SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Definitive Information Statement
OHIO POWER COMPANY
(Name of Registrant As Specified in Charter)
John M. Adams, Jr.
(Name of Person(s) Filing the Information Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11.
1) Title of each class of securities to which transaction
applies:______________________________________________
2) Aggregate number of securities to which transaction
applies:______________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
______________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________
1 Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________
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<PAGE>
OHIO POWER COMPANY
301 Cleveland Avenue, S.W.
Canton, Ohio 44702
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF
OHIO POWER COMPANY:
The annual meeting of the shareholders of Ohio Power Company
will be held on Tuesday, May 3, 1994, at 2:30 p.m. at the
principal office of the Company, 301 Cleveland Avenue, S.W.,
Canton, Ohio, for the following purposes:
1. To elect eight directors of the Company to hold office
for one year or until their successors are elected and
qualified;
2. To consider and act upon an amendment to the Company's
Amended Articles of Incorporation which would reclassi-
fy 1,050,000 authorized but unissued shares of the
Company's Cumulative Preferred Stock, par value $100
per share, to 1,050,000 authorized but unissued shares
of the Company's Cumulative Preferred Stock, Non-Voting
par value $100 per share; and
3. To transact such other business (none known as of the
date of this notice) as may legally come before the
meeting or any adjournment thereof.
Only holders of record of Common Stock and Cumulative
Preferred Stock, par value $100 per share, at the close of
business on March 4, 1994 are entitled to notice of and to vote
at the annual meeting.
THERE WILL BE NO SOLICITATION OF PROXIES BY THE BOARD OF
DIRECTORS OF THE COMPANY.
JOHN F. DI LORENZO, JR.,
Secretary
March 24, 1994
<PAGE>
INFORMATION STATEMENT
This information statement is being furnished in connection
with the annual meeting of shareholders of Ohio Power Company
(the "Company"), to be held on Tuesday, May 3, 1994 at 2:30 p.m.
at the principal office of the Company, 301 Cleveland Avenue,
S.W., Canton, Ohio.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
Voting at Meeting
On March 4, 1994, the date for determining shareholders
entitled to notice of and to vote at the meeting, there were
1,712,403 shares of Cumulative Preferred Stock, par value $100
per share, and 27,952,473 shares of Common Stock outstanding.
Each holder of Cumulative Preferred Stock, par value $100
per share, and each holder of Common Stock has the right to one
vote for each share standing in such holder's name on the books
of the Company at the close of business on March 4, 1994 for the
election of directors and on any other business which may come
before the meeting. Holders of Cumulative Preferred Stock, $25
non-voting of the par value $25 per share, and Cumulative
Preferred Stock, $100 non-voting of the par value of $100 per
share, are not entitled to notice of, or to vote at, the meeting.
If notice in writing is given by any shareholder to the
President, any Vice President, or the Secretary of the Company,
not less than 48 hours before the time fixed for the meeting,
that such shareholder desires that the voting at the meeting for
directors shall be cumulative, and if an announcement of the
giving of such notice is made upon the convening of the meeting
by the Chairman or Secretary or by or on behalf of the sharehold-
er giving such notice, each shareholder will have the right to
cumulate such voting power as he possesses and to give one
candidate as many votes as the number of directors to be elected,
multiplied by the number of his votes, or to distribute his votes
on the same principle among two or more candidates, as he sees
fit.
