability of incorporators,
stockholders, officers and directors, as such, being waived and
released by the holder or owner hereof by the acceptance of this
bond and being likewise waived and released by the terms of the
Mortgage.
This bond shall not become valid or obligatory for any
purpose until BANKERS TRUST COMPANY, the Trustee under the
Mortgage, or its successor thereunder, shall have signed the form
of Authentication Certificate endorsed hereon.
In Witness Whereof, Appalachian Power Company has caused
this bond to be executed in its name by the signature of its
Chairman of the Board, its President or one of its Vice
Presidents and its corporate seal, or a facsimile thereof, to be
impressed or imprinted hereon and attested by the signature of
its Secretary or one of its Assistant Secretaries.
Dated:
APPALACHIAN POWER COMPANY
By________________________
Vice President<PAGE>
I-5
(SEAL)
Attest:___________________
Assistant Secretary
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds,
of the series herein designated,
described in the within-mentioned
Mortgage.
BANKERS TRUST COMPANY,
as Trustee,
By______________________________
Authorized Officer<PAGE>
I-6
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto
(PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE)
_______________________________________
________________________________________________________________
________________________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
________________________________________________________________
ASSIGNEE) the within Bond and all rights thereunder, hereby
________________________________________________________________
irrevocably constituting and appointing such person attorney to
________________________________________________________________
transfer such Bond on the books of the Issuer, with full power of
________________________________________________________________
substitution in the premises.
Dated: ______________________ ____________________________
NOTICE: The signature to this assignment must correspond with
the name as written upon the face of the within Bond in
every particular without alteration or enlargement or
any change whatsoever.
</PAGE>
<PAGE>
[CONFORMED COPY]
Indenture Supplemental
TO
Mortgage and Deed of Trust<PAGE>
(Dated as of December 1, 1940)
Executed by
APPALACHIAN POWER COMPANY
formerly Appalachian Electric Power Company
TO
BANKERS TRUST COMPANY,
As Trustee
Dated as of October 1, 1994
$50,000,000 First Mortgage Bonds,
Designated Secured Medium Term Notes,
7.85% Series due November 1, 2004<PAGE>
I-i
TABLE OF CONTENTS*
PAGE
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS
Execution of Mortgage. . . . . . . . . . . . . . . . . . 1
Execution of supplemental indentures . . . . . . . . . . 1
Termination of Individual Trustee. . . . . . . . . . . . 1
Provision for issuance of bonds in one or more series. . 2
Right to execute supplemental indenture. . . . . . . . . 2
First Mortgage Bonds heretofore issued . . . . . . . . . 2
Issue of new First Mortgage Bonds of the 55th Series . . 3
Second 1994 Supplemental Indenture . . . . . . . . . . . 3
Compliance with legal requirements . . . . . . . . . . . 3
GRANTING CLAUSES. . . . . . . . . . . . . . . . . . . . . . . 3
DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . 4
APPURTENANCES, ETC. . . . . . . . . . . . . . . . . . . . . . 4
HABENDUM. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PRIOR LEASEHOLD ENCUMBRANCES. . . . . . . . . . . . . . . . . 5
GRANT IN TRUST. . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 1. Supplement to Original Indenture by adding
Section 20BBB. . . . . . . . . . . . . . . . . 7
SECTION 2. Initial Issuance of the Bonds of the 55th Series. 10
SECTION 3. Provision for record date for meetings
of Bondholders . . . . . . . . . . . . . . . . 10
*The Table of Contents shall not be deemed to be any part of
the Indenture Supplemental to Mortgage and Deed of Trust.
i<PAGE>
I-ii
SECTION 4. Original Indenture and Second 1994 Supplemental
Indenture same instrument. . . . . . . . . . . 10
PAGE
SECTION 5. Limitation of rights . . . . . . . . . . . . . . 10
SECTION 6. Execution in counterparts . . . . . . . . . . . . 11
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES AND SEALS. . . . . . . . . . . . . . . . . . . . . 11
ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . 13
SCHEDULE I. . . . . . . . . . . . . . . . . . . . . . . . . . I-1
ii<PAGE>
SUPPLEMENTAL INDENTURE, dated as of the first day of October
in the year One Thousand Nine Hundred and Ninety-four, made and
entered into by and between APPALACHIAN POWER COMPANY, a
corporation of the Commonwealth of Virginia, the corporate title
of which was, prior to April 17, 1958, APPALACHIAN ELECTRIC POWER
COMPANY (hereinafter sometimes called the "Company"), a
transmitting utility (as such term is defined in Section 46-9-
105(1)(n) of the West Virginia Code), party of the first part,
and BANKERS TRUST COMPANY, a corporation of the State of New York
(hereinafter sometimes called the "Corporate Trustee" or
"Trustee"), as Trustee, party of the second part.
WHEREAS, the Company has heretofore executed and delivered
its Mortgage and Deed of Trust (hereinafter sometimes referred to
as the "Mortgage"), dated as of December 1, 1940, to the Trustee
for the security of all bonds of the Company outstanding
thereunder, and by said Mortgage conveyed to the Trustee, upon
certain trusts, terms and conditions, and with and subject to
certain provisos and covenants therein contained, all and
singular the property, rights and franchises which the Company
then owned or should thereafter acquire, excepting any property
expressly excepted by the terms of the Mortgage; and
WHEREAS, the Company has heretofore executed and delivered
to the Trustee supplements and indentures supplemental to the
Mortgage, dated as of December 1, 1943, December 2, 1946,
December 1, 1947, March 1, 1950, June 1, 1951, October 1, 1952,
December 1, 1953, March 1, 1957, May 1, 1958, October 2, 1961,
April 1, 1962, June 1, 1965, September 2, 1968, December 1, 1968,
October 1, 1969, June 1, 1970, October 1, 1970, September 1,
1971, February 1, 1972, December 1, 1972, July 1, 1973, March 1,
1974, April 1, 1975, May 1, 1975, December 1, 1975, April 1,
1976, September 1, 1976, November 1, 1977, May 1, 1979, August 1,
1979, February 1, 1980, November 1, 1980, April 1, 1982, October
1, 1983, February 1, 1987, September 1, 1987, November 1, 1989,
December 1, 1990, August 1, 1991, February 1, 1992, May 1, 1992,
August 1, 1992, November 15, 1992, April 15, 1993, May 15, 1993,
October 1, 1993, November 1, 1993 and August 15, 1994
(hereinafter referred to as the "First 1994 Supplemental
Indenture"), respectively, amending and supplementing the
Mortgage in certain respects (the Mortgage, as so amended and
supplemented, being hereinafter called the "Original Indenture")
and conveying to the Trustee, upon certain trusts, terms and
conditions, and with and subject to certain provisos and
covenants therein contained, certain property rights and property
therein described; and
WHEREAS, effective October 7, 1988, pursuant to Section 115
of the Original Indenture, the Individual Trustee resigned and
all powers of the Individual Trustee then terminated, as did the
Individual Trustee's right, title or interest in and to the trust<PAGE>
I-2
estate, and without appointment of a new trustee as successor to
the Individual Trustee, all the right, title and powers of the
Trustee thereupon devolved upon the Corporate Trustee and its
successors alone; and
WHEREAS, the Original Indenture provides that bonds issued
thereunder may be issued in one or more series and further
provides that, with respect to each series, the rate or rates of
interest, the date or dates of maturity, the dates for the
payment of interest, the terms and rates of optional redemption,
and other terms and conditions not inconsistent with the Original
Indenture may be established, prior to the issue of bonds of such
series, by an indenture supplemental to the Original Indenture;
and
WHEREAS, Section 132 of the Original Indenture provides that
any power, privilege or right expressly or impliedly reserved to
or in any way conferred upon the Company by any provision of the
Original Indenture, whether such power, privilege or right is in
any way restricted or is unrestricted, may be in whole or in part
waived or surrendered or subjected to any restriction if at the
time unrestricted or to additional restriction if already
restricted, and that the Company may enter into any further
covenants, limitations or restrictions for the benefit of any one
or more series of bonds issued under the Original Indenture and
provide that a breach thereof shall be equivalent to a default
under the Original Indenture, or the Company may cure any
ambiguity or correct or supplement any defective or inconsistent
provisions contained in the Original Indenture or in any
indenture supplemental to the Original Indenture, by an
instrument in writing, executed and acknowledged, and that the
Trustee is authorized to join with the Company in the execution
of any such instrument or instruments; and
WHEREAS, the Company has heretofore issued, in accordance
with the provisions of the Mortgage, as amended and supplemented
as of the respective dates thereof, bonds of the series (which
are outstanding), entitled and designated as hereinafter set
forth, in the respective original aggregate principal amounts
indicated:
Series Amount
First Mortgage Bonds, 7-1/2% Series due 1998. . . $45,000,000
First Mortgage Bonds, 7.00% Series due 1999. . . 30,000,000
First Mortgage Bonds, 7-5/8% Series due 2002. . . 50,000,000
First Mortgage Bonds, 7.95% Series due 2002. . . 60,000,000
2<PAGE>
I-3
First Mortgage Bonds, 7.38% Series due 2002. . . 50,000,000
First Mortgage Bonds, 7.40% Series due 2002. . . 30,000,000
First Mortgage Bonds, 7-1/2% Series due 2002. . . 70,000,000
First Mortgage Bonds, 6.65% Series due 2003. . . 40,000,000
First Mortgage Bonds, 6.85% Series due 2003. . . 30,000,000
First Mortgage Bonds, 6.00% Series due 2003. . . 30,000,000
First Mortgage Bonds, 7.70% Series due 2004. . . 21,000,000
First Mortgage Bonds, 9-1/8% Series due 2019. . . 50,000,000
First Mortgage Bonds, 9-7/8% Series due 2020. . . 50,000,000
First Mortgage Bonds, 9.35% Series due 2021. . . 50,000,000
First Mortgage Bonds, 8.75% Series due 2022. . . 50,000,000
First Mortgage Bonds, 8.70% Series due 2022. . . 40,000,000
First Mortgage Bonds, 8.43% Series due 2022. . . 50,000,000
First Mortgage Bonds, 8.50% Series due 2022. . . 70,000,000
First Mortgage Bonds, 7.80% Series due 2023. . . 40,000,000
First Mortgage Bonds, 7.90% Series due 2023. . . 30,000,000
First Mortgage Bonds, 7.15% Series due 2023. . . 30,000,000
First Mortgage Bonds, 7.125% Series due 2024. . . 50,000,000
and
WHEREAS, the Company, by appropriate corporate action in
conformity with the terms of the Original Indenture, has duly
determined to create a series of bonds under the Original
Indenture to be designated as "First Mortgage Bonds, Designated
Secured Medium Term Notes, 7.85% Series due November 1, 2004"
(hereinafter sometimes referred to as the "bonds of the 55th
Series"); and
WHEREAS, each of the bonds of the 55th Series is to be
substantially in the form set forth in Schedule I to this
Supplemental Indenture (hereinafter sometimes referred to as the
"Second 1994 Supplemental Indenture"); and
WHEREAS, the Company, in the exercise of the powers and
authorities conferred upon and reserved to it under and by virtue
of the provisions of the Original Indenture, and pursuant to
resolutions of its Board of Directors, has duly resolved and
determined to make, execute and deliver to the Trustee a
supplemental indenture, in the form hereof, for the purposes
herein provided; and
WHEREAS, all conditions and requirements necessary to make
this Second 1994 Supplemental Indenture a valid, binding and
legal instrument in accordance with its terms, have been done,
performed and fulfilled, and the execution and delivery thereof
have been in all respects duly authorized;
3<PAGE>
I-4
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That Appalachian Power Company, in consideration of the
premises and of the purchase and acceptance of the bonds by the
holders thereof and of the sum of One Dollar ($1.00) and other
good and valuable consideration paid to it by the Trustee at or
before the ensealing and delivery of these presents, the receipt
whereof is hereby acknowledged, and in order to secure the
payment of both the principal of and interest and premium, if
any, on the bonds from time to time issued under and secured by
the Original Indenture and this Second 1994 Supplemental
Indenture, according to their tenor and effect, and the
performance of all the provisions of the Original Indenture and
this Second 1994 Supplemental Indenture (including any further
indenture or indentures supplemental to the Original Indenture
and any modification or alteration made as in the Original
Indenture provided) and of said bonds, has granted, bargained,
sold, released, conveyed, transferred, mortgaged, pledged, set
over and confirmed, and by these presents does grant, bargain,
sell, release, convey, assign, transfer, mortgage, pledge, set
over and confirm unto Bankers Trust Company, as Trustee, and to
its respective successor or successors in the trust hereby
created, and to its and their assigns, all the following
described properties of the Company, that is to say:
All property, real, personal and mixed, tangible and
intangible, and all franchises owned by the Company on the date
of the execution hereof, acquired since the execution of the
First 1994 Supplemental Indenture (except any hereinafter
expressly excepted from the lien and operation of this Second
1994 Supplemental Indenture).
TOGETHER WITH all and singular the tenements, hereditaments
and appurtenances belonging or in anywise appertaining to the
aforesaid property or any part thereof, with the reversion and
reversions, remainder and remainders and (subject to the
provisions of Section 63 of the Original Indenture) the tolls,
rents, revenues, issues, earnings, income, product and profits
thereof and all the estate, right, title and interest and claim
whatsoever, at law as well as in equity, which the Company now
has or may hereafter acquire in and to the aforesaid property and
franchises and every part and parcel thereof.
Provided that, in addition to the reservations and
exceptions herein elsewhere contained, the following are not and
are not intended to be now or hereafter granted, bargained, sold,
released, conveyed, assigned, transferred, mortgaged, pledged,
4<PAGE>
I-5
set over or confirmed hereunder and are hereby expressly excepted
from the lien and operation of the Original Indenture and this
Second 1994 Supplemental Indenture, viz.: (1) cash, shares of
stock, and obligations (including bonds, notes and other
securities) not hereinafter or in the Original Indenture
specifically pledged, deposited or delivered hereunder or
thereunder or hereinafter or therein covenanted so to be; (2) any
goods, wares, merchandise, equipment, materials or supplies
acquired for the purpose of sale or resale in the usual course of
business or for consumption in the operation of any properties of
the Company and automobiles and trucks; (3) all judgments,
accounts, and choses in action, the proceeds of which the Company
is not obligated as hereinafter provided or as provided in the
Original Indenture to deposit with the Trustee hereunder and
thereunder; provided, however, that the property and rights
expressly excepted from the lien and operation of the Original
Indenture and this Second 1994 Supplemental Indenture in the
above subdivisions (2) and (3) shall (to the extent permitted by
law) cease to be so excepted, in the event that the Trustee or a
receiver or trustee shall enter upon and take possession of the
mortgaged and pledged property in the manner provided in Article
XIV of the Original Indenture by reason of the occurrence of a
completed default, as defined in said Article XIV.
TO HAVE AND TO HOLD all such properties, real, personal and
mixed, granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed by the
Company as aforesaid, or intended so to be, unto the Trustee and
its successors in the trust;
SUBJECT, HOWEVER, to the reservations, exceptions,
conditions, limitations and restrictions contained in the several
deeds, leases, servitudes, franchises and contracts or other
instruments through which the Company acquired and/or claims
title to and/or enjoys the use of the aforesaid properties; and
subject also to encumbrances of the character defined in Section
6 of the Original Indenture as "excepted encumbrances" in so far
as the same may attach to any of the property embraced herein.
Inasmuch as the Company holds certain of said lands, rights
of way and other property under leases, power agreements and
other contracts which provide that the Company's interest therein
shall not be mortgaged without the consent of the respective
lessors or other parties to said agreements and contracts, and
such lessors and parties have either given such consent or have
waived the requirement of such consent, it is hereby expressly
agreed and made a condition upon which this Second 1994
5<PAGE>
I-6
Supplemental Indenture is executed and delivered, that the lien
of this Second 1994 Supplemental Indenture and the estate, rights
and remedies of the Trustee hereunder, and the rights and
remedies of the holders of the bonds secured hereby and by the
Original Indenture in so far as they may affect such lands,
rights of way and other property now held or to be hereafter
acquired by the Company under such leases, contracts or
agreements, shall be subject and subordinate in all respects to
the rights and remedies of the respective lessors or other
parties thereto.
And it is hereby expressly covenanted and agreed as follows:
(a) That the rights of the Trustee hereunder, and of
every person or corporation whatsoever claiming by reason of
this Second 1994 Supplemental Indenture any right, title or
interest, legal or equitable, in the property covered by any
such lease, power agreement or other contract, are and at
all times hereafter shall be subject in the same manner and
degree as the rights of the Company might or would at all
times be subject, had this Second 1994 Supplemental
Indenture not been made, to all terms, provisions,
conditions, covenants, stipulations, and agreements, and to
all exceptions, reservations, limitations, restrictions, and
forfeitures contained in any such lease, power agreement or
other contract;
(b) That any right, claim, condition or forfeiture
which might at any time be asserted against the party in
possession under the provisions of any such lease, power
agreement or other contract, had this Second 1994
Supplemental Indenture not been made, may be asserted with
the same force and effect against any and all persons or
corporations at any time claiming any right, title or
interest in any such property under or by reason of this
Second 1994 Supplemental Indenture or of any bond hereby and
by the Original Indenture secured; and
(c) That such consent or waiver of the requirement of
such consent given by the lessor under any such lease or
party to any such power agreement or other contract is
intended and shall be construed to be solely for the purpose
of permitting the Company to mortgage its property generally
without violating the express covenant contained in such
lease, power agreement or other contract, and that such
consent or waiver of the requirement of such consent confers
upon the Trustee hereunder and the holders of bonds secured
6<PAGE>
I-7
hereby and by the Original Indenture no rights in addition
to such as they would have had, respectively, if such
consent or waiver of the requirement of such consent had not
been given.
IN TRUST NEVERTHELESS, upon the terms and trusts in the
Original Indenture and this Second 1994 Supplemental Indenture
set forth, for the equal and pro rata benefit and security of
those who shall hold the bonds and coupons issued and to be
issued hereunder and under the Original Indenture, in accordance
with the terms of the Original Indenture and of this Second 1994
Supplemental Indenture, without preference, priority or
distinction as to lien of any of said bonds or coupons over any
other thereof by reason of priority in the time of issuance or
negotiation thereof, or otherwise howsoever, subject, however, to
the conditions, provisions and covenants set forth in the
Original Indenture and in this Second 1994 Supplemental
Indenture.
AND THIS INDENTURE FURTHER WITNESSETH:
That in further consideration of the premises and for the
considerations aforesaid, the Company, for itself and it
successors and assigns, hereby covenants and agrees to and with
the Trustee, and its successor or successors in such trust, under
the Original Indenture, as follows:
Section 7. The Original Indenture is hereby supplemented by
adding immediately after Section 20AAA, a new Section 20BBB, as
follows:
SECTION 20BBB. The Company hereby creates a fifty-
fifth series of bonds to be issued under and secured by this
Indenture, to be designated and to be distinguished from the
bonds of all other series by the title "First Mortgage
Bonds, Designated Secured Medium Term Notes, 7.85% Series
due November 1, 2004" (herein sometimes referred to as the
"bonds of the 55th Series"). The form of the bonds of the
55th Series shall be substantially as set forth in Schedule
I to the Second 1994 Supplemental Indenture.
Bonds of the 55th Series shall mature on the date
specified in their title. Unless otherwise determined by
the Company, the bonds of the 55th Series shall be issued in
fully registered form without coupons in denominations of
$1,000 and in integral multiples thereof; the principal of
and premium (if any) and interest on each said bond to be
7<PAGE>
I-8
payable at the office or agency of the Company in the
Borough of Manhattan, The City of New York, in lawful money
of the United States of America, provided that at the option
of the Company interest may be mailed to registered owners
of the bonds at their respective addresses that appear on
the register thereof; and the rate of interest shall be the
rate per annum specified in the title thereof, payable semi-
annually on the first days of May and November of each year
(commencing May 1, 1995) and on their maturity date.
The person in whose name any bond of the 55th Series is
registered at the close of business on any record date (as
hereinbelow defined) with respect to any regular semi-annual
interest payment date (other than interest payable upon
repayment or maturity) shall be entitled to receive the
interest payable on such interest payment date
notwithstanding the cancellation of such bond of the 55th
Series upon any registration of transfer or exchange thereof
(including any exchange effected as an incident to a partial
repayment thereof) subsequent to the record date and prior
to such interest payment date, except, if and to the extent
that the Company shall default in the payment of the
interest due on such interest payment date, then the
registered owners of bonds of the 55th Series on such record
date shall have no further right to or claim in respect of
such defaulted interest as such registered owners on such
record date, and the persons entitled to receive payment of
any defaulted interest thereafter payable or paid on any
bonds of the 55th Series shall be the registered owners of
such bonds of the 55th Series (or any bond or bonds issued,
directly or after intermediate transactions upon transfer or
exchange or in substitution thereof) on the date of payment
of such defaulted interest. Interest payable upon repayment
or maturity shall be payable to the person to whom the
principal is paid. The term "record date" as used in this
Section 20BBB, and in the form of the bonds of the 55th
Series, with respect to any regular semi-annual interest
payment date (other than interest payable upon repayment or
maturity) applicable to the bonds of the 55th Series, shall
mean the April 15 next preceding a May 1 interest payment
date or the October 15 next preceding a November 1 interest
payment date, as the case may be, or, if such April 15 or
October 15 is not a Business Day (as defined hereinbelow),
the next preceding Business Day. The term "Business Day"
with respect to any bond of the 55th Series shall mean any
day, other than a Saturday or Sunday, which is not a day on
which banking institutions or trust companies in The City of
8<PAGE>
I-9
New York, New York or the city in which is located any
office or agency maintained for the payment of principal of
or premium, if any, or interest on such bond of the 55th
Series are authorized or required by law, regulation or
executive order to remain closed.
