S-3/A

As filed with the Securities and Exchange Commission on October 24, 2013

REGISTRATION NOS. 333-191392 and

____333-191392-01

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________________________

PRE-EFFECTIVE AMENDMENT NO. 1

TO

REGISTRATION STATEMENT

ON

FORM S-3

UNDER THE SECURITIES ACT OF 1933

____________________________________

  APPALACHIAN POWER COMPANY (Exact name of Registrant and Sponsor as specified in its charter) VIRGINIA (State or other jurisdiction of incorporation or organization) 54-0124790 (I.R.S. Employer Identification No.) 1 RIVERSIDE PLAZA COLUMBUS, OHIO 43215 (614) 716-1000 APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC (Exact name of Registrant and Issuing Entity as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 46-3706150 (I.R.S. Employer Identification No.) 1 RIVERSIDE PLAZA COLUMBUS, OHIO 43215 (614) 716-3627

(Address, including zip code, and telephone number, including

area code, of Registrant’s principal executive offices)

Julia A. Sloat

Appalachian Power Company

1 Riverside Plaza, 28th Floor

Columbus, Ohio 43215

(614) 716-2885

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

____________________________________

With a Copy to:

Kevin Hochberg, Esq.

Sidley Austin llp

One South Dearborn Street

Chicago, Illinois 60603

(312) 853-2085

____________________________________

Approximate date of commencement of proposed sale to the public:From time to time after this Registration Statement becomes effective as determined by market conditions.

____________________________________

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box.  þ

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o__________________.

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o _________________.

If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, please check the following box. o

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, please check the following box. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer x (do not check if smaller reporting company)	Smaller reporting company o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to Be Registered	Amount to Be Registered	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee (2)
Senior Secured Consumer Rate Relief Bonds	$382,000,000	100% (1)	$382,000,000(1)	$49,201.60

(1)           Estimated pursuant to Rule 457 solely for the purpose of calculating the registration fee.

(2)           $136.40 of the registration fee was previously paid on September 25, 2013.

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

2

The information in this prospectus supplement and the prospectus is not complete and may be changed. The Consumer Rate Relief Bonds may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement and the prospectus are not an offer to sell nor do they seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion

Preliminary Prospectus Supplement, dated October 24, 2013

PROSPECTUS SUPPLEMENT

(To Prospectus dated October [__], 2013)

$[__]

Appalachian Consumer Rate Relief Funding LLC

Issuing Entity

Senior Secured Consumer Rate Relief Bonds

Tranche	Expected Weighted Average Life (Years)	Principal Amount Issued	Scheduled Final Payment Date	Final Maturity Date	Interest Rate	Initial Price to Public	Underwriting Discounts and Commissions	Proceeds to Issuer (Before Expenses)
A-1		$[__]
A-2		$[__]

The total price to the public is $_____________.  The total amount of the underwriting discounts and commissions is $_________.  The total amount of proceeds to the issuing entity before deduction of expenses (estimated to be $_________) is $_____________.

Investing in the Senior Secured Consumer Rate Relief Bonds involves risks.  Please read “Risk Factors” on page 10 of the accompanying prospectus.

Appalachian Consumer Rate Relief Funding LLC, or the issuing entity, is issuing $[__] of Senior Secured Consumer Rate Relief Bonds, referred to herein as the consumer rate relief bonds or the bonds, in [two] tranches.  Appalachian Power Company, or APCo, is the depositor, seller, initial servicer and sponsor with regard to the bonds.  The bonds are senior secured obligations of the issuing entity supported by the consumer rate relief property, described in this prospectus supplement, which includes the right to a special, irrevocable nonbypassable charge, known as a consumer rate relief charge or a CRR charge, paid by West Virginia retail electric customers of APCo (or any successor) based on their electricity consumption and/or demand as discussed in this prospectus supplement and the accompanying prospectus.  The Recovery Act (defined herein) mandates that CRR charges be adjusted at least annually, and the Public Service Commission of West Virginia, or the PSC, further requires such true-ups to occur semi-annually (and permits such true-ups to occur more frequently) if necessary, in each case to ensure the expected recovery of amounts sufficient to timely provide all scheduled payments of principal and interest on the bonds and all ongoing financing costs, as described further in this prospectus supplement and the accompanying prospectus.  Credit enhancement for the bonds will be provided by such true-up adjustments as well as by accounts held under the indenture.

The bonds represent obligations only of the issuing entity and do not represent obligations of APCo or any of its affiliates other than the issuing entity.  The bonds are secured by the assets of the issuing entity, consisting principally of the CRR property and funds on deposit in the collection account for the bonds and related subaccounts.  Please read “The Bonds—The Collateral” and “—The CRR Property” and “Credit Enhancement” in this prospectus supplement.  The bonds are not a debt or general obligation of the State of West Virginia, the PSC or of any county, municipality or other political subdivision of the State of West Virginia and are not a pledge of the faith and credit or taxing power of the State of West Virginia or any county, municipality or other political subdivision of the State of West Virginia.

The PSC guarantees that it will act pursuant to its financing order to ensure that expected CRR charges are sufficient to pay on a timely basis scheduled principal of and interest on the bonds and all other ongoing financing costs as described below in this prospectus supplement and the accompanying prospectus.  The PSC’s obligations relating to the bonds, including the specific actions that it has guaranteed to take, are direct, explicit, irrevocable and unconditional upon issuance of the bonds, and are legally enforceable against the PSC.

Additional information is contained in the accompanying prospectus.  You should read this prospectus supplement and the accompanying prospectus carefully before you decide to invest in the bonds.  This prospectus supplement may not be used to offer or sell the bonds unless accompanied by the prospectus.

Matters relating to the structuring, marketing and pricing of the bonds have been considered jointly with the PSC, acting through Public Resources Advisory Group, as its independent financial advisor.

_________________________

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ARE TRUTHFUL OR COMPLETE.  ANY REPRESENTATION TO THE CONTRARY IS A  CRIMINAL OFFENSE.

The underwriters expect to deliver the bonds through the book-entry facilities of The Depository Trust Company against payment in immediately available funds on or about November [__], 2013.  Each bond will be entitled to interest on [February 1] and [August 1] of each year.  The first scheduled payment date is [August 1], 2014.  [Interest will accrue from November [__], 2013 and must be paid by the purchaser if the bonds are delivered after that date.]  There currently is no secondary market for the bonds, and we cannot assure you that one will develop.

	Joint Bookrunning Managers
Morgan Stanley	Co-Managers	RBS
BoA Merrill Lynch	PNC Capital Markets LLC	Wells Fargo Securities

The date of this prospectus supplement is November [___], 2013

The information in this prospectus supplement and the prospectus is not complete and may be changed. The Consumer Rate Relief Bonds may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement and the prospectus are not an offer to sell nor do they seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

READING THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS	S-1
SUMMARY OF TERMS	S-2
THE BONDS	S-8
The Collateral	S-8
The CRR Property	S-9
Financing Order	S-10
PSC Financial Advisor	S-10
Payment and Record Dates and Payment Sources	S-10
Principal Payments	S-11
EXPECTED SINKING FUND SCHEDULE	S-12
EXPECTED AMORTIZATION SCHEDULE	S-13
Weighted Average Life Sensitivity	S-14
Assumptions	S-14
Fees and Expenses	S-14
Distribution Following Acceleration	S-15
Interest Payments	S-15
Optional Redemption	S-15
THE TRUSTEE	S-15
CREDIT ENHANCEMENT	S-16
True-Up Mechanism for Payment of Scheduled Principal and Interest	S-16
Collection Account and Subaccounts	S-17
How Funds in the Collection Account Will Be Allocated	S-18
THE CRR CHARGES	S-19
Initial CRR charges	S-19
UNDERWRITING THE BONDS	S-19
The Underwriters’ Sales Price for the Bonds	S-21
No Assurance as to Resale Price or Resale Liquidity for the Bonds	S-21
Various Types of Underwriter Transactions That May Affect the Price of the Bonds	S-21
USE OF PROCEEDS	S-22
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES	S-22
WHERE YOU CAN FIND MORE INFORMATION	S-22
LEGAL PROCEEDINGS	S-22
LEGAL MATTERS	S-22
OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS	S-23
READING THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT	1
PROSPECTUS SUMMARY	2
RISK FACTORS	10
RISKS ASSOCIATED WITH POTENTIAL JUDICIAL, LEGISLATIVE OR REGULATORY ACTIONS	10
SERVICING RISKS	12
RISKS ASSOCIATED WITH THE UNUSUAL NATURE OF THE CRR PROPERTY	14
STORM RELATED RISK	14
RISKS ASSOCIATED WITH POTENTIAL BANKRUPTCY PROCEEDINGS OF THE SELLER OR THE SERVICER	14
OTHER RISKS ASSOCIATED WITH AN INVESTMENT IN THE CONSUMER RATE RELIEF BONDS	17
REVIEW OF CRR PROPERTY	20
THE RECOVERY ACT	22
APCO’S FINANCING ORDER	26
DESCRIPTION OF THE CRR PROPERTY	30
THE DEPOSITOR, SELLER, INITIAL SERVICER AND SPONSOR	32
APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, THE ISSUING ENTITY	38
AFFILIATIONS AND CERTAIN RELATIONSHIPS	40
USE OF PROCEEDS	40
DESCRIPTION OF THE CONSUMER RATE RELIEF BONDS	40
THE TRUSTEE	56
SECURITY FOR THE CONSUMER RATE RELIEF BONDS	57
WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS FOR THE CONSUMER RATE RELIEF BONDS	62
THE SALE AGREEMENT	62
THE SERVICING AGREEMENT	70
HOW A BANKRUPTCY MAY AFFECT YOUR INVESTMENT	79
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES	81
ERISA CONSIDERATIONS	84
PLAN OF DISTRIBUTION	86
RATINGS FOR THE CONSUMER RATE RELIEF BONDS	87
WHERE YOU CAN FIND MORE INFORMATION	87
LEGAL MATTERS	88
GLOSSARY OF DEFINED TERMS	89

i 

Until 90 days after the date of this prospectus supplement, all dealers that effect transactions in these securities, whether or not participating in the offering described in this prospectus supplement, may be required to deliver a prospectus supplement and prospectus.  This is in addition to the dealers’ obligation to deliver a prospectus supplement and prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

ii 

READING THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS

This prospectus supplement and the accompanying prospectus provide information about us, the bonds and Appalachian Power Company, or APCo, the depositor, seller, initial servicer and sponsor of the bonds.  This prospectus supplement and the accompanying prospectus describe the terms of the bonds offered hereby.

References in this prospectus supplement and the accompanying prospectus to the term we, us, or the issuing entity mean Appalachian Consumer Rate Relief Funding LLC, the entity which will issue the bonds.  References to the consumer rate relief bonds or the bonds, unless the context otherwise requires, means the consumer rate relief bonds offered pursuant to this prospectus supplement.  References to APCo, the depositor, the seller or the sponsor mean Appalachian Power Company.  References to the bondholders or the holders refer to the registered holders of the consumer rate relief bonds.  References to the servicer refer to APCo and any successor servicer under the servicing agreement referred to in this prospectus supplement.  References to the Recovery Act refer to the West Virginia legislation adopted in March 2012, found at W.Va.Code Section 24-2-4f, as amended, which authorizes the recovery of certain expanded net energy costs (such costs are referred to as ENEC costs) by certain electric utilities through the issuance of consumer rate relief bonds.  Unless the context otherwise requires, the term customer or retail customer means a West Virginia retail user of electric delivery services provided by an electric utility such as APCo, and retail electric customer means all existing and future retail West Virginia customers that receive electric delivery services from APCo or its successors.  References to the PSC refer to the Public Service Commission of West Virginia.  You can find a glossary of some of the other defined terms we use in this prospectus supplement and the accompanying prospectus on page 89 of the accompanying prospectus.

We have included cross-references to sections in this prospectus supplement and the accompanying prospectus where you can find further related discussions.

You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and in any written communication from us or the underwriters specifying the terms of this offering.  Neither we nor any underwriter, agent, dealer, salesperson, the PSC or APCo has authorized anyone else to provide you with any different information.  If anyone provides you with different or inconsistent information, you should not rely on it.  We are not offering to sell the bonds in any jurisdiction where the offer or sale is not permitted.  The information in this prospectus supplement is current only as of the date of this prospectus supplement.

S-1

SUMMARY OF TERMS

The following section is only a summary of selected information and does not provide you with all the information you will need to make your investment decision.  There is more detailed information in this prospectus supplement and in the accompanying prospectus.  To understand all of the terms of the offering of the bonds, carefully read this entire document and the accompanying prospectus.

Securities offered:	$[__] Senior Secured Consumer Rate Relief Bonds, scheduled to pay principal semi-annually and sequentially in accordance with the expected sinking fund schedule.  Only the bonds are being offered through this prospectus supplement.
Issuing Entity and Capital Structure:	Appalachian Consumer Rate Relief Funding LLC is a special purpose Delaware limited liability company.  Appalachian Power Company is our sole member and owns all of our equity interests.  We have no commercial operations.  We were formed solely to purchase and own CRR property, to issue the bonds and to perform activities incidental thereto.  Please read “Appalachian Consumer Rate Relief Funding LLC, the Issuing Entity” in the accompanying prospectus.
	In addition to the CRR property, we will be capitalized with an upfront cash deposit equity contribution from APCo equal to 0.5% of the bonds’ initial principal amount issued (held in the capital subaccount) and will have an excess funds subaccount to retain any amounts collected and remaining on a payment date after all payments on the bonds and all ongoing financing costs have been made.
Purpose of transaction:	This issuance of the bonds will enable APCo to recover certain uncollected ENEC costs and associated financing costs in the State of West Virginia.  Please read “The Recovery Act” in the accompanying prospectus.
Ouraddress:	One Riverside Plaza 28th Floor Columbus, Ohio 43215
Ourtelephonenumber:	(614) 716-3627

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Our Managers:	The following is a list of our managers as of the date of this prospectus supplement:
	Name	Age		Background
	Renee V. Hawkins		48	Assistant treasurer and manager of the issuing entity.  Managing director corporate finance of the American Electric Power Service Corporation (Service Corporation), a subsidiary of American Electric Power Company, Inc. (AEP) since 2003 and assistant treasurer of the Service Corporation since 2008.  Assistant Treasurer of certain other AEP System companies.
	Julia A. Sloat		44	Treasurer and manager of the issuing entity.  Treasurer of APCo, treasurer of AEP and senior vice president and treasurer of the Service Corporation since January 1, 2013.  Joined the Service Corporation in 1999 and was appointed as director-investor relations in January 2003, became managing director-investor relations in November 2003, became vice president-investor relations in September 2004, became vice president-investor relations and strategic initiatives in June 2007 and became vice president and  treasurer  in January 2008. From August 2008 to August 2009 served as vice president-investor relations & corporate finance for Tween Brands, Inc.  Rejoined the Service Corporation in September 2009 as managing director-regulatory case management and became vice president-regulatory case management in August 2010.  Treasurer of certain other AEP System companies.
	Brian X. Tierney		46	President and manager of the issuing entity.  Vice president, chief financial officer and director of APCo, executive vice president and chief financial officer of AEP and executive vice president, chief financial officer and director of the Service Corporation.  Joined the Service Corporation in 1998 and was appointed senior vice president-energy marketing in 2003, became senior vice president-commercial operations in 2005, became executive vice president-AEP utilities east in 2006 and assumed his present position in 2009.  Vice president and director of certain other AEP System companies.
	Kenneth J. Uva		63	Manager of the issuing entity. Vice-President, CT Corporation System, since 1997.  Prior to that, a variety of positions at CT Corporation System or its subsidiaries since January 1976.  Mr. Uva presently serves as an independent manager for four special purpose affiliates of the issuing entity, AEP Texas Central Transition Funding LLC (TCC Funding I), AEP Texas Central Transition Funding II LLC (TCC Funding II) and AEP Texas Central Transition Funding III LLC (TCC Funding III), all wholly owned subsidiaries of AEP Texas Central Company (TCC), and Ohio Phase-In-Recovery Funding LLC (Ohio Funding), a wholly owned subsidiary of Ohio Power Company (OPCo).
	Victor A. Duva		55	Manager of the issuing entity.  President, CT Corporation Staffing, Inc., a subsidiary of CT Corporation System, since 2003.  From 1997 to 2002, Assistant Vice President and Officer Manager for CT Corporation’s Philadelphia office and, prior to that, a variety of positions at CT Corporation System since January 1981.  Mr. Duva presently serves as an independent manager for TCC Funding I, TCC Funding II, TCC Funding III and Ohio Funding.

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Credit ratings:	We expect the bonds will receive credit ratings from two nationally recognized statistical rating organizations.  Please read “Ratings for the Consumer Rate Relief Bonds” in the accompanying prospectus.
The Depositor, Seller, Sponsor and Servicer of the CRR property:	APCo, a Virginia corporation, is a fully regulated electric utility under the laws of West Virginia providing service in that state.  At December 31, 2012, APCo provided electric service to approximately 437,000 metered West Virginia retail electric customers covering a service territory of approximately 9,216 square miles.  APCo is an operating subsidiary of AEP, a public utility holding company based in Columbus, Ohio.  The bonds do not constitute a debt, liability or other legal obligation of APCo or AEP.  APCo, acting as the initial servicer, and any successor or assignee servicer, will service the CRR property securing the bonds under a servicing agreement with us.  Please read “The Depositor, Seller, Initial Servicer and Sponsor” and “The Servicing Agreement” in the accompanying prospectus.
PSC financial advisor:	Public Resources Advisory Group has served as the independent financial advisor to the PSC in connection with the structuring, marketing and pricing of the bonds.
APCo’s address:	One Riverside Plaza 28th Floor Columbus, Ohio 43215
APCo’s telephone number:	(614) 716-1000
Use of proceeds:	Proceeds (after underwriting discounts and commissions) will be used by us to pay upfront  financing costs of the transaction, including among others, expenses of authorization, issuance and sale of the bonds, and to purchase the CRR property from APCo.  APCo will use the sales price of the CRR property to reimburse itself for upfront financing costs incurred by it in connection with the transaction and to redeem, repay or retire a portion of its existing debt and/or equity. Please read “Use of Proceeds” in this prospectus supplement and in the accompanying prospectus.
Bond structure:	Sinking fund bond: tranche A-1, expected weighted average life [__] years, and tranche A-2, expected weighted average life [__] years.  The bonds are scheduled to pay principal semi-annually and sequentially.  Please read “Expected Amortization Schedule” in this prospectus supplement.
Trustee:	U.S. Bank National Association, a national banking association.  Please read “The Trustee” in the accompanying prospectus for a description of the trustee’s duties and responsibilities under the indenture.
Average life profile:	Prepayment is not permitted.  Extension risk is possible but is expected to be statistically remote.  Please read “Expected Amortization Schedule—Weighted Average Life Sensitivity” in this prospectus supplement and “Weighted Average Life and Yield Considerations for the Consumer Rate Relief Bonds” in the accompanying prospectus.
Optional redemption:	None.  Non-call for the life of the bonds.
Minimum denomination:	$100,000, or integral multiples of $1,000 in excess thereof, except that one bond of each tranche may be of a smaller denomination.
Credit/security:	The bonds will be secured primarily by the CRR property, which includes our irrevocable right to impose, charge and collect a nonbypassable consumption and/or demand based CRR charge from retail electric customers (approximately 437,000 retail electric customers as of December 31, 2012).  CRR charges are set and periodically adjusted to collect amounts sufficient to pay principal of and interest on the bonds on a timely basis and all other ongoing financing costs.  Please read “Credit Enhancement—True-Up Mechanism for Payment of Scheduled Principal and Interest” in this prospectus supplement, as well as the chart entitled “Parties to Transaction and Responsibilities” and “The Recovery Act” and “Description of the CRR Property—Creation of CRR Property” in the accompanying prospectus.

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	The CRR property securing the bonds is not a pool of receivables.  It consists of all of APCo’s rights and interests established pursuant to the financing order transferred to us in connection with the issuance of the bonds, including the irrevocable right to impose, charge and collect nonbypassable CRR charges and the right to implement the true-up mechanism discussed below.  Upon the sale of the CRR property to us and the pledge to the trustee under the indenture, the CRR property will constitute a present property right created by the Recovery Act and the financing order and is protected by the state pledge in the Recovery Act described below.
	The bonds are secured only by our assets, including the CRR property and also the funds on deposit in the collection account for the bonds and related subaccounts.  The subaccounts consist of a capital subaccount, which will be funded at closing in the amount of 0.5% of the initial aggregate principal amount of the bonds, a general subaccount, into which the servicer will deposit all CRR charge collections, and an excess funds subaccount, into which we will transfer any amounts collected and remaining on a payment date after all payments to bondholders and other parties (including APCo) have been made and any amounts drawn from the capital account are replenished.  Amounts on deposit in each of these subaccounts will be available to make payments on the bonds on each payment date.  For a description of the CRR property, please read “The Bonds—The CRR Property” in this prospectus supplement.
State pledge:	The State of West Virginia has pledged in the Recovery Act to bondholders, assignees and financing parties under the financing order that it will not take or permit any action that would impair the value of the CRR property or revise the consumer rate relief costs for which recovery is authorized under the financing order or, except for the specified true-up adjustments to correct any overcollections or undercollections, or reduce, alter or impair the CRR charges until all principal and interest in respect of the bonds and all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid or performed in full.  No voter initiative or referendum process exists in West Virginia, unlike in some other states.  Please read “The Recovery Act—APCo and Other Utilities May Securitize Consumer Rate Relief Costs” in the accompanying prospectus.
True-up mechanism for payment of scheduled principal and interest:	The financing order, in accordance with the Recovery Act, mandates that CRR charges on retail electric customers be adjusted at least annually to correct any overcollections or undercollections during the preceding set of collection periods and to ensure the billing of amounts necessary to generate collections of CRR charges sufficient to timely provide payment of all amounts due on the bonds and all other ongoing financing costs.  In addition, the financing order requires that CRR charges be adjusted semi-annually (or, if there are any bonds outstanding following the last scheduled final payment date for the latest maturing tranche, quarterly), and permits such true-up adjustments to occur more frequently, if the servicer projects that CRR charges will be insufficient to make all scheduled payments of principal of and interest on the bonds and ongoing financing costs on a timely basis during the current or next succeeding set of collection periods and/or to replenish draws on the capital subaccount.  The financing order also provides for the implementation of a nonstandard true-up adjustment to the CRR charges under certain circumstances to reflect significant changes from historical conditions of operation, such as the loss of significant electric load, or a merger of APCo with another utility and a resulting expansion of APCo’s customer base.  APCo will also initiate a nonstandard true-up proceeding if APCo and Wheeling Power merge in order to take into account the impact of the combined allocation of CRR revenue groups. Please read “APCo’s Financing Order—True-Up Mechanism” and “The Depositor, Seller, Initial Servicer and Sponsor—Merger with Wheeling Power Company” in the accompanying prospectus.  In the financing order, the PSC guarantees that it will act pursuant to the financing order to ensure that expected CRR charges are sufficient to pay on a timely basis all scheduled principal and interest on the bonds and other ongoing financing costs. There is no “cap” on the level of CRR charges that may be imposed on retail electric customers to pay on a timely basis scheduled principal and interest on the bonds and ongoing financing costs.  Such CRR charges may continue to be imposed, charged

S-5

	and collected until the bonds are paid in full, without any specified time limit.  Through the true-up mechanism, which adjusts for undercollections of CRR charges due to any reason, retail electric customers share in the liabilities of all other retail electric customers for the payment of CRR charges.
	The financing order provides that the true-up mechanism and all other obligations of the State of West Virginia and the PSC set forth in the financing order are direct, explicit, irrevocable and unconditional upon issuance of the bonds, and are legally enforceable against the State of West Virginia and the PSC.  Please read “The Recovery Act—APCo and Other Utilities May Securitize Consumer Rate Relief Costs” and “The Servicing Agreement—True-Up Adjustment Process” in the accompanying prospectus.
Nonbypassable CRR charges:	The Recovery Act mandates and the financing order requires the imposition and the collection of CRR charges from all existing and future West Virginia retail electric customers that receive electric delivery service from APCo or its successors, subject to only very limited exceptions set forth in the financing order and described in the accompanying prospectus.  A successor to APCo under the Recovery Act includes any entity that succeeds by operation of law to the rights and obligations of APCo pursuant to any bankruptcy, reorganization, restructuring, or other insolvency proceeding, any merger, acquisition or consolidation, or any sale or transfer of assets, regardless of whether any of these occur as a result of a restructuring of the electric power industry or otherwise.  The CRR charges are applied to retail electric customers individually and are adjusted and reallocated among all such customers as necessary under the true-up mechanism, subject only to limited exceptions.  Please read “The CRR Charges” in this prospectus supplement and “APCo’s Financing Order” and “The Servicing Agreement—True-Up Adjustment Process” in the accompanying prospectus.  Please read “Risk Factors—Other Risks Associated with an Investment in the Consumer Rate Relief Bonds” in the accompanying prospectus.  Please also read “The Depositor, Seller, Initial Servicer and Sponsor—Merger with Wheeling Power Company” in the accompanying prospectus.
Priority of Payments:	On each payment date for the bonds, the trustee will allocate or pay all amounts on deposit in the general subaccount of the collection account in the following order of priority:

1.	payment of the trustee’s fees, expenses and any outstanding indemnity amounts not to exceed $100,000 per annum,
2.	payment of the servicing fee relating to the bonds, plus any unpaid servicing fees from prior payment dates,
3.	payment of the administration fee and the fees of our independent managers, and in each case with any unpaid administration or management fees from prior payment dates,
4.	payment of all of our other ordinary periodic operating expenses relating to the bonds, such as accounting and audit fees, rating agency fees, legal fees and certain reimbursable costs of the administrator under the administration agreement and the servicer under the servicing agreement,
5.	payment of the interest then due on the bonds, including any past-due interest,
6.	payment of the principal then required to be paid on the bonds as a result of acceleration upon an event of default or at final maturity,
7.	payment of the principal then scheduled to be paid on the bonds in accordance with the expected sinking fund schedule, including any previously unpaid scheduled principal,
8.	payment of any of our remaining unpaid operating expenses and any remaining amounts owed pursuant to the basic documents, including all remaining indemnity amounts owed to the trustee,
9.	replenishment of any amounts drawn from the capital subaccount,

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10.	release to APCo of a return on its equity investment equal to 5.85% per annum on the initial amount deposited by it into the capital subaccount,
11.	allocation of the remainder, if any, to the excess funds subaccount, and
12.	after the bonds have been paid in full and discharged and all of the foregoing amounts are paid in full, the balance, together with all amounts in the capital subaccount and the excess funds subaccount, to us free and clear of the lien of the indenture.

	The annual servicing fee for the bonds in clause 2 payable to APCo or any affiliate thereof while it is acting as servicer shall not at any time exceed 0.05% of the original principal amount of the bonds, plus reimbursable costs.  The annual servicing fee for the bonds payable to any other servicer not affiliated with APCo shall not at any time exceed 1.25% of the original principal amount of the bonds unless such higher rate is approved by the PSC.  The annual administration fee in clause 3 above may not exceed $100,000, plus reimbursable costs.  Please read “Credit Enhancement—How Funds in the Collection Account Will Be Allocated” in this prospectus supplement.
Initial CRR charge as a percentage of customer’s total electricity bill:	The initial CRR charge for the bonds is expected to represent approximately [__]% of the total bill received by an average 1,000 kWh West Virginia residential retail electric customer served by APCo as of December 31, 2012.
Tax treatment:	The bonds will be treated as debt of APCo for U.S. federal income tax purposes.  Please read “Material U.S. Federal Income Tax Consequences” in the accompanying prospectus.
ERISA eligible:	Yes; please read “ERISA Considerations” in the accompanying prospectus.
Payment dates and interest accrual:	Semi-annually, [February 1] and [August 1] and on the final maturity date for any tranche.  Interest will be calculated on a 30/360 basis.  The first scheduled payment date is [August 1], 2014.  If any interest payment date is not a business day, payments scheduled to be made on such date may be made on the next succeeding business day and no interest shall accrue upon such payment during the intervening period.
	Interest is due on each payment date and principal is due upon the final maturity date for each tranche.
Expected settlement:	The closing date will be on or about November [__], 2013, [settling flat].  DTC, Clearstream and Euroclear.
Risk factors:	You should consider carefully the risk factors beginning on page 10 of the accompanying prospectus before you invest in the bonds.

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THE BONDS

We will issue the bonds and secure their payment under an indenture that we will enter into with U.S. Bank National Association, as trustee, referred to in this prospectus supplement and the accompanying prospectus as the trustee.  We will issue the bonds in minimum denominations of $100,000 and in integral multiples of $1,000 in excess thereof, except that we may issue one bond in each tranche in a smaller denomination.  The initial principal balance, scheduled final payment date, final maturity date and interest rate for each tranche of the bonds are stated in the table below:

Tranche	Expected Weighted Average Life (Years)	Principal Amount Issued	Scheduled Final Payment Date	Final Maturity Date	Interest Rate
A-1	[__]	$[__]			[__]%
A-2	[__]	$[__]			[__]%

The scheduled final payment date for each tranche of the bonds is the date when the outstanding principal balance of that tranche will be reduced to zero if we make payments according to the expected amortization schedule for that tranche.  The final maturity date for each tranche of bonds is the date when we are required to pay the entire remaining unpaid principal balance, if any, of all outstanding bonds of that tranche.  The failure to pay principal of any tranche of the bonds by the final maturity date for that tranche is an event of default, but the failure to pay principal of any tranche of the bonds by the related scheduled final payment date will not be an event of default.  Please read “Description of the Consumer Rate Relief Bonds—Interest and Principal on the Consumer Rate Relief Bonds” and “—Events of Default; Rights Upon Event of Default” in the accompanying prospectus.

The Collateral

The bonds will be secured under the indenture by all of our assets relating to the bonds.  The principal asset pledged will be the CRR property relating to the bonds, which will constitute  a present property right created under the Recovery Act by the financing order issued by the PSC, referred to in this prospectus supplement as the financing order.  The collateral includes all of our right, title and interests (whether owned on the closing date or thereafter acquired or arising) in and to the following property:

· the CRR property created under and pursuant to the financing order and the Recovery Act, and transferred by the seller to us pursuant to the sale agreement (including, to the fullest extent permitted by law, the right to impose, charge and collect CRR charges, the right to obtain adjustments to those charges, and all revenues, receipts, collections, rights to payment, payments, moneys, claims or other proceeds arising from the rights and interests created under the financing order),

· all CRR charges related to the CRR property,

· the sale agreement and the bill of sale executed in connection therewith and all property and interests in property transferred under the sale agreement and the bill of sale with respect to the CRR property and the consumer rate relief bonds,

· the servicing agreement, the administration agreement, any intercreditor agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing CRR property and the consumer rate relief bonds,

· the collection account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto,

· all rights to compel the servicer to file for and obtain true-up adjustments to the CRR charges in accordance with the Recovery Act and the financing order,

· all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute CRR property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property,

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· all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, and

· all payments on or under and all proceeds in respect of any or all of the foregoing.

Our collateral does not include:

· cash that has been released pursuant to the terms of the indenture, and

· amounts deposited with us on the closing date, for payment of costs of issuance with respect to the bonds (together with any interest earnings thereon).

Please read “Security for the Consumer Rate Relief Bonds” in the accompanying prospectus.

The CRR Property

In general terms, all of the rights and interests of APCo that relate to the bonds established pursuant to the financing order, upon transfer to us pursuant to the sale agreement, are referred to in this prospectus supplement as the CRR property.  The CRR property includes the right to impose, charge and collect CRR charges payable by all West Virginia retail electric customers of APCo or any successors, subject to only very limited exceptions, which receive electric delivery service from APCo or its successors in an amount sufficient to pay principal and interest and ongoing financing costs and to replenish the capital subaccount in connection with the bonds.  A successor to APCo under the Recovery Act includes any entity that succeeds by operation of law to the rights and obligations of APCo pursuant to any bankruptcy, reorganization, restructuring, or other insolvency proceeding, any merger, acquisition or consolidation, or any sale or transfer of assets, regardless of whether any of these occur as a result of a restructuring of the electric power industry or otherwise, and would include any entity resulting from a merger of APCo with its affiliate, Wheeling Power Company.  Please read “The Depositor, Seller, Initial Servicer and Sponsor—Merger with Wheeling Power Company” in the accompanying prospectus. During the twelve months ended December 31, 2012, approximately 37.07% of APCo’s total retail electric usage (as measured by billed GWh sales) in the state of West Virginia was to industrial customers, approximately 25.22% was to commercial customers and approximately 37.49% was to residential customers.  Had Wheeling Power’s retail electric usage (as measured by billed GWh sales) been included in the above percentages, the usage by industrial customers would have increased to 41.10% of the companies’ combined deliveries for the twelve months ending December 31, 2012, and the percentages for commercial and residential customers would have decreased to 24.19% and 34.49%, respectively.  Although the Recovery Act provides that CRR charges are payable by all West Virginia retail electric customers of APCo, the financing order provides that three customer rate classes (Century, Special Contract Customer J and the GS Transmission rate class, whose current rate structure exempts them from responsibility for ENEC costs) should be similarly excluded from responsibility for payment of the CRR charges.  GS Transmission service is available solely to transmission customers with less than 1,000 kw of load and the other two exempt classes consist of single customers. As of December 31, 2012, APCo did not have any customers taking GS Transmission service (although Wheeling Power had one such customer), and sales to the three excluded classes represented approximately one-tenth of one percent (0.1%) of APCo’s total retail electric usage (based on billed Gwh sales) for the year then ended, although that percentage could increase in the future should Century restart its operations or Special Contract Customer J expand its West Virginia operations or  additional customers become eligible to take GS Transmission service. During this period, deliveries to the State of West Virginia and other federal, state and local governmental entities, which are responsible for CRR charges, comprised approximately 0.22% of APCo’s retail electric deliveries.

We will purchase the CRR property from APCo.  The CRR property is not a receivable, and the principal collateral securing the bonds is not a pool of receivables.  CRR charges authorized in the financing order that relate to the bonds are irrevocable and not subject to reduction, impairment, or adjustment by further action of the PSC, except for annual and interim true-up adjustments to correct overcollections or undercollections and to provide the expected recovery of amounts sufficient to timely provide all payments of debt service and other required amounts and charges in connection with the bonds.  Please read “Credit Enhancement—True-Up Mechanism for Payment of Scheduled Principal and Interest” in this prospectus supplement.  All revenues and collections resulting from CRR charges provided for in the financing order are part of the CRR property.  The CRR property relating to the bonds is

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described in more detail under “The Sale Agreement—Sale and Assignment of the CRR Property” in the accompanying prospectus.

The servicer will bill and collect CRR charges allocable to the bonds from retail electric customers.  The financing order requires APCo to show the CRR charges as a separate line item on bills sent to customers and to provide customers on an annual basis with a plain-English explanation of the CRR charges.  Prior to the date on which the servicer remits the CRR charges to the trustee, the CRR charges may be commingled with the servicer’s other funds, although the servicer will remit collections within two business days following the receipt of such CRR charges.

For information on how electric service to retail electric customers may be terminated, please read “Risk Factors—Servicing Risks—Limits on rights to terminate service might make it more difficult to collect the CRR charges” in the accompanying prospectus.  Because the amount of CRR charge collections will depend largely on the amount of retail electric customer demand for, and consumption of, electricity, the amount of collections may vary substantially from year to year.  Please read “The Depositor, Seller, Initial Servicer and Sponsor” in the accompanying prospectus.

Under the indenture, the trustee or the holders of the bonds have the right to foreclose or otherwise enforce the lien on the CRR property.  However, in the event of foreclosure, there is likely to be a limited market, if any, for the CRR property.  Therefore, foreclosure might not be a realistic or practical remedy.  Please read “Risk Factors—Risks Associated with the Unusual Nature of the CRR Property—Foreclosure of the trustee’s lien on the CRR property for the Consumer Rate Relief Bonds might not be practical, and acceleration of the Consumer Rate Relief Bonds before maturity might have little practical effect” in the accompanying prospectus.

Financing Order

On September 20, 2013, the PSC issued the financing order relating to the bonds.  The financing order authorizes APCo to securitize and cause to be issued bonds in one or more series in an aggregate principal amount equal to the sum of (a) $376,024,583, plus (b) upfront financing costs (upfront financing costs, as described below) not to exceed the sum of (1) the fees charged and costs incurred by the PSC Financial Advisor plus (2) $5,750,000. The financing order became final and non-appealable on October 21, 2013.

The financing order also authorizes CRR charges in amounts sufficient to recover the principal of and interest on the bonds plus ongoing financing costs.  The PSC guarantees that it will act pursuant to the irrevocable financing order to ensure that expected CRR charges are sufficient to timely pay scheduled principal and interest on the bonds and ongoing financing costs. The financing order provides that the true-up mechanism and all other obligations of the State of West Virginia and the PSC set forth in the financing order are direct, explicit, irrevocable and unconditional upon issuance of the bonds, and are legally enforceable against the State of West Virginia and the PSC.  Please read “APCo’s Financing Order” in the accompanying prospectus.

PSC Financial Advisor

Public Resources Advisory Group has served as the independent financial advisor to the PSC in connection with the structuring, marketing and pricing of the bonds.  The financial advisor has participated in all plans and decisions related to the pricing, marketing and structuring of the bonds.

Payment and Record Dates and Payment Sources

Beginning [August 1], 2014, we will make payments on the bonds semi-annually on [February 1] and [August 1] of each year, or, if that day is not a business day, the following business day (each, a payment date).  So long as the bonds are in book-entry form, on each payment date, we will make interest and principal payments to the persons who are the holders of record as of the business day immediately prior to that payment date, which is referred to as the record date.  If we issue certificated bonds to beneficial owners of the bonds, the record date will be the last business day of the calendar month immediately preceding the payment date.  On each payment date, we will pay amounts on outstanding bonds from amounts available in the collection account and the related subaccounts held by the trustee in the priority set forth under “Credit Enhancement—How Funds in the Collection Account Will Be Allocated” in this prospectus supplement.  These available amounts, which will include amounts collected by the servicer for us with respect to the CRR charges, are described in greater detail under “Security For The Consumer

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Rate Relief Bonds—How Funds in the Collection Account will be Allocated” and “The Servicing Agreement—Remittances to Collection Account” in the accompanying prospectus.

Principal Payments

On each payment date, we will pay principal of the bonds to the bondholders equal to the sum, without duplication, of:

· the unpaid principal amount of any bond whose final maturity date is on that payment date, plus

· the unpaid principal amount of any bond upon acceleration following an event of default relating to the bonds, plus

· any overdue payments of principal, plus

· any unpaid and previously scheduled payments of principal, plus

· the principal scheduled to be paid on any bond on that payment date,

but only to the extent funds are available in the collection account after payment of certain of our fees and expenses and after payment of interest as described below under “—Interest Payments.”  To the extent funds are so available, we will make scheduled payments of principal of the bonds in the following order:

1. to the holders of the tranche A-1 bonds, until the principal balance of that tranche has been reduced to zero, and

2. to the holders of the tranche A-2 bonds, until the principal balance of that tranche has been reduced to zero.

However, unless the bonds have been accelerated following an event of default, we will not pay principal of any tranche of bonds on any payment date if making the payment would reduce the principal balance of that tranche to an amount lower than the amount specified in the expected amortization schedule below for that tranche on that payment date.  Unless the bonds have been accelerated following an event of default, any excess funds remaining in the collection account after payment of principal, interest, ongoing financing costs and other applicable fees and expenses, replenishment of any amounts drawn from the capital account and release of an allowed return on the amount contributed to the capital account, will be retained in the excess funds subaccount.  The entire unpaid principal balance of each tranche of the bonds will be due and payable on the final maturity date for that tranche.

If an event of default under the indenture has occurred and is continuing, the trustee or the holders of a majority in principal amount of the bonds then outstanding may declare the unpaid principal balance of the bonds, together with accrued interest thereon, to be due and payable.  However, the nature of our business will result in payment of principal upon an acceleration of the bonds being made as funds become available.  Please read “Risk Factors—Risks Associated With The Unusual Nature of the CRR Property—Foreclosure of the trustee’s lien on the CRR Property for the Consumer Rate Relief Bonds might not be practical, and acceleration of the Consumer Rate Relief Bonds before maturity might have little practical effect” and “Risk Factors—You may experience material payment delays or incur a loss on your investment in the Consumer Rate Relief Bonds because the source of funds for payment is limited” in the accompanying prospectus.  If there is a shortfall in the amounts available to make principal payments on the bonds that are due and payable, including upon an acceleration following an event of default, the trustee will distribute principal from the collection account pro rata to each tranche of bonds based on the principal amount then due and payable on the payment date; and if there is a shortfall in the remaining amounts available to make principal payments on the bonds that are scheduled to be paid, the trustee will distribute principal from the collection account pro rata to each tranche of bonds based on the principal amount then scheduled to be paid on the payment date.

The expected sinking fund schedule below sets forth the corresponding principal payment that is scheduled to be made on each payment date for each tranche of the bonds from the issuance date to the scheduled final payment date.  Similarly, the expected amortization schedule below sets forth the principal balance that is scheduled to remain outstanding on each payment date for each tranche of the bonds from the issuance date to the scheduled final payment date.

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Expected Sinking Fund Schedule

Semi-Annual Payment Date	Tranche A-1 Scheduled Principal Payment	Tranche A-2 Scheduled Principal Payment
8/1/2014	$	$
2/1/2015
8/1/2015
2/1/2016
8/1/2016
2/1/2017
8/1/2017
2/1/2018
8/1/2018
2/1/2019
8/1/2019
2/1/2020
8/1/2020
2/1/2021
8/1/2021
2/1/2022
8/1/2022
2/1/2023
8/1/2023
2/1/2024
Total Payments	$	$

We cannot assure you that the principal balance of any tranche of the bonds will be reduced at the rate indicated in the table above.  The actual reduction in tranche principal balances may occur more slowly.  The actual reduction in tranche principal balances will not occur more quickly than indicated in the above table, except in the case of acceleration due to an event of default under the indenture.  The bonds will not be in default if principal is not paid as specified in the schedule above.  The bonds will be in default if the principal of any tranche is not paid in full on or before the final maturity date of that tranche.

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Expected Amortization Schedule

Outstanding Principal Balance Per Tranche

Semi-Annual Payment Date	Tranche A-1 Balance	Tranche A-2 Balance
Issuance Date
8/1/2014
2/1/2015
8/1/2015
2/1/2016
8/1/2016
2/1/2017
8/1/2017
2/1/2018
8/1/2018
2/1/2019
8/1/2019
2/1/2020
8/1/2020
2/1/2021
8/1/2021
2/1/2022
8/1/2022
2/1/2023
8/1/2023
2/1/2024

On each payment date, the trustee will make principal payments to the extent the principal balance of each tranche of the bonds exceeds the amount indicated for that payment date in the table above and to the extent of funds available in the collection account after payment of certain of our fees and expenses and after payment of interest.

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Weighted Average Life Sensitivity

Weighted average life refers to the average amount of time from the date of issuance of a security until each dollar of principal of the security has been repaid to the investor.  The rate of principal payments on each tranche of bonds, the aggregate amount of each interest payment on each tranche of bonds and the actual final payment date of each tranche of bonds will depend on the timing of the servicer’s receipt of CRR charges from West Virginia retail electric customers of APCo.  Please read “Weighted Average Life and Yield Considerations for the Consumer Rate Relief Bonds” in the accompanying prospectus for further information.  Changes in the expected weighted average lives of the tranches of the bonds in relation to variances in actual energy consumption and demand levels (retail electric sales) from forecast levels are shown below.

Weighted Average Life Sensitivity
		-5% ([__] Standard Deviations from Mean)		-15% ([__] Standard Deviations from Mean)
Tranche	Expected Weighted Average Life (Years)	WAL (yrs)	Change (days)*	WAL (yrs)	Change (days)*
A-1	[__]
A-2	[__]

*    Number is rounded to whole days.

Assumptions

For the purposes of preparing the above chart, the following assumptions, among others, have been made:  (i) the forecast error stays constant over the life of the bonds and is equal to an overestimate of electricity consumption or demand of [-5]% ([__] standard deviations from mean) or [-15]% ([__] standard deviations from mean), (ii) the servicer makes timely and accurate filings to true-up the CRR charges semi-annually, (iii) customer charge-off rates are held constant at [__]% for the residential CRR rate class and [__]% for all other CRR classes of retail electric customers, (iv) retail electric customers remit all CRR charges [30] days after such CRR charges are billed, (v) operating expenses are equal to projections, (vi) there is no acceleration of the final maturity date of the bonds; (vii) a permanent loss of all customers has not occurred and (viii) the closing date is November [__], 2013. There can be no assurance that the weighted average lives of the bonds will be as shown.

Fees and Expenses

As set forth in the table below, the issuing entity is obligated to pay fees to the servicer, the trustee, its independent managers and APCo as administrator and to pay certain ongoing expenses, including a return to APCo on its equity investment in the issuing entity.  These obligations are included in ongoing financing costs and are components of the calculation of the CRR charges to be collected.  The following table illustrates this arrangement.

Recipient	Source of Payment	Fees and Expenses Payable
Servicer	CRR charge collections and investment earnings.	$[__] per annum (so long as servicer is APCo or an affiliate), plus out-of-pocket expenses
Trustee	CRR charge collections and investment earnings.	$ 4,000 per annum, plus out-of-pocket expenses
Independent Managers	CRR charge collections and investment earnings.	$ 5,000 per annum, plus out-of-pocket expenses
Administration Fee	CRR charge collections and	$100,000 per annum, plus out-of-pocket expenses

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Recipient	Source of Payment	Fees and Expenses Payable
	investment earnings.
APCo return on equity investment	CRR charge collections and investment earnings.	$ [__] per annum [insert number which is 5.85% of capital subaccount contribution]

The annual servicing fee payable to any servicer not affiliated with APCo shall not at any time exceed 1.25% of the original principal amount of the bonds unless such higher rate is approved by the PSC.

Distribution Following Acceleration

Upon an acceleration of the maturity of the bonds, the total outstanding principal balance of and interest accrued on the bonds will be payable, without priority of interest over principal or principal over interest.  Although principal will be due and payable upon acceleration, the nature of our business will result in principal being paid as funds become available.  Please read “Risk Factors—Risks Associated With The Unusual Nature of the CRR Property—Foreclosure of the trustee’s lien on the CRR Property for the Consumer Rate Relief Bonds might not be practical, and acceleration of the Consumer Rate Relief Bonds before maturity might have little practical effect” and “Risk Factors—You may experience material payment delays or incur a loss on your investment in the Consumer Rate Relief Bonds because the source of funds for payment is limited” in the accompanying prospectus.

