Star Symposium 2013 The Changing Reality of Energy Development Jeffery LaFleur, Vice President Generation Assets APCO/KYPCO October 22, 2013

Time From Rule Finalization to Compliance Effluent Limit Guidelines (water discharge limits) Coal Combustion Residuals MATS (mercury & air toxics) 2012 & 2014 Compliance Phases Rule Vacated pending Supreme Court Appeal Environmental Rules Development CSAPR (SO2 & NOx) (b) Rule (water intake structures) New Source CO2 NSPS Existing Source CO2 NSPS Proposed and/or Finalized Rules Anticipated Rules Potential for One Year Compliance Extension Compliance Timeline Contingent on Permit Renewal Cycle Compliance Timeline Contingent on State Implementation Plans Compliance Required from Rule Proposal Date Re-Proposal of Rule Expected Compliance Timeline Will Vary

Historic AEP Emission Reductions Since 1980, AEP’s TOTAL generating fleet has reduced: SO 2 emissions by more than 77 percent NOx emissions by about 80 percent

Global CO 2 Emissions 4

2012 global CO2 emissions totaled 32.2 billion metric tons. Of that, China accounted for 28 percent. The U.S. accounted for 17 percent. Global emissions have increased 15 percent since percent of the increase is because of growth in China. By 2040, emissions from developing countries will rise by more than 70 percent. 5

U.S. Greenhouse Emissions 6

In 2011, EGU CO2 emissions were 10 percent below 2005 levels. Preliminary 2012 EIA data indicates EGU emissions were 15 percent below 2005 levels. 7 U.S. Greenhouse Emissions

Proposed CO 2 Regs 1,100 lbs. per MWh for new coal plants. – CCS would be required to meet goal. 1,000 lbs. per MWh for new natural gas plants. New Turk plant is 1,800 lbs. per MWh. 8

Cost to Build 9 Installation Cost Per kW

Coal vs. Natural Gas 10 MMBTU

IGCC Status Duke Edwardsport IGCC – Began commercial operation June – 618 MW facility without CO 2 capture. – Estimated Cost: $3.4 billion or $5,500/kW. Southern Company Kemper IGCC – Under construction (expected COD mid-2014). – 582 MW facility with 65 percent CO 2 capture (3.5 million tonnes per year). – Estimated Cost: $4.7 billion to date or $8,000/kW (original estimate about $2.4 billion). By comparison, the Turk plant is a 620 MW ultra-supercritical and was completed at a cost of about $1.8 billion, or $2,900/kW.

A Customer’s Bill 12 7% Transmission 25% Distribution

Recent Rate Activity

The Appalachian Power Experience The Effect on Customers Low per capita income – West Virginia - $23,697. – Virginia - $21,636 (our service area). Unemployment remains high – West Virginia – 6.3 percent. – Virginia – 5.8 percent (our service area). 54 percent of customers have electric heat. 25 percent of customers are behind on their bills. 400 percent increase in uncollectibles. 14

Customer Data