Leases

12 Months Ended

Dec. 31, 2013

Leases

13. LEASES

Leases of property, plant and equipment are for remaining periods up to 36 years and require payments of related property taxes, maintenance and operating costs. The majority of the leases have purchase or renewal options and will be renewed or replaced by other leases.

Lease rentals for both operating and capital leases are generally charged to Other Operation and Maintenance expense in accordance with rate-making treatment for regulated operations. Additionally, for regulated operations with capital leases, a capital lease asset and offsetting liability are recorded at the present value of the remaining lease payments for each reporting period. Capital leases for nonregulated property are accounted for as if the assets were owned and financed. The components of rental costs are as follows:

	Years Ended December 31,
Lease Rental Costs	2013		2012		2011
	(in millions)
Net Lease Expense on Operating Leases	$	327	$	346	$	343
Amortization of Capital Leases		74		73		72
Interest on Capital Leases		28		29		32
Total Lease Rental Costs	$	429	$	448	$	447

The following table shows the property, plant and equipment under capital leases and related obligations recorded on thebalance sheets. Capital lease obligations are included in Other Current Liabilities and Deferred Credits and Other Noncurrent Liabilities on thebalance sheets.

	December 31,
Property, Plant and Equipment Under Capital Leases	2013		2012
	(in millions)
Generation	$	103	$	117
Other Property, Plant and Equipment		627		495
Total Property, Plant and Equipment Under Capital Leases		730		612
Accumulated Amortization		197		173
Net Property, Plant and Equipment Under Capital Leases	$	533	$	439
Obligations Under Capital Leases
Noncurrent Liability	$	428	$	375
Liability Due Within One Year		110		74
Total Obligations Under Capital Leases	$	538	$	449

Future minimum lease payments consisted of the following as of December 31, 2013:

				Noncancelable
Future Minimum Lease Payments		Capital Leases		Operating Leases
		(in millions)
2014		$	135	$	288
2015			111		268
2016			97		246
2017			79		230
2018			44		215
Later Years			215		862
Total Future Minimum Lease Payments			681	$	2,109
Less Estimated Interest Element			143
Estimated Present Value of Future Minimum
	Lease Payments	$	538

Master Lease Agreements

We lease certain equipment under master lease agreements. Under the lease agreements, the lessor is guaranteed a residual value up to a stated percentage of either the unamortized balance or the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, we are committed to pay the difference between the actual fair value and the residual value guarantee. Historically, at the end of the lease term, the fair value has been in excess of the unamortized balance. As of December 31, 2013, the maximum potential loss for these lease agreements was approximately $20 millionassuming the fair value of the equipment is zero at the end of the lease term.

Rockport Lease

AEGCo and I&M entered into a sale-and-leaseback transaction in 1989 with Wilmington Trust Company (Owner Trustee), an unrelated, unconsolidated trustee for Rockport Plant, Unit 2 (the Plant). The Owner Trustee was capitalized with equity from six owner participants with no relationship to AEP or any of its subsidiaries and debt from a syndicate of banks and securities in a private placement to certain institutional investors.

The gain from the sale was deferred and is being amortized over the term of the lease, which expires in 2022. The Owner Trustee owns the Plant and leases it equally to AEGCo and I&M. The lease is accounted for as an operating lease with the payment obligations included in the future minimum lease payments schedule earlier in this note. The lease term is for 33 years with potential renewal options. At the end of the lease term, AEGCo and I&M have the option to renew the lease or the Owner Trustee can sell the Plant. AEP, AEGCo and I&M haveno ownership interest in the Owner Trustee and do not guarantee its debt. The future minimum lease payments for this sale-and-leaseback transaction as of December 31, 2013 are as follows:

Future Minimum Lease Payments	AEGCo		I&M
	(in millions)
2014	$	74	$	74
2015		74		74
2016		74		74
2017		74		74
2018		74		74
Later Years		295		295
Total Future Minimum Lease Payments	$	665	$	665

Railcar Lease

In June 2003, AEP Transportation LLC (AEP Transportation), a subsidiary of AEP, entered into an agreement with BTM Capital Corporation, as lessor, to lease 875 coal-transporting aluminum railcars. The lease is accounted for as an operating lease. In January 2008, AEP Transportation assigned the remaining 848 railcars under the original lease agreement to I&M (390 railcars) and SWEPCo (458 railcars). The assignment is accounted for as operating leases for I&M and SWEPCo. The initial lease term was five years with three consecutive five-year renewal periods for a maximum lease term of twenty years. I&M and SWEPCo intend to renew these leases for the full lease term of twenty yearsvia the renewal options. The future minimum lease obligations are $13 millionand $15 million for I&M and SWEPCo, respectively,for the remaining railcars as of December 31, 2013. These obligations are included in the future minimum lease payments schedule earlier in this note.

Under the lease agreement, the lessor is guaranteed that the sale proceeds under a return-and-sale option will equal at least a lessee obligation amount specified in the lease, which declines from approximately 83% of the projected fair value of the equipment under the current five-year lease term to 77% at the end of the 20-year term. I&M and SWEPCo have assumed the guarantee under the return-and-sale option. The maximum potential losses related to the guarantee are approximately $9 million and $10 millionfor I&M and SWEPCo, respectively, assuming the fair value of the equipment is zero at the end of the current five-year lease term. However, we believe that the fair value would produce a sufficient sales price to avoid any loss.