Interest Payments

Interest on each tranche of bonds will accrue from and including the issue date to but excluding the first payment date, and thereafter from and including the previous payment date to but excluding the applicable payment date until the bonds have been paid in full, at the interest rate indicated on the cover of this prospectus supplement and in the table on page S-8.  Each of those periods is referred to as an interest accrual period.  On each payment date, we will pay interest on each tranche of the bonds equal to the following amounts:

· if there has been a payment default, any interest payable but unpaid on any prior payment date, together with interest on such unpaid interest, if any, and

· accrued interest on the principal balance of each tranche of the bonds as of the close of business on the preceding payment date (or with respect to the initial payment date, the date of the original issuance of the bonds) after giving effect to all payments of principal made on the preceding payment date, if any.

We will pay interest on the bonds before we pay principal on the bonds.  Please read “Description of the Consumer Rate Relief Bonds—Interest and Principal on the Consumer Rate Relief Bonds” in the accompanying prospectus.  If there is a shortfall in the amounts available in the collection account to make interest payments on the bonds, the trustee will distribute interest pro rata to each tranche of bonds based on the amount of interest payable on each such outstanding tranche.  Please read “Credit Enhancement—Collection Account and Subaccounts” in this prospectus supplement.  We will calculate interest on tranches of the bonds on the basis of a 360-day year of twelve 30-day months.

Optional Redemption

We may not voluntarily redeem any tranche of the bonds.

THE TRUSTEE

U.S. Bank National Association will be the indenture trustee (trustee).  U.S. Bank National Association (U.S. Bank), a national banking association, will also act as paying agent and registrar.  U.S. Bancorp, with total assets exceeding $353 billion as of June 30, 2013, is the parent company of U.S. Bank, the fifth largest commercial bank in the United States.  As of June 30, 2013, U.S. Bancorp served approximately 17 million

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customers and operated over 3,000 branch offices in 25 states. A network of specialized U.S. Bancorp offices across the nation provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions.

U.S. Bank has one of the largest corporate trust businesses in the country with office locations in 48 Domestic and 3 International cities.  The indenture will be administered from U.S. Bank’s corporate trust office located at 190 S. LaSalle Street, 7th Floor, Chicago, IL 60603.

U.S. Bank has provided corporate trust services since 1924.  As of June 30, 2013, U.S. Bank was acting as trustee with respect to over 84,000 issuances of securities with an aggregate outstanding principal balance of over $2.9 trillion.  This portfolio includes corporate and municipal bonds, mortgage-backed and asset-backed securities and collateralized debt obligations.

The trustee shall make each monthly statement available to the bondholders via the trustee’s internet website at http://www.usbank.com/abs.  Bondholders with questions may direct them to the trustee’s bondholder services group at (800) 934-6802.

U.S. Bank serves or has served as indenture trustee, paying agent and registrar on several issues of similar asset backed securities including those issued by three AEP affiliates, AEP Texas Central Transition Funding LLC, AEP Texas Central Transition Funding III LLC and Ohio Phase-In-Recovery Funding LLC.

The issuing entity, APCo and their respective affiliates may from time to time enter into normal banking and trustee relationships with U.S. Bank and its affiliates. No relationships currently exist or existed during the past two years between issuing entity, APCo and their respective affiliates, on the one hand, and U.S. Bank and its affiliates, on the other hand, that would be outside the ordinary course of business or on terms other than would be obtained in an arm’s length transaction with an unrelated third party.

CREDIT ENHANCEMENT

Credit enhancement for the bonds is intended to protect you against losses or delays in scheduled payments on your bonds.  Please read “Risk Factors—You may experience material payment delays or incur a loss on your investment in the Consumer Rate Relief Bonds because the source of funds for payment is limited” in the accompanying prospectus.

True-Up Mechanism for Payment of Scheduled Principal and Interest

The financing order, in accordance with the Recovery Act, mandates that CRR charges on retail electric customers be adjusted at least annually to correct any overcollections or undercollections during the preceding set of collection periods and to ensure the billing of amounts necessary to generate collections of CRR charges sufficient to timely provide payment of all amounts due on the bonds and all other ongoing financing costs.  In addition, the financing order requires that CRR charges be adjusted semi-annually (or, if there are any bonds outstanding following the last scheduled final payment date for the latest maturing tranche, quarterly), and permits such true-up adjustments to occur more frequently, if the servicer projects that CRR charges will be insufficient to make all scheduled payments of principal of and interest on the bonds and ongoing financing costs on a timely basis during the current or next succeeding set of collection periods and/or to replenish draws on the capital subaccount.  In the financing order, the PSC guarantees that it will act pursuant to the financing order to ensure that expected CRR charges are sufficient to pay on a timely basis all scheduled principal and interest on the bonds and other ongoing financing costs.

The financing order also provides for the implementation of a nonstandard true-up adjustment to the CRR charges under certain circumstances to reflect significant changes from historical conditions of operation, such as the loss of significant electric load or a merger of APCo with another utility and a resulting expansion of APCo’s customer base.  APCo will also initiate a nonstandard true-up proceeding if APCo and Wheeling Power merge in order to take into account the impact of the combined allocation of revenue groups.

There is no “cap” on the level of CRR charges that may be imposed on consumers of electricity to pay on a timely basis scheduled principal and interest on the bonds and ongoing financing costs, and such CRR charges may continue to be imposed, charged and collected until the bonds are paid in full, without any specified time limit.  Through the true-up mechanism, which adjusts for undercollections of CRR charges due to any reason, retail electric customers share in the liabilities of all other retail electric customers for the payment of CRR charges.

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In the event of a merger between APCo and its affiliate, Wheeling Power Company, the merged entity will be a successor under the Recovery Act and Wheeling Power Company’s customers, along with customers of APCo, will be subject to the CRR charge.  Please read “The Depositor, Seller, Initial Servicer and Sponsor—Merger with Wheeling Power Company” in the accompanying prospectus.

The financing order provides that the true-up mechanism and all other obligations of the State of West Virginia and the PSC set forth in the financing order are direct, explicit, irrevocable and unconditional upon issuance of the bonds, and are legally enforceable against the State of West Virginia and the PSC.

Please read “The CRR Charges” below in this prospectus supplement and “APCo’s Financing Order—True-Up Mechanism” and “The Servicing Agreement—True-Up Adjustment Process” in the accompanying prospectus.

Collection Account and Subaccounts

The trustee will establish a collection account for the bonds to hold the capital contribution from APCo and collected CRR charges periodically remitted to the trustee by the servicer.  The collection account will consist of various subaccounts, including the following:

· the general subaccount,

· the excess funds subaccount, and

· the capital subaccount.

For administrative purposes, the subaccounts may be established as separate accounts which will be recognized individually as subaccounts and collectively as the collection account.  Withdrawals from and deposits to these subaccounts will be made as described below in this prospectus supplement and under “Security for the Consumer Rate Relief Bonds—Description of Indenture Accounts” and “—How Funds in the Collection Account will be Allocated” in the accompanying prospectus.

The General Subaccount.  The trustee will deposit collected CRR charges remitted to it by the servicer with respect to the bonds into the general subaccount.  On each payment date, the trustee will allocate amounts in the general subaccount as described under “Credit Enhancement—How Funds in the Collection Account Will Be Allocated” below.

The Excess Funds Subaccount.  The excess funds subaccount will be funded with collected CRR charges and earnings on amounts in the collection account in excess of the amount necessary to pay on any payment date:

· fees and expenses, including any indemnity payments, of the trustee, our independent managers, the servicer and the administrator and other fees, expenses, costs and charges,

· principal and interest payments on the bonds required to be paid or scheduled to be paid on that payment date, and

· any amount required to replenish any amounts drawn from the capital subaccount or to pay APCo any unpaid return on the initial amount deposited by it into the capital subaccount.

The periodic true-up adjustments of the CRR charges will be calculated to eliminate any amounts held in the excess funds subaccount.

If amounts available in the general subaccount are not sufficient to pay the fees and expenses due on any payment date, to make required or scheduled payments to the bondholders and to replenish any amounts drawn from the capital subaccount, the trustee will first draw on any amounts in the excess funds subaccount to make those payments.

The Capital Subaccount.  On the date we issue the bonds, APCo will deposit $[__] into the capital subaccount as a capital contribution to us, which is equal to 0.5% of the initial principal balance of the bonds.  The capital contribution has been set at a level sufficient to obtain the ratings on the bonds described in the accompanying prospectus under “Ratings for the Consumer Rate Relief Bonds” and to obtain favorable tax treatment.  If amounts available in the general subaccount and the excess funds subaccount are not sufficient to make required or scheduled payments to the bondholders and to pay the fees and expenses specified in the indenture due on any payment date, the trustee will draw on amounts in the capital subaccount to make those payments.  

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APCo will be entitled to receive a return of 5.85% per annum on this initial capital contributed by it and this amount will be an ongoing financing cost and released free and clear of the indenture to APCo on a semi-annual basis.

How Funds in the Collection Account Will Be Allocated

Amounts remitted by the servicer to the trustee with respect to the bonds, including any indemnity amounts and all investment earnings on amounts in the subaccounts in the collection account, will be deposited into the general subaccount of the collection account.

On each payment date, the trustee will allocate or pay all amounts on deposit in the general subaccount of the collection account for the bonds in the following priority:

1.	payment of the trustee’s fees, expenses and any outstanding indemnity amounts, not to exceed $100,000 per annum;
2.	payment of the servicing fee relating to the bonds, plus any unpaid servicing fees from prior payment dates,
3.	payment of the administration fee and of the fees of our independent managers, each as described in the table beginning on page S-14, and in each case with any unpaid administration or management fees from prior payment dates,
4.	payment of all of our other ordinary periodic operating expenses relating to the bonds, such as accounting and audit fees, rating agency fees, legal fees and certain reimbursable costs of the administrator under the administration agreement and of the servicer under the servicing agreement,
5.	payment of the interest then due on the bonds, including any past-due interest,
6.	payment of principal then required to be paid on the bonds as a result of acceleration upon an event of default or at final maturity,
7.	payment of principal then scheduled to be paid on the bonds in accordance with the expected sinking fund schedule, including any previously unpaid scheduled principal,
8.	payment of any of our remaining unpaid operating expenses and any remaining amounts owed pursuant to the basic documents, including all remaining indemnity amounts owed to the trustee,
9	replenishment of any amounts drawn from the capital subaccount for the bonds,
10.	release to APCo of a return on its equity investment equal to 5.85% per annum on the initial amount deposited by it into the capital subaccount,
11.	allocation of the remainder, if any, to the excess funds subaccount, and
12.	after the bonds have been paid in full and discharged and all of the foregoing amounts are paid in full, the balance, together with all amounts in the capital subaccount and the excess funds subaccount, to us free and clear of the lien of the indenture.

The amounts paid during any calendar year in respect of the servicing fee in clause 2 may not exceed 0.05% of the original principal balance of the bonds (for so long as APCo or any of its affiliates is the servicer) and may not exceed 1.25% of the original principal balance of the bonds if APCo or any of its affiliates is not the servicer, unless otherwise approved by the PSC.  The annual administration fee in clause 3 may not exceed $100,000.  Each of the servicer and the administrator is also entitled to reimbursement of certain out-of-pocket expenses, such as those of accountants and counsel.  Please read “Risk Factors—Other Risks Associated with an Investment in the Consumer Rate Relief Bonds—APCo’s indemnification obligations under the sale and servicing agreements are limited and might not be sufficient to protect your investment in the Consumer Rate Relief Bonds” in the accompanying prospectus.

If, on any payment date, funds in the general subaccount are insufficient to make the allocations or payments contemplated by clauses 1 through 9 of the first paragraph of this subsection, the trustee will draw from amounts on deposit in the following subaccounts in the following order up to the amount of the shortfall:

1. from the excess funds subaccount for allocations and payments contemplated in clauses 1 through 9, and

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2. from the capital subaccount for allocations and payments contemplated in clauses 1 through 8.

If, on any payment date, available collections of CRR charges allocable to the bonds, together with available amounts in the related subaccounts, are not sufficient to pay all amounts due on all outstanding bonds on that payment date amounts available will be allocated sequentially in the following order, in each case to the extent of available funds:

· first, pro rata to interest based on the amount of interest then due and payable on each tranche of the bonds;

· second, pro rata to principal, based on the principal amount of each tranche then due and payable; and

· third, then pro rata to principal, based upon the principal amount of each tranche then scheduled to be paid, including any previously unpaid scheduled principal.

If the trustee uses amounts on deposit in the capital subaccount to pay those amounts or make those transfers, as the case may be, subsequent adjustments to the related CRR charges will take into account, among other things, the need to replenish those amounts.

THE CRR CHARGES

APCo will be the initial servicer of the bonds.  Beginning on the date we issue the bonds, the initial CRR charges listed in the table below will be imposed on West Virginia retail electric customers in each CRR rate class at the applicable rate for the class determined pursuant to the financing order.  These CRR charges will be adjusted annually, or more frequently under certain circumstances, by the servicer in accordance with its filings with the PSC.  Please read “Description of the CRR Property—Creation of CRR Property” in the accompanying prospectus.

Initial CRR charges

CRR Rate Class	Initial CRR Charge Rate (per kWh or kW)
Residential CRR Revenue Group
Residential  – (RS & RS-TOD)
Commercial CRR Revenue Group
Commercial – Sec (SWS, SGS, SS Secondary, GS Secondary)
Commercial – Pri (SS & GS Primary)
Commercial – C (Special Contract C)
Commercial – Subt (GS – Subtransmission)
Commercial – AF (GS – AF & SS - AF)
Commercial - OL & SL (OL & SL)
Industrial CRR Revenue Group
Industrial – Sec (LCP & IP Secondary)
Industrial – Pri (LCP & IP Primary)
Industrial – Subt (LCP & IP Subtransmission)
Industrial – Trans (LCP & IP Transmission, Special Contract K)
Industrial – A (Special Contract A)
Industrial – B (Special Contract B)
Industrial – D (Special Contract D)
Industrial – H (Special Contract H)
Industrial – I (Special Contract I)

Please read “Description of the CRR Property—Creation of CRR Property” and “—CRR Revenue Groups and CRR Rate Classes” in the accompanying prospectus.

UNDERWRITING THE BONDS

Subject to the terms and conditions in the underwriting agreement among us, APCo and the underwriters, for whom [underwriters] are acting as representatives, we have agreed to sell to the underwriters, and the

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underwriters have severally agreed to purchase, the principal amount of the bonds listed opposite each underwriter’s name below:

Underwriter	Tranche A-1	Tranche A-2
Morgan Stanley & Co. LLC
RBS Securities Inc.	$	$
Merrill Lynch, Pierce Fenner & Smith
Incorporated
PNC Capital Markets LLC
Wells Fargo Securities, LLC
Total	$	$

Under the underwriting agreement, the underwriters will take and pay for all of the bonds we offer, if any is taken.  If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

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The Underwriters’ Sales Price for the Bonds

The bonds sold by the underwriters to the public will be initially offered at the prices to the public set forth on the cover of this prospectus supplement.  The underwriters propose initially to offer the bonds to dealers at such prices, less a selling concession not to exceed the percentage listed below for each tranche.  The underwriters may allow, and dealers may reallow, a discount not to exceed the percentage listed below for each tranche.

	Selling Concession	Reallowance Discount
Tranche A-1
Tranche A-2

After the initial public offering, the public offering prices, selling concessions and reallowance discounts may change.

No Assurance as to Resale Price or Resale Liquidity for the Bonds

The bonds are a new issue of securities with no established trading market.  They will not be listed on any securities exchange.  The underwriters have advised us that they intend to make a market in the bonds, but they are not obligated to do so and may discontinue market making at any time without notice.  We cannot assure you that a liquid trading market will develop for the bonds.

Various Types of Underwriter Transactions That May Affect the Price of the Bonds

The underwriters may engage in overallotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids with respect to the bonds in accordance with Regulation M under the Securities Exchange Act of 1934.  Overallotment transactions involve syndicate sales in excess of the offering size, which create a syndicate short position.  Stabilizing transactions are bids to purchase the bonds, which are permitted, so long as the stabilizing bids do not exceed a specific maximum price.  Syndicate covering transactions involve purchases of the bonds in the open market after the distribution has been completed in order to cover syndicate short positions.  Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the bonds originally sold by the syndicate member are purchased in a syndicate covering transaction.  These overallotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids may cause the prices of the bonds to be higher than they would otherwise be.  Neither we, APCo, the trustee, our managers nor any of the underwriters represent that the underwriters will engage in any of these transactions or that these transactions, if commenced, will not be discontinued without notice at any time.

Certain of the underwriters and their affiliates have in the past provided, and may in the future from time to time provide, investment banking and general financing and banking services to APCo and its affiliates for which they have in the past received, and in the future may receive, customary fees.  In addition, each underwriter may from time to time take positions in the bonds.  Morgan Stanley & Co. LLC, as financial advisor, has rendered certain financial advisory/structuring services to us and will receive the fee set forth in “Use of Proceeds” below for such services, which fee is a component of the underwriting discount and expenses.  In accordance with FINRA Rule 5110, this financial advisory fee and the reimbursement of expenses are deemed underwriting compensation in connection with the offering.  Public Resources Advisory Group, as financial advisor to the PSC, has rendered certain financial advisory/structuring services to the PSC.

We and APCo have agreed to indemnify the underwriters against some liabilities, including liabilities under the Securities Act of 1933, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the bonds, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters, including the validity of the bonds and other conditions contained in the underwriting agreement, such as receipt of ratings confirmations, officers’ certificates and legal opinions.  The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject offers in whole or in part.

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USE OF PROCEEDS

We will use the net proceeds from the sale of the bonds to pay the upfront financing costs of the transaction, including among others, expenses of the authorization, issuance and sale of the bonds, and to purchase the CRR property from APCo. APCo will use the net proceeds from the sale of the CRR property to reimburse itself for upfront financing costs incurred by it in connection with the transaction and to refinance its uncollected ENEC costs, through redeeming, retiring and repaying a portion of its outstanding debt and/or equity.

Up-front financing costs incurred in connection with issuance and sale of the bonds and the creation and acquisition of the CRR property, net of underwriting discounts and commissions of $[__], are expected to be approximately $[__]. An aggregate of approximately $[__] of such financing costs are payable to the servicer in connection with set-up costs, including costs incurred in connection with establishing the issuing entity and building the necessary information technology systems, processes and reports. The upfront financing costs include $[__] payable to Morgan Stanley & Co. LLC in respect of the financial advisory fee referenced above under “Underwriting the Bonds” in this prospectus supplement and $[__] payable to Morgan Stanley & Co. LLC for reimbursement of expenses incurred as financial/structuring advisor for the transaction.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

In the opinion of Sidley Austin LLP, counsel to us and to APCo, interest paid on the bonds generally will be taxable to a U.S. bondholder as ordinary interest income at the time it accrues or is received in accordance with the U.S. bondholder’s method of accounting for U.S. federal income tax purposes.  Sidley Austin LLP has also issued an opinion, based on Revenue Procedure 2005-62, 2005-2 C.B. 507, that, for federal income tax purposes (1) we will not be treated as a taxable entity separate and apart from APCo, our sole member and (2) the bonds will constitute indebtedness of APCo.  Each beneficial owner of a bond, by acquiring a beneficial interest, agrees to treat such bond as indebtedness of our sole member secured by the collateral for federal (and, to the extent applicable, state) income tax purposes unless otherwise required by appropriate taxing authorities.  Please read “Material U.S. Federal Income Tax Consequences” in the accompanying prospectus.

WHERE YOU CAN FIND MORE INFORMATION

To the extent that we are required by law to file such reports and information with the Securities and Exchange Commission (the SEC) under the Securities Exchange Act of 1934, we will file annual, quarterly and current reports and other information with the SEC.  We are incorporating by reference any future filings we or the sponsor, but solely in its capacity as our sponsor, make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the termination of the offering, excluding any information that is furnished to, and not filed with, the SEC.  These reports will be filed under our own name as issuing entity.  Please read “Where You Can Find More Information” in the accompanying prospectus.  Under the Indenture, we may voluntarily suspend or terminate our filing obligations as issuing entity with the SEC, to the extent permitted by applicable law.

LEGAL PROCEEDINGS

There are no legal or governmental proceedings pending against us, the sponsor, seller, trustee,  or servicer, or of which any property of the foregoing is subject, that is material to the holders of the bonds.

LEGAL MATTERS

Certain legal matters relating to the bonds, including certain U.S. federal income tax matters, will be passed on by Sidley Austin LLP, counsel to APCo and the issuing entity, by Richards, Layton & Finger, special Delaware counsel to the issuing entity, by Robinson & McElwee, PLLC, West Virginia regulatory counsel to APCo and the issuing entity, by Jackson Kelly PLLC, West Virginia counsel to APCo and the issuing entity, and by Hunton & Williams LLP, counsel to the underwriters.  Hunton & Williams LLP acts as counsel to our affiliates from time to time.

S-22

OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS

NOTICE TO RESIDENTS OF SINGAPORE

THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS HAS NOT BEEN REGISTERED AND WILL NOT BE REGISTERED AS A PROSPECTUS WITH THE MONETARY AUTHORITY OF SINGAPORE, AND THE CONSUMER RATE RELIEF BONDS WILL BE OFFERED PURSUANT TO EXEMPTIONS UNDER THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE (THE “SECURITIES AND FUTURES ACT”).  ACCORDINGLY, THE CONSUMER RATE RELIEF BONDS MAY NOT BE OFFERED OR SOLD OR MADE THE SUBJECT OF AN INVITATION FOR SUBSCRIPTION OR PURCHASE NOR MAY THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR ANY OTHER DOCUMENT OR MATERIAL IN CONNECTION WITH THE OFFER OR SALE, OR INVITATION FOR SUBSCRIPTION OR PURCHASE, OF BONDS BE CIRCULATED OR DISTRIBUTED WHETHER DIRECTLY OR INDIRECTLY TO ANY PERSON IN SINGAPORE OTHER THAN (I) TO AN INSTITUTIONAL INVESTOR UNDER SECTION 274 OF THE SECURITIES AND FUTURES ACT, (II) TO A RELEVANT PERSON PURSUANT TO SECTION 275(1) OF THE SECURITIES AND FUTURES ACT, OR ANY PERSON PURSUANT TO SECTION 275(1A) OF THE SECURITIES AND FUTURES ACT, AND IN ACCORDANCE WITH THE CONDITIONS, SPECIFIED IN SECTION 275 OF THE SECURITIES AND FUTURES ACT, OR (III) OTHERWISE PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF, ANY OTHER APPLICABLE PROVISION OF THE SECURITIES AND FUTURES ACT.

WHERE THE CONSUMER RATE RELIEF BONDS ARE SUBSCRIBED OR PURCHASED UNDER SECTION 275 OF THE SECURITIES AND FUTURES ACT BY A RELEVANT PERSON WHICH IS:

(A)           A CORPORATION (WHICH IS NOT AN ‘‘ACCREDITED INVESTOR’’ AS DEFINED IN SECTION 4 OF THE SECURITIES AND FUTURES ACT) THE SOLE BUSINESS OF WHICH IS TO HOLD INVESTMENTS AND THE ENTIRE SHARE CAPITAL OF WHICH IS OWNED BY ONE OR MORE INDIVIDUALS, EACH OF WHOM IS AN ACCREDITED INVESTOR; OR

(B)           A TRUST (WHERE THE TRUSTEE IS NOT AN ACCREDITED INVESTOR) WHOSE SOLE PURPOSE IS TO HOLD INVESTMENTS AND EACH BENEFICIARY OF THE TRUST IS AN INDIVIDUAL WHO IS AN ACCREDITED INVESTOR,

SHARES, DEBENTURES AND UNITS OF SHARES AND DEBENTURES OF THAT CORPORATION OR THE BENEFICIARIES’ RIGHTS AND INTEREST HOWEVER DESCRIBED, IN THAT TRUST SHALL NOT BE TRANSFERABLE WITHIN SIX MONTHS AFTER THAT CORPORATION OR THAT TRUST HAS ACQUIRED THE  FOREGOING SECURITIES PURSUANT TO OFFER MADE UNDER SECTION 275 OF THE SECURITIES AND FUTURES ACT EXCEPT:

(1)           TO AN INSTITUTIONAL INVESTOR (FOR CORPORATIONS, UNDER SECTION 274 OF THE SECURITIES AND FUTURES ACT) OR TO A RELEVANT PERSON DEFINED IN SECTION 275(2) OF THE SECURITIES AND FUTURES ACT, OR TO ANY PERSON PURSUANT TO AN OFFER THAT IS MADE ON TERMS THAT SUCH SECURITIES OF THAT CORPORATION OR SUCH RIGHTS AND INTEREST IN THAT TRUST ARE ACQUIRED AT A CONSIDERATION OF NOT LESS THAN US$200,000 (OR ITS EQUIVALENT IN ANY FOREIGN CURRENCY) FOR EACH TRANSACTION, WHETHER SUCH AMOUNT IS TO BE PAID FOR IN CASH OR BY EXCHANGE OF SECURITIES OR OTHER ASSETS, AND FURTHER FOR CORPORATIONS, IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275 OF THE SECURITIES AND FUTURES ACT;

(2)           WHERE NO CONSIDERATION IS OR WILL BE GIVEN FOR THE TRANSFER; OR

(3)           WHERE THE TRANSFER IS BY OPERATION OF LAW.

NOTICE TO RESIDENTS OF THE PEOPLE’S REPUBLIC OF CHINA

THE CONSUMER RATE RELIEF BONDS SHALL NOT BE OFFERED OR SOLD IN THE PEOPLE’S REPUBLIC OF CHINA, EXCLUDING HONG KONG, MACAU AND TAIWAN, (THE “PRC”) AS PART OF THE INITIAL DISTRIBUTION OF THE CONSUMER RATE RELIEF BONDS.

THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN THE PRC TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN THE PRC.

S-23

THE STATE DOES NOT REPRESENT THAT THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS MAY BE LAWFULLY DISTRIBUTED, OR THAT ANY BONDS MAY BE LAWFULLY OFFERED, IN COMPLIANCE WITH ANY APPLICABLE REGISTRATION OR OTHER REQUIREMENTS IN THE PRC, OR PURSUANT TO AN EXEMPTION AVAILABLE THEREUNDER, OR ASSUME ANY RESPONSIBILITY FOR FACILITATING ANY SUCH DISTRIBUTION OR OFFERING.  IN PARTICULAR, NO ACTION HAS BEEN TAKEN BY THE ISSUING ENTITY WHICH WOULD PERMIT A PUBLIC OFFERING OF ANY BONDS OR THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS  IN THE PRC.  ACCORDINGLY, THE CONSUMER RATE RELIEF BONDS ARE NOT BEING OFFERED OR SOLD WITHIN THE PRC BY MEANS OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR ANY OTHER DOCUMENT.  NEITHER THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY ADVERTISEMENT OR OTHER OFFERING MATERIAL MAY BE DISTRIBUTED OR PUBLISHED IN THE PRC, EXCEPT UNDER CIRCUMSTANCES THAT WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS.  THE STATE SHALL NOT BE RESPONSIBLE OR LIABLE FOR ANY APPROVALS, REGISTRATION OR FILING PROCEDURES REQUIRED BY THE PRC INVESTORS IN CONNECTION WITH THEIR SUBSCRIPTIONS UNDER THIS PROSPECTUS SUPPLEMENT UNDER THE LAWS OF THE PRC AS WELL AS ANY OTHER REQUIREMENTS UNDER OTHER FOREIGN LAWS.

NOTICE TO RESIDENTS OF JAPAN

THE CONSUMER RATE RELIEF BONDS HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE FINANCIAL INSTRUMENTS AND EXCHANGE ACT OF JAPAN (ACT NO. 25 OF 1948, AS AMENDED, THE “FINANCIAL INSTRUMENTS AND EXCHANGE ACT”), AND EACH UNDERWRITER HAS  REPRESENTED AND AGREED THAT IT WILL NOT OFFER OR SELL ANY OF THE CONSUMER RATE RELIEF BONDS, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY RESIDENT OF JAPAN (WHICH TERM AS USED HEREIN MEANS ANY PERSON RESIDENT OF JAPAN, INCLUDING ANY CORPORATION OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF JAPAN) OR TO, OR FOR THE BENEFIT OF OTHERS FOR REOFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO A RESIDENT OF JAPAN, EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF, AND OTHERWISE IN COMPLIANCE WITH THE FINANCIAL INSTRUMENTS AND EXCHANGE ACT AND ANY OTHER APPLICABLE LAWS, REGULATIONS AND MINISTERIAL GUIDELINES AND REGULATIONS OF JAPAN.

NOTICE TO RESIDENTS OF HONG KONG

EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT IT HAS NOT OFFERED OR SOLD AND WILL NOT OFFER OR SELL IN HONG KONG, BY MEANS OF ANY DOCUMENT, ANY BONDS OTHER THAN (A) TO “PROFESSIONAL INVESTORS” AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE (CAP.  571) OF HONG KONG AND ANY RULES MADE UNDER THAT ORDINANCE; OR (B) IN OTHER CIRCUMSTANCES WHICH DO NOT RESULT IN THE DOCUMENT BEING A “PROSPECTUS” AS DEFINED IN THE COMPANIES ORDINANCE (CAP.  32) OF HONG KONG OR WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THAT ORDINANCE; AND IT HAS NOT ISSUED OR HAD IN ITS POSSESSION FOR THE PURPOSES OF ISSUE, AND WILL NOT ISSUE OR HAVE IN ITS POSSESSION FOR THE PURPOSES OF ISSUE, WHETHER IN HONG KONG OR ELSEWHERE, ANY ADVERTISEMENT, INVITATION OR DOCUMENT RELATING TO THE CONSUMER RATE RELIEF BONDS, WHICH IS DIRECTED AT, OR THE CONTENTS OF WHICH ARE LIKELY TO BE ACCESSED OR READ BY, THE PUBLIC OF HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE SECURITIES LAWS OF HONG KONG) OTHER THAN WITH RESPECT TO BONDS WHICH ARE OR ARE INTENDED TO BE DISPOSED OF ONLY TO PERSONS OUTSIDE HONG KONG OR ONLY TO “PROFESSIONAL INVESTORS” AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE (CAP. 571) AND ANY RULES MADE UNDER THAT ORDINANCE.

NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA

IN RELATION TO EACH MEMBER STATE OF THE EUROPEAN ECONOMIC AREA WHICH HAS IMPLEMENTED THE PROSPECTUS DIRECTIVE (EACH, A “RELEVANT MEMBER STATE”), EACH OF THE UNDERWRITERS HAS REPRESENTED AND AGREED THAT WITH EFFECT FROM AND INCLUDING THE DATE ON WHICH THE PROSPECTUS DIRECTIVE IS IMPLEMENTED IN THAT RELEVANT MEMBER STATE (THE “RELEVANT IMPLEMENTATION DATE”) IT HAS NOT MADE AND WILL NOT MAKE AN OFFER OF THE CONSUMER RATE RELIEF BONDS TO THE PUBLIC IN THAT RELEVANT MEMBER STATE PRIOR TO THE PUBLICATION OF A PROSPECTUS IN RELATION TO THE CONSUMER RATE RELIEF BONDS WHICH HAS BEEN APPROVED BY THE COMPETENT AUTHORITY IN THAT MEMBER STATE OR, WHERE APPROPRIATE, APPROVED IN ANOTHER RELEVANT MEMBER STATE AND PUBLISHED AND NOTIFIED TO THE COMPETENT

S-24

AUTHORITY IN THAT RELEVANT MEMBER STATE, ALL IN ACCORDANCE WITH THE PROSPECTUS DIRECTIVE AS IMPLEMENTED IN THAT RELEVANT MEMBER STATE OR FOLLOWING, IN EITHER CASE, TWELVE MONTHS AFTER SUCH PUBLICATION, EXCEPT THAT IT MAY, WITH EFFECT FROM AND INCLUDING THE RELEVANT IMPLEMENTATION DATE, MAKE AN OFFER OF SUCH BONDS TO THE PUBLIC IN THAT RELEVANT MEMBER STATE:

(A)           SOLELY TO QUALIFIED INVESTORS (AS DEFINED IN THE PROSPECTUS DIRECTIVE);

(B)           TO FEWER THAN 100 NATURAL OR LEGAL PERSONS (OR, IF THE RELEVANT MEMBER STATE HAS IMPLEMENTED THE RELEVANT PROVISION OF THE 2010 AMENDING DIRECTIVE, 150 NATURAL OR LEGAL PERSONS) OTHER THAN QUALIFIED INVESTORS AS DEFINED IN THE PROSPECTUS DIRECTIVE, SUBJECT TO OBTAINING THE PRIOR CONSENT OF THE REPRESENTATIVE OF THE UNDERWRITERS FOR ANY SUCH OFFER; OR

(C)           IN ANY OTHER CIRCUMSTANCES FALLING WITHIN ARTICLE 3(2) OF THE PROSPECTUS DIRECTIVE,

PROVIDED THAT NO SUCH OFFER OF THE CONSUMER RATE RELIEF BONDS SHALL REQUIRE THE ISSUING ENTITY OR ANY UNDERWRITER TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE OR SUPPLEMENT A PROSPECTUS PURSUANT TO ARTICLE 16 OF THE PROSPECTUS DIRECTIVE.

FOR PURPOSES OF THIS PROVISION, THE EXPRESSION AN “OFFER OF THE CONSUMER RATE RELIEF BONDS TO THE PUBLIC” IN RELATION TO ANY CONSUMER RATE RELIEF BONDS IN ANY RELEVANT MEMBER STATE MEANS THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT INFORMATION ON THE TERMS OF THE OFFER AND THE CONSUMER RATE RELIEF BONDS TO BE OFFERED SO AS TO ENABLE AN INVESTOR TO DECIDE TO PURCHASE OR SUBSCRIBE FOR THE CONSUMER RATE RELIEF BONDS, AS THE SAME MAY BE VARIED IN THAT MEMBER STATE BY ANY MEASURE IMPLEMENTING THE PROSPECTUS DIRECTIVE IN THAT MEMBER STATE, THE EXPRESSION “PROSPECTUS DIRECTIVE” MEANS DIRECTIVE 2003/71/EU AND INCLUDES ANY RELEVANT IMPLEMENTING MEASURE OR AMENDING MEASURE IN EACH RELEVANT MEMBER STATE AND THE EXPRESSION “2010 AMENDING DIRECTIVE” MEANS DIRECTIVE 2010/73/EU.

NOTICE TO RESIDENTS OF UNITED KINGDOM

EACH OF THE UNDERWRITERS HAS REPRESENTED AND AGREED THAT (I) IT HAS ONLY COMMUNICATED OR CAUSED TO BE COMMUNICATED AND WILL ONLY COMMUNICATE OR CAUSE TO BE COMMUNICATED AN INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED (THE “FSMA”)) RECEIVED BY IT IN CONNECTION WITH THE ISSUE OR SALE OF THE CONSUMER RATE RELIEF BONDS IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO THE ISSUING ENTITY; AND (II) IT HAS COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE FSMA WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE CONSUMER RATE RELIEF BONDS IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM.

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The information in this prospectus is not complete and may be changed. The Consumer Rate Relief Bonds may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion

Preliminary Prospectus Dated October 24, 2013

PROSPECTUS

Appalachian Consumer Rate Relief Funding LLC

Issuing Entity

Senior Secured Consumer Rate Relief Bonds

Appalachian Power Company

Depositor, Seller, Initial Servicer and Sponsor

________________

You should carefully consider the Risk Factors beginning on page 10 of this prospectus before you invest in the Consumer Rate Relief Bonds.

We, the issuing entity, will issue the Consumer Rate Relief Bonds (referred to herein as the bonds) in one or more tranches as described in this prospectus.  The bonds represent only our obligations and are backed only by our assets.  Appalachian Power Company and its affiliates, other than us, are not liable for any payments on the bonds.  The bonds are not a debt or general obligation of the State of West Virginia, the Public Service Commission of West Virginia or any county, municipality or other political subdivision of the State of West Virginia and are not a pledge of the faith and credit or taxing power of the State of West Virginia or any county, municipality or other political subdivision of the State of West Virginia.

We are a special purpose entity and own no property other than the collateral described in this prospectus.  The collateral is the sole source of payment for the bonds.

We may offer and sell the bonds by use of this prospectus.  We will provide the specific terms of the offering of the bonds in a supplement to this prospectus.  You should read this prospectus and the related prospectus supplement carefully before you invest in the bonds.  This prospectus may not be used to offer and sell the bonds unless accompanied by a prospectus supplement.

________________

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

________________

The date of this Prospectus is October [__], 2013.

The information in this prospectus is not complete and may be changed. The Consumer Rate Relief Bonds may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

READING THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS	S-1
SUMMARY OF TERMS	S-2
THE BONDS	S-8
The Collateral	S-8
The CRR Property	S-9
Financing Order	S-10
PSC Financial Advisor	S-10
Payment and Record Dates and Payment Sources	S-10
Principal Payments	S-11
EXPECTED SINKING FUND SCHEDULE	S-12
EXPECTED AMORTIZATION SCHEDULE	S-13
Weighted Average Life Sensitivity	S-14
Assumptions	S-14
Fees and Expenses	S-14
Distribution Following Acceleration	S-15
Interest Payments	S-15
Optional Redemption	S-15
THE TRUSTEE	S-15
CREDIT ENHANCEMENT	S-16
True-Up Mechanism for Payment of Scheduled Principal and Interest	S-16
Collection Account and Subaccounts	S-17
How Funds in the Collection Account Will Be Allocated	S-18
THE CRR CHARGES	S-19
Initial CRR charges	S-19
UNDERWRITING THE BONDS	S-19
The Underwriters’ Sales Price for the Bonds	S-21
No Assurance as to Resale Price or Resale Liquidity for the Bonds	S-21
Various Types of Underwriter Transactions That May Affect the Price of the Bonds	S-21
USE OF PROCEEDS	S-22
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES	S-22
WHERE YOU CAN FIND MORE INFORMATION	S-22
LEGAL PROCEEDINGS	S-22
LEGAL MATTERS	S-22
OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS	S-23
READING THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT	1
PROSPECTUS SUMMARY	2
Summary of the Consumer Rate Relief Bonds	2
Parties to Transaction and Responsibilities	4
Flow of Funds	4
The Collateral	5
The CRR Property	5
Interest Payments	6
Principal Payments and Record Dates and Payment Sources	6
Priority of Payments	7
Credit Enhancement	7
State Pledge	8
Optional Redemption	8
Payment and Record Dates	8
Scheduled Final Payment Dates and Final Maturity Dates	8
Ratings for the Consumer Rate Relief Bonds	8
Reports to Bondholders	8
Servicing Compensation	9
Federal Income Tax Status	9
ERISA Considerations	9
RISK FACTORS	10
You may experience material payment delays or incur a loss on your investment in the Consumer Rate Relief Bonds because the source of funds for payment is limited.	10
RISKS ASSOCIATED WITH POTENTIAL JUDICIAL, LEGISLATIVE OR REGULATORY ACTIONS	10
We are not obligated to indemnify you for changes in law.	10
Future judicial action could reduce the value of your investment in the Consumer Rate Relief Bonds.	10
Future state legislative action might attempt to reduce the value of your investment in the Consumer Rate Relief Bonds.	11
The federal government might preempt the Recovery Act without full compensation.	11
The PSC might attempt to take actions that could reduce the value of your investment in the Consumer Rate Relief Bonds.	11
SERVICING RISKS	12
Inaccurate consumption, demand or collection forecasting might reduce scheduled payments on the Consumer Rate Relief Bonds. Your investment in the Consumer Rate Relief Bonds depends on APCo or its	12

successors or assignees, acting as servicer of the CRR Property.	12
If we need to replace APCo as the servicer, we may experience difficulties finding and using a replacement servicer.	12
Changes to billing and collection practices might reduce the value of your investment in the Consumer Rate Relief Bonds.	13
Limits on rights to terminate service might make it more difficult to collect the CRR charges.	13
Future adjustments to CRR charges by CRR rate class might result in insufficient collections.	14
RISKS ASSOCIATED WITH THE UNUSUAL NATURE OF THE CRR PROPERTY	14
Foreclosure of the trustee’s lien on the CRR Property for the Consumer Rate Relief Bonds might not be practical, and acceleration of the Consumer Rate Relief Bonds before maturity might have little practical effect.	14
STORM RELATED RISK	14
Storm damage to APCo’s operations could impair payment of the Consumer Rate Relief Bonds.	14
RISKS ASSOCIATED WITH POTENTIAL BANKRUPTCY PROCEEDINGS OF THE SELLER OR THE SERVICER	14
The servicer will commingle the CRR charges with other revenues it collects, which might obstruct access to the CRR charges in case of the servicer’s bankruptcy and reduce the value of your investment in the Consumer Rate Relief Bonds.	15
The bankruptcy of APCo or any successor seller might result in losses or delays in payments on the Consumer Rate Relief Bonds.	15
The sale of the CRR Property might be construed as a financing and not a sale in a case of APCo’s bankruptcy which might delay or limit payments on the Consumer Rate Relief Bonds.	16
If the servicer enters bankruptcy proceedings, the remittances of the CRR charges by the servicer prior to the date of bankruptcy might constitute preferences, which means these funds might be unavailable to pay amounts owing on the Consumer Rate Relief Bonds.	17
Claims against APCo or any successor seller might be limited in the event of a bankruptcy of the seller.	17
The bankruptcy of APCo or any successor seller might limit the remedies available to the trustee.	17
OTHER RISKS ASSOCIATED WITH AN INVESTMENT IN THE CONSUMER RATE RELIEF BONDS	17
APCo’s indemnification obligations under the sale and servicing agreements are limited and might not be sufficient to protect your investment in the Consumer Rate Relief Bonds.	17
The credit ratings are no indication of the expected rate of payment of principal on the Consumer Rate Relief Bonds.	18
Alternatives to purchasing electricity through APCo’s distribution facilities may be more widely utilized by retail electric customers in the future.	18
The absence of a secondary market for the Consumer Rate Relief Bonds might limit your ability to resell your Consumer Rate Relief Bonds.	18
You might receive principal payments for the Consumer Rate Relief Bonds later than you expect.	19
APCo may sell property similar to the CRR Property or similar property through another affiliated entity in the future.	19
Regulatory provisions affecting certain investors could adversely affect the liquidity of the Consumer Rate Relief Bonds.	19
If the investment of collected CRR charges and other funds held by the trustee in the collection account results in investment losses or the investments become illiquid, you may receive payment of principal and interest on the Consumer Rate Relief Bonds later than you expect.	20
REVIEW OF CRR PROPERTY	20
THE RECOVERY ACT	22
Purpose of the Recovery Act	22
APCo and Other Utilities May Securitize Consumer Rate Relief Costs	22
APCO’S FINANCING ORDER	26
APCo’s Financing Order	26

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PSC Financial Advisor	26
Collection of CRR charges	26
Terms of Bonds	27
Issuance Advice Letter	27
CRR Rate Schedules	27
CRR Rate Classes and Cost Allocations; Nonbypassability	27
Allocation of Payment Responsibility Among Customer Classes	27
True-Up Mechanism	28
State Pledge	29
Servicing Agreement	29
Binding on Successors	29
DESCRIPTION OF THE CRR PROPERTY	30
Creation of CRR Property	30
CRR Revenue Groups and CRR Rate Classes	31
Billing and Collection	32
THE DEPOSITOR, SELLER, INITIAL SERVICER AND SPONSOR	32
General	32
Merger with Wheeling Power Company	33
Servicing Experience	33
APCo Customer Base and Electric Energy Consumption and Demand	33
Electricity Delivered to West Virginia Retail Electric Customers, Total Billed Retail Electric Revenues and Retail Electric Customers*	33
Forecasting Electricity Consumption and Demand	34
Annual Forecast Variance For Ultimate Electric Delivery (GWh)	35
Billing and Collections	35
Loss Experience	37
Days Sales Outstanding	37
Delinquencies	37
APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, THE ISSUING ENTITY	38
Restricted Purpose	38
Our Relationship with APCo	39
Our Management	39
Manager Fees and Limitation on Liabilities	39
We Are a Separate and Distinct Legal Entity from APCo	40
Administration Agreement	40
AFFILIATIONS AND CERTAIN RELATIONSHIPS	40
USE OF PROCEEDS	40
DESCRIPTION OF THE CONSUMER RATE RELIEF BONDS	40
General	40
Interest and Principal on the Consumer Rate Relief Bonds	41
Payments on the Consumer Rate Relief Bonds	42
Registration and Transfer of the Consumer Rate Relief Bonds	43
Consumer Rate Relief Bonds Will Be Issued in Book-Entry Form	43
Definitive Consumer Rate Relief Bonds	45
Optional Redemption	46
Access of Bondholders	46
Reports to Bondholders	46
Website Disclosure	47
We and the Trustee May Modify the Indenture	47
Our Covenants	50
Events of Default; Rights Upon Event of Default	52
Actions by Bondholders	54
Annual Report of Trustee	54
Annual Compliance Statement	55
Satisfaction and Discharge of Indenture	55
Our Legal and Covenant Defeasance Options	55
No Recourse to Others	56
THE TRUSTEE	56
SECURITY FOR THE CONSUMER RATE RELIEF BONDS	57
General	57
Pledge of Collateral	57
Security Interest in the Collateral	58
Right of Sequestration	59
Description of Indenture Accounts	59
How Funds in the Collection Account will be Allocated	60
State Pledge	61
WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS FOR THE CONSUMER RATE RELIEF BONDS	62
THE SALE AGREEMENT	62
Sale and Assignment of the CRR Property	62
Conditions to the Sale of CRR Property	63
Seller Representations and Warranties	64
Covenants of the Seller	67
Indemnification	69
Successors to the Seller	70
Amendment	70
THE SERVICING AGREEMENT	70
Servicing Procedures	70
Servicing Standards and Covenants	71
True-Up Adjustment Process	71
Remittances to Collection Account	73
Servicing Compensation	73
Servicer Representations and Warranties	74

iii 

The Servicer Will Indemnify Us, Other Entities and the PSC in Limited Circumstances	75
Evidence as to Compliance	76
Matters Regarding the Servicer	76
Servicer Defaults	77
Rights Upon a Servicer Default	77
Waiver of Past Defaults	78
Successor Servicer	78
Amendment	78
Intercreditor Agreement	78
HOW A BANKRUPTCY MAY AFFECT YOUR INVESTMENT	79
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES	81
General	81
Taxation of the Issuing Entity and Characterization of the Consumer Rate Relief Bonds	82
Tax Consequences to U.S. Holders	82
Tax Consequences to Non-U.S. Holders	83
Backup Withholding	84
Recently Enacted Legislation	84
ERISA CONSIDERATIONS	84
General	84
Regulation of Assets Included in a Plan	85
Prohibited Transaction Exemptions	86
Consultation with Counsel	86
PLAN OF DISTRIBUTION	86
RATINGS FOR THE CONSUMER RATE RELIEF BONDS	87
WHERE YOU CAN FIND MORE INFORMATION	87
LEGAL MATTERS	88
GLOSSARY OF DEFINED TERMS	89

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READING THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT

This prospectus is part of a registration statement we have filed with the SEC.  This prospectus provides you with a general description of the bonds we may offer.  When we offer the bonds, we will provide a supplement to this prospectus.  The prospectus supplement will describe the specific terms of the offering.  The prospectus supplement may also contain information that supplements the information contained in this prospectus, and you should rely on the supplementary information in the prospectus supplement.  Please read carefully this prospectus, the prospectus supplement and the information, if any, contained in the documents we refer to in this prospectus under the heading “Where You Can Find More Information.”

