11. FINANCING ACTIVITIES

Long-term Debt

The following table details long-term debt outstanding as of March 31, 2013 and December 31, 2012:

Type of Debt	March 31, 2013		December 31, 2012
	(in millions)
Senior Unsecured Notes	$	12,462	$	12,712
Pollution Control Bonds		1,958		1,958
Notes Payable		398		427
Securitization Bonds		2,176		2,281
Spent Nuclear Fuel Obligation (a)		265		265
Other Long-term Debt		341		140
Fair Value of Interest Rate Hedges		1		3
Unamortized Discount, Net		(28)		(29)
Total Long-term Debt Outstanding		17,573		17,757
Long-term Debt Due Within One Year		1,674		2,171
Long-term Debt	$	15,899	$	15,586

(a) Pursuant to the Nuclear Waste Policy Act of 1982, I&M, a nuclear licensee, has an obligation to the United States Department of Energy for spent nuclear fuel disposal. The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983. Trust fund assets related to this obligation were $309 million and $308 million as of March 31, 2013 and December 31, 2012, respectively, and are included in Spent Nuclear Fuel and Decommissioning Trusts on our condensed balance sheets.

Long-term debt and other securities issued, retired and principal payments made during the first three months of 2013 are shown in the tables below:

			Principal			Interest
Company	Type of Debt		Amount			Rate	Due Date
Issuances:		(in millions)				(%)
AEP	Other Long-term Debt		$	200	(a)	Variable	2015
I&M	Senior Unsecured Notes			250		3.20	2023

Non-Registrant:
AEPTCo	Senior Unsecured Notes			25		4.83	2043
TNC	Senior Unsecured Notes			125		3.09	2023
TNC	Senior Unsecured Notes			75		4.48	2043
Total Issuances			$	675	(b)

(a) Draw on a $1 billion term credit facility due in May 2015 to fund certain OPCo maturities on an interim basis and to facilitate the corporate separation of generation assets from transmission and distribution.

(b) Amount indicated on the statement of cash flows is net of issuance costs and premium or discount and will not tie to the total issuances.

				Principal		Interest
Company		Type of Debt		Amount Paid		Rate	Due Date
Retirements and			(in millions)			(%)
	Principal Payments:
I&M		Notes Payable		$	4	Variable	2015
I&M		Notes Payable			6	Variable	2016
I&M		Notes Payable			4	2.12	2016
I&M		Notes Payable			11	Variable	2016
OPCo		Senior Unsecured Notes			250	5.50	2013
OPCo		Senior Unsecured Notes			250	5.50	2013
SWEPCo		Notes Payable			1	4.58	2032

Non-Registrant:
AEP Subsidiaries		Notes Payable			1	Variable	2017
AEP Subsidiaries		Notes Payable			1	7.59 - 8.03	2026
TCC		Securitization Bonds			67	4.98	2013
TCC		Securitization Bonds			38	5.96	2013
TNC		Senior Unsecured Notes			225	5.50	2013
Total Retirements and
	Principal Payments			$	858

In April 2013, I&M retired $28 million of Notes Payable related to DCC Fuel.

In April 2013, I&M reacquired $40 million of 5.25% Pollution Control Bonds due in 2025. The variable rate bonds are held by a trustee on behalf of I&M.

In April 2013, AEGCo retired $4 million of 6.33% Senior Unsecured Notes due in 2037.

As of March 31, 2013, trustees held, on our behalf, $533 million of our reacquired Pollution Control Bonds.

Dividend Restrictions

Parent Restrictions

The holders of our common stock are entitled to receive the dividends declared by our Board of Directors provided funds are legally available for such dividends. Our income derives from our common stock equity in the earnings of our utility subsidiaries.

Pursuant to the leverage restrictions in our credit agreements, we must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements. None of AEP's retained earnings were restricted for the purpose of the payment of dividends.

Utility Subsidiaries' Restrictions

Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of our utility subsidiaries to transfer funds to us in the form of dividends. Specifically, several of our public utility subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%.

The Federal Power Act prohibits the utility subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock. This restriction does not limit the ability of the utility subsidiaries to pay dividends out of retained earnings.

