13. SUSTAINABLE COST REDUCTIONS

In April 2012, we initiated a process to identify strategic repositioning opportunities and efficiencies that will result in sustainable cost savings. We selected a consulting firm to facilitate an organizational and process evaluation and a second firm to evaluate our current employee benefit programs. The process resulted in involuntary severances and was completed by the end of the first quarter of 2013. The severance program provides two weeks of base pay for every year of service along with other severance benefits.

We recorded a charge of $47 million to Other Operation expense in 2012 primarily related to severance benefits as a result of the sustainable cost reductions initiative. In addition, the sustainable cost reduction activity for the nine months ended September 30, 2013 is described in the following table:

	Sustainable Cost
	Reduction Activity
	(in millions)
Balance as of December 31, 2012	$	25
Incurred		16
Settled		(30)
Adjustments		(9)
Balance as of September 30, 2013	$	2

These expenses, net of adjustments, relate primarily to severance benefits and are included primarily in Other Operation expense on the condensed statements of income. Approximately 95% of the expense was within the Utility Operations segment. The remaining liability is included in Other Current Liabilities on the condensed balance sheets. We do not expect additional costs to be incurred related to this initiative.

Sustainable Cost Reductions

13. SUSTAINABLE COST REDUCTIONS

In April 2012, management initiated a process to identify strategic repositioning opportunities and efficiencies that will result in sustainable cost savings. Management selected a consulting firm to facilitate an organizational and process evaluation and a second firm to evaluate current employee benefit programs. The process resulted in involuntary severances and was completed by the end of the first quarter of 2013. The severance program provides two weeks of base pay for every year of service along with other severance benefits.

The Registrant Subsidiaries recorded charges to Other Operation expense in 2012 primarily related to severance benefits as a result of the sustainable cost reductions initiative. The total amount incurred in 2012 by Registrant Subsidiary was as follows:

Company	Total Cost Incurred
	(in thousands)
APCo	$	8,472
I&M		5,678
OPCo		13,498
PSO		3,675
SWEPCo		5,709

The Registrant Subsidiaries' sustainable cost reduction activity for the nine months ended September 30, 2013 is described in the following table:

			Expense		Incurred for							Remaining
	Balance as of		Allocation from		Registrant						Balance as of
Company	December 31, 2012		AEPSC		Subsidiaries		Settled		Adjustments		September 30, 2013
	(in thousands)
APCo	$	1,321	$	1,017	$	-	$	(1,575)	$	(730)	$	33
I&M		1,357		736		-		(1,681)		(373)		39
OPCo		3,450		1,354		6,114		(8,837)		(1,630)		451
PSO		652		325		-		(483)		(471)		23
SWEPCo		627		622		-		(1,620)		405		34

These expenses, net of adjustments, relate primarily to severance benefits and are included primarily in Other Operation expense on the condensed statements of income. The remaining liability is included in Other Current Liabilities on the condensed balance sheets. Management does not expect additional costs to be incurred related to this initiative.

Sustainable Cost Reductions

13. SUSTAINABLE COST REDUCTIONS

In April 2012, management initiated a process to identify strategic repositioning opportunities and efficiencies that will result in sustainable cost savings. Management selected a consulting firm to facilitate an organizational and process evaluation and a second firm to evaluate current employee benefit programs. The process resulted in involuntary severances and was completed by the end of the first quarter of 2013. The severance program provides two weeks of base pay for every year of service along with other severance benefits.

The Registrant Subsidiaries recorded charges to Other Operation expense in 2012 primarily related to severance benefits as a result of the sustainable cost reductions initiative. The total amount incurred in 2012 by Registrant Subsidiary was as follows:

Company	Total Cost Incurred
	(in thousands)
APCo	$	8,472
I&M		5,678
OPCo		13,498
PSO		3,675
SWEPCo		5,709

The Registrant Subsidiaries' sustainable cost reduction activity for the nine months ended September 30, 2013 is described in the following table:

			Expense		Incurred for							Remaining
	Balance as of		Allocation from		Registrant						Balance as of
Company	December 31, 2012		AEPSC		Subsidiaries		Settled		Adjustments		September 30, 2013
	(in thousands)
APCo	$	1,321	$	1,017	$	-	$	(1,575)	$	(730)	$	33
I&M		1,357		736		-		(1,681)		(373)		39
OPCo		3,450		1,354		6,114		(8,837)		(1,630)		451
PSO		652		325		-		(483)		(471)		23
SWEPCo		627		622		-		(1,620)		405		34

These expenses, net of adjustments, relate primarily to severance benefits and are included primarily in Other Operation expense on the condensed statements of income. The remaining liability is included in Other Current Liabilities on the condensed balance sheets. Management does not expect additional costs to be incurred related to this initiative.

Sustainable Cost Reductions

13. SUSTAINABLE COST REDUCTIONS

In April 2012, management initiated a process to identify strategic repositioning opportunities and efficiencies that will result in sustainable cost savings. Management selected a consulting firm to facilitate an organizational and process evaluation and a second firm to evaluate current employee benefit programs. The process resulted in involuntary severances and was completed by the end of the first quarter of 2013. The severance program provides two weeks of base pay for every year of service along with other severance benefits.