Every registered bond of the 55th Series shall be dated
the date of authentication ("Issue Date") and shall bear
interest computed on the basis of a 360-day year consisting
of twelve 30-day months from its Issue Date or from the
latest semi-annual interest payment date to which interest
has been paid on the bonds of the 55th Series preceding the
Issue Date, unless such Issue Date be an interest payment
date to which interest is being paid on the bonds of the
55th Series, in which case it shall bear interest from its
Issue Date or unless the Issue Date be the record date for
the interest payment date first following the date of
original issuance of bonds of the 55th Series (the "Original
Issue Date"), or a date prior to such record date, then from
the Original Issue Date; provided that, so long as there is
no existing default in the payment of interest on said
bonds, the owner of any bond authenticated by the Corporate
Trustee between the record date for any regular semi-annual
interest payment date and such interest payment date shall
not be entitled to the payment of the interest due on such
interest payment date (other than interest payable upon
repayment or maturity) and shall have no claim against the
Company with respect thereto; provided further, that, if and
to the extent the Company shall default in the payment of
the interest due on such interest payment date, then any
such bond shall bear interest from the May 1 or November 1,
as the case may be, next preceding its Issue Date, to which
interest has been paid or, if the Company shall be in
default with respect to the interest payment date first
following the Original Issue Date, then from the Original
Issue Date.
If any semi-annual interest payment date or the
repayment date or maturity date is not a Business Day,
payment of amounts due on such date may be made on the next
succeeding Business Day, and, if such payment is made or
duly provided for on such Business Day, no interest shall
accrue on such amounts for the period from and after such
interest payment date or the repayment date or maturity
date, as the case may be, to such Business Day.
9<PAGE>
I-10
Notwithstanding the provisions of Section 14 of this
Indenture, the bonds of the 55th Series shall be executed on
behalf of the Company by its Chairman of the Board, by its
President or by one of its Vice Presidents or by one of its
officers designated by the Board of Directors of the Company
for such purpose, whose signature may be a facsimile, and
its corporate seal shall be thereunto affixed or printed
thereon and attested by its Secretary or one of its
Assistant Secretaries, and the provisions of the penultimate
sentence of said Section 14 shall be applicable to such
bonds of the 55th Series.
The bonds of the 55th Series are not redeemable prior
to their maturity.
The bonds of the 55th Series are subject to repayment
on November 1, 1999 at the option of the holder as set forth
in the form of bond contained in Schedule I to the Second
1994 Supplemental Indenture.
Notwithstanding the provisions of Section 12 of this
Indenture, the Company shall not be required to make
transfers or exchanges of bonds of the 55th Series for a
period of fifteen days next preceding any interest payment
date.
Registered bonds of the 55th Series shall be
transferable upon presentation and surrender thereof, for
cancellation, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, and at such
other office or agency of the Company as the Company may
from time to time designate, by the registered owners
thereof, in person or by duly authorized attorney, in the
manner and upon payment, if required by the Company, of the
charges prescribed in this Indenture. In the manner and
upon payment, if required by the Company, of the charges
prescribed in this Indenture, registered bonds of the 55th
Series may be exchanged for a like aggregate principal
amount of registered bonds of the 55th Series of other
authorized denominations, upon presentation and surrender
thereof, for cancellation, at the office or agency of the
Company in the Borough of Manhattan, The City of New York,
or at such other office or agency of the Company as the
Company may from time to time designate.
Section 8. Initial Issuance of the Bonds of the 55th Series:
10<PAGE>
I-11
In accordance with and upon compliance with such provisions
of the Original Indenture as shall be selected for such purpose
by the officers of the Company duly authorized to take such
action, bonds of the 55th Series, in an aggregate principal
amount not exceeding $50,000,000, shall forthwith be executed by
the Company and delivered to the Trustee and shall be
authenticated by the Trustee and delivered to or upon the order
of the Company (without awaiting the filing and recording of this
Second 1994 Supplemental Indenture except to the extent required
by subdivision (10) of Section 29 of the Original Indenture).
Section 9. At any meeting of bondholders held as provided for
in Article XX of the Original Indenture at which owners of bonds
of the 55th Series are entitled to vote, all owners of bonds of
the 55th Series at the time of such meeting shall be entitled to
vote thereat; provided, however, that the Trustee may, and upon
request of the Company or of a majority of the bondowners of the
55th Series, shall, fix a day not exceeding ninety days preceding
the date for which the meeting is called as a record date for the
determination of owners of bonds of the 55th Series, entitled to
notice of and to vote at such meeting and any adjournment thereof
and only such registered owners who shall have been such
registered owners on the date so fixed, and who are entitled to
vote such bonds of the 55th Series at the meeting, shall be
entitled to receive notice of such meeting.
Section 10. As supplemented by this Second 1994 Supplemental
Indenture, the Original Indenture is in all respects ratified and
confirmed and the Original Indenture and this Second 1994
Supplemental Indenture shall be read, taken and construed as one
and the same instrument. The bonds of the 55th Series are the
original debt secured by this Second 1994 Supplemental Indenture
and the Original Indenture, and this Second 1994 Supplemental
Indenture and the Original Indenture shall be, and shall be
deemed to be, the original lien instrument securing the bonds of
the 55th Series.
Section 11. Nothing contained in this Second 1994 Supplemental
Indenture shall, or shall be construed to, confer upon any person
other than the owners of bonds issued under the Original
Indenture and this Second 1994 Supplemental Indenture, the
Company and the Trustee, any right to avail themselves of any
benefit of any provision of the Original Indenture or of this
Second 1994 Supplemental Indenture.
11<PAGE>
I-12
Section 12. This Second 1994 Supplemental Indenture may be
simultaneously executed in several counterparts and all such
counterparts executed and delivered, each as an original, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, APPALACHIAN POWER COMPANY, party of the
first part, has caused this instrument to be signed in its name
and behalf by its President, a Vice President or an Assistant
Treasurer, and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary, and BANKERS
TRUST COMPANY, party of the second part, in token of its
acceptance hereof, has caused this instrument to be signed in its
name and behalf by a Vice President or an Assistant Vice
President and its corporate seal to be hereunto affixed and
attested by its Secretary, an Assistant Secretary, Assistant
Treasurer or Assistant Vice President. Executed and delivered as
of the date and year first above written.
APPALACHIAN POWER COMPANY
[SEAL]
By: /s/ B. M. Barber
B. M. Barber
Assistant Treasurer
Attest:
/s/ Jeffrey D. Cross
Jeffrey D. Cross
Assistant Secretary
In the presence of:
/s/ T. G. Berkemeyer
T. G. Berkemeyer
/s/ A. A. Pena
A. A. Pena
BANKERS TRUST COMPANY
[SEAL]
By /s/ Robert Caporale
12<PAGE>
I-13
Robert Caporale
Vice President
Attest:
/s/ M. Lisa Morrone
M. Lisa Morrone
Assistant Vice President
Executed by BANKERS TRUST COMPANY
in the presence of:
/s/ M. Waters
M. Waters
/s/ K. O'Brien
K. O'Brien
13<PAGE>
I-14
STATE OF OHIO )
) SS:
COUNTY OF FRANKLIN )
On this 13th day of October, 1994, personally appeared
before me, a Notary Public within and for said County in the
State aforesaid, B. M. BARBER and JEFFREY D. CROSS, to me known
and known to me to be respectively an Assistant Treasurer and
Assistant Secretary of APPALACHIAN POWER COMPANY, one of the
corporations named in and which executed the foregoing
instrument, who severally acknowledged that they did sign and
seal said instrument as such Assistant Treasurer and Assistant
Secretary for and on behalf of said corporation and that the same
is their free act and deed as such Assistant Treasurer and
Assistant Secretary, respectively, and the free and corporate act
and deed of said corporation.
In Witness Whereof, I have hereunto set my hand and notarial
seal this 13th day of October, 1994.
[Notarial Seal]
/s/ Mary M. Soltesz
MARY M. SOLTESZ
Notary Public, State of Ohio
My Commission Expires July 12, 1999
14<PAGE>
I-15
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
I, PATRICIA M. CARILLO, a Notary Public, duly qualified,
commissioned and sworn, and acting in and for the County and
State aforesaid, hereby certify that on this 14th day of October,
1994:
ROBERT CAPORALE and M. LISA MORRONE, whose names are signed
to the writing above, bearing a date as of the 1st day of
October, 1994, as Vice President and Assistant Vice President,
respectively, of BANKERS TRUST COMPANY, have this day
acknowledged the same before me in my County aforesaid.
ROBERT CAPORALE, who signed the writing above and hereto
annexed for BANKERS TRUST COMPANY, a corporation, bearing a date
as of the 1st day of October, 1994, has this day in my said
County before me acknowledged the said writing to be the act and
deed of said corporation.
Before me appeared ROBERT CAPORALE and M. LISA MORRONE to me
personally known, who, being by me duly sworn, did say that they
are Vice President and Assistant Vice President, respectively, of
BANKERS TRUST COMPANY, and that the seal affixed to said
instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed in behalf of said
corporation, by authority of its Board of Directors and said
ROBERT CAPORALE acknowledged said instrument to be the free act
and deed of said corporation.
M. LISA MORRONE personally came before me this day and
acknowledged that she is an Assistant Vice President of BANKERS
TRUST COMPANY, a corporation, and that by authority duly given
and as the act of the corporation, the foregoing instrument was
signed in its name by an Assistant Vice President, sealed with
its corporate seal, and attested by herself as an Assistant Vice
President.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County and State of New York, this 14th day
of October, 1994.
/s/ Patricia M. Carillo
PATRICIA M. CARILLO
Notary Public, State of New York
No. 41-4747732
Qualified in Queens County
15<PAGE>
I-16
Certificate filed in New York County
Commission expires May 31, 1995
[SEAL]
The foregoing instrument was prepared by Jeffrey D. Cross, 1
Riverside Plaza, Columbus, Ohio 43215.
SCHEDULE I
APPALACHIAN POWER COMPANY
FIRST MORTGAGE BOND, DESIGNATED
SECURED MEDIUM TERM NOTE, 7.85%
SERIES DUE NOVEMBER 1, 2004
Bond No.
Original Issue Date: October 21, 1994
Principal Amount:
Semi-annual Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
CUSIP No: 03774B AT0
APPALACHIAN POWER COMPANY, a corporation of the Commonwealth
of Virginia (hereinafter called the "Company"), for value
received, hereby promises to pay to ____________, or registered
assigns, the Principal Amount set forth above on the maturity
date specified in the title of this bond in lawful money of the
United States of America, at the office or agency of the Company
in the Borough of Manhattan, The City of New York, and to pay to
the registered owner hereof interest on said sum from the date of
authentication of this bond (herein called the "Issue Date") or
latest semi-annual interest payment date to which interest has
been paid on the bonds of this series preceding the Issue Date,
unless the Issue Date be an interest payment date to which
interest is being paid, in which case from the Issue Date or
unless the Issue Date be the record date for the interest payment
date first following the Original Issue Date set forth above or a
date prior to such record date, then from the Original Issue Date
(or, if the Issue Date is between the record date for any
interest payment date and such interest payment date, then from
such interest payment date, provided, however, that if and to the
extent that the Company shall default in the payment of the
interest due on such interest payment date, then from the next
preceding semi-annual interest payment date to which interest has
been paid on the bonds of this series, or if such interest
1<PAGE>
I-2
payment date is the interest payment date first following the
Original Issue Date set forth above, then from the Original Issue
Date), until the principal hereof shall have become due and
payable, at the rate per annum specified in the title of this
bond, payable on May 1 and November 1 of each year (commencing
May 1, 1995) and on the maturity date specified in the title of
this bond; provided that, at the option of the Company, such
interest may be paid by check, mailed to the registered owner of
this bond at such owner's address appearing on the register
hereof.<PAGE>
I-3
This bond is one of a duly authorized issue of bonds of the
Company, issuable in series, and is one of a series known as its
First Mortgage Bonds, of the series designated in its title, all
bonds of all series issued and to be issued under and equally
secured (except in so far as any sinking fund, established in
accordance with the provisions of the Mortgage hereinafter
mentioned, may afford additional security for the bonds of any
particular series and except as provided in Section 73 of the
Mortgage) by a Mortgage and Deed of Trust (herein, together with
all indentures supplemental thereto, called the Mortgage), dated
as of December 1, 1940, executed by APPALACHIAN ELECTRIC POWER
COMPANY (the corporate title of which was changed to APPALACHIAN
POWER COMPANY) to BANKERS TRUST COMPANY, as Trustee, to which
Mortgage reference is made for a description of the property
mortgaged and pledged, the nature and extent of the security, the
rights of the holders of the bonds and of the Trustee in respect
thereof, the duties and immunities of the Trustee, and the terms
and conditions upon which the bonds are secured. With the
consent of the Company and to the extent permitted by and as
provided in the Mortgage, the rights and obligations of the
Company and/or of the holders of the bonds and/or coupons and/or
the terms and provisions of the Mortgage and/or of any
instruments supplemental thereto may be modified or altered by
affirmative vote of the holders of at least seventy-five per
centum (75%) in principal amount of the bonds affected by such
modification or alteration, then outstanding under the Mortgage
(excluding bonds disqualified from voting by reason of the
Company's interest therein as provided in the Mortgage); provided
that, without the consent of the owner hereof no such
modification or alteration shall permit the extension of the
maturity of the principal of or interest on this bond or the
reduction in the rate of interest hereon or any other
modification in the terms of payment of such principal or
interest or the creation of a lien on the mortgaged and pledged
property ranking prior to or on a parity with the lien of the
Mortgage or the deprivation of the owner hereof of a lien upon
such property or reduce the above percentage.
As provided in said Mortgage, said bonds may be for various
principal sums and are issuable in series, which may mature at
different times, may bear interest at different rates and may
otherwise vary as therein provided, and this bond is one of a
series entitled "First Mortgage Bonds, Designated Secured Medium
Term Notes, 7.85% Series due November 1, 2004 (herein called
"bonds of the 55th Series") created by an Indenture Supplemental
to Mortgage and Deed of Trust dated as of October 1, 1994 (the
"Second 1994 Supplemental Indenture"), as provided for in said
Mortgage.
The interest payable on any May 1 or November 1 (other than
interest payable upon repayment or maturity) will, subject to<PAGE>
I-4
certain exceptions provided in said Second 1994 Supplemental
Indenture, be paid to the person in whose name this bond is
registered at the close of business on the record date, which
shall be the April 15 or October 15, as the case may be, next
preceding such interest payment date, or, if such April 15 or
October 15 is not a Business Day (as hereinbelow defined), the
next preceding Business Day. Interest payable upon repayment or
maturity shall be payable to the person to whom the principal is
paid. The term "Business Day" means any day, other than a
Saturday or Sunday, which is not a day on which banking
institutions or trust companies in The City of New York, New York
or the city in which is located any office or agency maintained
for the payment of principal or premium, if any, or interest on
bonds of the 55th Series are authorized or required by law,
regulation or executive order to remain closed.
If any semi-annual interest payment date or the repayment
date or maturity date is not a Business Day, payment of amounts
due on such date may be made on the next succeeding Business Day,
and, if such payment is made or duly provided for on such
Business Day, no interest shall accrue on such amounts for the
period from and after such interest payment date or the repayment
date or maturity date, as the case may be, to such Business Day.
The Company and the Trustee may deem and treat the person in
whose name this bond is registered as the absolute owner hereof
for the purpose of receiving payment of or on account of
principal or (subject to the provisions hereof) interest hereon
and for all other purposes and the Company and the Trustee shall
not be affected by any notice to the contrary.
The Company shall not be required to make transfers or
exchanges of bonds of the 55th Series for a period of fifteen
days next preceding any interest payment date.
The bonds of the 55th Series are not redeemable by the
Company prior to their maturity.
This bond is repayable on November 1, 1999, at the option of
the registered owner or owners hereof, at 100% of its principal
amount together with accrued and unpaid interest payable to the
date of repayment. The repayment option may be exercised by the
registered owner or owners of this bond for less than the entire
principal amount of this bond, provided the principal amount
which is to be repaid to such holder is equal to $1,000 or an
integral multiple of $1,000. Such election by the registered
owner or owners to tender this bond for repayment will be
irrevocable. The Company must receive at the office or agency of
the Company in the Borough of Manhattan, The City of New York, or
at such other office or agency of the Company as the Company may
designate, during the period from and including September 1, 1999<PAGE>
I-5
to and including October 1, 1999 or, if October 1, 1999 is not a
Business Day, the next succeeding Business Day, the bond to be
repaid with the form entitled "Option to Elect Repayment" below
duly completed. All questions as to the validity, eligibility
(including time of receipt) and acceptance of any bond for
repayment will be determined by the Company, whose determination
shall be final and binding.
The principal hereof may be declared or may become due prior
to the express date of the maturity hereof on the conditions, in
the manner and at the time set forth in the Mortgage, upon the
occurrence of a completed default as in the Mortgage provided.
This bond is transferable as prescribed in the Mortgage by
the registered owner hereof in person, or by his duly authorized
attorney, at the office or agency of the Company in the Borough
of Manhattan, The City of New York, and at such other office or
agency of the Company as the Company may designate, upon
surrender and cancellation of this bond and upon payment, if the
Company shall require it, of the transfer charges prescribed in
the Mortgage, and, thereupon, a new registered bond or bonds of
authorized denominations of the same series for a like principal
amount will be issued to the transferee in exchange herefor as
provided in the Mortgage. In the manner and upon payment, if the
Company shall require it, of the charges prescribed in the
Mortgage, registered bonds of the 55th Series may be exchanged
for a like aggregate principal amount of registered bonds of
other authorized denominations of the same series, upon
presentation and surrender thereof, for cancellation, at the
office or agency of the Company in the Borough of Manhattan, The
City of New York, or at such other office or agency of the
Company as the Company may from time to time designate.
No recourse shall be had for the payment of the principal of
or interest on this bond against any incorporator or any past,
present or future stockholder, officer or director, as such, of
the Company or of any successor corporation, either directly or
through the Company or any successor corporation, under any rule
of law, statute or constitution or by the enforcement of any
assessment or otherwise, all such liability of incorporators,
stockholders, officers and directors, as such, being waived and
released by the holder or owner hereof by the acceptance of this
bond and being likewise waived and released by the terms of the
Mortgage.
This bond shall not become valid or obligatory for any
purpose until BANKERS TRUST COMPANY, the Trustee under the
Mortgage, or its successor thereunder, shall have signed the form
of Authentication Certificate endorsed hereon.<PAGE>
I-6
In Witness Whereof, Appalachian Power Company has caused
this bond to be executed in its name by the signature of its
Chairman of the Board, its President or one of its Vice
Presidents and its corporate seal, or a facsimile thereof, to be
impressed or imprinted hereon and attested by the signature of
its Secretary or one of its Assistant Secretaries.
Dated:
APPALACHIAN POWER COMPANY
By________________________
Vice President
(SEAL)
Attest:___________________
Assistant Secretary
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds,
of the series herein designated,
described in the within-mentioned
Mortgage.
BANKERS TRUST COMPANY,
as Trustee,
By______________________________
Authorized Officer<PAGE>
I-7
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto
(PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE)
_______________________________________
________________________________________________________________
________________________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
________________________________________________________________
ASSIGNEE) the within Bond and all rights thereunder, hereby
________________________________________________________________
irrevocably constituting and appointing such person attorney to
________________________________________________________________
transfer such Bond on the books of the Issuer, with full power of
________________________________________________________________
substitution in the premises.
Dated: ______________________ ____________________________
NOTICE: The signature to this assignment must correspond with
the name as written upon the face of the within Bond in
every particular without alteration or enlargement or
any change whatsoever.<PAGE>
I-8
[FORM OF OPTION TO ELECT REPAYMENT]
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs
the Company to repay the First Mortgage Bond, Designated Secured
Medium Term Note, 7.85% Series due November 1, 2004, Bond No.
______, in the principal amount of $____________, of Appalachian
Power Company (or portion thereof specified below) pursuant to
its terms at a price equal to the principal amount thereof,
together with accrued and unpaid interest to the repayment date,
to the undersigned, at
_______________________________________________________________
_______________________________________________________________
(Please Print or Typewrite Name, Address and
Tax Identification Number of the Undersigned)
If less than the entire principal amount of the bond is to
be repaid, specify the portion thereof (which shall be $1,000 or
an integral multiple of $1,000) which the holder elects to have
repaid: $____________. Specify the denomination or
denominations (which shall be $1,000 or an integral multiple of
$1,000 in excess of $1,000) of the bond or bonds to be issued to
the registered owner or owners for the amount of the portion of
the bond not being repaid (in the absence of any such
specification, one such bond will be issued for the portion not
being repaid): $____________.
_________________________
Signature
NOTICE: The signature on this Option to Elect Repayment must
correspond with the name as written upon the face of the bond in
every particular without alteration or enlargement or any other
change. The undersigned also must furnish any required
certifications for federal or state tax purposes.