References in this prospectus and the prospectus supplement to the terms we, us, or the issuing entity mean Appalachian Consumer Rate Relief Funding LLC.  References to APCo, the seller or the sponsor refer to Appalachian Power Company.  References to the consumer rate relief bonds or the bonds, unless the context otherwise requires, means the bonds offered pursuant to the prospectus supplement.  References to the bondholders or the holders refer to the registered holders of the bonds.  References to the servicer refer to APCo and any successor servicer under the servicing agreement referred to in this prospectus.  References to the Recovery Act refer to the West Virginia legislation adopted in March 2012, found at W.Va.Code Section 24-2-4f, as amended, which authorizes the recovery of certain expanded net energy costs (such costs are referred to as ENEC costs) by certain electric utilities through the issuance of bonds.  Unless the context otherwise requires, the term customer or retail customer means a West Virginia retail user of electric delivery services provided by an electric utility such as APCo, and retail electric customer means all existing and future retail West Virginia customers that receive electric delivery services from APCo or its successors.  References to the PSC refer to the Public Service Commission of West Virginia.  You can find a glossary of some of the other defined terms we use in this prospectus on page 89 of this prospectus.

We have included cross-references to sections in this prospectus where you can find further related discussions.  You can also find key topics in the table of contents on the preceding pages.  Check the table of contents to locate these sections.

You should rely only on the information contained or incorporated by reference in this prospectus and the prospectus supplement.  We have not authorized anyone else to provide you with any different information.  If anyone provides you with different or inconsistent information, you should not rely on it.  We are not making an offer to sell the bonds in any jurisdiction where the offer or sale is not permitted.  The information in this prospectus is current only as of the date of this prospectus.

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PROSPECTUS SUMMARY

This summary contains a brief description of the bonds and applies to the bonds we are offering by use of this prospectus.  You will find a more detailed description of the terms of the offering of the bonds in the prospectus supplement.

You should carefully consider the Risk Factors beginning on page 10 of this prospectus before you invest in the bonds.

Summary of the Consumer Rate Relief Bonds

The issuing entity:	Appalachian Consumer Rate Relief Funding LLC is a special purpose Delaware limited liability company.  Appalachian Power Company is our sole member and owns all of our equity interests.  We have no commercial operations.  We were formed solely to purchase and own CRR property, to issue the bonds secured by CRR property and to perform any activity incidental thereto and our organizational documents prohibit us from engaging in any other activity except as specifically authorized by the financing order.
Purpose of transaction:	This issuance of Senior Secured Consumer Rate Relief Bonds will enable APCo to recover certain costs related to certain uncollected ENEC costs and associated financing costs in the State of West Virginia.  Please read “The Recovery Act” in this prospectus.
Our address:	One Riverside Plaza 28th Floor Columbus, Ohio 43215
Our telephone number:	(614) 716-3627
Depositor, Seller, Initial Servicer and Sponsor:	Appalachian Power Company, referred to as APCo, is a Virginia corporation which operates as a fully regulated electric utility in West Virginia under West Virginia law.  APCo is engaged in the generation, transmission and distribution of electric energy in a 9,216 square mile area in West Virginia.  As of December 31, 2012, APCo provided service to approximately 437,000 metered retail electric customers in this area.  APCo is an operating subsidiary of American Electric Power Company, Inc., referred to as AEP, a public utility holding company based in Columbus, Ohio.  AEP is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states, and is among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States.  Neither APCo nor AEP is an obligor of the bonds.
	APCo, acting as the initial servicer, and any successor servicer, referred to in this prospectus as the servicer, will service the CRR property under a servicing agreement with us.
APCo’s address:	One Riverside Plaza 28th Floor Columbus, Ohio 43215
APCo’s phone number:	(614) 716-1000
The trustee:	The trustee for the bonds will be named in the prospectus supplement.
Transaction overview:	On March 7, 2012, the West Virginia Legislature passed the Recovery Act which allows the recovery of certain ENEC costs by certain electric utilities through the issuance of consumer rate relief bonds.  The Recovery Act establishes a process to obtain a

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financing order under which the PSC is allowed to impose an irrevocable nonbypassable CRR charge on retail electric customers of an electric utility (or its successors) for payment of the bonds, subject to only very limited exceptions.  The amount and terms for collections of these CRR charges are governed by one or more financing orders issued to an electric utility by the PSC.  The Recovery Act permits an electric utility to transfer its rights and interests under a financing order, including the right to impose, charge and collect CRR charges, to a special purpose entity formed by the electric utility to issue consumer rate relief bonds secured by the right to receive revenues arising from the CRR charges.  The electric utility’s right to impose, charge, collect  and adjust the CRR charges, and all revenues, receipts, collections, rights to payment, payments, moneys, claims or other proceeds arising from the rights and interests created under the financing order, upon transfer to the issuing entity, constitute CRR property.  Under the Recovery Act, CRR property comes into existence simultaneous with the sale by an electric utility of  the CRR property to an assignee and the pledge of the CRR property to secure the consumer rate relief bonds.  References in this prospectus and the prospectus supplement to a financing order, unless the context indicates otherwise, mean the financing order issued by the PSC on September 20, 2013 which is further described below.  Please read “APCo’s Financing Order” in this prospectus.

On September 20, 2013, the PSC issued the financing order to APCo to enable APCo to recover certain ENEC costs through the issuance of consumer rate relief bonds, in an aggregate principal amount equal to the sum of (a) $376,024,583, plus (b) upfront financing costs (upfront financing costs, as described below) not to exceed the sum of (1) the fees charged and costs incurred by the PSC Financial Advisor plus (2) $5,750,000.  Please read “APCo’s Financing Order” in this prospectus for a discussion of the consumer rate relief costs authorized in the financing order, which we refer to in this prospectus and the prospectus supplement as consumer rate relief costs.

The primary transactions underlying the offering of the bonds are as follows:

·APCo will sell CRR property to us in exchange for the net proceeds from the sale of the bonds,

·we will sell the bonds, which will be secured primarily by the CRR property, to the underwriters named in the prospectus supplement, and

· APCo will act as the initial servicer of the CRR property.

The bonds are not obligations of the trustee, our managers, APCo, AEP or of any of their affiliates other than us.  The bonds are also not obligations of the State of West Virginia or any county, municipality or other political subdivision of the State of West Virginia.

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Parties to Transaction and Responsibilities

The following chart represents a general summary of the parties to the transactions underlying the offering of the bonds, their roles and their various relationships to the other parties:

Flow of Funds

The following chart represents a general summary of the flow of funds:

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The Collateral

The principal asset securing the bonds will be CRR property, which is a present property right created under the Recovery Act by a financing order issued by the PSC.  The collateral includes all of our right, title and interest (whether owned on the closing date or thereafter acquired or arising) in and to the following property:

· the CRR property created under and pursuant to the financing order and the Recovery Act, and transferred by the seller to us pursuant to the sale agreement (including, to the fullest extent permitted by law, the right to impose, charge and collect CRR charges, the right to obtain adjustments to those charges, and all revenues, receipts, collections, rights to payment, payments, moneys, claims or other proceeds arising from the rights and interests created under the financing order),

· all CRR charges related to the CRR property,

· the sale agreement and the bill of sale executed in connection therewith and all property and interests in property transferred under the sale agreement and the bill of sale with respect to the CRR property and the consumer rate relief bonds,

· the servicing agreement, the administration agreement, any intercreditor agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing CRR property and the consumer rate relief bonds,

· the collection account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto,

· all rights to compel the servicer to file for and obtain true-up adjustments to the CRR charges in accordance with the Recovery Act and the financing order,

· all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute CRR property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property,

· all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, and

· all payments on or under and all proceeds in respect of any or all of the foregoing.

Our collateral does not include:

· cash that has been released pursuant to the terms of the indenture, and

· amounts deposited with us on the closing date, for payment of costs of issuance with respect to the bonds (together with any interest earnings thereon).

Please read “Security for the Consumer Rate Relief Bonds” in this prospectus.

The CRR Property

In general terms, all of the rights and interests of APCo established pursuant to the financing order that are transferred to us pursuant to the sale agreement are referred to in this prospectus and the prospectus supplement as the CRR property.  CRR property includes the right to impose, charge,  collect and adjust CRR charges in amounts sufficient to pay principal and interest and to replenish the capital subaccount in connection with the bonds and to pay ongoing financing costs.  CRR charges are payable by all retail electric customers which receive electric delivery service from APCo or its successors (subject to only very limited exceptions set forth in the financing order), including, in the event of a merger between APCo and Wheeling Power, all such customers of the successor entity.  Such retail electric customers who subsequently receive electric delivery service from another utility and including any successors to APCo pursuant to bankruptcy, reorganization, restructuring or other insolvency proceeding, or any merger, acquisition, consolidation or sale or transfer of assets, must pay the CRR charge.  Self generated electricity that is both produced and consumed by the self generator “behind the meter” will not be subject to the

5

CRR charge.  However, if all or any portion of a customer’s self generation is transmitted on APCo’s (or its successors’) delivery system, that portion of self generation will be subject to the CRR charge.  During the twelve months ended December 31, 2012, approximately 37.07% of APCo’s total retail electric usage (as measured by billed GWh sales) in the state of West Virginia was to industrial customers, approximately 25.22% was to commercial customers and approximately 37.49% was to residential customers.  Had Wheeling Power’s retail electric usage (as measured by billed GWh sales) been included in the above calculation, the deliveries to industrial customers would have increased to 41.10% of the companies’ combined deliveries for the twelve months ending December 31, 2012, and the percentages for commercial and residential customers would have decreased to 24.19% and 34.49%, respectively.  Although the Recovery Act provides that CRR charges are payable by all West Virginia retail electric customers of APCo, the financing order provides that three customer rate classes (Century, Special Contract Customer J, and the GS Transmission rate class), whose current rate structure exempts them from responsibility for ENEC costs, should be similarly excluded from responsibility for payment of the CRR charges.  As of December 31, 2012, APCo did not have any customers taking GS Transmission service, and sales to the three excluded classes represented approximately one-tenth of one percent (0.1%) of APCo’s total electric usage (based on billed Gwh sales) for the year then ended, although that percentage could increase in the future should Century or Special Contract Customer J expand their West Virginia operations or customers resume GS Transmission service. During this period, deliveries to the State of West Virginia and other federal, state and local governmental entities, which are responsible for CRR charges, comprised approximately 0.22% of APCo’s retail electric deliveries.

The CRR property is not a receivable and the principal collateral securing the bonds will not be a pool of receivables.  The CRR charges authorized in the financing order are irrevocable and not subject to reduction, impairment, or adjustment by further action of the PSC, except for annual and interim true-up adjustments to correct overcollections or undercollections and to provide for the expected recovery of amounts sufficient to timely provide all payments of debt service and other required amounts and charges in connection with the bonds.  Please read “The Servicing Agreement—True-Up Adjustment Process.”  All revenues and collections resulting from the CRR charges are part of the CRR property.

We will purchase CRR property from APCo to support the issuance of the bonds.  The servicer will collect the applicable CRR charges from retail electric customers that receive electric delivery service from APCo, and will remit the collections to the trustee.

For information on how electric service to retail electric customers may be terminated, please read “Risk Factors—Servicing Risks—Limits on rights to terminate service might make it more difficult to collect the CRR charges.”  Because the amount of CRR charge collections will largely depend on the demand for electricity, and the amount of electricity consumed, by customers within APCo’s service territory, the amount of collections may vary substantially from year to year.  Please read “The Depositor, Seller, Initial Servicer and Sponsor.”

Interest Payments

Interest on each tranche of bonds will accrue from the issue date at the interest rate stated in the prospectus supplement.  On each payment date, we will pay interest on each tranche of bonds equal to the following amounts:

· if there has been a payment default, any interest payable but unpaid on any prior payment dates, together with interest on such unpaid interest, if any, and

· accrued interest on the principal balance of each tranche of bonds as of the close of business on the preceding payment date (or, in the case of the first payment date, on the date of the original issuance of each tranche of bonds) after giving effect to all payments of principal made on the preceding payment date, if any.

We will pay interest on each tranche of bonds before we pay the principal of each tranche of bonds.  Please read “Description of the Consumer Rate Relief Bonds—Interest and Principal on the Consumer Rate Relief Bonds.”  If there is a shortfall in the amounts available in the collection account to make interest payments, the trustee will distribute interest pro rata to each tranche of bonds based on the amount of interest payable on each outstanding tranche.  Unless otherwise specified in the prospectus supplement, we will calculate interest on the basis of a 360-day year of twelve 30-day months.

Principal Payments and Record Dates and Payment Sources

On each payment date specified in the prospectus supplement, we will pay amounts then due or scheduled to be paid on the outstanding bonds from amounts available in the collection account and the related subaccounts held by the trustee.  We will make these payments to the holders of record of the bonds on the related record date specified in the prospectus supplement.  Amounts available to make these payments, which will include the applicable CRR charges collected by the

6

servicer for us since the last payment date, are described in greater detail under “Security for the Consumer Rate Relief Bonds—How Funds in the Collection Account will be Allocated” and “The Servicing Agreement—Remittances to Collection Account.”

Priority of Payments

On each payment date, the trustee will allocate or pay all amounts on deposit in the general subaccount of the collection account in the following order of priority:

1. payment of the trustee’s fees, expenses and any outstanding indemnity amounts not to exceed a specified amount in any 12-month period which amount will be fixed in the indenture,

2. payment of the servicing fee, which will be a fixed amount specified in the servicing agreement, plus any unpaid servicing fees from prior payment dates,

3. payment of the administration fee, which will be a fixed amount specified in the administration agreement between us and APCo, and of the fees of our independent managers, which will be in an amount specified in an agreement between us and our independent managers, plus any unpaid administrative or management fees from prior payment dates,

4. payment of all of our other ordinary periodic operating expenses relating to the bonds, such as accounting and audit fees, rating agency fees, legal fees and certain reimbursable costs of the administrator under the administration agreement and of the servicer under the servicing agreement,

5. payment of the interest then due on the bonds, including any past-due interest,

6. payment of the principal then required to be paid on the bonds at final maturity or as a result of acceleration upon an event of default,

7. payment of the principal then scheduled to be paid on the bonds, including any previously unpaid scheduled principal,

8. payment of any of our remaining unpaid operating expenses and any remaining amounts owed pursuant to the basic documents, including all remaining indemnity amounts owed to the trustee,

9. replenishment of any amounts drawn from the capital subaccount,

10. release to APCo of a return on its equity investment equal to 5.85% per annum on the initial amount deposited by it into the capital subaccount,

11. allocation of the remainder, if any, to the excess funds subaccount, and

12. after the bonds have been paid in full and discharged and all of the foregoing amounts are paid in full, the balance, together with all amounts in the capital subaccount and the excess funds subaccount, to us free and clear of the lien of the indenture.

The trustee’s fees, expenses and indemnity amounts referred to in clause 1 above, the amount of the servicer’s fee referred to in clause 2 above and the amount of the administration fee referred to in clause 3 above  will be described in the prospectus supplement and may not exceed the amounts approved in the issuance advice letter relating to the bonds.  The priority of payments for the collected CRR charges, as well as available amounts in the subaccounts, are described in more detail under “Security for the Consumer Rate Relief Bonds—How Funds in the Collection Account will be Allocated,” as well as in the prospectus supplement.

Credit Enhancement

Credit enhancement for the bonds, which is intended to protect you against losses or delays in scheduled payments on the bonds, will be as follows:

· The Recovery Act mandates that CRR charges on retail customers be adjusted at least annually upon petition of the servicer, to make up for any shortfall, due to any reason, or reduce any excess in collected CRR charges, and the financing order provides for more frequent adjustments under certain circumstances.  We sometimes refer to these adjustments as the true-up adjustments and the process for making such adjustments as the true-up mechanism.  These adjustments consist of both standard and nonstandard true-up adjustments.  Required standard true-up

7

adjustments will be made annually, and if determined necessary by the servicer, semi-annually (quarterly after the scheduled final payment for the latest maturing tranche) and standard true-up adjustments are permitted to be made more frequently, to ensure the expected recovery of amounts sufficient to timely provide all payments of debt service and other required amounts and charges in connection with the bonds.  Nonstandard true-up adjustments will be made upon approval of the PSC to reallocate CRR charges as among customer groups to reflect significant changes in historical conditions of operation, such as the loss of significant electric load or a merger of APCo with another utility and a resulting expansion of APCo’s customer base.  APCo will also initiate a nonstandard true-up proceeding if APCo and Wheeling Power merge in order to take into account the impact of the combined allocation of revenue groups.  Please read “APCo’s Financing Order—True-Up Mechanism.”

· Collection Account—Under the indenture, the trustee will hold a collection account for the bonds, divided into various subaccounts.  The primary subaccounts for credit enhancement purposes are:

· the general subaccount—the trustee will deposit into the general subaccount all CRR charge collections remitted to it by the servicer;

· the capital subaccount—APCo will deposit an amount specified in the prospectus supplement into the capital subaccount on the date of issuance of the bonds; and

· the excess funds subaccount—any excess amount of collected CRR charges and investment earnings not released to us will be held in the excess funds subaccount.

State Pledge

The State of West Virginia has pledged in the Recovery Act that it will not take or permit any action that would impair the value of the CRR property or revise the consumer rate relief costs for which recovery is authorized under the final financing order, or, except as permitted in connection with a true-up adjustment authorized by the Recovery Act, reduce, alter or impair the CRR charges until any principal, interest and redemption premium in respect of the bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement have been paid in full.

The bonds are not a debt or an obligation of the State of West Virginia, the PSC or any county, municipality or other political subdivision of the State of West Virginia and are not a charge on the faith and credit or taxing power of the State of West Virginia or any county, municipality or other political subdivision of the State of West Virginia.

Optional Redemption

We will not have the option to redeem or otherwise prepay any bonds.

Payment and Record Dates

The payment and record dates for the bonds will be specified in the prospectus supplement.

Scheduled Final Payment Dates and Final Maturity Dates

Failure to pay a scheduled principal payment on any payment date or the entire outstanding amount of the bonds of any tranche by the scheduled final payment date for such tranche will not result in a default with respect to that tranche.  The failure to pay the entire outstanding principal balance of the bonds of any tranche will result in a default only if such payment has not been made by the final maturity date for the tranche.  We will specify the scheduled final payment date and the final maturity date of each tranche of bonds in the prospectus supplement.

Ratings for the Consumer Rate Relief Bonds

We expect the bonds will receive credit ratings from two nationally recognized statistical rating organizations.  Please read “Ratings for the Consumer Rate Relief Bonds.”

Reports to Bondholders

Pursuant to the indenture, the trustee will make available on its website (currently located at http://www.usbank.com/abs) to the holders of record of the bonds regular reports prepared by the servicer containing

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information concerning, among other things, us and the collateral.  Unless and until the bonds are issued in definitive certificated form, the reports will be provided to The Depository Trust Company.  The reports will be available to beneficial owners of the bonds upon written request to the trustee or the servicer.  These reports will not be examined and reported upon by an independent public accountant.  In addition, no independent public accountant will provide an opinion thereon.  Please read “Description of the Consumer Rate Relief Bonds—Reports to Bondholders.”

Servicing Compensation

We will pay the servicer on each payment date the servicing fee with respect to the bonds.  As long as APCo or any affiliated entity acts as servicer, this fee will be 0.05% of the original principal amount of the bonds on an annualized basis.  If a successor servicer that is not an affiliate of APCo is appointed, the servicing fee will be negotiated by the successor servicer and the trustee, but will not, unless the PSC consents, exceed 1.25% of the original principal amount of the bonds on an annualized basis.  The servicer will also be entitled to reimbursement of certain out-of-pocket expenses, such as those of accountants and counsel.  In no event will the trustee be liable for any servicing fee in its individual capacity.

Federal Income Tax Status

In the opinion of Sidley Austin LLP, counsel to us and to APCo, for federal income tax purposes, the bonds will constitute indebtedness of APCo, our sole member.  If you purchase a beneficial interest in any bond, you agree by your purchase to treat the bonds as debt of our sole member for federal income tax purposes.

ERISA Considerations

Investors who are acting on behalf of or using assets of certain employee benefit plans or arrangements subject to ERISA or Section 4975 of the Internal Revenue Code may acquire the bonds subject to specified conditions.  The acquisition and holding of the bonds could be treated as a direct or indirect prohibited transaction under ERISA.  Accordingly, by purchasing the bonds, each investor purchasing on behalf of or with assets of such an employee benefit plan or arrangement will be deemed to certify that the purchase and subsequent holding of the bonds would not result in a non-exempt prohibited transaction under the rules of ERISA.  Please read “ERISA Considerations.”

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RISK FACTORS

Please carefully consider all the information we have included or incorporated by reference in this prospectus and the prospectus supplement, including the risks described below before deciding whether to invest in the bonds.

You may experience material payment delays or incur a loss on your investment in the Consumer Rate Relief Bonds because the source of funds for payment is limited.

The only source of funds for payment of the bonds will be our assets, which consist of:

· the CRR property securing the bonds, including the right to impose, charge and collect the CRR charges and our right to adjust them under the true-up mechanism;

· the funds on deposit in the accounts held by the trustee; and

· our rights under various contracts we describe in this prospectus.

The bonds are not a pledge of the faith and credit or taxing power of the State of West Virginia or any county, municipality or other political subdivision of the State of West Virginia, nor will the bonds be insured or guaranteed by APCo, including in its capacity as the servicer, or by its parent, AEP, any of their respective affiliates (other than us), the trustee or by any other person or entity.  Thus, you must rely for payment of the bonds solely upon the Recovery Act, state and federal constitutional rights to enforcement of the Recovery Act, the irrevocable financing order, collections of the CRR charges and funds on deposit in the related accounts held by the trustee.  Our organizational documents restrict our right to acquire other assets unrelated to the transactions described in this prospectus.  Please read “Appalachian Consumer Rate Relief Funding LLC, The Issuing Entity.”

RISKS ASSOCIATED WITH POTENTIAL JUDICIAL, LEGISLATIVE OR REGULATORY ACTIONS

We are not obligated to indemnify you for changes in law.

Neither we nor APCo will indemnify you for any changes in the law, including any federal preemption or repeal or amendment of the Recovery Act, that may affect the value of your bonds.  APCo will agree in the servicing agreement to institute any action or proceeding as may be reasonably necessary to block or overturn any attempts to cause a repeal, modification or amendment to the Recovery Act that would be materially adverse to us, the trustee or bondholders.  Please read “The Sale Agreement—Covenants of the Seller” and “The Servicing Agreement—Servicing Standards and Covenants.”  However, we cannot assure you that APCo would be able to take this action or that any such action would be successful.

Future judicial action could reduce the value of your investment in the Consumer Rate Relief Bonds.

The CRR property securing the bonds is the creation of the Recovery Act and the financing order that has been issued by the PSC to APCo.  There is uncertainty associated with investing in bonds payable from an asset that depends for its existence on legislation because there is limited judicial or regulatory experience implementing and interpreting the legislation.  Because the CRR property is a creation of the Recovery Act, any judicial determination affecting the validity of or interpreting the Recovery Act, the CRR property or our ability to make payments on the bonds might have an adverse effect on the bonds.  A federal or state court could be asked in the future to determine whether the relevant provisions of the Recovery Act are unlawful or invalid.  If the Recovery Act is invalidated, the financing order might also be invalidated.

Other states have passed legislation similar to the Recovery Act to authorize recoveries by utilities of specified costs, such as environmental control costs, hurricane recovery costs, or costs associated with deregulation of the electricity market, and some of those laws have been challenged by judicial actions or utility commission proceedings.  To date, none of those challenges has succeeded, but future judicial challenges might be made.  An unfavorable decision regarding another state’s law would not automatically invalidate the Recovery Act or the financing order, but it might provoke a challenge to the Recovery Act, establish a legal precedent for a successful challenge to the Recovery Act or heighten awareness of the political and other risks of the bonds, and in that way may limit the liquidity and value of the bonds.  Therefore, legal activity in other states may indirectly affect the value of your investment in the bonds.

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Future state legislative action might attempt to reduce the value of your investment in the Consumer Rate Relief Bonds.

Despite its pledge in the Recovery Act not to take or permit certain actions that would impair the value of the CRR property or the CRR charges, the West Virginia legislature might in the future attempt to repeal or amend the Recovery Act in a manner that limits or alters the CRR property so as to reduce its value.  For a description of the State’s pledge, please read “The Recovery Act—APCo and Other Utilities May Securitize Consumer Rate Relief Costs—State Pledge.”  It might be possible for the West Virginia legislature to repeal or amend the Recovery Act notwithstanding the State’s pledge if the legislature acts in order to serve a significant and legitimate public purpose.  Any such action, as well as the costly and time-consuming litigation that likely would ensue, might adversely affect the price and liquidity, the dates of payment of interest on and principal of, and the weighted average lives of, the bonds.  Moreover, the outcome of any litigation cannot be predicted.  Accordingly, you might incur a loss on or delay in recovery of your investment in the bonds.

If an action of the West Virginia legislature adversely affecting the CRR property or the ability to collect CRR charges were considered a “taking” under the United States or West Virginia Constitutions, the State of West Virginia might be obligated to pay compensation for the taking.  However, even in that event, there is no assurance that any amount provided as compensation would be sufficient for you to recover fully your investment in the bonds or to offset interest lost pending such recovery.

Unlike the citizens of California, Massachusetts, Michigan and some other states, the citizens of the State of West Virginia currently do not have the constitutional right to adopt or revise state laws by initiative or referendum.  Thus, absent an amendment of the West Virginia Constitution to provide for such rights, the Recovery Act cannot be amended or repealed by direct action of the electorate of the State of West Virginia.

The enforcement of any rights against the State of West Virginia or the PSC under the State’s pledge may be subject to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against state and local governmental entities in West Virginia.  These limitations might include, for example, the necessity to exhaust administrative remedies prior to bringing suit in a court, or limitations on type and locations of courts in which the State of West Virginia or the PSC may be sued.

The federal government might preempt the Recovery Act without full compensation.

Federal preemption of the Recovery Act could prevent bondholders from receiving payments on the bonds. In the past, bills have been introduced in Congress to prohibit the recovery of charges similar to the CRR charges, although Congress has not enacted any such law. As of the date of this prospectus, we are not aware of the House or the Senate, or any of their committees having primary relevant jurisdiction having considered legislation that would prohibit the recovery of charges similar to the CRR charges. However, we can give no assurances that Congress may not do so in the future. Enactment of a federal law prohibiting the recovery of charges similar to the CRR charges might have the effect of preempting the Recovery Act and thereby prohibiting the recovery of the CRR charges, which would cause delays and losses on payments on the bonds.

We can give no assurances that a court would consider the preemption by federal law of the Recovery Act to be a taking of property from us or the bondholders under the U.S. Constitution or under the Constitution of the State of West Virginia. Moreover, even if this preemption of the Recovery Act by the federal government were considered a taking under the U.S. Constitution or under the Constitution of the State of West Virginia for which the federal government had to pay “just compensation,” we can give no assurance that this compensation would be sufficient to pay the full amount of principal of and interest on the bonds or to pay such amounts on a timely basis.

The PSC might attempt to take actions that could reduce the value of your investment in the Consumer Rate Relief Bonds.

The Recovery Act provides that a financing order is irrevocable and that the PSC may not reduce, impair, postpone or terminate the CRR charges authorized under a financing order, except for the true-up adjustments to the CRR charges, or impair the CRR property or the collection of the consumer rate relief costs.  However, the PSC retains the power to adopt, revise or rescind rules or regulations affecting APCo.  The PSC also retains the power to interpret the financing order granted to APCo, and in that capacity might be called upon to rule on the meanings of provisions of the order that might need further elaboration.  Any new or amended regulations or orders from the PSC might attempt to affect the ability of the servicer to collect the CRR charges in full and on a timely basis, affecting the amortization of the bonds and their weighted average lives, and, accordingly, the rating of the bonds or their price.

The servicer is required to file with the PSC, on our behalf, certain adjustments of the CRR charges.  Please read “APCo’s Financing Order—True-Up Mechanism” and “The Servicing Agreement—True-Up Adjustment Process.”  True-up adjustment procedures have been challenged in the past and may be challenged in the future.  Challenges to or delays in the

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true-up process might adversely affect the market perception and valuation of the bonds.  Also, any litigation might materially delay CRR charge collections due to delayed implementation of true-up adjustments and might result in missing payments or payment delays and lengthened weighted average life of the bonds.

SERVICING RISKS

Inaccurate consumption, demand or collection forecasting might reduce scheduled payments on the Consumer Rate Relief Bonds.

Although affiliates of APCo have familiarity with making the type of calculations required by the financing order with respect to the bonds and the CRR charges, the servicer itself has not previously calculated CRR charges or similar charges for retail electric customers.  The CRR charges are generally assessed based on forecasted customer usage, which includes kilowatt-hours of electricity consumed by retail electric customers, and in the case of some industrial customers, kilowatt demand.  The amount and the rate of CRR charge collections will depend in part on such actual electricity usage and kilowatt demand charges and the amount of collections and write-offs for each CRR rate class.  If the servicer inaccurately forecasts either electricity consumption and demand or customer delinquency or charge-offs when setting or adjusting the CRR, there could be a shortfall or material delay in CRR charge collections, which might result in missed or delayed payments of principal and interest and lengthened weighted average life of the bonds.  Please read “APCo’s Financing Order—True-Up Mechanism” and “The Servicing Agreement—True-Up Adjustment Process.”

Inaccurate forecasting of electricity consumption or demand by the servicer might result from, among other things, unanticipated weather or economic conditions, resulting in less electricity consumption and demand than forecast; general economic conditions being worse than expected, causing retail electric customers to migrate from APCo’s service territory or reduce their electricity consumption or demand; the occurrence of a natural disaster, such as a hurricane, wind storm or an act of terrorism, cyber attack or other catastrophic event; unanticipated changes in the market structure of the electric industry; customers consuming less electricity than anticipated because of increased energy prices, unanticipated increases in conservation efforts or unanticipated increases in electric usage efficiency; differences or changes in forecasting methodology; or future access to alternative sources of energy, including self-generation of electric power.

Inaccurate forecasting of delinquency or charge-off rates by the servicer might result also from, among other things, unexpected deterioration of the economy or the unanticipated declaration of a moratorium on terminating electric service to customers in the event of extreme weather, either of which would cause greater delinquencies or charge-offs than expected or force APCo to grant additional payment relief to more customers, or any other unanticipated change in law that makes it more difficult for APCo to terminate service to nonpaying customers or that requires APCo to apply more lenient credit standards in accepting retail electric customers.

Your investment in the Consumer Rate Relief Bonds depends on APCo or its successors or assignees, acting as servicer of the CRR Property.

APCo, as servicer, will be responsible for, among other things, calculating, billing and collecting the CRR charges from retail electric customers, submitting requests to the PSC to adjust these charges, monitoring the collateral for the bonds and taking certain actions in the event of non-payment by a retail electric customer.  The trustee’s receipt of collections in respect of the CRR charges, which will be used to make payments on bonds, will depend in part on the skill and diligence of the servicer in performing these functions.  The systems that the servicer has in place for CRR charge billings and collections, as the same may be modified by any applicable current or future PSC regulations, might, in particular circumstances, cause the servicer to experience difficulty in performing these functions in a timely and completely accurate manner.  If the servicer fails to make collections for any reason, then the servicer’s payments to the trustee in respect of the CRR charges might be delayed or reduced.  In that event, our payments on the bonds might be delayed or reduced.

If we need to replace APCo as the servicer, we may experience difficulties finding and using a replacement servicer.

If APCo ceases to service the CRR property related to the bonds, it might be difficult to find a successor servicer.  Also, any successor servicer might have less experience and ability than APCo and might experience difficulties in collecting CRR charges and determining appropriate adjustments to the CRR charges and billing and/or payment arrangements may change, resulting in delays or disruptions of collections.  A successor servicer might not be willing to perform except for fees higher than those approved in the financing order and might charge fees that, while permitted under the financing order, are substantially higher than the fees paid to APCo as servicer.  Although a true-up adjustment would be required to allow for the increase in fees, there could be a gap between the incurrence of such fees and the implementation of a true-up adjustment to

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adjust for such increase that might adversely affect distributions to bondholders.  In the event of the commencement of a case by or against the servicer under the United States Bankruptcy Code or similar laws, we and the trustee might be prevented from effecting a transfer of servicing due to operation of the Bankruptcy Code.  Any of these factors might delay the timing of payments and reduce the value of your investment.

APCo is currently a party to financing arrangements involving the sale of accounts receivable generated by its retail electricity delivery business in Virginia; these receivables are collected and processed separately from APCo’s receivables owing by its West Virginia retail electric customers.  APCo may in the future, however, enter into similar financing arrangements involving the sale of accounts receivable generated by its retail electric delivery business in West Virginia.  Any such future arrangement would be subject to an intercreditor agreement described under “The Servicing Agreement—Intercreditor Agreement.”  Although the CRR Charges would not be subject to this accounts receivable financing, the CRR Charges and APCo’s accounts receivable arising from sales of electricity in West Virginia are owed by the same pool of customers and are expected to be collected for the foreseeable future under a single bill.  APCo has covenanted in the sale agreement that it will not enter into any future accounts receivable financing arrangements with respect to its West Virginia receivables without first entering into an intercreditor agreement, and without the trustee and any investors in such accounts receivable financing arrangement becoming parties thereto.  Any intercreditor agreement will provide that, in the event the trustee has the right to replace APCo as servicer or the investors have the right to replace APCo as collection agent for the accounts receivable financing, the trustee and the investors’ agent will act jointly in the exercise of such rights and neither party will be entitled to replace APCo under its agreement without the consent of the other party.  The intercreditor agreement may therefore make it more difficult for the trustee to replace APCo following a servicer default.  Conversely, if a default were to occur under the accounts receivable financing arrangement, such a default may increase the possibility of APCo being replaced as servicer, even if APCo is not in default under the servicing agreement for the CRR Property.

In addition to the above, it is possible that APCo may, in the future, cause subsidiaries to issue other securities, similar to the bonds, which are backed by consumer rate relief charges owing from retail electric customers in West Virginia or similar types of property.  APCo has covenanted in the sale agreement that, in the event of any such issuance, it will also enter into an intercreditor agreement with the trustee and the trustees for such other issuances, which would provide that the servicer for the bonds and such other issuances must be one and the same entity.  Any such expansion of the intercreditor agreement to include such subsequent issuances could further impair the ability of  the bondholders to appoint a successor servicer in the event of a servicer default.

Changes to billing and collection practices might reduce the value of your investment in the Consumer Rate Relief Bonds.

The financing order specifies the methodology for determining the amount of the CRR charges we may impose.  The servicer may not change this methodology without approval from the PSC.  However, the servicer may set its own billing and collection arrangements with retail electric customers from whom it collects CRR charges, provided that these arrangements comply with any applicable PSC customer safeguards and the provisions of the servicing agreement.  For example, to recover part of an outstanding bill, the servicer may agree to extend a retail electric customer’s payment schedule or to write off the remaining portion of the bill, including the CRR charges.  Also, the servicer may change billing and collection practices, which might adversely impact the timing and amount of retail electric customer payments and might reduce CRR charge collections, thereby limiting our ability to make scheduled payments on the bonds.  Separately, the PSC might require changes to these practices.  Any changes in billing and collection practices regulations might make it more difficult for the servicer to collect the CRR charges and adversely affect the value of your investment in the bonds.

Limits on rights to terminate service might make it more difficult to collect the CRR charges.

The financing order expressly provides that we have the right to authorize disconnection of  electric service for nonpayment of CRR charges to the extent permitted by and pursuant to the terms and limitation of PSC-approved service termination rules and orders.  PSC rules and orders regulate and control the right to disconnect service and are subject to change.  For example, under current rules, residential customers who receive a disconnection notice must be given the opportunity to enter into a deferred payment plan agreement.  In addition, the servicer may not, and therefore we may not, terminate service to a retail electric customer (1) on a day when APCo is not open to accept payment or the day immediately preceding any such day, (2) on a Friday, Saturday or Sunday, (3) if a customer utilizes electric or gas energy using life-supporting equipment such as kidney dialysis machines or iron lungs, (4) if termination would otherwise be especially dangerous to the health of safety of a member of the customer’s household, (5) during the period from December 1st through the last day of February or (6) to residential customers sixty-five years old or older without first making contact with a near relative or responsible third-party and unless the customer refuses to agree to a reasonable deferred payment schedule, or (7) if the customer is the landlord of a master-metered apartment building or other multiple unit dwelling or a third-party non-

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resident of the identified service location unless certain notices are given.  The servicer’s inability to terminate service may adversely impact is ability to collect CRR charges from these retail electric customers.

Future adjustments to CRR charges by CRR rate class might result in insufficient collections.

The customers who pay CRR charges are divided into separate classes, or CRR rate classes.  Each CRR rate class falls within a larger CRR Revenue Group (i.e., residential, commercial and industrial).  CRR charges for the bonds will be allocated among CRR rate classes and assessed in accordance with the methodology used to allocate ENEC costs.

Although any shortfall in collections from any CRR rate class will be included in the future revenue requirements collected from all retail electric customers, the percentage allocation of cost to any particular CRR rate class will not change, unless (1) all customers with a CRR rate class disappear, in which case the costs are spread among the remaining CRR rate classes within the related CRR revenue group as part of the standard true-up adjustment, or (2) the total consumption or demand for a CRR revenue group drops by 10% or more, in which case a nonstandard true-up adjustment will be implemented after PSC review and approval to adjust such allocation.  However, if enough customers in a CRR rate class fail to pay CRR charges or cease to be customers, the servicer might have to substantially increase the CRR charges for the remaining customers in that CRR rate class.  Such increase could be significant in the case of APCo’s large industrial CRR rate classes, some of which consist of a small number of large industrial retail electric customers.  Other factors, such as economic conditions, could also lead to industrial customers reducing their demand for electricity or to abandon operation of their facilities.  The inability to impose, charge and collect CRR charges or the failure to collect CRR charges from such retail electric customers could lead to increases in CRR charges for that CRR rate class, and for all customers.  These increases could lead to further unanticipated failures by the remaining customers to pay CRR charges, thereby increasing the risk of a shortfall in funds to pay the bonds. Please see “APCo’s Financing Order—True-up Mechanism” for more detail.

RISKS ASSOCIATED WITH THE UNUSUAL NATURE OF THE CRR PROPERTY

Foreclosure of the trustee’s lien on the CRR Property for the Consumer Rate Relief Bonds might not be practical, and acceleration of the Consumer Rate Relief Bonds before maturity might have little practical effect.

Under the Recovery Act and the indenture, the trustee or the bondholders have the right to foreclose or otherwise enforce the lien on the CRR property securing the bonds.  However, in the event of foreclosure, there is likely to be a limited market, if any, for the CRR property.  Therefore, foreclosure might not be a realistic or practical remedy.  Moreover, although principal of the bonds will be due and payable upon acceleration of the bonds before maturity, CRR charges likely would not be accelerated and the nature of our business will result in principal of the bonds being paid as funds become available.  If there is an acceleration of the bonds, all tranches of the bonds will be paid pro rata; therefore, some tranches might be paid earlier than expected and some tranches might be paid later than expected.

STORM RELATED RISK

Storm damage to APCo’s operations could impair payment of the Consumer Rate Relief Bonds.

APCo’s operations could be impacted by hurricanes, tropical storms, wind storms or ice storms.  Transmission and/or distribution and generation facilities could be damaged or destroyed and usage of electricity could be interrupted temporarily, reducing the collections of CRR charges.  There could be longer-lasting weather-related adverse effects on residential and commercial development and economic activity among APCo’s customers, which could cause the CRR charges to be greater than expected.

RISKS ASSOCIATED WITH POTENTIAL BANKRUPTCY PROCEEDINGS OF THE SELLER OR THE SERVICER

For a more detailed discussion of the following bankruptcy risks, please read “How a Bankruptcy May Affect Your Investment.”

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The servicer will commingle the CRR charges with other revenues it collects, which might obstruct access to the CRR charges in case of the servicer’s bankruptcy and reduce the value of your investment in the Consumer Rate Relief Bonds.

The servicer will be required to remit collections to the trustee within two business days of receipt.  The servicer will not segregate the CRR charges from the other funds it collects from retail electric customers or its general funds.  The CRR charges will be segregated only when the servicer pays them to the trustee.

Despite this requirement, the servicer might fail to pay the full amount of the CRR charges to the trustee or might fail to do so on a timely basis.  This failure, whether voluntary or involuntary, might materially reduce the amount of CRR charge collections available to make payments on the bonds.

The Recovery Act provides that the priority of a lien and security interest perfected in CRR property is not impaired by the commingling of the funds arising from CRR charges with any other funds.  In a bankruptcy of the servicer, however, a bankruptcy court might rule that federal bankruptcy law takes precedence over the Recovery Act and might decline to recognize our right to collections of the CRR charges that are commingled with other funds of the servicer as of the date of bankruptcy.  If so, the collections of the CRR charges held by the servicer as of the date of bankruptcy would not be available to pay amounts owing on the bonds.  In this case, we would have only a general unsecured claim against the servicer for those amounts.  This decision could cause material delays in payments of principal or interest, or losses, on your bonds and could materially reduce the value of your investment in the bonds.

The bankruptcy of APCo or any successor seller might result in losses or delays in payments on the Consumer Rate Relief Bonds.

The Recovery Act and the financing order provide that as a matter of West Virginia state law:

· the rights and interests of a qualifying utility under a financing order, including the right to impose, charge and collect CRR charges, may be transferred, sold, conveyed or assigned to any affiliate of the qualifying utility created for the limited purpose of acquiring, owning or administering consumer rate relief property, issuing bonds under the financing order or a combination of these purposes,

· upon the transfer to us and pledge to the trustee for the benefit of bondholders, in connection with the issuance of the bonds, the rights described above will become CRR property, which CRR property will continue to exist until the bonds and all ongoing financing costs relating thereto have been paid in full,

· such CRR property constitutes an existing, present property right, notwithstanding any requirement that the imposition, charging and collection of CRR charges depend on the electric distribution utility continuing to deliver retail electric distribution service or continuing to perform its servicing functions relating to the collection of CRR charges or on the level of future energy consumption or demand, regardless of whether the CRR charges have been billed, have accrued, or have been collected, and notwithstanding any requirement that the value or amount of the property is dependent on the future provision of service to customers by the electric distribution utility,

· all or any portion of the consumer rate relief property may be pledged to secure the payment of the bonds, amounts payable to financing parties and bondholders and amounts payable under the servicing agreement and other ancillary agreements relating to the bonds, and

· a transfer of the CRR property from the seller or its affiliate, to us, under an agreement that expressly states the transfer is a sale or other absolute transfer, is a true sale of the CRR property and not a pledge of or secured transaction relating to, the CRR property.

These provisions are important to maintaining payments on the bonds in accordance with their terms during any bankruptcy of APCo.  In addition, the transaction has been structured with the objective of keeping us legally separate from APCo and its affiliates in the event of a bankruptcy of APCo or any such affiliates.

A bankruptcy court generally follows state property law on issues such as those addressed by the state law provisions described above.  However, a bankruptcy court does not follow state law if it determines that the state law is contrary to a paramount federal bankruptcy policy or interest.  If a bankruptcy court in an APCo bankruptcy refused to enforce one or more of the state property law provisions described above, the effect of this decision on you as a beneficial owner of the bonds might be similar to the treatment you would receive in an APCo bankruptcy if the bonds had been issued directly by APCo.  A decision by the bankruptcy court that, despite our separateness from APCo, our assets and liabilities and those of APCo should be consolidated would have a similar effect on you as a bondholder.

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We have taken steps together with APCo, as the seller, to reduce the risk that in the event the seller or an affiliate of the seller were to become the debtor in a bankruptcy case, a court would order that our assets and liabilities be substantively consolidated with those of APCo or an affiliate.  Nonetheless, these steps might not be completely effective, and thus if APCo or an affiliate of the seller were to become a debtor in a bankruptcy case, a court might order that our assets and liabilities be consolidated with those of APCo or an affiliate of the seller.  This might cause material delays in payment of, or losses on, your bonds and might materially reduce the value of your investment in the bonds.  For example:

· without permission from the bankruptcy court, the trustee might be prevented from taking actions against APCo or recovering or using funds on your behalf or replacing APCo as the servicer,

· the bankruptcy court might order the trustee to exchange the CRR property for other property, of lower value,

· tax or other government liens on APCo’s property might have priority over the trustee’s lien and might be paid from collected CRR charges before payments on the bonds,

· the trustee’s lien might not be properly perfected in the collected CRR property collections prior to or as of the date of APCo’s bankruptcy, with the result that the bonds would represent only general unsecured claims against APCo,

· the bankruptcy court might rule that neither our property interest nor the trustee’s lien extends to CRR charges in respect of electricity consumed after the commencement of APCo’s bankruptcy case, with the result that the bonds would represent only general unsecured claims against APCo,

· we and APCo might be relieved of any obligation to make any payments on the bonds during the pendency of the bankruptcy case and might be relieved of any obligation to pay interest accruing after the commencement of the bankruptcy case,

· APCo might be able to alter the terms of the bonds as part of its plan of reorganization,

· the bankruptcy court might rule that the CRR charges should be used to pay, or that we should be charged for, a portion of the cost of providing electric service, or

· the bankruptcy court might rule that the remedy provisions of the sale agreement are unenforceable, leaving us with an unsecured claim for actual damages against APCo that may be difficult to prove or, if proven, to collect in full.

Furthermore, if APCo enters bankruptcy proceedings, it might be permitted to stop acting as servicer and it may be difficult to find a third party to act as servicer.  The failure of the servicer to perform its duties or the inability to find a successor servicer might cause payment delays or losses on your investment in the bonds.  Also, the mere fact of a servicer or seller bankruptcy proceeding might have an adverse effect on the resale market for the bonds and on the value of the bonds.

The sale of the CRR Property might be construed as a financing and not a sale in a case of APCo’s bankruptcy which might delay or limit payments on the Consumer Rate Relief Bonds.