Principal Shareholders
American Electric Power Company, Inc. ("AEP"), 1 Riverside
Plaza, Columbus, Ohio 43215, a registered public utility holding
company under the Public Utility Holding Company Act of 1935,
owns all of the Company's outstanding Common Stock. The Common
Stock represents approximately 94% of the combined voting power
of the capital stock of the Company entitled to vote at the
meeting. Aetna Life and Casualty Company, 151 Farmington Avenue,
Hartford Connecticut 06156, has reported that it is the
beneficial owner of 40,800 shares of the Company's Cumulative
Preferred Stock, par value $100 per share, 7.60% Series, which
constitutes 11.6% of such Series and 2.4% of the voting power of
all Cumulative Preferred Stock and The Colonial Group, Inc.,
Colonial Management Associates, Inc. and John A. McNeice, Jr.,
One Financial Center, Boston, Massachusetts 02111, have reported
that they jointly beneficially own 30,000 shares of the Company's
Cumulative Preferred Stock, par value $100 per share, 7-6/10%
Series, which constitutes 8.6% of such Series and 1.9% of the
voting power of all Cumulative Preferred Stock. Other than such
<PAGE>
ownership, the management of the Company does not know of any
person (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) who beneficially
owns more than 5% of the outstanding shares of Cumulative
Preferred Stock, par value $100 per share.
AEP also owns, directly or indirectly, all of the common
stock of the other companies which constitute the American
Electric Power System (the "AEP System"). The AEP System is an
integrated electric utility system and, as a result, the member
companies of the AEP System, including the Company, 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 electrici-
ty; sales, transportation and handling of fuel; sales or rentals
of property; and interest or dividend payments on the securities
held by the companies' respective parents. American Electric
Power Service Corporation (the "Service Corporation"), a wholly-
owned subsidiary of AEP, renders management, advisory, engineer-
ing and other similar services at cost to the principal operating
companies of the AEP System, including the Company.
ELECTION OF DIRECTORS
Eight directors are to be elected to hold office for one
year or until their successors are elected and qualify. The
Company has been informed that AEP will nominate, and cast the
votes of all of the outstanding shares of Common Stock for, the
persons named below. In the event that any of such persons
should unexpectedly be unable to stand for election, AEP has
informed the Company that it will cast its votes for a substitute
chosen by the Board of Directors of the Company and approved by
AEP.
The following brief biographies of the nominees include
their ages as of March 15, 1994, an account of their business
experience and the names of certain publicly-held corporations of
which they are also directors.
<TABLE>
<CAPTION>Name Age Business Experience
<S> <C> <C>
PETER J. DEMARIA 59 Vice president and treasurer
of the Company, treasurer of
AEP and executive vice pres-
ident-administration and
chief accounting officer of
the Service Corporation.
Joined the Service Corpora-
tion in 1959, became an
assistant treasurer in 1969,
assistant vice president in
1971, vice president in
1974, treasurer and senior
vice president in 1978 and
assumed his present posi-
tions with AEP in 1978 and
the Service Corporation in
1984. Has been a director
and treasurer of the Company
since 1978 and a vice presi-
dent since 1991. A director
of AEP and certain other AEP
System companies.
A. JOSEPH DOWD 64 Vice President of the Compa-
ny, secretary of AEP and
senior vice president and
general counsel of the Ser-
vice Corporation. Joined
the Service Corporation in
1962, became a vice presi-
dent and its general counsel
in 1973, and secretary of
AEP in 1974. Assumed his
present positions with the
Service Corporation in 1975.
Has been a director and vice
president of the Company
since 1977. A director of
AEP and certain other AEP
System companies.
E. LINN DRAPER, JR. 52 Chairman of the board and
chief executive officer of
the Company, chairman of the
board, president and chief
executive officer of AEP and
the Service Corporation.
Joined the Service Corpora-
tion in 1992 as president
and chief operating officer
and assumed his present
position in 1993. President
of AEP from 1992 until as-
suming his present position
in 1993. From 1987 until
1992 was chairman of the
board, president and chief
executive officer of Gulf
States Utilities Company, an
unaffiliated electric utili-
ty. A director of the Com-
pany, AEP, certain other AEP
System companies and Pacific
Nuclear Systems, Inc.
CARL A. ERIKSON 43 President and chief operat-
ing officer of the Company.