Short-term Debt

Our outstanding short-term debt was as follows:

		March 31, 2013				December 31, 2012
		Outstanding		Interest		Outstanding		Interest
	Type of Debt	Amount		Rate (a)		Amount		Rate (a)
		(in millions)				(in millions)
	Securitized Debt for Receivables (b)	$	646	0.23	%	$	657	0.26	%
	Commercial Paper		661	0.36	%		321	0.42	%
	Line of Credit – Sabine (c)		-	-	%		3	1.82	%
	Total Short-term Debt	$	1,307			$	981

(a) Weighted average rate.

(b) Amount of securitized debt for receivables as accounted for under the ''Transfers and Servicing'' accounting guidance.

(c) This line of credit does not reduce available liquidity under AEP's credit facilities.

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 4.

Securitized Accounts Receivable – AEP Credit

AEP Credit has a receivables securitization agreement with bank conduits. Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries. AEP Credit continues to service the receivables. These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase our operating companies' receivables and accelerate AEP Credit's cash collections.

Accounts receivable information for AEP Credit is as follows:

	Three Months Ended
	March 31,
	2013			2012
	(dollars in millions)
Effective Interest Rates on Securitization of Accounts Receivable		0.23	%		0.26	%
Net Uncollectible Accounts Receivable Written Off	$	7		$	8

		March 31,		December 31,
		2013		2012
		(in millions)
Accounts Receivable Retained Interest and Pledged as Collateral
	Less Uncollectible Accounts	$	863	$	835
Total Principal Outstanding			646		657
Delinquent Securitized Accounts Receivable			38		37
Bad Debt Reserves Related to Securitization/Sale of Accounts Receivable			21		21
Unbilled Receivables Related to Securitization/Sale of Accounts Receivable			256		316

Customer accounts receivable retained and securitized for our operating companies are managed by AEP Credit. AEP Credit's delinquent customer accounts receivable represents accounts greater than 30 days past due.

Financing Activities

11. FINANCING ACTIVITIES

Long-term Debt

Long-term debt and other securities issued, retired and principal payments made during the first three months of 2013 are shown in the tables below:

			Principal		Interest
Company		Type of Debt	Amount Paid		Rate	Due Date
Retirements and			(in thousands)		(%)
	Principal Payments:
APCo		Land Note	$	7	13.718	2026
I&M		Notes Payable		4,040	Variable	2015
I&M		Notes Payable		5,953	Variable	2016
I&M		Notes Payable		4,123	2.12	2016
I&M		Notes Payable		10,542	Variable	2016
I&M		Other Long-term Debt		206	6.00	2025
OPCo		Senior Unsecured Notes		250,000	5.50	2013
OPCo		Senior Unsecured Notes		250,000	5.50	2013
PSO		Notes Payable		99	3.00	2027
SWEPCo		Notes Payable		1,625	4.58	2032

Dividend Restrictions

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

Federal Power Act

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

Leverage Restrictions

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of the subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with FERC. The amount of outstanding loans (borrowings) to/from the Utility Money Pool as of March 31, 2013 and December 31, 2012 is included in Advances to/from Affiliates on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the three months ended March 31, 2013 are described in the following table:

									Net
									Loans
	Maximum		Maximum		Average		Average		(Borrowings)		Authorized
	Borrowings		Loans		Borrowings		Loans		to/from Utility		Short-term
	from Utility		to Utility		from Utility		to Utility		Money Pool as of		Borrowing
Company	Money Pool		Money Pool		Money Pool		Money Pool		March 31, 2013		Limit
	(in thousands)
APCo	$	217,174	$	23,509	$	114,102	$	23,313	$	(73,448)	$	600,000
I&M		23,135		337,330		8,308		99,150		321,985		500,000
OPCo		410,456		169,284		207,014		53,482		(161,869)		600,000
PSO		24,004		25,343		11,929		11,527		(24,004)		300,000
SWEPCo		-		153,830		-		78,892		26,885		350,000

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

	Three Months Ended March 31,
	2013		2012
Maximum Interest Rate	0.43	%	0.56	%
Minimum Interest Rate	0.35	%	0.45	%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

	Average Interest Rate				Average Interest Rate
	for Funds Borrowed				for Funds Loaned
	from Utility Money Pool for				to Utility Money Pool for
	Three Months Ended March 31,				Three Months Ended March 31,
Company	2013		2012		2013		2012
APCo	0.38	%	0.51	%	0.37	%	0.51	%
I&M	0.36	%	-	%	0.37	%	0.51	%
OPCo	0.36	%	0.47	%	0.37	%	0.52	%
PSO	0.36	%	-	%	0.38	%	0.51	%
SWEPCo	-	%	0.53	%	0.38	%	0.51	%

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 4.

