SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
[X] 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
______________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________
5) Total fee paid:
______________________________________________________
[ ] 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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4) Date Filed:___________________________________________
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 7, 1996, at 2:30 p.m. at the principal office of American
Electric Power Service Corporation, 1 Riverside Plaza, Columbus, Ohio, for the
following purposes:
1. To elect seven directors of the Company to hold office for one year
or until their successors are elected and qualified; and
2. 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 8, 1996 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 28, 1996
<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 7, 1996 at 2:30 p.m. at the principal office of American
Electric Power Service Corporation, 1 Riverside Plaza, Columbus Ohio.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
VOTING AT MEETING
On March 8, 1996, the date for determining shareholders entitled to
notice of and to vote at the meeting, there were 862,403 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 8, 1996 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 shareholder 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 97% of the
combined voting power of the capital stock of the Company entitled to vote at
the meeting. 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 electricity; 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, engineering and other similar services at
cost to the principal operating companies of the AEP System, including the
Company.
ELECTION OF DIRECTORS
Seven 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, 1996, 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 61 Vice president and controller of the Company,
controller of AEP and executive vice president-
administration and chief accounting officer of the
Service Corporation. Joined the Service Corporation 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 position with the Service Corporation in
1984. Became treasurer of the Company in 1978 and
assumed his present position in 1995. Has been a
director of the Company since 1978 and a vice president
since 1991. Became treasurer of AEP in 1978 and
assumed his present position in 1995. A director of
AEP and certain other AEP System companies.
E. LINN DRAPER, JR. 54 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 Corporation in 1992 as president and
chief operating officer and assumed his present
position in 1993. President of AEP and vice president
and director of the Company from 1992 until assuming
his present positions in 1993. From 1987 until 1992
was chairman of the board, president and chief
executive officer of Gulf States Utilities Company, an
unaffiliated electric utility. A director of the
Company, AEP, certain other AEP System companies and
VECTRA Technologies, Inc.
HENRY W. FAYNE 49 Senior vice president-corporate planning and budgeting
of the Service Corporation. Joined the Service
Corporation in 1974, became assistant controller in
1978, controller in 1984, vice president and controller
in 1988, senior vice president in 1993 and assumed his
present position in 1995. A director of certain other
AEP System companies.
WILLIAM J. LHOTA 56 President and chief operating officer of the Company
and executive vice president of the Service
Corporation. Joined the Company in 1965, was president
of Columbus Southern Power Company, a subsidiary of
AEP, from 1987 until 1989, when he became executive
vice president-operations of the Service Corporation.
Assumed his present position with the Service
Corporation in 1993. Became a vice president of the
Company in 1989 and assumed his present position in
January, 1996. Has been a director of the Company
since 1989. A director of certain other AEP System
companies and Huntington Bancshares Incorporated.
G. P. MALONEY 63 Vice president of the Company, vice president and
secretary of AEP and executive vice president-chief
financial officer of the Service Corporation. Joined
the Service Corporation in 1955, became controller in
1965, vice president-finance in 1970, senior vice
president-finance in 1974 and assumed his present
position with the Service Corporation in 1991. Has
been a vice president of the Company since 1970 and a
director since 1973. Became a vice president of AEP in
1974 and secretary of AEP in 1994. A director of AEP
and certain other AEP System companies.
JAMES J. MARKOWSKY 51 Vice president of the Company and executive vice
president-power generation of the Service Corporation.
Joined the Service Corporation in 1971 as a senior
engineer, became assistant vice president-mechanical
engineering in 1984, senior vice president and chief
engineer in 1988, executive vice president-engineering
and construction in 1993 and assumed his present
position in February, 1996. Became a director of the
Company in 1989 and a vice president of the Company in
1995. A director of certain other AEP System
companies.
JOSEPH H. VIPPERMAN 55 Vice president of the Company and executive vice
president-energy delivery of the Service Corporation.
Joined Appalachian Power Company ("Appalachian"), a
subsidiary of AEP, in 1962, transferred to the Service
Corporation and became controller in 1978, vice
president in 1980 and executive vice president-
operations in 1984. Transferred to Appalachian as
executive vice president in 1989 and became president
in 1990. Assumed his present position with the Service
Corporation in January, 1996. Became a vice president
and a director of the Company in January, 1996.