Joined the Service Corpora-
tion in 1979, was assistant
to the executive vice presi-
dent-operations from 1989
until 1990 and vice presi-
dent of the Company from
1990 until 1992 when he
became vice president of the
Service Corporation and
executive assistant to the
President. Became president
and chief operating officer
and a director of the Compa-
ny and Columbus Southern
Power Company ("CSPCo"),
another subsidiary of AEP,
in 1993.
HENRY W. FAYNE 47 Senior vice president and
controller of the Service
Corporation. Joined the
Service Corporation in 1974,
became assistant controller
in 1978, controller in 1984,
vice president and control-
ler in 1988 and assumed his
present position in January
1993. A director of certain
other AEP System companies.
WILLIAM J. LHOTA 54 Vice president of the Compa-
ny and executive vice presi-
dent of the Service Corpora-
tion. Joined the Company in
1965, was president of CSPCo
from 1987 until 1989 when he
became executive vice presi-
dent-operations of the Ser-
vice Corporation. He as-
sumed his present position
with the Service Corporation
in 1993. Has been a vice
president and director of
the Company since 1989. A
director of certain other
AEP System companies and
Huntington Bancshares Incor-
porated.
G. P. MALONEY 61 Vice president of the Compa-
ny and of AEP and executive
vice president-chief finan-
cial officer of the Service
Corporation. Joined the
Service Corporation in 1955,
became its controller in
1965, vice president-finance
in 1970, senior vice presi-
dent-finance in 1974 and
assumed his present position
with the Service Corporation
in 1991. Became vice presi-
dent of the Company in 1970
and vice president of AEP in
1974. Has been a director
of the Company since 1973.
A director of AEP and cer-
tain other AEP System compa-
nies.
JAMES J. MARKOWSKY 49 Executive vice president-
engineering and construction
of the Service Corporation.
Joined the Service Corpora-
tion in 1971 as a senior
engineer, became assistant
vice president-mechanical
engineering in 1984, senior
vice president and chief
engineer in 1988 and assumed
his present position in
1993. Has been a director
of the Company since 1989.
A director of certain other
AEP System companies.
</TABLE>
Messrs. DeMaria, Dowd, Draper, Lhota and Maloney are
directors of Appalachian Power Company ("Appalachian"), CSPCo,
Indiana Michigan Power Company ("I&M") and Kentucky Power Company
("Kentucky"), all of which are subsidiaries of AEP and have one
or more classes of publicly held preferred stock or debt
securities. Mr. Fayne is a director of CSPCo and Mr. Markowsky
is a director of Appalachian and CSPCo. Messrs. DeMaria, Dowd,
Draper, Fayne, Lhota, Maloney and Markowsky are also directors of
AEP Generating Company, another subsidiary of AEP.
PROPOSED AMENDMENT TO AMENDED ARTICLES OF INCORPORATION
Article Fourth of the Company's Amended Articles of
Incorporation, as amended, provides that the Company is
authorized to issue and have outstanding a total of 47,762,403
shares of capital stock divided in four classes as follows:
40,000,000 shares of Common Stock without par value;
2,762,403 shares of Cumulative Preferred Stock of the par
value of $100 each (the "$100 Voting Preferred");
1,000,000 shares of Cumulative Preferred Stock, $100 Non-
Voting, of the par value of $100 each (the "$100 Non-Voting
Preferred"); and
4,000,000 shares of Cumulative Preferred Stock, $25 Non-
Voting, of the par value of $25 each (the $25 Non-Voting
Preferred").
The Company currently has issued and outstanding 1,712,403 shares
of the $100 Voting Preferred, 700,000 shares of the $100 Non-
Voting Preferred and no shares of the $25 Non-Voting Preferred.
Subject to approval by the shareowners, the Company proposes
to amend Article Fourth to reclassify 1,050,000 authorized but
unissued shares of $100 Voting Preferred to 1,050,000 authorized
but unissued shares of $100 Non-Voting Preferred. As a result,
the total authorized shares of $100 Voting Preferred would be
1,712,403 and the total authorized shares of $100 Non-Voting
Preferred would be 2,050,000.