</PAGE>
<PAGE>
[CONFORMED COPY]<PAGE>
I-9
Indenture Supplemental
TO
Mortgage and Deed of Trust
(Dated as of December 1, 1940)
Executed by
APPALACHIAN POWER COMPANY
formerly Appalachian Electric Power Company
TO
BANKERS TRUST COMPANY,
As Trustee
Dated as of March 1, 1995
$50,000,000 First Mortgage Bonds,
Designated Secured Medium Term Notes,
8.00% Series due May 1, 2005<PAGE>
I-i
TABLE OF CONTENTS*
PAGE
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS
Execution of Mortgage. . . . . . . . . . . . . . . . . . 1
Execution of supplemental indentures . . . . . . . . . . 1
Termination of Individual Trustee. . . . . . . . . . . . 1
Provision for issuance of bonds in one or more series. . 2
Right to execute supplemental indenture. . . . . . . . . 2
First Mortgage Bonds heretofore issued . . . . . . . . . 2
Issue of new First Mortgage Bonds of the 56th Series . . 3
First 1995 Supplemental Indenture . . . . . . . . . . . 3
Compliance with legal requirements . . . . . . . . . . . 4
GRANTING CLAUSES. . . . . . . . . . . . . . . . . . . . . . . 4
DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . 4
APPURTENANCES, ETC. . . . . . . . . . . . . . . . . . . . . . 4
HABENDUM. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PRIOR LEASEHOLD ENCUMBRANCES. . . . . . . . . . . . . . . . . 5
GRANT IN TRUST. . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 1. Supplement to Original Indenture by adding
Section 20CCC. . . . . . . . . . . . . . . . . 7
SECTION 2. Initial Issuance of the Bonds of the 56th Series. 9
SECTION 3. Provision for record date for meetings
of Bondholders . . . . . . . . . . . . . . . . 10
SECTION 4. Original Indenture and First 1995 Supplemental
Indenture same instrument. . . . . . . . . . . 10
i<PAGE>
I-ii
*The Table of Contents shall not be deemed to be any
part of the Indenture Supplemental to Mortgage and Deed of Trust.
PAGE
SECTION 5. Limitation of rights. . . . . . . . . . . . . . . 10
SECTION 6. Execution in counterparts . . . . . . . . . . . . 10
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES AND SEALS. . . . . . . . . . . . . . . . . . . . . 11
ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . 13
SCHEDULE I. . . . . . . . . . . . . . . . . . . . . . . . . . I-1
ii<PAGE>
SUPPLEMENTAL INDENTURE, dated as of the first day of March
in the year One Thousand Nine Hundred and Ninety-five, made and
entered into by and between APPALACHIAN POWER COMPANY, a
corporation of the Commonwealth of Virginia, the corporate title
of which was, prior to April 17, 1958, APPALACHIAN ELECTRIC POWER
COMPANY (hereinafter sometimes called the "Company"), a
transmitting utility (as such term is defined in Section 46-9-
105(1)(n) of the West Virginia Code), party of the first part,
and BANKERS TRUST COMPANY, a corporation of the State of New York
(hereinafter sometimes called the "Corporate Trustee" or
"Trustee"), as Trustee, party of the second part.
WHEREAS, the Company has heretofore executed and delivered
its Mortgage and Deed of Trust (hereinafter sometimes referred to
as the "Mortgage"), dated as of December 1, 1940, to the Trustee
for the security of all bonds of the Company outstanding
thereunder, and by said Mortgage conveyed to the Trustee, upon
certain trusts, terms and conditions, and with and subject to
certain provisos and covenants therein contained, all and
singular the property, rights and franchises which the Company
then owned or should thereafter acquire, excepting any property
expressly excepted by the terms of the Mortgage; and
WHEREAS, the Company has heretofore executed and delivered
to the Trustee supplements and indentures supplemental to the
Mortgage, dated as of December 1, 1943, December 2, 1946,
December 1, 1947, March 1, 1950, June 1, 1951, October 1, 1952,
December 1, 1953, March 1, 1957, May 1, 1958, October 2, 1961,
April 1, 1962, June 1, 1965, September 2, 1968, December 1, 1968,
October 1, 1969, June 1, 1970, October 1, 1970, September 1,
1971, February 1, 1972, December 1, 1972, July 1, 1973, March 1,
1974, April 1, 1975, May 1, 1975, December 1, 1975, April 1,
1976, September 1, 1976, November 1, 1977, May 1, 1979, August 1,
1979, February 1, 1980, November 1, 1980, April 1, 1982, October
1, 1983, February 1, 1987, September 1, 1987, November 1, 1989,
December 1, 1990, August 1, 1991, February 1, 1992, May 1, 1992,
August 1, 1992, November 15, 1992, April 15, 1993, May 15, 1993,
October 1, 1993, November 1, 1993, August 15, 1994 and October 1,
1994 (hereinafter referred to as the "Second 1994 Supplemental
Indenture"), respectively, amending and supplementing the
Mortgage in certain respects (the Mortgage, as so amended and
supplemented, being hereinafter called the "Original Indenture")
and conveying to the Trustee, upon certain trusts, terms and
conditions, and with and subject to certain provisos and
covenants therein contained, certain property rights and property
therein described; and
WHEREAS, effective October 7, 1988, pursuant to Section 115
of the Original Indenture, the Individual Trustee resigned and
all powers of the Individual Trustee then terminated, as did the
Individual Trustee's right, title or interest in and to the trust
estate, and without appointment of a new trustee as successor to
the Individual Trustee, all the right, title and powers of the<PAGE>
I-2
Trustee thereupon devolved upon the Corporate Trustee and its
successors alone; and
WHEREAS, the Original Indenture provides that bonds issued
thereunder may be issued in one or more series and further
provides that, with respect to each series, the rate or rates of
interest, the date or dates of maturity, the dates for the
payment of interest, the terms and rates of optional redemption,
and other terms and conditions not inconsistent with the Original
Indenture may be established, prior to the issue of bonds of such
series, by an indenture supplemental to the Original Indenture;
and
WHEREAS, Section 132 of the Original Indenture provides that
any power, privilege or right expressly or impliedly reserved to
or in any way conferred upon the Company by any provision of the
Original Indenture, whether such power, privilege or right is in
any way restricted or is unrestricted, may be in whole or in part
waived or surrendered or subjected to any restriction if at the
time unrestricted or to additional restriction if already
restricted, and that the Company may enter into any further
covenants, limitations or restrictions for the benefit of any one
or more series of bonds issued under the Original Indenture and
provide that a breach thereof shall be equivalent to a default
under the Original Indenture, or the Company may cure any
ambiguity or correct or supplement any defective or inconsistent
provisions contained in the Original Indenture or in any
indenture supplemental to the Original Indenture, by an
instrument in writing, executed and acknowledged, and that the
Trustee is authorized to join with the Company in the execution
of any such instrument or instruments; and
WHEREAS, the Company has heretofore issued, in accordance
with the provisions of the Mortgage, as amended and supplemented
as of the respective dates thereof, bonds of the series (which
are outstanding), entitled and designated as hereinafter set
forth, in the respective original aggregate principal amounts
indicated:
SERIES AMOUNT
First Mortgage Bonds, 7-1/2% Series due 1998. . . $45,000,000
First Mortgage Bonds, 7.00% Series due 1999. . . 30,000,000
First Mortgage Bonds, 7-5/8% Series due 2002. . . 50,000,000
First Mortgage Bonds, 7.95% Series due 2002. . . 60,000,000
First Mortgage Bonds, 7.38% Series due 2002. . . 50,000,000
First Mortgage Bonds, 7.40% Series due 2002. . . 30,000,000
First Mortgage Bonds, 7-1/2% Series due 2002. . . 70,000,000
First Mortgage Bonds, 6.65% Series due 2003. . . 40,000,000
2<PAGE>
I-3
First Mortgage Bonds, 6.85% Series due 2003. . . 30,000,000
First Mortgage Bonds, 6.00% Series due 2003. . . 30,000,000
First Mortgage Bonds, 7.70% Series due 2004. . . 21,000,000
First Mortgage Bonds, 7.85% Series due 2004. . . 50,000,000
First Mortgage Bonds, 9-1/8% Series due 2019. . . 50,000,000
First Mortgage Bonds, 9-7/8% Series due 2020. . . 50,000,000
First Mortgage Bonds, 9.35% Series due 2021. . . 50,000,000
First Mortgage Bonds, 8.75% Series due 2022. . . 50,000,000
First Mortgage Bonds, 8.70% Series due 2022. . . 40,000,000
First Mortgage Bonds, 8.43% Series due 2022. . . 50,000,000
First Mortgage Bonds, 8.50% Series due 2022. . . 70,000,000
First Mortgage Bonds, 7.80% Series due 2023. . . 40,000,000
First Mortgage Bonds, 7.90% Series due 2023. . . 30,000,000
First Mortgage Bonds, 7.15% Series due 2023. . . 30,000,000
First Mortgage Bonds, 7.125% Series due 2024. . . 50,000,000
and
WHEREAS, the Company, by appropriate corporate action in
conformity with the terms of the Original Indenture, has duly
determined to create a series of bonds under the Original
Indenture to be designated as "First Mortgage Bonds, Designated
Secured Medium Term Notes, 8.00% Series due May 1, 2005"
(hereinafter sometimes referred to as the "bonds of the 56th
Series"); and
WHEREAS, each of the bonds of the 56th Series is to be
substantially in the form set forth in Schedule I to this
Supplemental Indenture (hereinafter sometimes referred to as the
"First 1995 Supplemental Indenture"); and
WHEREAS, the Company, in the exercise of the powers and
authorities conferred upon and reserved to it under and by virtue
of the provisions of the Original Indenture, and pursuant to
resolutions of its Board of Directors, has duly resolved and
determined to make, execute and deliver to the Trustee a
supplemental indenture, in the form hereof, for the purposes
herein provided; and
WHEREAS, all conditions and requirements necessary to make
this First 1995 Supplemental Indenture a valid, binding and legal
instrument in accordance with its terms, have been done,
performed and fulfilled, and the execution and delivery thereof
have been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
3<PAGE>
I-4
That Appalachian Power Company, in consideration of the
premises and of the purchase and acceptance of the bonds by the
holders thereof and of the sum of One Dollar ($1.00) and other
good and valuable consideration paid to it by the Trustee at or
before the ensealing and delivery of these presents, the receipt
whereof is hereby acknowledged, and in order to secure the
payment of both the principal of and interest and premium, if
any, on the bonds from time to time issued under and secured by
the Original Indenture and this First 1995 Supplemental
Indenture, according to their tenor and effect, and the
performance of all the provisions of the Original Indenture and
this First 1995 Supplemental Indenture (including any further
indenture or indentures supplemental to the Original Indenture
and any modification or alteration made as in the Original
Indenture provided) and of said bonds, has granted, bargained,
sold, released, conveyed, transferred, mortgaged, pledged, set
over and confirmed, and by these presents does grant, bargain,
sell, release, convey, assign, transfer, mortgage, pledge, set
over and confirm unto Bankers Trust Company, as Trustee, and to
its respective successor or successors in the trust hereby
created, and to its and their assigns, all the following
described properties of the Company, that is to say:
All property, real, personal and mixed, tangible and
intangible, and all franchises owned by the Company on the date
of the execution hereof, acquired since the execution of the
Second 1994 Supplemental Indenture (except any hereinafter
expressly excepted from the lien and operation of this First 1995
Supplemental Indenture).
TOGETHER WITH all and singular the tenements, hereditaments
and appurtenances belonging or in anywise appertaining to the
aforesaid property or any part thereof, with the reversion and
reversions, remainder and remainders and (subject to the
provisions of Section 63 of the Original Indenture) the tolls,
rents, revenues, issues, earnings, income, product and profits
thereof and all the estate, right, title and interest and claim
whatsoever, at law as well as in equity, which the Company now
has or may hereafter acquire in and to the aforesaid property and
franchises and every part and parcel thereof.
Provided that, in addition to the reservations and
exceptions herein elsewhere contained, the following are not and
are not intended to be now or hereafter granted, bargained, sold,
released, conveyed, assigned, transferred, mortgaged, pledged,
set over or confirmed hereunder and are hereby expressly excepted
from the lien and operation of the Original Indenture and this
4<PAGE>
I-5
First 1995 Supplemental Indenture, viz.: (1) cash, shares of
stock, and obligations (including bonds, notes and other
securities) not hereinafter or in the Original Indenture
specifically pledged, deposited or delivered hereunder or
thereunder or hereinafter or therein covenanted so to be; (2) any
goods, wares, merchandise, equipment, materials or supplies
acquired for the purpose of sale or resale in the usual course of
business or for consumption in the operation of any properties of
the Company and automobiles and trucks; (3) all judgments,
accounts, and choses in action, the proceeds of which the Company
is not obligated as hereinafter provided or as provided in the
Original Indenture to deposit with the Trustee hereunder and
thereunder; provided, however, that the property and rights
expressly excepted from the lien and operation of the Original
Indenture and this First 1995 Supplemental Indenture in the above
subdivisions (2) and (3) shall (to the extent permitted by law)
cease to be so excepted, in the event that the Trustee or a
receiver or trustee shall enter upon and take possession of the
mortgaged and pledged property in the manner provided in Article
XIV of the Original Indenture by reason of the occurrence of a
completed default, as defined in said Article XIV.
TO HAVE AND TO HOLD all such properties, real, personal and
mixed, granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed by the
Company as aforesaid, or intended so to be, unto the Trustee and
its successors in the trust;
SUBJECT, HOWEVER, to the reservations, exceptions,
conditions, limitations and restrictions contained in the several
deeds, leases, servitudes, franchises and contracts or other
instruments through which the Company acquired and/or claims
title to and/or enjoys the use of the aforesaid properties; and
subject also to encumbrances of the character defined in Section
6 of the Original Indenture as "excepted encumbrances" in so far
as the same may attach to any of the property embraced herein.
Inasmuch as the Company holds certain of said lands, rights
of way and other property under leases, power agreements and
other contracts which provide that the Company's interest therein
shall not be mortgaged without the consent of the respective
lessors or other parties to said agreements and contracts, and
such lessors and parties have either given such consent or have
waived the requirement of such consent, it is hereby expressly
agreed and made a condition upon which this First 1995
Supplemental Indenture is executed and delivered, that the lien
of this First 1995 Supplemental Indenture and the estate, rights
5<PAGE>
I-6
and remedies of the Trustee hereunder, and the rights and
remedies of the holders of the bonds secured hereby and by the
Original Indenture in so far as they may affect such lands,
rights of way and other property now held or to be hereafter
acquired by the Company under such leases, contracts or
agreements, shall be subject and subordinate in all respects to
the rights and remedies of the respective lessors or other
parties thereto.
And it is hereby expressly covenanted and agreed as follows:
(a) That the rights of the Trustee hereunder, and of
every person or corporation whatsoever claiming by reason of
this First 1995 Supplemental Indenture any right, title or
interest, legal or equitable, in the property covered by any
such lease, power agreement or other contract, are and at
all times hereafter shall be subject in the same manner and
degree as the rights of the Company might or would at all
times be subject, had this First 1995 Supplemental Indenture
not been made, to all terms, provisions, conditions,
covenants, stipulations, and agreements, and to all
exceptions, reservations, limitations, restrictions, and
forfeitures contained in any such lease, power agreement or
other contract;
(b) That any right, claim, condition or forfeiture
which might at any time be asserted against the party in
possession under the provisions of any such lease, power
agreement or other contract, had this First 1995
Supplemental Indenture not been made, may be asserted with
the same force and effect against any and all persons or
corporations at any time claiming any right, title or
interest in any such property under or by reason of this
First 1995 Supplemental Indenture or of any bond hereby and
by the Original Indenture secured; and
(c) That such consent or waiver of the requirement of
such consent given by the lessor under any such lease or
party to any such power agreement or other contract is
intended and shall be construed to be solely for the purpose
of permitting the Company to mortgage its property generally
without violating the express covenant contained in such
lease, power agreement or other contract, and that such
consent or waiver of the requirement of such consent confers
upon the Trustee hereunder and the holders of bonds secured
hereby and by the Original Indenture no rights in addition
to such as they would have had, respectively, if such
6<PAGE>
I-7
consent or waiver of the requirement of such consent had not
been given.
IN TRUST NEVERTHELESS, upon the terms and trusts in the
Original Indenture and this First 1995 Supplemental Indenture set
forth, for the equal and pro rata benefit and security of those
who shall hold the bonds and coupons issued and to be issued
hereunder and under the Original Indenture, in accordance with
the terms of the Original Indenture and of this First 1995
Supplemental Indenture, without preference, priority or
distinction as to lien of any of said bonds or coupons over any
other thereof by reason of priority in the time of issuance or
negotiation thereof, or otherwise howsoever, subject, however, to
the conditions, provisions and covenants set forth in the
Original Indenture and in this First 1995 Supplemental Indenture.
AND THIS INDENTURE FURTHER WITNESSETH:
That in further consideration of the premises and for the
considerations aforesaid, the Company, for itself and it
successors and assigns, hereby covenants and agrees to and with
the Trustee, and its successor or successors in such trust, under
the Original Indenture, as follows:
Section 13. The Original Indenture is hereby supplemented by
adding immediately after Section 20BBB, a new Section 20CCC, as
follows:
SECTION 20CCC. The Company hereby creates a fifty-
sixth series of bonds to be issued under and secured by this
Indenture, to be designated and to be distinguished from the
bonds of all other series by the title "First Mortgage
Bonds, Designated Secured Medium Term Notes, 8.00% Series
due May 1, 2005" (herein sometimes referred to as the "bonds
of the 56th Series"). The form of the bonds of the 56th
Series shall be substantially as set forth in Schedule I to
the First 1995 Supplemental Indenture.
Bonds of the 56th Series shall mature on the date
specified in their title. Unless otherwise determined by
the Company, the bonds of the 56th Series shall be issued in
fully registered form without coupons in denominations of
$1,000 and in integral multiples thereof; the principal of
and premium (if any) and interest on each said bond to be
payable at the office or agency of the Company in the
Borough of Manhattan, The City of New York, in lawful money
of the United States of America, provided that at the option
7<PAGE>
I-8
of the Company interest may be mailed to registered owners
of the bonds at their respective addresses that appear on
the register thereof; and the rate of interest shall be the
rate per annum specified in the title thereof, payable semi-
annually on the first days of May and November of each year
(commencing May 1, 1995) and on their maturity date.
The person in whose name any bond of the 56th Series is
registered at the close of business on any record date (as
hereinbelow defined) with respect to any regular semi-annual
interest payment date (other than interest payable upon
maturity) shall be entitled to receive the interest payable
on such interest payment date notwithstanding the
cancellation of such bond of the 56th Series upon any
registration of transfer or exchange thereof (including any
exchange effected as an incident to a partial redemption
thereof) subsequent to the record date and prior to such
interest payment date, except, if and to the extent that the
Company shall default in the payment of the interest due on
such interest payment date, then the registered owners of
bonds of the 56th Series on such record date shall have no
further right to or claim in respect of such defaulted
interest as such registered owners on such record date, and
the persons entitled to receive payment of any defaulted
interest thereafter payable or paid on any bonds of the 56th
Series shall be the registered owners of such bonds of the
56th Series (or any bond or bonds issued, directly or after
intermediate transactions upon transfer or exchange or in
substitution thereof) on the date of payment of such
defaulted interest. Interest payable upon maturity shall be
payable to the person to whom the principal is paid. The
term "record date" as used in this Section 20CCC, and in the
form of the bonds of the 56th Series, with respect to any
regular semi-annual interest payment date (other than
interest payable upon maturity) applicable to the bonds of
the 56th Series, shall mean the April 15 next preceding a
May 1 interest payment date or the October 15 next preceding
a November 1 interest payment date, as the case may be, or,
if such April 15 or October 15 is not a Business Day (as
defined hereinbelow), the next preceding Business Day. The
term "Business Day" with respect to any bond of the 56th
Series shall mean any day, other than a Saturday or Sunday,
which is not a day on which banking institutions or trust
companies in The City of New York, New York or the city in
which is located any office or agency maintained for the
payment of principal of or premium, if any, or interest on
8<PAGE>
I-9
such bond of the 56th Series are authorized or required by
law, regulation or executive order to remain closed.
Every registered bond of the 56th Series shall be dated
the date of authentication ("Issue Date") and shall bear
interest computed on the basis of a 360-day year consisting
of twelve 30-day months from its Issue Date or from the
latest semi-annual interest payment date to which interest
has been paid on the bonds of the 56th Series preceding the
Issue Date, unless such Issue Date be an interest payment
date to which interest is being paid on the bonds of the
56th Series, in which case it shall bear interest from its
Issue Date or unless the Issue Date be the record date for
the interest payment date first following the date of
original issuance of bonds of the 56th Series (the "Original
Issue Date"), or a date prior to such record date, then from
the Original Issue Date; provided that, so long as there is
no existing default in the payment of interest on said
bonds, the owner of any bond authenticated by the Corporate
Trustee between the record date for any regular semi-annual
interest payment date and such interest payment date shall
not be entitled to the payment of the interest due on such
interest payment date (other than interest payable upon
maturity) and shall have no claim against the Company with
respect thereto; provided further, that, if and to the
extent the Company shall default in the payment of the
interest due on such interest payment date, then any such
bond shall bear interest from the May 1 or November 1, as
the case may be, next preceding its Issue Date, to which
interest has been paid or, if the Company shall be in
default with respect to the interest payment date first
following the Original Issue Date, then from the Original
Issue Date.