Sabine Dragline Lease

During 2009, Sabineentered into capital lease arrangements with a nonaffiliated company to finance the purchase of two electric draglines to be used for Sabine's mining operations totaling $47 million. The amounts included in the lease represented the aggregate fair value of the existing equipment and a sale-and-leaseback transaction for additional dragline rebuild costs required to keep the dragline operational. These capital lease assets are included in Other Property, Plant and Equipment on our December 31, 2013 and 2012balance sheets. The short-term and long-term capital lease obligations are included in Other Current Liabilities and Deferred Credits and Other Noncurrent Liabilities on our December 31, 2013 and 2012balance sheets. The future payment obligations are included in our future minimum lease payments schedule earlier in this note.

I&M Nuclear Fuel Lease

In November 2013, I&M entered into a sale-and-leaseback transaction with IMP 11-2013, anonaffiliated Ohio Trust, to lease nuclear fuel for I&M's Cook Plant. In November 2013, I&M sold a portion of its unamortized nuclear fuel inventory to the trust for $110 million. The lease has a variable rate based on one month LIBOR and is accounted for as a capital lease with lease terms up to 54 months. The future payment obligations of $110 millionare included in our future minimum lease payments schedule earlier in this note. The net capital lease asset is included in Other Property, Plant and Equipment and the short-term and long-term capital lease obligations are included in Other Current Liabilities and Deferred Credits and Other Noncurrent Liabilities, respectively, on our December 31, 2013 balance sheet. The future minimum lease payments for the sale-and-leaseback transaction as of December 31, 2013 are as follows, based on estimated fuel burn:

Future Minimum Lease Payments	I&M
	(in millions)
2014	$	43
2015		32
2016		27
2017		6
2018		2
Total Future Minimum Lease Payments	$	110

Appalachian Power Co [Member]

Leases

12. LEASES

Leases of property, plant and equipment are for remaining periods up to 36 years and require payments of related property taxes, maintenance and operating costs. The majority of the leases have purchase or renewal options and will be renewed or replaced by other leases.

Lease rentals for both operating and capital leases are generally charged to Other Operation and Maintenance expense in accordance with rate-making treatment for regulated operations. Additionally, for regulated operations with capital leases, a capital lease asset and offsetting liability are recorded at the present value of the remaining lease payments for each reporting period. Capital leases for nonregulated property are accounted for as if the assets were owned and financed. The components of rental costs are as follows:

Year Ended December 31, 2013	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	17,500	$	95,606	$	57,814	$	4,131	$	6,328
Amortization of Capital Leases		6,293		11,307		7,800		4,099		15,456
Interest on Capital Leases		1,410		1,870		4,125		782		8,153
Total Lease Rental Costs	$	25,203	$	108,783	$	69,739	$	9,012	$	29,937
Year Ended December 31, 2012	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	15,633	$	95,509	$	59,836	$	5,283	$	5,797
Amortization of Capital Leases		7,429		8,429		10,906		3,839		14,793
Interest on Capital Leases		1,782		1,738		3,307		815		9,041
Total Lease Rental Costs	$	24,844	$	105,676	$	74,049	$	9,937	$	29,631
Year Ended December 31, 2011	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	13,488	$	94,317	$	59,983	$	6,532	$	5,990
Amortization of Capital Leases		7,880		8,762		13,118		4,438		12,694
Interest on Capital Leases		1,898		2,115		3,753		1,098		9,651
Total Lease Rental Costs	$	23,266	$	105,194	$	76,854	$	12,068	$	28,335

The following table shows the property, plant and equipment under capital leases and related obligations recorded on the Registrant Subsidiaries' balance sheets. Unless shown as a separate line on the balance sheet due to materiality, current capital lease obligations are included in Other Current Liabilities and long-term capital lease obligations are included in Deferred Credits and Other Noncurrent Liabilities on the Registrant Subsidiaries' balance sheets.

December 31, 2013		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	13,531	$	18,324	$	-	$	9,675	$	34,476
Other Property, Plant and Equipment			18,720		130,249		26,532		15,413		157,853
Total Property, Plant and Equipment			32,251		148,573		26,532		25,088		192,329
Accumulated Amortization			11,379		15,356		9,800		10,957		66,637
Net Property, Plant and Equipment
	Under Capital Leases	$	20,872	$	133,217	$	16,732	$	14,131	$	125,692
Obligations Under Capital Leases:
Noncurrent Liability		$	15,718	$	87,000	$	11,212	$	10,222	$	105,086
Liability Due Within One Year			5,154		46,210		5,520		3,909		17,899
Total Obligations Under Capital Leases		$	20,872	$	133,210	$	16,732	$	14,131	$	122,985

December 31, 2012		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	11,798	$	19,102	$	39,080	$	3,624	$	27,745
Other Property, Plant and Equipment			20,944		22,697		35,666		15,614		154,166
Total Property, Plant and Equipment			32,742		41,799		74,746		19,238		181,911
Accumulated Amortization			10,282		13,154		27,513		6,738		50,440
Net Property, Plant and Equipment
	Under Capital Leases	$	22,460	$	28,645	$	47,233	$	12,500	$	131,471
Obligations Under Capital Leases:
Noncurrent Liability		$	16,375	$	22,842	$	36,381	$	8,864	$	114,161
Liability Due Within One Year			6,085		5,803		14,707		3,636		17,599
Total Obligations Under Capital Leases		$	22,460	$	28,645	$	51,088	$	12,500	$	131,760