The reclassification of the unissued shares of $100 Voting
Preferred will not affect in any way the dividend, voting and
other rights of the shares of $100 Voting Preferred or $100 Non-
Voting Preferred that are now issued and outstanding.
The classes of $100 Voting Preferred shares and $100 Non-
Voting Preferred shares now authorized are of equal rank and
confer equal rights upon the holders thereof, except as to the
voting rights of the respective classes and permissible
variations among the series of each class. Unlike the holders of
shares of $100 Voting Preferred, who are entitled to vote for the
election of directors of the Company and upon all other matters
submitted to the shareholders, the holders of shares of $100 Non-
Voting Preferred are not entitled to vote, except in proceedings
as to which their vote is required by Ohio law and in the case of
certain other events specified in the Amended Articles of
Incorporation.
The Company has proposed the amendment because since the
classes of $100 Non-Voting Preferred and $25 Non-Voting Preferred
were authorized in 1977, management has believed that to the
extent possible it would be appropriate to issue only non-voting
shares of Cumulative Preferred Stock. As a result of the
issuance of 700,000 shares of $100 Non-Voting Preferred in 1993,
the Company has only 300,000 authorized but unissued shares of
$100 Non-Voting Preferred. The proposed amendment would provide
the Company with an additional 1,050,000 authorized but unissued
shares of $100 Non-Voting Preferred and so permit the Company to
issue additional shares of $100 Non-Voting Preferred.
The proposed amendment must be approved by the affirmative
vote of holders of more than two-thirds of the outstanding shares
of Common Stock and outstanding shares of $100 Voting Preferred,
voting together as a single class. AEP, the owner of all of the
Company's outstanding Common Stock, has indicated that it intends
to vote all of such shares in favor of the amendment. If
approved by the necessary vote of shareholders, the proposed
amendment will become effective when it is certified by the
appropriate officers of the Company and filed with the Secretary
of State of Ohio.
OTHER BUSINESS
Management does not intend to bring any matters before the
meeting other than the election of directors and does not know of
any matters that will be brought before the meeting by others.
EXECUTIVE COMPENSATION
Certain executive officers of the Company are employees of
the Service Corporation. The salaries of these executive
officers are paid by the Service Corporation and a portion of
their salaries has been allocated and charged to the Company.
The following table shows for 1993, 1992 and 1991 the compensa-
tion earned from all AEP System companies by (i) the chief
executive officer and four other most highly compensated
executive officers (as defined by regulations of the Securities
and Exchange Commission) of the Company at December 31, 1993 and
(ii) a chief executive officer and executive officer, both of
whom retired in 1993.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION> Annual Compensation
All Other
Name and Principal Position Salary Bonus Compensation
<S> Year ($) ($)(1) ($)(2)
<C> <C> <C> <C>
E. Linn Draper, Jr. - Chairman of the 1993 538,333 148,742 18,180
board and chief executive officer of 1992 395,833 8,730 63,700
the Company; chairman of the board,
president and chief executive officer
of AEP and the Service Corporation;
chairman of the board and chief execu-
tive officer of other AEP System
companies (3)
Richard E. Disbrow - Chairman of the 1993 200,000 55,260 102,753
board and chief executive officer of 1992 600,000 13,234 17,676
the Company, AEP, the Service Corpora- 1991 540,000 86,994 17,272
tion and other AEP System companies
(3)
Peter J. DeMaria - Vice president, 1993 280,000 77,364 17,811
treasurer and director of the Company; 1992 273,000 6,021 15,576
treasurer of AEP; executive vice 1991 258,000 41,564 14,987
president-administration and chief