If any semi-annual interest payment date or the
maturity date is not a Business Day, payment of amounts due
on such date may be made on the next succeeding Business
Day, and, if such payment is made or duly provided for on
such Business Day, no interest shall accrue on such amounts
for the period from and after such interest payment date or
the maturity date, as the case may be, to such Business Day.
Notwithstanding the provisions of Section 14 of this
Indenture, the bonds of the 56th Series shall be executed on
behalf of the Company by its Chairman of the Board, by its
President or by one of its Vice Presidents or by one of its
officers designated by the Board of Directors of the Company
9<PAGE>
I-10
for such purpose, whose signature may be a facsimile, and
its corporate seal shall be thereunto affixed or printed
thereon and attested by its Secretary or one of its
Assistant Secretaries, and the provisions of the penultimate
sentence of said Section 14 shall be applicable to such
bonds of the 56th Series.
The bonds of the 56th Series are not redeemable prior
to their maturity.
Notwithstanding the provisions of Section 12 of this
Indenture, the Company shall not be required to make
transfers or exchanges of bonds of the 56th Series for a
period of fifteen days next preceding any interest payment
date.
Registered bonds of the 56th Series shall be
transferable upon presentation and surrender thereof, for
cancellation, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, and at such
other office or agency of the Company as the Company may
from time to time designate, by the registered owners
thereof, in person or by duly authorized attorney, in the
manner and upon payment, if required by the Company, of the
charges prescribed in this Indenture. In the manner and
upon payment, if required by the Company, of the charges
prescribed in this Indenture, registered bonds of the 56th
Series may be exchanged for a like aggregate principal
amount of registered bonds of the 56th Series of other
authorized denominations, upon presentation and surrender
thereof, for cancellation, at the office or agency of the
Company in the Borough of Manhattan, The City of New York,
or at such other office or agency of the Company as the
Company may from time to time designate.
Section 14. Initial Issuance of the Bonds of the 56th Series:
In accordance with and upon compliance with such provisions
of the Original Indenture as shall be selected for such purpose
by the officers of the Company duly authorized to take such
action, bonds of the 56th Series, in an aggregate principal
amount not exceeding $50,000,000, shall forthwith be executed by
the Company and delivered to the Trustee and shall be
authenticated by the Trustee and delivered to or upon the order
of the Company (without awaiting the filing and recording of this
First 1995 Supplemental Indenture except to the extent required
by subdivision (10) of Section 29 of the Original Indenture).
10<PAGE>
I-11
Section 15. At any meeting of bondholders held as provided for
in Article XX of the Original Indenture at which owners of bonds
of the 56th Series are entitled to vote, all owners of bonds of
the 56th Series at the time of such meeting shall be entitled to
vote thereat; provided, however, that the Trustee may, and upon
request of the Company or of a majority of the bondowners of the
56th Series, shall, fix a day not exceeding ninety days preceding
the date for which the meeting is called as a record date for the
determination of owners of bonds of the 56th Series, entitled to
notice of and to vote at such meeting and any adjournment thereof
and only such registered owners who shall have been such
registered owners on the date so fixed, and who are entitled to
vote such bonds of the 56th Series at the meeting, shall be
entitled to receive notice of such meeting.
Section 16. As supplemented by this First 1995 Supplemental
Indenture, the Original Indenture is in all respects ratified and
confirmed and the Original Indenture and this First 1995
Supplemental Indenture shall be read, taken and construed as one
and the same instrument. The bonds of the 56th Series are the
original debt secured by this First 1995 Supplemental Indenture
and the Original Indenture, and this First 1995 Supplemental
Indenture and the Original Indenture shall be, and shall be
deemed to be, the original lien instrument securing the bonds of
the 56th Series.
Section 17. Nothing contained in this First 1995 Supplemental
Indenture shall, or shall be construed to, confer upon any person
other than the owners of bonds issued under the Original
Indenture and this First 1995 Supplemental Indenture, the Company
and the Trustee, any right to avail themselves of any benefit of
any provision of the Original Indenture or of this First 1995
Supplemental Indenture.
Section 18. This First 1995 Supplemental Indenture may be
simultaneously executed in several counterparts and all such
counterparts executed and delivered, each as an original, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, APPALACHIAN POWER COMPANY, party of the
first part, has caused this instrument to be signed in its name
and behalf by its President, a Vice President or an Assistant
Treasurer, and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary, and BANKERS
TRUST COMPANY, party of the second part, in token of its
11<PAGE>
I-12
acceptance hereof, has caused this instrument to be signed in its
name and behalf by a Vice President or an Assistant Vice
President and its corporate seal to be hereunto affixed and
attested by its Secretary, an Assistant Secretary, Assistant Vice
President or Assistant Treasurer. Executed and delivered as of
the date and year first above written.
APPALACHIAN POWER COMPANY
[SEAL]
By: /s/ B. M. Barber
B. M. Barber
Assistant Treasurer
Attest:
/s/ Jeffrey D. Cross
Jeffrey D. Cross
Assistant Secretary
In the presence of:
/s/ T. G. Berkemeyer
T. G. Berkemeyer
/s/ A. A. Pena
A. A. Pena
12<PAGE>
I-13
BANKERS TRUST COMPANY
[SEAL]
By /s/ Robert Caporale
Robert Caporale
Vice President
Attest:
/s/ Scott Thiel
Scott Thiel
Assistant Treasurer
Executed by BANKERS TRUST COMPANY
in the presence of:
/s/ K. O'Brien
K. O'Brien
/s/ P. Dispenza
P. Dispenza
13<PAGE>
I-14
STATE OF OHIO )
) SS:
COUNTY OF FRANKLIN )
On this 28th day of February, 1995, personally appeared
before me, a Notary Public within and for said County in the
State aforesaid, B. M. BARBER and JEFFREY D. CROSS, to me known
and known to me to be respectively an Assistant Treasurer and
Assistant Secretary of APPALACHIAN POWER COMPANY, one of the
corporations named in and which executed the foregoing
instrument, who severally acknowledged that they did sign and
seal said instrument as such Assistant Treasurer and Assistant
Secretary for and on behalf of said corporation and that the same
is their free act and deed as such Assistant Treasurer and
Assistant Secretary, respectively, and the free and corporate act
and deed of said corporation.
In Witness Whereof, I have hereunto set my hand and notarial
seal this 28th day of February, 1995.
[Notarial Seal]
/s/ Mary M. Soltesz
MARY M. SOLTESZ
Notary Public, State of Ohio
My Commission Expires July 12, 1999
14<PAGE>
I-15
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
I, PATRICIA M. CARILLO, a Notary Public, duly qualified,
commissioned and sworn, and acting in and for the County and
State aforesaid, hereby certify that on this 3rd day of March,
1995:
ROBERT CAPORALE and SCOTT THIEL, whose names are signed to
the writing above, bearing a date as of the 1st day of March,
1995, as Vice President and Assistant Treasurer, respectively, of
BANKERS TRUST COMPANY, have this day acknowledged the same before
me in my County aforesaid.
ROBERT CAPORALE, who signed the writing above and hereto
annexed for BANKERS TRUST COMPANY, a corporation, bearing a date
as of the 1st day of March, 1995, has this day in my said County
before me acknowledged the said writing to be the act and deed of
said corporation.
Before me appeared ROBERT CAPORALE and SCOTT THIEL to me
personally known, who, being by me duly sworn, did say that they
are Vice President and Assistant Treasurer, respectively, of
BANKERS TRUST COMPANY, and that the seal affixed to said
instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed in behalf of said
corporation, by authority of its Board of Directors and said
ROBERT CAPORALE acknowledged said instrument to be the free act
and deed of said corporation.
SCOTT THIEL personally came before me this day and
acknowledged that he is an Assistant Treasurer of BANKERS TRUST
COMPANY, a corporation, and that by authority duly given and as
the act of the corporation, the foregoing instrument was signed
in its name by an Assistant Treasurer, sealed with its corporate
seal, and attested by himself as an Assistant Treasurer.
IN WITNESS WHEREOF, I have hereunto set my hand and official
notarial seal, in the County and State of New York, this 3rd day
of March, 1995.
/s/ Patricia M. Carillo
PATRICIA M. CARILLO
Notary Public, State of New York
No. 41-4747732
Qualified in Queens County
15<PAGE>
I-16
Certificate filed in New York County
Commission expires May 31, 1995
[SEAL]
16<PAGE>
I-1
SCHEDULE I
APPALACHIAN POWER COMPANY
FIRST MORTGAGE BOND, DESIGNATED
SECURED MEDIUM TERM NOTE, 8.00%
SERIES DUE MAY 1, 2005
Bond No.
Original Issue Date: March 15, 1995
Principal Amount:
Semi-annual Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
CUSIP No: 03774B AU7
APPALACHIAN POWER COMPANY, a corporation of the Commonwealth
of Virginia (hereinafter called the "Company"), for value
received, hereby promises to pay to ____________, or registered
assigns, the Principal Amount set forth above on the maturity
date specified in the title of this bond in lawful money of the
United States of America, at the office or agency of the Company
in the Borough of Manhattan, The City of New York, and to pay to
the registered owner hereof interest on said sum from the date of
authentication of this bond (herein called the "Issue Date") or
latest semi-annual interest payment date to which interest has
been paid on the bonds of this series preceding the Issue Date,
unless the Issue Date be an interest payment date to which
interest is being paid, in which case from the Issue Date or
unless the Issue Date be the record date for the interest payment
date first following the Original Issue Date set forth above or a
date prior to such record date, then from the Original Issue Date
(or, if the Issue Date is between the record date for any
interest payment date and such interest payment date, then from
such interest payment date, provided, however, that if and to the
extent that the Company shall default in the payment of the
interest due on such interest payment date, then from the next
preceding semi-annual interest payment date to which interest has
been paid on the bonds of this series, or if such interest
payment date is the interest payment date first following the
Original Issue Date set forth above, then from the Original Issue
Date), until the principal hereof shall have become due and
payable, at the rate per annum specified in the title of this
bond, payable on May 1 and November 1 of each year (commencing
May 1, 1995) and on the maturity date specified in the title of
this bond; provided that, at the option of the Company, such
interest may be paid by check, mailed to the registered owner of<PAGE>
I-2
this bond at such owner's address appearing on the register
hereof.
This bond is one of a duly authorized issue of bonds of the
Company, issuable in series, and is one of a series known as its
First Mortgage Bonds, of the series designated in its title, all
bonds of all series issued and to be issued under and equally
secured (except in so far as any sinking fund, established in
accordance with the provisions of the Mortgage hereinafter
mentioned, may afford additional security for the bonds of any
particular series and except as provided in Section 73 of the
Mortgage) by a Mortgage and Deed of Trust (herein, together with
all indentures supplemental thereto, called the Mortgage), dated
as of December 1, 1940, executed by APPALACHIAN ELECTRIC POWER
COMPANY (the corporate title of which was changed to APPALACHIAN
POWER COMPANY) to BANKERS TRUST COMPANY, as Trustee, to which
Mortgage reference is made for a description of the property
mortgaged and pledged, the nature and extent of the security, the
rights of the holders of the bonds and of the Trustee in respect
thereof, the duties and immunities of the Trustee, and the terms
and conditions upon which the bonds are secured. With the
consent of the Company and to the extent permitted by and as
provided in the Mortgage, the rights and obligations of the
Company and/or of the holders of the bonds and/or coupons and/or
the terms and provisions of the Mortgage and/or of any
instruments supplemental thereto may be modified or altered by
affirmative vote of the holders of at least seventy-five per
centum (75%) in principal amount of the bonds affected by such
modification or alteration, then outstanding under the Mortgage
(excluding bonds disqualified from voting by reason of the
Company's interest therein as provided in the Mortgage); provided
that, without the consent of the owner hereof no such
modification or alteration shall permit the extension of the
maturity of the principal of or interest on this bond or the
reduction in the rate of interest hereon or any other
modification in the terms of payment of such principal or
interest or the creation of a lien on the mortgaged and pledged
property ranking prior to or on a parity with the lien of the
Mortgage or the deprivation of the owner hereof of a lien upon
such property or reduce the above percentage.
As provided in said Mortgage, said bonds may be for various
principal sums and are issuable in series, which may mature at
different times, may bear interest at different rates and may
otherwise vary as therein provided, and this bond is one of a
series entitled "First Mortgage Bonds, Designated Secured Medium
Term Notes, 8.00% Series due May 1, 2005 (herein called "bonds of
the 56th Series") created by an Indenture Supplemental to<PAGE>
I-3
Mortgage and Deed of Trust dated as of March 1, 1995 (the "First
1995 Supplemental Indenture"), as provided for in said Mortgage.
The interest payable on any May 1 or November 1 (other than
interest payable upon maturity) will, subject to certain
exceptions provided in said First 1995 Supplemental Indenture, be
paid to the person in whose name this bond is registered at the
close of business on the record date, which shall be the April 15
or October 15, as the case may be, next preceding such interest
payment date, or, if such April 15 or October 15 is not a
Business Day (as hereinbelow defined), the next preceding
Business Day. Interest payable upon maturity shall be payable to
the person to whom the principal is paid. The term "Business
Day" means any day, other than a Saturday or Sunday, which is not
a day on which banking institutions or trust companies in The
City of New York, New York or the city in which is located any
office or agency maintained for the payment of principal or
premium, if any, or interest on bonds of the 56th Series are
authorized or required by law, regulation or executive order to
remain closed.
If any semi-annual interest payment date or the maturity
date is not a Business Day, payment of amounts due on such date
may be made on the next succeeding Business Day, and, if such
payment is made or duly provided for on such Business Day, no
interest shall accrue on such amounts for the period from and
after such interest payment date or the maturity date, as the
case may be, to such Business Day.
The Company and the Trustee may deem and treat the person in
whose name this bond is registered as the absolute owner hereof
for the purpose of receiving payment of or on account of
principal or (subject to the provisions hereof) interest hereon
and for all other purposes and the Company and the Trustee shall
not be affected by any notice to the contrary.
The Company shall not be required to make transfers or
exchanges of bonds of the 56th Series for a period of fifteen
days next preceding any interest payment date.
The bonds of the 56th Series are not redeemable prior to
their maturity.
The principal hereof may be declared or may become due prior
to the express date of the maturity hereof on the conditions, in
the manner and at the time set forth in the Mortgage, upon the
occurrence of a completed default as in the Mortgage provided.<PAGE>
I-4
This bond is transferable as prescribed in the Mortgage by
the registered owner hereof in person, or by his duly authorized
attorney, at the office or agency of the Company in the Borough
of Manhattan, The City of New York, and at such other office or
agency of the Company as the Company may designate, upon
surrender and cancellation of this bond and upon payment, if the
Company shall require it, of the transfer charges prescribed in
the Mortgage, and, thereupon, a new registered bond or bonds of
authorized denominations of the same series for a like principal
amount will be issued to the transferee in exchange herefor as
provided in the Mortgage. In the manner and upon payment, if the
Company shall require it, of the charges prescribed in the
Mortgage, registered bonds of the 56th Series may be exchanged
for a like aggregate principal amount of registered bonds of
other authorized denominations of the same series, upon
presentation and surrender thereof, for cancellation, at the
office or agency of the Company in the Borough of Manhattan, The
City of New York, or at such other office or agency of the
Company as the Company may from time to time designate.
No recourse shall be had for the payment of the principal of
or interest on this bond against any incorporator or any past,
present or future stockholder, officer or director, as such, of
the Company or of any successor corporation, either directly or
through the Company or any successor corporation, under any rule
of law, statute or constitution or by the enforcement of any
assessment or otherwise, all such liability of incorporators,
stockholders, officers and directors, as such, being waived and
released by the holder or owner hereof by the acceptance of this
bond and being likewise waived and released by the terms of the
Mortgage.
This bond shall not become valid or obligatory for any
purpose until BANKERS TRUST COMPANY, the Trustee under the
Mortgage, or its successor thereunder, shall have signed the form
of Authentication Certificate endorsed hereon.<PAGE>
I-5
In Witness Whereof, Appalachian Power Company has caused
this bond to be executed in its name by the signature of its
Chairman of the Board, its President or one of its Vice
Presidents and its corporate seal, or a facsimile thereof, to be
impressed or imprinted hereon and attested by the signature of
its Secretary or one of its Assistant Secretaries.
Dated:
APPALACHIAN POWER COMPANY
By________________________
Vice President
(SEAL)
Attest:___________________
Assistant Secretary
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds,
of the series herein designated,
described in the within-mentioned
Mortgage.
BANKERS TRUST COMPANY,
as Trustee,
By______________________________
Authorized Officer<PAGE>
I-6
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto
(PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE)
_______________________________________
________________________________________________________________
________________________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
________________________________________________________________
ASSIGNEE) the within Bond and all rights thereunder, hereby
________________________________________________________________
irrevocably constituting and appointing such person attorney to
________________________________________________________________
transfer such Bond on the books of the Issuer, with full power of
________________________________________________________________
substitution in the premises.
Dated: ______________________ ____________________________
NOTICE: The signature to this assignment must correspond with
the name as written upon the face of the within Bond in
every particular without alteration or enlargement or
any change whatsoever.
The foregoing instrument was prepared by Jeffrey D. Cross,
1 Riverside Plaza, Columbus, Ohio 43215.
</PAGE>
<PAGE>
Exhibit 10(d)
AEP SYSTEM INTERIM ALLOWANCE AGREEMENT
BY AND AMONG
APPALACHIAN POWER COMPANY
COLUMBUS SOUTHERN POWER COMPANY
INDIANA MICHIGAN POWER COMPANY
KENTUCKY POWER COMPANY
OHIO POWER COMPANY
AND WITH
AMERICAN ELECTRIC POWER SERVICE CORPORATION
AS AGENT
Dated: JULY 28, 1994<PAGE>
CONTENTS
PREAMBLE. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 - Definitions. . . . . . . . . . . . . . . . 4
ARTICLE 2 - Emission Allowance Management. . . . . . . 9
ARTICLE 3 - Agent's Responsibilities . . . . . . . . .10
ARTICLE 4 - Settlements. . . . . . . . . . . . . . . .11
ARTICLE 5 - Billings and Payments. . . . . . . . . . .15
ARTICLE 6 - Taxes. . . . . . . . . . . . . . . . . . .15
ARTICLE 7 - Modifications. . . . . . . . . . . . . . .16
ARTICLE 8 - Effective Date and Terms of this Agreement.16
ARTICLE 9 - Regulatory Authorities . . . . . . . . . . 17
ARTICLE 10 - Assignment . . . . . . . . . . . . . . . . 17<PAGE>
0.1 THIS AGREEMENT, made and entered into as of the
28th day of July, 1994 by and among APPALACHIAN POWER COMPANY
(APCo), a Virginia corporation, COLUMBUS SOUTHERN POWER COMPANY
(CSP), an Ohio corporation, INDIANA MICHIGAN POWER COMPANY (I&M),
an Indiana corporation, KENTUCKY POWER COMPANY (KPCo), a Kentucky
corporation, OHIO POWER COMPANY (OPCo), an Ohio corporation, said
companies (herein sometimes called 'Members' when referred to
collectively and 'Member' when referred to individually) being
affiliated companies of the integrated public utility electric
system known as the American Electric Power System (AEP), and
AMERICAN ELECTRIC POWER SERVICE CORPORATION (Agent), a New York
corporation, being a service company engaged solely in the
business of furnishing essential services to the aforesaid
companies and the other affiliated companies.
W I T N E S S E T H
T H A T:
0.2 WHEREAS, the Members own and operate electric
facilities in the states herein indicated, (i) APCo in Virginia,
West Virginia and Tennessee, (ii) CSP in Ohio, (iii) I&M in
Indiana and Michigan, (iv) KPCo in Kentucky, and (v) OPCo in Ohio
and West Virginia; and
0.3 WHEREAS, the Members have entered into an
Interconnection Agreement, dated July 6, 1951, with modifications
thereto, which provides for certain understandings, conditions,
1<PAGE>
and procedures designed to achieve the full benefits and
advantages available through the coordinated planning and
operation of their electric power supply facilities; and
0.4 WHEREAS, Congress in 1990 enacted amendments to
the Clean Air Act, including Title IV, 104 Stat. 2584, 42
U.S.C.A. Section 7651, et seq. ("the 1990 Amendments") which
limit emissions of sulfur dioxide (SO2) by electric utilities; and
0.5 WHEREAS, under the 1990 Amendments, compliance is
to be achieved in two stages -- Phase I, which begins January 1,
1995 and Phase II which begins January 1, 2000; and reductions in
sulfur dioxide emissions are to be effected by a system in which
a limited number of "emission allowances" have been allocated by
the United States Environmental Protection Agency (EPA) to
individual utility generating units; and
0.6 WHEREAS, twenty-one (21) of the Members'
generating units have been designated by the 1990 Amendments as
Phase I affected units, and fifty-one (51) of the Members'
generating units have been designated as Phase II affected units,
and as such, have been awarded emission allowances by the EPA;
and
0.7 WHEREAS, the Members may have ownership or
entitlement to emission allowances through several means,
including: (i) EPA-AWARDED ALLOWANCES based on emission levels
experienced during a base-line period, (ii) EPA bonus allowances
awarded for various compliance strategies, primarily through the
installation of FGD systems, and (iii) the purchase of
2<PAGE>
allowances. Generally, Members are permitted to emit SO2 only to
the extent they have allowances to cover such emissions.
