1. AEP’s Emission Reduction Strategy AEP’s Emission Reduction Strategy Presented by: John McManus, Vice President Environmental Services APP Site Visit October 30 – November 4, 2006

2. 2 U.S. Emissions vs. Production Sources: EEI

3. 3 Environmental Drivers New Regulations for Existing Plants –Clean Air Interstate Rule – SO 2, NOx –Clean Air Mercury Rule - Hg –Clean Air Visibility Rule – SO 2 –Clean Water Act Sec. 316(b) More Stringent Air Quality Standards Siting and Permitting for New Plants Climate Change – CO 2, other GHGs

4. 4 AEP Coal Fired Emissions

5. 5 NOx Emissions AEP has been operating SCR (Selective Catalytic Reduction) systems since 2001 Nearly $1.3 billion invested in equipment retrofits Performing better than the design 90% reduction –Achieving reductions of 92 to 94% Currently SCR systems installed on –11 Generating Units –10,015 MW Other units control NOx with combustion control technologies –Low-NOx burners –Over-fire Air –Water Injection Additional SCR retrofits by 2010 –3 generating units –2,380 MW AEP's emission control equipment performs better than designed to reduce ozone season NOx emissions

6. 6 SO 2 Emissions AEP has been operating FGD (Flue Gas Desulfurization) systems since the 1970s More than $1 billion invested in retrofits since the 1990s Currently FGD systems installed on –6 generating units –4715 MW Other units control SO 2 with –Low Sulfur coal Additional Retrofits by 2010 –12 generating units –9795 MW An added benefit of FGD/SCR systems is a reduction of mercury emissions

7. 7 AEP - CO 2 Production In 2005, AEP: Burned 75 million tons of coal (68 million metric tons (mmt)) Generated 187 million MWh (includes sources in addition to coal) Produced 160 million tons CO 2 (145 mmt) 2005 AEP System CO 2 Production Rate: 0.86 ton CO 2 /MWh generated (0.78 metric tons/MWh) 2.1 tons CO 2 /ton Coal Burned (2.1 metric tons CO 2 /metric ton Coal Burned) Muskingum River Plant

8. 8 AEP CO 2 Avoided Since 1990

9. 9 CO 2 Emission Reduction Strategies

10. 10 AEP’s Climate Program Participant in DOE’s Climate Challenge Program since mid-90s Founding member of Chicago Climate Exchange Numerous domestic and international programs for carbon sequestration (forestry and geologic) Founding member of FutureGen Utility industry leader in Asia Pacific Partnership program with Administration

11. 11 Chicago Climate Exchange (CCX) Organization of volunteer members to establish model for CO 2 trading program AEP Membership –Socially-responsible investment & opportunity to set public policy precedents –Learning Opportunity for Market-based approach –Experience incorporating greenhouse gas risks in capital and operating decisions (through a price for carbon) Central part of overall climate change strategy to meet the President’s Voluntary Plan

12. 12 CO 2 Emission Reduction Strategies Numerous Generation-based CO 2 emission reduction strategies exist, including efficiency improvements for existing plants. Categories of potential opportunities: Equipment Upgrades Maintenance Activities Operations Activities Corporate Culture Amos Plant