Sale of Receivables – AEP Credit

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2013 and December 31, 2012 was as follows:

	March 31,		December 31,
Company	2013		2012
	(in thousands)
APCo	$	163,474	$	153,719
I&M		134,377		123,447
OPCo		319,682		300,675
PSO		84,456		85,530
SWEPCo		121,202		132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	1,556	$	2,130
I&M		1,452		1,543
OPCo		4,669		5,916
PSO		1,414		1,732
SWEPCo		1,380		1,386

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	398,193	$	346,526
I&M		351,830		339,581
OPCo		696,958		837,897
PSO		240,275		272,795
SWEPCo		331,936		321,608

Financing Activities

11. FINANCING ACTIVITIES

Long-term Debt

Long-term debt and other securities issued, retired and principal payments made during the first three months of 2013 are shown in the tables below:

		Principal			Interest
Company	Type of Debt	Amount (a)			Rate	Due Date
Issuances:		(in thousands)			(%)
I&M	Senior Unsecured Notes	$	250,000		3.20	2023
OPCo	Long-term Debt - Affiliated		200,000	(b)	Variable	2015

(a) Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.

(b) Intercompany issuance from AEP consisting of a draw on a $1 billion term credit facility due in May 2015 to fund certain OPCo maturities on an interim basis and to facilitate the corporate separation of generation assets from transmission and distribution.

			Principal		Interest
Company		Type of Debt	Amount Paid		Rate	Due Date
Retirements and			(in thousands)		(%)
	Principal Payments:
APCo		Land Note	$	7	13.718	2026
I&M		Notes Payable		4,040	Variable	2015
I&M		Notes Payable		5,953	Variable	2016
I&M		Notes Payable		4,123	2.12	2016
I&M		Notes Payable		10,542	Variable	2016
I&M		Other Long-term Debt		206	6.00	2025
OPCo		Senior Unsecured Notes		250,000	5.50	2013
OPCo		Senior Unsecured Notes		250,000	5.50	2013
PSO		Notes Payable		99	3.00	2027
SWEPCo		Notes Payable		1,625	4.58	2032

In April 2013, I&M retired $28 million of Notes Payable related to DCC Fuel.

In April 2013, I&M reacquired $40 million of 5.25% Pollution Control Bonds due in 2025. The variable rate bonds are held by a trustee on behalf of I&M.

Dividend Restrictions

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

Federal Power Act

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

Leverage Restrictions

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of the subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with FERC. The amount of outstanding loans (borrowings) to/from the Utility Money Pool as of March 31, 2013 and December 31, 2012 is included in Advances to/from Affiliates on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the three months ended March 31, 2013 are described in the following table:

									Net
									Loans
	Maximum		Maximum		Average		Average		(Borrowings)		Authorized
	Borrowings		Loans		Borrowings		Loans		to/from Utility		Short-term
	from Utility		to Utility		from Utility		to Utility		Money Pool as of		Borrowing
Company	Money Pool		Money Pool		Money Pool		Money Pool		March 31, 2013		Limit
	(in thousands)
APCo	$	217,174	$	23,509	$	114,102	$	23,313	$	(73,448)	$	600,000
I&M		23,135		337,330		8,308		99,150		321,985		500,000
OPCo		410,456		169,284		207,014		53,482		(161,869)		600,000
PSO		24,004		25,343		11,929		11,527		(24,004)		300,000
SWEPCo		-		153,830		-		78,892		26,885		350,000

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

	Three Months Ended March 31,
	2013		2012
Maximum Interest Rate	0.43	%	0.56	%
Minimum Interest Rate	0.35	%	0.45	%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

	Average Interest Rate				Average Interest Rate
	for Funds Borrowed				for Funds Loaned
	from Utility Money Pool for				to Utility Money Pool for
	Three Months Ended March 31,				Three Months Ended March 31,
Company	2013		2012		2013		2012
APCo	0.38	%	0.51	%	0.37	%	0.51	%
I&M	0.36	%	-	%	0.37	%	0.51	%
OPCo	0.36	%	0.47	%	0.37	%	0.52	%
PSO	0.36	%	-	%	0.38	%	0.51	%
SWEPCo	-	%	0.53	%	0.38	%	0.51	%

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 4.

