Business Segments

6 Months Ended

Jun. 30, 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.

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 and six months ended June 30, 2012 and 2011 and balance sheet information as of June 30, 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 June 30, 2012
Revenues from:
	External Customers	$	3,234	$	1	$	163	$	148	$	5	$	-	$	3,551
	Other Operating Segments		24		1		4		-		1		(30)		-
Total Revenues		$	3,258	$	2	$	167	$	148	$	6	$	(30)	$	3,551
Net Income (Loss)		$	365	$	8	$	3	$	(5)	$	(8)	$	-	$	363
						Nonutility Operations
								Generation
		Utility		Transmission		AEP River		and		All Other		Reconciling
		Operations		Operations		Operations		Marketing		(a)		Adjustments		Consolidated
		(in millions)
Three Months Ended June 30, 2011
Revenues from:
	External Customers	$	3,359	$	1	$	162	$	79	$	8	$	-	$	3,609
	Other Operating Segments		29		(1)		4		-		2		(34)		-
Total Revenues		$	3,388	$	-	$	166	$	79	$	10	$	(34)	$	3,609
Net Income (Loss)		$	350	$	6	$	(1)	$	11	$	(13)	$	-	$	353

						Nonutility Operations
								Generation
		Utility		Transmission		AEP River		and		All Other		Reconciling
		Operations		Operations		Operations		Marketing		(a)		Adjustments		Consolidated
		(in millions)
Six Months Ended June 30, 2012
Revenues from:
	External Customers	$	6,596	$	2	$	335	$	233	$	10	$	-	$	7,176
	Other Operating Segments		47		3		11		-		3		(64)		-
Total Revenues		$	6,643	$	5	$	346	$	233	$	13	$	(64)	$	7,176
Net Income (Loss)		$	749	$	17	$	12	$	(6)	$	(19)	$	-	$	753
						Nonutility Operations
								Generation
		Utility		Transmission		AEP River		and		All Other		Reconciling
		Operations		Operations		Operations		Marketing		(a)		Adjustments		Consolidated
		(in millions)
Six Months Ended June 30, 2011
Revenues from:
	External Customers	$	6,856	$	1	$	329	$	141	$	12	$	-	$	7,339
	Other Operating Segments		56		(1)		9		1		3		(68)		-
Total Revenues		$	6,912	$	-	$	338	$	142	$	15	$	(68)	$	7,339
Net Income (Loss)		$	724	$	10	$	6	$	12	$	(44)	$	-	$	708

						Nonutility Operations
								Generation				Reconciling
		Utility		Transmission		AEP River		and		All Other		Adjustments
		Operations		Operations		Operations		Marketing		(a)		(b)			Consolidated
		(in millions)
June 30, 2012
Total Property, Plant and Equipment		$	55,289	$	508	$	624	$	618	$	11	$	(266)		$	56,784
Accumulated Depreciation and
	Amortization		18,627		2		150		232		10		(65)			18,956
Total Property, Plant and
	Equipment - Net	$	36,662	$	506	$	474	$	386	$	1	$	(201)		$	37,828
Total Assets		$	50,983	$	865	$	650	$	1,030	$	16,638	$	(16,745)	(c)	$	53,421
						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.