Future minimum lease payments consisted of the following as ofDecember 31, 2013:

Capital Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	5,930	$	49,685	$	6,224	$	4,548	$	25,172
2015			4,789		39,468		3,217		3,174		22,837
2016			4,247		31,053		2,762		2,828		19,871
2017			3,610		9,512		2,697		2,834		21,247
2018			2,602		4,338		2,136		1,798		11,134
Later Years			2,079		10,244		1,914		1,127		55,475
Total Future Minimum Lease
	Payments		23,257		144,300		18,950		16,309		155,736
Less Estimated Interest Element			2,385		11,090		2,218		2,178		32,751
Estimated Present Value of Future
	Minimum Lease Payments	$	20,872	$	133,210	$	16,732	$	14,131	$	122,985
Noncancelable Operating Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	16,327	$	98,819	$	11,986	$	2,241	$	5,010
2015			12,976		95,935		10,817		2,004		4,369
2016			12,111		90,431		10,097		1,654		3,721
2017			11,661		84,624		9,575		1,487		3,338
2018			10,737		83,525		8,292		1,123		2,887
Later Years			46,452		341,472		31,627		2,031		14,823
Total Future Minimum Lease
	Payments	$	110,264	$	794,806	$	82,394	$	10,540	$	34,148

Master Lease Agreements

The Registrant Subsidiaries lease certain equipment under master lease agreements. Under the lease agreements, the lessor is guaranteed a residual value up to a stated percentage of either the unamortized balance or the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, the Registrant Subsidiaries are committed to pay the difference between the actual fair value and the residual value guarantee. Historically, at the end of the lease term the fair value has been in excess of the unamortized balance. As of December 31, 2013, the maximum potential loss by Registrant Subsidiary for these lease agreements assuming the fair value of the equipment is zero at the end of the lease term is as follows:

	Maximum
Company	Potential Loss
	(in thousands)
APCo	$	3,696
I&M		2,548
OPCo		4,555
PSO		1,354
SWEPCo		2,366

Indiana Michigan Power Co [Member]

Leases

12. LEASES

Leases of property, plant and equipment are for remaining periods up to 36 years and require payments of related property taxes, maintenance and operating costs. The majority of the leases have purchase or renewal options and will be renewed or replaced by other leases.

Lease rentals for both operating and capital leases are generally charged to Other Operation and Maintenance expense in accordance with rate-making treatment for regulated operations. Additionally, for regulated operations with capital leases, a capital lease asset and offsetting liability are recorded at the present value of the remaining lease payments for each reporting period. Capital leases for nonregulated property are accounted for as if the assets were owned and financed. The components of rental costs are as follows:

Year Ended December 31, 2013	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	17,500	$	95,606	$	57,814	$	4,131	$	6,328
Amortization of Capital Leases		6,293		11,307		7,800		4,099		15,456
Interest on Capital Leases		1,410		1,870		4,125		782		8,153
Total Lease Rental Costs	$	25,203	$	108,783	$	69,739	$	9,012	$	29,937
Year Ended December 31, 2012	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	15,633	$	95,509	$	59,836	$	5,283	$	5,797
Amortization of Capital Leases		7,429		8,429		10,906		3,839		14,793
Interest on Capital Leases		1,782		1,738		3,307		815		9,041
Total Lease Rental Costs	$	24,844	$	105,676	$	74,049	$	9,937	$	29,631
Year Ended December 31, 2011	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	13,488	$	94,317	$	59,983	$	6,532	$	5,990
Amortization of Capital Leases		7,880		8,762		13,118		4,438		12,694
Interest on Capital Leases		1,898		2,115		3,753		1,098		9,651
Total Lease Rental Costs	$	23,266	$	105,194	$	76,854	$	12,068	$	28,335

The following table shows the property, plant and equipment under capital leases and related obligations recorded on the Registrant Subsidiaries' balance sheets. Unless shown as a separate line on the balance sheet due to materiality, current capital lease obligations are included in Other Current Liabilities and long-term capital lease obligations are included in Deferred Credits and Other Noncurrent Liabilities on the Registrant Subsidiaries' balance sheets.