The Registrant Subsidiaries recorded charges to Other Operation expense in 2012 primarily related to severance benefits as a result of the sustainable cost reductions initiative. The total amount incurred in 2012 by Registrant Subsidiary was as follows:

Company	Total Cost Incurred
	(in thousands)
APCo	$	8,472
I&M		5,678
OPCo		13,498
PSO		3,675
SWEPCo		5,709

The Registrant Subsidiaries' sustainable cost reduction activity for the nine months ended September 30, 2013 is described in the following table:

			Expense		Incurred for							Remaining
	Balance as of		Allocation from		Registrant						Balance as of
Company	December 31, 2012		AEPSC		Subsidiaries		Settled		Adjustments		September 30, 2013
	(in thousands)
APCo	$	1,321	$	1,017	$	-	$	(1,575)	$	(730)	$	33
I&M		1,357		736		-		(1,681)		(373)		39
OPCo		3,450		1,354		6,114		(8,837)		(1,630)		451
PSO		652		325		-		(483)		(471)		23
SWEPCo		627		622		-		(1,620)		405		34

These expenses, net of adjustments, relate primarily to severance benefits and are included primarily in Other Operation expense on the condensed statements of income. The remaining liability is included in Other Current Liabilities on the condensed balance sheets. Management does not expect additional costs to be incurred related to this initiative.

Sustainable Cost Reductions

13. SUSTAINABLE COST REDUCTIONS

In April 2012, management initiated a process to identify strategic repositioning opportunities and efficiencies that will result in sustainable cost savings. Management selected a consulting firm to facilitate an organizational and process evaluation and a second firm to evaluate current employee benefit programs. The process resulted in involuntary severances and was completed by the end of the first quarter of 2013. The severance program provides two weeks of base pay for every year of service along with other severance benefits.

The Registrant Subsidiaries recorded charges to Other Operation expense in 2012 primarily related to severance benefits as a result of the sustainable cost reductions initiative. The total amount incurred in 2012 by Registrant Subsidiary was as follows:

Company	Total Cost Incurred
	(in thousands)
APCo	$	8,472
I&M		5,678
OPCo		13,498
PSO		3,675
SWEPCo		5,709

The Registrant Subsidiaries' sustainable cost reduction activity for the nine months ended September 30, 2013 is described in the following table:

			Expense		Incurred for							Remaining
	Balance as of		Allocation from		Registrant						Balance as of
Company	December 31, 2012		AEPSC		Subsidiaries		Settled		Adjustments		September 30, 2013
	(in thousands)
APCo	$	1,321	$	1,017	$	-	$	(1,575)	$	(730)	$	33
I&M		1,357		736		-		(1,681)		(373)		39
OPCo		3,450		1,354		6,114		(8,837)		(1,630)		451
PSO		652		325		-		(483)		(471)		23
SWEPCo		627		622		-		(1,620)		405		34

These expenses, net of adjustments, relate primarily to severance benefits and are included primarily in Other Operation expense on the condensed statements of income. The remaining liability is included in Other Current Liabilities on the condensed balance sheets. Management does not expect additional costs to be incurred related to this initiative.

Sustainable Cost Reductions

13. SUSTAINABLE COST REDUCTIONS

In April 2012, management initiated a process to identify strategic repositioning opportunities and efficiencies that will result in sustainable cost savings. Management selected a consulting firm to facilitate an organizational and process evaluation and a second firm to evaluate current employee benefit programs. The process resulted in involuntary severances and was completed by the end of the first quarter of 2013. The severance program provides two weeks of base pay for every year of service along with other severance benefits.

The Registrant Subsidiaries recorded charges to Other Operation expense in 2012 primarily related to severance benefits as a result of the sustainable cost reductions initiative. The total amount incurred in 2012 by Registrant Subsidiary was as follows:

Company	Total Cost Incurred
	(in thousands)
APCo	$	8,472
I&M		5,678
OPCo		13,498
PSO		3,675
SWEPCo		5,709

The Registrant Subsidiaries' sustainable cost reduction activity for the nine months ended September 30, 2013 is described in the following table:

			Expense		Incurred for							Remaining
	Balance as of		Allocation from		Registrant						Balance as of
Company	December 31, 2012		AEPSC		Subsidiaries		Settled		Adjustments		September 30, 2013
	(in thousands)
APCo	$	1,321	$	1,017	$	-	$	(1,575)	$	(730)	$	33
I&M		1,357		736		-		(1,681)		(373)		39
OPCo		3,450		1,354		6,114		(8,837)		(1,630)		451
PSO		652		325		-		(483)		(471)		23
SWEPCo		627		622		-		(1,620)		405		34

These expenses, net of adjustments, relate primarily to severance benefits and are included primarily in Other Operation expense on the condensed statements of income. The remaining liability is included in Other Current Liabilities on the condensed balance sheets. Management does not expect additional costs to be incurred related to this initiative.