Sale of Receivables – AEP Credit

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2013 and December 31, 2012 was as follows:

	March 31,		December 31,
Company	2013		2012
	(in thousands)
APCo	$	163,474	$	153,719
I&M		134,377		123,447
OPCo		319,682		300,675
PSO		84,456		85,530
SWEPCo		121,202		132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	1,556	$	2,130
I&M		1,452		1,543
OPCo		4,669		5,916
PSO		1,414		1,732
SWEPCo		1,380		1,386

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	398,193	$	346,526
I&M		351,830		339,581
OPCo		696,958		837,897
PSO		240,275		272,795
SWEPCo		331,936		321,608

Financing Activities

11. FINANCING ACTIVITIES

Long-term Debt

Long-term debt and other securities issued, retired and principal payments made during the first three months of 2013 are shown in the tables below:

		Principal			Interest
Company	Type of Debt	Amount (a)			Rate	Due Date
Issuances:		(in thousands)			(%)
I&M	Senior Unsecured Notes	$	250,000		3.20	2023
OPCo	Long-term Debt - Affiliated		200,000	(b)	Variable	2015

(a) Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.

(b) Intercompany issuance from AEP consisting of a draw on a $1 billion term credit facility due in May 2015 to fund certain OPCo maturities on an interim basis and to facilitate the corporate separation of generation assets from transmission and distribution.

			Principal		Interest
Company		Type of Debt	Amount Paid		Rate	Due Date
Retirements and			(in thousands)		(%)
	Principal Payments:
APCo		Land Note	$	7	13.718	2026
I&M		Notes Payable		4,040	Variable	2015
I&M		Notes Payable		5,953	Variable	2016
I&M		Notes Payable		4,123	2.12	2016
I&M		Notes Payable		10,542	Variable	2016
I&M		Other Long-term Debt		206	6.00	2025
OPCo		Senior Unsecured Notes		250,000	5.50	2013
OPCo		Senior Unsecured Notes		250,000	5.50	2013
PSO		Notes Payable		99	3.00	2027
SWEPCo		Notes Payable		1,625	4.58	2032

As of March 31, 2013, trustees held, on behalf of OPCo, $413 million of its reacquired Pollution Control Bonds.

Dividend Restrictions

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

Federal Power Act

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

Leverage Restrictions

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of the subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with FERC. The amount of outstanding loans (borrowings) to/from the Utility Money Pool as of March 31, 2013 and December 31, 2012 is included in Advances to/from Affiliates on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the three months ended March 31, 2013 are described in the following table:

									Net
									Loans
	Maximum		Maximum		Average		Average		(Borrowings)		Authorized
	Borrowings		Loans		Borrowings		Loans		to/from Utility		Short-term
	from Utility		to Utility		from Utility		to Utility		Money Pool as of		Borrowing
Company	Money Pool		Money Pool		Money Pool		Money Pool		March 31, 2013		Limit
	(in thousands)
APCo	$	217,174	$	23,509	$	114,102	$	23,313	$	(73,448)	$	600,000
I&M		23,135		337,330		8,308		99,150		321,985		500,000
OPCo		410,456		169,284		207,014		53,482		(161,869)		600,000
PSO		24,004		25,343		11,929		11,527		(24,004)		300,000
SWEPCo		-		153,830		-		78,892		26,885		350,000

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

	Three Months Ended March 31,
	2013		2012
Maximum Interest Rate	0.43	%	0.56	%
Minimum Interest Rate	0.35	%	0.45	%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

	Average Interest Rate				Average Interest Rate
	for Funds Borrowed				for Funds Loaned
	from Utility Money Pool for				to Utility Money Pool for
	Three Months Ended March 31,				Three Months Ended March 31,
Company	2013		2012		2013		2012
APCo	0.38	%	0.51	%	0.37	%	0.51	%
I&M	0.36	%	-	%	0.37	%	0.51	%
OPCo	0.36	%	0.47	%	0.37	%	0.52	%
PSO	0.36	%	-	%	0.38	%	0.51	%
SWEPCo	-	%	0.53	%	0.38	%	0.51	%

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 4.