December 31, 2013		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	13,531	$	18,324	$	-	$	9,675	$	34,476
Other Property, Plant and Equipment			18,720		130,249		26,532		15,413		157,853
Total Property, Plant and Equipment			32,251		148,573		26,532		25,088		192,329
Accumulated Amortization			11,379		15,356		9,800		10,957		66,637
Net Property, Plant and Equipment
	Under Capital Leases	$	20,872	$	133,217	$	16,732	$	14,131	$	125,692
Obligations Under Capital Leases:
Noncurrent Liability		$	15,718	$	87,000	$	11,212	$	10,222	$	105,086
Liability Due Within One Year			5,154		46,210		5,520		3,909		17,899
Total Obligations Under Capital Leases		$	20,872	$	133,210	$	16,732	$	14,131	$	122,985

December 31, 2012		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	11,798	$	19,102	$	39,080	$	3,624	$	27,745
Other Property, Plant and Equipment			20,944		22,697		35,666		15,614		154,166
Total Property, Plant and Equipment			32,742		41,799		74,746		19,238		181,911
Accumulated Amortization			10,282		13,154		27,513		6,738		50,440
Net Property, Plant and Equipment
	Under Capital Leases	$	22,460	$	28,645	$	47,233	$	12,500	$	131,471
Obligations Under Capital Leases:
Noncurrent Liability		$	16,375	$	22,842	$	36,381	$	8,864	$	114,161
Liability Due Within One Year			6,085		5,803		14,707		3,636		17,599
Total Obligations Under Capital Leases		$	22,460	$	28,645	$	51,088	$	12,500	$	131,760

Future minimum lease payments consisted of the following as ofDecember 31, 2013:

Capital Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	5,930	$	49,685	$	6,224	$	4,548	$	25,172
2015			4,789		39,468		3,217		3,174		22,837
2016			4,247		31,053		2,762		2,828		19,871
2017			3,610		9,512		2,697		2,834		21,247
2018			2,602		4,338		2,136		1,798		11,134
Later Years			2,079		10,244		1,914		1,127		55,475
Total Future Minimum Lease
	Payments		23,257		144,300		18,950		16,309		155,736
Less Estimated Interest Element			2,385		11,090		2,218		2,178		32,751
Estimated Present Value of Future
	Minimum Lease Payments	$	20,872	$	133,210	$	16,732	$	14,131	$	122,985
Noncancelable Operating Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	16,327	$	98,819	$	11,986	$	2,241	$	5,010
2015			12,976		95,935		10,817		2,004		4,369
2016			12,111		90,431		10,097		1,654		3,721
2017			11,661		84,624		9,575		1,487		3,338
2018			10,737		83,525		8,292		1,123		2,887
Later Years			46,452		341,472		31,627		2,031		14,823
Total Future Minimum Lease
	Payments	$	110,264	$	794,806	$	82,394	$	10,540	$	34,148

Master Lease Agreements

The Registrant Subsidiaries lease certain equipment under master lease agreements. Under the lease agreements, the lessor is guaranteed a residual value up to a stated percentage of either the unamortized balance or the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, the Registrant Subsidiaries are committed to pay the difference between the actual fair value and the residual value guarantee. Historically, at the end of the lease term the fair value has been in excess of the unamortized balance. As of December 31, 2013, the maximum potential loss by Registrant Subsidiary for these lease agreements assuming the fair value of the equipment is zero at the end of the lease term is as follows:

	Maximum
Company	Potential Loss
	(in thousands)
APCo	$	3,696
I&M		2,548
OPCo		4,555
PSO		1,354
SWEPCo		2,366

Rockport Lease

AEGCo and I&M entered into a sale-and-leaseback transaction in 1989 with Wilmington Trust Company (Owner Trustee), an unrelated, unconsolidated trustee for Rockport Plant, Unit 2 (the Plant). The Owner Trustee was capitalized with equity from six owner participants with no relationship to AEP or any of its subsidiaries and debt from a syndicate of banks and securities in a private placement to certain institutional investors.

The gain from the sale was deferred and is being amortized over the term of the lease, which expires in 2022. The Owner Trustee owns the Plant and leases it equally to AEGCo and I&M. The lease is accounted for as an operating lease with the payment obligations included in the future minimum lease payments schedule earlier in this note. The lease term is for 33 years with potential renewal options. At the end of the lease term, AEGCo and I&M have the option to renew the lease or the Owner Trustee can sell the Plant. AEP, AEGCo and I&M have no ownership interest in the Owner Trustee and do not guarantee its debt. I&M's future minimum lease payments for this sale-and-leaseback transaction as of December 31, 2013 are as follows:

Future Minimum Lease Payments	I&M
	(in thousands)
2014	$	73,854
2015		73,854
2016		73,854
2017		73,854
2018		73,854
Later Years		295,416
Total Future Minimum Lease Payments	$	664,686

Railcar Lease

In June 2003, AEP Transportation LLC (AEP Transportation), a subsidiary of AEP, entered into an agreement with BTM Capital Corporation, as lessor, to lease 875 coal-transporting aluminum railcars. The lease is accounted for as an operating lease. In January 2008, AEP Transportation assigned the remaining 848 railcars under the original lease agreement to I&M (390 railcars) and SWEPCo (458 railcars). The assignment is accounted for as operating leases for I&M and SWEPCo. The initial lease term was five years with three consecutive five-year renewal periods for a maximum lease term of twenty years. I&M and SWEPCo intend to renew these leases for the full lease term of twenty yearsvia the renewal options. The future minimum lease obligations are $13 millionand $15 million for I&M and SWEPCo, respectively, for the remaining railcars as of December 31, 2013. These obligations are included in the future minimum lease payments schedule earlier in this note.