</TABLE>
Messrs. DeMaria, Draper, Lhota, Maloney, Markowsky and Vipperman are
directors of Appalachian, Columbus Southern Power Company ("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 Appalachian and
CSPCo. Messrs. DeMaria, Draper, Fayne, Lhota, Maloney, Markowsky and Vipperman
are also directors of AEP Generating Company, another subsidiary of AEP.
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 1995, 1994 and 1993 the
compensation earned from all AEP System companies by the chief executive
officer and the four other most highly compensated executive officers (as
defined by regulations of the Securities and Exchange Commission) of the
Company at December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
<S> <C> <C> <C> <C> <C>
PAYOUTS All Other
Salary Bonus LTIP PAYOUTS($)(1) Compensation
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2)
E. LINN DRAPER, JR. - Chairman of the board 1995 685,000 236,325 334,851 30,790
and chief executive officer of the Company; 1994 620,000 209,436 137,362 29,385
chairman of the board, president and chief 1993 538,333 148,742 18,180
executive officer of AEP and the Service
Corporation; chairman of the board and chief
executive officer of other AEP System
companies
PETER J. DEMARIA - Vice president, controller 1995 330,000 113,850 143,829 20,050
and director of the Company; controller and 1994 305,000 103,029 59,032 18,750
director of AEP; executive vice president- 1993 280,000 77,364 17,811
administration and chief accounting officer
and director of the Service Corporation; vice
president, controller and director of other
AEP System companies
G. P. MALONEY - Vice president and director of 1995 330,000 113,850 141,582 20,060
the Company; vice president, secretary and 1994 300,000 101,340 58,094 19,745
director of AEP; executive vice president- 1993 269,000 74,325 18,000
chief financial officer and director of the
Service Corporation; vice president and
director of other AEP System companies
WILLIAM J. LHOTA - President, chief operating 1995 300,000 103,500 132,592 19,140
officer and director of the Company; 1994 280,000 94,584 54,409 19,185
executive vice president and director of the 1993 249,000 68,799 17,160
Service Corporation; president, chief
operating officer and director of other AEP
System companies
JAMES J. MARKOWSKY - Director of the Company; 1995 285,000 98,325 126,599 17,515
executive vice president-power generation and 1994 267,000 90,193 51,930 14,755
director of the Service Corporation; vice 1993 247,000 65,259 11,165
president and director of other AEP System
companies
</TABLE>
___________
(1) Amounts in the "Bonus" column reflect payments under the Management
Incentive Compensation Plan for performance measured for each of the years
ended December 31, 1993, 1994 and 1995. Payments are made in March of the
subsequent year. Amounts for 1995 are estimates but should not change
significantly.
Amounts in the "Long-Term Compensation" column reflect performance share
units earned under the Performance Share Incentive Plan (which became
effective January 1, 1994) for the one-year and two-year transition
performance periods ending December 31, 1994 and 1995, respectively. For
1995, their value was calculated by multiplying the $40.50 closing price of
AEP's Common Stock as reported on the New York Stock Exchange on
December 29, 1995, the last trading day of fiscal year 1995, by the number
of units earned.
See below under "Long-Term Incentive Plans - Awards in 1995" and page 10
for additional information.
(2) For 1995, 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, $16,050;
Mr. DeMaria, $5,400; Mr. Maloney, $5,400; Mr. Lhota, $4,500; and
Dr. Markowsky, $4,050; and (iii) subsidiary companies director fees:
Dr. Draper, $10,240; Mr. DeMaria, $10,150; Mr. Maloney, $10,160; Mr. Lhota,
$10,140; and Dr. Markowsky, $8,965.
LONG-TERM INCENTIVE PLANS - AWARDS IN 1995
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.
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 discussed in the Human Resources Committee
Report. 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.