Sale of Receivables – AEP Credit

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2013 and December 31, 2012 was as follows:

	March 31,		December 31,
Company	2013		2012
	(in thousands)
APCo	$	163,474	$	153,719
I&M		134,377		123,447
OPCo		319,682		300,675
PSO		84,456		85,530
SWEPCo		121,202		132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	1,556	$	2,130
I&M		1,452		1,543
OPCo		4,669		5,916
PSO		1,414		1,732
SWEPCo		1,380		1,386

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	398,193	$	346,526
I&M		351,830		339,581
OPCo		696,958		837,897
PSO		240,275		272,795
SWEPCo		331,936		321,608

Financing Activities

11. FINANCING ACTIVITIES

Long-term Debt

Long-term debt and other securities issued, retired and principal payments made during the first three months of 2013 are shown in the tables below:

			Principal		Interest
Company		Type of Debt	Amount Paid		Rate	Due Date
Retirements and			(in thousands)		(%)
	Principal Payments:
APCo		Land Note	$	7	13.718	2026
I&M		Notes Payable		4,040	Variable	2015
I&M		Notes Payable		5,953	Variable	2016
I&M		Notes Payable		4,123	2.12	2016
I&M		Notes Payable		10,542	Variable	2016
I&M		Other Long-term Debt		206	6.00	2025
OPCo		Senior Unsecured Notes		250,000	5.50	2013
OPCo		Senior Unsecured Notes		250,000	5.50	2013
PSO		Notes Payable		99	3.00	2027
SWEPCo		Notes Payable		1,625	4.58	2032

Dividend Restrictions

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

Federal Power Act

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

Leverage Restrictions

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of the subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with FERC. The amount of outstanding loans (borrowings) to/from the Utility Money Pool as of March 31, 2013 and December 31, 2012 is included in Advances to/from Affiliates on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the three months ended March 31, 2013 are described in the following table:

									Net
									Loans
	Maximum		Maximum		Average		Average		(Borrowings)		Authorized
	Borrowings		Loans		Borrowings		Loans		to/from Utility		Short-term
	from Utility		to Utility		from Utility		to Utility		Money Pool as of		Borrowing
Company	Money Pool		Money Pool		Money Pool		Money Pool		March 31, 2013		Limit
	(in thousands)
APCo	$	217,174	$	23,509	$	114,102	$	23,313	$	(73,448)	$	600,000
I&M		23,135		337,330		8,308		99,150		321,985		500,000
OPCo		410,456		169,284		207,014		53,482		(161,869)		600,000
PSO		24,004		25,343		11,929		11,527		(24,004)		300,000
SWEPCo		-		153,830		-		78,892		26,885		350,000

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

	Three Months Ended March 31,
	2013		2012
Maximum Interest Rate	0.43	%	0.56	%
Minimum Interest Rate	0.35	%	0.45	%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

	Average Interest Rate				Average Interest Rate
	for Funds Borrowed				for Funds Loaned
	from Utility Money Pool for				to Utility Money Pool for
	Three Months Ended March 31,				Three Months Ended March 31,
Company	2013		2012		2013		2012
APCo	0.38	%	0.51	%	0.37	%	0.51	%
I&M	0.36	%	-	%	0.37	%	0.51	%
OPCo	0.36	%	0.47	%	0.37	%	0.52	%
PSO	0.36	%	-	%	0.38	%	0.51	%
SWEPCo	-	%	0.53	%	0.38	%	0.51	%

Sale of Receivables – AEP Credit

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2013 and December 31, 2012 was as follows:

	March 31,		December 31,
Company	2013		2012
	(in thousands)
APCo	$	163,474	$	153,719
I&M		134,377		123,447
OPCo		319,682		300,675
PSO		84,456		85,530
SWEPCo		121,202		132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	1,556	$	2,130
I&M		1,452		1,543
OPCo		4,669		5,916
PSO		1,414		1,732
SWEPCo		1,380		1,386

