Business Segments

3 Months Ended

Mar. 31, 2012

Business Segments

6. BUSINESS SEGMENTS

As outlined in our 2011 Annual Report, our primary business is the generation, transmission and distribution of electricity. Within our Utility Operations segment, we centrally dispatch generation assets and manage our overall utility operations on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight. Intersegment sales and transfers are generally based on underlying contractual arrangements and agreements.

While our Utility Operations segment remains our primary business segment, the advancement of an area of our business prompted us to identify a new reportable segment. Starting in the fourth quarter of 2011, we established our new Transmission Operations segment as described below:

Utility Operations

• Generation of electricity for sale to U.S. retail and wholesale customers.
• Transmission and distribution of electricity through assets owned and operated by our ten utility operating companies.

Transmission Operations

• Development, construction and operation of transmission facilities through investments in our wholly-owned transmission subsidiaries that were established in 2009 and ourtransmission joint ventures. These investments have PUCT-approved or FERC-approved returns on equity.
• In April 2012, AEP and Great Plains Energy (Great Plains) formed Transource Energy LLC (Transource). AEP and Great Plains own 86.5% and 13.5% of Transource, respectively. Transource will initially pursue transmission power projects in PJM, SPP and MISO.

AEP River Operations

• Commercial barging operations that transport coal and dry bulk commodities primarily on the Ohio, Illinois and lower Mississippi Rivers.

Generation and Marketing

• Nonregulated generation in ERCOT.
• Marketing, risk management and retail activities in ERCOT, PJM and MISO.

The remainder of our activities is presented as All Other. While not considered a reportable segment, All Other includes:

• Parent's guarantee revenue received from affiliates, investment income, interest income and interest expense and other nonallocated costs.
• Forward natural gas contracts that were not sold with our natural gas pipeline and storage operations in 2004 and 2005. These contracts were financial derivatives which settled and expired in the fourth quarter of 2011.
• Revenue sharing related to the Plaquemine Cogeneration Facilitywhich ended in the fourth quarter of 2011.

The tables below present our reportable segment information for the three months ended March 31, 2012 and 2011 and balance sheet information as of March 31, 2012 and December 31, 2011. These amounts include certain estimates and allocations where necessary. We reclassified prior year amounts to conform to the current year's presentation.

						Nonutility Operations
								Generation
		Utility		Transmission		AEP River		and		All Other		Reconciling
		Operations		Operations		Operations		Marketing		(a)		Adjustments		Consolidated
		(in millions)
Three Months Ended March 31, 2012
Revenues from:
	External Customers	$	3,362	$	1	$	172	$	85	$	5	$	-	$	3,625
	Other Operating Segments		23		2		7		-		2		(34)		-
Total Revenues		$	3,385	$	3	$	179	$	85	$	7	$	(34)	$	3,625
Net Income (Loss)		$	384	$	9	$	9	$	(1)	$	(11)	$	-	$	390
						Nonutility Operations
								Generation
		Utility		Transmission		AEP River		and		All Other		Reconciling
		Operations		Operations		Operations		Marketing		(a)		Adjustments		Consolidated
		(in millions)
Three Months Ended March 31, 2011
Revenues from:
	External Customers	$	3,497	$	-	$	167	$	62	$	4	$	-	$	3,730
	Other Operating Segments		27		-		5		1		1		(34)		-
Total Revenues		$	3,524	$	-	$	172	$	63	$	5	$	(34)	$	3,730
Net Income (Loss)		$	374	$	4	$	7	$	1	$	(31)	$	-	$	355

						Nonutility Operations
								Generation				Reconciling
		Utility		Transmission		AEP River		and		All Other		Adjustments
		Operations		Operations		Operations		Marketing		(a)		(b)			Consolidated
		(in millions)
March 31, 2012
Total Property, Plant and Equipment		$	54,839	$	410	$	612	$	617	$	11	$	(266)		$	56,223
Accumulated Depreciation and
	Amortization		18,474		1		143		225		10		(62)			18,791
Total Property, Plant and
	Equipment - Net	$	36,365	$	409	$	469	$	392	$	1	$	(204)		$	37,432
Total Assets		$	50,581	$	727	$	657	$	1,012	$	16,397	$	(16,472)	(c)	$	52,902
						Nonutility Operations
								Generation				Reconciling
		Utility		Transmission		AEP River		and		All Other		Adjustments
		Operations		Operations		Operations		Marketing		(a)		(b)			Consolidated
		(in millions)
December 31, 2011
Total Property, Plant and Equipment		$	54,396	$	323	$	608	$	590	$	11	$	(258)		$	55,670
Accumulated Depreciation and
	Amortization		18,393		-		136		219		10		(59)			18,699
Total Property, Plant and
	Equipment - Net	$	36,003	$	323	$	472	$	371	$	1	$	(199)		$	36,971
Total Assets		$	50,093	$	594	$	659	$	868	$	16,751	$	(16,742)	(c)	$	52,223

(a)All Other includes:

• Parent's guarantee revenue received from affiliates, investment income, interest income and interest expense and other nonallocated costs.
• Forward natural gas contracts that were not sold with our natural gas pipeline and storage operations in 2004 and 2005. These contracts were financial derivatives which settled and expired in the fourth quarter of 2011.
• Revenue sharing related to the Plaquemine Cogeneration Facilitywhich ended in the fourth quarter of 2011.

(b)Includes eliminations due to an intercompany capital lease.

(c)       Reconciling Adjustments for Total Assets primarily include the elimination of intercompany advances to affiliates and intercompany accounts receivable along with the elimination of AEP's investments in subsidiary companies.

Appalachian Power Co [Member]

Business Segments

5. BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business. The Registrant Subsidiaries' other activities are insignificant. The Registrant Subsidiaries' operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Indiana Michigan Power Co [Member]

Business Segments

5. BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business. The Registrant Subsidiaries' other activities are insignificant. The Registrant Subsidiaries' operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Ohio Power Co [Member]

Business Segments

5. BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business. The Registrant Subsidiaries' other activities are insignificant. The Registrant Subsidiaries' operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Public Service Co Of Oklahoma [Member]

Business Segments

5. BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business. The Registrant Subsidiaries' other activities are insignificant. The Registrant Subsidiaries' operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Southwestern Electric Power Co [Member]

Business Segments

5. BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business. The Registrant Subsidiaries' other activities are insignificant. The Registrant Subsidiaries' operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.