<TABLE>
<CAPTION>
Performance Estimated Future Payouts of
Number of Period Until Performance Share Units Under
Performance Maturation NON-STOCK PRICE-BASED PLAN
NAME SHARE UNITS OR PAYOUT
<S> <C> <C> <C> <C> <C>
Threshold Target Maximum
(#) (#) (#)
E. L. Draper, Jr. 8,302 1995-1997 2,075 8,302 16,604
P. J. DeMaria 3,499 1995-1997 875 3,499 6,998
G. P. Maloney 3,499 1995-1997 875 3,499 6,998
W. J. Lhota 3,181 1995-1997 795 3,181 6,362
J. J. Markowsky 3,022 1995-1997 755 3,022 6,044
</TABLE>
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.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF ACCREDITED SERVICE
<S> <C> <C> <C> <C> <C> <C> <C>
HIGHEST AVERAGE
ANNUAL EARNINGS 15 20 25 30 35 40 45
$ 300,000 $ 69,930 $ 93,240 $116,550 $139,860 $163,170 $183,120 $203,070
400,000 93,930 125,240 156,550 187,860 219,170 245,770 272,370
500,000 117,930 157,240 196,550 235,860 275,170 308,420 341,670
700,000 165,930 221,240 276,550 331,860 387,170 433,720 480,270
900,000 213,930 285,240 356,550 427,860 499,170 559,020 618,870
1,100,000 261,930 349,240 436,550 523,860 611,170 684,320 757,470
</TABLE>
The amounts shown in the table are the straight life annuities payable
under the Retirement 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.
AEP maintains a supplemental retirement plan which provides for the
payment of benefits that are not payable under the Retirement Plan due
primarily to limitations imposed by Federal tax law on benefits paid by
qualified plans. The table includes supplemental retirement benefits.
Compensation upon which retirement benefits are based, for the executive
officers named in the Summary Compensation Table above, consists of the average
of the 36 consecutive months of the officer's highest aggregate salary and
Management Incentive Compensation Plan awards, shown in the "Salary" and
"Bonus" columns, respectively, of the Summary Compensation Table, out of the
officer's most recent 10 years of service. As of December 31, 1995, the number
of full years of service applicable for retirement benefit calculation purposes
for such officers were as follows: Dr. Draper, three years; Mr. DeMaria,
36 years; Mr. Maloney, 40 years; Mr. Lhota, 31years; and Dr. Markowsky,
24 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
entitlement from the Gulf States Utilities Company Trusteed Retirement Plan, a
plan sponsored by his prior employer.
AEP will pay supplemental retirement benefits to 19 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 1996 of
the executive officers named in the Summary Compensation Table, only Mr.
Maloney would be affected and his annual supplemental benefit would be $972.
AEP made available a voluntary deferred-compensation program in 1982 and
1986, which permitted certain members of AEP System management to defer receipt
of a portion of their salaries. Under this program, a participant 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 participant 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
<S> <C> <C> <C> <C>
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)
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.
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 AEP's performance. None of the
members of the Committee is or has been an officer or employee of any AEP
System company or receives remuneration from any AEP System company in any
capacity other than as a director.
The Human Resources Committee recognizes that the executive officers are
charged with managing a $16 billion, multi-state electric utility during
challenging times and with addressing many difficult and complex issues.
AEP's executive compensation program is designed to enhance shareholder
value, to support the implementation of AEP's business strategy and to improve
both corporate and personal performance. 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 compensation should be closely tied to
performance in order to provide incentives that will maximize shareholder
value. AEP's Management Incentive Compensation Plan and Performance Share
Incentive Plan, both described below, reflect the intention of the Committee to
place a significant portion of the total compensation of senior officers at
risk similar to the risk experienced by other AEP shareholders.
The Committee also has taken into account management's ability to respond
to the impact of increased competition and other significant changes in the
rapidly evolving electric utility industry. It is the Committee's opinion
that, in this ever-changing environment, Dr. Draper and the senior management
team continue to develop effectively and implement strategies to position AEP
for the future. AEP's recent and continuing restructuring and organizational
realignment and its proposal for the industry's transition to retail
competition are two major steps. Some of the benefits of these efforts to AEP
cannot, of course, be quantifiably measured but the Committee believes these
efforts are vital to AEP's continuing success.