Under the lease agreement, the lessor is guaranteed that the sale proceeds under a return-and-sale option will equal at least a lessee obligation amount specified in the lease, which declines from approximately 83% of the projected fair value of the equipment under the current five-year lease term to 77%at the end of the 20-year term. I&M and SWEPCo have assumed the guarantee under the return-and-sale option. The maximum potential losses related to the guarantee are approximately $9 millionand $10 million for I&M and SWEPCo, respectively, assuming the fair value of the equipment is zero at the end of the current five-year lease term. However, management believes that the fair value would produce a sufficient sales price to avoid any loss.

I&M Nuclear Fuel Lease

In November 2013, I&M entered into a sale-and-leaseback transaction with IMP 11-2013, anonaffiliated Ohio trust, to lease nuclear fuel for I&M's Cook Plant. In November 2013, I&M sold a portion of its unamortized nuclear fuel inventory to the trust for $110 million. The lease has a variable rate based on one month LIBOR and is accounted for as a capital lease with lease terms up to 54 months. The future payment obligations of $110 million are included in I&M's future minimum lease payments schedule earlier in this note. The net capital lease asset is included in Other Property, Plant and Equipment and the short-term and long-term capital lease obligations are included in Other Current Liabilities and Deferred Credits and Other Noncurrent Liabilities, respectively, on I&M's December 31, 2013 balance sheet. The future minimum lease payments for the sale-and-leaseback transaction as of December 31, 2013 are as follows, based on estimated fuel burn:

Future Minimum Lease Payments	I&M
	(in thousands)
2014	$	42,567
2015		32,198
2016		26,888
2017		5,762
2018		2,398
Total Future Minimum Lease Payments	$	109,813

Ohio Power Co [Member]

Leases

12. LEASES

Leases of property, plant and equipment are for remaining periods up to 36 years and require payments of related property taxes, maintenance and operating costs. The majority of the leases have purchase or renewal options and will be renewed or replaced by other leases.

Lease rentals for both operating and capital leases are generally charged to Other Operation and Maintenance expense in accordance with rate-making treatment for regulated operations. Additionally, for regulated operations with capital leases, a capital lease asset and offsetting liability are recorded at the present value of the remaining lease payments for each reporting period. Capital leases for nonregulated property are accounted for as if the assets were owned and financed. The components of rental costs are as follows:

Year Ended December 31, 2013	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	17,500	$	95,606	$	57,814	$	4,131	$	6,328
Amortization of Capital Leases		6,293		11,307		7,800		4,099		15,456
Interest on Capital Leases		1,410		1,870		4,125		782		8,153
Total Lease Rental Costs	$	25,203	$	108,783	$	69,739	$	9,012	$	29,937
Year Ended December 31, 2012	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	15,633	$	95,509	$	59,836	$	5,283	$	5,797
Amortization of Capital Leases		7,429		8,429		10,906		3,839		14,793
Interest on Capital Leases		1,782		1,738		3,307		815		9,041
Total Lease Rental Costs	$	24,844	$	105,676	$	74,049	$	9,937	$	29,631
Year Ended December 31, 2011	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	13,488	$	94,317	$	59,983	$	6,532	$	5,990
Amortization of Capital Leases		7,880		8,762		13,118		4,438		12,694
Interest on Capital Leases		1,898		2,115		3,753		1,098		9,651
Total Lease Rental Costs	$	23,266	$	105,194	$	76,854	$	12,068	$	28,335

The following table shows the property, plant and equipment under capital leases and related obligations recorded on the Registrant Subsidiaries' balance sheets. Unless shown as a separate line on the balance sheet due to materiality, current capital lease obligations are included in Other Current Liabilities and long-term capital lease obligations are included in Deferred Credits and Other Noncurrent Liabilities on the Registrant Subsidiaries' balance sheets.

December 31, 2013		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	13,531	$	18,324	$	-	$	9,675	$	34,476
Other Property, Plant and Equipment			18,720		130,249		26,532		15,413		157,853
Total Property, Plant and Equipment			32,251		148,573		26,532		25,088		192,329
Accumulated Amortization			11,379		15,356		9,800		10,957		66,637
Net Property, Plant and Equipment
	Under Capital Leases	$	20,872	$	133,217	$	16,732	$	14,131	$	125,692
Obligations Under Capital Leases:
Noncurrent Liability		$	15,718	$	87,000	$	11,212	$	10,222	$	105,086
Liability Due Within One Year			5,154		46,210		5,520		3,909		17,899
Total Obligations Under Capital Leases		$	20,872	$	133,210	$	16,732	$	14,131	$	122,985

December 31, 2012		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	11,798	$	19,102	$	39,080	$	3,624	$	27,745
Other Property, Plant and Equipment			20,944		22,697		35,666		15,614		154,166
Total Property, Plant and Equipment			32,742		41,799		74,746		19,238		181,911
Accumulated Amortization			10,282		13,154		27,513		6,738		50,440
Net Property, Plant and Equipment
	Under Capital Leases	$	22,460	$	28,645	$	47,233	$	12,500	$	131,471
Obligations Under Capital Leases:
Noncurrent Liability		$	16,375	$	22,842	$	36,381	$	8,864	$	114,161
Liability Due Within One Year			6,085		5,803		14,707		3,636		17,599
Total Obligations Under Capital Leases		$	22,460	$	28,645	$	51,088	$	12,500	$	131,760

Future minimum lease payments consisted of the following as ofDecember 31, 2013:

Capital Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	5,930	$	49,685	$	6,224	$	4,548	$	25,172
2015			4,789		39,468		3,217		3,174		22,837
2016			4,247		31,053		2,762		2,828		19,871
2017			3,610		9,512		2,697		2,834		21,247
2018			2,602		4,338		2,136		1,798		11,134
Later Years			2,079		10,244		1,914		1,127		55,475
Total Future Minimum Lease
	Payments		23,257		144,300		18,950		16,309		155,736
Less Estimated Interest Element			2,385		11,090		2,218		2,178		32,751
Estimated Present Value of Future
	Minimum Lease Payments	$	20,872	$	133,210	$	16,732	$	14,131	$	122,985
Noncancelable Operating Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	16,327	$	98,819	$	11,986	$	2,241	$	5,010
2015			12,976		95,935		10,817		2,004		4,369
2016			12,111		90,431		10,097		1,654		3,721
2017			11,661		84,624		9,575		1,487		3,338
2018			10,737		83,525		8,292		1,123		2,887
Later Years			46,452		341,472		31,627		2,031		14,823
Total Future Minimum Lease
	Payments	$	110,264	$	794,806	$	82,394	$	10,540	$	34,148

Master Lease Agreements

The Registrant Subsidiaries lease certain equipment under master lease agreements. Under the lease agreements, the lessor is guaranteed a residual value up to a stated percentage of either the unamortized balance or the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, the Registrant Subsidiaries are committed to pay the difference between the actual fair value and the residual value guarantee. Historically, at the end of the lease term the fair value has been in excess of the unamortized balance. As of December 31, 2013, the maximum potential loss by Registrant Subsidiary for these lease agreements assuming the fair value of the equipment is zero at the end of the lease term is as follows:

	Maximum
Company	Potential Loss
	(in thousands)
APCo	$	3,696
I&M		2,548
OPCo		4,555
PSO		1,354
SWEPCo		2,366

Public Service Co of Oklahoma [Member]

Leases

12. LEASES

Leases of property, plant and equipment are for remaining periods up to 36 years and require payments of related property taxes, maintenance and operating costs. The majority of the leases have purchase or renewal options and will be renewed or replaced by other leases.

Lease rentals for both operating and capital leases are generally charged to Other Operation and Maintenance expense in accordance with rate-making treatment for regulated operations. Additionally, for regulated operations with capital leases, a capital lease asset and offsetting liability are recorded at the present value of the remaining lease payments for each reporting period. Capital leases for nonregulated property are accounted for as if the assets were owned and financed. The components of rental costs are as follows:

Year Ended December 31, 2013	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	17,500	$	95,606	$	57,814	$	4,131	$	6,328
Amortization of Capital Leases		6,293		11,307		7,800		4,099		15,456
Interest on Capital Leases		1,410		1,870		4,125		782		8,153
Total Lease Rental Costs	$	25,203	$	108,783	$	69,739	$	9,012	$	29,937
Year Ended December 31, 2012	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	15,633	$	95,509	$	59,836	$	5,283	$	5,797
Amortization of Capital Leases		7,429		8,429		10,906		3,839		14,793
Interest on Capital Leases		1,782		1,738		3,307		815		9,041
Total Lease Rental Costs	$	24,844	$	105,676	$	74,049	$	9,937	$	29,631
Year Ended December 31, 2011	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	13,488	$	94,317	$	59,983	$	6,532	$	5,990
Amortization of Capital Leases		7,880		8,762		13,118		4,438		12,694
Interest on Capital Leases		1,898		2,115		3,753		1,098		9,651
Total Lease Rental Costs	$	23,266	$	105,194	$	76,854	$	12,068	$	28,335

The following table shows the property, plant and equipment under capital leases and related obligations recorded on the Registrant Subsidiaries' balance sheets. Unless shown as a separate line on the balance sheet due to materiality, current capital lease obligations are included in Other Current Liabilities and long-term capital lease obligations are included in Deferred Credits and Other Noncurrent Liabilities on the Registrant Subsidiaries' balance sheets.

December 31, 2013		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	13,531	$	18,324	$	-	$	9,675	$	34,476
Other Property, Plant and Equipment			18,720		130,249		26,532		15,413		157,853
Total Property, Plant and Equipment			32,251		148,573		26,532		25,088		192,329
Accumulated Amortization			11,379		15,356		9,800		10,957		66,637
Net Property, Plant and Equipment
	Under Capital Leases	$	20,872	$	133,217	$	16,732	$	14,131	$	125,692
Obligations Under Capital Leases:
Noncurrent Liability		$	15,718	$	87,000	$	11,212	$	10,222	$	105,086
Liability Due Within One Year			5,154		46,210		5,520		3,909		17,899
Total Obligations Under Capital Leases		$	20,872	$	133,210	$	16,732	$	14,131	$	122,985

December 31, 2012		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	11,798	$	19,102	$	39,080	$	3,624	$	27,745
Other Property, Plant and Equipment			20,944		22,697		35,666		15,614		154,166
Total Property, Plant and Equipment			32,742		41,799		74,746		19,238		181,911
Accumulated Amortization			10,282		13,154		27,513		6,738		50,440
Net Property, Plant and Equipment
	Under Capital Leases	$	22,460	$	28,645	$	47,233	$	12,500	$	131,471
Obligations Under Capital Leases:
Noncurrent Liability		$	16,375	$	22,842	$	36,381	$	8,864	$	114,161
Liability Due Within One Year			6,085		5,803		14,707		3,636		17,599
Total Obligations Under Capital Leases		$	22,460	$	28,645	$	51,088	$	12,500	$	131,760