The Recovery Act provides that the characterization of a transfer of CRR property as a sale or other absolute transfer will not be affected or impaired by treatment of the transfer as a financing for tax, financial reporting or other purposes.  We and APCo will treat the transaction as a sale under applicable law, although for financial reporting and federal and state income and franchise tax purposes the transaction will be treated as a financing.  In the event of a bankruptcy of APCo, a party in interest in the bankruptcy might assert that the sale of the CRR property to us was a financing transaction and not a “sale or other absolute transfer” and that the treatment of the transaction for financial reporting and tax purposes as a financing and not a sale lends weight to that position.  If a court were to characterize the transaction as a financing, we expect that we would, on behalf of ourselves and the trustee, be treated as a secured creditor of APCo in the bankruptcy proceedings, although a court might determine that we only have an unsecured claim against APCo.  Even if we had a security interest in the CRR property, we would not likely have access to the related CRR charge collections during the bankruptcy and would be subject to the risks of a secured creditor in a bankruptcy case, including the possible bankruptcy risks described in the immediately preceding risk factor.  As a result, repayment of the bonds might be significantly delayed and a plan of reorganization in the bankruptcy might permanently modify the amount and timing of payments to us of the related CRR charge collections and therefore the amount and timing of funds available to us to pay bondholders.

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If the servicer enters bankruptcy proceedings, the remittances of the CRR charges by the servicer prior to the date of bankruptcy might constitute preferences, which means these funds might be unavailable to pay amounts owing on the Consumer Rate Relief Bonds.

In the event of a bankruptcy of the servicer, a party in interest might take the position that the remittance to the trustee of funds prior to bankruptcy of the servicer pursuant to the servicing agreement was a payment on account of antecedent debt owed by the servicer and therefore constitutes a preference under bankruptcy law.  If a court were to hold that the remittance of funds constitutes a preference, any such remittance within 90 days of the filing of the bankruptcy petition (or within one year if the remittance was on account of antecedent debt owed to us as opposed to the bondholders) could be avoidable, and the funds could be required to be returned to the bankruptcy estate of the servicer.  To the extent that CRR charges have been commingled with the general funds of the servicer prior to the transfer of funds to the trustee, the risk that a court would hold that a remittance of funds was a preference would increase.  The trustee would merely be an unsecured creditor of the servicer.  If any funds were required to be returned to the bankruptcy estate of the servicer, we would expect that the amount of any future CRR charges would be increased through the true-up mechanism to recover such amount.

Claims against APCo or any successor seller might be limited in the event of a bankruptcy of the seller.

If the seller were to become a debtor in a bankruptcy case, claims, including indemnity claims, by us against the seller under the sale agreement and the other documents executed in connection with the sale agreement would be unsecured claims and would be adjudicated in the bankruptcy case.  In addition, the bankruptcy court might estimate any contingent claims that we have against the seller and, if it determines that the contingency giving rise to these claims is unlikely to occur, estimate the claims at a lower amount.  A party in interest in the bankruptcy of the seller might challenge the enforceability of the indemnity provisions in a sale agreement.  If a court were to hold that the indemnity provisions were unenforceable, we would be left with a claim for actual damages against the seller based on breach of contract principles, which would be subject to estimation and/or calculation by the court.  We cannot give any assurance as to the result if any of the above-described actions or claims were made.  Furthermore, we cannot give any assurance as to what percentage of their claims, if any, unsecured creditors would receive in any bankruptcy proceeding involving the seller.

The bankruptcy of APCo or any successor seller might limit the remedies available to the trustee.

Upon an event of default for the bonds under the indenture, the Recovery Act permits the trustee to enforce the security interest in the related CRR property in accordance with the terms of the indenture.  If the default is caused by the failure of the servicer to remit to the CRR collection account, the Recovery Act provides that a court, upon the application of trustee or another interested party or the PSC, shall, without limiting any other remedies available to the applying party, order the sequestration and payment to bondholders of all revenues arising with respect to the CRR property.  The Recovery Act further provides that such order shall remain in full force and effect notwithstanding the bankruptcy, reorganization or insolvency of the qualifying utility, or any affiliate of the qualifying utility.  There can be no assurance, however, that a court or the PSC would issue this order after an APCo bankruptcy in light of the automatic stay provisions of Section 362 of the United States Bankruptcy Code.  In that event, the trustee would be required to seek an order from the bankruptcy court lifting the automatic stay to permit this action by the West Virginia court, and an order requiring an accounting and segregation of the revenues arising from the CRR property.  There can be no assurance that a court would grant either order.

OTHER RISKS ASSOCIATED WITH AN INVESTMENT IN THE CONSUMER RATE RELIEF BONDS

APCo’s indemnification obligations under the sale and servicing agreements are limited and might not be sufficient to protect your investment in the Consumer Rate Relief Bonds.

APCo is obligated under the sale agreement to indemnify us and the trustee, for itself and on behalf of the bondholders, only in specified circumstances and will not be obligated to repurchase any CRR property in the event of a breach of any of its representations, warranties or covenants regarding the CRR property.  Similarly, APCo is obligated under the servicing agreement to indemnify us and the trustee, for itself and on behalf of the bondholders, and the PSC only in specified circumstances.  Please read “The Sale Agreement” and “The Servicing Agreement.”

Neither the trustee nor the bondholders will have the right to accelerate payments on the bonds as a result of a breach under the sale agreement or servicing agreement, absent an event of default under the indenture relating to the bonds as described in “Description of the Consumer Rate Relief Bonds—Events of Default; Rights Upon Event of Default.”  Furthermore, APCo might not have sufficient funds available to satisfy its indemnification obligations under the basic documents, and the amount of any indemnification paid by APCo might not be sufficient to pay all obligations and/or costs

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owed by us or for you to recover all of your investment in the bonds.  In addition, if APCo becomes obligated to indemnify bondholders, the then-current ratings on the bonds will likely be downgraded as a result of the circumstances causing the breach and the fact that bondholders will be unsecured creditors of APCo with respect to any of these indemnification amounts.

The credit ratings are no indication of the expected rate of payment of principal on the Consumer Rate Relief Bonds.

We expect the bonds will receive credit ratings from two nationally recognized statistical rating organizations (NRSROs).  A rating is not a recommendation to buy, sell or hold the bonds.  The ratings merely analyze the probability that we will repay the total principal amount of the bonds at the final maturity date (which is later than the scheduled final payment date) and will make timely interest payments.  The ratings are not an indication that the rating agencies believe that principal payments are likely to be paid on time according to the expected sinking fund schedule.

Under Rule 17g-5 of the Securities Exchange Act of 1934, NRSROs providing the sponsor with the requisite certification will have access to all information posted on a website by the sponsor for the purpose of determining the initial rating and monitoring the rating after the closing date in respect of the bonds.  As a result, an NRSRO other than the NRSRO hired by the sponsor (the hired NRSRO) may issue ratings on the bonds (Unsolicited Ratings), which may be lower, and could be significantly lower, than the ratings assigned by the hired NRSROs.  The Unsolicited Ratings may be issued prior to, or after, the closing date in respect of the bonds.  Issuance of any Unsolicited Rating will not affect the issuance of the bonds.  Issuance of an Unsolicited Rating lower than the ratings assigned by the hired NRSRO on the bonds might adversely affect the value of the bonds and, for regulated entities, could affect the status of the bonds as a legal investment or the capital treatment of the bonds.  Investors in the bonds should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO.  None of APCo, us, the underwriters or any of their affiliates will have any obligation to inform you of any Unsolicited Ratings assigned after the date of this prospectus.  In addition, if we or APCo fail to make available to a non-hired NRSRO any information provided to any hired rating agency for the purpose of assigning or monitoring the ratings on the bonds, a hired NRSRO could withdraw its ratings on the bonds, which could adversely affect the market value of your bonds and/or limit your ability to resell your bonds.

Alternatives to purchasing electricity through APCo’s distribution facilities may be more widely utilized by retail electric customers in the future.

Broader use of distributed generation by retail electric customers may result from customers’ changing perceptions of the merits of utilizing existing generation technology, tax or other economic incentives or from technological developments resulting in smaller-scale, more fuel efficient, more environmentally friendly and/or more cost effective distributed generation.  Moreover, an increase in distributed generation may result if extreme weather conditions result in shortages of grid-supplied energy or if other factors cause grid-supplied energy to be less reliable.  The financing order provides that to the extent any customer’s self generation, and any portion thereof, is transmitted on APCo’s (or its successors’) delivery system, such portion of self generation will be subject to the CRR charge.  However, more widespread use of distributed generation which is not transmitted through APCo’s delivery system (“behind the meter”) might allow greater numbers of retail electric customers to reduce or eliminate their payment of CRR charges causing CRR charges to remaining customers to increase.

In addition, West Virginia law may authorize certain local municipalities to seek to acquire portions of APCo’s electric distribution facilities through the power of eminent domain for use as part of municipally-owned utility systems.  Although the power of eminent domain has not been used by municipalities in West Virginia in recent times to acquire electric distribution systems, there can be no assurance that one or more municipalities will not seek to acquire some or all of APCo’s electric distribution facilities while bonds remain outstanding.  The Recovery Act specifies that CRR charges approved by a PSC order shall be collected by an electric utility as well as its successors.  In the servicing agreement, APCo has covenanted to assert in an appropriate forum that any municipality that acquires any portion of APCo’s electric distribution facilities must be treated as a successor to APCo under the Recovery Act and the financing order, and that retail electric customers in such municipalities remain responsible for payment of CRR charges.  However, the involved municipality might assert that it should not be treated as a successor to APCo for these purposes and that its distribution customers are not responsible for payment of CRR charges.  In any such cases, there can be no assurance that the CRR charges will be collected from customers of municipally-owned utilities who were formerly customers of APCo.

The absence of a secondary market for the Consumer Rate Relief Bonds might limit your ability to resell your Consumer Rate Relief Bonds.

The underwriters for the bonds might assist in resales of the bonds, but they are not required to do so.  A secondary market for the bonds might not develop and we do not expect to list the bonds on any securities exchange.  If a secondary

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market does develop, it might not continue or it might not be sufficiently liquid to allow you to resell any of your bonds.  Please read “Plan of Distribution.”

You might receive principal payments for the Consumer Rate Relief Bonds later than you expect.

The amount and the rate of collection of the CRR charges for the bonds, together with the related CRR charge adjustments, will generally determine whether there is a delay in the scheduled repayments of bond principal.  If the servicer collects the CRR charges at a slower rate than expected,  it might have to request adjustments of the CRR charges to correct for such delays.  If those adjustments are not timely and accurate, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the bonds.

APCo may sell property similar to the CRR Property through another affiliated entity in the future.

APCo may in the future without your review or approval sell property similar to the CRR property to one or more entities other than us in connection with a new issuance of bonds similar to the bonds, or similarly authorized types of bonds (such as storm recovery bonds).  Any new issuance may include terms and provisions that would be unique to that particular issue.  We may not issue additional bonds.

APCo has covenanted in the sale agreement not to sell consumer rate relief property owing from West Virginia customers or similar property to other entities if the sale would result in the credit ratings on the bonds being reduced or withdrawn.  APCo has also covenanted in the sale agreement that, in the event of any such sale, it will also enter into an intercreditor agreement with the trustee and the trustees for such other issuances, which would provide that the servicer for the bonds and such other issuances must be one and the same entity.  In the event a customer does not pay in full all amounts owed under any bill, including CRR charges, APCo, as servicer, is required to allocate any resulting shortfalls in CRR charges ratably based on the amounts of CRR charges owing in respect of the bonds, and the total amounts owed by such customer.  However, we cannot assure you that a new sale would not cause reductions or delays in payment of your bonds.

Regulatory provisions affecting certain investors could adversely affect the liquidity of the Consumer Rate Relief Bonds.

Article 122a of European Union Directive 2006/48/EU (as required to be implemented by the Member States of the European Economic Area (EEA) (the CRD)) applies, in general, to newly issued securitizations after December 31, 2010.  Article 122a restricts an EEA regulated credit institution and consolidated group affiliates thereof (each, an Affected Investor) from investing in a securitization (as defined by the CRD) unless the originator, sponsor or original lender in respect of that securitization has explicitly disclosed to the Affected Investor that it will retain, on an ongoing basis, a net economic interest of not less than 5 per cent. in that securitization in the manner contemplated by Article 122a.  Article 122a also requires that an EEA regulated credit institution be able to demonstrate that it (or, in the case of investment by an affiliated Affected Investor, such Affected Investor)  has undertaken certain due diligence in respect of, amongst other things, the bonds it has acquired and the underlying exposures, and that procedures have been established for monitoring the performance of the underlying exposures on an on-going basis.  Failure to comply with one or more of the requirements set out in Article 122a may result in the imposition of a substantial additional capital charge with respect to the investment made in the securitization by the relevant Affected Investor.

None of APCo, us or any other party to the transaction intends to retain a material net economic interest in the transaction in accordance with the requirements of Article 122a or take any other action which may be required by Affected Investors for the purposes of their compliance with Article 122a.  This may have a negative impact on the regulatory capital position of an EEA regulated credit institution (directly or by virtue of consolidated regulatory capital requirements) and on the value and liquidity of the bonds in the secondary market.  Affected Investors in the bonds are responsible for analyzing their own regulatory position, and are encouraged to consult with their own investment and legal advisors regarding compliance with Article 122a (and any related implementing rules in the relevant EEA Member State) and the suitability of the bonds for investment.  None of APCo, us, any underwriter or any other party to the transaction makes any representation to any prospective investor or purchaser of the bonds regarding the regulatory capital treatment of their investment in the bonds on the closing date or at any time in the future.

The fact that the bonds have not been structured to comply with Article 122a could limit the ability of an EEA- regulated credit institution or the interest of another Affected Investor to purchase bonds, which in turn may adversely affect the liquidity of the bonds in the secondary market. This could adversely affect the liquidity of the market should you seek to sell your bonds or the price you may receive upon any sale of your bonds.

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If the investment of collected CRR charges and other funds held by the trustee in the collection account results in investment losses or the investments become illiquid, you may receive payment of principal and interest on the Consumer Rate Relief Bonds later than you expect.

Funds held by the trustee in the collection account will be invested in eligible investments. Eligible investments include money market funds having a rating from Moody’s and S&P of “Aaa” and “AAA,” respectively. Although investments in these money market funds have traditionally been viewed as highly liquid with a low probability of principal loss, illiquidity and principal losses have been experienced by investors in certain of these funds as a result of disruptions in the financial markets in recent years. If investment losses or illiquidity is experienced, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the bonds.

REVIEW OF CRR PROPERTY

Pursuant to the rules of the Securities and Exchange Commission (the SEC), APCo, as sponsor, has performed, as described below, a review of the CRR property underlying the bonds.  As required by these rules, the review was designed and effected to provide reasonable assurance that disclosure regarding the CRR property is accurate in all material respects.  APCo did not engage a third party in conducting its review.

The bonds will be secured under the indenture by the indenture’s trust estate.  The principal asset of the indenture’s trust estate is the CRR property relating to the bonds.  The CRR property is a present property right authorized and created pursuant to the Recovery Act and the irrevocable financing order.  The CRR property includes the irrevocable right to impose, charge and collect nonbypassable CRR charges in amounts sufficient to pay scheduled principal and interest and ongoing financing costs and other amounts and charges in connection with the bonds.  The CRR charges are payable by retail electric customers of APCo or its successors (subject to only very limited exceptions for customers specified in the financing order) that receive electric delivery service from APCo or its successors.

The CRR property is not a static pool of receivables or assets.  CRR charges authorized in the financing order that relate to the CRR property are irrevocable and not subject to reduction, impairment, or adjustment by further action of the PSC except that CRR charges are subject to annual and semi-annual and other interim standard true-up adjustments to correct overcollections or undercollections and to provide the expected recovery of amounts sufficient to timely provide all scheduled payments of debt service and other required amounts and charges in connection with the bonds, and to nonstandard true-up adjustments under certain circumstances to reflect significant changes from historical conditions of operations, such as the loss of significant electric load or a merger of APCo with another utility and a resulting expansion of APCo’s customer base.  APCo will also initiate a nonstandard true-up proceeding if APCo and Wheeling Power merge in order to take into account the impact of the combined allocation of revenue groups.  There is no “cap” on the level of CRR charges that may be imposed on consumers of electricity in APCo’s service territory to meet scheduled principal of and interest on the bonds and to pay ongoing financing costs, and such CRR charges may be assessed until the bonds are paid in full, without any specified time limit.  All revenues and collections resulting from CRR charges provided for in the financing order that relate to the bonds are part of the CRR property.  The CRR property relating to the bonds is described in more detail under “Description of the CRR Property” in this prospectus.

In the financing order, the PSC, among other things:

· orders that APCo is authorized to impose nonbypassable CRR charges on, and APCo as servicer is authorized to collect from, all of APCo’s existing and future retail electric customers (subject to only very limited exceptions set forth in the financing order), in an amount sufficient to provide for the timely payment of principal of and interest on the consumer rate relief bonds and all ongoing financing costs,

· orders that upon the transfer of the CRR property to us by APCo, all of the rights, title and interest of APCo under the financing order shall become CRR property and we shall have all of the rights, title and interest of APCo with respect to any CRR property, including, without limitation, the right to impose, charge and collect the consumer rate relief charges authorized by the financing order and to exercise any and all rights and remedies with respect thereto, including the right to authorize disconnection of electric service and to assess and collect any amounts payable by any customer in respect of the CRR property, and

· guarantees that it will act pursuant to the financing order to ensure that expected CRR charges are sufficient to pay on a timely basis scheduled principal of and interest on the bonds and ongoing financing costs.

Please read “The Recovery Act” and “APCo’s Financing Order” in this prospectus for more information.

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The characteristics of CRR property are unlike the characteristics of assets underlying mortgage and other commercial asset securitizations because CRR property is a creature of statute and state regulatory commission proceedings.  Because the nature and characteristics of the CRR property and many elements of the bonds securitization are set forth and constrained by the Recovery Act, APCo, as sponsor, does not select the assets to be securitized in ways common to many securitizations.  Moreover, the bonds do not contain origination or underwriting elements similar to typical mortgage or other loan transactions involved in other forms of asset-backed securities. The Recovery Act and the PSC require the imposition on, and collection of CRR charges from, existing and future retail electric customers of APCo or its successors, subject to only very limited exceptions. Since the CRR charges are assessed against all such retail electric customers and the true-up adjustment mechanism adjusts for the impact of customer defaults, the collectability of the CRR charges is not ultimately dependent upon the credit quality of particular APCo customers; as would be the case in the absence of the true-up adjustment mechanism.

The review by APCo of the CRR property underlying the bonds has involved a number of discrete steps and elements as described in more detail below. First, APCo has analyzed and applied the Recovery Act’s requirements for securitization of certain uncollected ENEC costs and associated financing costs in seeking approval of the PSC for the issuance of the financing order and in its proposal with respect to the characteristics of the CRR property to be created pursuant to the financing order. In preparing this proposal, APCo worked with its counsel and its financial advisor in preparing the application for a financing order and with the PSC on the terms of the financing order. Moreover, APCo worked with its counsel, its financial advisor and counsel to the financial advisor and the underwriters in preparing the legal agreements that provide for the terms of the bonds and the security for the bonds. APCo has analyzed economic issues and practical issues for the scheduled payment of the bonds including the impact of economic factors, potential for disruptions due to weather or catastrophic events and its own forecasts for customer growth as well as the historic accuracy of its prior forecasts.

In light of the unique nature of the CRR property, APCo has taken (or prior to the offering of the bonds, will take) the following actions in connection with its review of the CRR property and the preparation of the disclosure for inclusion in this prospectus and the accompanying prospectus supplement describing the CRR property, the bonds and the proposed securitization:

· reviewed the Recovery Act and any applicable rules and regulations of the PSC as they relate to the CRR property in connection with the preparation and filing of the application with the PSC for the approval of the financing order in order to confirm that the application and proposed financing order satisfied applicable statutory and regulatory requirements;

· actively participated in the proceeding before the PSC relating to the approval of the requested financing order;

· compared the financing order, as issued by the PSC, to the Recovery Act and any applicable rules and regulations of the PSC as they relate to the CRR property to confirm that the financing order met such requirements;

· compared the proposed terms of the bonds to the applicable requirements in the Recovery Act, the financing order and any applicable regulations of the PSC to confirm that they met such requirements;

· prepared and reviewed the agreements to be entered into in connection with the issuance of the bonds and compared such agreements to the applicable requirements in the Recovery Act, the financing order and any applicable regulations of the PSC to confirm that they met such requirements;

· reviewed the disclosure in this prospectus and the accompanying prospectus supplement regarding the Recovery Act, the financing order and the agreements to be entered into in connection with the issuance of the bonds, and compared such descriptions to the relevant provisions of the Recovery Act, the financing order and such agreements to confirm the accuracy of such descriptions;

· consulted with legal counsel to assess if there is a basis upon which the bondholders (or the trustee acting on their behalf) could successfully challenge the constitutionality of any legislative action by the State of West Virginia (including the PSC) that could repeal or amend the securitization provisions of the Recovery Act that could substantially impair the value of the CRR property, or substantially reduce, alter or impair the CRR charges;

· reviewed the process and procedures in place for it, as servicer, to perform its obligations under the servicing agreement, including without limitation, billing and collecting the CRR charges to be provided for under the CRR property, forecasting CRR charges, preparing and filing applications for true-up adjustments to the CRR charges;

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· reviewed the operation of the true-up mechanism for adjusting CRR charge levels to meet the scheduled payments on the bonds and in this context took into account its experience with the PSC; and

· with the assistance of its financial advisor and the underwriters, prepared financial models in order to set the initial CRR charges to be provided for under the CRR property at a level sufficient to pay on a timely basis scheduled principal and interest on the bonds and other ongoing financing costs.

In connection with the preparation of such models, APCo:

· reviewed (i) the historical retail electric demand and usage and customer growth within its service territory and (ii) forecasts of expected energy sales and customer growth; and

· analyzed the sensitivity of the weighted average life of the bonds in relation to variances in actual energy consumption or demand levels (retail electric sales) from forecasted levels and in relation to the true-up mechanism in order to assess the probability that the weighted average life of the bonds may be extended as a result of such variances, and in the context of the operation of the true-up mechanism for adjustment of CRR charges to address under or overcollections in light of scheduled payments on the bonds.

As a result of this review, APCo has concluded that:

· the CRR property, the financing order and the agreements to be entered into in connection with the issuance of the bonds meet in all material respects the applicable statutory and regulatory requirements;

· the disclosure in this prospectus and the accompanying prospectus supplement regarding the Recovery Act, the financing order and the agreements to be entered into in connection with the issuance of the bonds is, or in the case of the accompanying prospectus supplement, will be, as of its respective date, accurate in all material respects;

· the servicer has adequate processes and procedures in place to perform its obligations under the servicing agreement;

· CRR charges, as adjusted from time to time as provided in the Recovery Act and the financing order, are expected to generate sufficient revenues to pay on a timely basis scheduled principal and interest on the bonds and other ongoing financing costs; and

· the design and scope of APCo’s review of the CRR property as described above is effective to provide reasonable assurance that the disclosure regarding the CRR property in this prospectus and the accompanying prospectus supplement is accurate in all material respects.

THE RECOVERY ACT

Purpose of the Recovery Act

On March 7, 2012, the West Virginia Legislature enacted the Recovery Act, codified as Section 24-2-4f, West Virginia Code to give public utilities engaged in the sale of electricity to West Virginia retail electric customers the opportunity to finance the recovery of ENEC costs through the issuance of consumer rate relief bonds.  ENEC costs include historical and projected costs, inclusive of carrying charges on under-recovery balances authorized by the PSC, adjudicated pursuant to the PSC’s expanded net energy cost proceedings and authorized for recovery by an order of the PSC, whether or not subject to judicial appeal.  The West Virginia Legislature enacted some technical amendments to the Recovery Act on April 9, 2013.

APCo and Other Utilities May Securitize Consumer Rate Relief Costs

We May Issue Consumer Rate Relief Bonds to Recover APCo’s Consumer Rate Relief Costs.

The Recovery Act authorizes the PSC to issue financing orders approving the issuance of consumer rate relief bonds, such as the bonds being issued by us, to permit electric utilities to recover ENEC costs and to recover financing costs associated with the issuance of consumer rate relief bonds.  A utility, its successors or a third-party assignee of a utility may issue consumer rate relief bonds.  The Recovery Act requires the proceeds of consumer rate relief bonds to be used solely for the purpose of recovering the ENEC costs which occasioned the issuance of the bonds, including the retirement of a portion of its outstanding debt and/or equity of the utility which was incurred to finance or refinance such costs, and to pay associated expenses.  The bonds are secured by and payable from CRR property, which includes the right to impose, charge and collect

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CRR charges.  Under the financing order, our bonds may have a final legal final maturity date no later than 18 years from the date of issuance.  The CRR charges may be based on the energy consumption and demand of the CRR rate classes.  CRR charges can be imposed only when and to the extent that the bonds are issued.

The Recovery Act contains a number of provisions designed to facilitate the securitization of consumer rate relief costs.

Creation of CRR Property.

Under the financing order as contemplated by the Recovery Act, CRR property is created when the rights and interests of an electric utility or successor under a financing order, including the right to impose, charge and collect CRR charges authorized in the financing order, are first sold to an assignee, such as us, and pledged in connection with the issuance of consumer rate relief bonds.

A Financing Order is Irrevocable.

A financing order, once effective, is irrevocable, and with the CRR charges authorized by that financing order are not subject to reduction, impairment, postponement or termination by the PSC, subject to adjustments to the CRR charges pursuant to the true-up adjustment mechanism in order to correct overcollections or undercollections and to provide that sufficient funds are available to provide on a timely basis for payments of debt service and other required amounts in connection with the bonds.  The Recovery Act further provides that any such financing order shall remain in effect and unabated, notwithstanding the bankruptcy, reorganization or insolvency of the qualifying utility, or any affiliate of the qualifying utility, or the commencement of any judicial or nonjudicial proceeding on the final financing order.

State Pledge.

Under the Recovery Act, the State of West Virginia has pledged, for the benefit and protection of the bondholders, any assignees and financing parties under the financing order, that it will not take or permit any action that would impair the value of the CRR property, or revise the consumer rate relief costs for which recovery is authorized under the financing order or except for adjustments discussed in “APCo’s Financing Order—True-Up Mechanism” and “The Servicing Agreement—True-Up Adjustment Process,” reduce, alter, or impair the CRR charges to be imposed, charged or collected for the benefit of bondholders, assignees and financing parties until the principal, interest and premium, if any, and other ongoing financing costs and any other charges incurred and contracts to be performed in connection with the bonds have been paid and performed in full.  Please read “Risk Factors—Risks Associated with Potential Judicial, Legislative or Regulatory Actions.”

Constitutional Matters.

To date, no federal or West Virginia cases addressing the repeal or amendment of securitization provisions analogous to those contained in the Recovery Act have been decided.  There have been cases in which federal courts have applied the Contract Clause of the United States constitution or West Virginia courts have applied the Contract Clause of the West Virginia constitution to strike down legislation regarding similar matters, such as legislation reducing or eliminating taxes, public charges or other sources of revenues servicing other types of bonds issued or contracts entered into by public instrumentalities or private issuers, or otherwise substantially impairing or eliminating the security for bonds or other indebtedness or contractual obligations.  Based upon this case law, Sidley Austin LLP expects to deliver an opinion, prior to the closing of the offering of the bonds to the effect that the language of the State pledge constitutes a contractual relationship with the bondholder and therefore the bondholders (or the trustee acting on their behalf) could, absent a demonstration that such action was necessary to serve a significant and legitimate public purpose, challenge successfully the constitutionality under the United States constitution of any act by the State of West Virginia (including the PSC) of a legislative character to repeal or amend the Recovery Act, or to take or refuse to take any action required under its pledge described above if the repeal or amendment or the action or inaction would limit, alter, impair or reduce the value of the CRR property or the CRR charges so as to substantially impair (x) the terms of the indenture or the bonds or (y) the rights and remedies of the bondholders (or the trustee acting on their behalf) prior to the time that the bonds are fully paid and discharged.  Based upon this case law, Jackson Kelly PLLC expects to deliver an opinion, prior to the closing of the offering of the bonds, to the effect that under applicable West Virginia constitutional principles relating to the impairment of contracts, the West Virginia legislature could not enact legislation (other than a law passed by the West Virginia legislature in the valid exercise of the state’s police power to safeguard the vital interests of its people, including preservation of community order, health, safety, morals and economic well being) that repeals the State pledge or impairs the value of the CRR property or reduces, alters or impairs the CRR charges so as to substantially impair (i) the terms of the indenture or the bonds or (ii) the rights and remedies of the bondholders (or the trustee acting on their behalf) prior to the time that the bonds are fully paid and discharged if such action would prevent the payment of the bonds or would substantially affect the security for the bonds.  It may be possible for the West Virginia

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legislature to repeal or amend the Recovery Act or for the PSC to amend or revoke the financing order notwithstanding the State’s pledge, if the legislature or the PSC acts in order to serve a significant and legitimate public purpose, such as protecting the public health and safety or responding to a national or regional catastrophe affecting APCo’s service territory, or if the legislature otherwise acts in the valid exercise of the state’s police power.  We will file a copy of each of the Sidley Austin LLP and Jackson Kelly PLLC opinions as exhibits to an amendment to the registration statement of which this prospectus is a part, or to one of our periodic filings with the SEC.

In addition, any action of the West Virginia legislature adversely affecting the CRR property or the ability to collect CRR charges may be considered a “taking” under the United States or West Virginia constitutions.  Each of Sidley Austin LLP and Jackson Kelly PLLC has advised us that they are not aware of any federal or West Virginia court cases addressing the applicability of the Takings Clause of the United States or West Virginia constitutions in a situation analogous to that which would be involved in an amendment or repeal of the Recovery Act.  It is possible that a court would decline even to apply a Takings Clause analysis to a claim based on an amendment or repeal of the Recovery Act, since, for example, a court might determine that a Contract Clause analysis rather than a Takings Clause analysis should be applied.  Sidley Austin LLP expects to render an opinion, prior to the closing of the offering of the bonds, to the effect that under existing case law, assuming a Takings Clause analysis were applied under the United States constitution, the State of West Virginia would be required under the United States constitution to pay just compensation to the bondholders if the State were to repeal or amend the Recovery Act, or if the PSC were to amend or revoke the financing order or take any other action in contravention of the State pledge, in either case which (i) permanently appropriates the related CRR property or denies all economically productive use of the related CRR property; or (ii) destroys the related CRR property, other than in response to emergency conditions; or (iii) substantially reduces, alters or impairs the value of the related CRR property, if the law unduly interferes with the bondholders’ reasonable expectations arising from their investments in the bonds.  In determining what is an undue interference, a court would consider the nature of the governmental action and weigh the public purpose served thereby against the degree to which it interferes with the legitimate property interests and distinct investment-backed expectations of the bondholders.  In addition, Jackson Kelly PLLC expects to render an opinion, prior to the closing of the offering of the bonds, to the effect that under existing case law, assuming a Takings Clause analysis were applied under the West Virginia constitution, a West Virginia state court would find a compensable taking under the Takings Clause of the West Virginia constitution if (a) it concludes that the related CRR property is property of a type protected by the Takings Clause of the West Virginia constitution and (b) the State of West Virginia (including the PSC) takes action that, without paying just compensation to the bondholders, (i) permanently appropriates the CRR property or denies all economically productive use of the CRR property; or (ii) destroys the CRR property, other than in response to emergency conditions; or (iii) substantially reduces, alters or impairs the value of the CRR property, if the action unduly interferes with the bondholders’ reasonable investment backed expectations.  In examining whether action of the West Virginia legislature amounts to a regulatory taking, both federal and state courts will consider the character of the governmental action and whether such action substantially advances the State’s legitimate governmental interests, the economic impact of the governmental action on the bondholders, and the extent to which the governmental action interferes with distinct investment-backed expectations.  There is no assurance, however, that, even if a court were to award just compensation, it would be sufficient for you to recover fully your investment in the bonds.

In connection with the foregoing, each of Sidley Austin LLP and Jackson Kelly PLLC has advised us that issues relating to the Contract and Takings Clauses of the United States and West Virginia constitutions are essentially decided on a case-by-case basis and that the courts’ determinations, in most cases, appear to be strongly influenced by the facts and circumstances of the particular case, and both firms have further advised us that there are no reported controlling judicial precedents that are directly on point.  The opinions described above will be subject to the qualifications included in them.  The degree of impairment necessary to meet the standards for relief under a Takings Clause analysis or Contract Clause analysis could be substantially in excess of what a bondholder would consider material.

For a discussion of risks associated with potential judicial, legislation or regulatory actions, please read “Risk Factors—Risks Associated with Potential Judicial, Legislative or Regulatory Actions.”

The PSC Must Adjust CRR Charges.

The Recovery Act requires the PSC to provide in all financing orders a mechanism requiring that CRR charges be adjusted at least annually.  We sometimes refer to this adjustment mechanism as the true-up mechanism.  The purpose of these adjustments is:

· to correct any overcollections or undercollections, and

· to provide for the expected recovery of amounts sufficient to timely provide all payments of debt service and other required amounts and charges in connection with the bonds.

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CRR Charges Are Nonbypassable.

The Recovery Act provides that the CRR charges are nonbypassable.  Nonbypassable as set forth in the Recovery Act means that a West Virginia retail electric customer may not avoid payment of CRR charges and that each such customer (subject to only very limited exceptions set forth in the financing order) that receives electric delivery service from a West Virginia electric utility or its successors, must pay the CRR charge so long as the bonds are outstanding.  Please see “The Bonds—The CRR Property” in the accompanying prospectus supplement and “APCo’s Financing Order—CRR Rate Classes and Cost Allocations; Nonbypassibility” below for further detail.

The Recovery Act Protects the Bondholders’ Lien on CRR Property.

The Recovery Act provides that a valid and enforceable lien and security interest in the CRR property will be  created in favor of the bondholder upon the later of the date the security agreement is executed and delivered or the date that we receive the net proceeds from the issuance of the bonds.  The security interest will attach without any physical delivery of collateral or other act and upon the filing of a financing statement with the Office of the Secretary of State of West Virginia.  The security interest (i) shall be valid, binding and perfected against all parties having claims of any kind in tort, contract or otherwise us, regardless of whether the parties have notice of the lien and (ii) shall constitute a continuously perfected security interest and will have priority over any other lien, created by operation of law or otherwise, that may subsequently attach to the CRR property or those rights or interests unless the holder of the lien agrees in writing otherwise.

The Recovery Act provides that priority of security interests in CRR property will not be impaired by:

· commingling of funds arising from CRR charges with other funds, or

· any application of the true-up adjustment under the financing order.

Please read “Risk Factors—Risks Associated with the Unusual Nature of the CRR Property.”

The Recovery Act Characterizes the Transfer of CRR Property as a True Sale.

The Recovery Act provides that an electric utility’s or an assignee’s transfer of CRR property is a “true sale” under West Virginia law and is not a secured transaction and that legal and equitable title passes to the transferee, if the agreement governing that transfer expressly states that the transfer is a sale or other absolute transfer.  Please read “The Sale Agreement” and “Risk Factors—Risks Associated With Potential Bankruptcy Proceedings of the Seller or the Servicer.”  The Recovery Act also provides that the characterization of the sale or assignment as an absolute transfer and the corresponding characterization of the property interest of the purchaser shall be effective and perfected against all third parties and will not be affected or impaired by, among other things, any of the following:

· commingling of collected CRR charges with other funds;

· retention by the seller of any partial or residual interest in the CRR property or the right to recover costs associated with taxes, franchise fees or license fees imposed on the collection of CRR charges;

· any recourse that the purchaser or any assignee may have against the seller;

· any indemnification rights, obligations or repurchase rights made or provided by the seller;

· the obligation of the seller to collect CRR charges on behalf of an assignee;

· the treatment of the sale, assignment or transfer for tax, financial reporting or other purposes; or

· any application of the true-up adjustment under the financing order.

The Recovery Act Provides a Tax Exemption to APCo and the Issuing Entity.

The Recovery Act provides that “the imposition, billing, collection and receipt of CRR charges are exempt from state income, sales, franchise, gross receipts, business and occupation and other taxes or similar charges.”  However, municipalities may tax CRR charges under the authority granted to them pursuant to the West Virginia code.  Under APCo’s existing service tariff, in the event that APCo becomes liable to any municipal corporation or other tax levying corporation, or political subdivision of the State, for any excise, tax, privilege tax, use tax or like tax based on the amount of electric services sold or revenues received by it, or for any other tax, fee or service charge not imposed on all other businesses at substantially the same rate, then APCo is authorized to adjust its bills to add the amount of such tax, fee or service charge, including compensation for additional state gross receipts taxes resulting therefrom.   So long as APCo or any successor is entitled to (and does) include in its bills to retail electric customers any such tax surcharges or tax adjustments, the CRR charges and CRR Property shall not include such surcharges or adjustments, and APCo or such successor shall retain sole responsibility to cause such adjustments and surcharges to be forwarded to the applicable governmental authority.  If, for any reason, APCo or any successor no longer includes any such tax surcharges or adjustments in its bills to retail electric customers or we are otherwise responsible for payment of any taxes, franchise fees or license fees imposed on consumer rate relief charges, then the CRR charges shall be grossed up in accordance with Section 24-2-4f(b)(11)(G) of the Recovery Act to include any such taxes, franchise fees or license fees.

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APCO’S FINANCING ORDER

APCo’s Financing Order

On August 22, 2012, APCo, together with its affiliate Wheeling Power (collectively the Applicants), filed a joint application with the PSC for a financing order pursuant to the Recovery Act.  In their application the Applicants requested that APCo be given the authority, among other things, to securitize, through the issuance of  consumer rate relief bonds, $422.3 million in ENEC costs, together with issuance costs estimated at approximately $7.1 million.  Under the Application, APCo alone was proposed to be the sole sponsor and seller into the securitization.  Nonetheless, the PSC has previously directed that APCo and Wheeling Power merge the two companies into one so that the companies’ fixed costs are spread out among a larger customer base in West Virginia.  At the time that the companies are merged, the merged entity will be a successor to APCo and all customers of the merged entity will be responsible for payment of CRR charges.  See “The Depositor, Seller, Initial Servicer and Sponsor—Merger with Wheeling Power Company.”

On March 13, 2013 the Applicants, the staff and the consumer rate advocate division of the PSC and other interested parties entered into a joint stipulation and agreement for settlement (the Settlement) pursuant to which the parties agreed with the Applicants to certain changes to the Application, including a reduction of the amount of ENEC costs requested to be securitized to a fixed amount of $376,024,583 and a reduction of the maximum upfront financing costs permitted to be securitized, as well as  certain other modifications to the Application.

On September 20, 2013, the PSC approved the Settlement, and in accordance with the terms of the Settlement, issued a financing order (the financing order).  Under the financing order, APCo was given the authority, among other things,  to securitize, through the issuance of consumer rate relief bonds, $376,024,583 in ENEC costs, together with issuance costs (referred to in the financing order as upfront financing costs) not to exceed the sum of (1) the costs of the PSC’s Financial Advisor plus (2) $5,750,000.

The financing order became final and non-appealable on October 21, 2013.

In the financing order, the PSC guarantees that it will act pursuant to the irrevocable financing order to ensure that expected CRR charges are sufficient to pay on a timely basis scheduled principal and interest on the bonds and other ongoing financing costs, including fees and expenses, in connection with the bonds.  Pursuant to the provisions of the Recovery Act and, by its terms, the financing order, is irrevocable and is not subject to reduction, impairment or adjustment by further action of the PSC, except as contemplated by the statutory  true-up adjustment mechanism.  The financing order also provides that the true-up mechanism and all other obligations of the State of West Virginia and the PSC set forth in the irrevocable financing order are direct, explicit, irrevocable and unconditional upon issuance of the bonds, and are legally enforceable against the State of West Virginia and the PSC.

We have filed the financing order with the SEC as an exhibit to the registration statement of which this prospectus forms a part.  The statements summarizing the financing order in this prospectus do not purport to be complete and are subject to and qualified by reference to the provisions of the financing order.

PSC Financial Advisor

Public Resources Advisory Group has served as the independent financial advisor to the PSC in connection with the structuring, marketing and pricing of the bonds.  The financial advisor has participated in all plans and decisions related to the pricing, marketing and structuring of the bonds.

Collection of CRR charges

The financing order authorizes APCo to collect CRR charges from the retail electric customers of APCo or its successors in an amount sufficient to pay on a timely basis all principal of and interest on the bonds and all ongoing financing costs associated with the bonds.  There is no “cap” on the level of CRR charges that may be imposed on retail electric customers, to pay on a timely basis scheduled principal and interest on the bonds and such CRR charges may continue to be imposed, charged and collected until the bonds and ongoing financing costs are paid in full, without any specified time limit.

Terms of Bonds

The financing order provides certain parameters for the issuance of the bonds, including a scheduled final payment date for the latest maturing bonds of approximately 15 years from the date of issuance and a final legal maturity date of no later than 18 years after the date of issuance.  The financing order also authorizes a bond structure providing for substantially level

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annual debt service and revenue requirements over the expected life of the bonds. As described below the issuance advice letter will confirm to the PSC the final interest rate(s), expected sinking fund schedule and certain other terms for the bonds.

Issuance Advice Letter

By the close of the first business day after the pricing date for the bonds and prior to their issuance, APCo is required to file with the PSC an issuance advice letter, which will:

· demonstrate compliance with the requirements of the financing order,

· evidence the final terms on which the bonds will be issued,

· show the actual dollar amount of the initial CRR charges relating to the bonds,

· identify the final amount of ENEC costs and upfront financing costs being securitized,

· certify that, based on information known or reasonably available to APCo, the structuring and pricing of the bonds and imposition of the CRR charges are just and reasonable and reasonably expected to achieve the lowest reasonably attainable cost in order to produce cost savings to retail electric customers and to mitigate rate impact on retail electric customers, as compared to traditional financing mechanisms or traditional cost-recovery methods available to APCo, and

· update the benefit analysis to verify the foregoing.

Both the issuance advice letter and the authority to impose the CRR charges become effective on the date of issuance of the bonds unless prior to noon on the fourth business day after the PSC receives the issuance advice letter, the PSC issues a disapproval letter directing that the bonds as proposed not be issued and the basis for such disapproval.  Absent disapproval received within that four business day period, the CRR charges will become effective on the date of issuance of the consumer rate relief bonds (or, if later, the first day of the first billing cycle next following the date of issuance of the bonds without further PSC action).

CRR Rate Schedules

On our behalf, APCo is required, prior to the issuance of the bonds, to complete and file a schedule (the CRR rate schedule) to its existing tariff in the form attached to the financing order.  The schedule will set forth the initial CRR charges and will be updated in connection with each true-up adjustment.  Please see “Description of the CRR Property—CRR Revenue Groups and CRR Rate Classes.”

CRR Rate Classes and Cost Allocations; Nonbypassability

The CRR charges are nonbypassable (as defined in the Recovery Act) and will be payable by all existing and future retail electric customers receiving electric delivery service from APCo and its successors, subject to only very limited exceptions.  Although the Recovery Act provides that CRR charges are payable by all West Virginia retail electric customers of APCo, the financing order provides that three customer rate classes (Century, Special Contract Customer J, and the GS Transmission rate class), whose current rate structure exempts them from responsibility for ENEC costs, should be similarly excluded from responsibility for payment of the CRR charges.  Another exception applies to customers who self-generate their electricity, but only to that portion of any self generated electricity that is both produced and consumed by the self generating customer behind the customer’s electric meter.

Allocation of Payment Responsibility Among Customer Classes

Under the terms of the financing order, responsibility for the payment of the costs associated with the bonds is allocated among retail electric customer classes (which we refer to as CRR rate classes) based upon the same allocation methodology approved by the PSC for APCo to recover ENEC costs.  Each CRR rate class is a sub-class of a larger revenue group.  These larger revenue groups (which we refer to as CRR revenue groups) consist of residential, commercial and industrial customers.  Under the financing order, each CRR rate class is allocated a percentage responsibility for the payment of the bonds and related costs.  The initial percentage allocations are shown below under “Description of the CRR Property—CRR Revenue Groups and CRR Rate Classes.”

As described below under “—True-Up Mechanism,” the allocation of responsibility for the payment of the bonds is subject to adjustment during the life of the bonds to reflect significant losses of load within any CRR rate class or CRR revenue

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group.  The percentage allocations are subject to adjustment through the standard true-up adjustment process in the event that any CRR charges cannot be allocated to a given CRR rate class (because there are no longer any customers within that CRR rate class), and are subject to adjustment through the nonstandard true-up adjustment process in the event that decreases in forecasted load for a CRR revenue group equal 10% or more from the original  load projections at the time of the issuance of the financing order. Both the standard true-up process and the nonstandard true-up adjustment process are described below.

True-Up Mechanism

The financing order authorizes two types of formula-based adjustments to CRR charges to ensure the expected recovery of amounts sufficient to timely provide payment of all amounts due on the bonds: (i) standard adjustments that are limited to relatively stable conditions of operations; and (ii) nonstandard adjustments that are necessary to reflect significant changes from historical conditions of operations, such as the loss of significant electrical load or a merger of APCo with another utility and a resulting expansion of APCo’s customer base.  APCo will also initiate a nonstandard true-up proceeding if APCo and Wheeling Power merge in order to take into account the impact of the combined allocation of revenue groups.

There is no “cap” on the level of CRR charges that may be imposed on retail electric customers as a result of the true-up adjustment process, whether under a standard or nonstandard true-up adjustment.

Standard True-Up Adjustments. Under the Recovery Act and the financing order, standard adjustments to CRR charges are required to be made at least annually to correct any overcollections or undercollections during the preceding set of collection periods and to ensure the expected recovery of amounts sufficient to timely provide payment of all amounts due on the bonds and all other ongoing financing costs for the upcoming set of collection periods.  The servicer is also required under the financing order to make mandatory interim standard true-up adjustments semi-annually if the servicer forecasts that CRR charge collections during the current or next succeeding set of collection periods (generally twelve months) will be insufficient to pay on a timely basis all scheduled payments of principal and interest on the bonds and other ongoing financing costs and any other amounts payable in respect of the bonds, or to replenish any draws on the capital subaccount.  These required debt service payments and other amounts are sometimes referred to as the periodic payment requirement.  If there are any bonds outstanding following the scheduled final payment date for the latest maturing tranche, the servicer is also required under the financing order to make mandatory interim true-up adjustments quarterly.

Standard true-up adjustments may also be made by the servicer under the financing order more frequently at any time, without limits as to frequency, in order to ensure the expected recovery of amounts sufficient to timely provide all payments of debt service and other required amounts and charges in connection with the bonds.  Each standard true-up adjustment will become effective on the first day of the billing cycle following the date of the true-up filing with the PSC, but in no event sooner than 15 days after such filing.

Standard true-up adjustments will be based upon the cumulative differences between the periodic payment requirement and the amount of CRR charge remittances to the trustee.  In order to provide for adequate revenues from the CRR charges, the servicer will calculate the adjusted CRR charges using its most recent forecast of electric consumption and demand and its most current estimates of ongoing transaction-related expenses.  The calculation of the CRR charges will reflect any customer defaults or charge-offs and payment lags between the billing and collection of CRR charges, based upon the servicer’s most recent experience regarding collection of CRR charges.  The calculation of CRR charges will also take into account any amounts due to any customers as a result of the reconciliation of the remittances and collections.