0.8 WHEREAS, compliance with the 1990 Amendments has
been and will continue to be planned by the Members on an
integrated and coordinated basis, consistent with the integrated
and coordinated planning and operation of the Members' electric
systems; and
0.9 WHEREAS, the Members desire to arrive at an
equitable methodology of allocating emission allowances and
associated costs and benefits between and among the Members; and
0.10 WHEREAS, the Members, with input from affected
state regulatory agencies, are considering alternatives for a
permanent allowance agreement, but recognize the need to have in
place, by the beginning of Phase I, an interim allowance
agreement; and
0.11 WHEREAS, the Members believe that an agreement
which provides for an equitable assignment of cost and benefits
among the Members can best be realized if administered by a
single clearing agent; and
0.12 WHEREAS, the Members believe that the Agent
designated herein for such purpose is qualified to perform such
services;
0.13 NOW, THEREFORE, in consideration of the premises
and of the mutual covenants and agreements hereinafter contained,
the parties hereto, hereby agree as follows:
3<PAGE>
ARTICLE 1
DEFINITIONS
1.1 The following terms and factors associated with
settlements under this Agreement are defined in alphabetic order
as follows:
1.2 CONTINGENCY BANK -- a minimum reserve of approx-
imately 100,000 allowances in excess of projected consumption
held by the Members to assure that sufficient allowances will be
available for compliance with the 1990 Amendments each year.
Agent shall have authority to adjust the level of the CONTINGENCY
BANK as needed. A Member's share of the CONTINGENCY BANK is
determined by its level of EPA-AWARDED ALLOWANCES in proportion
to the total for all Members.
1.3 DELIVERING MEMBER -- a Member which sells PRIMARY
ENERGY and/or ECONOMY ENERGY to the POOL.
1.4 ECONOMY ENERGY -- electric energy delivered to the
POOL from the MEMBER PRIMARY CAPACITY of a particular Member to
displace energy that otherwise would be supplied by less
efficient MEMBER PRIMARY CAPACITY of another Member to meet its
MEMBER LOAD OBLIGATION.
1.5 EPA-AWARDED ALLOWANCES -- the allowances awarded
to each generating unit by the EPA as defined in Section 404(a)
of the 1990 Amendments.
1.6 FERC -- the Federal Energy Regulatory Commission
or any successor agency.
4<PAGE>
1.7 GAVIN BONUS ALLOWANCES -- 184.7, 184.0, 44.6, 44.6
and 44.6 thousand allowances, excluding transfer allowances, for
the years 1995, 1996, 1997, 1998 and 1999, respectively, awarded
by the EPA to OPCo's Gavin Plant pursuant to Section 404(d) of
the 1990 Amendments.
1.8 GAVIN EPA-AWARDED ALLOWANCES -- the allowances
awarded to the Gavin Plant by the EPA pursuant to Section 404(a)
of the 1990 Amendments.
1.9 GAVIN SCRUBBER SO2 REDUCTION -- the difference
between actual SO2 emissions at OPCo's Gavin Plant operating with
scrubbers and GAVIN UNCONTROLLED EMISSIONS for a given year.
1.10 GAVIN UNCONTROLLED EMISSIONS -- an estimated
amount of SO2 emissions that would result from operating the
Gavin Plant without scrubbers. The estimate of GAVIN
UNCONTROLLED EMISSIONS is calculated by dividing the scrubbed
Gavin SO2 EMISSIONS by (1.00 minus the scrubber SO2 removal
efficiency rate).
1.11 INTERCONNECTION AGREEMENT -- the Interconnection
Agreement among the Members dated July 6, 1951, as amended.
1.12 MEMBER AFFECTED UNITS -- a Member's generating
units that are required to meet the emission standards
established by the 1990 Amendments.
1.13 MEMBER CAPACITY DEFICIT FACTOR -- for any Member,
the average for the calendar year of its MEMBER PRIMARY CAPACITY
DEFICIT divided by the sum of all members' average MEMBER PRIMARY
CAPACITY DEFICITS.
5<PAGE>
1.14 MEMBER DEMAND -- MEMBER LOAD OBLIGATION determined
on a clock-hour integrated kilowatt basis.
1.15 MEMBER GENERATION -- the total of a Member's net
generation from its MEMBER PRIMARY CAPACITY.
1.16 MEMBER LOAD OBLIGATION -- a Member's internal load
plus any firm power sales to Foreign Companies and to affiliated
companies other than Members.
1.17 MEMBER LOAD RATIO -- the ratio of a particular
Member's MEMBER MAXIMUM DEMAND in effect for a calendar month to
the sum of the five MEMBER MAXIMUM DEMANDS in effect for such
month.
1.18 MEMBER MAXIMUM DEMAND -- the MEMBER MAXIMUM DEMAND
in effect for a calendar month for a particular Member shall be
equal to the maximum MEMBER DEMAND experienced by said Member
during the twelve consecutive calendar months next preceding such
calendar month.
1.19 MEMBER PRIMARY CAPACITY -- the aggregate capacity
of the electric power sources of a particular Member, in
kilowatts, that is normally expected to be available to carry
load. Such capacity shall include (i) the capacity installed at
the generating stations owned by the Member and (ii) the capacity
available to that Member through interconnection arrangements
with affiliated companies or Foreign Companies.
1.20 MEMBER PRIMARY CAPACITY DEFICIT -- difference
between the MEMBER PRIMARY CAPACITY and MEMBER PRIMARY CAPACITY
RESERVATION of a particular Member, when such MEMBER PRIMARY
6<PAGE>
CAPACITY is less than such MEMBER PRIMARY CAPACITY RESERVATION.
1.21 MEMBER PRIMARY CAPACITY RESERVATION -- SYSTEM
PRIMARY CAPACITY multiplied by the MEMBER LOAD RATIO of a
particular Member.
1.22 OPCo CAPACITY SURPLUS FACTOR -- the weighted
average for the calendar year of (OPCo's MEMBER PRIMARY CAPACITY
minus OPCo's MEMBER PRIMARY CAPACITY RESERVATION) divided by
OPCo's MEMBER PRIMARY CAPACITY.
1.23 OVER-COMPLIANCE -- the amount by which a Member's
SO2 EMISSIONS are less than its EPA-AWARDED ALLOWANCES for the
current year; provided, however, that in determining OPCo's OVER-
COMPLIANCE, its emissions shall be deemed to include, in lieu of
actual emissions from the Gavin Plant, 50% of GAVIN UNCONTROLLED
EMISSIONS, and its allowances shall be deemed to include, in lieu
of actual GAVIN EPA-AWARDED ALLOWANCES, only 50% of GAVIN EPA-
AWARDED ALLOWANCES.
1.24 POOL -- electric energy delivered by one Member,
from its MEMBER PRIMARY CAPACITY, to another Member shall be
considered to be energy delivered to the POOL by the former
Member and delivered from the POOL by the latter Member.
1.25 POWER SALES TO FOREIGN COMPANIES -- sales of
electric power and energy to Foreign Companies, made by a Member
on behalf of the System, where the revenue and cost of such sales
are allocated to the Members in proportion to their respective
MEMBER LOAD RATIOS.
1.26 PRIMARY AND ECONOMY ENERGY RECEIPT FACTOR -- the
7<PAGE>
ratio of PRIMARY ENERGY and ECONOMY ENERGY receipts by a
receiving Member from a DELIVERING MEMBER to the total sales of
PRIMARY ENERGY and ECONOMY ENERGY by the DELIVERING MEMBER.
1.27 PRIMARY AND ECONOMY ENERGY SUPPLY FACTOR -- the
sum of the Member's PRIMARY ENERGY and ECONOMY ENERGY deliveries
divided by the MEMBER'S GENERATION.
1.28 PRIMARY ENERGY -- electric energy delivered to the
POOL from the MEMBER PRIMARY CAPACITY of a particular Member to
meet another Member's deficiency in capacity.
1.29 RECEIVING MEMBER -- a Member which buys PRIMARY
ENERGY and/or ECONOMY ENERGY from the POOL.
1.30 SO2 EMISSIONS -- the total of the Member's SO2
EMISSIONS from the MEMBER'S AFFECTED UNITS.
1.31 SURPLUS ALLOWANCES -- the excess of a Member's
current year EPA-AWARDED ALLOWANCES, plus allowances transferred
to the Member pursuant to Sections 4.1, 4.2 and 4.3 of this
Agreement, over the Member's annual SO2 EMISSIONS and its share
of the CONTINGENCY BANK.
1.32 SYSTEM COST OF COMPLIANCE -- for calendar year
1995 is $115.43/ton of SO2. For each subsequent year, the SYSTEM
COST OF COMPLIANCE shall be $115.43/ton of SO2 escalated annually
at a rate of 10.56%.
1.33 SYSTEM PRIMARY CAPACITY -- the sum of the MEMBER
PRIMARY CAPACITY of all the Members.
1.34 UNDER-COMPLIANCE -- the amount by which a Member's
SO2 EMISSIONS are greater than its EPA-AWARDED ALLOWANCES for the
8<PAGE>
current year; provided, however, that in determining OPCo's
UNDER-COMPLIANCE, its emissions shall be deemed to include, in
lieu of actual emissions from the Gavin Plant, 50% of GAVIN
UNCONTROLLED EMISSIONS, and its allowances shall be deemed to
include, in lieu of actual GAVIN EPA-AWARDED ALLOWANCES, only 50%
of GAVIN EPA-AWARDED ALLOWANCES.
ARTICLE 2
EMISSION ALLOWANCE MANAGEMENT
2.1 In determining the transfer of costs and benefits
related to emission allowances among Members, settlements for the
following transactions will be governed by this Agreement: 1) an
annual reallocation of Gavin allowances, described in Section
4.1, 2) an annual cash settlement for the transfer of allowances
associated with PRIMARY ENERGY and ECONOMY ENERGY, described in
Section 4.2, 3) a monthly cash settlement for allowances
consumed for POWER SALES TO FOREIGN COMPANIES, described in
Section 4.3, 4) an annual transfer of allowances for current
period compliance, described in Section 4.4, and 5) an annual
transfer of allowances for future period compliance, described in
Section 4.5.
2.2 Participation in the allowance market could
involve either the sale or purchase of allowances to or from non-
affiliated parties. The ownership of any allowances purchased or
the entitlement to the proceeds from any such sales of allowances
9<PAGE>
are not addressed by this interim agreement, but are intended to
be addressed in a subsequent allowance agreement which shall
govern all such transactions, whether occurring before or after
the effective date of such subsequent allowance agreement.
During the interim period pending resolution of such issues in
the subsequent allowance agreement, net proceeds from any such
sales and the cost associated with any such purchases will be
deferred, with a return accrued at the AEP System cost of
capital, on the books of the Member involved. Nothing in this
agreement shall be deemed to affect or preempt the right of state
regulatory commissions to prescribe accounting treatment for the
proceeds and costs associated with such transactions.
2.3 Agent shall have the authority to make any and all
decisions relating to the use, management, purchase, sale and
transfer of emission allowances. Except as provided in this
Agreement or any superseding agreement, no other payment or
compensation shall be made between or among the Members with
respect to any such use, management, purchase, sale or transfer.
ARTICLE 3
AGENT'S RESPONSIBILITIES
3.1 For the purpose of carrying out the provisions of
this Agreement, the Members hereby delegate to Agent, and Agent
hereby accepts, the responsibility of administration of this
Agreement, and in furtherance thereof Agent hereby agrees:
3.11 To render to each Member as promptly as
10<PAGE>
possible after the end of each month a statement setting
forth the settlements hereunder for such preceding
calendar month, in such detail and with such segregation
as may be needed for accounting, operating, or other
proper purposes.
3.12 To carry out allowance transfer
settlements under this Agreement. Settlement for the
Gavin Allowance Reallocation shall be recorded annually
in December for each calendar year.
3.13 To carry out cash settlements under this
Agreement. Monthly settlements by the Members shall be
determined for POWER SALES TO FOREIGN COMPANIES and
annual settlements, in December of each calendar year,
for allowance transfers for primary and economy energy
transactions and for the transfers of allowances for
current and future compliance through an account (hereby
designated and hereinafter called the SYSTEM ALLOWANCE
ACCOUNT) to be administered by Agent. Payments to or
from such account shall be made to or by Agent as
clearing agent of the account. The total amount of the
payments made by the Members to the SYSTEM ALLOWANCE
ACCOUNT each month shall be equal to the total amount of
the payments made from the SYSTEM ALLOWANCE ACCOUNT for
the same period.
ARTICLE 4
11<PAGE>
SETTLEMENTS
4.1 GAVIN ALLOWANCE REALLOCATION - In December of 1995
and each subsequent calendar year, the allowance inventory
accounts of the Members will be adjusted to recognize the Gavin
Allowance Reallocation. The number of Gavin allowances available
for reallocation is determined by multiplying the OPCo CAPACITY
SURPLUS FACTOR by the sum of (i) GAVIN BONUS ALLOWANCES and (ii)
50% of the sum of the GAVIN EPA-AWARDED ALLOWANCES and the GAVIN
SCRUBBER SO2 REDUCTION. The Gavin allowances available for
reallocation shall be transferred, at zero cost, to the Members
having a MEMBER PRIMARY CAPACITY DEFICIT. Each deficit Member's
share of the Gavin Allowance Reallocation is determined by
multiplying the Gavin Allowances to Reallocate by the MEMBER'S
CAPACITY DEFICIT FACTOR.
4.2 ALLOWANCE TRANSFERS ASSOCIATED WITH PRIMARY AND
ECONOMY ENERGY TRANSACTIONS - In December of each year, the
DELIVERING MEMBERS shall transfer allowances to or receive
allowances from the RECEIVING MEMBERS, according to this Section.
A DELIVERING MEMBER shall be transferred allowances from a
RECEIVING MEMBER if the DELIVERING MEMBER is in an UNDER-
COMPLIANCE position. A DELIVERING MEMBER shall transfer
allowances to a RECEIVING MEMBER if the DELIVERING MEMBER is in
an OVER-COMPLIANCE position. Members supplying allowances shall
be compensated by the Members receiving allowances based on the
supplying Member's average allowance inventory cost. For the
year, a Member may be both a DELIVERING MEMBER and a RECEIVING
12<PAGE>
MEMBER.
4.21 In December of each year, the Member's
annual OVER-COMPLIANCE or UNDER-COMPLIANCE shall be
determined.
4.22 The PRIMARY AND ECONOMY ENERGY SUPPLY
FACTOR of each DELIVERING MEMBER shall be multiplied by
that Member's over/(under) compliance to determine its
incremental OVER-COMPLIANCE or incremental UNDER-
COMPLIANCE position. The incremental over/(under)
compliance position represents the total number of
allowances to be transferred from or received by the
DELIVERING MEMBER.
4.23 If the DELIVERING MEMBER is in an UNDER-
COMPLIANCE position, the number of allowances to be
transferred from the RECEIVING MEMBER is calculated by
multiplying the DELIVERING MEMBER'S incremental UNDER-
COMPLIANCE by the respective PRIMARY AND ECONOMY ENERGY
RECEIPT FACTOR. If the DELIVERING MEMBER is in an OVER-
COMPLIANCE position, the number of allowances to be
transferred to the RECEIVING MEMBERS is calculated by
multiplying the incremental OVER-COMPLIANCE of the
DELIVERING MEMBER by the respective PRIMARY AND ECONOMY
ENERGY RECEIPT FACTORS.
4.24 The net allowances transferred from the
supplying Member during the year are priced at their
individual weighted average inventory cost computed at
13<PAGE>
the end of December. The net allowances transferred to
the receiving Members shall be based on the weighted
average inventory cost of all Members supplying
allowances. The average inventory cost of a supplying
Member is computed by taking the total book cost of
allowances available for transfer divided by the number
of allowances availablefor transfer atthe end ofDecember.
4.3 ALLOWANCES CONSUMED FOR POWER SALES TO FOREIGN
COMPANIES - Monthly, each Member shall be responsible for its
MEMBER LOAD RATIO share of the allowances consumed in generating
the energy for POWER SALES TO FOREIGN COMPANIES and unless the
supplying company is otherwise compensated by the foreign
company, shall be required to pay the supplying company for each
such allowance at the SYSTEM COST OF COMPLIANCE. The method for
determining the allowances consumed in generating the energy for
POWER SALES TO FOREIGN COMPANIES is set forth in Appendix E to
this Agreement.
4.4 TRANSFERS OF ALLOWANCES FOR CURRENT PERIOD
COMPLIANCE - In December of each calendar year, a Member whose
annual SO2 EMISSIONS exceed its available allowance inventory,
after intercompany settlements described in Section 4.1, 4.2 and
4.3 of this Agreement, will purchase allowances to eliminate its
shortfall in that calendar year and to provide for its share of
the CONTINGENCY BANK. These purchases will be made from Members
having SURPLUS ALLOWANCES and will be priced at the SYSTEM COST
OF COMPLIANCE. If more than one Member has SURPLUS ALLOWANCES,
14<PAGE>
the buying Member will purchase a proportionate share from the
surplus Members.
4.5 TRANSFERS OF ALLOWANCES FOR FUTURE PERIOD
COMPLIANCE - In December of each calendar year, an estimate will
be made of each Member's allowance requirements for the following
twenty (20) years. Each Member with an estimated shortage will
purchase allowances to the full extent of its estimated shortage,
proportionately from the Member's estimated to have a surplus to
the extent that sufficient SURPLUS ALLOWANCES are available.
Such purchases shall be made at the SYSTEM COST OF COMPLIANCE.
ARTICLE 5
BILLINGS AND PAYMENTS
5.1 All bills for amounts owing hereunder shall be due
and payable on the fifteenth day of the month next following the
month to which a settlement has been rendered, or on the tenth
day following the receipt of the bill, whichever date is later.
Interest on unpaid amounts shall accrue daily at the prime
interest rate per annum in effect on the due date at Citibank,
plus 2% per annum, from the due date until the date upon which
payment is made. Unless otherwise agreed upon, the calendar
month shall be the standard period for the purpose of settlements
under this Agreement. If bills cannot be accurately determined
at any time, they shall be rendered on an estimated basis and
subsequently adjusted to conform to the terms of this Agreement.
15<PAGE>
ARTICLE 6
TAXES
6.1 If at any time during the duration of this
Agreement there should be levied and/or assessed by any
governmental authority against any Member any tax related to the
receipt of settlements calculated pursuant to Article 5 of this
Agreement (including, but not limited to sales, excise, etc.),
the tax expense incurred by such Member that would not have been
incurred were the allowance settlements hereunder not being made,
such Member shall be entitled to reimbursement of the tax expense
from the Member generating the tax expense.
ARTICLE 7
MODIFICATIONS
7.1 Any Member, by written notice given to the other
Members and Agent, may call for a reconsideration of the terms
and conditions herein provided. If such reconsideration is
called for, the Members shall take into account any changed
conditions, any results from the application of said terms and
conditions, and any other facts that might cause said terms and
conditions to result in an inequitable sharing of costs and
benefits under this Agreement. Any modification in terms and
conditions agreed to by the Members shall be subject to
appropriate regulatory approval and become effective the first
day of the month following regulatory authorization.
16<PAGE>
ARTICLE 8
EFFECTIVE DATE AND TERMS OF THIS AGREEMENT
8.1 This Agreement shall become effective and shall
become a binding obligation of the Parties on January 1, 1995, or
such other effective date determined by FERC.
8.2 This Agreement shall continue in effect from the
effective date until the effective date of any subsequent
agreement.
ARTICLE 9
REGULATORY AUTHORITIES
9.1 The Members recognize that this Agreement, and any
tariff or rate schedule which shall embody or supersede this
Agreement or any part thereof, are in certain respects subject to
the jurisdiction of the FERC under the Federal Power Act, and are
also subject to such lawful action as any regulatory authority
having jurisdiction shall hereinafter take with respect thereto.
The performance of any obligation of the Members shall be subject
to the receipt of such authorizations, approvals or actions of
regulatory authorities having jurisdiction as shall be required
by law.
9.2 It is expressly understood that the Members shall
be entitled, at any time unilaterally, to make application to the
FERC for a change in the rates, charges, classification of
service, or any rule, regulation or contract relating thereto, or
to make any change in or supersede in whole or in part any
17<PAGE>
provision of the this Agreement, under Section 205 of the Federal
Power Act and pursuant to the FERC's Rules and Regulations
promulgated thereunder.
ARTICLE 10
ASSIGNMENT
10.1 This Agreement shall accrue to the benefit of and
be binding upon the successors and assigns of the respective
parties.
IN WITNESS WHEREOF, the parties hereto have caused the
Agreement to be executed in their respective corporate names and
on their behalf by their proper officers thereunto duly
authorized as of the day and year first above written.