Future minimum lease payments consisted of the following as ofDecember 31, 2013:

Capital Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	5,930	$	49,685	$	6,224	$	4,548	$	25,172
2015			4,789		39,468		3,217		3,174		22,837
2016			4,247		31,053		2,762		2,828		19,871
2017			3,610		9,512		2,697		2,834		21,247
2018			2,602		4,338		2,136		1,798		11,134
Later Years			2,079		10,244		1,914		1,127		55,475
Total Future Minimum Lease
	Payments		23,257		144,300		18,950		16,309		155,736
Less Estimated Interest Element			2,385		11,090		2,218		2,178		32,751
Estimated Present Value of Future
	Minimum Lease Payments	$	20,872	$	133,210	$	16,732	$	14,131	$	122,985
Noncancelable Operating Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	16,327	$	98,819	$	11,986	$	2,241	$	5,010
2015			12,976		95,935		10,817		2,004		4,369
2016			12,111		90,431		10,097		1,654		3,721
2017			11,661		84,624		9,575		1,487		3,338
2018			10,737		83,525		8,292		1,123		2,887
Later Years			46,452		341,472		31,627		2,031		14,823
Total Future Minimum Lease
	Payments	$	110,264	$	794,806	$	82,394	$	10,540	$	34,148

Master Lease Agreements

The Registrant Subsidiaries lease certain equipment under master lease agreements. Under the lease agreements, the lessor is guaranteed a residual value up to a stated percentage of either the unamortized balance or the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, the Registrant Subsidiaries are committed to pay the difference between the actual fair value and the residual value guarantee. Historically, at the end of the lease term the fair value has been in excess of the unamortized balance. As of December 31, 2013, the maximum potential loss by Registrant Subsidiary for these lease agreements assuming the fair value of the equipment is zero at the end of the lease term is as follows:

	Maximum
Company	Potential Loss
	(in thousands)
APCo	$	3,696
I&M		2,548
OPCo		4,555
PSO		1,354
SWEPCo		2,366

Southwestern Electric Power Co [Member]

Leases

12. LEASES

Leases of property, plant and equipment are for remaining periods up to 36 years and require payments of related property taxes, maintenance and operating costs. The majority of the leases have purchase or renewal options and will be renewed or replaced by other leases.

Lease rentals for both operating and capital leases are generally charged to Other Operation and Maintenance expense in accordance with rate-making treatment for regulated operations. Additionally, for regulated operations with capital leases, a capital lease asset and offsetting liability are recorded at the present value of the remaining lease payments for each reporting period. Capital leases for nonregulated property are accounted for as if the assets were owned and financed. The components of rental costs are as follows:

Year Ended December 31, 2013	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	17,500	$	95,606	$	57,814	$	4,131	$	6,328
Amortization of Capital Leases		6,293		11,307		7,800		4,099		15,456
Interest on Capital Leases		1,410		1,870		4,125		782		8,153
Total Lease Rental Costs	$	25,203	$	108,783	$	69,739	$	9,012	$	29,937
Year Ended December 31, 2012	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	15,633	$	95,509	$	59,836	$	5,283	$	5,797
Amortization of Capital Leases		7,429		8,429		10,906		3,839		14,793
Interest on Capital Leases		1,782		1,738		3,307		815		9,041
Total Lease Rental Costs	$	24,844	$	105,676	$	74,049	$	9,937	$	29,631
Year Ended December 31, 2011	APCo		I&M		OPCo		PSO		SWEPCo
	(in thousands)
Net Lease Expense on Operating Leases	$	13,488	$	94,317	$	59,983	$	6,532	$	5,990
Amortization of Capital Leases		7,880		8,762		13,118		4,438		12,694
Interest on Capital Leases		1,898		2,115		3,753		1,098		9,651
Total Lease Rental Costs	$	23,266	$	105,194	$	76,854	$	12,068	$	28,335

The following table shows the property, plant and equipment under capital leases and related obligations recorded on the Registrant Subsidiaries' balance sheets. Unless shown as a separate line on the balance sheet due to materiality, current capital lease obligations are included in Other Current Liabilities and long-term capital lease obligations are included in Deferred Credits and Other Noncurrent Liabilities on the Registrant Subsidiaries' balance sheets.