accounting officer and director of the
Service Corporation; vice president,
treasurer and director of other AEP
System companies
John E. Katlic - Senior vice presi- 1993 279,167 74,677 45,452
dent-fuel supply and director of the 1992 325,000 6,400 9,396
Service Corporation; president, chief 1991 300,000 38,419 9,402
operating officer and director of coal
mining subsidiaries (retired October
31, 1993)
G. P. Maloney - Vice president and 1993 269,000 74,325 18,000
director of the Company; vice presi- 1992 261,000 5,757 17,036
dent of AEP and executive vice presi- 1991 246,000 39,631 16,662
dent-chief financial officer and
director of the Service Corporation;
vice president and director of other
AEP System companies
A. Joseph Dowd - Vice president and 1993 268,000 61,707 15,760
director of the Company; secretary and 1992 260,000 4,779 13,876
director of AEP and senior vice presi- 1991 245,000 32,891 14,002
dent, general counsel, assistant
secretary and director of the Service
Corporation; vice president and direc-
tor of other AEP System companies
William J. Lhota - Vice president and 1993 249,000 68,799 17,160
director of the Company; executive 1992 230,000 5,073 15,116
vice president and director of the 1991 210,000 33,831 14,385
Service Corporation; vice president
and director of other AEP System
companies
</TABLE>
____________
(1) Reflects payments under the AEP Management Incentive
Compensation Plan ("MICP") in which individuals in key
management positions with AEP System companies participate.
Amounts for 1993 are estimates but should not change
significantly. For 1991 and 1993, these amounts included
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 during the three-
year period. At December 31, 1993, the deferred amounts
(included in the above table) for Dr. Draper and Messrs.
DeMaria, Maloney, Dowd and Lhota were equivalent to 813,
746, 715, 593 and 639 units having a value of $30,177,
$27,701, $26,526, $22,020 and $23,730, respectively, based
upon a $37-1/8 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) Includes amounts contributed by AEP System companies under
the American Electric Power System Employees Savings Plan on
behalf of their employee participants. For 1993 this amount
was $7,075 for Dr. Draper and Messrs. Katlic, Maloney, Dowd
and Lhota and $6,000 for Mr. Disbrow and $7,006 for Mr.
DeMaria. The AEP System Savings Plan is available to all
employees of AEP System companies (except for employees
covered by certain collective bargaining agreements) who
have met minimum service requirements.
Includes director's fees for AEP System companies. For 1993
these fees were: Dr. Draper, $11,105; Mr. Disbrow, $3,580;
Mr. DeMaria, $10,805; Mr. Katlic, $2,300; Mr. Maloney,
$10,925; Mr. Dowd, $8,685; and Mr. Lhota, $10,085.
Includes payments of $93,173 and $36,077 for unused accrued
vacation which Messrs. Disbrow and Katlic, respectively,
received upon their retirement.
(3) Dr. Draper was elected chairman of the board and chief
executive officer of the Company and other AEP System
companies and chairman of the board, president and chief
executive officer of AEP and the Service Corporation,
succeeding Mr. Disbrow, who retired, effective April 28,
1993.
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 the Company. 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.
<TABLE>
PENSION PLAN TABLE
<CAPTION> Years of Accredited Service
Highest Average
Annual Earnings 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
$250,000 $ 58,155 $ 77,540 $ 96,925 $116,310 $135,695 $152,230
350,000 82,155 109,540 136,925 164,310 191,695 214,970
450,000 106,155 141,540 176,925 212,310 247,695 277,620
550,000 130,155 173,540 216,925 260,310 303,695 340,270
700,000 166,155 221,540 276,925 332,310 387,695 434,245
</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.
With respect to Messrs. Disbrow and Katlic, since they retired in
1993, the amounts of $600,000 and $316,944, respectively, are the
actual salaries upon which their retirement benefits are based.