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	398,193	$	346,526
I&M		351,830		339,581
OPCo		696,958		837,897
PSO		240,275		272,795
SWEPCo		331,936		321,608

Financing Activities

11. FINANCING ACTIVITIES

Long-term Debt

Long-term debt and other securities issued, retired and principal payments made during the first three months of 2013 are shown in the tables below:

			Principal		Interest
Company		Type of Debt	Amount Paid		Rate	Due Date
Retirements and			(in thousands)		(%)
	Principal Payments:
APCo		Land Note	$	7	13.718	2026
I&M		Notes Payable		4,040	Variable	2015
I&M		Notes Payable		5,953	Variable	2016
I&M		Notes Payable		4,123	2.12	2016
I&M		Notes Payable		10,542	Variable	2016
I&M		Other Long-term Debt		206	6.00	2025
OPCo		Senior Unsecured Notes		250,000	5.50	2013
OPCo		Senior Unsecured Notes		250,000	5.50	2013
PSO		Notes Payable		99	3.00	2027
SWEPCo		Notes Payable		1,625	4.58	2032

Dividend Restrictions

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

Federal Power Act

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

Leverage Restrictions

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of the subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with FERC. The amount of outstanding loans (borrowings) to/from the Utility Money Pool as of March 31, 2013 and December 31, 2012 is included in Advances to/from Affiliates on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the three months ended March 31, 2013 are described in the following table:

									Net
									Loans
	Maximum		Maximum		Average		Average		(Borrowings)		Authorized
	Borrowings		Loans		Borrowings		Loans		to/from Utility		Short-term
	from Utility		to Utility		from Utility		to Utility		Money Pool as of		Borrowing
Company	Money Pool		Money Pool		Money Pool		Money Pool		March 31, 2013		Limit
	(in thousands)
APCo	$	217,174	$	23,509	$	114,102	$	23,313	$	(73,448)	$	600,000
I&M		23,135		337,330		8,308		99,150		321,985		500,000
OPCo		410,456		169,284		207,014		53,482		(161,869)		600,000
PSO		24,004		25,343		11,929		11,527		(24,004)		300,000
SWEPCo		-		153,830		-		78,892		26,885		350,000

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

	Three Months Ended March 31,
	2013		2012
Maximum Interest Rate	0.43	%	0.56	%
Minimum Interest Rate	0.35	%	0.45	%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

	Average Interest Rate				Average Interest Rate
	for Funds Borrowed				for Funds Loaned
	from Utility Money Pool for				to Utility Money Pool for
	Three Months Ended March 31,				Three Months Ended March 31,
Company	2013		2012		2013		2012
APCo	0.38	%	0.51	%	0.37	%	0.51	%
I&M	0.36	%	-	%	0.37	%	0.51	%
OPCo	0.36	%	0.47	%	0.37	%	0.52	%
PSO	0.36	%	-	%	0.38	%	0.51	%
SWEPCo	-	%	0.53	%	0.38	%	0.51	%

Short-term Debt

The Registrant Subsidiaries’ outstanding short-term debt was as follows:

March 31, 2013

December 31, 2012

Outstanding

Interest

Outstanding

Interest

Company

Type of Debt

Amount

Rate (a)

Amount

Rate (a)

(in thousands)

SWEPCo

Line of Credit – Sabine

$

-

%

$

2,603

1.82

%

(a) Weighted average rate.

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 4.

Sale of Receivables – AEP Credit

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2013 and December 31, 2012 was as follows:

	March 31,		December 31,
Company	2013		2012
	(in thousands)
APCo	$	163,474	$	153,719
I&M		134,377		123,447
OPCo		319,682		300,675
PSO		84,456		85,530
SWEPCo		121,202		132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	1,556	$	2,130
I&M		1,452		1,543
OPCo		4,669		5,916
PSO		1,414		1,732
SWEPCo		1,380		1,386

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

	Three Months Ended March 31,
Company	2013		2012
	(in thousands)
APCo	$	398,193	$	346,526
I&M		351,830		339,581
OPCo		696,958		837,897
PSO		240,275		272,795
SWEPCo		331,936		321,608