December 31, 2013		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	13,531	$	18,324	$	-	$	9,675	$	34,476
Other Property, Plant and Equipment			18,720		130,249		26,532		15,413		157,853
Total Property, Plant and Equipment			32,251		148,573		26,532		25,088		192,329
Accumulated Amortization			11,379		15,356		9,800		10,957		66,637
Net Property, Plant and Equipment
	Under Capital Leases	$	20,872	$	133,217	$	16,732	$	14,131	$	125,692
Obligations Under Capital Leases:
Noncurrent Liability		$	15,718	$	87,000	$	11,212	$	10,222	$	105,086
Liability Due Within One Year			5,154		46,210		5,520		3,909		17,899
Total Obligations Under Capital Leases		$	20,872	$	133,210	$	16,732	$	14,131	$	122,985

December 31, 2012		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
Property, Plant and Equipment Under
	Capital Leases:
Generation		$	11,798	$	19,102	$	39,080	$	3,624	$	27,745
Other Property, Plant and Equipment			20,944		22,697		35,666		15,614		154,166
Total Property, Plant and Equipment			32,742		41,799		74,746		19,238		181,911
Accumulated Amortization			10,282		13,154		27,513		6,738		50,440
Net Property, Plant and Equipment
	Under Capital Leases	$	22,460	$	28,645	$	47,233	$	12,500	$	131,471
Obligations Under Capital Leases:
Noncurrent Liability		$	16,375	$	22,842	$	36,381	$	8,864	$	114,161
Liability Due Within One Year			6,085		5,803		14,707		3,636		17,599
Total Obligations Under Capital Leases		$	22,460	$	28,645	$	51,088	$	12,500	$	131,760

Future minimum lease payments consisted of the following as ofDecember 31, 2013:

Capital Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	5,930	$	49,685	$	6,224	$	4,548	$	25,172
2015			4,789		39,468		3,217		3,174		22,837
2016			4,247		31,053		2,762		2,828		19,871
2017			3,610		9,512		2,697		2,834		21,247
2018			2,602		4,338		2,136		1,798		11,134
Later Years			2,079		10,244		1,914		1,127		55,475
Total Future Minimum Lease
	Payments		23,257		144,300		18,950		16,309		155,736
Less Estimated Interest Element			2,385		11,090		2,218		2,178		32,751
Estimated Present Value of Future
	Minimum Lease Payments	$	20,872	$	133,210	$	16,732	$	14,131	$	122,985
Noncancelable Operating Leases		APCo		I&M		OPCo		PSO		SWEPCo
		(in thousands)
2014		$	16,327	$	98,819	$	11,986	$	2,241	$	5,010
2015			12,976		95,935		10,817		2,004		4,369
2016			12,111		90,431		10,097		1,654		3,721
2017			11,661		84,624		9,575		1,487		3,338
2018			10,737		83,525		8,292		1,123		2,887
Later Years			46,452		341,472		31,627		2,031		14,823
Total Future Minimum Lease
	Payments	$	110,264	$	794,806	$	82,394	$	10,540	$	34,148

Master Lease Agreements

The Registrant Subsidiaries lease certain equipment under master lease agreements. Under the lease agreements, the lessor is guaranteed a residual value up to a stated percentage of either the unamortized balance or the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, the Registrant Subsidiaries are committed to pay the difference between the actual fair value and the residual value guarantee. Historically, at the end of the lease term the fair value has been in excess of the unamortized balance. As of December 31, 2013, the maximum potential loss by Registrant Subsidiary for these lease agreements assuming the fair value of the equipment is zero at the end of the lease term is as follows:

	Maximum
Company	Potential Loss
	(in thousands)
APCo	$	3,696
I&M		2,548
OPCo		4,555
PSO		1,354
SWEPCo		2,366

Railcar Lease

In June 2003, AEP Transportation LLC (AEP Transportation), a subsidiary of AEP, entered into an agreement with BTM Capital Corporation, as lessor, to lease 875 coal-transporting aluminum railcars. The lease is accounted for as an operating lease. In January 2008, AEP Transportation assigned the remaining 848 railcars under the original lease agreement to I&M (390 railcars) and SWEPCo (458 railcars). The assignment is accounted for as operating leases for I&M and SWEPCo. The initial lease term was five years with three consecutive five-year renewal periods for a maximum lease term of twenty years. I&M and SWEPCo intend to renew these leases for the full lease term of twenty yearsvia the renewal options. The future minimum lease obligations are $13 millionand $15 million for I&M and SWEPCo, respectively, for the remaining railcars as of December 31, 2013. These obligations are included in the future minimum lease payments schedule earlier in this note.

Under the lease agreement, the lessor is guaranteed that the sale proceeds under a return-and-sale option will equal at least a lessee obligation amount specified in the lease, which declines from approximately 83% of the projected fair value of the equipment under the current five-year lease term to 77%at the end of the 20-year term. I&M and SWEPCo have assumed the guarantee under the return-and-sale option. The maximum potential losses related to the guarantee are approximately $9 millionand $10 million for I&M and SWEPCo, respectively, assuming the fair value of the equipment is zero at the end of the current five-year lease term. However, management believes that the fair value would produce a sufficient sales price to avoid any loss.

Sabine Dragline Lease

During 2009, Sabineentered into capital lease arrangements with a nonaffiliated company to finance the purchase of two electric draglines to be used for Sabine's mining operations totaling $47 million. The amounts included in the lease represented the aggregate fair value of the existing equipment and a sale-and-leaseback transaction for additional dragline rebuild costs required to keep the dragline operational. These capital lease assets are included in Other Property, Plant and Equipment on SWEPCo's December 31, 2013 and 2012 balance sheets. The short-term and long-term capital lease obligations are included in Obligations Under Capital Leases on SWEPCo's December 31, 2013 and 2012 balance sheets. The future payment obligations are included in SWEPCo's future minimum lease payments schedule earlier in this note.