Mr. Disbrow's retirement benefit was enhanced by computing his
benefit based on his 1992 base salary as described in the Human
Resources Committee Report in this proxy statement. As of
December 31, 1993, 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, 1 year; Mr. Disbrow, 39 years; Mr. DeMaria,
34 years; Mr. Katlic, 10 years; Mr. Maloney, 38 years; Mr. Dowd,
31 years; and Mr. Lhota, 29 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.
Mr. Katlic has a contract with the Service Corporation under
which the Service Corporation agrees to provide him with a
supplemental retirement annuity equal to the annual pension that
Mr. Katlic would have received with service of 30 years under the
AEP System Retirement Plan as then in effect, less his actual
annual pension entitlement under the Retirement Plan. Mr. Katlic
commenced receiving his supplemental annuity upon his retirement
effective October 31, 1993.
AEP has determined to pay supplemental retirement benefits
to 23 AEP System employees (including Messrs. Disbrow, DeMaria,
Maloney and Lhota) 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. Upon his
retirement on April 28, 1993, Mr. Disbrow began receiving an
annual supplemental benefit of $2,642. Assuming retirement of
the remaining eligible employees in 1994, 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, assuming retirement at age 65, and
annual supplemental retirement payments under the 1982 and 1986
programs for the individuals listed in the summary compensation
table.
<TABLE>
<CAPTION> 1982 Program 1986 Program
Annual Amount of Annual Amount of
Annual Supplemental Annual Supplemental
Amount Retirement Amount Retirement
Deferred Payment Deferred Payment
Name (4-Year Period) (15-Year Period) (4-Year Period) (15-Year Period)
<S> <C> <C> <C> <C>
Mr. Disbrow $15,000 $54,375 -- --
Mr. DeMaria 10,000 52,000 $13,000 $53,300
Mr. Katlic 15,000 24,500 -- --
Mr. Maloney 15,000 67,500 16,000 56,400
Mr. Dowd 10,000 34,000 10,000 25,500
</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.
AEP BOARD HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Human Resources Committee of the AEP Board of Directors
regularly reviews executive compensation policies and practices
and evaluates the performance of management in the context of the
Company's performance. The Committee is composed entirely of
independent outside directors.
The Human Resources Committee recognizes that the executive
officers are charged with managing a $15 billion, multi-state
electric utility during challenging times and with addressing
many difficult and complex issues. The Committee believes that
compensation must be competitive in order to attract, retain,
reward and motivate the highly qualified individuals needed to
manage AEP to meet corporate objectives and that it should be
closely tied to performance in order to provide incentives that
will maximize shareowner value.
Pay Mix and Measurement
Base Salary. The major component of compensation for the
executive officers is their annual salaries.
When reviewing salaries, the Committee considers external
pay practices used by other competitive electric utilities and by
industry in general. In addition, the Committee considers the
respective positions held by the executive officers, their levels
of responsibility, performance and experience, and the relation-
ship of their salaries to the salaries of other AEP managers and
employees.
For compensation comparison purposes, the Human Resources
Committee uses the electric utility companies in the S&P Electric
Utility Index. In recognition of AEP's relatively large size and
operational complexity, executive officer salary levels are
targeted to the third quartile (between the 50th and 75th
percentiles) of the range of compensation paid by the other
electric utilities in this compensation peer group. Base salary
levels in 1993 for the five most highly compensated executive
officers of AEP named in the Summary Compensation Table (who were
employed as such at the end of the year) were at about the median
of the range of the compensation peer group. In establishing
salary levels against that range, the Human Resources Committee
considers the competitiveness of AEP's entire compensation
package.
Salaries are reviewed and adjusted annually to reflect indi-
vidual and corporate performance and consistency with compensa-
tion changes within the entire Company and the compensation peer
group of other electric utilities.
The Committee meets without the presence of Dr. Draper,
chairman, president and chief executive officer of AEP, to
evaluate his performance and compensation and reports on that
evaluation to the outside directors of the Board. These
directors then act on the Committee's recommendation. Dr.
Draper's increased salary, effective May 1, 1993, reflects the
salary increase he received upon becoming chairman, president and
chief executive officer of AEP.