The PSC must be given at least 15 days’ notice prior to making any true-up adjustment (other than a nonstandard true-up adjustment described in the next paragraph).  In the event any correction to a true-up adjustment due to mathematical errors in the calculation of the adjustment or otherwise is necessary, the correction will be made in a future true-up adjustment so as not to delay the implementation of the requested true-up adjustment.

As part of the standard true-up adjustment, in the event that any CRR charges cannot be allocated to a given CRR rate class (because there are no longer any customers within the CRR rate class), the percentage responsibility of the CRR rate class  shall be re-allocated to the remaining CRR rate classes within the related CRR revenue group, using the same ratable allocation to the CRR rate classes within such CRR revenue group excluding the CRR rate class for which allocation is no longer feasible.

Nonstandard True-Up Adjustments. Nonstandard true-up adjustments are intended to permit changes in the allocation of payment responsibility among CRR revenue groups and CRR rate classes to address significant changes from historical conditions of operations, such as the loss of significant electrical load or a merger of APCo with another utility and a resulting expansion of APCo’s customer base.  APCo will also initiate a nonstandard true-up proceeding if APCo and Wheeling Power merge in order to take into account the impact of the combined allocation of revenue groups.  The nonstandard true-up should avoid overburdening the remaining members of a CRR revenue group that has lost significant aggregate load (relative to

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original projections).  Specifically, the financing order provides for a nonstandard true-up procedure to be implemented if APCo experiences or projects a drop in electricity consumption or demand for one or more of the CRR revenue groups of 10% or more as calculated by comparing the difference between the revised forecasted load and the original projected load.

For the nonstandard true-up to be implemented, the servicer will make a filing with the PSC at least 60 days before the date that the CRR charges to be imposed in connection with such nonstandard true-up are to go into effect. The filing will include the new proposed percentage allocation factors for each CRR revenue group and each CRR rate class within such group to be applied for each subsequent true-up adjustment.  If the nonstandard true-up filing would result in an increase to the amount of CRR charges, the servicer is required to give public notice of the nonstandard true-up filing.  Pursuant to the Recovery Act, the scope of review by the PSC of a nonstandard true-up filing is limited to the mathematical accuracy of the total adjustment needed to assure the full and timely payment of the bonds and related financing costs, but the PSC may also review and determine the appropriate allocation of costs within and between CRR rate classes and CRR revenue groups, the proper design of the CRR charges and appropriate application of those charges under the methodology set forth in the true-up mechanism approved in the financing order.  Within 30 days after the nonstandard true-up filing request by APCo, the PSC will hold a public hearing if it deems necessary.  The nonstandard true-up adjustment filing, as modified by the PSC, if necessary, will become effective within 60 days after the initial filing.  If a nonstandard true-up is implemented, the original allocation percentages used for the respective CRR revenue groups will be recalculated and then CRR charges for customers within the applicable CRR revenue groups will be adjusted upward or downwards by the same percentage adjustments imposed on the CRR revenue group as a whole.

Once the nonstandard true-up filing has become effective, the modified allocation percentages will remain in effect until and unless another nonstandard true-up filing is made. The Recovery Act provides that any procedure for a nonstandard true-up must be consistent with assuring the full and timely payment of the bonds and related financing costs. Further, through the irrevocable financing order, the PSC guarantees that it will act pursuant to the financing order to ensure that expected CRR charges are sufficient to pay on a timely basis scheduled principal and interest on the bonds and ongoing financing costs.

State Pledge

The State of West Virginia has pledged in the Recovery Act for the benefit and protection of bondholders, assignees and financing parties that it will not take or permit any action that would impair the value of the CRR property, or revise the consumer rate relief costs for which recovery is authorized under the financing order or, except as permitted in connection with a true-up adjustment authorized by the statute, reduce, alter or impair the CRR charges until the principal, interest and premium and any other financing costs and amounts to be paid under contracts entered into in connection with the bonds, have been paid and performed in full.

Servicing Agreement

In the financing order, the PSC authorized APCo, as the servicer, to enter into the servicing agreement described under “The Servicing Agreement” in this prospectus.

Binding on Successors

The financing order, together with the obligation to provide service and collect and account for the CRR charges authorized in the financing order, is binding on:

· APCo, and

· any successor to APCo as defined in the Recovery Act.

DESCRIPTION OF THE CRR PROPERTY

Creation of CRR Property

The Recovery Act defines CRR property as the property, rights and interests of a qualifying electric utility or an assignee under a financing order, including the right to impose, charge and collect CRR charges established in the financing order and including the right to obtain true-up adjustments to those charges, and any revenues, receipts, collections, rights to payments, moneys, claims or other proceeds arising from the rights and interests created under the financing order.  CRR property becomes property at the time that it is sold to an assignee and pledged in connection with the issuance of bonds, such

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as the bonds.  The bonds will be secured by CRR property, as well as the other collateral described under “Security for the Consumer Rate Relief Bonds.”

In addition to the right to impose, charge and collect CRR charges, the financing order:

· authorizes the transfer of CRR property to us and the issuance of consumer rate relief bonds;

· establishes procedures for periodic true-up adjustments to CRR charges in the event of overcollection or undercollection; and

· provides that the financing order is irrevocable and not subject to reduction, impairment, or adjustment by further act of the PSC (except for the periodic true-up adjustments to the CRR charges).

A form of issuance advice letter and a form of the CRR rate schedule described below are attached to the financing order.  We will complete and file both documents with the PSC no later than the end of the first business day after the pricing of the bonds.

The issuance advice letter will set forth the initial rate of the CRR charges as described above under “APCo’s Financing Order—Issuance Advice Letter.”  The CRR charges will become effective on the date of issuance of the consumer rate relief bonds (or, if later, the first day of the first billing cycle next following the date of issuance of the bonds) without further PSC action.  The initial CRR charges, along with any other terms of the issuance advice letter, will be more fully described in the prospectus supplement.  The initial CRR charges will also be set forth in a CRR rate schedule to be filed as part of APCo’s existing service tariff, which CRR rate schedule will be initially filed prior to the issuance of the bonds and thereafter will be modified in connection with any true-up adjustment to reflect any modifications in the CRR charges resulting therefrom.

As described above, in determining the CRR charge, responsibility for the payment of the costs associated with the consumer rate relief bonds will be, subject to the nonstandard true-up adjustment mechanism, allocated among CRR rate classes based upon the same allocation methodology used by the PSC to recover the ENEC costs.  Each CRR rate class is a sub-class of a larger CRR revenue group.

The defined CRR Revenue groups and CRR rate classes are as follows:

Residential CRR Revenue Group

· Residential — This class is comprised of all customers subject to APCo’s tariffs for residential customers (both RS and RS-TOD) and is applicable to customers consisting of individual private dwellings and individually metered apartments.  In addition, security or flood lighting services provided on residential end-use customers premises will be included in this rate class.

Commercial CRR Revenue Group

· Commercial Secondary — This class is comprised of all customers subject to APCo’s  tariff for SWS, SGS, SS Secondary and GS Secondary service and is applicable to non-residential customers (1) with annual maximum measured demands less than 10 kiloWatts (KW) and (2) whose current rate class for the purpose of transmission and distribution usage is billed without any demand charges.  In addition, security or flood lighting services provided on applicable end-use customer’s premises will be included in this rate class.

· Commercial — Primary — This class is comprised of all customers subject to APCo’s  tariff for SS Primary and GS Primary service and is comprised of non-residential customers taking service at the primary voltage level.

· Commercial — Subtransmission— This class is comprised of customers subject to APCo’s tariff for GS-Subtransmission service and is applicable to non-residential customers taking service at the subtransmission voltage level.

· Commercial— AF  — This class is comprised of customers subject to APCo’s tariff for GS-AF and SS-AF service and is applicable to non-residential customers with service to athletic field lighting.

· Commercial — OL & SL — This class is comprised of customers subject to APCo’s tariffs for OL & SL service and is applicable to residential and non-residential customers outdoor and street lighting.

· Commercial— Special Contract Customer C— This class is comprised of Special Contract Customer C taking electric service under APCo’s existing tariff designated Special Contract C and is applicable to this customer only.

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Industrial CRR Revenue Group

· Industrial— Secondary — This class is comprised of customers subject to APCo’s tariff for LCP and IP service and is applicable to non-residential customers whose service is provided at the secondary voltage level.

· Industrial – Primary - This class is comprised of customers subject to APCo’s tariff for LCP and IP service and is applicable to non-residential customers whose service is provided at the primary voltage level.

· Industrial – Subtransmission - This class is comprised of customers subject to APCo’s tariff for LCP and IP service and is applicable to non-residential customers whose service is provided at the subtransmission voltage level.

· Industrial – Transmission - This class is comprised of customers subject to APCo’s tariff for LCP, IP and Special Contract Customer K and is applicable to non-residential customers whose service is provided at the transmission voltage level.

· Industrial— Special Contract Customer A— This class is comprised of Special Contract Customer A taking electric service under APCo’s existing tariff designated Special Contract A and is applicable to this customer only.

· Industrial— Special Contract Customer B— This class is comprised of Special Contract Customer B taking electric service under APCo’s existing tariff designated Special Contract B and is applicable to this customer only.

· Industrial— Special Contract Customer D— This class is comprised of Special Contract Customer D taking electric service under APCo’s existing tariff designated Special Contract D and is applicable to this customer only.

· Industrial— Special Contract Customer H— This class is comprised of Special Contract Customer H taking electric service under APCo’s existing tariff designated Special Contract H and is applicable to this customer only.

· Industrial— Special Contract Customer I— This class is comprised of Special Contract Customer I taking electric service under APCo’s existing tariff designated Special Contract I and is applicable to this customer only.

Under the terms of the financing order, APCo will initially allocate the CRR charges among the CRR revenue groups and CRR rate classes as follows:

CRR Revenue Groups and CRR Rate Classes

CRR Revenue Group	CRR  Rate Class	Allocation Percentage
Residential	Residential (RS & RS-TOD)	38.68%
Commercial	Commercial – Sec (SWS, SGS, SS Secondary, GS Secondary)	20.62%
	Commercial – Pri (SS & GS Primary)	2.00%
	Commercial – C (Special Contract C)	0.00%
	Commercial – Subt (GS – Subtransmission)	0.14%
	Commercial – AF (GS – AF & SS - AF)	0.03%
	Commercial - OL & SL (OL & SL)	0.44%
Industrial	Industrial – Sec (LCP & IP Secondary)	1.56%
	Industrial – Pri (LCP & IP Primary)	10.27%
	Industrial – Subt (LCP & IP Subtransmission)	11.89%
	Industrial – Trans (LCP & IP Transmission, Special Contract K)	8.16%
	Industrial – A (Special Contract A)	2.47%
	Industrial – B (Special Contract B)	2.13%
	Industrial – D (Special Contract D)	0.57%
	Industrial – H (Special Contract H)	0.00%
	Industrial – I (Special Contract I)	1.04%

Because of differences in cost responsibility as shown above, the CRR rate for each CRR rate class will differ.  In the financing order, the PSC requires APCo and any successor servicer under certain circumstances to request adjustments to the allocation of cost responsibility through a nonstandard true-up procedure as described under “APCo’s Financing Order—True-Up Mechanism.”

For most retail electric customers, the CRR charge will be a kilowatt-hour (kWh) charge, although for some industrial customers the CRR charge will have a demand (kW) component.

The initial CRR charge rates that will be assessed to customers comprising each of the above CRR rate classes, as of the issuance date for the bonds as well as the estimated percentage of the total bill received by an average retail residential customer that such CRR charge and all other CRR charges represent, will be set forth in the accompanying prospectus supplement.

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Billing and Collection

CRR charges will be collected by the servicer from retail electric customers as part of its normal collection activities.  CRR charges will be deposited by the servicer into the collection account under the terms of the indenture and the servicing agreement.  The servicer will deposit in the collection accounts payments of CRR charges on each business day based on estimated collections in accordance with the procedures described below under “The Servicing Agreement—Remittances to Collection Account.”

The obligation to pay CRR charges is not subject to set off, counterclaim, surcharge or defense by the applicable electric utility or other person, including as a result of the electric utility’s failure to provide past, present, or future services, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electric utility, any affiliate or any other entity.  CRR charges are nonbypassable in accordance with the provisions set forth in the Recovery Act and the financing order.  If a retail electric customer pays only a portion of its bill, a pro-rata amount (based on all amounts owed by such retail electric customer) of CRR charges will be deemed to be collected provided that late fees and late charges may be allocated to the servicer to the extent consistent with the “Terms and Conditions of Service” included in APCo’s existing tariff on file with the PSC.

The servicer is permitted to commingle the CRR charges with other funds collected prior to remitting such charges to the trustee, pursuant to the servicing agreement, the financing order and the Recovery Act.  All collections and other funds for APCo are concentrated into an APCo bank account.  The collected CRR charges commingled with other funds will be remitted from APCo’s bank account to the trustee for deposit in the applicable collection account within two business days.

THE DEPOSITOR, SELLER, INITIAL SERVICER AND SPONSOR

General

APCo will be the seller and initial servicer of the CRR property securing the bonds, and will be the depositor and sponsor of the securitization in which bonds covered by this prospectus are issued.

APCo is an electric utility providing electric service in West Virginia and Virginia.  At December 31, 2012, APCo provided electric service to approximately 437,000 metered retail electric customers in its West Virginia service territory covering approximately 9,216 square miles.  The retail electric customer base in West Virginia includes a mix of residential, commercial and diversified industrial retail electric customers.  During the twelve months ended December 31, 2012, APCo billed approximately 14,280 million kilowatt hours of electricity to its retail electric customers in West Virginia resulting in revenues of approximately $1,164 million.  APCo, incorporated under the laws of the Commonwealth of Virginia in 1926, is an operating subsidiary of AEP, a public utility holding company based in Columbus, Ohio.  AEP is one of the largest electric utility holding companies in the United States, delivering electricity to more than five million customers in 11 states, and is among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States.

APCo is subject to the jurisdiction of the Federal Energy Regulatory Commission under the Federal Power Act of 2005 with respect to acquisitions and divestitures of utility assets, certain affiliate transactions and other matters.  APCo is regulated by the PSC and by the Virginia State Corporation Commission with respect to rates charged for delivery of electricity for consumption or demand by retail electric customers, affiliate transactions, quality of service, and service area certification in West Virginia and Virginia, respectively.  APCo’s customers located in Virginia will have no responsibilities for the payment of CRR charges.

Merger with Wheeling Power Company

APCo and its sister company Wheeling Power Company, or Wheeling Power, are separate corporations within the AEP system, each of which operates as a fully regulated utility in West Virginia.  As of December 31, 2012 Wheeling Power served approximately 41,000 customers in West Virginia in its West Virginia service territory.  During the twelve months ended December 31, 2012, Wheeling Power billed approximately 2,519 million kilowatt hours of electricity to its customers.  Although APCo and Wheeling Power are separate corporations and maintain their historically separate and distinct power supply arrangements, since June 2000 the two companies have charged uniform rates in West Virginia per the directives of the PSC and follow the same regulations.  For accounting and other reasons, however, all over and under recoveries of ENEC costs have been carried solely on APCo’s books with monthly intercompany transfers to APCo to true-up any over or under payments from Wheeling Power customers for such costs.

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Under the financing order, APCo alone is the sole sponsor and seller into the securitization.  Nonetheless, the PSC has previously directed that APCo and Wheeling Power merge the two companies into one so that the companies’ fixed costs are spread out among a larger customer base.  Applications have been filed with the PSC, the Virginia State Corporation Commission and the Federal Energy Regulatory Commission seeking approval to merge.  As of this date, the PSC has not consented to the proposed terms of the merger and it is not certain whether and when the merger will occur.  Prior to the time of the merger, Wheeling Power customers will not pay CRR charges; instead the ENEC costs previously approved by the PSC for Wheeling Power customers shall remain in effect and shall be used to determine the amount of revenue that is applied to APCo’s and Wheeling Power’s over/under recovery position and shall continue to be carried on APCo’s books for rate-making purposes.  APCo’s ENEC cost rates will be adjusted downward by an amount equal to the CRR charges so that the ENEC cost recovery component and the CRR charge component, cumulatively, of APCo’s overall rates will be equal to the ENEC cost recovery components of the overall rates charged by Wheeling Power.  Under the financing order, the foregoing shall have no impact upon the calculation or imposition of the CRR Charges.  If and when the companies are finally merged, the merged entity will be a successor to APCo and all customers of the merged entity will be responsible for payment of CRR charges.  Prior to such time, APCo will implement a nonstandard true-up, to be effective concurrently with the merger, by recalculating the original allocations among CRR revenue groups and CRR rate classes to take into account revised usage numbers reflecting the combined CRR revenue groups and CRR rate classes of APCo as well as Wheeling Power customers.  See “APCo Customer Base and Electric Energy Consumption and Demand.”

Servicing Experience

APCo is currently an originator, sponsor and servicer of a structured financing arrangement involving the sale of accounts receivable, but such financing arrangement does not involve receivables owing from its customers in West Virginia.  APCo does not, however, have any experience as a depositor or sponsor of a securitization transaction or as a servicer of CRR property or any other property or pool of assets in any securitization transaction. In fact, the financing order was the first granted under the Recovery Act, which was only passed in March 2012. Other utility subsidiaries of AEP, however, have  experience acting as a depositor, sponsor and servicer in four similarly-structured utility rate recovery securitization transactions in Texas and in Ohio, both of which states have a similar enabling statute.  Under a West Virginia 2005 statute that was substantially similar to the Recovery Act, Monangahela Power and Potomac Edison two indirect subsidiaries of FirstEnergy Corp. have acted as sponsors and servicers for environmental control bonds backed by payments from retail customers in West Virginia and the PSC therefore has experience with similar securitizations.  APCo has been billing and collecting charges from retail electric customers since 1926.

APCo Customer Base and Electric Energy Consumption and Demand

APCo’s retail electric customer base consists of three revenue reporting CRR revenue groups:  residential, commercial and industrial.  The CRR revenue groups are broad groups that include CRR rate classes with a wide range of load characteristics served under a variety of rate designs.

The following tables show the electricity delivered to retail electric customers, electric delivery revenues and number of retail electric customers for each of the three CRR revenue groups for the year ending December 31, 2012 and each of the four preceding years.  There can be no assurances that the retail electricity sales, retail electric revenues and number of retail electric customers or the composition of any of the foregoing will remain at or near the levels reflected in the following tables.

Electricity Delivered to West VirginiaRetail Electric Customers, Total Billed Retail Electric Revenues and Retail Electric Customers*

Retail Electric Usage (As Measured by Billed GWh Sales) by CRR Rate Class and Percentage Composition
CRR Revenue Group	2008		2009		2010		2011		2012
Residential	5,820	32.78%	5,760	39.26%	6,117	40.19%	5,833	38.92%	5,352	37.49%
Commercial	3,679	20.72%	3,640	24.81%	3,761	24.71%	3,716	24.80%	3,602	25.22%
Industrial	8,219	46.30%	5,238	35.70%	5,310	34.88%	5,403	36.06%	5,294	37.07%
Other**	35	0.20%	34	0.23%	34	0.22%	33	0.22%	32	0.22%
Total Retail	17,753	100.00%	14,672	100.00%	15,222	100.00%	14,985	100.00%	14,280	100.00%

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Total Billed Retail Electric Revenue by CRR Revenue Group and Percentage Composition (Dollars in thousands)
CRR Revenue Group	2008		2009		2010		2011		2012
Residential	$384,233	40.67%	$416,739	44.90%	$494,898	46.35%	$523,833	45.28%	$512,403	44.04%
Commercial	218,355	23.11%	233,359	25.15%	272,573	25.52%	296,971	25.68%	304,051	26.13%
Industrial	339,008	35.89%	274,767	29.61%	296,857	27.80%	332,147	28.72%	343,485	29.52%
Other**	3,073	0.33%	3,176	0.34%	3,566	0.33%	3,698	0.32%	3,635	0.31%
Total Retail	$944,669	100.00%	$928,041	100.00%	$1,067,894	100.00%	$1,156,649	100.00%	$1,163,574	100.00%
Service Territory Number of Average Metered Retail Electric Customers and Percentage Composition
CRR Revenue Group	2008		2009		2010		2011		2012
Residential	372,131	84.60%	371,936	84.54%	371,429	84.42%	370,432	84.34%	368,414	84.28%
Commercial	64,461	14.66%	64,750	14.72%	65,347	14.85%	65,551	14.93%	65,542	14.99%
Industrial	2,456	0.56%	2,452	0.56%	2,429	0.55%	2,432	0.55%	2,412	0.55%
Other**	784	0.18%	778	0.18%	788	0.18%	790	0.18%	784	0.18%
Total Retail	439,832	100.00%	439,916	100.00%	439,993	100.00%	439,205	100.00%	437,152	100.00%

______

*  Totals may not add up to 100% due to rounding.

**The “Other” row includes public street and highway lights and sales to public authorities other than public schools.

The above tables are based on information for APCo only and do not reflect the combined numbers that would be reflected for deliveries to retail electric customers, electric delivery revenues and number of retail electric customers of both APCo and Wheeling Power. Had Wheeling Power’s retail electric usage (as measured by billed GWh sales) been included in the above calculations, the usage by industrial customers would have increased to 41.10% of the companies’ combined deliveries for the twelve months ending December 31, 2012, and the percentages for commercial and residential customers would have decreased to 24.19% and 34.49%, respectively. The Financing Order provides that, if and when APCo merges with Wheeling Power, APCo must make a non-standard true-up adjustment in order to recalculate the allocations among CRR Revenue Groups and CRR Rate Classes to take into account the combined usage of both APCo and Wheeling Power customers.

Forecasting Electricity Consumption and Demand

APCo produces a kilowatt-hour forecast annually, or more frequently when deemed necessary, for planning purposes.  These forecasts are the basis for earnings projections as well as capacity/generation planning.  The forecast cycle completed during the third quarter is typically adopted as APCo’s official budget.  APCo maintains the option to revise the budget due to changes in subsequent forecasts.  The company monitors the accuracy of each forecast by conducting variance analysis on a monthly basis taking into account weather impacts on kilowatt-hour sales and deviations from forecast within the customer count.  Peak demand forecasts are then generated using the kilowatt-hour forecast as a basis.

APCo employs two methods for developing the kilowatt-hour forecast, a short-term approach and a long-term approach.  Each are developed independently and then joined over a six month period by a “blending” process.  This “blended period” typically falls within the first eighteen months of the forecast horizon.  Within the “blending period,” a weighted average of the two forecast methods is taken with the weights stepping down each month giving more weight, at first, to the short-term forecast and, eventually to the long-term forecast.

The short-term method employs regression models with time-series error modeling to predict kilowatt-hour per customer and customer count for the residential and commercial classes.  Kilowatt-hours are estimated for all other sales classes.  Within the kilowatt-hour per customer and kilowatt-hour models, weather, in the form of cooling and heating degree days, is used as the primary explanatory driver.  Customer count models follow the traditional ARIMA approach of time-series based models incorporating lagged dependent variables and lagged prediction-error terms.  These time-series methods are widely used throughout the electrical utility industry.  The resulting kilowatt-hour per customer and customer count forecasts are then multiplied together for the residential and commercial classes.  No such computation is necessary for the remaining classes.  This short-term method is useful in predicting systematic patterns in monthly consumer behavior when housing levels and appliance saturations remain relatively fixed and prices are relatively stable.

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The long-term method employs regression analysis of consumer “end-use” electricity demand for the residential and commercial sectors, i.e. a Statistically Adjusted End-Use (SAE) model developed by Itron.  The SAE models considers economic and demographic trends, changes in competing and complimentary fuel prices and changes in appliance saturations, as well as changes in appliance efficiencies such as those mandated by legislation. Weather patterns also play a role in the SAE models.  The other long-term forecast models are econometric models that incorporate economic and demographic trends and price as explanatory variables. These models allow for flexibility in consumer response to economic stimuli as well as trends in consumer preferences.

Annual Forecast Variance For Ultimate Electric Delivery (GWh)

	2008			2009			2010			2011			2012
Residential
Forecast		5,891			5,898			5,980			5,967			5,380
Actual		5,820			5,760			6,117			5,833			5,352
Variance (%)		-1.2	%		-2.3	%		2.3	%		-2.2	%		-0.5	%
Commercial
Forecast		3,743			3,717			3,759			3,651			3,636
Actual		3,679			3,640			3,761			3,716			3,602
Variance (%)		-1.3	%		-7.3	%		4.7	%		0.3	%		-0.9	%
Industrial
Forecast		8,329			5,652			5,570			5,389			5,455
Actual		8,219			5,238			5,310			5,403			5,294
Variance (%)		-1.3	%		-7.3	%		-4.7	%		0.3	%		-3.0	%
Other Retail*
Forecast		35			35			35			34			33
Actual		35			34			34			33			32
Variance (%)		-0.9	%		-2.3	%		-3.8	%		-3.8	%		-1.9	%
TOTAL
Forecast		17,998			15,302			15,343			15,041			14,504
Actual		17,753			14,672			15,222			14,985			14,280
Variance (%)		-1.4	%		-4.1	%		-0.8	%		-0.4	%		-1.5	%

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* “Other Retail” includes public street and highway lights and sales to public authorities other than public schools.

Variances among the eleven CRR rate classes, which are used to allocate payment responsibility for the bonds, may differ from the variances shown above, as the classifications are more specific.

Billing and Collections

The servicer of the bonds will bill retail electric customers for the CRR charges attributable to them and the servicer will also collect payments of the CRR charges as described under “The Servicing Agreement—Servicing Procedures.”  The servicer will not pay any shortfalls resulting from the failure of any customer to pay CRR charge collections. If a customer defaults in the payment of CRR charges, the servicer will implement collection procedures as described below under “—Billing” and “—Collection Process.”

Credit Policy.

APCo’s West Virginia credit and collections policies are regulated by the PSC. Under PSC’s regulations, APCo is obligated to provide electric distribution service to all customers within its West Virginia service territory.

On application for service, the identification and credit standing of all customers is verified by previous payment history if available.  If a customer’s previous payment history is not available, standard credit scoring information is obtained from a major credit reporting service. A new applicant for service will be assessed a security deposit if the applicant has a previous bankruptcy, charge-off, unsatisfactory credit score, or poor payment history. If an applicant for residential service refuses to provide a Social Security number, if the credit check indicates the need to assess a deposit, or if the customer has been terminated for nonpayment, a security deposit will be required. The residential deposit is set at 1/12th of estimated annual

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usage. A new applicant for nonresidential service will be assessed a security deposit if the applicant has a previous bankruptcy, charge-off, unsatisfactory credit score, or poor payment history.  This can be done through providing a security deposit (twice the average estimated monthly electricity bill), furnishing a surety bond and/or a bank letter of credit.

According to PSC regulations, APCo may refuse to provide service, at any location, to an applicant who is indebted to it for any service previously furnished to the applicant. APCo will commence service, however, if a reasonable payment plan for the indebtedness is agreed to by the residential applicant and the company, and it may likewise commence service for an industrial or commercial applicant.

PSC regulations and APCo’s tariff allow certain classes of retail electric customers to elect to be billed using an Average Monthly Payment (AMP) billing program or the Equal Payment Plan (EPP) budget billing program. For AMP customers, APCo determines and bills a monthly budget amount based on the most recent twelve months of billing history for each account.  At the next billing period, the oldest month’s billing history is dropped, the current month’s billing is added, and the average is recalculated.  Overpayments or underpayments for actual usage during the prior year are typically carried in a deferred balance that will accumulate both debits and credits over a twelve-month period, and the net accumulated deferred balance is divided by twelve to be included in the average payment amount for the succeeding twelve month period.  For EPP customers, APCo estimates total service in advance for an “equal payment period,” typically one year, and bills are rendered monthly on the basis of one twelfth of that estimate (or for payment periods of less than one year, one divided by the number of months in the applicable period).  If the charges for actual service during the equal payment period exceed the bills as rendered, the amount of such excess must be paid on or before the due date of the bill covering the last month of the payment period; if the charges for actual service used are less than the amount paid by the EPP customer, the amount of such overpayment must be refunded to the customer or credited on the last bill of the equal payment period.  For EPP customers, all refunds and credits will be applied based on the portion of their bills not constituting CRR charges, and therefore no payments of CRR charges will be refunded or credited to these customers in the event of overpayment.

Billing.

APCo bills its West Virginia customers about once every 30 days in 21 cycles, with approximately an equal number of electricity bills being distributed each business day. For the year ending December 31, 2012, APCo mailed out an average of 23,297 regular electricity bills plus notices of disconnection on each business day to West Virginia customers in various customer categories. For the year ending December 31, 2012, Wheeling Power mailed out an average of 2,082 regular electricity bills plus notices of disconnection on each business day to West Virginia customers in various customer categories.

As of December 31, 2012 approximately 89,889 of APCo’s residential and small business customers in West Virginia, who constitute approximately 21% of APCo’s West Virginia retail electric customers, had chosen to be billed using Average Monthly Payment (AMP) billing program or the Equal Payment Plan (EPP) budget billing program described above.

For accounts with potential billing errors, exception alerts and reports are generated for manual review by billing personnel. This review examines accounts that have abnormally high or low electricity bills, potential meter-reading errors and possible meter malfunctions.

Collection Process.

APCo historically received, and expects that it will continue to receive, the majority of customer payments via the U.S. mail and paystations; however, other payment options are also available.  These options include payment by electronic fund transfers or credit/debit cards.

APCo considers residential customer electricity bills to be delinquent if they are unpaid 30 days after the billing date. APCo considers nonresidential customer electricity bills to be delinquent if they are unpaid 30 days after the billing date. In general, APCo’s collection process begins when balances are unpaid for 32 days or more from the billing date. At that time APCo begins collection activities ranging from delinquency notice mailings, to telephone calls, to personal collection and ending with electricity shut-off. APCo uses collection agencies and legal collection experts as needed throughout the collection process.

The servicer may change its collection policies and procedures, consistent with PSC guidelines and the financing order, from time to time.

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Loss Experience

The following table sets forth information relating to the annual net charge-offs for APCo, including net charge-offs of retail electric customers as part of APCo’s annual charge-off reconciliation process.

Net Charge-Offs as a Percentage of Billed Transmission & Distribution Revenues

	As Of 12/31/08		As Of 12/31/09		As Of 12/31/10		As Of 12/31/11		As Of 12/31/12
Billed Electric Revenues ($000)	$	944,669	$	928,041	$	1,067,894	$	1,156,649	$	1,163,574
Net Charge-Offs ($000)	$	2,982	$	3,550	$	4,440	$	7,246	$	12,290
Percentage of Billed Revenue		0.32%		0.38%		0.42%		0.63%		1.06%

The table above reflects historical information for APCo without taking into account the corresponding experience of Wheeling Power.  In each of the annual periods referenced above, however, the net charge-offs for Wheeling Power as a percentage of billed revenue were lower than the percentages experienced by APCo.

Days Sales Outstanding

The following table sets forth information relating to the average number of days that APCo’s bills remained outstanding during the calendar year (or other period referred to below) ending on each of the dates referred to below.

Average Days Sales Outstanding

	As Of 12/31/08		As Of 12/31/09		As Of 12/31/10		As Of 12/31/11		As Of 12/31/12
Average Days Sales Outstanding		24		24		27		28		25

The table above reflects historical information for APCo without taking into account the corresponding experience of Wheeling Power.  In each of the annual periods referenced above, however, the average days sales outstanding for Wheeling Power bills were lower than the corresponding number of days outstanding for APCo.

Delinquencies

The following table sets forth information relating to the delinquency experience of APCo as of each of the dates shown below.

Delinquencies as a Percentage of Total Billed Revenues

	As Of 12/31/08			As Of 12/31/09			As Of 12/31/10			As Of 12/31/11			As Of 12/31/12
30-59 days		1.21	%		1.36	%		1.37	%		1.47	%		1.37	%
60-89 days		0.22	%		0.23	%		0.29	%		0.32	%		0.30	%
90+ days		0.12	%		0.12	%		0.24	%		0.36	%		0.31	%
Total		1.55	%		1.71	%		1.90	%		2.16	%		1.99	%

The table above reflects historical information for APCo without taking into account the corresponding experience of Wheeling Power.  In each of the annual periods referenced above, however, the amount of delinquencies experienced by Wheeling Power as a percentage of billed revenues was lower than the corresponding percentages experienced by APCo.

Where to Find Information About APCo.

APCo files periodic reports with the SEC as required by the Securities Exchange Act of 1934.  Reports filed with the SEC by APCo are available for inspection without charge at the public reference room maintained by the SEC at 100 F Street, N.E., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of periodic reports and exhibits thereto may be obtained at the above location at prescribed rates.  Information as to the operation of the public reference facilities is available by calling the SEC at 1-800-SEC-0330.  Information filed with the SEC can also be inspected at the SEC’s website at http://www.sec.gov.  Except as provided in the prospectus supplement, no other information contained on that website constitutes part of this prospectus or the prospectus supplement related to the bonds.

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APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, THE ISSUING ENTITY

We are a special purpose limited liability company formed under the Delaware Limited Liability Company Act pursuant to a limited liability company agreement executed by our sole member, APCo, and the filing of a certificate of formation with the Secretary of the State of Delaware.  The limited liability company agreement was amended and restated on October 23 , 2013, and references in this prospectus and the prospectus supplement to our limited liability company agreement mean the amended and restated agreement.  Our limited liability company agreement restricts us from engaging in activities other than those described in this section.  We do not have any employees, but we will pay our member for out-of-pocket expensesincurred by the member in connection with its services to us in accordance with our limited liability company agreement.  We have summarized selected provisions of our limited liability company agreement below, a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part.  On the date of issuance of the bonds, our capital will be equal to 0.5% of the principal amount of such bonds issued or such other amount as may allow the bonds to achieve the desired security rating and treat the bonds as debt under applicable guidance issued by the Internal Revenue Service, which we also refer to as the IRS.

As of the date of this prospectus, we have not carried on any business activities and have no operating history.  We are not an agency or instrumentality of the State of West Virginia.

Our assets will consist of:

· the CRR property,

· our rights under the sale agreement, under the administration agreement and under the bill of sale delivered by APCo pursuant to the sale agreement,

· our rights under the servicing agreement and any subservicing, agency, administration, intercreditor or collection agreements executed in connection with such servicing agreement,

· the collection account and all subaccounts of such collection account,

· all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, and

· all payments on or under and all proceeds in respect of any or all of the foregoing.

The indenture provides that the CRR property, as well as our other assets, other than any cash released to APCo by the trustee semi-annually as a return on its equity investment in the issuing entity, will be pledged by us to the trustee to secure our obligations in respect of the bonds.  Pursuant to the indenture, the collected CRR charges remitted to the trustee by the servicer must be used to pay principal and interest on the bonds and other ongoing financing costs and our other obligations specified in the indenture.

Restricted Purpose

We have been created for the sole purpose of:

· purchasing, owning, administering and servicing the CRR property and the other collateral;

· issuing and registering the bonds;

· making payment on the bonds;

· distributing amounts released to us;

· managing, selling, assigning, pledging, collecting amounts due on, or otherwise dealing with the CRR property and the other collateral and related assets;

· negotiating, executing, assuming and performing our obligations under the basic documents;

· pledging our interest in the CRR property and other collateral to the trustee under the indenture in order to secure the bonds; and

· performing other activities that are necessary, suitable or convenient to accomplish these purposes.

Our limited liability company agreement does not permit us to engage in any activities not directly related to these purposes, including issuing securities (other than the bonds), borrowing money or making loans to other persons.  The list of permitted activities set forth in our limited liability company agreement may not be altered, amended or repealed without the affirmative vote of a majority of our managers, which vote must include the affirmative vote of our independent managers.

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Our limited liability company agreement and the indenture will prohibit us from issuing any consumer rate relief bonds (as such term is defined in the Recovery Act) other than the bonds that we will offer pursuant to the prospectus supplement.

Our Relationship with APCo

On the issue date for the bonds APCo will sell CRR property to us pursuant to a sale agreement between us and APCo.  APCo will service the CRR property pursuant to a servicing agreement between us and APCo and will provide administrative services to us pursuant to an administration agreement between us and APCo.

Our Management

Pursuant to our limited liability company agreement, our business will be managed by five or more managers, of whom at least two will be independent managers, in each case appointed from time to time by APCo or, in the event that APCo transfers its interest in us, by our owner or owners.  Following the issuance of the bonds, we will have at least two independent managers, each of whom, among other things, (1) is an individual who has prior experience as an independent director, independent manager or independent member for special-purpose entities, (2) is employed by a nationally-recognized company that provides professional Independent Managers and other corporate services, (3) is duly appointed as an independent manager and (4) is not and has not been for at least five years from the date of his or her appointment, and while serving as an Independent Manager will not be, any of the following:

· a member, partner, or equity holder of us, APCo, any of our respective affiliates or any of our owner’s affiliates,

· an officer, employee, director or manager (other than as an independent director or manager for a special purpose bankruptcy-remote entity) of APCo or any of our affiliates or any of our owner’s affiliates, or

· a creditor, supplier or service provider (including provider of professional services) to us, APCo or any of their respective equity holders or affiliates, other than a nationally recognized company that routinely provides professional independent managers and other corporate services to us, APCo or any of its affiliates in the ordinary course of its business,

· a family member of any member, partner, equity holder, manager, officer, employee, creditor, supplier or service provider,

· a person who controls (whether directly, indirectly or otherwise) APCo or its affiliates or any member, partner, equity holder, manager, officer, employee, director, creditor, supplier or service provider described above; provided, that the indirect or beneficial ownership of stock of APCo or its affiliates through a mutual fund or similar diversified investment vehicle with respect to which APCo does not have discretion or control over the investments held by such diversified investment vehicle shall not preclude such owner from being an independent manager.

APCo, as our sole member, will appoint the independent managers prior to the issuance of the bonds.  None of our managers or officers has been involved in any legal proceedings specified in Item 401(f) of the SEC’s Regulation S-K.

Manager Fees and Limitation on Liabilities

We have not paid any compensation to any manager since we were formed.  We will not compensate our managers, other than the independent managers, for their services on our behalf.  We will pay the annual fees of the independent managers from our revenues and will reimburse them for reasonable out-of-pocket expenses.  These expenses include the reasonable compensation, expenses and disbursements of the agents, representatives, experts and counsel that the independent managers may employ in connection with the exercise and performance of his or her rights and duties under our limited liability company agreement.

Our limited liability company agreement provides that to the extent permitted by law, the managers will not be personally liable for any of our debts, obligations or liabilities.  Our limited liability company agreement further provides that, except as described below, to the fullest extent permitted by law, we will indemnify the managers against any liability incurred in connection with their services as managers for us if they acted in good faith and in a manner which they reasonably believed to be in or not opposed to our best interests.  With respect to a criminal action, the managers will be indemnified unless they had reasonable cause to believe their conduct was unlawful.  We will not indemnify the manager for any judgment, penalty, fine or other expense directly caused by their fraud, gross negligence or willful misconduct.  In addition, unless ordered by a court, we will not indemnify the managers if a final adjudication establishes that their acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action.  We will pay any indemnification

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amounts owed to the managers out of funds in the collection accounts, subject to the priority of payments described in “Security for the Consumer Rate Relief Bonds—How Funds in the Collection Account will be Allocated.”

We Are a Separate and Distinct Legal Entity from APCo

Under our limited liability company agreement, we may not file a voluntary petition for relief under the Bankruptcy Code, without the affirmative vote of our member and the affirmative vote of all of our managers, including the independent managers.  APCo has agreed that it will not cause us to file a voluntary petition for relief under the Bankruptcy Code.  Our limited liability company agreement requires us, except for financial reporting purposes (to the extent required by generally accepted accounting principles) and for federal income tax purposes, and, to the extent consistent with applicable state law, state income and franchise tax purposes, to maintain our existence separate from APCo including:

· taking all necessary steps to continue our identity as a separate legal entity;

· making it apparent to third persons that we are an entity with assets and liabilities distinct from those of APCo, other affiliates of APCo, the managers or any other person; and

· making it apparent to third persons that, except for federal and certain other tax purposes, we are not a division of APCo or any of its affiliated entities or any other person.

Administration Agreement

APCo will, pursuant to an administration agreement between APCo and us, provide administrative services to us, including services relating to the preparation of financial statements, required filings with the SEC, any tax returns we might be required to file under applicable law, qualifications to do business, and minutes of our managers’ meetings.  We will pay APCo a fixed fee of $100,000 per annum, payable in installments of $50,000 on each payment date for performing these services, plus we will reimburse APCo for all costs and expenses for services performed by unaffiliated third parties and actually incurred by APCo in performing such services described above.

AFFILIATIONS AND CERTAIN RELATIONSHIPS

The issuing entity is a wholly-owned subsidiary of APCo.  APCo is an operating subsidiary of AEP.  U.S. Bank, National Association has been the trustee on three securitizations, AEP Texas Central Transition Funding LLC, AEP Texas Central Transition Funding III LLC and Ohio Phase-In-Recovery Funding LLC, each of which was sponsored by other subsidiaries of AEP, specifically AEP Texas Central Company and Ohio Power Company.  One of the underwriters of the bonds.  Morgan Stanley & Co. LLC, also served as the financial advisor to APCo in connection with the structuring of the bonds and to AEP Texas Central Company in connection with the issuance of transition bonds issued by AEP Texas Central Transition Funding III LLC.  Each of the sponsor, the depositor and Morgan Stanley & Co. LLC may maintain other banking relationships in the ordinary course with U.S. Bank, National Association.

USE OF PROCEEDS

We will use the proceeds of the issuance of the bonds (after underwriting discounts and commissions) to pay the expenses of the authorization, issuance and sale of the bonds and to purchase the CRR property from APCo.  In accordance with the Recovery Act and the financing order, APCo will use the proceeds it receives from the sale of the CRR property to refinance its uncollected ENEC costs, through redeeming, retiring and repaying a portion of its outstanding debt and/or equity.  Also under the financing order, APCo is permitted to use a portion of these proceeds to reimburse itself on the closing date for certain upfront financing costs incurred by it in connection with the transaction.

DESCRIPTION OF THE CONSUMER RATE RELIEF BONDS

General

We will issue the bonds pursuant to the terms of an indenture between us and the trustee specified in the prospectus supplement to finance the purchase by us of the CRR property.  The particular terms of the bonds will be described in the indenture and the series supplement.  We have summarized below selected provisions of the indenture and the bonds.  This summary does not purport to be complete and is subject to the terms and provisions of the indenture and series supplement,

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forms of which are filed as exhibits to the registration statement of which this prospectus forms a part.  Please read “Where You Can Find More Information.”

The aggregate principal amount of the bonds that may be authenticated and delivered under the indenture and the financing order is approximately $ 382 million, consisting of:  $376,024,583, together with upfront financing costs not to exceed the sum of (1) the fees charged and costs incurred by the PSC Financial Advisor plus (2) $5,750,000.  The bonds may include one or more tranches.  Tranches of bonds may differ from each other as to the interest rate, maturity and the timing, sequential order and amount of payments of principal or interest, or both.

The prospectus supplement will describe the terms of the bonds and, if applicable, the tranches thereof, including, among other things:

· the principal amount and, if more than one tranche is issued, the respective principal amounts of the tranches of the bonds,

· the CRR charges,

· the annual rate at which interest accrues or the method or methods of determining such annual rate and, if more than one tranche is issued, such information for the respective tranches,

· the payment dates,

· the collateral,

· the scheduled final payment date and the final maturity date of the bonds and, if more than one tranche is issued, such information for the respective tranches,

· the issuance date of the bonds,

· the authorized denominations,

· the expected sinking fund schedule for principal of the bonds and, if more than one tranche is issued, such schedule for the respective tranches,

· any other material terms of the tranches that are not inconsistent with the provisions of the indenture and that will not result in any rating agency reducing or withdrawing its rating of any outstanding tranche of bonds, and

· the identity of the trustee.

The bonds are not a debt, liability or other obligation of the State of West Virginia, the PSC or of any county, municipality or other political subdivision of the State of West Virginia and do not represent an interest in or legal obligation of APCo or any of its affiliates, other than us.  Neither APCo nor any of its affiliates will guarantee or insure the bonds.  Financing orders authorizing the issuance of consumer rate relief bonds do not constitute a pledge of the faith and credit of the State of West Virginia or of any of its political subdivisions.  The issuance of the bonds under the Recovery Act will not directly, indirectly or contingently obligate the State of West Virginia or any county, municipality or other political subdivision of the State of West Virginia to levy or to pledge any form of taxation for the bonds or to make any appropriation for their payment.

Interest and Principal on the Consumer Rate Relief Bonds

Interest will accrue on the principal balance of each bond at the interest rate specified in or determined in the manner specified in the prospectus supplement.  Interest will be payable on each payment date, commencing on the date specified in the prospectus supplement.  Interest payments will be made from collections of CRR charges, including amounts available in the excess funds subaccount and, if necessary, the amounts available in the capital subaccount.  Please read “Security for the Consumer Rate Relief Bonds—How Funds in the Collection Account will be Allocated.”

Principal of the bonds of each tranche will be payable in the amounts and on the payment dates specified in the prospectus supplement, but only to the extent that amounts in the collection account are available, and subject to the other limitations described below, under “Security for the Consumer Rate Relief Bonds—How Funds in the Collection Account will be Allocated.”  Accordingly, principal of the bonds may be paid later, but not sooner, than reflected in the expected sinking fund schedule, except in the case of an acceleration.  The prospectus supplement will set forth the expected sinking fund schedule and expected amortization schedule for the bonds and, if applicable, the tranches thereof.  The expected sinking fund schedule will be established in a manner required by the financing order.  If principal of any tranche is not paid in full on the final maturity date for such tranche, an event or default will occur.  On any payment date, unless an event of default has

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occurred and is continuing and the bonds have been declared due and payable, the trustee will make principal payments on the bonds only until the outstanding principal balances of those bonds have been reduced to the principal balances specified in the applicable expected amortization schedule for that payment date.  The trustee will retain in the excess funds subaccount any collections of CRR charges in excess of amounts then due and payable in respect of our obligations and expenses (all as described under “Security for the Consumer Rate Relief Bonds—How Funds in the Collection Account will be Allocated”).

If the trustee receives insufficient collections of CRR charges for any payment date, and amounts in the collection account (and the applicable subaccounts of the collection account) are not sufficient to make up the shortfall, principal of any tranche of bonds may be payable later than expected, as described in this prospectus.  Please read “Risk Factors—Other Risks Associated with an Investment in the Consumer Rate Relief Bonds.”  The failure to make a scheduled payment of principal on the bonds because there are not sufficient funds in the collection account does not constitute a default or an event of default under the indenture, except for the failure to pay in full the unpaid balance of any tranche upon the final maturity date for such tranche.  If an event of default (other than a breach by the State of West Virginia of its pledge) has occurred and is continuing, then the trustee or the holders of not less than a majority in principal amount of the bonds then outstanding may declare the bonds to be immediately due and payable, in which event the entire unpaid principal amount of the bonds will become due and payable.  Please read “—Events of Default; Rights Upon Event of Default.”