APPALACHIAN POWER COMPANY
By__/s/ J. W. Vipperman__
COLUMBUS SOUTHERN POWER COMPANY
OHIO POWER COMPANY
By__/s/ Carl A. Erikson___
INDIANA MICHIGAN POWER COMPANY
By__/s/ R. C. Menge_______
KENTUCKY POWER COMPANY
By__/s/ C. R. Boyle, III__
AMERICAN ELECTRIC POWER
SERVICE CORPORATION
By__/s/ E. L. Draper, Jr._
</PAGE>
<PAGE>
<TABLE>
EXHIBIT 12
APPALACHIAN POWER COMPANY
Computation of Consolidated Ratio of Earnings to Fixed Charges
(in thousands except ratio data)
<CAPTION>
Year Ended December 31,
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Fixed Charges:
Interest on First Mortgage Bonds. . . . . . . . . . . . . . $66,403 $ 72,800 $ 84,177 $ 80,472 $ 75,815
Interest on Other Long-term Debt. . . . . . . . . . . . . . 19,637 18,282 17,986 16,846 16,415
Interest on Short-term Debt . . . . . . . . . . . . . . . . 1,633 3,089 1,792 1,615 3,366
Miscellaneous Interest Charges. . . . . . . . . . . . . . . 1,999 3,011 2,617 2,954 3,913
Estimated Interest Element in Lease Rentals . . . . . . . . 5,300 5,700 6,700 7,900 7,700
Total Fixed Charges. . . . . . . . . . . . . . . . . . $94,972 $102,882 $113,272 $109,787 $107,209
Earnings:
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . $107,988 $140,419 $131,419 $125,132 $102,345
Plus Federal Income Taxes . . . . . . . . . . . . . . . . . 41,194 47,227 46,017 51,681 39,599
Plus State Income Taxes . . . . . . . . . . . . . . . . . . 5,878 3,650 2,649 8,887 5,910
Plus Fixed Charges (as above) . . . . . . . . . . . . . . . 94,972 102,882 113,272 109,787 107,209
Total Earnings . . . . . . . . . . . . . . . . . . . . $250,032 $294,178 $293,357 $295,487 $255,063
Ratio of Earnings to Fixed Charges. . . . . . . . . . . . . . 2.63 2.85 2.58 2.69 2.37
</TABLE>
<PAGE>
<TABLE>
Selected Consolidated Financial Data
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
(in thousands)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENTS DATA:
Operating Revenues $1,535,500 $1,519,104 $1,410,778 $1,378,706 $1,468,694
Operating Expenses 1,330,282 1,289,764 1,176,882 1,143,626 1,269,548
Operating Income 205,218 229,340 233,896 235,080 199,146
Nonoperating Income
(Loss) (4,716) (3,353) 3,036 1,132 (2,492)
Income Before
Interest Charges 200,502 225,987 236,932 236,212 196,654
Interest Charges 98,157 100,855 105,513 95,793 88,666
Net Income 102,345 125,132 131,419 140,419 107,988
Preferred Stock
Dividend Requirements 15,660 16,540 16,596 13,861 14,285
Earnings Applicable
to Common Stock $ 86,685 $ 108,592 $ 114,823 $ 126,558 $ 93,703
Year Ended December 31,
1994 1993 1992 1991 1990
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEETS DATA:
Electric Utility
Plant $4,398,727 $4,193,700 $4,038,735 $3,884,833 $3,720,515
Accumulated
Depreciation and
Amortization 1,627,852 1,550,855 1,477,078 1,405,074 1,328,309
Net Electric Utility
Plant $2,770,875 $2,642,845 $2,561,657 $2,479,759 $2,392,206
Regulatory Assets $ 403,906 $ 382,877 $ 64,157 $ 27,691 $ 21,739
Total Assets $3,584,488 $3,428,367 $3,094,091 $2,972,581 $2,825,522
Common Stock and
Paid-in Capital $ 764,866 $ 755,292 $ 741,509 $ 742,107 $ 742,106
Retained Earnings 206,361 227,816 229,920 220,933 198,051
Total Common
Shareowner's Equity $ 971,227 $ 983,108 $ 971,429 $ 963,040 $ 940,157
Cumulative Preferred Stock:
Not Subject to
Mandatory
Redemption $ 55,000 $ 55,000 $ 105,000 $ 105,000 $ 105,000
Subject to Mandatory
Redemption (a) 190,385 160,537 108,509 65,662 69,675
Total Cumulative
Preferred Stock $ 245,385 $ 215,537 $ 213,509 $ 170,662 $ 174,675
Long-term Debt (a) $1,228,911 $1,215,168 $1,200,272 $1,100,626 $1,051,057
Obligations Under
Capital Leases (a) $ 43,138 $ 29,973 $ 24,269 $ 19,801 $ 14,360
Total Capitalization
and Liabilities $3,584,488 $3,428,367 $3,094,091 $2,972,581 $2,825,522
(a) Including portion due within one year.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Net Income
Net income decreased by $22.8 million in 1994 due to increased AEP
System Power Pool (Power Pool) capacity costs, severe winter storm damage
expenses, an increase in West Virginia business and occupation taxes
resulting from increased generation at West Virginia plants, and increased
charges under the AEP System transmission equalization agreement. Net income
decreased by $6.3 million in 1993 due to a change in accounting for
postretirement benefits other than pensions in accordance with a new
accounting standard, planned generating unit repairs and storm damage
expenditures.
Revenues Increase
Operating revenues increased 1% in 1994 and 8% in 1993 and can be
analyzed as follows:
Increase (Decrease)
From Previous Year
(dollars in millions) 1994 1993
Amount % Amount %
Retail:
Price variance . . . . $ 7.9 $ 1.3
Volume variance. . . . 2.6 36.4
Power Supply Costs . . (5.4) 35.0
5.1 0.4 72.7 6.4
Wholesale:
Price variance . . . . 23.9 5.1
Volume variance. . . . (20.9) 36.9
Power Supply Costs . . (.8) (6.0)
2.2 0.8 36.0 14.3
Other Operating Revenues 9.1 (.4)
Total . . . . . $ 16.4 1.1 $108.3 7.7
The slight increase in retail revenues in 1994 can be attributed to the
effect of a May 1993 rate increase in the Virginia retail jurisdiction.
Although wholesale energy sales decreased 7% in 1994, wholesale revenues
increased primarily due to an increase in take-or-pay capacity charges to
unaffiliated utilities. Take-or-pay capacity charges are to reserve a
specified quantity of generating capacity and must be paid even when the
energy is not taken. The decline in wholesale energy sales reflects lower
energy sales by the Power Pool. While severe winter weather in January 1994
and hotter than normal weather in June increased the Power Pool's short-term
wholesale sales in those months, the mild weather throughout the remainder of
1994, combined with increased competition in the wholesale market, reduced
short-term sales for the year.
The increase in retail revenues in 1993 was primarily due to a return to
normal weather, increased recoveries of deferred power supply costs, and the
May 1993 Virginia retail rate increase. In 1993 wholesale revenues increased
14% due to a 15% increase in sales as the Company's share of short-term
wholesale sales made by the Power Pool increased reflecting the decreased
availability of unaffiliated generating units and the return to normal hot
summer weather.
<PAGE>
Operating Expenses Increase
Operating expenses increased 3% in 1994 and 10% in 1993. Changes in the
components of operating expenses were as follows:
Increase (Decrease)
From Previous Year
(dollars in millions) 1994 1993
Amount % Amount %
Fuel . . . . . . . . . $ 8.2 2.2 $ 30.9 8.8
Purchased Power. . . . 5.5 1.8 28.1 10.0
Other Operation. . . . 9.6 5.2 18.2 10.8
Maintenance. . . . . . 14.3 12.0 15.2 14.5
Depreciation and
Amortization . . . . 4.9 4.0 5.8 4.9
Taxes Other Than
Federal Icome Taxes. 6.7 6.0 7.4 7.0
Federal Income Taxes . (8.7) (16.1) 7.3 15.4
Total. . . . . . . . $40.5 3.1 $112.9 9.6
The increase in fuel expense in 1994 was primarily due to an increase in
coal-fired generation partially offset by a reduction in the average cost of
fuel consumed. The increase in generation resulted from fewer maintenance
outages compared with last year at the Company's generating units and
scheduled outages at an affiliate's nuclear power plant which required the
Company to increase its generation for delivery to the Power Pool. Fuel
expense increased in 1993 due primarily to the operation of the power supply
cost recovery mechanism as previously deferred fuel costs were expensed
concurrent with their recovery, partially offset by reduced coal-fired
generation due to planned power plant maintenance outages.
Although 1994 energy purchases from the Power Pool declined, reflecting
an increase in the Company's generation, purchased power expense increased as
a result of increased Power Pool capacity charges. The Power Pool allocates
capacity costs to its members based on their relative peak demands in the
prior twelve months. As a result of a new internal peak demand experienced
in January 1994, the Company is being charged with a greater portion of the
Power Pool's capacity charges which are recorded as purchased power expense.
The increase in purchased power expense in 1993 reflects increased energy
purchases from the Power Pool to meet increased sales and to replace power
not generated as a result of maintenance outages.
Other operation expense increased in 1994 primarily due to increased
charges under the AEP System transmission equalization agreement.
Transmission charges are allocated based on the relative peak demands in the
prior twelve months. The increase in such charges reflects the Company's new
peak demand. In 1993 a change in accounting method for postretirement
benefits other than pensions from pay-as-you-go to accrual accounting in
accordance with a new accounting standard was the principal reason other
operation expense increased.
A January 1994 snow storm, primarily in the West Virginia service
territory and two major ice storms in February and March 1994, mainly in the
Virginia service territory significantly increased 1994 maintenance expense.
Storm damage expenditures in 1994 were $43.2 million of which $23.9 million
was deferred in the Virginia retail jurisdiction for future recovery as a
regulatory asset in accordance with a precedent established in a previous
rate proceeding. Maintenance expense increased in 1993 principally due to
planned generating unit repair and inspection outages as well as storm damage
expenses from a March 1993 blizzard and June 1993 windstorm.
Taxes other than federal income taxes increased in 1994 reflecting the
effect on the generation-based West Virginia business and occupation tax of
the increased generation at West Virginia plants. An increase in taxable
income caused the 1993 increase in taxes other than federal income taxes.
Federal income taxes attributable to operations decreased in 1994
primarily due to a decrease in pre-tax operating income. In 1993 federal
income taxes attributable to operations increased primarily due to changes in
certain book/tax differences accounted for on a flow-through basis and an
increase in pre-tax operating income.
Nonoperating Income
Nonoperating income decreased in 1994 due to the adoption of SFAS 112,
Employers' Accounting for Postemployment Benefits, by the Company's
subsidiaries, which were formerly engaged in coal-mining, and the effect of a
refund in 1993 of medical costs received by the inactive coal subsidiaries
from surplus funds in the Black Lung Trust Fund. Nonoperating income
decreased in 1993 principally because of interest income recorded in 1992 on
tax refunds received from the IRS in connection with the settlement of audits
of prior years' tax returns.
Interest Charges
Refinancing of long-term debt during 1993 and the early part of 1994
reduced the average interest rate on outstanding long-term debt as well as
the average levels of long-term debt causing the decline in interest expense
in 1994 and 1993. In the past two years management refinanced and retired
$332 million of long-term debt.
Construction
Total plant and property additions were $253 million in 1994 and $201
million in 1993. Management estimates construction expenditures for the next
three years to be $631 million including expenditures necessary to meet the
requirements of the Clean Air Act Amendments of 1990. The funds for
construction of new facilities and improvement of existing facilities will
come from a combination of internally generated funds, short-term and long-
term borrowings and investments in common equity by the Company's parent,
American Electric Power Co., Inc. (AEP Co., Inc.). Approximately 75% of the
construction expenditures for the next three years are expected to be fi-
nanced internally. These estimated construction expenditures do not include
any major new plant construction.
Capital Resources
The Company generally issues short-term debt to provide for interim
financing of capital expenditures that exceed internally generated funds. At
December 31, 1994, unused short-term lines of credit shared with other
American Electric Power (AEP) System companies of $558 million were
available; however, charter provisions limit short-term debt borrowing to
$213 million. Short-term borrowings increased by $83 million in 1994.
Periodic reductions of outstanding short-term debt are made through issuance
of long-term debt, preferred stock and equity capital contributions by the
parent company.
The Company received or has requested regulatory approval to issue up to
$204 million of long-term debt to retire short-term debt, refinance higher
cost and maturing long-term debt, reacquire cumulative preferred stock and
fund construction expenditures.
The Company presently exceeds all minimum coverage requirements for
issuance of preferred stock and long-term debt. At December 31, 1994, long-
term debt and preferred stock coverage ratios were 3.10 and 1.65,
respectively.
Competition
In exchange for the exclusive right to provide electric generation,
transmission and distribution services within a designated service territory
at cost-based regulated prices that provide the opportunity to earn a
regulator-determined reasonable rate of return on shareholders' equity,
electric utilities are obligated to serve all customers within such service
territories. While the Company is a regulated monopoly, we have competed
historically with self-generation and with distributors of alternative
sources of energy, such as natural gas, fuel oil and coal, within our service
area. In recent years regulated electric utilities have also competed with
independent power producers for the right to build and operate new generating
plant. The primary competitive factors have been price, reliability of
service and the ability of customers to utilize sources of energy other than
electric power. The lack of independent power producers and significant self
generation in our service territory evidences our past ability to compete.
With respect to alternative energy sources, management believes that the
convenience and versatility of electricity and reliability of our service
coupled with the limited ability of customers to substitute other energy
sources for electric power have placed us in a favorable competitive
position. However, we continue to work to improve the competitiveness,
effectiveness and reliability of our product. The Company, for example,
encourages customers to use high-efficiency heat pumps which lowers the cost
of space heating and cooling.
Competition in the wholesale market, that is the sale of bulk power to
other public and municipal utilities, is not new and has been increasing for
a number of years. This is particularly true in the short-term wholesale
market. The National Energy Policy Act of 1992 (the Energy Act) facilitated
competition in the short and long-term wholesale market since, among other
things, it authorized the Federal Energy Regulatory Commission (FERC) to
order transmission access for wholesale transactions. The principal factors
in competing for wholesale sales are price including fuel costs, availability
of capacity, transmission capability and cost, and reliability of service.
Management believes that over the years the Company has generally maintained
a favorable competitive position in these factors. However, due to the
recent availability of additional capacity of other utilities and reduced
fuel prices, price competition, particularly in the short-term wholesale
market, has been, and is expected to be important in the future.
With the passage of the Energy Act, the potential for retail wheeling,
i.e., competition for retail sales, is getting considerable attention. While
the Energy Act gave the FERC broad authority to mandate transmission access
in the wholesale market, it prohibits the FERC from ordering retail wheeling.
A number of state legislatures and state regulatory agencies have begun to
study retail wheeling with encouragement from major industrial customers.
If it occurs, increased competition may require the resolution of some
complex issues, such as stranded investment and the obligation to serve.
When a customer leaves a utility system there is an issue of who pays for
regulatory assets, plant investment and commitments that are no longer
needed. If a customer leaves its native electric supplier and later decides
to return, the issue of whether the original local utility has an obligation
to serve the returning customer must also be addressed. If not recovered
directly from customers that choose another supplier and/or from the
remaining regulated customers, the Company, like all electric utilities, will
be required to address stranded investment losses that could result from any
future loss of customers or reduced pricing from head-to-head competition.
Management intends to seek recovery of any stranded investment, including
regulatory assets, as an appropriate recovery of previously approved cost of
service.
Activity-based budgeting and cost management techniques are being
currently developed to enable management to cost logical work activities and
services. By examining our operations by logical work units, the cost of all
major activities can be better controlled, identified and evaluated to prop-
erly price our products and to eliminate unnecessary activities and their
cost. Management believes these activities will enhance our ability to
compete.
The development of tools and training to enable management to better
manage the costs of operations are only one of the options currently being
pursued. In 1994 the Company's management team has been:
- Reviewing and streamlining operations and staffing,
- Reducing layers of supervision,
- Expanding customer relations and service activities,
- Expanding its ability to help customers adopt new electro-technologies
to reduce their usage of electricity, and
- Expanding strategic planning and management training activities.
Management is committed to maintaining and enhancing the Company's core
business. Management is moving in "new directions" to maintain and improve
our competitive position. Whether competition expands or not, these efforts
should serve to lower cost of service and rates and improve sales through
economic development in our service territory.
Environmental Concerns
Clean Air Act
The Clean Air Act Amendments (CAAA) of 1990 require, among other things,
substantial reductions in sulfur dioxide and nitrogen oxide emissions from
electric generating plants. The first phase of reductions in sulfur dioxide
emissions (Phase I) began on January 1, 1995 and the second, more restrictive
phase (Phase II) begins on January 1, 2000. The law also establishes a
permanent nationwide cap on sulfur dioxide emissions after 1999.
As a Power Pool member with insufficient generating capacity in relation
to the Pool, the Company will share in the AEP System's Phase I compliance
costs, which reflects various methods of compliance. The cornerstone of the
compliance strategy is the installation of scrubbers at the two-unit 2,600
megawatt Gavin Plant owned by an affiliated Power Pool member, Ohio Power
Company. The scrubbers for Gavin Unit 1 were completed in December 1994 and
the Unit 2 scrubbers are expected to be completed in March 1995. Phase II of
the CAAA will require further compliance actions and additional costs.
Management intends to seek timely recovery of its share of the AEP System's
additional compliance costs.
Hazardous Material
By-products from the generation of electricity include materials such as
ash, slag and sludge. Coal combustion by-products, which constitute the
overwhelming percentage of these materials, are typically disposed of or
treated in captive disposal facilities or are beneficially utilized. In
addition, the Company's generating plants and transmission and distribution
facilities have used asbestos, polychlorinated biphenyls (PCBs) and other
hazardous and non-hazardous materials. Substantial costs are currently being
incurred to safely dispose of such substances, and additional costs could be
incurred to comply with new laws and regulations if enacted.
The Comprehensive Environmental Response Compensation and Liability Act
(Superfund) addresses clean-up of hazardous substance disposal sites and
authorizes the United States Environmental Protection Agency (Federal EPA) to
administer the clean-up programs. The Company has been named by the Federal
EPA as a "potentially responsible party" (PRP) for one site as of December
31, 1994. Liability has been settled for this site with no significant
effect on results of operations. In addition, there are two sites for which
the Company has received information requests or demand letters from the
Federal EPA, which could lead to PRP designations. The State of Tennessee
has also named the Company as a PRP at one site under analogous state cleanup
laws.
In all instances where the Company has been named a PRP or defendant,
the disposal or recycling activity was in accordance with applicable laws and
regulations. However Superfund does not recognize compliance as a defense,
but imposes strict liability on parties who fall within its broad statutory
categories. As a result, AEP has instituted a number of Systemwide policies
that have raised the standard of care by going beyond regulatory requirements
where appropriate.
While the potential liability for each site must be evaluated
separately, several general statements can be made regarding such potential
liability. The disposal by the Company at a particular site is often
unsubstantiated; the quantity of material disposed of at a site was generally
small; and the nature of the material generally disposed of was non-
hazardous. Typically, the Company is one of many parties named PRPs for a
site and, although liability is joint and several, at least some of the other
parties are financially sound enterprises. Therefore, present estimates do
not anticipate material clean-up costs for identified disposal sites.
However, if for unknown reasons, significant costs are incurred for cleanup,
results of operations and possibly financial condition would be adversely
affected unless the costs can be recovered from insurance proceeds and/or
with regulatory approval from ratepayers.
Global Climate Change
Concern about global climate change, or "the greenhouse effect" has been
the focus of intensive debate within the United States and around the world.
Much of the uncertainty about what effects greenhouse gas concentrations will
have on the global climate results from a myriad of factors that affect
climate. Based on the terms of a 1992 United Nations treaty that pledged the
United States to reduce greenhouse gas emissions, the Clinton Administration
developed a voluntary plan to reduce greenhouse gas emissions to 1990 levels
by the year 2000. As part of this plan, the AEP System is participating with
the U.S. Department of Energy (DOE) and other electric utility companies in a
climate change program to limit future greenhouse gas emissions.
The climate change program applies a policy of proactive environmental
stewardship, whereby actions are taken that make economic and environmental
sense on their own merits, irrespective of the uncertain threat of global
climate change. The plan includes energy conservation programs, improvements
in fossil generation efficiency, increased use of nuclear capacity and forest
management activities. However, should it be determined necessary to enact
significant new measures to control the burning of coal, the cost of such
measures if not recovered from ratepayers, could adversely impact results of
operations and possibly financial condition.
EMF
The potential for electric and magnetic fields (EMF) from transmission
and distribution facilities to adversely affect the public health is being
extensively researched. The AEP System continues to support research to help
determine the extent, if any, to which EMF may adversely impact public
health. Our concern is that new laws imposing EMF limits may be passed or
new regulations promulgated without sufficient scientific study and evidence
to support them. As long as there is uncertainty about EMF, electric
utilities will have difficulty finding acceptable sites for their facilities,
which could hamper economic growth within our service area. If the present
energy delivery system must be changed because of EMF concerns, or if the
courts conclude that EMF exposure harms individuals and that utilities are
liable for damages, then results of operations and financial condition could
be adversely affected, unless the costs can be recovered from ratepayers.
Litigation
The Company is involved in a number of legal proceedings and claims.
While we are unable to predict the outcome of such litigation, it is not
expected that the resolution of these matters will have a material adverse
effect on financial condition.
Effects of Inflation
Inflation affects the cost of replacing utility plant and the cost of
operating and maintaining such plant. The rate-making process generally
limits recovery to the historical cost of assets resulting in economic losses
when inflation effects are not recovered from customers on a timely basis.