Mr. Disbrow, the former chairman and chief executive
officer, retired several years in advance of his normal
retirement date to facilitate the management transition. In
recognition of this, and his many years of distinguished service
with the AEP System, the Committee determined to pay his supple-
mental retirement annuity by computing such benefit on the basis
of his 1992 base salary rather than the 36 consecutive months of
his highest base salary that would have been used, as specified
in the Retirement Plan, had he retired at age 65.
Annual Incentive. A variable, performance-based portion of
the executive officers' total compensation is paid through the
Management Incentive Compensation Plan ("MICP"), which is
included in the "Bonus" column in the Summary Compensation Table.
The MICP was established (effective January 1, 1990) to motivate
and reward superior management performance in serving customer
needs and creating shareholder value. Each participant is
assigned an annual target award expressed as a percentage of
annual salary. The target award ranges from 25-30% for the
executive officers. Actual awards can vary from 0-150% of the
target award based on performance.
The MICP awards for the executive officers (except for Mr.
Katlic) are based entirely on pre-established AEP corporate
performance criteria specified in the MICP, which include return
on stockholder equity (weighted at 25%) and total investor return
reflecting stock price and payment of dividends (weighted at
25%), both measured relative to the performance of the utilities
in the S&P Electric Utility Index, and the extent to which the
average price of power sold to retail customers (weighted at 50%)
is lower as compared with other utilities in AEP's service area.
Fifty percent (50%) of Mr. Katlic's award is based on certain
fuel supply performance criteria. For 1993, the AEP corporate
performance and fuel supply performance targets were achieved to
the extent of 92.1% and 121.9%, respectively. These percentages
are estimates but should not change significantly.
To more closely align the long-term financial interests of
the executive officers with AEP's shareowners, 20% of the MICP
awards have been generally deferred for three years (although the
full amounts of the awards are shown in the Summary Compensation
Table) and treated as if they are invested in AEP Common Stock,
although no stock is actually purchased. However, for 1992, the
full amount of the MICP awards was paid in cash in view of the
small value of the deferrals that would otherwise have been
involved.
Long-Term Incentive. As a result of the Committee's review
of the competitiveness of the Company's total compensation
program for executive and other senior officers, the Committee
recommended to the Board of Directors that the Company adopt the
Performance Share Incentive Plan ("PSI Plan") to provide longer-
term, performance-driven, equity incentive award opportunities
directly related to shareowner value. An independent consulting
firm advised the Committee that 19 of the 24 S&P utilities
provide their senior officers with longer-term incentive
opportunities, in addition to annual incentives, and that the
absence of such a plan created a significant competitive
deficiency, and resulted in AEP's executive officer total
compensation being substantially below the median for the
companies in the S&P Utility Index. The AEP Board of Directors
approved the PSI Plan, subject to AEP shareowner approval at the
annual meeting and approval by the Securities and Exchange Com-
mission under the Public Utility Holding Company Act of 1935.
Performance share units earned by a participant are based on
a pre-established factor. This factor reflects, for a period of
at least three years, the relative ranking of AEP's total
shareholder return ("TSR") compared to the TSR's of the peer
group of companies comprising the S&P Electric Utility Index.
Notwithstanding AEP's TSR ranking, no performance share units are
earned unless AEP shareowners realize a positive TSR. The
Committee granted performance share units for the period
beginning January 1, 1994 and ending December 31, 1996 and
certain transition periods.
Performance share units granted for the 1994-96 performance
periods were determined based on an evaluation of long-term
incentive opportunities provided by the S&P peer companies, again
targeting the third quartile of competitive practice.
January 26, 1994 Human Resources Committee Members
Toy F. Reid, Chairman
Arthur G. Hansen
Morris Tanenbaum
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of
AEP Common Stock as of December 31, 1993 for all directors as of
the date of this Information Statement, all nominees to the Board
of Directors, each of the persons named in the Summary Compensa-
tion Table and all directors and executive officers as a group.