Payments on the Consumer Rate Relief Bonds

The trustee will pay on each payment date to the holders of each tranche of bonds, to the extent of available funds in the collection account, all payments of principal and interest then due.  The trustee will make each payment other than the final payment with respect to any bonds to the holders of record of the bonds of the applicable tranche on the record date for that payment date.  The trustee will make the final payment for each tranche of bonds, however, only upon presentation and surrender of the bonds of that tranche at the office or agency of the trustee specified in the notice given by the trustee of the final payment.  The trustee will mail notice of the final payment to the bondholders no later than five days prior to the final payment date, specifying the date set for the final payment and the amount of the payment.

The failure to pay accrued interest on any payment date (even if the failure is caused by a shortfall in CRR charges received) will result in an event of default for the bonds unless such failure is cured within five business days.  Please read “—Events of Default; Rights Upon Event of Default.”  Any interest not paid when due (plus interest on the defaulted interest at the applicable interest rate to the extent lawful) will be payable to the bondholders on a special record date.  The special record date will be at least 15 business days prior to the date on which the trustee is to make such special payment (a special payment date).  We will fix any special record date and special payment date.  At least 10 days before any special record date, the trustee will mail to each affected bondholder a notice that states the special record date, the special payment date and the amount of defaulted interest (plus interest on the defaulted interest) to be paid.

The entire unpaid principal amount of the bonds will be due and payable:

·           on the final maturity date,

· if an event of default under the indenture occurs and is continuing and the trustee or the holders of a majority in principal amount of the bonds have declared the bonds to be immediately due and payable.

However, the nature of our business will result in payment of principal upon an acceleration of the bonds being made as funds become available.  Please read “Risk Factors—Risks associated with the Unusual Nature of the CRR Property—foreclosure of the trustee’s lien on the CRR property securing the Consumer Rate Relief Bonds might not be practical, and acceleration of the Consumer Rate Relief Bonds before maturity might have little practical effect” and “Risk Factors—You may experience material payment delays or incur a loss on your investment in the Consumer Rate Relief Bonds because the source of funds for payment is limited.”

At the time, if any, we issue the bonds in the form of definitive bonds and not to DTC or its nominee, the trustee will make payments with respect to that tranche on a payment date or a special payment date by check mailed to each holder of a definitive bond of the tranche of record on the applicable record date at its address appearing on the register maintained with respect to the bonds.  Upon written application by a holder of any tranche of bonds in physical form to the trustee not later than the applicable record date, the trustee will make payments by wire transfer to an account maintained by the payee.

If any special payment date or other date specified for any payments to bondholders is not a business day, the trustee will make payments scheduled to be made on that special payment date or other date on the next succeeding business day and no interest will accrue upon the payment during the intervening period.

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Registration and Transfer of the Consumer Rate Relief Bonds

Bonds in definitive form will be transferable and exchangeable at the office of the registrar identified in the prospectus supplement.  Unless otherwise specified in the prospectus supplement, there will be no service charge for any registration or transfer of the bonds, but the trustee may require the owner to pay a sum sufficient to cover any tax or other governmental charge.

We will issue each tranche of the bonds in the minimum initial denominations set forth in the prospectus supplement.

The trustee will make payments of interest and principal on each payment date to the bondholders in whose names the bonds were registered on the record date.

Consumer Rate Relief Bonds Will Be Issued in Book-Entry Form

Unless we specify otherwise in the prospectus supplement, the bonds will be available to investors only in the form of book-entry bonds.  You may hold your bonds through DTC in the United States, Clearstream Banking, Luxembourg, S.A., referred to as Clearstream, or Euroclear in Europe or in any other manner we describe in the prospectus supplement.  You may hold your bonds directly with one of these systems if you are a participant in the system or indirectly through organizations that are participants.

The Role of DTC, Clearstream and Euroclear

Cede & Co., as nominee for DTC, will hold the global bond or bonds representing the bonds.  Clearstream and Euroclear will hold omnibus positions on behalf of the Clearstream customers and Euroclear participants, respectively, through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries.  These depositaries will, in turn, hold these positions in customers’ securities accounts in the depositaries’ names on the books of DTC.

The Function of DTC

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.  DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (Direct Participants) deposit with DTC.  DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts, thereby eliminating the need for physical movement of securities certificates.  Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations.  DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (DTCC).  DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies.  DTCC is owned by the users of its regulated subsidiaries.  Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (Indirect Participants).  The DTC Rules applicable to its Participants are on file with the SEC.  More information about DTC can be found at www.dtcc.com and www.dtc.org.

The Function of Clearstream

Clearstream holds securities for its customers and facilitates the clearance and settlement of securities transactions between Clearstream customers through electronic book-entry changes in accounts of Clearstream customers, thereby eliminating the need for physical movement of securities.  Transactions may be settled by Clearstream in any of various currencies, including United States dollars.  Clearstream provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing.  Clearstream also deals with domestic securities markets in various countries through established depositary and custodial relationships.  Clearstream is registered as a bank in Luxembourg and therefore is subject to regulation by the Luxembourg Commission de Surveillance du Secteur Financier, which supervises Luxembourg banks.  Clearstream’s customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations, among others, and may include the underwriters of the bonds.  Clearstream’s U.S. customers are limited to

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securities brokers and dealers and banks.  Clearstream has customers located in various countries.  Indirect access to Clearstream is also available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream.  Clearstream has established an electronic bridge with Euroclear to facilitate settlement of trades between Clearstream and Euroclear.

The Function of Euroclear

The Euroclear System was created in 1968 in Brussels.  Euroclear holds securities and book-entry interests in securities for Euroclear participants and facilitates the clearance and settlement of securities transactions between Euroclear participants, and between Euroclear participants and participants of certain other securities intermediaries through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of securities and any risk from lack of simultaneous transfers of securities and cash.  Such transactions may be settled in any of various currencies, including United States dollars.  The Euroclear System includes various other services, including, among other things, safekeeping, administration, clearance and settlement, securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described below.  The Euroclear System is operated by Euroclear Bank SA/NV.  Euroclear participants include central banks and other banks, securities brokers and dealers and other professional financial intermediaries and may include the underwriters of the bonds.  Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly.

Terms and Conditions of Euroclear

Securities clearance accounts and cash accounts with Euroclear are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (collectively, the Terms and Conditions).  These Terms and Conditions govern transfers of securities and cash within the Euroclear System, withdrawals of securities and cash from the Euroclear System and receipts of payments with respect to securities in the Euroclear System.  All securities in Euroclear are held on a fungible basis without attribution of specific securities to specific securities clearance accounts.  Euroclear acts under the Terms and Conditions only on behalf of Euroclear participants and has no record of or relationship with persons holding through Euroclear participants.

The Rules for Transfers Among DTC, Clearstream or Euroclear Participants

Transfers between DTC participants will occur in accordance with DTC rules.  Transfers between Clearstream customers or Euroclear participants will occur in the ordinary way in accordance with their applicable rules and operating procedures and will be settled using procedures applicable to conventional securities held in registered form.

Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream customers or Euroclear participants, on the other, will be effected through DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its depositary; however, those cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in accordance with its rules and procedures and within its established deadlines, which will be based on European time.  The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its depositary to take action to effect final settlement on its behalf by delivering or receiving bonds in DTC and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC.  Clearstream customers and Euroclear participants may not deliver instructions directly to Clearstream’s and Euroclear’s depositaries.

Because of time-zone differences, credits of securities in Clearstream or Euroclear as a result of a transaction with a participant will be made during the subsequent securities settlement processing, dated the business day following the DTC settlement date, and those credits or any transactions in those securities settled during that processing will be reported to the relevant Clearstream customer or Euroclear participant on that business day.  Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream customer or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.

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DTC Will Be the Holder of the Consumer Rate Relief Bonds

Bondholders that are not participants or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interest in, bonds may do so only through participants and indirect participants.  In addition, bondholders will receive all payments of principal of and interest on the bonds from the trustee through the participants, who in turn will receive them from DTC.  Under a book-entry format, bondholders may experience some delay in their receipt of payments because payments will be forwarded by the trustee to Cede & Co., as nominee for DTC.  DTC will forward those payments to its participants, who thereafter will forward them to indirect participants or bondholders.  It is anticipated that the only “bondholder” will be Cede & Co., as nominee of DTC.  The trustee will not recognize bondholders as bondholders, as that term is used in the indenture, and bondholders will be permitted to exercise the rights of bondholders only indirectly through the participants, who in turn will exercise the rights of bondholders through DTC.

Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers of book-entry certificates among participants on whose behalf it acts with respect to the bonds and is required to receive and transmit payments of principal and interest on the bonds.  Participants and indirect participants with whom bondholders have accounts with respect to the bonds similarly are required to make book-entry transfers and receive and transmit those payments on behalf of their respective bondholders.  Accordingly, although bondholders will not possess bonds, bondholders will receive payments and will be able to transfer their interests.

Because DTC can act only on behalf of participants, who in turn act on behalf of indirect participants and certain banks, the ability of a bondholder to pledge bonds to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of those bonds, may be limited due to the lack of a physical certificate for those bonds.

DTC has advised us that it will take any action permitted to be taken by a bondholder under the indenture only at the direction of one or more participants to whose account with DTC the bonds are credited.  Additionally, DTC has advised us that it will take those actions with respect to specified percentages of the collateral amount only at the direction of and on behalf of participants whose holdings include interests that satisfy those specified percentages.  DTC may take conflicting actions with respect to other interests to the extent that those actions are taken on behalf of participants whose holdings include those interests.

Except as required by law, none of any underwriter, the servicer, APCo, the trustee, us or any other party will have any liability for any aspect of the records relating to or payments made on account of beneficial interests in the certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial interests.

How Consumer Rate Relief Bond Payments Will Be Credited by Clearstream and Euroclear

Payments with respect to bonds held through Clearstream or Euroclear will be credited to the cash accounts of Clearstream customers or Euroclear participants in accordance with the applicable system’s rules and operating procedures, to the extent received by its depositary.  Those payments will be subject to tax reporting in accordance with relevant United States tax laws and regulations.  Please read “Material U.S. Federal Income Tax Consequences” in this prospectus.  Clearstream or the Euroclear operator, as the case may be, will take any other action permitted to be taken by a bondholder under the indenture on behalf of a Clearstream customer or Euroclear participant only in accordance with its applicable rules and operating procedures and subject to its depositary’s ability to effect those actions on its behalf through DTC.

Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of the bonds among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform those procedures, and those procedures may be discontinued at any time.

Definitive Consumer Rate Relief Bonds

Unless otherwise specified in the prospectus supplement, we will issue bonds in registered, certificated form to bondholders, or their nominees, rather than to DTC, only under the circumstances provided in the indenture, which will include:  (1)  us advising the trustee in writing that DTC is no longer willing or able to properly discharge its responsibilities as nominee and depositary with respect to the book-entry bonds and that we are unable to locate a qualified successor, (2) our electing to terminate the book-entry system through DTC, with written notice to the trustee, or (3) after the occurrence of an event of default under the indenture, holders of bonds aggregating not less than a majority of the aggregate outstanding principal amount of the bonds maintained as book-entry bonds advising us, the trustee, and DTC in writing that the

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continuation of a book-entry system through DTC (or a successor) is no longer in the best interests of those bondholders.  Upon issuance of definitive bonds, the bonds evidenced by such definitive bonds will be transferable directly (and not exclusively on a book-entry basis) and registered holders will deal directly with the trustee with respect to transfers, notices and payments.

Upon surrender by DTC of the definitive securities representing the bonds and instructions for registration, the trustee will issue the bonds in the form of definitive bonds, and thereafter the trustee will recognize the registered holders of the definitive bonds as bondholders under the indenture.

The trustee will make payment of principal of and interest on the bonds directly to bondholders in accordance with the procedures set forth herein and in the indenture and the prospectus supplement.  The trustee will make interest payments and principal payments to bondholders in whose names the definitive bonds were registered at the close of business on the related record date.  The trustee will make payments by wire transfer to an account maintained by the bondholder in accordance with payment instructions delivered to the trustee by such bondholders.  The trustee will make the final payment on any bond (whether definitive bonds or notes registered in the name of Cede & Co.), however, only upon presentation and surrender of the bond on the final payment date at the office or agency that is specified in the notice of final payment to bondholders.  The trustee will provide the notice to registered bondholders not later than the fifth day prior to the final payment date.

Definitive bonds will be transferable and exchangeable at the offices of the transfer agent and registrar, which initially will be the trustee.  There will be no service charge for any registration of transfer or exchange, but the transfer agent and registrar may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith.

Optional Redemption

The indenture does not permit an optional redemption of bonds under any circumstances.

Access of Bondholders

Upon written request of any bondholder or group of bondholders of bonds evidencing not less than 10 percent of the aggregate outstanding principal amount of the bonds, the trustee will afford the bondholder or bondholders making such request a copy of a current list of bondholders for purposes of communicating with other bondholders with respect to their rights under the indenture.

The indenture does not provide for any annual or other meetings of bondholders.

Reports to Bondholders

On or prior to each payment date, special payment date or any other date specified in the indenture for payments with respect to any tranche of bonds, the servicer will deliver to the trustee, and the trustee will make available on its website (currently located at http://www.usbank.com/abs), a statement prepared by the servicer with respect to the payment to be made on the payment date, special payment date or other date, as the case may be, setting forth the following information:

· the amount of the payment to bondholders allocable to (1) principal and (2) interest,

· the aggregate outstanding principal balance of the bonds, before and after giving effect to payments allocated to principal reported immediately above,

· the difference, if any, between the amount specified immediately above and the principal amount scheduled to be outstanding on that date according to the related expected amortization schedule,

· any other transfers and payments to be made on such payment date, including amounts paid to the trustee and the servicer, and

· the amounts on deposit in the capital subaccount and the excess funds subaccount, after giving effect to the foregoing payments.

Unless and until bonds are no longer issued in book-entry form, the reports will be provided to the depository for the bonds, or its nominee, as sole beneficial owner of the bonds.  The reports will be available to bondholders upon request to the trustee or the servicer.  Such reports will not constitute financial statements prepared in accordance with generally accepted accounting principles.  The financial information provided to bondholders will not be examined and reported upon by an

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independent public accountant.  In addition, an independent public accountant will not provide an opinion on the financial information.

Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of the bonds, the trustee, so long as it is acting as paying agent and transfer agent and registrar for the bonds, will, upon written request by us or any bondholder, mail to persons who at any time during the calendar year were bondholders and received any payment on the bonds, a statement containing certain information for the purposes of the bondholder’s preparation of United States federal and state income tax returns.

Website Disclosure

We will, to the extent permitted by and consistent with our legal obligations under applicable law, cause to be posted on a website associated with APCo, currently located at www.aep.com, periodic reports containing to the extent such information is reasonably available to us:

· the final prospectus for the bonds,

· a statement of CRR charge remittances made to the trustee,

· a statement reporting the balances in the collection account and in each subaccount of the collection account as of the end of each quarter or the most recent date available,

· a statement showing the balance of outstanding bonds that reflects the actual periodic payments made on the bonds during the applicable period,

· the semi-annual servicer’s certificate delivered for the bonds pursuant to the servicing agreement,

· the text (or a link to the website where a reader can find the text) of each true-up filing in respect of the outstanding bonds and the results of each such true-up filing,

· any change in the long-term or short-term credit ratings of the servicer assigned by the rating agencies,

· material legislative or regulatory developments directly relevant to the bonds, and

· any reports and other information that we are required to file with the SEC under the Securities Exchange Act of 1934.

We and the Trustee May Modify the Indenture

Modifications of the Indenture that do not Require Consent of Consumer Rate Relief Bondholders

From time to time, and without the consent of the bondholders (but with prior notice to the rating agencies and, in certain instances,  with the consent or deemed consent of the PSC and when authorized by an issuer order), we may enter into one or more agreements supplemental to the indenture for various purposes described in the indenture, including:

· to correct or amplify the description of any property including, without limitation, the collateral subject to the indenture, or to better convey, assure and confirm to the trustee the property subject to the indenture, or to add additional property,

· to add to the covenants for the benefit of the bondholders and the trustee, or surrender any right or power conferred to us by the indenture,

· to convey, transfer, assign, mortgage or pledge any property to or with the trustee,

· to cure any ambiguity or correct or supplement any provision in the indenture or in any supplemental indenture which may be inconsistent with any other provision in the indenture or in any supplemental indenture or to make any other provisions with respect to matters or questions arising under the indenture or in any supplemental indenture, provided however, that (i) such action will not, as evidenced by an opinion of counsel, adversely affect in any material respect the interests of the bondholders and (ii) the rating agency condition shall have been satisfied with respect thereto,

· to evidence and provide for the acceptance of the appointment under the indenture of a successor trustee with respect to the bonds and to add or change any of the provisions of the indenture as shall be necessary to facilitate the administration of the trusts thereunder by more than one trustee,

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· to evidence the succession of another person to us in accordance with the terms of the indenture and the assumption by any such successor of the covenants in the indenture and in the bonds,

· to modify, eliminate or add to the provisions of the indenture to such extent as shall be necessary to effect qualification under the Trust Indenture Act of 1939 or under any similar or successor federal statute hereafter enacted, and to add provisions expressly required by such Act,

· to qualify the bonds for registration with a clearing agency, and

· to satisfy any rating agency requirements.

We may also, without the consent of the bondholders, enter into one or more other agreements supplemental to the indenture with the effect of adding, changing or eliminating provisions of the indenture or modifying the rights of bondholders so long as (i) the supplemental agreement does not, as evidenced by an opinion of nationally recognized counsel of the issuing entity experienced in structured finance transactions, adversely affect the interests of any holders of bonds then outstanding in any material respect, (ii) the rating agency condition shall have been satisfied with respect thereto, and (iii) with respect to any amendment that would increase ongoing financing costs, we have obtained the consent or deemed consent of the PSC.

Modifications of the Indenture that Require the Approval of Consumer Rate Relief Bondholders.

We may, with the consent of bondholders holding not less than a majority of the aggregate outstanding principal amount of the bonds of each tranche to be affected (and with prior notice to the rating agencies and with the consent or deemed consent of the PSC if such supplemental indenture will increase ongoing financing costs), enter into one or more indentures supplemental to the indenture for the purpose of, among other things, adding any provisions to or changing in any manner or eliminating any of the provisions of the indenture or modifying in any manner the rights of bondholders.  In determining whether a majority of holders have consented, bonds owned by us, APCo or any affiliate of us shall be disregarded, except that, in determining whether the trustee shall be protected in relying upon any such consent, the trustee shall only be required to disregard any bonds it actually knows to be so owned.  No supplement, however, may, without the consent of each bondholder of each tranche affected thereby, take certain actions enumerated in the indenture, including:

· change the date of payment of any installment of principal of or premium, if any, or interest on any bond of such tranche, or reduce in any manner the principal amount thereof, the interest rate thereon or the premium, if any, with respect thereto,

· change the provisions of the indenture and any applicable supplemental indenture relating to the application of collections on, or the proceeds of the sale of, the collateral to payment of principal of or premium, if any, or interest on the bonds or tranche, or change the place of payment where, or coin or currency in which any bond or any interest thereon is payable,

· reduce the percentage of the aggregate amount of the outstanding bonds, or of a tranche thereof, the consent of the bondholders of which is required for any supplemental indenture, or the consent of the bondholders of which is required for any waiver of compliance with those provisions of the indenture specified therein or of defaults specified therein and their consequences provided for in the indenture,

· reduce the percentage of the outstanding amount of the bonds or tranche the holders of which are required to direct the trustee to direct the issuing entity to sell or liquidate the collateral,

· modify any of the provisions of the indenture in a manner so as to affect the amount of any payment of interest, principal or premium, if any, payable on any bond of such tranche on any payment date or change the expected sinking fund schedules or final maturity dates of any bonds of such tranche,

· decrease the required capital amount,

· permit the creation of any lien ranking prior to or on a parity with the lien of the indenture with respect to any of the collateral for the bonds or tranche or, except as otherwise permitted or contemplated in the indenture, terminate the lien of the indenture on any property at any time subject thereto or deprive the holder of any bond of the security provided by the lien of the indenture,

· cause any material adverse federal income tax consequence to the seller, the issuing entity, the manager, the trustee or the beneficial owners of the bonds,

· modify the provisions of the indenture with respect to amendments to the indenture and to certain of the other basic documents requiring consent of bondholders except to increase any percentage specified, or

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· impair the right to institute suit for enforcement of the provisions of the indenture regarding payment or application of funds.

Promptly following the execution of any supplement to the indenture, the trustee will furnish either a copy of such supplement or written notice of the substance of the supplement to each bondholder of a bond to which such supplement relates, and a copy of such supplement to each rating agency.

Notification of the Rating Agencies, the PSC, the Trustee and the Consumer Rate Relief Bondholders of Any Modification

If we, APCo or the servicer or any other party to the applicable agreement:

· proposes to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, waiver, supplement, termination or surrender of, the terms of the sale agreement or the servicing agreement, or

· waives timely performance or observance by APCo, the administrator or the servicer under the sale agreement, the administration agreement, the servicing agreement or any intercreditor agreement,

in each case in a way which would materially and adversely affect the interests of bondholders, we must first notify the rating agencies and satisfy the rating agency condition.  Upon receiving notification regarding satisfaction of the rating agency condition, we must thereafter notify the trustee and the PSC in writing and the trustee shall notify the bondholders of the proposed amendment and whether the rating agency condition has been satisfied with respect thereto.  The trustee will consent to this proposed amendment, modification, supplement or waiver only with the written consent of the holders of a majority of the outstanding principal amount of the bonds of the tranches materially and adversely affected thereby.  In determining whether a majority of holders have consented, bonds owned by us, APCo or any affiliate of us shall be disregarded, except that, in determining whether the trustee shall be protected in relying upon any such consent, the trustee shall only be required to disregard any bonds it actually knows to be so owned.

Modifications to the Sale Agreement, the Administration Agreement, the Servicing Agreement and Other Basic Documents

With the prior written consent of the trustee, the sale agreement, the administration agreement, the servicing agreement and any intercreditor agreement may be amended, so long as the rating agency condition is satisfied in connection therewith, at any time and from time to time, without the consent of the bondholders but, with respect to amendments that would increase ongoing financing costs as defined in the financing order, with the consent or deemed consent of the PSC.  However, any such amendment may not adversely affect the interest of any bondholder in any material respect without the consent of the holders of a majority of the outstanding principal amount of the bonds.  In determining whether a majority of holders have consented, bonds owned by us, APCo or any affiliate of us shall be disregarded, except that, in determining whether the trustee shall be protected in relying upon any such consent, the trustee shall only be required to disregard any bonds it actually knows to be so owned.  The servicing agreement provides that any right, remedy or claim to which any retail electric customer may be entitled pursuant to the financing order and to the servicing agreement may be asserted or exercised only by the PSC (or by its counsel in the name of the PSC) for the benefit of such customer.  The servicing agreement does not provide any bondholder or any other person with any legal or equitable right, remedy or claim in the CRR Property, the servicing agreement or any covenants, conditions or provisions contained therein.

Enforcement of the Sale Agreement, the Administration Agreement, the Servicing Agreement and Other Basic Documents

The indenture provides that we will take all lawful actions to enforce our rights under the sale agreement, the administration agreement, the servicing agreement, any intercreditor agreement and the other basic documents.  The indenture also provides that, promptly following a default, we will take all lawful actions the trustee may request to compel or secure the performance and observance by each of APCo, each other party under any such intercreditor agreement, the administrator and the servicer of their respective obligations to us under or in connection with the sale agreement, the administration agreement, the servicing agreement and each intercreditor agreement, if any.  So long as no event of default occurs and is continuing, we may exercise any and all rights, remedies, powers and privileges lawfully available to us under or in connection with the sale agreement, the administration agreement, the servicing agreement and each intercreditor agreement, if any.  However, if we or the servicer propose to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, supplement, termination, waiver or surrender of, the process for adjusting the CRR charges, we must notify the trustee and the PSC in writing and the trustee must notify the bondholders of this proposal.  In addition, the trustee may consent to this proposal only with the written consent of the holders of a majority of the principal amount of the outstanding bonds of the tranches affected thereby and only if the rating agency condition is satisfied.  In determining whether a majority of holders

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have consented, bonds owned by us, APCo or any affiliate of us shall be disregarded, except that, in determining whether the trustee shall be protected in relying upon any such consent, the trustee shall only be required to disregard any bonds it actually knows to be so owned.  In addition, any proposed amendment of the indenture, the sale agreement, the servicing agreement or any intercreditor agreement that would increase ongoing financing costs as defined in the financing order requires the prior written consent or deemed consent of the PSC.

If an event of default occurs and is continuing, the trustee may, and, at the written direction of the holders of a majority of the outstanding amount of all affected tranches of bonds, shall exercise all of our rights, remedies, powers, privileges and claims against APCo, the administrator and servicer, under or in connection with the sale agreement, administration agreement, servicing agreement and any intercreditor agreement, and any right of ours to take this action shall be suspended.

The servicing agreement includes an indemnity from the servicer to the PSC, for the benefit of customers, for losses incurred as a result of the servicer’s willful misconduct, bad faith or negligence in performance of its duties or observance of its covenants under the servicing agreement, or the servicer’s failure to remit any required payment of CRR Charges; such indemnification obligation, however, may be asserted or exercised only by the PSC and is not enforceable by any retail electric customers.

Procedure for obtaining consent or deemed consent of the PSC

To the extent the consent of the PSC is required to effect any amendment, modification or supplemental indenture of the indenture or any other of the basic documents, the indenture sets forth procedures whereby we may request such consent and the PSC shall, within 30 days of receiving such a request, either (i) provide notice of its consent or lack of consent, or (ii) be conclusively deemed to have consented to the proposed amendment, modification or supplemental indenture, unless, within such 30 day period, the PSC delivers to us a written statement requesting an additional amount of time, not to exceed 30 days, in which to consider whether to consent to the proposed amendment, modification or supplemental indenture.  If the PSC requests an extension of time as described above, the PSC shall either (i) provide notice of its consent or lack of consent no later than the last day of such extended period of time or (ii) be conclusively deemed to have consented to the proposed amendment, modification or supplemental indenture on the last day of such extended period of time.

Our Covenants

We may not consolidate with or merge into any other entity, unless:

· the entity formed by or surviving the consolidation or merger is organized under the laws of the United States or any State;

· the entity expressly assumes, by a supplemental indenture, the performance or observance of all of our agreements and covenants under the indenture and the series supplement;

· the entity expressly assumes all of our obligations and succeeds to all of our rights under the sale agreement, servicing agreement and any other basic document to which we are a party;

· no default, event of default or servicer default under the indenture has occurred and is continuing immediately after the merger or consolidation;

· the rating agency condition will have been satisfied with respect to the merger or consolidation;

· we have delivered to APCo, the trustee and the rating agencies an opinion or opinions of outside tax counsel (as selected by us, in form and substance reasonably satisfactory to APCo and the trustee, and which may be based on a ruling from the IRS) to the effect that the consolidation or merger will not result in a material adverse federal or state income tax consequence to us, APCo, the trustee or the then existing bondholders;

· any action as is necessary to maintain the lien and the first priority perfected security interest in the collateral created by the indenture and the series supplement has been taken, as evidenced by an opinion of counsel of our external counsel; and

· we have delivered to the trustee an officer’s certificate and an opinion of counsel of our external counsel, each stating that all conditions precedent in the indenture provided for relating to the transaction have been complied with.

We may not sell, convey, exchange, transfer or otherwise dispose of any of our properties or assets included in the collateral to any person or entity, unless:

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· the person or entity acquiring the properties and assets:

· is a United States citizen or an entity organized under the laws of the United States or any State,

· expressly assumes, by a supplemental indenture, the performance or observance of all of our agreements and covenants under the indenture and the series supplement,

· expressly agrees by the supplemental indenture that all right, title and interest so conveyed or transferred will be subject and subordinate to the rights of bondholders,

· unless otherwise specified in the supplemental indenture referred to above, expressly agrees to indemnify, defend and hold us and the trustee harmless against and from any loss, liability or expense arising under or related to the indenture, the series supplement and the bonds,

· expressly agrees by means of the supplemental indenture that the person (or if a group of persons, then one specified person) will make all filings with the SEC (and any other appropriate person) required by the Securities Exchange Act of 1934 in connection with the bonds; and

· if such sale, conveyance, exchange, transfer or disposal relates to our rights and obligations under the sale agreement or the servicing agreement, such person or entity assumes all obligations and succeeds to all of our rights under the sale agreement and the servicing agreement, as applicable;

· no default, event of default or servicer default under the indenture has occurred and is continuing immediately after the transactions;

· the rating agency condition has been satisfied with respect to such transaction;

· we have delivered to APCo, the trustee and the rating agencies an opinion or opinions of outside tax counsel (as selected by us, in form and substance reasonably satisfactory to APCo and the trustee, and which may be based on a ruling from the IRS) to the effect that the disposition will not result in a material adverse federal or state income tax consequence to us, APCo, the trustee or the then existing bondholders;

· any action as is necessary to maintain the lien and the first priority perfected security interest in the collateral created by the indenture and the series supplement has been taken as evidenced by an opinion of counsel of external counsel; and

· we have delivered to the trustee an officer’s certificate and an opinion of counsel of our external counsel, each stating that the conveyance or transfer complies with the indenture and the series supplement and all conditions precedent therein provided for relating to the transaction have been complied with.

We will not, among other things, for so long as any bonds are outstanding:

· except as expressly permitted by the indenture and the other basic documents, sell, transfer, exchange or otherwise dispose of any of our assets unless directed to do so by the trustee;

· claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the bonds (other than amounts properly withheld from such payments under the Internal Revenue Code or other tax laws) or assert any claim against any present or former bondholder by reason of the payment of the taxes levied or assessed upon any part of the collateral;

· terminate our existence, or dissolve or liquidate in whole or in part,

· permit the validity or effectiveness of the indenture or the series supplement or the other basic documents to be impaired;

· permit the lien of the indenture and the series supplement to be amended, hypothecated, subordinated, terminated or discharged or permit any person to be released from any covenants or obligations with respect to the bonds except as may be expressly permitted by the indenture;

· permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance, other than the lien and security interest granted under the indenture or the series supplement, to be created on or extend to or otherwise arise upon or burden the collateral or any part thereof or any interest therein or the proceeds thereof (other than tax liens arising by operation of law with respect to amounts not yet due);

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· permit the lien granted under the indenture or the series supplement not to constitute a valid first priority perfected security interest in the collateral;

· enter into any swap, hedge or similar financial arrangement;

· elect to be classified as an association taxable as a corporation for federal tax purposes, file any tax return, or take any other action inconsistent with our treatment, for federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from our sole member;

· change our name, identity or structure or the location of our chief executive office, unless at least ten business days prior to the effective date of any such change, we deliver to the trustee (with copies to each rating agency) such documents, instruments or agreements, executed by us, as are necessary to reflect such change and to continue the perfection of the security interest of the indenture or the series supplement;

· take any action which is subject to the rating agency condition without satisfying the rating agency condition;

· except to the extent permitted by applicable law, voluntarily suspend or terminate our SEC filing obligations; or

· issue any consumer rate relief bonds under the Recovery Act or any similar law (other than the bonds offered hereby) or issue or incur any other debt obligations.

We may not engage in any business other than purchasing, owning, administering and servicing the CRR property and the other collateral and the issuance of the bonds in the manner contemplated by the financing order and the basic documents, or certain related activities incidental thereto.

We will not issue, incur, assume, guarantee or otherwise become liable for any indebtedness except for the bonds.  Also, we will not, except as contemplated by the bonds and the basic documents, make any loan or advance or credit to, or guarantee, endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other person.  We will not, except for the acquisition of CRR property as contemplated by the bonds and the basic documents, make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).

Except for the return to APCo of its 5.85% annual return on its equity investment permitted under the indenture, we will not (a) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to any owner of an interest in the issuing entity or otherwise with respect to any ownership or equity interest or similar security in or of the issuing entity, (b) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or similar security or (c) set aside or otherwise segregate any amounts for any such purpose.

We will not, directly or indirectly, make payments to or distributions from the collection account except in accordance with the indenture and the other basic documents.

We will cause the servicer to deliver to the trustee the annual accountant’s certificates, compliance certificates, reports regarding distributions and statements to bondholders required by the servicing agreement.

Events of Default; Rights Upon Event of Default

An event of default with respect to the bonds is defined in the indenture as any one of the following events:

· a default for five business days in the payment when due of any interest on any bond (whether such failure to pay interest is caused by a shortfall in CRR charges received or otherwise),

· a default in the payment of the then unpaid principal of any bond of any tranche on the final maturity date for that tranche,

· a default in the observance or performance of any of our covenants or agreements made in the indenture (other than defaults described above) and the continuation of any default for a period of 30 days after the earlier of (i) the date that written notice of the default is given to us by registered or certified mail by the trustee or to us and the trustee by the holders of at least 25% in principal amount of the bonds then outstanding or (ii) the date that we had actual knowledge of the default,

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· any representation or warranty made by us in the indenture or in any certificate or other writing delivered pursuant to the indenture or in connection with the indenture having been incorrect in any material respect as of the time made, and such breach not having been cured within 30 days after the earlier of (i) the date that notice of the breach is given by registered or certified mail to us by the trustee or to us and the trustee by the holders of at least 25% in principal amount of the bonds then outstanding or (ii) the date that we had actual knowledge of the default,

· certain events of bankruptcy, insolvency, receivership or liquidation,

· a breach by the State of West Virginia or any of its agencies (including the PSC), officers or employees that violates or is not in accordance with the State’s pledge, or

· any other event designated as such in the series supplement as described in the prospectus supplement.

If an event of default (other than as specified in the sixth bullet point above) should occur and be continuing with respect to the bonds, the trustee or holders of not less than a majority in principal amount of the bonds then outstanding may declare the unpaid principal of the bonds and all accrued and unpaid interest thereon to be immediately due and payable.  However, the nature of our business will result in payment of principal upon an acceleration of the bonds being made as funds become available.  Please read “Risk Factors—Risks Associated with the Unusual Nature of the CRR Property—Foreclosure of the trustee’s lien on the CRR Property for the Consumer Rate Relief Bonds might not be practical, and acceleration of the Consumer Rate Relief Bonds before maturity might have little practical effect” and “Risk Factors—You may experience material payment delays or incur a loss on your investment in the Consumer Rate Relief Bonds because the source of funds for payment is limited.”  The holders of a majority in principal amount of the bonds may rescind and annul that declaration and its consequences so long as we deposit with the trustee any past due amounts and expenses of the trustee and all events of default, other than the nonpayment caused by acceleration, have been cured.  Additionally, the trustee may exercise all of our rights, remedies, powers, privileges and claims against the seller or the servicer under or in connection with the sale agreement, the servicing agreement and the administration agreement.  If an event of default as specified in the sixth bullet above has occurred, the servicer will be obligated under the servicing agreement to institute (and the trustee, for the benefit of the bondholders, will be entitled and empowered to institute) any suits, actions or proceedings at law, in equity or otherwise, to enforce the State’s pledge and to collect any monetary damages as a result of a breach thereof, and each of the servicer and the trustee may prosecute any suit, action or proceeding to final judgment or decree.  The servicer will be required to advance its own funds in order to bring any suits, actions or proceedings and, for so long as the legal actions were pending, the servicer will be required, unless otherwise prohibited by applicable law or court or regulatory order in effect at that time, to bill and collect the CRR charges, perform adjustments and discharge its obligations under the servicing agreement.  The costs of any such action not paid as ongoing financing costs would be payable by the seller pursuant to the sale agreement.

If an event of default (other than a breach by the State of West Virginia or any of its agencies of the State’s pledge as specified in the sixth bullet point above) shall have occurred and be continuing, the trustee may, at the written direction of the holders of a majority in principal amount of the bonds then outstanding, either sell the CRR property or elect to have us maintain possession of all or a portion of such CRR property and continue to apply CRR charge collections as if there had been no declaration of acceleration.  There is likely to be a limited market, if any, for the CRR property following a foreclosure, in light of the event of default, the unique nature of the CRR property as an asset and other factors discussed in this prospectus.  In addition, the trustee is prohibited from selling the CRR property following an event of default, other than a default in the payment of any principal or a default for five business days or more in the payment of any interest on any bond, unless:

· the holders of all the outstanding bonds consent to the sale,

· the proceeds of the sale are sufficient to pay in full the principal of and the accrued interest on the outstanding bonds, or

· the trustee determines that the proceeds of the collateral would not be sufficient on an ongoing basis to make all payments on the bonds as those payments would have become due if the bonds had not been declared due and payable, and the trustee obtains the consent of the holders of 66 2/3% of the aggregate outstanding amount of the bonds.

Subject to the provisions of the indenture relating to the duties of the trustee, if an event of default occurs and is continuing, the trustee will be under no obligation to exercise any of the rights or powers under the bonds at the request or direction of any of the holders of bonds if the trustee believes in its discretion it will not be adequately indemnified against the costs, expenses and liabilities which might be incurred by it in complying with the request.  Subject to the provisions for indemnification and certain limitations contained in the indenture:

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· the holders of not less than a majority in principal amount of the outstanding bonds of an affected tranche will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee and,

· prior to the acceleration of the bonds, the holders of not less than a majority in principal amount of the bonds then outstanding of an affected tranche may, in certain cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the indenture that cannot be modified without the consent of all of the holders of the outstanding bonds of all tranches affected thereby.

No holder of any bond will have the right to institute any proceeding, to avail itself of any remedies provided in the Recovery Act or of the right to foreclose on the collateral, or otherwise to enforce the lien and security interest on the collateral or to seek the appointment of a receiver or trustee, or for any other remedy under the indenture, unless:

· the holder previously has given to the trustee written notice of a continuing event of default,

· the holders of not less than a majority in principal amount of the outstanding bonds have made written request of the trustee to institute the proceeding in its own name as trustee,

· the holder or holders have offered the trustee satisfactory indemnity,

· the trustee has for 60 days failed to institute the proceeding, and

· no direction inconsistent with the written request has been given to the trustee during the 60-day period by the holders of a majority in principal amount of the outstanding bonds.

In addition, the trustee and the servicer will covenant and each bondholder will be deemed to covenant that it will not, prior to the date which is one year and one day after the termination of the indenture, institute against us or against our managers or our member or members any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law.

Neither any manager nor the trustee in its individual capacity, nor any holder of any ownership interest in us, nor any of their respective owners, beneficiaries, agents, officers, directors, employees, successors or assigns will, in the absence of an express agreement to the contrary, be personally liable for the payment of the principal of or interest on the bonds or for our agreements contained in the indenture.

Actions by Bondholders

Subject to certain exceptions, the holders of not less than a majority of the aggregate outstanding amount of the bonds of the affected tranche or tranches will have the right to direct the time, method and place of (i) conducting any proceeding for any remedy available to the trustee, and (ii) exercising any trust or power conferred on the trustee under the indenture; provided that:

· the direction is not in conflict with any rule of law or with the indenture and would not involve the trustee in personal liability or expense;

· subject to any other conditions specified in the indenture, any direction to the trustee to sell or liquidate the collateral shall be by holders of not less than 100% of the bonds; and

· the trustee may take any other action deemed proper by the trustee which is not inconsistent with the direction.

Notwithstanding the foregoing, the indenture allows each bondholder to institute suit for the enforcement of payment of (1) the interest, if any, on its bonds which remains unpaid as of the applicable due date and (2) the unpaid principal, if any, of its bonds on the final maturity date therefor.

Annual Report of Trustee

If required by the Trust Indenture Act of 1939, the trustee will be required to mail each year to all bondholders a brief report, commencing in March 2014.  The report must state, among other things:

· any change in the trustee’s eligibility and qualification to continue as the trustee under the indenture,

· any amounts advanced by it under the indenture,

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· any change in the amount, interest rate and maturity date of specific indebtedness owing by us to the trustee in the trustee’s individual capacity,

· any change in the property and funds physically held by the trustee, and

· any action taken by it that materially affects the bonds and that has not been previously reported.

Annual Compliance Statement

We will file annually with the trustee, the rating agencies and the PSC, a written statement as to whether we have fulfilled our obligations under the indenture.

Satisfaction and Discharge of Indenture

The indenture will cease to be of further effect with respect to the bonds and the trustee, on our written demand and at our expense, will execute instruments acknowledging satisfaction and discharge of the indenture with respect to the bonds, when:

· either all bonds which have already been authenticated or delivered, with certain exceptions set forth in the indenture, have been delivered to the trustee for cancellation or either the scheduled final payment date for bonds not delivered for cancellation has occurred or will occur within one year and we have irrevocably deposited or cause to be deposited in trust with the trustee cash and/or U.S. government obligations which through the scheduled payments of principal and interest in accordance with their terms are in an amount sufficient to pay principal, interest and premiums, if any, on the bonds and other ongoing financing costs and all other sums payable by us with respect to the bonds when scheduled to be paid and to discharge the entire indebtedness on such bonds when due,

· we have paid all other sums payable by us under the indenture, and

· we have delivered to the trustee an officer’s certificate, an opinion of our external counsel, and if required by the Trust Indenture Act or the trustee, a certificate from a firm of independent registered public accountants, each stating that there has been compliance with the conditions precedent in the indenture relating to the satisfaction and discharge of the indenture.

Our Legal and Covenant Defeasance Options

We may, at any time, terminate all of our obligations under the indenture, referred to herein as the legal defeasance option, or terminate our obligations to comply with some of the covenants in the indenture, including some of the covenants described under “—Our Covenants,” referred to herein as our covenant defeasance option.

We may exercise the legal defeasance option of the bonds notwithstanding our prior exercise of the covenant defeasance option.  If we exercise the legal defeasance option, the bonds will be entitled to payment only from the funds or other obligations set aside under the indenture for payment thereof as described below.  The bonds of any tranche will not be subject to payment through redemption or acceleration prior to the scheduled final payment date or redemption date, as applicable, for such tranche.  If we exercise the legal defeasance option, the maturity of the bonds may not be accelerated because of an event of default.  If we exercise the covenant defeasance option, the maturity of the bonds may not be accelerated because of an event of default relating to a default in the observance or performance of any of our covenants or agreements made in the indenture.

The indenture provides that we may exercise our legal defeasance option or our covenant defeasance option of bonds only if:

· we irrevocably deposit or cause to be irrevocably deposited in trust with the trustee cash and/or U.S. government obligations which through the scheduled payments of principal and interest in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the bonds and other ongoing financing costs and any other sums payable by us under the indenture with respect to the bonds when scheduled to be paid and to discharge the entire indebtedness on the bonds when due,

· we deliver to the trustee a certificate from a nationally recognized firm of independent registered public accountants expressing its opinion that the payments of principal and interest on the U.S. government obligations when due and without reinvestment plus any deposited cash will provide cash at times and in sufficient amounts to pay in respect of the bonds:

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§ principal in accordance with the expected sinking fund schedule therefor,

§ interest when due, and

§ other ongoing financing costs and all other sums payable by us under the indenture with respect to the bonds,

· in the case of the legal defeasance option, 95 days pass after the deposit is made and during the 95-day period no default relating to events of our bankruptcy, insolvency, receivership or liquidation occurs and is continuing at the end of the period,

· no default has occurred and is continuing on the day of this deposit and after giving effect thereto,

· in the case of the legal defeasance option, we deliver to the trustee an opinion of our external counsel stating that:  we have received from, or there has been published by, the IRS a ruling, or since the date of execution of the indenture, there has been a change in the applicable federal income tax law, and in either case confirming that the holders of the bonds will not recognize income, gain or loss for federal income tax purposes as a result of the exercise of the legal defeasance option and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the legal defeasance had not occurred,

· in the case of the covenant defeasance option, we deliver to the trustee an opinion of our external counsel to the effect that the holders of the bonds will not recognize income, gain or loss for federal income tax purposes as a result of the exercise of the covenant defeasance option and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the covenant defeasance had not occurred,

· we deliver to the trustee a certificate of one of our officers and an opinion of our counsel, each stating that the amendment is authorized and permitted and that all conditions precedent to the legal defeasance option or the covenant defeasance option, as applicable, have been complied with as required by the indenture,

· we deliver to the trustee an opinion of our external counsel to the effect that (a) in a case under the Bankruptcy Code in which APCo (or any of its affiliates, other than us) is the debtor, the court would hold that the deposited cash or U.S. government obligations would not be in the bankruptcy estate of APCo (or any of its affiliates, other than us, that deposited the cash or U.S. government obligations); and (b) in the event APCo (or any of its affiliates, other than us, that deposited the cash or U.S. government obligations), were to be a debtor in a case under the Bankruptcy Code, the court would not disregard the separate legal existence of APCo (or any of its affiliates, other than us, that deposited the cash or U.S. government obligations) and us so as to order substantive consolidation under the Bankruptcy Code of our assets and liabilities with the assets and liabilities of APCo or such other affiliate, and

· the rating agency condition has been satisfied with respect to the exercise of any legal defeasance option or covenant defeasance option.

No Recourse to Others

No recourse may be taken directly or indirectly, by the holders with respect to our obligations on the bonds, under the indenture or any supplement thereto or any certificate or other writing delivered in connection therewith, against (1) any owner of a beneficial interest in us (including APCo) or (2) any shareholder, partner, owner, beneficiary, agent, officer, director, employee or agent of the trustee, the managers or any owner of a beneficial interest in us (including APCo) in its individual capacity, or of any successors or assigns or any of them in their respective individual or corporate capacities, except as any such person may have expressly agreed.  Each holder by accepting a bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability.  The waiver and release are part of the consideration for issuance of the bonds.

Notwithstanding any provision of the indenture or the series supplement to the contrary, bondholders shall look only to the bond collateral with respect to any amounts due to the bondholders under the indenture and the bonds, and, in the event such collateral is insufficient to pay in full the amounts owed on the bonds, shall have no recourse against us in respect of such insufficiency.  Each bondholder by accepting a bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability.  The waiver and release are part of consideration for issuance of bonds.