However, economic gains that result from the repayment of long-term debt with
inflated dollars partly offset such losses.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareowners and Board of
Directors of Appalachian Power Company:
We have audited the accompanying consolidated balance sheets of Appalachian
Power Company and its subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, retained earnings, and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Appalachian Power Company and
its subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Columbus, Ohio
February 21, 1995
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
Year Ended December 31,
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
OPERATING REVENUES $1,535,500 $1,519,104 $1,410,778
OPERATING EXPENSES:
Fuel 390,864 382,633 351,750
Purchased Power 315,818 310,307 282,166
Other Operation 196,097 186,471 168,226
Maintenance 134,092 119,754 104,581
Depreciation and Amortization 128,192 123,306 117,513
Taxes Other Than Federal Income Taxes 119,458 112,739 105,377
Federal Income Taxes 45,761 54,554 47,269
Total Operating Expenses 1,330,282 1,289,764 1,176,882
OPERATING INCOME 205,218 229,340 233,896
NONOPERATING INCOME (LOSS) (4,716) (3,353) 3,036
INCOME BEFORE INTEREST CHARGES 200,502 225,987 236,932
INTEREST CHARGES 98,157 100,855 105,513
NET INCOME 102,345 125,132 131,419
PREFERRED STOCK DIVIDEND REQUIREMENTS 15,660 16,540 16,596
EARNINGS APPLICABLE TO COMMON STOCK $ 86,685 $ 108,592 $ 114,823
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
December 31,
1994 1993
(in thousands)
<S> <C> <C>
ASSETS
ELECTRIC UTILITY PLANT:
Production $1,848,263 $1,781,005
Transmission 1,010,344 987,147
Distribution 1,315,915 1,225,436
General 160,752 140,942
Construction Work in Progress 63,453 59,170
Total Electric Utility Plant 4,398,727 4,193,700
Accumulated Depreciation and Amortization 1,627,852 1,550,855
NET ELECTRIC UTILITY PLANT 2,770,875 2,642,845
OTHER PROPERTY AND INVESTMENTS 48,928 51,551
CURRENT ASSETS:
Cash and Cash Equivalents 5,297 4,626
Accounts Receivable:
Customers 108,785 118,523
Affiliated Companies 10,980 9,565
Miscellaneous 4,327 4,118
Allowance for Uncollectible Accounts (830) (1,344)
Fuel - at average cost 65,581 46,881
Materials and Supplies - at average cost 49,451 43,351
Accrued Utility Revenues 51,686 58,294
Prepayments 6,487 7,430
TOTAL CURRENT ASSETS 301,764 291,444
REGULATORY ASSETS 403,906 382,877
DEFERRED CHARGES 59,015 59,650
TOTAL $3,584,488 $3,428,367
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31,
1994 1993
(in thousands)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 30,000,000 Shares
Outstanding - 13,499,500 Shares $ 260,458 $ 260,458
Paid-in Capital 504,408 494,834
Retained Earnings 206,361 227,816
Total Common Shareowner's Equity 971,227 983,108
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption 55,000 55,000
Subject to Mandatory Redemption 190,300 160,450
Long-term Debt 1,228,911 1,215,124
TOTAL CAPITALIZATION 2,445,438 2,413,682
OTHER NONCURRENT LIABILITIES 66,156 55,865
CURRENT LIABILITIES:
Short-term Debt 122,825 39,500
Accounts Payable - General 46,729 33,627
Accounts Payable - Affiliated Companies 46,983 34,531
Taxes Accrued 34,623 52,128
Customer Deposits 14,362 13,670
Interest Accrued 17,347 18,212
Other 77,236 71,259
TOTAL CURRENT LIABILITIES 360,105 262,927
DEFERRED FEDERAL INCOME TAXES 595,353 578,948
DEFERRED INVESTMENT TAX CREDITS 77,862 82,987
DEFERRED CREDITS 39,574 33,958
COMMITMENTS AND CONTINGENCIES (Note 4)
TOTAL $3,584,488 $3,428,367
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Year Ended December 31,
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 102,345 $ 125,132 $ 131,419
Adjustments for Noncash Items:
Depreciation and Amortization 130,694 125,847 120,056
Deferred Federal Income Taxes 17,355 (5,834) 29,132
Deferred Investment Tax Credits (5,492) (5,468) (5,096)
Deferred Power Supply Costs (net) 9,356 22,100 (30,493)
Provision for Rate Refunds (8,780) 18,654 (4,708)
Storm Damage Expense Deferrals (net) (21,741) (3,371) -
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net) 7,600 (2,758) (8,906)
Fuel, Materials and Supplies (24,800) 62,608 8,135
Accrued Utility Revenues 6,608 (11,598) (4,919)
Accounts Payable 25,554 (20,018) (4,963)
Taxes Accrued (17,505) 12,104 (14,419)
Other (net) (3,192) 13,247 (23,713)
Net Cash Flows From Operating Activities 218,002 330,645 191,525
INVESTING ACTIVITIES:
Construction Expenditures (230,531) (189,767) (188,380)
Other 948 1,806 1,884
Net Cash Flows Used For Investing Activities (229,583) (187,961) (186,496)
FINANCING ACTIVITIES:
Capital Contributions from Parent Company 10,000 15,000 -
Issuance of Cumulative Preferred Stock 29,574 108,783 49,402
Issuance of Long-term Debt 70,443 286,486 493,447
Retirement of Cumulative Preferred Stock (152) (112,505) (7,153)
Retirement of Long-term Debt (58,236) (277,704) (404,309)
Change in Short-term Debt (net) 83,325 (40,350) (19,200)
Dividends Paid on Common Stock (108,140) (110,696) (105,836)
Dividends Paid on Cumulative Preferred Stock (14,562) (16,573) (15,330)
Net Cash Flows From (Used For)
Financing Activities 12,252 (147,559) (8,979)
Net Increase (Decrease) in Cash and Cash Equivalents 671 (4,875) (3,950)
Cash and Cash Equivalents January 1 4,626 9,501 13,451
Cash and Cash Equivalents December 31 $ 5,297 $ 4,626 $ 9,501
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Retained Earnings
Year Ended December 31,
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Retained Earnings January 1 $227,816 $229,920 $220,933
Net Income 102,345 125,132 131,419
330,161 355,052 352,352
Deductions:
Cash Dividends Declared:
Common Stock 108,140 110,696 105,836
Cumulative Preferred Stock:
4-1/2% Series 1,350 1,350 1,350
4.50% Series 22 30 36
5.90% Series 2,950 713 -
5.92% Series 3,552 1,066 -
6.85% Series 1,296 - -
7.40% Series 1,850 1,850 1,850
7.80% Series 3,900 3,900 3,228
8.12% Series - 1,962 2,436
8.52% Series - 1,372 1,704
9% Series - 3,746 5,333
$2.65 Series - 22 193
Total Cash Dividends Declared 123,060 126,707 121,966
Other 740 529 466
Total Deductions 123,800 127,236 122,432
Retained Earnings December 31 $206,361 $227,816 $229,920
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
Organization
Appalachian Power Company (the Company or APCo) is a wholly-owned
subsidiary of American Electric Power Company, Inc. (AEP Co., Inc.), a public
utility holding company. The Company is engaged in the generation, purchase,
transmission and distribution of electric power in southwestern Virginia and
southern West Virginia. As a member of the American Electric Power (AEP)
System Power Pool (Power Pool) and a signatory company to the AEP
Transmission Equalization Agreement, APCo's facilities are operated in
conjunction with the facilities of certain other AEP affiliated utilities as
an integrated utility system.
The Company has five wholly-owned subsidiaries: Cedar Coal Co., Central
Appalachian Coal Company and Southern Appalachian Coal Company (which were
formerly engaged in coal mining and now lease their coal reserves to
unaffiliated companies), Kanawha Valley Power Company (which owns and oper-
ates hydroelectric generating units and sells electricity to APCo) and West
Virginia Power Company (which is inactive).
Regulation
As a member of the AEP System, APCo is subject to the regulation of the
Securities and Exchange Commission (SEC) under the Public Utility Holding
Company Act of 1935 (1935 Act). Retail rates are regulated by the Virginia
State Corporation Commission (Virginia SCC) and the Public Service Commission
of West Virginia (WVPSC). The Federal Energy Regulatory Commission (FERC)
regulates wholesale rates.
Principles of Consolidation
The consolidated financial statements include APCo and its wholly-owned
subsidiaries. Significant intercompany items are eliminated in consol-
idation.
Basis of Accounting
As a cost-based rate-regulated entity, APCo's financial statements reflect
the actions of regulators that result in the recognition of revenues and
expenses in different time periods than enterprises that are not rate
regulated. In accordance with Statement of Financial Accounting Standards
(SFAS) No. 71, Accounting for the Effects of Certain Types of Regulation,
regulatory assets and liabilities are recorded and represent regulator
approved deferred expenses and revenues, respectively, resulting from the
rate-making process. Such deferrals are amortized commensurate with their
inclusion in rates (revenues).
Utility Plant
Electric utility plant is stated at original cost and is generally subject
to first mortgage liens. Additions, major replacements and betterments are
added to the plant accounts. Retirements from the plant accounts and
associated removal costs, net of salvage, are deducted from accumulated
depreciation.
The costs of labor, materials and overheads incurred to operate and
maintain utility plant are included in operating expenses.
Allowance for Funds Used During Construction (AFUDC)
AFUDC is a noncash nonoperating income item that is recovered with
regulator approval over the service life of utility plant through
depreciation and represents the estimated cost of borrowed and equity funds
used to finance construction projects. In the Virginia jurisdiction, con-
struction work in progress is included in rate base in lieu of recording
AFUDC. The average rates used to accrue AFUDC in the West Virginia and FERC
jurisdictions were 4.5%, 3.5% and 4% in 1994, 1993 and 1992, respectively,
and the amounts of AFUDC accrued were $1.4 million in 1994, $1 million in
1993 and $1.1 million in 1992.
Depreciation and Amortization
Depreciation is provided on a straight-line basis over the estimated
useful lives of utility plant and is calculated largely through the use of
composite rates by functional class as follows:
Functional Class Composite
of Property Annual Rates
Production:
Steam 3.6%
Hydro 2.5%
Transmission 2.2%
Distribution 3.5%
General 3.3%
Amounts to be used for demolition of plant are recovered through deprecia-
tion charges included in rates.
Cash and Cash Equivalents
Cash and cash equivalents include temporary cash investments with original
maturities of three months or less.
Operating Revenues
Revenues include the accrual of electricity consumed but unbilled at
month-end as well as billed revenues.
Power Supply Costs and Fuel Costs
The Company practices deferred accounting with respect to the over and
under collection of certain fuel and power supply costs pursuant to the
Virginia regulatory commission's fuel cost recovery mechanism. In the
Virginia jurisdiction, changes in fuel costs and the fuel portion of
purchased power costs are reviewed annually by the Virginia SCC. In the West
Virginia jurisdiction deferral accounting is not being used for the over and
under collection of certain power supply costs incurred from November 1993
through October 1996 as a result of a three-year freeze on fuel rates which
is described in Note 3. Prior to November 1, 1993 deferred fuel accounting
was practiced in the West Virginia jurisdiction.
Wholesale jurisdictional fuel cost changes are expensed and billed as
incurred.
Income Taxes
The Company follows the liability method of accounting for income taxes as
prescribed by SFAS 109, Accounting for Income Taxes. Under the liability
method, deferred income taxes are provided for all temporary differences be-
tween book cost and tax basis of assets and liabilities which will result in
a future tax consequence. Where the flow-through method of accounting for
temporary differences is reflected in rates, regulatory assets and
liabilities are recorded in accordance with SFAS 71.
Investment Tax Credits
The Company's policy was to account for invest-ment tax credits under the
flow-through method except where regulatory commissions reflected investment
tax credits in the rate-making process on a deferral basis. Commensurate
with rate treatment deferred investment tax credits are being amortized over
the life of the related plant investment.
Debt and Preferred Stock
Gains and losses on reacquired debt are deferred and amortized over the
term of the reacquired debt in accordance with rate-making treatment. If the
debt is refinanced the reacquisition costs are deferred and amortized over
the term of the replacement debt commensurate with their recovery in rates.
Debt discount or premium and debt issuance expenses are amortized over the
term of the related debt, with the amortization included in interest charges.
Redemption premiums paid to reacquire preferred stock are deferred and
amortized in accordance with rate-making treatment. The excess of par value
over costs of preferred stock reacquired to meet sinking fund requirements is
credited to paid-in capital.
Other Property and Investments
Other property and investments are stated at cost.
Reclassifications
Certain prior-period amounts were reclassified to conform with current-
period presentation.
<PAGE>
2. EFFECTS OF REGULATION:
The consolidated financial statements include assets and liabilities
recorded in accordance with regulatory actions to match expenses and revenues
in cost-based rates. Regulatory assets are expected to be recovered in
future periods through the rate-making process and regulatory liabilities are
expected to reduce future rate recoveries. The Company's regulatory assets
and liabilities are comprised of the following:
December 31,
1994 1993
(in thousands)
Regulatory Assets:
Amounts Due From Customers
For Future Federal
Income Taxes $319,160 $320,160
Unamortized Loss On
Reacquired Debt 25,621 26,114
Deferred Storm Damages 25,112 3,371
Other 34,013 33,232
Total Regulatory Assets $403,906 $382,877
Regulatory Liabilities:
Deferred Investment Tax
Credits $77,862 $82,987
Other Regulatory Liabilities* 7,075 549
Total Regulatory Liabilities $84,937 $83,536
* Included in Deferred Credits on Consolidated Balance Sheets.
3. RATE MATTERS:
On June 27, 1994 the Virginia SCC issued a final order granting the
Company an increase in annual revenues of $17.9 million. The Company had
requested to increase its Virginia retail rates by $31.4 million annually and
on May 4, 1993, implemented the rates, subject to refund, based on an interim
order. As a result of the final order, the Company made a revenue refund
including interest to its Virginia customers in August 1994 of $15.8 million.
As a result of certain significant fuel cost reductions, on November 15,
1994 the Company implemented a net decrease in rates charged to its Virginia
retail customers of $13.2 million, subject to final approval by the Virginia
SCC. The net decrease consisted of a $28.9 million decrease in the fuel
component of its rates offset, in part, by an increase of $15.7 million in
base rates. On December 19, 1994, the Virginia SCC issued an order approving
the decrease in the fuel factor component of rates. The increase in base
rates would, in part, recover over three years the costs of extensive repairs
to facilities damaged by last winter's severe storms. The Company deferred
$23.9 million of Virginia retail incremental storm damage expenses related to
two major ice storms in February and March 1994. The Company proposes in
this rate proceeding to amortize the deferred storm damage expenses over a
three-year period, consistent with the amortization of previous storm damage
expense deferrals approved in a 1992 rate case. The ultimate recovery of the
entire deferred storm damage costs is subject to Virginia SCC approval. If
not approved, results of operations would be adversely affected. A hearing
has been scheduled to begin in July 1995.
Under the terms of a 1993 settlement agreement, the Company agreed to a
base rate freeze in the West Virginia jurisdiction and suspension of the
WVPSC's Expanded Net Energy Cost (ENEC) re-covery mechanism until October 31,
1996. Deferral accounting will not be used for new ENEC cost variances
incurred from November 1993 through October 1996. The ENEC actual under-
recovery balance on October 31, 1993 of $13.3 million is being collected
through a component of the revised ENEC rates over the three-year period
ending October 31, 1996. At December 31, 1994 the unrecovered ENEC balance
was $7.6 million.
Effective September 15, 1992 the FERC authorized the Company to implement,
subject to refund, an $8.7 million annual rate increase. The Company is
awaiting a final order from the FERC in this matter.
4. COMMITMENTS AND CONTINGENCIES:
Construction and Other Commitments
Substantial construction commitments have been made. Such commitments do
not include any expenditures for new generating capacity. The aggregate
construction program expenditures for 1995-1997 are estimated to be $631
million.
Long-term fuel supply contracts contain clauses that provide for periodic
price adjustments. The Virginia jurisdiction has a fuel cost recovery
mechanism that provides, with the regulators' review and approval, for de-
ferral and subsequent recovery or refund of changes in the cost of fuel. The
Company agreed to freeze the fuel cost recovery factor in the West Virginia
jurisdiction for three years ending October 31, 1996. The Company will
seek, after October 1996, reinstatement of a similar fuel cost recovery
mechanism in its West Virginia jurisdiction. The contracts are for various
terms, the longest of which extends to 2006, and contain various clauses that
would release the Company from its obligation under certain force majeure
conditions.
Litigation
The Company is involved in a number of legal proceedings and claims.
While management is unable to predict the outcome of litigation, it is not
expected that the resolution of these matters will have a material adverse
effect on financial condition.
Clean Air
The Clean Air Act Amendments of 1990 require significant reductions in
sulfur dioxide and nitrogen oxide emissions from various AEP System generat-
ing plants. The first phase of reductions in sulfur dioxide emissions (Phase
I) began on January 1, 1995 and the second, more restrictive phase (Phase II)
begins on January 1, 2000. The law also established a permanent nationwide
cap on sulfur dioxide emissions after 1999.
The Company's plants are not affected by Phase I emissions requirements;
however, the Company will incur a portion of the Phase I compliance costs of
other AEP affiliates through the Power Pool (which is described in Note 6).
The compliance plan for the AEP System's generating units affected by Phase I
includes installation of flue gas desulfurization systems (scrubbers) at the
two-unit 2,600 mw Gavin Plant owned by an affiliate, Ohio Power Company, and
fuel switching at other affected affiliated plants. The Company will incur
additional costs to comply with Phase II requirements at its generating
plants and those of affiliated Power Pool members. If the Company is unable
to recover its share of the AEP System costs of compliance, it will have an
adverse impact on results of operations and financial condition.
Other Environmental Matters
The Company and its subsidiaries are regulated by federal, state and local
authorities with respect to air and water quality and other environmental
matters. Local authorities also regulate zoning. The generation of
electricity produces non-hazardous and hazardous by-products. Asbestos,
polychlorinated biphenyls (PCBs) and other hazardous materials have been used
in the generating plants and transmission/distribution facilities.
Substantial costs to store and dispose of hazardous materials have been
incurred. Significant additional costs could be incurred in the future to
meet the requirements of new laws and regulations and to clean up disposal
sites under existing legislation. Management has no knowledge of any
material clean up costs related to the Company's past disposal of hazardous
and non-hazardous materials.
5. RELATED PARTY TRANSACTIONS:
Benefits and costs of the System's generating plants are shared by members
of the Power Pool. Under terms of the System Interconnection Agreement,
capacity charges and credits are designed to allocate the cost of the
System's capacity among the Power Pool members based on their relative peak
demands and generating reserves. Power Pool members are also compensated for
the out-of-pocket costs of energy delivered to the Power Pool and charged for
energy received from the Power Pool.
Operating revenues include $32.3 million in 1994, $33.4 million in 1993
and $22.2 million in 1992 for energy supplied to the Power Pool.
Charges for Power Pool capacity reservation and energy received were
included in purchased power expense as follows:
Year Ended December 31,
1994 1993 1992
(in thousands)
Capacity Charges $138,517 $111,335 $112,113
Energy Charges 147,655 182,205 152,585
Total $286,172 $293,540 $264,698
Power Pool members share in wholesale sales to unaffiliated utilities made
by the Power Pool. The Company's share of the Power Pool's wholesale sales
included in operating revenues were $103.8 million in 1994, $96.7 million in
1993 and $76.1 million in 1992.
In addition, the Power Pool purchases power from unaffiliated companies
for immediate resale to other unaffiliated utilities. The Company's share of
these purchases was included in purchased power expense and totaled $27.5
million in 1994, $9 million in 1993 and $11.3 million in 1992. Revenues
from these transactions are included in the above Power Pool wholesale
operating revenues.
Energy sold directly to Kingsport Power Company, an affiliated
distribution utility that is not a member of the Power Pool, was included in
operating revenues in the amounts of $61.1 million in 1994, $61.8 million in
1993 and $58.8 million in 1992.
Purchased power expense includes $2.1 million in 1994, $7.8 million in 1993
and $6.1 million in 1992 of energy bought from the Ohio Valley Electric
Corporation, an affiliated company that is not a member of the Power Pool.
AEP System companies participate in a transmission equalization
agreement. This agreement combines certain AEP System companies' investments
in transmission facilities and shares the costs of ownership in proportion to
the System companies' respective peak demands. Pursuant to the terms of the
agreement, other operation expense includes equalization charges of $10.2
million, $3.2 million and $8 million in 1994, 1993 and 1992, respectively.
The Company and an affiliate, Ohio Power Company, jointly own certain
facilities at two power plants. The costs of operating these facilities are
apportioned between the owners based on ownership interests. The Company's
share of these costs is included in the appropriate expense accounts on the
Consolidated Statement of Income.
American Electric Power Service Corporation (AEPSC) provides certain
managerial and professional services to AEP System companies. The costs of
the services are billed by AEPSC on a direct-charge basis, to the extent
practicable, and on reasonable bases of proration for indirect costs. The
charges for services are made at cost and include no compensation for the use
of equity capital, which is furnished to AEPSC by AEP Co., Inc. Billings
from AEPSC are capitalized or expensed depending on the nature of the
services rendered. AEPSC and its billings are subject to the regulation of
the SEC under the 1935 Act.