INTERNAL REVENUE CODE SECTION 162(M). The Committee has considered the impact
of Section 162(m) of the Internal Revenue Code, which provides a limit on the
deductibility of compensation for certain executive officers in excess of
$1,000,000 per year. Award payments under the Performance Share Incentive Plan
have been structured to be exempt from the deduction limit because they are
made pursuant to a shareholder-approved performance-driven plan. No named
officer in the Summary Compensation Table had taxable compensation for 1995 in
excess of the deduction limit. The Committee intends to continue to evaluate
the impact of this Code provision.
STOCK OWNERSHIP GUIDELINES. The AEP Board of Directors, upon the Committee's
recommendation, underscored the importance of linking executive and shareholder
interests by adopting in December 1994 stock ownership guidelines for senior
management participants in the Performance Share Incentive Plan. Under the
guidelines, the target ownership of AEP Common Stock is directly related to the
officer's corporate position with the greatest ownership target for the chief
executive officer. The target for the CEO is 45,000 shares, which was
equivalent to approximately three times his then annual base salary. The
targets for the other four officers named in the Summary Compensation Table are
15,000 shares each, equivalent to approximately 1.5 times their then annual
base salary. Each officer is expected to achieve the ownership target within a
period of five years commencing on January 1, 1995. Common Stock equivalents
earned through the Management Incentive Compensation Plan and the Performance
Share Incentive Plan are included in determining compliance with the ownership
targets.
Substantial progress has been made in complying with the stock ownership
guidelines and, as of January 1, 1996, the executive officers named in the
Summary Compensation Table had achieved their respective ownership targets to
the following extent (see the table on page 11 for actual ownership amounts):
Dr. Draper, 40%; Mr. DeMaria, 69%; Mr. Maloney, 70%; Mr. Lhota, 120%; and
Dr. Markowsky, 75%.
COMPONENTS OF EXECUTIVE COMPENSATION
BASE SALARY. When reviewing salaries, the Committee considers pay practices
used by other 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
relationship 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 1995
for the five most highly compensated executive officers of AEP named in the
Summary Compensation Table were within this third quartile. 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 individual and
corporate performance and consistency with compensation changes within AEP 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 AEP
Board. These directors then act on the Committee's recommendation.
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 is 30% for the executive officers named in the compensation table.
Actual awards can vary from 0-150% of the target award based on performance.
The MICP awards for the executive officers named in the compensation
table are based entirely on preestablished AEP corporate performance criteria
specified in the MICP, which include return on stockholder equity (weighted at
25%) and total investor return reflecting changes in stock price and payment of
dividends (weighted at 25%), both measured relative to the performance of
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 the states which AEP serves. For 1995, AEP
corporate performance target was achieved to the extent of 115%. This
percentage is an estimate but should not change significantly.
<PAGE>
To more closely align the financial interests of the executive officers
with AEP's shareholders, 20% of an MICP award is deferred for three years and
treated as if invested in Common Stock of AEP, although no stock is actually
purchased. Dividend equivalents are credited during the three-year period.
Effective for 1996 and subsequent years, MICP participants may elect to defer
further the 20%, and to defer all or any part of the remaining 80% of an award,
for payment up to five years past termination of employment, with the same
treatment.
LONG-TERM INCENTIVE. The Performance Share Incentive Plan (the "Plan")
provides longer-term, performance-driven, equity incentive award opportunities
directly related to shareholder value. The AEP Board of Directors approved the
Plan in December 1993 and, at the 1994 annual meeting, the AEP shareholders
also approved it.
The Plan grants performance share units annually which are paid based on
AEP's subsequent three-year total shareholder returns measured relative to the
S&P peer utilities. In 1995, the Committee granted Dr. Draper and the other
executive officers named in the Summary Compensation Table performance share
units equivalent to 40% and 35%, respectively, of their base salaries. The
number of performance share units granted has been determined after an
evaluation of long-term incentive opportunities provided by the S&P peer
companies, again targeting the third quartile of competitive practice.
However, the awards which will ultimately be paid to participants under the
Plan for a performance period are not determinable in advance and, in fact,
could be zero.
