1. Market Monitoring of AEP By Douglas R. Bohi Charles River Associates Washington, DC June 25, 2002

2. CHARLES RIVER ASSOCIATES Origin and Purpose of Monitoring of AEP Origin Requirement imposed on the merger of AEP and CSW. Interim market monitoring is required until AEP joins a FERC accepted RTO. Purpose To determine whether AEP creates transmission congestion in order to limit competition in the wholesale market. Respond to complaints and requests for additional studies.

3. CHARLES RIVER ASSOCIATES Measures of Transmission Congestion TLRs, with special attention to periods when curtailments of existing service occur. Refusals of new service.

4. CHARLES RIVER ASSOCIATES Where has congestion occurred?

5. CHARLES RIVER ASSOCIATES How does AEP transmission access compare with others? Comparative Refusal Rates of AEP East and Other Transmission Customers June 15, 2000 to June 14, 2002 Ratio of Refusals to the sum of Refused and Confirmed (%) From/ToCPLDUKETVAVAP AEP East Hourly Refusal Rate0.65.10.33.3 Daily Refusal Rate32.447.239.537.9 Both8.615.77.112.9 Other Transmission Customers Hourly Refusal Rate3.26.51.55.9 Daily Refusal Rate80.474.086.861.7 Both61.741.435.224.4 Ratio of Refusals to the sum of Refused, Confirmed, Retracted, and Withdrawn (%) From/ToCPLDUKETVAVAP AEP East Hourly Refusal Rate0.65.10.33.3 Daily Refusal Rate23.433.726.729.3 Both7.814.26.511.9 Other Transmission Customers Hourly Refusal Rate3.26.11.45.7 Daily Refusal Rate35.231.644.734.4 Both31.224.025.118.9 Source: AEP East OASIS Website.

6. CHARLES RIVER ASSOCIATES AEP wholesale prices in markets affected by congestion. Do they rise when flowgates are congested? Do they rise more than market hub indexes (from Power Markets Week). Identify specific time periods for further examination.

7. CHARLES RIVER ASSOCIATES Effect of AEP generation dispatch on congestion Use generation shift response factors (GSRFs) to measure the contribution of each generating unit to congestion. Correlate rank order of operating rates by unit to rank order of GSRFs during periods of congestion. Is the rank order of operating rates consistent with economic merit order?

8. CHARLES RIVER ASSOCIATES Effect of transmission outages on congestion Are there outages that coincide with periods of congestion? Are the outages that do coincide important to congestion (using outage transfer distribution factors)?

9. CHARLES RIVER ASSOCIATES Response to complaints or requests for additional studies. None