6. BENEFIT PLANS:
The Company and its subsidiaries participate in the AEP System pension
plan, a trusteed, noncontributory defined benefit plan covering all employees
meeting eligibility requirements. Benefits are based on service years and
compensation levels. Pension costs are allocated by first charging each
System company with its service cost and then allocating the remaining
pension cost in proportion to its share of the projected benefit obligation.
The funding policy is to make annual trust fund contributions equal to the
net periodic pension cost up to the maximum amount deductible for federal
income taxes, but not less than the minimum contribution required by the
Employee Retirement Income Security Act of 1974.
Net pension costs for the years ended December 31, 1994, 1993 and 1992
were $5.3 million, $5.1 million and $6.4 million, respectively.
An employee savings plan is offered which allows participants to
contribute up to 17% of their salaries into three investment alternatives,
including AEP Co., Inc. common stock. An employer matching contribution,
equaling one-half of the employees' contribution to the plan up to a maximum
of 3% of the employees' base salary, is invested in AEP Co., Inc. common
stock. The Company's annual contribution totaled $4.2 million in 1994, $3.9
million in 1993 and $3.7 million in 1992.
Certain other benefits are provided for retired employees under an AEP
System other postretirement benefit plan. Substantially all employees are
eligible for postretirement health care and life insurance if they have at
least 10 service years and are age 55 at retirement. Prior to 1993, net
costs of these benefits were recognized as an expense when paid and totaled
$5.3 million in 1992.
SFAS 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, was adopted in January 1993 for the Company's aggregate liability
for postretirement benefits other than pensions (OPEB). SFAS 106 requires
the accrual during the employee's service years of the present value
liability for OPEB costs. Costs for the accumulated postretirement benefits
earned and not recognized at adoption are being recognized, in accordance
with SFAS 106, as a transition obligation over 20 years. OPEB costs are
determined by the application of AEP System actuarial assumptions to each
operating company's employee complement. The Company's annual accrued costs
for employees and retirees OPEBs required by SFAS 106, which includes the
recognition of one-twentieth of the prior service transition obligation, were
$19.4 million in 1994 and $18.6 million in 1993.
In order to fund OPEB benefits the Company established a Voluntary
Employees Beneficiary Association (VEBA) trust fund and a corporate owned
life insurance (COLI) program. The insur-ance policies have a substantial
cash surrender value which is recorded, net of equally substantial policy
loans, as other property and investments. The amount contributed to the VEBA
trust fund is the difference between the pay-as-you-go OPEB cost and SFAS 106
total OPEB cost. This contribution is funded by amounts collected from
ratepayers plus net earnings from the COLI program. Contributions to the
VEBA trust fund were $11.6 million in 1994 and $5.6 million in 1993.
<PAGE>
<TABLE>
7. FEDERAL INCOME TAXES:
The details of federal income taxes as reported are as follows:
<CAPTION>
Year Ended December 31,
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Charged (Credited) to Operating
Expenses (net):
Current $28,779 $61,988 $21,991
Deferred 19,763 (4,664) 27,808
Deferred Investment Tax Credits (2,781) (2,770) (2,530)
Total 45,761 54,554 47,269
Charged (Credited) to
Nonoperating Income (net):
Current (1,043) 995 (10)
Deferred (2,408) (1,170) 1,324
Deferred Investment Tax Credits (2,711) (2,698) (2,566)
Total (6,162) (2,873) (1,252)
Total Federal Income Taxes as Reported $39,599 $51,681 $46,017
</TABLE>
The following is a reconciliation of the difference between the amount of
federal income taxes computed by multiplying book income before federal
income taxes by the statutory tax rate, and the amount of federal income
taxes reported.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Net Income $102,345 $125,132 $131,419
Federal Income Taxes 39,599 51,681 46,017
Pre-tax Book Income $141,944 $176,813 $177,436
Federal Income Taxes on Pre-tax
Book Income at Statutory Rate
(35% in 1994 and 1993; 34% in 1992) $ 49,680 $ 61,885 $ 60,328
Increase (Decrease) in Federal
Income Taxes Resulting From the
Following Items:
Depreciation 11,103 8,912 6,866
Corporate Owned Life Insurance (5,050) (6,170) (6,181)
Removal Costs (4,200) (4,742) (4,145)
Percentage Repair Allowance (2,813) (3,444) (3,307)
Federal Income Tax Accrual
Adjustments (3,100) (2,000) -
Investment Tax Credits (net) (5,492) (5,468) (5,495)
Other (529) 2,708 (2,049)
Total Federal Income Taxes
as Reported $ 39,599 $ 51,681 $ 46,017
Effective Federal Income Tax Rate 27.9% 29.2% 25.9%
</TABLE>
<PAGE>
The following tables show the elements of the net deferred tax liability
and the significant temporary differences that gave rise to it:
December 31,
1994 1993
(in thousands)
Deferred Tax Assets $ 98,501 $ 98,440
Deferred Tax Liabilities (693,854) (677,388)
Net Deferred Tax Liabilities $(595,353) $(578,948)
Property Related Temporary
Differences $(472,597) $(463,249)
Amounts Due From Customers For
Future Federal Income Taxes (111,706) (112,056)
All Other (net) (11,050) (3,643)
Total Net Deferred
Tax Liabilities $(595,353) $(578,948)
The Company and its subsidiaries join in the filing of a consolidated
federal income tax return with their affiliated companies in the AEP System.
The allocation of the AEP System's current consolidated federal income tax to
the System companies is in accordance with SEC rules under the 1935 Act.
These rules permit the allocation of the benefit of current tax losses to the
System companies giving rise to them in determining their current tax
expense. The tax loss of the System parent company, AEP Co., Inc., is
allocated to its subsidiaries with taxable income. With the exception of the
loss of the parent company, the method of allocation approximates a separate
return result for each company in the consolidated group.
The AEP System has settled with the Internal Revenue Service (IRS) all
issues from the audits of the consolidated federal income tax returns for the
years prior to 1988. Returns for the years 1988 through 1990 are presently
being audited by the IRS. In the opinion of management, the final settlement
of open years will not have a material effect on results of operations.
8. LEASES:
Leases of property, plant and equipment are for periods up to 30 years
and require payments of related property taxes, maintenance and operating
costs. The majority of the leases have purchase or renewal options and will
be renewed or replaced by other leases.
Lease rentals are primarily charged to operating expenses in accordance
with rate-making treatment. The components of rental costs are as follows:
Year Ended December 31,
1994 1993 1992
(in thousands)
Operating Leases $ 9,490 $11,068 $11,526
Amortization of
Capital Leases 8,878 5,186 4,790
Interest on Capital Leases 4,585 4,165 2,886
Total Rental Cost $22,953 $20,419 $19,202
<PAGE>
Properties under capital leases and related obligations recorded on the
Consolidated Balance Sheets are as follows:
December 31,
1994 1993
(in thousands)
Electric Utility Plant:
Production $ 9,180 $ 7,559
Transmission 34 34
General 59,748 42,204
Total Electric Utility Plant 68,962 49,797
Accumulated Amortization 25,824 19,824
Net Properties under
Capital Leases $43,138 $29,973
Capital Lease Obligations:
Noncurrent Liability $32,984 $24,288
Liability Due Within One Year 10,154 5,685
Total Capital Lease Obligations $43,138 $29,973
Properties under operating leases and related
obligations are not included in the Consolidated
Balance Sheets.
Future minimum lease payments consisted of the
following at December 31, 1994:
Non-
Cancelable
Capital Operating
Leases Leases
(in thousands)
1995 $13,773 $ 4,707
1996 10,532 4,494
1997 10,855 3,917
1998 7,179 2,618
1999 6,984 2,111
Later Years 19,946 11,941
Total Future Minimum Lease
Rentals 69,269 $29,788
Less Estimated Interest Element 26,131
Estimated Present Value of Future
Minimum Lease Payments $43,138
<PAGE>
9. CUMULATIVE PREFERRED STOCK:
The authorized shares of no par value cumulative preferred stock is
8,000,000 shares. The aggregate involuntary liquidation price for all shares
of cumulative preferred stock may not exceed $300 million. The unissued
shares of the cumulative preferred stock may or may not possess mandatory
redemption characteristics upon issuance.
The cumulative preferred stock is callable at the price indicated plus
accrued dividends. The involuntary liquidation preference is $100 per share.
During 1993 the Company redeemed and cancelled the following entire series:
300,000 shares of 8.12% series; 200,000 shares of 8.52% series; 570,000
shares of 9% series; and 32,900 shares of $2.65 series. In 1992 the Company
redeemed and cancelled 30,000 shares of the 9% series and 160,000 shares of
the $2.65 series.
<TABLE>
Cumulative Preferred Stock Not Subject to Mandatory Redemption:
<CAPTION>
Call Price Shares Amount
December 31, Outstanding December 31,
Series 1994 December 31, 1994 1994 1993
(in thousands)
<S> <C> <C> <C> <C>
4-1/2% $110.00 300,000 $30,000 $30,000
7.40% 102.11 250,000 25,000 25,000
$55,000 $55,000
Cumulative Preferred Stock Subject to Mandatory Redemption:
<CAPTION>
Call Price Shares Amount
December 31, Number of Shares Redeemed Outstanding December 31,
Series(a) 1994 Year Ended December 31, December 31, 1994 1994 1993
1994 1993 1992 (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
4.50% (b) $102.00 1,517 1,507 1,526 3,848 $ 385 $ 537
7.80% (c) 107.80 - - - 500,000 50,000 50,000
5.90% (d) (g) - - N/A 500,000 50,000 50,000
5.92% (e) (g) - - N/A 600,000 60,000 60,000
6.85% (f) (h) - N/A N/A 300,000 30,000 -
$190,385 $160,537
N/A - Not applicable, shares were issued in a subsequent year.
(a) The sinking fund provisions of series subject to mandatory redemption
aggregate $85,000 in 1995, $150,000 in 1996,
$85,000 in 1997, $2,500,000 in 1998 and $2,500,000 in 1999.
(b) A sinking fund for the 4.50% cumulative preferred stock requires the
purchase or redemption of 1,500 shares at $100 a share on or before
November 30 in each year. In anticipation of future sinking fund
requirements, 652 shares have been reacquired as of December 31, 1994.
Unless all sinking fund provisions for this series have been made, no
distribution may be made on the common stock.
(c) Commencing in 1998, a sinking fund for the 7.80% cumulative preferred
stock will require the redemption of 25,000 shares at $100 a share on or
before May 1 in each year. The Company has the non-cumulative option to
redeem up to 25,000 additional shares on any sinking fund date at a
redemption price of $100 per share.
(d) Shares issued November 1993. Commencing in 2003 and continuing
through the year 2007, a sinking fund for the 5.90% cumulative preferred
stock will require the redemption of 25,000 shares each year and the
redemption of the remaining outstanding shares on November 1, 2008, in
each case at $100 per share.
(e) Shares issued October 1993. Commencing in 2003 and continuing
through the year 2007, a sinking fund for the 5.92% cumulative preferred
stock will require the redemption of 30,000 shares each year and the
redemption of the remaining shares outstanding on November 1, 2008, in
each case at $100 per share.
(f) Shares issued June 1994. Commencing in 2000 and continuing through
date of redemption, a sinking fund for the 6.85% cumulative perferred
stock will require the redemption of 60,000 shares each year, in each
case at $100 per share.
The Company has the non-cumulative option to redeem up to 60,000
additional shares on any sinking fund date at a redemption price of $100
per share.
(g) Not callable until after 2002.
(h) Not callable until after 1999.
/TABLE
<PAGE>
10. LONG-TERM DEBT AND LINES OF CREDIT:
Long-term debt by major category was outstanding as follows:
December 31,
1994 1993
(in thousands)
First Mortgage Bonds $ 987,949 $ 974,310
Installment Purchase
Contracts 233,706 233,537
Sinking Fund Debentures 7,256 7,260
Other Long-term Debt - 61
1,228,911 1,215,168
Less Portion Due Within
One Year - 44
Total $1,228,911 $1,215,124
First mortgage bonds outstanding were as follows:
December 31,
1994 1993
(in thousands)
% Rate Due
7-1/2 1998 - December 1 $ 45,000 $ 45,000
7.00 1999 - December 1 30,000 30,000
7-5/8 2002 - February 1 43,350 43,350
7.95 2002 - March 1 60,000 60,000
7.38 2002 - August 15 50,000 50,000
7-1/2 2002 - December 1 59,760 59,760
7.40 2002 - December 1 30,000 30,000
6.65 2003 - May 1 40,000 40,000
6.85 2003 - June 1 30,000 30,000
6.00 2003 - November 1 30,000 30,000
7.70 2004 - September 1 21,000 -
7.85 2004 - November 1 50,000 -
8-3/4 2017 - February 1 - 56,686
9-1/8 2019 - November 1 47,000 47,500
9-7/8 2020 - December 1 47,500 48,000
9.35 2021 - August 1 50,000 50,000
8.75 2022 - February 1 50,000 50,000
8.70 2022 - May 22 40,000 40,000
8.43 2022 - June 1 50,000 50,000
8.50 2022 - December 1 70,000 70,000
7.80 2023 - May 1 40,000 40,000
7.90 2023 - June 1 30,000 30,000
7.15 2023 - November 1 30,000 30,000
7.125 2024 - May 1 50,000 50,000
Unamortized Discount (net) (5,661) (5,986)
Total $987,949 $974,310
Certain indentures relating to the first mortgage bonds contain
improvement, maintenance and replacement provisions requiring the deposit of
cash or bonds with the trustee, or in lieu thereof, certification of unfunded
property additions.
<PAGE>
Installment purchase contracts have been entered into, in connection with
the issuance of pollution control revenue bonds by governmental authorities
as follows:
% Rate Due December 31,
1994 1993
(in thousands)
Industrial Development Authority of
Russell County, Virginia:
7-1/4% 1998 - November 1 $ 19,500 $ 19,500
7.70% 2007 - November 1 17,500 17,500
Putnam County, West Virginia:
5.45% 2019 - June 1 40,000 40,000
6.60% 2019 - July 1 30,000 30,000
Mason County, West Virginia:
7-7/8% 2013 - November 1 10,000 10,000
7.40% 2014 - January 1 30,000 30,000
6.85% 2022 - June 1 40,000 40,000
6.60% 2022 - October 1 50,000 50,000
Unamortized Discount (3,294) (3,463)
Total $233,706 $233,537
Under the terms of the installment purchase contracts, the Company is
required to pay amounts sufficient to enable the payment of interest on and
the principal (at stated maturities and upon mandatory redemptions) of
related pollution control revenue bonds issued to finance the construction of
pollution control facilities at certain plants.
Sinking fund debentures outstanding were as follows:
December 31,
1994 1993
(in thousands)
6% due 1996 - March 1 $7,251 $7,251
Unamortized Premium 5 9
Total $7,256 $7,260
Prior to December 31, 1994 sufficient principal amounts of debentures had
been reacquired in anticipation of all future sinking fund requirements. The
Company may elect to redeem additional amounts of debentures up to $600,000
annually.
At December 31, 1994, annual long-term debt payments, excluding premium
or discount, are as follows:
Principal Amount
(in thousands)
1995 $ -
1996 7,251
1997 -
1998 64,500
1999 30,000
Later Years 1,136,110
Total $1,237,861
Short-term debt borrowings are limited by provisions of the 1935 Act to
$250 million and further limited by charter provisions to $213 million.
Lines of credit are shared with other AEP System companies and at
December 31, 1994 and 1993 were available in the amounts of $558 million
and $537 million, respectively.
Commitment fees of approximately 3/16 of 1% of the unused
short-term line of credit are paid each year to the banks to maintain the
lines of credit. Outstanding short-term debt consisted of:
Balance Weighted
Outstanding Average
(in thousands) Interest Rate
December 31, 1994:
Notes Payable $ 2,425 6.3%
Commercial Paper 120,400 6.2
Total $122,825 6.2
December 31, 1993:
Notes Payable $ 3,400 3.6%
Commercial Paper 36,100 3.4
Total $39,500 3.4
11. COMMON SHAREOWNER'S EQUITY:
The Company received from AEP Co., Inc. cash capital contributions of $10
million and $15 million in 1994 and 1993, respectively, which were credited
to paid-in capital. In 1994, 1993 and 1992 charges to paid-in capital of
$426,000, $1,217,000 and $598,000, respectively, represented issuance
expenses of cumulative preferred stock.
There were no other material transactions
affecting common stock and paid-in capital accounts in 1994, 1993 and 1992.
Mortgage indentures, debentures, charter provisions and orders of
regulatory authorities place various restrictions on the use of retained
earnings for the payment of cash dividends on common stock. At December 31,
1994, $37 million of retained earnings were restricted. To pay dividends out
of paid-in capital, the Company needs regulatory approval.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
short-term debt and accounts payable approximate fair value because of the
short-term maturity of these instruments. At December 31, 1994 and 1993 fair
values for preferred stock subject to mandatory redemption were $169 million
and $163 million and for long-term debt were $1,157 million and $1,310
million, respectively. The carrying amounts for preferred stock subject to
mandatory redemption were $190 million and $160 million and for long-term
debt were $1,229 million and $1,215 million at December 31, 1994 and 1993,
respectively. Fair values are based on quoted market prices for the same or
similar issues and the current dividend or interest rates offered for
instruments of the same remaining maturities.
13. SUPPLEMENTARY INFORMATION:
Year Ended December 31,
1994 1993 1992
(in thousands)
Cash was paid for:
Interest (net of
capitalized amounts) $96,667 $103,387 $109,037
Income Taxes 48,872 62,305 41,811
Noncash Acquisitions Under
Capital Leases were 22,883 11,403 9,736
14. UNAUDITED QUARTERLY FINANCIAL INFORMATION:
Quarterly Periods Operating Operating Net
Ended Revenues Income Income
1994
March 31 $438,095 $59,942 $32,532
June 30 369,862 48,662 24,008
September 30 371,842 50,846 25,731
December 31 355,701 45,768 20,074
1993
March 31 393,036 67,747 41,554
June 30 340,617 44,873 18,428
September 30 393,671 56,651 31,941
December 31 391,780 60,069 33,209
Net income for fourth quarter 1994 and 1993 includes favorable federal
income tax accrual adjustments of $3.1 million and $2 million, respectively,
related to the resolution of various issues with the IRS.
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-50229 of Appalachian Power Company on Form S-3
of our reports dated February 21, 1995, appearing in and
incorporated by reference in this Annual Report on Form 10-K of
Appalachian Power Company for the year ended December 31, 1994.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Columbus, Ohio
March 28, 1995
/PAGE
<PAGE>
<PAGE>
Exhibit 24
POWER OF ATTORNEY
APPALACHIAN POWER COMPANY
Annual Report on Form lO-K for the Fiscal Year Ended
December 31, 1994
The undersigned directors of APPALACHIAN POWER COMPANY, a
Virginia corporation (the "Company"), do hereby constitute and
appoint E. LINN DRAPER, JR., G. P. MALONEY and P. J. DeMARIA, and
each of them, their attorneys-in-fact and agents, to execute for
them, and in their names, and in any and all of their capacities,
the Annual Report of the Company on Form lO-K, pursuant to
Section 13 of the Securities Exchange Act of 1934, for the fiscal
year ended December 31, 1994, and any and all amendments thereto,
and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform every act and thing required or necessary to be done, as
fully to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have signed these
presents this 22nd day of February, 1995.
/s/ P. J. DeMaria /s/ Wm. J. Lhota
P. J. DeMaria Wm. J. Lhota
/s/ E. Linn Draper, Jr. /s/ G. P. Maloney
E. Linn Draper, Jr. G. P. Maloney
/s/ Henry W. Fayne /s/ James J. Markowsky
Henry W. Fayne James J. Markowsky
/s/ Luke M. Feck /s/ J. H. Vipperman
Luke M. Feck J. H. Vipperman
/PAGE
<PAGE>
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<ARTICLE> UT
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<NAME> APPALACHIAN POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,770,875
<OTHER-PROPERTY-AND-INVEST> 48,928
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<OTHER-ASSETS> 403,906
<TOTAL-ASSETS> 3,584,488
<COMMON> 260,458
<CAPITAL-SURPLUS-PAID-IN> 504,408
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<TOTAL-COMMON-STOCKHOLDERS-EQ> 971,227
190,300
55,000
<LONG-TERM-DEBT-NET> 1,228,911
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85
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<TOT-CAPITALIZATION-AND-LIAB> 3,584,488
<GROSS-OPERATING-REVENUE> 1,535,500
<INCOME-TAX-EXPENSE> 51,672
<OTHER-OPERATING-EXPENSES> 1,278,610
<TOTAL-OPERATING-EXPENSES> 1,330,282
<OPERATING-INCOME-LOSS> 205,218
<OTHER-INCOME-NET> (4,716)
<INCOME-BEFORE-INTEREST-EXPEN> 200,502
<TOTAL-INTEREST-EXPENSE> 98,157
<NET-INCOME> 102,345
15,660
<EARNINGS-AVAILABLE-FOR-COMM> 86,685
<COMMON-STOCK-DIVIDENDS> 108,140
<TOTAL-INTEREST-ON-BONDS> 75,815
<CASH-FLOW-OPERATIONS> 218,002
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> All common stock owned by parent company; no EPS required.
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