The Plan ended a two-year transition performance period at year end 1995.
AEP's total shareholder return for 1993-1995 ranked sixth relative to the S&P
24 peer utilities and, as a result, 160% of the performance share units granted
(and dividend credits) were earned. The associated award payments are listed
in the Summary Compensation Table.
Similar to that portion of the MICP awards which are deferred, payments
of earned awards under the Plan, commencing with the performance period ending
in 1995, are also deferred in the form of restricted stock units (equivalent to
shares of AEP Common Stock). Such Plan deferrals continue until termination of
employment or, if so elected by the recipient, up to five years thereafter.
Once the officers meet and maintain their respective equivalent stock ownership
targets discussed above, they may then elect either to continue to defer or to
receive further earned Plan awards in cash and/or Common Stock. Dividend
equivalents are credited as though reinvested in additional restricted stock
units.
The Plan is further described above.
HUMAN RESOURCES COMMITTEE MEMBERS
Toy F. Reid, Chairman
Arthur G. Hansen
Donald G. Smith
Morris Tanenbaum
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of AEP Common
Stock as of January 1, 1996 for all directors as of the date of this
Information Statement, each of the persons named in the Summary
Compensation 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 and stock-based units of AEP
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.
<PAGE>
<TABLE>
<CAPTION>
STOCK
NAME SHARES UNITS(a) TOTAL
<S> <C> <C> <C>
P. J. DeMaria 7,356(b)(c)(d)(e)(f) 5,391 12,747
E. L. Draper, Jr. 6,119(c)(e) 11,984 18,103
H. W. Fayne 3,653(c)(e) 2,405 6,058
W. J. Lhota 13,064(c)(d)(e) 4,944 18,008
G. P. Maloney 5,227(c)(d)(e) 5,306 10,533
J. J. Markowsky 6,631(c)(f) 4,714 11,345
J. H. Vipperman 5,092(c)(e) 3,365 8,457
All directors and
executive officers
as a group (7 persons) 132,373(g) 38,109 170,482
</TABLE>
___________
(a) This column includes amounts deferred in stock units and held under the
Management Incentive Compensation Plan and Performance Share Incentive
Plan.
(b) Mr. DeMaria owns 100 shares of Cumulative Preferred Shares 9.50% Series,
$100 par value, of Columbus Southern Power Company.
(c) Includes shares and share equivalents held in the following plans in the
amounts listed below:
<TABLE>
<CAPTION>
AEP EMPLOYEE STOCK AEP PERFORMANCE
OWNERSHIP PLAN SHARE INCENTIVE PLAN AEP EMPLOYEES SAVINGS PLAN
(SHARES) (SHARES) (SHARE EQUIVALENTS)
<S> <C> <C> <C>
Mr. DeMaria 83 944 2,705
Dr. Draper -- 2,196 1,958
Mr. Fayne 63 398 3,162
Mr. Lhota 60 812 10,824
Mr. Maloney 85 867 2,775
Dr. Markowsky 66 830 5,718
Mr. Vipperman 80 564 4,391
All Directors and
Executive Officers 437 6,611 31,533
</TABLE>
With respect to the shares and share equivalents held in these plans, such
persons have sole voting power, but the investment/disposition power is
subject to the terms of such plans.
(d) Does not include, for Messrs. DeMaria, Lhota and Maloney, 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 (they disclaim beneficial ownership). The amount of shares shown
for all directors and executive officers as a group includes these shares.
(e) Includes the following numbers of shares held in joint tenancy with a
family member: Mr. DeMaria, 1,232; Dr. Draper, 1,965; Mr. Fayne, 30;
Mr. Lhota, 1,368; Mr. Maloney, 1,500 and Mr. Vipperman, 57.
(f) Includes the following numbers of shares held by family members over which
beneficial ownership is disclaimed: Mr. DeMaria, 2,392 and Dr. Markowsky,
17.
(g) Represents less than 1% of the total number of shares outstanding.
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 1995, the Board held twelve regular
meetings and one special meeting.
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 LLP has been selected as
the independent auditors of the Company for the year 1996.
A representative of Deloitte & Touche LLP 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 28, 1996