Unless otherwise noted, each person had sole voting and
investment power over the number of shares of AEP Common Stock
set forth across from his or her name. Fractions of shares have
been rounded to the nearest whole share. No executive officer,
director or nominee owns any shares of any series of the
Cumulative Preferred Stock of the Company.
NAME SHARES(a)
P. J. DeMaria 5,789(b)(c)
R. E. Disbrow 9,822(b)
A. J. Dowd 4,707
E. L. Draper, Jr. 951(b)
C. A. Erikson 1,854
H. W. Fayne 2,567
J. E. Katlic 2,290
W. J. Lhota 6,673(b)(c)
G. P. Maloney 4,227(b)
J. J. Markowsky 4,362(b)
All directors and
executive officers as a group (9 persons) 119,157(b)(c)
(a) The holdings of AEP Common Stock of the following
individuals include shares held by the trustee of the AEP System
Employees Savings Plan, over which they have voting power but the
investment/disposition power is subject to the terms of such
Plan: Mr. DeMaria, 2,081 shares; Mr. Disbrow, 4,027 shares; Mr.
Dowd, 4,203 shares; Dr. Draper, 836 shares; Mr. Erikson, 1,807
shares; Mr. Fayne, 2,478 shares; Mr. Katlic, 2,230 shares; Mr.
Lhota, 5,245 shares; Mr. Maloney, 2,142 shares; Dr. Markowsky,
4,281 shares; and all directors and executive officers as a
group, 25,087 shares. Messrs. Disbrow's, Dowd's and Maloney's
holdings include 85 shares each, and Messrs. DeMaria's,
Erikson's, Fayne's, Katlic's, Lhota's and Markowsky's holdings
include 83, 46, 63, 60, 60 and 66 shares, respectively, and the
holdings of all directors and executive officers as a group
include 536 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. The shares beneficially owned by the
directors and executive officers of the Company as a group and by
the individuals listed above in each case represent less than 1%
of the total number of shares of AEP Common Stock outstanding as
of December 31, 1993.
(b) Includes shares with respect to such directors,
nominees and executive officers share voting and/or investment
power as follows: Mr. DeMaria, 3,624 shares; Mr. Disbrow, 283
shares; Dr. Draper, 115 shares; Mr. Lhota, 1,368 shares; Mr.
Maloney, 2,000 shares; and Dr. Markowsky, 181 shares. Mr.
DeMaria disclaims beneficial ownership of 807 shares.
(c) Does not include 85,231 shares in the American Electric
Power System Education Trust Fund over which Messrs. DeMaria,
Lhota and Maloney share voting and investment power as trustees
(they disclaim beneficial ownership). The amount of shares shown
for all directors and executive officers as a group includes
these shares.
MEETINGS OF THE BOARD OF DIRECTORS
Regular meetings of the Board of Directors were held once
each month during the year. In addition, the Board of Directors
holds special meetings from time to time as required. During
1993, the Board held twelve regular meetings and four special
meetings. During 1993, the only director who attended fewer than
75% of the total number of meetings of the Board of Directors was
Dr. Markowsky.
Directors of the Company receive a fee of $100 for each
meeting of the Board of Directors attended in addition to their
salaries.
The Board of Directors of the Company has no committees.
INDEPENDENT AUDITORS
The public accounting firm of Deloitte & Touche has been
selected as the independent auditors of the Company for the year
1994.
A representative of Deloitte & Touche will not be present at
the meeting unless prior to the day of the meeting the Secretary
of the Company has received written notice from a stockholder
addressed to the Secretary at 1 Riverside Plaza, Columbus, Ohio
43215, that such stockholder will attend the meeting and wishes
to ask questions of a representative of the firm.
JOHN F. DI LORENZO, JR.,
Secretary
March 24, 1994