THE TRUSTEE

The trustee for the bonds will be identified in the prospectus supplement.  You will find the address of the principal office of the trustee, as well as a description of its experience as a trustee, in the prospectus supplement.  The trustee may

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resign at any time upon 30 days’ prior written notice to us.  The holders of a majority in principal amount of the bonds then outstanding may remove the trustee by so notifying the trustee and may appoint a successor trustee.  We will remove the trustee if the trustee: (i) ceases to be eligible under the Trust Indenture Act; (ii) ceases to satisfy certain credit standards set forth in the indenture; (iii) becomes a debtor in a bankruptcy proceeding or is adjudicated insolvent, or a receiver or other public officer takes charge of the trustee or its property; (iv) becomes incapable of acting; or (v) fails to provide to us certain information we reasonably request which is necessary for us to satisfy our reporting obligations under the securities laws.  If the trustee resigns or is removed or a vacancy exists in the office of trustee for any reason, we will be obligated promptly to appoint a successor trustee eligible under the indenture and notice of such appointment is required to be promptly given to each rating agency by the successor trustee.  No resignation or removal of the trustee will become effective until acceptance of the appointment by a successor trustee.

The trustee will at all times satisfy the requirements of the Trust Indenture Act and Section 26(a)(i) under the Investment Company Act of 1940 and have a combined capital and surplus of at least $50 million and a long-term debt rating of “BBB-” (or the equivalent thereof) or better by all of the rating agencies rating the bonds and from which a rating is available.  If the trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets to, another entity, the resulting, surviving or transferee entity will without any further action be the successor trustee.

The trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided that its conduct does not constitute willful misconduct, negligence or bad faith.  We have agreed to indemnify the trustee and its officers, directors, employees and agents against any and all loss, liability or expense (including reasonable attorney’s fees and expenses) incurred by it in connection with the administration of the trust and the performance of its duties under the indenture, provided that we are not required to pay any expense or indemnify against any loss, liability or expense incurred by the trustee through the trustee’s own willful misconduct, negligence or bad faith.

SECURITY FOR THE CONSUMER RATE RELIEF BONDS

General

The bonds issued under the indenture will be non-recourse obligations and are payable solely from and secured solely by a pledge of and lien on the CRR property and the other collateral as provided in the indenture.  If and to the extent the CRR property and the other assets of the trust estate are insufficient to pay all amounts owing with respect to the bonds, then the bondholders will generally have no claim in respect of such insufficiency against us or any other person.  By the acceptance of the bonds, the bondholders waive any such claim.

As noted under, “Description of the Consumer Rate Relief Bonds,” we will issue the bonds pursuant to the terms of the indenture.  We will establish the particular terms of the bonds in the series supplement.  We will describe the material terms of the bonds in the prospectus supplement.

Pledge of Collateral

To secure the payment of principal of and interest on the bonds, we will grant to the trustee a security interest in all of our right, title and interest (whether owned on the closing date or thereafter acquired or arising) in and to the following property:

· the CRR property created under and pursuant to the financing order and the Recovery Act, and transferred by the seller to us pursuant to the sale agreement (including, to the fullest extent permitted by law, the right to impose, charge and collect CRR charges, the right to obtain adjustments to those charges, and all revenues, receipts, collections, rights to payment, payments, moneys, claims or other or proceeds arising from the rights and interests created under the financing order),

· all CRR charges related to the CRR property,

· the sale agreement and the bill of sale executed in connection therewith and all property and interests in property transferred under the sale agreement and the bill of sale with respect to the CRR property and the consumer rate relief bonds,

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· the servicing agreement, the administration agreement, any intercreditor agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing CRR property and the consumer rate relief bonds,

· the collection account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto,

· all rights to compel the servicer to file for and obtain true-up adjustments to the CRR charges in accordance with the Recovery Act and the financing order,

· all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute CRR property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property,

· all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, and

· all payments on or under and all proceeds in respect of any or all of the foregoing.

Our collateral does not include:

· cash that has been released pursuant to the terms of the indenture, and

· amounts deposited with us on the closing date, for payment of costs of issuance with respect to the bonds (together with any interest earnings thereon).

We refer to the foregoing assets in which we, as assignee of the seller, will grant the trustee a security interest as the Collateral.  Please read “—How Funds in the Collection Account will be Allocated.”

Security Interest in the Collateral

Section 24-2-4f(o) of the Recovery Act provides that the creation, perfection and enforcement of a security interest in CRR property is governed by the Recovery Act and not, except as provided therein, by Article 9 of the Uniform Commercial Code as in effect in West Virginia.  Under the Recovery Act, a valid and enforceable lien and security interest in CRR property will attach and be perfected only by a financing order and the execution and delivery of a security agreement in connection with issuance of financing instruments such as the bonds.  The lien and security interest attaches without any physical delivery of collateral or other act and upon the filing of a financing statement with the Secretary of State of West Virginia, and is created, valid and binding at the later of the date the security agreement is signed and delivered or the time when value is received for the bonds.  Upon perfection by filing of a financing statement with the West Virginia Secretary of State under Section 24-2-4f(o) of the Recovery Act, the lien and security interest will be a continuously perfected lien and security interest in the CRR property and will have priority over any other lien, created by operation of law or otherwise, that may subsequently attach to the property or those rights and interests.  The Recovery Act also provides that the trustee will have a perfected security interest in the amount of all CRR charges collected that are deposited in a cash or deposit account of the qualifying utility in which such collected CRR charges have been commingled with other funds. Any other security interest that may apply to those funds shall be terminated when the funds are transferred to a segregated account for an assignee or a financing party.

The indenture states that it constitutes a security agreement within the meaning of the Recovery Act.  The servicer’s duties under the servicing agreement include the filing with the West Virginia Secretary of State of the filing required by Section 24-2-4f(o) of the Recovery Act to perfect the lien of the trustee in the CRR property.  The seller will represent, at the time of issuance of the bonds, that no prior filing has been made under the terms of Section 24-2-4f(o) of the Recovery Act with respect to the CRR property securing the bonds to be issued other than a filing which provides the trustee with a first priority perfected security interest in such CRR property.

Certain items of the collateral may not constitute CRR property and the perfection of the trustee’s security interest in those items of collateral would therefore be subject to the Uniform Commercial Code or common law and not Section 24-2-4f(o) of the Recovery Act.  These items consist of our rights in:

· the sale agreement, the servicing agreement, the administration agreement and any other basic documents,

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· the capital subaccount or any other funds on deposit in the collection account which do not constitute CRR charge collections together with all instruments, investment property or other assets on deposit therein or credited thereto and all financial assets and securities entitlements carried therein or credited thereto which do not constitute CRR charge collections,

· all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters-of-credit, letter-of-credit rights, money, commercial tort claims and supporting obligations and all of our other property to the extent not CRR property, and

· proceeds of the foregoing items.

Additionally, any contractual rights we have against retail electric customers (other than the right to impose CRR charges and rights otherwise included in the definition of CRR property) would be collateral to which the UCC applies.

As a condition to the issuance of the bonds, we will have made all filings and taken any other action required by the UCC or common law to perfect the lien of the trustee in all the items included in collateral which do not constitute CRR property.  We will also covenant to take all actions necessary to maintain or preserve the lien and security interest on a first priority basis.  We will represent, along with the seller, at the time of issuance of the bonds, that no prior filing has been made with respect to that party under the terms of the UCC, other than a filing which provides the trustee with a lien and first priority perfected security interest in the collateral.

Right of Sequestration

The Recovery Act provides that if an electric utility defaults in the required payment of consumer rate relief charges collected by it, a court, upon application of an interested party (which would include the holders of the bonds or their representatives, as secured parties) or the PSC, upon application or its own motion, may order the sequestration and payment of the consumer rate relief charges collected for the benefit of bondholders, assignees and financing parties.  The Recovery Act further provides that such order shall remain in full force and effect notwithstanding the bankruptcy, reorganization or insolvency of the qualifying utility, or any affiliate of the qualifying utility.

Description of Indenture Accounts

Collection Account.

Pursuant to the indenture, we will establish a segregated trust account for the bonds called the collection account withan eligible institution for the benefit of the trustee.  The collection account will be under the sole dominion and exclusive control of the trustee.  The collection account for the bonds will consist of three subaccounts:  a general subaccount, an excess funds subaccount, and a capital subaccount, which need not be separate bank accounts.  For administrative purposes, the subaccounts may be established by the trustee as separate accounts which will be recognized individually as subaccounts and collectively as the collection account.  All amounts in the collection account not allocated to any other subaccount will be allocated to the general subaccount.  Unless the context indicates otherwise, references in this prospectus and the prospectus supplement to the collection account include the collection account and each of the subaccounts contained therein.

The following institutions are eligible institutions for the establishment of the collection account:

· the corporate trust department of the trustee, so long as any of the securities of the trustee have either a short-term credit rating from Moody’s of at least “P-1” or a long-term unsecured debt rating from Moody’s of at least “A2” and have a credit rating from each other rating agency in one of its generic rating categories which signifies investment grade; or

· a depository institution organized under the laws of the United States of America or any state (or any domestic branch of a foreign bank), which (i) has either (A) a long-term issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s or (B) a short-term issuer rating of “A-1+” or higher by S&P and “P-1” or higher by Moody’s or any other long-term, short-term or certificate of deposit rating acceptable to the rating agencies and (ii) whose deposits are insured by the FDIC.

Permitted Investments for Funds in the Collection Account.

Funds in the collection account may be invested only in such investments as meet the criteria set forth in the indenture, in substantially the form filed as an exhibit to the registration statement of which this prospectus forms a part.

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The trustee will have access to the collection account for the purpose of making deposits in and withdrawals from the collection account in accordance with the indenture.  The servicer will select the eligible investments in which funds will be invested, unless otherwise directed by us.

The servicer will remit CRR charge payments to the collection account in the manner described under “The Servicing Agreement — Remittances to Collection Account.”

General Subaccount

The general subaccount will hold all funds held in the collection account that are not held in the other two subaccounts.  The servicer will remit all CRR charge payments to the general subaccount.  On each payment date, the trustee will draw on amounts in the general subaccount to pay our expenses and to pay interest and make scheduled payments on the bonds, and to make other payments and transfers in accordance with the terms of the indenture.  Funds in the general subaccount will be invested in the eligible investments described above.

Excess Funds Subaccount

The trustee, at the direction of the servicer, will allocate to the excess funds subaccount CRR charge collections available with respect to any payment date in excess of amounts necessary to make the payments specified on such payment date.  The excess funds subaccount will also hold all investment earnings on the collection account in excess of such amounts.

Capital Subaccount

In connection with the issuance of the bonds, the seller, in its capacity as our sole owner, will contribute capital to us in an amount equal to the required capital level, which will be not less than 0.50% of the principal amount of the bonds issued.  This amount will be funded by the seller and not from the proceeds of the sale of the bonds, and will be deposited into the capital subaccount on the issuance date.  In the event that amounts on deposit in the general subaccount and the excess funds subaccount are insufficient to make scheduled payments of principal and interest on the bonds and payments of fees and expenses  contemplated by the first eight bullet points under “—How Funds in the Collection Account will be Allocated” below, the trustee will draw on amounts in the capital subaccount to make such payments up to the amount of such insufficiency.  In the event of any such withdrawal, collected CRR charges available on any subsequent payment date that are not necessary to pay scheduled payments of principal and interest on the bonds and payments of fees and expenses will be used to replenish any amounts drawn from the capital subaccount.  If the bonds have been retired as of any payment date, the amounts on deposit in the capital subaccount will be released to us, free of the lien of the indenture.

How Funds in the Collection Account will be Allocated

On each payment date, the trustee will with respect to the bonds, pay or allocate, at the direction of the servicer, all amounts on deposit in the collection account (including investment earnings thereon) to pay the following amounts in the following priority:

(1) amounts owed by us to the trustee, including the trustee’s fees and expenses and any outstanding indemnity amounts owed to the trustee in an amount not to exceed in any 12-month period the amount set forth in the series supplement;

(2) a servicing fee, which will be a fixed percentage of the initial principal balance of the bonds, and any unpaid servicing fees from prior payment dates as described under “The Servicing Agreement — Servicing Compensation,” to the servicer;

(3) an administration fee, which will be a fixed amount specified in the Administration Agreement between us and APCo and the fees owed to our independent managers, which will be a fixed amount specified in an agreement between us and our independent managers, and any unpaid administration or management fees from prior payment dates;

(4) all of our other ordinary and periodic operating expenses, such as accounting and audit fees, rating agency fees, legal fees and certain reimbursable costs of the administrator under the administration agreement and of the servicer under the servicing agreement;

(5) interest then due on the bonds, including any past-due interest (together with, to the extent lawful, interest thereon);

(6) principal then due and payable on the bonds as a result of an event of default or on the final maturity date for the bonds;

(7) scheduled principal payments of bonds according to its expected sinking fund schedule, together with any overdue scheduled principal payments, paid pro rata among the bonds if there is a deficiency;

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(8) any remaining unpaid operating expenses and any remaining amounts owed pursuant to the basic documents, including indemnity amounts owed to the trustee;

(9) replenishment of the capital subaccount if necessary, up to the required capital level;

(10) if there is a positive balance after making the foregoing allocations, so long as no event of default has occurred and is continuing, release to APCo of a return on its equity investment in the issuing entity equal to 5.85% per annum on the initial amount deposited into the capital subaccount;

(11) the trustee will pay the remainder, if any, to the excess funds subaccount; and

(12) after principal of and premium, if any, and interest on all bonds and all of the other foregoing amounts have been paid in full, the balance (including all amounts then held in the capital subaccount and the excess funds subaccount), if any, shall be paid to us free and clear from the lien of the indenture and the series supplement.

The amounts of the limit on trustee fees and expenses and indemnity amounts referred to in clause (1) above, the servicing fee referred to in clause (2) above and the administrative fee referred to in clause (3) above will be described in the prospectus supplement.

If on any payment date funds on deposit in the general subaccount are insufficient to make the payments contemplated by clauses (1) through (8) above, the trustee will first, draw from amounts on deposit in the excess funds subaccount, and second, draw from amounts on deposit in the capital subaccount, up to the amount of the shortfall, in order to make those payments in full.  If the trustee uses amounts on deposit in the capital subaccount to pay those amounts or make those transfers, as the case may be, subsequent adjustments to the CRR charges will take into account, among other things, the need to replenish those amounts.  In addition, if on any payment date funds on deposit in the general subaccount are insufficient to make the transfers described in clause (9) above, the trustee will draw from amounts on deposit in the excess funds subaccount to make such transfers.

If, on any payment date, available collections of the CRR charges, together with available amounts in the subaccounts, are not sufficient to pay interest due on all outstanding bonds on that payment date, amounts available will be allocated pro rata based on the amount of interest payable.  If, on any payment date, remaining collections of the CRR charges, together with available amounts in the subaccounts, are not sufficient to pay principal due and payable on all outstanding bonds on that payment date, amounts available will be allocated pro rata based on the principal amount then due and payable.  If, on any payment date, remaining collections of the CRR charges, together with available amounts in the subaccounts, are not sufficient to pay principal scheduled to be paid on all outstanding bonds, amounts available will be allocated pro rata based on the principal amounts then scheduled to be paid on the payment date.

On any business day on which the trustee receives a written request from the administrator stating that any operating expense payable by us (but only as described in clauses (1) through (4) above) will become due and payable prior to the next succeeding payment date, and setting forth the amount and nature of such operating expense, as well as any supporting documentation that the trustee may reasonably request, the trustee, upon receipt of such information will make payment of such operating expenses on or before the date such payment is due from amounts on deposit in the general subaccount, the excess funds subaccount and the capital subaccount, in that order and only to the extent required to make such payment.

State Pledge

Section 24-2-4f(q)(2) of the Recovery Act provides in pertinent part:  “Consumer rate relief bonds issued under a final financing order do not constitute a debt or a pledge of the faith and credit or taxing power of this state or of any county, municipality or other political subdivision of this state.  Bondholders have no right to have taxes levied by this state or the taxing authority of any county, municipality or other political subdivision of this state for the payment of the principal of or interest on the bonds.  The issuance of consumer rate relief bonds does not, directly, indirectly or contingently, obligate this state or a county municipality or political subdivision of this state to levy a tax or make an appropriation for payment of the principal of or interest on the bonds.”  Under Section 24-2-4f(s)(1) of the Recovery Act, “[T]he state pledges to and agrees with the bondholders, assignees and financing parties under a final financing order that the state will not take or permit any action that impairs the value of consumer rate relief property under the final financing order or revises the consumer rate relief costs for which recovery is authorized under the final financing order or, except as allowed under [the true-up adjustment mechanism], reduce, alter or impair consumer rate relief charges that are imposed, charged, collected or remitted for the benefit of the bondholders, assignees and financing parties, until any principal, interest and redemption premium in respect of consumer rate relief bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid or performed in full.”  The Recovery Act further permits any party issuing consumer rate relief bonds to include this pledge in any documentation related to those bonds.

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The bondholders and the trustee, for the benefit of the bondholders, will be entitled to the benefit of the pledge of the State of West Virginia set forth above.  We have included the pledge in the indenture and the bonds for the benefit of the trustee and the bondholders, and acknowledge that any purchase by a bondholder of a bond is made in reliance on the pledge of the State of West Virginia.

WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS FOR THE CONSUMER RATE RELIEF BONDS

The rate of principal payments, the amount of each interest payment and the actual final payment date of each tranche of the bonds and the weighted average life thereof will depend primarily on the timing of receipt of collected CRR charges by the trustee and the true-up mechanism.  The aggregate amount of collected CRR charges and the rate of principal amortization on the bonds will depend, in part, on actual energy usage and demand and the rate of delinquencies and write-offs.  The CRR charges are required to be adjusted from time to time based in part on the actual rate of collected CRR charges.  However, we can give no assurance that the servicer will be able to forecast accurately actual electricity usage and demand and the rate of delinquencies and write-offs or implement adjustments to the CRR charges that will cause collected CRR charges to be received at any particular rate.  Please read “Risk Factors—Servicing Risks—Inaccurate consumption, demand or collection forecasting might reduce scheduled payments on the Consumer Rate Relief Bonds” and “APCo’s Financing Order—True-Up Mechanism.”

The bonds may be retired later than expected.  Except in the event of an acceleration of the final payment date of the bonds after an event of default, however, the bonds will not be paid at a rate faster than that contemplated in the expected sinking fund schedule for each tranche of the bonds even if the receipt of collected CRR charges is accelerated.  Instead, receipts in excess of the amounts necessary to amortize the bonds in accordance with the applicable expected sinking fund schedules, to pay interest and ongoing financing costs and any other related fees and expenses and to fund deficiencies in the capital subaccount of the collection account will be allocated to the excess funds subaccount.  Amounts on deposit in the excess funds subaccount will be taken into consideration in calculating the next true-up adjustment.  Acceleration of the final maturity date after an event of default in accordance with the terms thereof will result in payment of principal earlier than the related scheduled final payment dates.  A payment on a date that is earlier than forecast might result in a shorter weighted average life, and a payment on a date that is later than forecast might result in a longer weighted average life.  In addition, if a larger portion of the delayed payments on the bonds is received in later years, the bonds may have a longer weighted average life.

THE SALE AGREEMENT

The following summary describes particular material terms and provisions of the sale agreement pursuant to which we will purchase CRR property from the seller.  We have filed the form of the sale agreement as an exhibit to the registration statement of which this prospectus forms a part.  This summary does not purport to be complete and is subject and qualified by reference to the provisions of the sale agreement.

Sale and Assignment of the CRR Property

On the issuance date the seller will irrevocably sell, transfer, assign, set over and otherwise convey the CRR property to us, subject to the satisfaction of the conditions specified in the sale agreement and the indenture.  We will finance the purchase of the CRR property through the issuance of the bonds.  On the issuance date, the seller will sell to us, without recourse, its entire right, title and interest in and to the CRR property.  The CRR property will include all of the seller’s rights under the financing order related to such CRR property to impose, charge and collect CRR charges, and including the right to obtain true-up adjustments and all revenues, receipts, collections, rights to payments, payments, money, claims or other proceeds arising from rights and interests under the financing order.

Under the Recovery Act, all rights and interests established pursuant to the financing order will become CRR property upon transfer of such rights to us by APCo in connection with the issuance of the bonds.  The CRR property will constitute our present property right for purposes of contracts concerning the sale or pledge of property. Under the Recovery Act, the sale of CRR property will constitute a true sale under state law which will not be affected or impaired by, among other things, the occurrence of any of the following:

· commingling of collected CRR charges with other amounts;

· the retention by the seller of any of the following:

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· a partial or residual interest, including an equity interest, in the CRR property, whether direct or indirect, or whether subordinate or otherwise;

· the right to recover costs associated with taxes, franchise fees or license fees imposed on the collections of the CRR charges;

· any recourse that the purchaser or any assignee may have against the seller;

· any indemnification rights, obligations or repurchase rights made or provided by the seller;

· the obligation of the seller to collect CRR charges on behalf of an assignee;

· the treatment of the sale, assignment or transfer for tax, financial reporting or other purposes; or

· any application of the true-up adjustment mechanism under the financing order.

Upon the issuance of the financing order, the execution and delivery of the sale agreement and the related bill of sale and the filing of a notice with the West Virginia Secretary of State in accordance with the rules prescribed under the Recovery Act, the transfer of the CRR property will be perfected as against all third persons, including subsequent judicial or other lien creditors.

Conditions to the Sale of CRR Property

Our obligation to purchase and the seller’s obligation to sell CRR property on the issuance date is subject to the satisfaction of each of the following conditions:

· on or prior to the issuance date, the seller shall have delivered to us a duly executed bill of sale identifying the CRR property to be conveyed on that date;

· on or prior to the issuance date, the seller shall have obtained the financing order from the PSC creating the CRR property;

· as of the issuance date, the seller may not be insolvent and may not be made insolvent by the sale of CRR property to us, and the seller may not be aware of any pending insolvency with respect to itself;

· as of the issuance date, the representations and warranties of the seller in the sale agreement must be true and correct with the same force and effect as if made on that date (except to the extent they relate to an earlier date), the seller may not have breached any covenant or agreement in the sale agreement, and the servicer shall not have defaulted or be in default under the servicing agreement;

· as of the issuance date, we must have sufficient funds available to pay the purchase price for CRR property to be conveyed and all conditions to the issuance of the bonds intended to provide the funds set forth in the indenture must have been satisfied or waived;

· on or prior to the issuance date, the seller must have taken all action required to transfer ownership of CRR property to be conveyed to us on the issuance date, free and clear of all liens other than liens created by us pursuant to the basic documents and to perfect such transfer including, without limitation, filing any statements or filings under the Recovery Act or the Uniform Commercial Code; and we or the servicer, on our behalf, must have taken any action required for us to grant the trustee a lien and first priority perfected security interest in the collateral and maintain that security interest as of the issuance date;

· the seller must deliver to us and to the rating agencies any opinions of counsel required by the rating agencies;

· the seller must receive and deliver to us and the trustee an opinion or opinions of outside tax counsel (as selected by the seller, and in form and substance reasonably satisfactory to us and the trustee) to the effect that: (i) we will not be subject to United States federal income tax as an entity separate from our sole owner and that the bonds will be treated as debt of our sole owner for U.S. federal income tax purposes and (ii) for U.S. federal income tax purposes, the issuance of the bonds will not result in gross income to the seller;

· on and as of the issuance date, our limited liability company agreement, the servicing agreement, the sale agreement, the indenture, the Recovery Act and the financing order must be in full force and effect;

· as of the issuance date, the bonds shall have received a rating or ratings as required by the financing order;

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· the seller must deliver to us and to the trustee an officer’s certificate confirming the satisfaction of each of these conditions; and

· the issuance advice letter shall have been filed and become effective in accordance with the financing order.

Seller Representations and Warranties

In the sale agreement, the seller will represent and warrant to us, as of the issuance date, to the effect, among other things, that:

· subject to the clause below regarding assumptions used in calculating the CRR charges as of the issuance date, all written information, as amended or supplemented from time to time, provided by the seller to us with respect to the CRR property (including the expected sinking fund schedule, the financing order and the issuance advice letter relating to the CRR property) is true and correct in all material respects;

· no portion of the transferred CRR property has been sold, transferred, assigned or pledged or otherwise conveyed by the seller to any person other than us, and no security agreement, financing statement or equivalent security or lien instrument listing the seller as debtor covering all or any part of the CRR property is on file or of record in any jurisdiction, except as may have been filed, recorded or made in favor of us or the trustee in connection with the basic documents;

· the seller has not authorized the filing of and is not aware (after due inquiry) of any financing statement against it that includes a description of collateral including the CRR property other than any financing statement filed, recorded or made in favor of us or the trustee in connection with the basic documents;

· the seller is not aware (after due inquiry) of any judgment or tax lien filings against us or the seller;

· on the issuance date, immediately upon the sale under the sale agreement, the CRR property will be validly transferred and sold to us, we will own the CRR property free and clear of all liens (except for liens created in favor of the trustee granted under the indenture and perfected under the Recovery Act) and all filings and action to be made or taken by the seller (including filings with the Secretary of State of West Virginia under the Recovery Act and the Secretary of State of the Commonwealth of Virginia) necessary in any jurisdiction to give us a perfected ownership interest (subject to any lien created by us in your favor under the indenture or the Recovery Act) in the CRR property will have been made or taken;

· under the laws of the State of West Virginia (including the Recovery Act) and the United States in effect on the issuance date:

· the financing order pursuant to which the rights and interests of the seller have been created, including the right to impose, charge and collect the CRR charges and, the interest in and to the CRR property, has become final and non-appealable and is in full force and effect;

· as of the issuance of the bonds, those bonds are entitled to the protection provided in the Recovery Act and, accordingly, the financing order, CRR charges and issuance advice letter are not revocable by the PSC;

· as of the issuance of the bonds, a CRR rate schedule to implement the CRR charges has been filed and is in full force and effect and is not subject to modification by the PSC except for true-up adjustments made in accordance with the Recovery Act;

· the process by which the financing order was adopted and approved and the financing order, issuance advice letter and CRR rate schedule comply with all applicable laws, rules and regulations;

· the issuance advice letter was filed in accordance with the financing order and an officer of the seller has provided the certification to the PSC required by the issuance advice letter; and

· no other approval, authorization, consent, order or other action of, or filing with any governmental authority is required in connection with the creation of the CRR property, except those that have been obtained or made;

· under the Recovery Act, the State of West Virginia has pledged and agreed with the bondholders, assignees and financing parties under the financing order that it will not take or permit any action that would impair the value of the CRR property under the financing order, or, except for true-up adjustments made in accordance with the Recovery Act, reduce, alter, or impair the CRR charges that are imposed, charged, collected or remitted for the benefit of the

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bondholders, assignees and financing parties, until any principal, interest and redemption premium in respect of the bonds, all financing costs and all amounts to be paid to any assignee or financing party under an ancillary agreement have been paid and performed in full, and consequently the State of West Virginia or the PSC could not constitutionally take any action of a legislative character, including the repeal or amendment of the Recovery Act, which would substantially limit, alter or impair the CRR property or other rights vested in the bondholders pursuant to the financing order, or substantially limit, alter, impair or reduce the value or amount of the CRR property, unless that action is a reasonable exercise of the State of West Virginia’s sovereign powers and of a character reasonable and appropriate to further a legitimate public purpose, and, under the takings clauses of the West Virginia and United States Constitutions, the State of West Virginia could not repeal or amend the Recovery Act or take any other action in contravention of its pledge and agreement quoted above without paying just compensation to the bondholders, as determined by a court of competent jurisdiction, if doing so would constitute a permanent appropriation of a substantial property interest of the bondholders in the CRR property and deprive the bondholders of their reasonable expectations arising from their investments in the bonds; however, there is no assurance that, even if a court were to award just compensation, it would be sufficient to pay the full amount of principal of and interest on the bonds;

· based on information available to the seller on the issuance date, the assumptions used in calculating the CRR charges as of the issuance date are reasonable and are made in good faith; however, notwithstanding the foregoing, APCo makes no representation or warranty, express or implied, that amounts actually collected arising from those CRR charges will in fact be sufficient to meet the payment obligations on the bonds or that the assumptions used in calculating such CRR charges will in fact be realized;

· upon the effectiveness of the financing order and the issuance advice letter with respect to the transferred CRR property and the transfer of such CRR property to us:

· the rights and interests of the seller under the financing order, including the right to impose, charge and collect the CRR charges established in the financing order, become CRR property;

· the CRR property constitutes a present property right vested in us;

· the CRR property includes the right, title and interest of the seller in the financing order and the CRR charges, the right to impose, charge and collect CRR charges, and including the right to obtain true-up adjustments (with respect to adjustments, in the manner and with the effect provided in the servicing agreement) and all revenues, receipts, collections, rights to payment, payments, moneys, claims or other or proceeds of or arising from the rights and interests created under the financing order;

· the owner of the CRR property is legally entitled to bill CRR charges and collect payments in respect of the CRR charges in the aggregate sufficient to pay the interest on and principal of the bonds and other ongoing financing costs in accordance with the indenture, to pay the fees and expenses of servicing the bonds and other ongoing financing costs, to replenish the capital subaccount to the required capital level until the bonds are paid in full, and the CRR rate class allocation percentages in the financing order do not prohibit the owner of the transferred CRR property from obtaining adjustments and effecting allocations to the CRR charges in order to collect payments of such amounts; and

· the CRR property is not subject to any lien other than the lien created by the basic documents or pursuant to the Recovery Act.

These representations and warranties made above by the seller will survive the execution and delivery of the sale agreement, and our pledge of the CRR property to the trustee.  The seller will further represent and warrant that:

· the seller is a corporation duly organized and validly existing and in good standing under the laws of the Commonwealth of Virginia, with the requisite corporate power and authority to own its properties and conduct its business as currently owned or conducted;

· the seller has the requisite corporate power and authority to obtain the financing order and to own the rights and interests under the financing order relating to the bonds, to sell and assign those rights and interests to us, whereupon (subject to the effectiveness of the related issuance advice letter) such rights and interests will become CRR property;

· the seller is duly qualified to do business and is in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require qualifications, licenses or approvals (except where the failure to so qualify or obtain such licenses and approvals would not be reasonably likely to have a material adverse effect on the seller’s business, operations, assets, revenues or properties).

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· the seller has the requisite corporate power and authority to execute and deliver the sale agreement and to carry out its terms, and the execution, delivery and performance of the sale agreement have been duly authorized by the seller by all necessary corporate action;

· the sale agreement constitutes a legal, valid and binding obligation of the seller, enforceable against it in accordance with its terms, subject to customary exceptions relating to bankruptcy, creditor’s rights and equitable principles;

· the consummation of the transactions contemplated by the sale agreement and the fulfillment of its terms do not (a) conflict with or result in a breach of any of the terms or provisions of or otherwise constitute (with or without notice or lapse of time) a default under the seller’s organizational documents or any indenture, or other agreement or instrument to which the seller is a party or by which it or any of its property is bound, (b) result in the creation or imposition of any lien upon the seller’s properties pursuant to the terms of any such indenture, agreement or other instrument (other than any liens that may be granted in favor of the trustee for the benefit of the bondholders or any liens created by us pursuant to the Recovery Act or that may be granted under the basic documents) or (c) violate any existing law or any existing order, rule or regulation applicable to the seller of any government authority having jurisdiction over the seller or its properties;

· no proceeding is pending and, to the seller’s knowledge, no proceeding is threatened and, to the seller’s knowledge, no investigation is pending or threatened before any governmental authority having jurisdiction over the seller or its properties involving or relating to the seller or to the issuing entity or, to the seller’s knowledge, any other person:

· asserting the invalidity of the Recovery Act, the financing order, the sale agreement, the bonds and the other basic documents;

· seeking to prevent the issuance of the bonds or the consummation of any of the transactions contemplated by the sale agreement or any of the other basic documents;

· seeking a determination that could reasonably be expected to materially and adversely affect the performance by the seller of its obligations under, or the validity or enforceability of, the Recovery Act, the financing order, the bonds, the sale agreement or the other basic documents; or

· seeking to adversely affect the federal income tax or state income or franchise tax classification of the bonds as debt;

· no approvals, authorizations, consents, orders or other actions of, or filings with, any governmental authority are required for the seller to execute, deliver, perform and fulfill its obligations under the sale agreement except those which have previously been obtained or made or are required to be made by the seller, acting as servicer in the future pursuant to the servicing agreement;

· there is no order by any court providing for the revocation, alteration, limitation or other impairment of the Recovery Act, the financing order, the issuance advice letter, the CRR property or the CRR charges or any rights arising under any of them or that seeks to enjoin the performance of any obligations under the financing order; and

· after giving effect to the sale of the CRR property under the sale agreement, APCo:

· is solvent and expects to remain solvent;

· is adequately capitalized to conduct its business and affairs considering its size and the nature of its business and intended purposes;

· is not engaged and does not expect to engage in a business for which its remaining property represents unreasonably small capital;

· reasonably believes that it will be able to pay its debts as they become due; and

· is able to pay its debts as they mature and does not intend to incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity.

The seller will not make any representation or warranty, express or implied, that billed CRR charges will be actually collected from customers.

Certain of the representations and warranties that the seller makes in the sale agreement involve conclusions of law.  The seller makes those representations and warranties in order to reflect the good faith understanding of the legal basis on which the bondholders are purchasing the bonds and to reflect the agreement that if this understanding proves to be incorrect, the seller will be obligated to indemnify us.

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The seller will not be in breach of any representation or warranty as a result of any change in law occurring after the issuance date including by means of any legislative enactment, constitutional amendment or voter initiative (if subsequently authorized) that renders any of the representations or warranties untrue.

Covenants of the Seller

In the sale agreement, the seller makes the following covenants:

· Subject to its right to assign its rights and obligations to a successor utility under the sale agreement, so long as any of the bonds are outstanding, the seller will (a) keep in full force and effect its existence and remain in good standing under the laws of the jurisdiction of its organization, (b) obtain and preserve its qualifications to do business in those jurisdictions necessary to protect the validity and enforceability of the sale agreement and the other basic documents or to the extent necessary to perform its obligations under the sale agreement and the other basic documents and (c) continue to operate its electric distribution system to provide electric service to its customers.

· Except for the conveyances under the sale agreement or any lien pursuant to the indenture in favor of the trustee for the benefit of the bondholders or any lien that may be granted under the basic documents, the seller will not sell, pledge, assign or transfer, or grant, create, incur, assume or suffer to exist any lien on, any of the CRR property, or any interest therein, and the seller will defend the right, title and interest of us and of the trustee on behalf of the bondholders, in, to and under the CRR property against all claims of third parties claiming through or under the seller.  The seller also covenants that, in its capacity as seller, it will not at any time assert any lien against, or with respect to, any of the CRR property.

· If the seller receives any payments in respect of the CRR charges or the proceeds thereof other than in its capacity as the servicer, the seller agrees to pay all those payments to the servicer as soon as practicable after receipt thereof, on behalf of us, and to hold such amounts in trust for us and the trustee prior to such payment.

· The seller will notify us and the trustee promptly after becoming aware of any lien on any of the CRR property, other than the conveyances under the sale agreement, and any lien pursuant to the basic documents, or under the Recovery Act created for our benefit or for the benefit of the bondholders and the trustee.

· The seller agrees to comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any governmental authority applicable to it, except to the extent that failure to so comply would not materially adversely affect our or the trustee’s interests in the CRR property or under the basic documents to which the seller is a party or the seller’s performance of its obligations under the basic documents to which the seller is a party.

· So long as any of the bonds are outstanding, the seller will:

· treat the CRR property as our property for all purposes other than for financial reporting, state or federal regulatory or tax purposes and treat the bonds as debt for all purposes and specifically as our debt, other than for financial reporting, state or federal regulatory or tax purposes;

· solely for the purposes of federal taxes and, to the extent consistent with applicable state, local or other tax law, for purposes of state, local or other tax law, treat the bonds as indebtedness of the seller (as our sole owner) secured by the collateral unless otherwise required by appropriate taxing authority;

· disclose in its financial statements that we and not the seller are the owner of the CRR property and that our assets are not available to pay creditors of the seller or its affiliates (other than us);

· not own or purchase any bonds; and

· disclose the effects of all transactions between us and the seller in accordance with generally accepted accounting principles.

· The seller agrees that, upon the sale by the seller of CRR property to us pursuant to the sale agreement:

· to the fullest extent permitted by law, including any applicable PSC regulations and the Recovery Act, we will have all of the rights originally held by the seller with respect to the CRR property, including the right (subject to the terms of the servicing agreement) to exercise any and all rights and remedies to collect any amounts payable by any retail electric customer in respect of the CRR property, notwithstanding any objection or direction to the contrary by the seller (and the seller agrees not to make any such objection or to take any such contrary action), and

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· any payment by any retail electric customer to us will discharge that customer’s obligations, if any, in respect of the CRR property to the extent of that payment, notwithstanding any objection or direction to the contrary by the seller.

· So long as any of the bonds are outstanding:

· in all proceedings relating directly or indirectly to the CRR property, the seller will affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial reporting or tax purposes),

· the seller will not make any statement or reference in respect of the CRR property that is inconsistent with our ownership interest (other than for financial accounting, state or regulatory or tax purposes),

· the seller will not take any action in respect of the CRR property except solely in its capacity as servicer pursuant to the servicing agreement or as otherwise contemplated by the basic documents,

· the seller will not sell property similar to CRR property under a separate financing order in connection with the issuance of additional consumer rate relief bonds unless the rating agency condition has been satisfied, and

· neither the seller nor the issuing entity will make any election, file any tax return, or take any other action inconsistent with the treatment of the issuing entity, for federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the seller (or, if relevant, from another sole owner of us, as the issuing entity).

· The seller will execute and file the filings required by law to fully preserve, maintain, protect and perfect our ownership interest in and the trustee’s lien on the CRR property, including all filings required under the Recovery Act and the Uniform Commercial Code relating to the transfer of the ownership of the rights and interests related to the bonds under the financing order by the seller to us and the pledge of the CRR property to the trustee.  The seller will deliver or cause to be delivered to us and the trustee file-stamped copies of, or filing receipts for any document so filed.  The seller will institute any action or proceeding necessary to compel performance by the PSC, the State of West Virginia or any of their respective agents of any of their obligations or duties under the Recovery Act, the financing order or any issuance advice letter.  The seller also will take those legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, in each case, as may be reasonably necessary (i) to protect us, the bondholders and the trustee from claims, state actions or other actions or proceedings of third parties which, if successfully pursued, would result in a breach of any representation or warranty or covenant of the seller in the sale agreement and (ii) to block or overturn any attempts to cause a repeal of, modification of or supplement to the Recovery Act, the financing order, any issuance advice letter or the rights of holders by legislative enactment or constitutional amendment that would be materially adverse to us, the trustee or the bondholder or which would otherwise cause an impairment of our rights or those of the bondholders and the trustee, and the seller will pay the costs of any such actions or proceedings.

· Even if the sale agreement or the indenture is terminated, the seller will not, prior to the date which is one year and one day after the termination of the indenture and payment in full of the bonds or any other amounts owed under the indenture, petition or otherwise invoke or cause us to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against us under any federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official or any substantial part of our property, or ordering the winding up or liquidation of our affairs.

· So long as any of the bonds are outstanding, the seller will, and will cause each of its subsidiaries to, pay all taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a lien on the transferred CRR property; provided that no such tax need be paid if the seller or any of its affiliates is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the seller or such affiliate has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

· The seller will not withdraw the filing of any issuance advice letter with the PSC.

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· Promptly after obtaining knowledge of any breach in any material respect (without regard to any materiality qualifier contained in such representation, warranty or covenant) of its representations, warranties or covenants in the sale agreement, the seller will notify us, the trustee, the PSC and the rating agencies of the breach.

· The seller will use the proceeds of the sale of the CRR property in accordance with the financing order and the Recovery Act.

· The seller shall not become a party to any (i) trade receivables purchase and sale arrangement or similar arrangement under which it sells all or any portion of its accounts receivables owing from West Virginia retail electric customers, unless the trustee, the seller and the other parties to such additional arrangement shall have entered into an intercreditor agreement in connection therewith and the terms of the documentation evidencing such trade receivables purchase and sale arrangement or similar arrangement shall expressly exclude CRR charges from any receivables or other assets pledged or sold under such arrangement, or (ii) sale agreement selling to any other affiliate property consisting of charges payable, other than the sale of CRR charges pursuant to the sale agreement, by retail electric customers pursuant to the Recovery Act or any similar law, unless the seller has entered into an intercreditor agreement with the trustee and the trustee for such other issuance.

· Upon our request, the seller will execute and deliver such further instruments and do such further acts as may be necessary to carry out more effectively the provisions and purposes of the sale agreement.

Indemnification

The seller will indemnify, defend and hold harmless us, the trustee (for itself and for the benefit of the bondholders) and any of our and the trustee’s respective officers, directors, employees and agents against:

· any and all amounts of principal and interest on the bonds not paid when due or when scheduled to be paid,

· any deposits required to be made by or to us under the basic documents or the financing order which are not made when required, and

· any and all other liabilities, obligations, losses, claims, damages, payment, costs or expenses incurred by any of these persons

in each case, as a result of a breach by the seller of any of its representations, warranties and covenants in the sale agreement.

The seller will indemnify us and the trustee (for itself and for the benefit of the bondholders) and each of their respective officers, directors, employees, trustees, managers, and agents for, and defend and hold harmless each such person from and against, any and all taxes (other than taxes imposed on the bondholders as a result of their ownership of bonds) that may at any time be imposed on or asserted against any such person as a result of (i) the sale of the CRR property to us, (ii) our ownership and assignment of the CRR property, (iii) the issuance and sale by us of the bonds or (iv) the other transactions contemplated in the basic documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of such person to withhold or remit taxes with respect to payments on the bonds.

In addition, the seller will indemnify, defend and hold harmless the trustee (for itself), our independent managers and any of their respective officers, directors, employees and agents against any and all liabilities, obligations, losses, claims, damages, payments, costs or expenses incurred by any of these parties as a result of the seller’s breach of any of its representations and warranties or covenants contained in the sale agreement, except to the extent of such losses either resulting from the willful misconduct, bad faith or gross negligence of such indemnified persons or resulting from a breach of a representation or warranty made by such indemnified persons in any of the basic documents that gives rise to the seller’s breach.  The seller shall not be required to indemnify any person otherwise indemnified under the sale agreement for any amount paid or payable by such person in the settlement of any action, proceeding or investigation without the prior written consent of the seller, which consent shall not be unreasonably withheld.

The seller will indemnify the servicer (if the servicer is not the seller) for the costs of any action instituted by the servicer pursuant to the servicing agreement which are not paid as an operating expense under the indenture.

The indemnification provided for in the sale agreement will survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Recovery Act or the financing order and will survive the resignation or removal of the trustee, or the termination of the sale agreement and will rank in priority with other general, unsecured obligations of the seller.  The seller shall not indemnify any person otherwise indemnified under the sale agreement for any changes in law after the issuance

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date, whether such changes in law are effected by means of any legislative enactment, constitutional amendment or any final and non-appealable judicial decision.

APCo’s indemnification obligations will rank equally in right of payment with other general unsecured obligations of APCo.

Successors to the Seller

Any entity which becomes the successor by merger, conversion or consolidation or by otherwise succeeding to all or substantially all of the assets of APCo may assume the rights and obligations of APCo under the sale agreement.  So long as the conditions of any such assumption are met, APCo will automatically be released from its obligations under the sale agreement.  The conditions include that:

· immediately after giving effect to any transaction referred to in this paragraph, no representation, warranty or covenant made in the sale agreement will have been breached, and no servicer default, and no event that, after notice or lapse of time, or both, would become a servicer default will have occurred and be continuing,

· the successor must execute an agreement of assumption to perform all of the obligations of the seller under the sale agreement;

· officer’s certificates and opinions of counsel specified in the sale agreement will have been delivered to us, the trustee and the rating agencies, and

· the rating agencies specified in the sale agreement will have received prior written notice of the transaction.

Amendment

The sale agreement may be amended in writing by the seller and us, if a copy of the amendment is provided by us to each rating agency and the rating agency condition is satisfied, with the consent of the trustee and, with respect to amendments that would increase ongoing financing costs as defined in the financing order, the consent or deemed consent of the PSC.  If any such amendment would adversely affect the interest of any bondholder in any material respect, the consent of a majority of bondholders of each affected tranche of bonds is also required.  In determining whether a majority of bondholders have consented, bonds owned by us, APCo or any affiliate of us shall be disregarded, except that, in determining whether the trustee shall be protected in relying upon any such consent, the trustee shall only be required to disregard any bonds it actually knows to be so owned.

THE SERVICING AGREEMENT

The following summary describes the material terms and provisions of the servicing agreement pursuant to which the servicer is undertaking to service the CRR property.  We have filed the form of the servicing agreement as an exhibit to the registration statement of which this prospectus forms a part.  This summary does not purport to be complete and is subject and qualified by reference to the provisions of the servicing agreement.

Servicing Procedures

The servicer, as our agent, will manage, service and administer, and bill and collect payments in respect of the CRR property according to the terms of the servicing agreement.  The servicer’s duties will include: calculating usage, billing the CRR charges, collecting the CRR charges from retail electric customers and posting all collections; responding to inquiries of retail electric customers, the PSC or any other governmental authority regarding the CRR property; investigating and handling delinquencies (and furnishing reports with respect to such delinquencies to us); processing and depositing collections and making periodic remittances; furnishing periodic reports and statements to us, the rating agencies and to the trustee; making all filings with the PSC and taking all other actions necessary to perfect our ownership interests in and the trustee’s lien on the CRR property; making all filings and taking such other action as may be necessary to perfect the trustee’s lien on and security interest in all collateral; selling, as our agent, as our interests may appear, defaulted or written off accounts; taking all necessary action in connection with true-up adjustments; and performing other duties specified under the financing order.

The servicer is required to notify us, the trustee and the rating agencies in writing of any laws or PSC regulations promulgated after the execution of the servicing agreement that have a material adverse effect on the servicer’s ability to perform its duties under the servicing agreement.  The servicer is also authorized to execute and deliver documents and to make filings and participate in proceedings on our behalf.

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In addition, upon our reasonable request or the reasonable request of the trustee or any rating agency, the servicer will provide to us, the trustee or rating agency public financial information about the servicer and any material information about the CRR property that is reasonably available, as may be reasonably necessary and permitted by law to enable us, the trustee or rating agency to monitor the servicer’s performance, and, so long as any bonds are outstanding, within a reasonable time after written request thereof, any information available to the servicer or reasonably obtainable by it that is necessary to calculate the CRR charges applicable to each CRR rate class.  The servicer will also prepare any reports required to be filed by us with the SEC and will cause to be delivered required opinions of counsel to the effect that all filings with the PSC, the State of West Virginia and the State of Virginia necessary to preserve and protect the interests of the trustee in the CRR property have been made.

Servicing Standards and Covenants

The servicing agreement will require the servicer, in servicing and administering the CRR property, to employ or cause to be employed procedures and exercise or cause to be exercised the same care and diligence it customarily employs and exercises with respect to billing and collection activities it conducts for its own account and, if applicable, for others.

The servicing agreement requires the servicer to implement procedures and policies to ensure that customers remit the CRR charges to the servicer on behalf of us and the bondholders.  The servicer will also monitor payments and will impose collection policies on retail electric customers, as permitted under each financing order and the rules of the PSC.

The servicing agreement requires the servicer to (i) manage, service, administer and make collections in respect of the CRR property with reasonable care and in material compliance with applicable requirements of law, including all applicable regulations of the PSC, (ii) follow customary standards, policies and procedures for the industry in West Virginia in performing its duties, (iii) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the CRR property and to bill and collect the CRR charges, (iv) comply with all requirements of law including all applicable regulations of the PSC applicable to and binding on it relating to the CRR property, (v) file all notices with the PSC described in the Recovery Act and file and maintain the effectiveness of UCC financing statements with respect to the property transferred under the Sale Agreement, and (vi) take such other action on our behalf to ensure that the lien of the trustee on the collateral remains perfected and of first priority.  The servicer shall follow customary and usual practices and procedures as it deems necessary or advisable in servicing the CRR property, which in the servicer’s judgment, may include taking legal action at the issuing entity’s expense but subject to the priority of payments set forth in the indenture.

The servicing agreement also requires the servicer to provide various reports regarding the CRR charges and allocation of the CRR charges among various classes of customers and payments to the bondholders, in each case as are necessary to effect collection, allocation and remittance of payments in respect of CRR charges and other collected funds as required under the basic documents.

The servicer is responsible for instituting any action or proceeding to compel performance by the State of West Virginia or the PSC of their respective obligations under the Recovery Act, the financing order, any issuance advice letter or any true-up adjustment.  The servicer is also responsible for instituting any action or proceeding as may be reasonably necessary to block or overturn any attempts, including without limitation by legislative enactment, voter initiative (if subsequently authorized) or constitutional amendment, to cause a repeal, modification or judicial invalidation of the Recovery Act or the financing order that would be detrimental to the interest of the holders or which would cause an impairment of the rights of the issuing entity or the holders.  In any proceedings related to the exercise of the power of eminent domain by any municipality to acquire a portion of APCo’s electric distribution facilities, the servicer will assert that the court ordering such condemnation must treat such municipality as a successor to APCo under the Recovery Act and the financing order.  The servicing agreement also designates the servicer as the custodian of our records and documents.  The servicing agreement requires the servicer to indemnify us, our independent managers and the trustee (for itself and for the benefit of bondholders) for any negligent act or omission relating to the servicer’s duties as custodian.

True-Up Adjustment Process

Among other things, the financing order and the servicing agreement both require the servicer to file adjustment requests annually, semi-annually, if necessary, and, if there are any bonds outstanding following the scheduled final payment date for the latest maturing tranche, quarterly, to ensure the expected recovery of amounts sufficient to provide timely payment of principal of and interest on the bonds, together with ongoing financing costs.  In addition to these mandatory true-up adjustment requests, the servicer may file at any time optional true-up adjustments in order to assure timely payment of the bonds and the other amounts payable with respect to the bonds.  For more information on the true-up process, please read “APCo’s Financing Order—True-Up Mechanism.”

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As part of each true-up adjustment, the servicer will calculate the CRR charges which must be billed in order to generate the revenues for the ensuing 12-month period necessary to result in:

· all accrued and unpaid interest on the bonds being paid in full,

· the outstanding principal balance of the bonds equaling the amount provided in the expected amortization schedule,

· the amount on deposit in the capital subaccount equaling the required capital level, and

· all other fees, expenses and indemnities of the issuing entity (up to the authorized amounts of such payments set forth in the financing order) being paid.

In calculating the necessary true-up adjustment, the servicer will use its most recent forecast of energy consumption and demand and its most current estimates of ongoing transaction-related expenses.  The true-up adjustment will reflect any projected customer defaults or charge-offs and allowances for projected payment lags between the billing and collection of CRR charges based upon the servicer’s most recent experience regarding collection of CRR charges.  The true-up adjustment will also take into account any amounts due to any customers as a result of the reconciliation of the remittances and collections, and any undercollections due to any reason.

There is no “cap” on the level of CRR charges that may be imposed on retail electric customers as a result of the true-up process.

The servicer must provide timely notice to the PSC of any true-up adjustment.  A standard true-up adjustment will be effective on the first day of the monthly billing cycle next following the true-up adjustment filing with the PSC, but in any event no earlier than 15 days following the date of the filing.  The servicer is required to give public notice of a standard or nonstandard true-up adjustment if such adjustment would result in an increase in the amount of CRR charges.  In the event a correction to a true-up adjustment is necessary due to mathematical errors in the calculation of the true-up adjustment, the adjustment incorporating any correction to the mathematical error as determined by the PSC will be automatically effective on the first day of the monthly billing cycle next following such true-up adjustment filing, but in no event later than 15 days following the date of the filing.

In calculating any true-up adjustment, the servicer will allocate payment responsibility among CRR rate classes and CRR revenue groups in accordance with the requirements of the financing order.  With respect to any standard true-up adjustment, in the event that any CRR charges cannot be allocated to a given CRR rate class, such CRR charges shall be re-allocated as part of the standard true-up adjustment to the remaining CRR rate classes within the given CRR revenue group, using the same ratable allocation to the CRR rate classes within such CRR revenue group excluding the CRR rate class for which allocation is no longer feasible.

Allocations of payment responsibility among CRR revenue groups and CRR rate classes may also change due to a nonstandard true-up in order to address significant changes from historical conditions of operations, such as a loss of significant electric load or a merger of APCo with another utility and a resulting expansion of APCo’s customer base.  APCo will also initiate a nonstandard true-up proceeding if APCo and Wheeling Power merge in order to take into account the impact of the combined allocation of revenue groups.  Specifically, the financing order provides for a nonstandard true-up procedure to be implemented as part of the annual true-up if APCo experiences or projects a drop in electricity consumption or demand for one or more of the CRR revenue groups of 10% or more as calculated by comparing the difference between the revised forecasted load and the original projected load.

For the nonstandard true-up to be implemented, the servicer will make a filing with the PSC at least 60 days before the date that the CRR charges to be imposed in connection with such nonstandard true-up are to go into effect.  The filing may include the new proposed percentage allocation factors for each CRR revenue group and each CRR rate class within such group to be applied for each subsequent true-up adjustment, the justification for such changes as necessary to address the specific cause of the proposed nonstandard true-up adjustment, and a statement of the proposed effective date.  The servicer is required to give public notice of the nonstandard true-up filing if there will be an increase in CRR charges.  Pursuant to the Recovery Act, the scope of review by the PSC of a nonstandard true-up filing is limited to the mathematical accuracy of the total adjustment needed to assure the full and timely payment of the bonds and related costs, but the PSC may also review and determine the appropriate allocation of costs within and between CRR rate classes and CRR revenue groups.  The financing parties will be permitted to comment on the nonstandard true-up adjustment and the PSC will hold a public hearing, if it deems necessary, within 30 days after the nonstandard true-up adjustment filing.  The nonstandard true-up adjustment filing, as modified by the PSC, if necessary, will become effective within 60 days after the initial filing.  If a nonstandard true-up is implemented, the original allocation percentages used for the respective CRR revenue groups will be recalculated and then CRR charges for customers within the applicable CRR revenue groups will be adjusted upward or downwards by the same percentage adjustments imposed on the CRR revenue group as a whole.  Once the nonstandard true-up filing has become

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effective, the modified allocation percentages will remain in effect until and unless another nonstandard true-up filing is made. The Recovery Act provides that any procedure for a nonstandard true-up must be consistent with assuring the full and timely payment of the debt service for the bonds and associated financing costs.  Further, through the irrevocable financing order, the PSC guarantees that it will act pursuant to the financing order to ensure that expected CRR charges are sufficient to pay on a timely basis scheduled principal and interest on the bonds and ongoing financing costs.

Remittances to Collection Account

The servicer will remit estimated collection payments on the CRR charges to the trustee for deposit in the collection account each business day.  For a description of the allocation of the deposits, please read “Security for the Consumer Rate Relief Bonds—How Funds in the Collection Account will be Allocated.”  Until CRR charge collections are remitted to the collection account, the servicer will not segregate them from its general funds.  Please read “Risk Factors—Risks Associated With Potential Bankruptcy Proceedings of the Seller or the Servicer” in this prospectus.

On each business day, the servicer shall remit to the general subaccount of the collection account the total CRR charge payments estimated to have been received by the servicer from or on behalf of retail electric customers on such business day in respect of all previously billed CRR charges. Such remittance shall be remitted as soon as reasonably practicable to the general subaccount of the collection account, but in no event later than the second business day after such payments are estimated to have been received.  Each month, the servicer will reconcile remittances of estimated payments arising from CRR charges with actual CRR charge payments received by the servicer for the immediately preceding calendar month, to more accurately reflect the amount of billed CRR charges that should have been remitted, based on the amounts actually received.  To the extent the remittances of estimated payments arising from the CRR charge exceed the amounts that should have been remitted based on actual system-wide charge-offs, the servicer will be entitled to receive, subject to certain exceptions, a payment from us in an amount equal to the excess remittance, or to withhold the excess amount from any subsequent remittance to the trustee.  To the extent the remittances of estimated payments arising from the CRR charges are less than the amount that should have been remitted, the servicer will remit the amount of the shortfall to the trustee within two business days of the date of such monthly calculation.  Although the servicer will remit estimated payments arising from the CRR charges to the trustee, the servicer is not obligated to make any payments on the bonds.  In the case of any shortfall, APCo will allocate that shortfall ratably based on the amount owed to APCo or other parties and the total amounts owed, provided, that late fees and late charges may be allocated to the servicer to the extent consistent with the Terms and Conditions of Service included in APCo’s existing tariff.

In the event that the servicer makes changes to its current computerized customer information system which would allow the servicer to track actual CRR charge payments and/or otherwise monitor payment and collection activity more efficiently or accurately than is being done today, the servicing agreement will allow the servicer to substitute actual remittance procedures for the estimated remittance procedures described above and otherwise modify the remittance procedures described above as may be appropriate in the interests of efficiency, accuracy, cost and/or system capabilities.  However, the servicer will not be allowed to make any modification or substitution that will materially adversely affect the bondholders.  The servicer must also give written notice to the trustee and the rating agencies of any such computer system changes prior to the date on which any retail electric customer accounts are billed on the new system.

Servicing Compensation

The servicer will be entitled to receive an annual servicing fee in an amount equal to:

· 0.05% of the initial aggregate principal amount of the bonds for so long as the servicer remains APCo or an affiliate plus out-of-pocket costs; or

· if APCo or any of its affiliates is not the servicer, an amount agreed upon by the successor servicer and the trustee, but any amount in excess of 1.25% of the initial aggregate principal amount of the bonds must be approved by the PSC.

The servicing fee shall be paid semi-annually with half of the servicing fee being paid on each payment date.  The servicer may invest CRR charge collections prior to remittance to the collection account and will be entitled to retain any interest earnings on CRR charge collections prior to remittance to the collection account, as well as all late payment charges, if any, collected from customers and to be reimbursed for ongoing financing costs as described in the servicing agreement.  However, if the servicer has failed to remit the CRR charge collections to any collection account on the day that such payment is to be made on more than three occasions during the period that the bonds are outstanding, then thereafter the servicer will be required to pay to the trustee interest on each daily remittance accrued at the Federal Funds Rate from the business day on which such daily remittance was required to be made to the date that such daily remittance is actually made.  The trustee will pay the servicing fee on each payment date (together with any portion of the servicing fee that remains unpaid from prior payment dates) to the extent of available funds prior to the distribution of any interest on and principal of the bonds.  So long as

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APCo or an affiliate, is the servicer or the administrator, APCo’s servicing compensation and the administration fee will each be included as an identified revenue credit and reduce revenue requirements for setting its rates.  The expenses of servicing and administration shall likewise be included as a cost of service in setting such rates.

Servicer Representations and Warranties

In the servicing agreement, the servicer will represent and warrant to us, as of the issuance date of the bonds, among other things, that:

· the servicer is duly organized, validly existing and is in good standing under the laws of the state of its organization, with requisite corporate or other power and authority to own its properties, to conduct its business as such properties are currently owned and such business is presently conducted by it, and to service the CRR property and hold the records related to the CRR property, and to execute, deliver and carry out the terms of the servicing agreement and any intercreditor agreement;

· the servicer is duly qualified to do business, is in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the CRR property as required under the servicing agreement) requires such qualifications, licenses or approvals (except where a failure to qualify would not be reasonably likely to have a material adverse effect on the servicer’s business, operations, assets, revenues or properties or to its servicing of the CRR property);

· the execution, delivery and performance of the terms of the servicing agreement have been duly authorized by all necessary action on the part of the servicer under its organizational or governing documents and laws;

· the servicing agreement constitutes a legal, valid and binding obligation of the servicer, enforceable against it in accordance with its terms, subject to applicable insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors’ rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law;

· the consummation of the transactions contemplated by the servicing agreement and any intercreditor agreement do not conflict with, result in any breach of, nor constitute (with or without notice or lapse of time) a default under the servicer’s organizational documents or any indenture or other agreement or instrument to which the servicer is a party or by which it or any of its property is bound, result in the creation or imposition of any lien upon the servicer’s properties pursuant to the terms of any such indenture or agreement or other instrument (other than any lien that may be granted in favor of the trustee for the benefit of bondholders under the basic documents or any lien created pursuant to Section 24-2-4f(o) of the Recovery Act) or violate any existing law or any existing order, rule or regulation applicable to the servicer of any governmental authority having jurisdiction over the servicer or its properties;

· each report or certificate delivered in connection with the issuance advice letter or delivered in connection with any filing made to the PSC by us with respect to the CRR charges or true-up adjustments will be true and correct in all material respects, or, if based in part on or containing assumptions, forecasts or other predictions of future events, such assumptions, forecasts or predictions are reasonable based on historical performance (and facts known to the servicer on the date such report or certificate is delivered);

· no governmental approvals, authorizations, consents, orders or other actions or filings with any governmental authority are required for the servicer to execute, deliver and perform its obligations under the servicing agreement except those which have previously been obtained or made, those that are required to be made by the servicer in the future pursuant to the servicing agreement or any intercreditor agreement and those that the servicer may need to file in the future to continue the effectiveness of any financing statements; and

· no proceeding or, to the servicer’s knowledge, investigation is pending and, to the servicer’s knowledge, no proceeding or investigation is threatened before any governmental authority having jurisdiction over the servicer or its properties involving or relating to the servicer or the issuing entity or, to the servicer’s knowledge, any other person, asserting the invalidity of the servicing agreement or the other basic documents, seeking to prevent issuance of the bonds or the consummation of the transactions contemplated by the servicing agreement or other basic documents, seeking a determination that could reasonably be expected to materially and adversely affect the performance by the servicer of its obligations under or the validity or enforceability of the servicing agreement or the other basic documents, the bonds or seeking to adversely affect the federal income tax or state income or franchise tax classification of bonds as debt.

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The servicer, the trustee and we are not responsible as a result of, any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the servicer’s failure to make any filings with the PSC required by the servicing agreement in a timely and correct manner or any breach by the servicer of its duties under the servicing agreement that adversely affects the CRR property or the true-up adjustments), by the PSC in any way related to the CRR property or in connection with any true-up adjustment, the subject of any such filings, any proposed true-up adjustment or the approval of any revised CRR charges and the scheduled adjustments thereto.  Except to the extent that the servicer otherwise is liable under the provisions of the servicing agreement, the servicer shall have no liability whatsoever relating to the calculation of any revised CRR charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculations, so long as the servicer has acted in good faith and has not acted in a negligent manner in connection therewith, nor shall the servicer have any liability whatsoever as a result of any person, including the bondholders, not receiving any payment, amount or return anticipated or expected or in respect of any bond generally.

The Servicer Will Indemnify Us, Other Entities and the PSC in Limited Circumstances

The servicer will indemnify, defend and hold harmless us and the trustee (for itself and for your benefit) and the independent managers and each of their respective officers, directors, employees and agents from any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, arising as a result of:

· the servicer’s willful misconduct, bad faith or negligence in the performance of, or reckless disregard of, its duties or observance of its covenants under the servicing agreement and any intercreditor agreement,

· the servicer’s breach of any of its representations or warranties under the servicing agreement or any intercreditor agreement, and

· litigation and related expenses relating to its status and obligations as servicer (other than any proceeding the servicer is required to institute under the servicing agreement).

The servicer will not be liable, however, for any liabilities, obligations, losses, damages, payments or claims, or reasonable costs or expenses, resulting from the willful misconduct, bad faith or gross negligence of the party seeking indemnification, or resulting from a breach of a representation or warranty made by any such person in any of the basic documents that give rise to the servicer’s breach.

In addition, the servicer will agree to indemnify the PSC (for the benefit of retail electric customers) in connection with any liabilities, obligations, losses, damages, payments and claims, including any increase in servicing fees as described under “—Servicing Compensation,” resulting from the servicer’s willful misconduct, bad faith or negligence in performance of its duties or observance of its covenants under the servicing agreement.  Any such indemnity payments made to the PSC for the benefit of the retail electric customers will be remitted to the trustee promptly for deposit in the collection account.

Except for payment of the servicing fee, reimbursement of cost of defending the CRR property and certain out-of-pocket costs incurred and payment of the purchase price of the CRR property, the servicing agreement also provides that the servicer releases us and our independent managers, the trustee and each of our respective officers, directors and agents from any and all actions, claims and demands which the servicer, in the capacity of servicer or otherwise, may have against those parties relating to the CRR property or the servicer’s activities with respect to the CRR property, other than actions, claims and demands arising from the willful misconduct, bad faith or gross negligence of the parties.

The PSC, acting through its authorized legal representative, may enforce the servicer’s obligations imposed pursuant to the financing order for the benefit of ratepayers to the extent permitted by law.

Notwithstanding the foregoing, however, except as expressly provided in the servicing agreement, the servicer shall not be under any obligation to appear in, prosecute or defend any legal action relating to the CRR property that is not directly related to one of the servicer’s enumerated duties in the servicing agreement or related to its obligation to pay indemnification, and that in its reasonable opinion may cause it to incur any expense or liability; provided, however, that the servicer may, in respect of any proceeding, undertake any action that it is not specifically identified in the servicing agreement as a duty of the servicer but that the servicer reasonably determines is necessary or desirable in order to protect the rights and duties of the issuing entity or the trustee and the interests of the bondholders and retail electric customers under the servicing agreement.  The servicer’s costs and expenses incurred in connection with any such proceeding shall be payable from CRR charge collections as an ongoing financing cost.

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Evidence as to Compliance

The servicing agreement will provide that the servicer will furnish annually to us, the trustee and the rating agencies, on or before the earlier of March 31 of each year, beginning March 31, 2014 or on the date on which the sponsor’s annual report on Form 10-K relating to the bonds is required to be filed with the SEC, certificates from a responsible officer of the servicer containing and certifying compliance with specified servicing criteria as required by Item 1122(a) and Item 1123 of Regulation AB (or any successor or similar item or rule), during the preceding 12 months ended December 31(or preceding period since the issuance date of the bonds in the case of the first statement), together with a certificate by an officer of the servicer certifying the statements set forth therein.

The servicing agreement also provides that a firm of independent certified public accountants, will furnish annually to us, the trustee and the rating agencies on or before the earlier of March 31 of each year, beginning March 31, 2014 or, on the date on which the sponsor’s annual report on Form 10-K relating to the bonds is required to be filed with the SEC, an annual accountant’s report, which will include any required attestation report that attests to and reports on the servicer’s assessment report described in the immediately preceding paragraph, to the effect that the accounting firm has performed agreed upon procedures in connection with the servicer’s compliance with its obligations under the servicing agreement during the preceding 12 months, identifying the results of the procedures and including any exceptions noted.  The report will also indicate that the accounting firm providing the report is independent of the servicer within the meaning of the rules of The Public Company Accounting Oversight Board.  The cost of the annual accountant’s report will be reimbursable as an ongoing financing cost.

Copies of the above reports will be filed with the SEC.  You may also obtain copies of the above statements and certificates by sending a written request addressed to the trustee.

The servicer will also be required to deliver to us, the trustee and the rating agencies monthly reports setting forth certain information relating to collections of CRR charges received during the preceding calendar month and, shortly before each payment date, a report setting forth the amount of principal and interest payable to bondholders on such date, the aggregate outstanding amount of the bonds, before and after giving effect to any payment of principal on such payment date, the difference between the principal outstanding on the bonds and the amounts specified in the related expected amortization schedule after giving effect to any such payments and the amounts on deposit in the capital subaccount and excess funds subaccount after giving effect to all transfers and payments to be made on such payment date.  The servicer is required to file copies of these reports with the SEC.

In addition, the servicer is required to send copies of each filing or notice evidencing a true-up adjustment to us, the trustee and the rating agencies.  The servicer is also required to prepare and deliver certain disclosures to its retail electric customers, and to provide to the rating agencies any non-confidential and non-proprietary information as is reasonably requested by the rating agencies.

Matters Regarding the Servicer

The servicing agreement will provide that APCo may not resign from its obligations and duties as servicer thereunder, except when APCo delivers to the trustee and the PSC an opinion of external legal counsel to the effect that APCo’s performance of its duties under the servicing agreement is no longer permissible under applicable law.  No resignation by APCo as servicer will become effective until a successor servicer has assumed APCo’s servicing obligations and duties under the servicing agreement.

The servicing agreement further provides that neither the servicer nor any of its directors, officers, employees, and agents will be liable to us or to the trustee, our managers, you or any other person or entity, except as provided under the servicing agreement, for taking any action or for refraining from taking any action under the servicing agreement or for good faith errors in judgment.  However, neither the servicer nor any person or entity will be protected against any liability that would otherwise be imposed by reason of willful misconduct, bad faith or gross negligence in the performance of its duties.  The servicer and any of its directors, officers, employees or agents may rely in good faith on the advice of counsel reasonably acceptable to the trustee or on any document submitted by any person respecting any matters under the servicing agreement.  Except as provided in the servicing agreement, the servicer is under no obligation to appear in, prosecute, or defend any legal action that is not directly related to one of its duties in the servicing agreement or otherwise related to its indemnification obligations.

Under the circumstances specified in the servicing agreement, any entity which becomes the successor by merger, or through the sale, transfer, lease, management contract or otherwise of or for substantially all of the servicer’s electric distribution assets may assume all of the rights and obligations of the servicer under the servicing agreement.  The following are conditions to the transfer of the duties and obligations to a successor servicer:

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· the successor to the servicer must execute an agreement of assumption to perform every obligation of the servicer under the servicing agreement;

· immediately after the transfer, no representation or warranty made by the servicer in the servicing agreement will have been breached and no servicer default or event which after notice of, lapse of time or both, would become a servicer default, has occurred and is continuing;

· the servicer has delivered to us and to the trustee an officer’s certificate and an opinion of external counsel stating that the transfer complies with the servicing agreement and all conditions to the transfer under the servicing agreement have been complied with;

· the servicer has delivered to us and to the trustee and the rating agencies an opinion of external counsel stating either that all necessary filings, including those with the PSC, to preserve, perfect and maintain the priority of our interests in and the trustee’s lien on the CRR property, have been made or that no filings are required;

· the servicer has given prior written notice to the rating agencies; and

· the servicer has delivered to us, the PSC, the trustee and the rating agencies an opinion of independent tax counsel to the effect that, for federal income tax purposes, such transaction will not result in a material federal income tax consequence to the issuing entity or the bondholders.

So long as the conditions of any such assumptions are met, then the prior servicer will automatically be released from its obligations under the servicing agreement.

Notwithstanding the foregoing, Wheeling Power will be allowed to merge into APCo without satisfying the above conditions so long as APCo is the entity surviving the merger.

The servicing agreement permits the servicer to appoint any person to perform any or all of its obligations.  However, unless the appointed person is an affiliate of APCo, appointment must satisfy the rating agency condition.  In all cases, the servicer must remain obligated and liable under the servicing agreement.

Servicer Defaults

Servicer defaults under the servicing agreement will include:

· any failure by the servicer to remit any amount, including payments arising from the CRR charges into the collection account as required under the servicing agreement, which failure continues unremedied for five business days after written notice from us or the trustee is received by the servicer or after discovery of the failure by an officer of the servicer;

· any failure by the servicer to duly perform its obligations to make CRR charge adjustment filings in the time and manner set forth in the servicing agreement, which failure continues unremedied for a period of five days;

· any failure by the servicer or, if the servicer is APCo or an affiliate of APCo, by APCo to observe or perform in any material respect any covenants or agreements in the servicing agreement or the other basic documents to which it is a party, which failure materially and adversely affects the rights of bondholders and which continues unremedied for 60 days after written notice of this failure has been given to the servicer or, if the servicer is APCo or an affiliate of APCo, by us or by the trustee or after such failure is discovered by an officer of the servicer;

· any representation or warranty made by the servicer in the servicing agreement or any basic document proves to have been incorrect in a material respect when made, which has a material adverse effect on the bondholders and which material adverse effect continues unremedied for a period of 60 days after the giving of written notice to the servicer by us or the trustee after such failure is discovered by an officer of the servicer; and

· events of bankruptcy, insolvency, receivership or liquidation of the servicer.

Rights Upon a Servicer Default

In the event of a servicer default that remains unremedied, the trustee may, or upon the instruction of the PSC (on behalf of the customers) or the holders of bonds evidencing not less than a majority in principal amount of then outstanding bonds, the trustee will, subject to the terms of any intercreditor agreement, by written notice given to the servicer, terminate all the rights and obligations of the servicer under the servicing agreement, other than the servicer’s indemnity obligation and obligation to continue performing its functions as servicer until a successor servicer is appointed.  After the termination, the

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trustee may and, upon the instruction of the holders of bonds evidencing not less than a majority in principal amount of then outstanding bonds, the trustee will appoint a successor servicer with our prior written consent (not to be unreasonably withheld) who will subject to the terms and provisions of any intercreditor agreement, succeed to all the responsibilities, duties and liabilities of the servicer under the servicing agreement, provide prompt written notice to us and the rating agencies and will be entitled to similar compensation arrangements.

In addition, when a servicer defaults by failing to remit CRR charges to the CRR collection account as required by the servicing agreement, a court, upon the application of trustee or another interested party or the PSC, shall order the sequestration and payment to bondholders of all revenues arising with respect to the CRR property.  If, however, a bankruptcy trustee or similar official has been appointed for the servicer, and no servicer default other than an appointment of a bankruptcy trustee or similar official has occurred, that trustee or official may have the power to prevent the trustee or the bondholders from effecting a transfer of servicing.  Please read “Risk Factors—Risks Associated With Potential Bankruptcy Proceedings of the Seller or the Servicer” and “How a Bankruptcy May Affect Your Investment” in this prospectus.

If within 30 days after the delivery of the termination notice, a new servicer shall not have been appointed, the trustee may appoint, or petition the PSC or a court of competent jurisdiction for the appointment of, a successor servicer which satisfies criteria specified by the nationally recognized statistical rating agencies rating the bonds is permitted under the PSC’s regulations and enters into a new agreement with us with substantially the same provisions.  In no event will the trustee be liable for its appointment of a successor servicer.  The trustee may make arrangements for compensation to be paid to the successor servicer.

Waiver of Past Defaults

Holders of bonds evidencing not less than a majority in principal amount of the then outstanding bonds, on behalf of all bondholders, together with the PSC, may direct the trustee to waive in writing any default by the servicer in the performance of its obligations under the servicing agreement and its consequences, except a default in making any required deposits to the collection account under the servicing agreement.  The servicing agreement provides that no waiver will impair the bondholders’ rights relating to subsequent defaults.  Promptly after executing such a waiver, the servicer will furnish a copy of such waiver to each rating agency.

Successor Servicer

If for any reason a third-party assumes the role of the servicer under the servicing agreement, the servicing agreement will require the servicer to cooperate with us and with the trustee and the successor servicer and provide whatever information is, and take whatever actions are, reasonably necessary to assist the successor servicer in performing its obligations under the servicing agreement.  The servicing agreement will provide that the servicer will be liable for the reasonable costs and expenses incurred in transferring the CRR property records to the successor servicer and amending the servicing agreement to reflect such succession if such transfer is the result of a servicer default.  In all other cases such costs and expenses will be paid by the party incurring them.

Amendment

The servicing agreement may be amended in writing by the servicer and us, if a copy of the amendment is provided by us to each rating agency and if the rating agency condition has been satisfied, with the prior written consent of the trustee and, with respect to amendments that would increase ongoing financing costs as defined in the financing order, the consent or deemed consent of the PSC; provided, that such amendment may not adversely affect the interest of any bondholder in any material respect without the consent of the bondholders of a majority of the outstanding principal amount of bonds.  In addition, the servicing agreement may be amended with prior written notice to the trustee and the rating agencies, but without the consent of the trustee, the rating agencies or any bondholders, solely to address changes to the servicer’s method of calculating estimated CRR charge collections as a result of changes to the servicer’s current computerized customer information system, including changes which would replace the remittances contemplated by the estimation procedures set forth the servicing agreement with remittances of CRR charge collections determined to have been actually received, so long as any such amendment shall not have a material adverse effect on the bondholders.

Intercreditor Agreement

APCo is a party to a trade receivables purchase and sale arrangement under which it sells a portion of its accounts receivable owing by its customers in Virginia on a daily basis to an affiliate, which in turn sells percentage interests in such receivables to financial institutions.  APCo has been appointed such affiliate’s agent for purposes of collecting and servicing

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the receivables sold under this arrangement.  These receivables are collected and processed separately from APCo’s receivables owing by its West Virginia retail electric customers, and the CRR charges, which are owed solely by West Virginia customers, are not subject to this arrangement.  APCo has covenanted in the sale agreement that it will not enter into any future accounts receivable financing arrangements regarding its West Virginia customers without first entering into an intercreditor agreement, and the trustee and any investors in such accounts receivable financing arrangement would become parties thereto.  Such intercreditor agreement would provide, among other things, that (i) the CRR charges are excluded from the assets sold under the financing arrangement; (ii) in the event the accounts receivable investors have the right to replace APCo as collection agent upon the occurrence of certain events, such investors will not replace APCo without the consent of the trustee and (iii) in the event that the trustee at the request of the bondholders, has the right to replace APCo as servicer, the trustee will not replace APCo without the consent of the accounts receivable investors.  In the sale agreement, APCo has also covenanted that it will not enter into any future sale of charges owing by West Virginia customers to affiliates for the purpose of issuing bonds backed by such charges without causing the parties to such issuance to become party to an intercreditor agreement.  Please refer to “Risk Factors — Servicing Risks — If we need to replace APCo as the servicer, we may experience difficulties finding and using a replacement servicer.”

HOW A BANKRUPTCY MAY AFFECT YOUR INVESTMENT

Challenge to True Sale Treatment

APCo will represent and warrant that the transfer of the CRR property in accordance with the sale agreement constitutes a true and valid sale and assignment of that CRR property by APCo to us.  It will be a condition of closing for the sale of the CRR property pursuant to the sale agreement that APCo will take the appropriate actions under the Recovery Act, including filing a notice of transfer of an interest in the CRR property, to perfect this sale.  The Recovery Act provides that a transfer of CRR property by an electric utility to an assignee which the parties have in the governing documentation expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all the transferor’s right, title and interest, as in a “true sale” under applicable creditors’ rights principles, and not as a pledge or other financing, of the relevant CRR property.  We and APCo will treat such a transaction as a sale under applicable law.  However, we expect that bonds will be reflected as debt on APCo’s consolidated financial statements.  In addition, we anticipate that the bonds will be treated as debt of APCo for federal income tax purposes.  Please read “Material U.S. Federal Income Tax Consequences.”  In the event of a bankruptcy of a party to a sale agreement, if a party in interest in the bankruptcy were to take the position that the transfer of the CRR property to us pursuant to that sale agreement was a financing transaction and not a true sale under applicable creditors’ rights principles, there can be no assurance that a court would not adopt this position.  Even if a court did not ultimately recharacterize the transaction as a financing transaction, the mere commencement of a bankruptcy of APCo and the attendant possible uncertainty surrounding the treatment of the transaction could result in delays in payments on the bonds.

In that regard, we note that the bankruptcy court in In re:  LTV Steel Company, Inc., et al., 274 B.R. 278 (Bankr. N. D. Oh.  2001) issued an interim order that observed that a debtor, LTV Steel Company, which had previously entered into securitization arrangements with respect both to its inventory and its accounts receivable may have “at least some equitable interest in the inventory and receivables, and that this interest is property of the Debtor’s estate. . .  sufficient to support the entry of” an interim order permitting the debtor to use proceeds of the property sold in the securitization.  274 B.R. at 285.  The court based its decision in large part on its view of the equities of the case.

LTV and the securitization investors subsequently settled their dispute over the terms of the interim order and the bankruptcy court entered a final order in which the parties admitted and the court found that the pre-petition transactions constituted “true sales.”  The court did not otherwise overrule its earlier ruling.  The LTV memorandum opinion serves as an example of the pervasive equity powers of bankruptcy courts and the importance that such courts may ascribe to the goal of reorganization, particularly where the assets sold are integral to the ongoing operation of the debtor’s business.

Even if creditors did not challenge the sale of CRR property as a true sale, a bankruptcy filing by APCo could trigger a bankruptcy filing by us with similar negative consequences for bondholders.  In a recent bankruptcy case, In re General Growth Properties, Inc., General Growth Properties, Inc. filed for bankruptcy together with many of its direct and indirect subsidiaries, including many subsidiaries that were organized as special purpose vehicles.  The Southern District of New York bankruptcy court upheld the validity of the filings of these special purpose subsidiaries and allowed the subsidiaries, over the objections of their creditors, to use the lenders’ cash collateral to make loans to the parent for general corporate purposes.  The creditors received adequate protection in the form of current interest payments and replacement liens to mitigate any diminution in value resulting from the use of the cash collateral, but the opinion serves as a reminder that bankruptcy courts may subordinate legal rights of creditors to the interests of helping debtors reorganize.  In re Gen. Growth Props., Inc., 409 B.R. 43, 54 (Bankr. S.D.N.Y. 2009).

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We and APCo have attempted to mitigate the impact of a possible recharacterization of a sale of CRR property as a financing transaction under applicable creditors’ rights principles.  The sale agreement will provide that if the transfer of the applicable CRR property is thereafter recharacterized by a court as a financing transaction and not a true sale, the transfer by APCo will be deemed to have granted to us on behalf of ourselves and the trustee a first priority security interest in all APCo’s right, title and interest in and to the CRR property and all proceeds thereof.  In addition, the sale agreement will require the filing of a financing statement describing the CRR property and the proceeds thereof as collateral in accordance with the Recovery Act.  As a result of this filing, we would, in the event of a recharacterization, be a secured creditor of APCo and entitled to recover against the collateral or its value.  This does not, however, eliminate the risk of payment delays or reductions and other adverse effects caused by an APCo bankruptcy.  Further, if, for any reason, a proper financing statement is not filed under the Recovery Act or we fail to otherwise perfect our interest in the CRR property, and the transfer is thereafter deemed not to constitute a true sale, we would be an unsecured creditor of APCo.

The Recovery Act provides that the creation, granting, perfection and enforcement of liens and security interests in CRR property are governed by the Recovery Act and not by Article 9 of the West Virginia Uniform Commercial Code.  Under the Recovery Act, a valid and enforceable lien and security interest in CRR property may be created only by a financing order issued under the Recovery Act and the execution and delivery of a security agreement with a holder of consumer rate relief bonds or a trustee or agent for the holder.  The lien and security interest attaches automatically from the time value is received for the bonds.  Upon perfection through the filing of a financing statement with the Secretary of State of West Virginia pursuant to rules established by the Secretary of State of West Virginia, the security interest shall be a continuously perfected lien and security interest in the CRR property, with priority in the order of filing and take precedence over any subsequent judicial lien or other creditor.  None of this, however, mitigates the risk of payment delays and other adverse effects caused by an APCo bankruptcy.  Further, if, for any reason, a properly filed financing statement related to the CRR property is not filed under the Recovery Act or we fail to otherwise perfect our interest in the CRR property sold pursuant to the sale agreement, and the transfer is thereafter deemed not to constitute a true sale, we would be an unsecured creditor of APCo.

Consolidation of the Issuing Entity and APCo

If APCo were to become a debtor in a bankruptcy case, a party in interest might attempt to substantively consolidate the assets and liabilities of APCo and us.  We and APCo have taken steps to attempt to minimize this risk.  Please read “Appalachian Consumer Rate Relief Funding LLC, The Issuing Entity” in this prospectus.  However, no assurance can be given that if APCo were to become a debtor in a bankruptcy case, a court would not order that our assets and liabilities be substantively consolidated with those of APCo.  Substantive consolidation would result in payment of the claims of the beneficial owners of the bonds to be subject to substantial delay and to adjustment in timing and amount under a plan of reorganization in the bankruptcy case.

Status of CRR Property as Current Property

APCo will represent in the sale agreement, and the Recovery Act provides, that the CRR property sold pursuant to such sale agreement constitutes a current property right on the date that it is first transferred or pledged in connection with the issuance  of consumer rate relief bonds.  Nevertheless, no assurance can be given that, in the event of a bankruptcy of APCo, a court would not rule that the applicable CRR property comes into existence only as retail electric customers use electricity.

If a court were to accept the argument that the applicable CRR property comes into existence only as retail electric customers use electricity, no assurance can be given that a security interest in favor of the bondholders would attach to the CRR charges in respect of electricity consumed after the commencement of the bankruptcy case or that the CRR property has been sold to us.  If it were determined that the CRR property had not been sold to us, and the security interest in favor of the bondholders  did not attach to the applicable CRR charges in respect of electricity consumed after the commencement of the bankruptcy case, then we would have an unsecured claim against APCo.  If so, there would be delays and/or reductions in payments on the bonds.  Whether or not a court determined that CRR property had been sold to us pursuant to a sale agreement, no assurances can be given that a court would not rule that any CRR charges relating to electricity consumed after the commencement of the bankruptcy could not be transferred to us or the trustee.

In addition, in the event of a bankruptcy of APCo, a party in interest in the bankruptcy could assert that we should pay, or that we should be charged for, a portion of APCo’s costs associated with the transmission or distribution of the electricity, consumption of which gave rise to the CRR charge receipts used to make payments on the bonds.

Regardless of whether APCo is the debtor in a bankruptcy case, if a court were to accept the argument that CRR property sold pursuant to the sale agreement comes into existence only as customers use electricity, a tax or government lien or other nonconsensual lien on property of APCo arising before that CRR property came into existence could have priority over our interest in that CRR property.  Adjustments to the CRR charges may be available to mitigate this exposure, although there may be delays in implementing these adjustments.

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Estimation of Claims; Challenges to Indemnity Claims

If APCo were to become a debtor in a bankruptcy case, claims, including indemnity claims, by us or the trustee against APCo as seller under the sale agreement and the other documents executed in connection therewith would be unsecured claims and would be subject to being discharged in the bankruptcy case.  In addition, a party in interest in the bankruptcy may request that the bankruptcy court estimate any contingent claims that we or the trustee have against APCo.  That party may then take the position that these claims should be estimated at zero or at a low amount because the contingency giving rise to these claims is unlikely to occur.  If a court were to hold that the indemnity provisions were unenforceable, we would be left with a claim for actual damages against APCo based on breach of contract principles.  The actual amount of these damages would be subject to estimation and/or calculation by the court.

No assurances can be given as to the result of any of the above-described actions or claims.  Furthermore, no assurance can be given as to what percentage of their claims, if any, unsecured creditors would receive in any bankruptcy proceeding involving APCo.

Enforcement of Rights by the Trustee

Upon an event of default under the indenture, the Recovery Act permits the trustee to enforce the security interest in the CRR property sold pursuant to the sale agreement in accordance with the terms of the indenture.  In this capacity, the trustee or the PSC are permitted to request that a West Virginia court order the sequestration and payment to bondholders of all revenues arising with respect to the CRR property.  There can be no assurance, however, that a judge would issue this order after a seller bankruptcy in light of the automatic stay provisions of Section 362 of the United States Bankruptcy Code.  In that event, the trustee may under the indenture seek an order from the bankruptcy court lifting the automatic stay with respect to this action by the PSC or a district court judge and an order requiring an accounting and segregation of the revenues arising from the CRR property sold pursuant to the sale agreement.  There can be no assurance that a court would grant either order.

Bankruptcy of the Servicer

The servicer is entitled to commingle the CRR charges that it receives with its own funds until each date on which the servicer is required to remit funds to the trustee as specified in the servicing agreement.  The Recovery Act provides that the relative priority of a lien created under the Recovery Act is not defeated or adversely affected by the commingling of CRR charges arising with respect to the CRR property with funds of the electric utility.  In the event of a bankruptcy of the servicer, a party in interest in the bankruptcy might assert, and a court might rule, that the CRR charges commingled by the servicer with its own funds and held by the servicer, prior to and as of the date of bankruptcy were property of the servicer as of that date, and are therefore property of the servicer’s bankruptcy estate, rather than our property.  If the court so rules, then the court would likely rule that the trustee has only a general unsecured claim against the servicer for the amount of commingled CRR charges held as of that date and could not recover the commingled CRR charges held as of the date of the bankruptcy.

However, if the court were to rule on the ownership of the commingled CRR charges, the automatic stay arising upon the bankruptcy of the servicer could delay the trustee from receiving the commingled CRR charges held by the servicer as of the date of the bankruptcy until the court grants relief from the stay.  A court ruling on any request for relief from the stay could be delayed pending the court’s resolution of whether the commingled CRR charges are our property or are property of the servicer, including resolution of any tracing of proceeds issues.

The servicing agreement will provide that the trustee, as our assignee, together with the other persons specified therein, may vote to appoint a successor servicer that satisfies the rating agency condition.  The servicing agreement will also provide that the trustee, together with the other persons specified therein, may petition the PSC or a court of competent jurisdiction to appoint a successor servicer that meets this criterion.  However, the automatic stay in effect during a servicer bankruptcy might delay or prevent a successor servicer’s replacement of the servicer.  Even if a successor servicer may be appointed and may replace the servicer, a successor may be difficult to obtain and may not be capable of performing all of the duties that APCo as servicer was capable of performing.  Furthermore, should the servicer enter into bankruptcy, it may be permitted to stop acting as servicer.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

General

The following is a general discussion of the material federal income tax consequences of the purchase, ownership and disposition of the bonds.  Except as specifically provided below with respect to Non-U.S. Holders (as defined below), this discussion does not address the tax consequences to persons other than initial purchasers who are U.S. Holders (as defined

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below) that hold their bonds as capital assets within the meaning of section 1221 of the Internal Revenue Code, and it does not address all of the tax consequences relevant to investors that are subject to special treatment under the United States federal income tax laws (such as financial institutions, life insurance companies, retirement plans, regulated investment companies, persons who hold bonds as part of a “straddle,” a “hedge” or a “conversion transaction,” persons that have a “functional currency” other than the United States dollar, investors in pass-through entities and tax-exempt organizations).  This summary also does not address the consequences to holders of the bonds under state, local or foreign tax laws.  However, by acquiring a bond, a bondholder agrees to treat the bond as a debt of APCo to the extent consistent with applicable state, local and other tax law unless otherwise required by appropriate taxing authorities.

This summary is based on current provisions of the Internal Revenue Code, the Treasury Regulations promulgated and proposed thereunder, judicial decisions and published administrative rulings and pronouncements of the IRS and interpretations thereof.  All of these authorities and interpretations are subject to change, and any change may apply retroactively and affect the accuracy of the opinions, statements and conclusions set forth in this discussion.

U.S. Holder and Non-U.S. Holder Defined

A U.S. Holder means a beneficial owner of a bond that, for U.S. federal income tax purposes, is (i) a citizen or individual resident of the United States, (ii) a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source, or (iv) a trust if (A) a court in the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (B) it has a valid election in place to be treated as a U.S. person.  A Non-U.S. Holder means a beneficial owner of a bond that is not a U.S. Holder but does not include (i) an entity or arrangement treated as a partnership for U.S. federal income tax purposes, (ii) a former citizen of the United States or (iii) a former resident of the United States.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes is a holder of a bond, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership.  Partners are encouraged to consult their tax advisors about the particular U.S. federal income tax consequences applicable to them.  Similarly, former citizens and former residents of the United States are encouraged to consult their tax advisors about the particular U.S. federal income tax consequences that may be applicable to them.

ALL PROSPECTIVE INVESTORS ARE ENCOURAGED TO CONSULT THEIR TAX ADVISERS REGARDING THE FEDERAL INCOME TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF BONDS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY FOREIGN, STATE, LOCAL OR OTHER LAWS.

Taxation of the Issuing Entity and Characterization of the Consumer Rate Relief Bonds

Based on Revenue Procedure 2005-62, 2005-2 CB 507, it is the opinion of Sidley Austin LLP, as special tax counsel, that for U.S. federal income tax purposes, (1) we will not be treated as a taxable entity separate and apart from APCo and (2) the bonds will be treated as debt of APCo.  By acquiring a bond, a beneficial owner agrees to treat the bond as debt of APCo for U.S. federal income tax purposes.  This opinion is based on certain representations made by us and APCo, on the application of current law to the facts as established by the indenture and other relevant documents and assumes compliance with the indenture and such other documents as in effect on the date of issuance of the bonds.

Tax Consequences to U.S. Holders

Interest

Interest income on the bonds, payable at a fixed rate, will be includible in income by a U.S. Holder when it is received, in the case of a U.S. Holder using the cash receipts and disbursements method of tax accounting, or as it accrues, in the case of a U.S. Holder using the accrual method of tax accounting.  We expect that the bonds will not be issued with original issue discount.  If the bonds are issued with original issue discount, the prospectus supplement will address the material tax consequences of purchasing and holding bonds with original issue discount.

Sale or Retirement of Consumer Rate Relief Bonds

On a sale, exchange or retirement of a bond, a U.S. Holder will have taxable gain or loss equal to the difference between the amount received by the U.S. Holder and the U.S. Holder’s tax basis in the bond.  A U.S. Holder’s tax basis in a

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bond is the U.S. Holder’s cost, subject to adjustments such as reductions in basis for principal payments received previously.  Gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if the bond was held for more than one year at the time of disposition.  If a U.S. Holder sells the bond between interest payment dates, a portion of the amount received will reflect interest that has accrued on the bond but that has not yet been paid by the sale date.  To the extent that amount has not already been included in the U.S. Holder’s income, it will be treated as ordinary interest income and not as capital gain.

Tax Consequences to Non-U.S. Holders

Withholding Taxation on Interest

Subject to the discussions of backup withholding and recently enacted legislation below, payments of interest income on the bonds received by a Non-U.S. Holder that does not hold its bonds in connection with the conduct of a trade or business in the United States will generally not be subject to U.S. federal withholding tax, provided that the Non-U.S. Holder is not a bank that acquires the bonds as part of its business of making loans, does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote or is not a controlled foreign corporation that is related to us through stock ownership and the withholding agent receives:

· from a Non-U.S. Holder appropriate documentation to treat the payment as made to a foreign beneficial owner under Treasury Regulations issued under section 1441 of the Internal Revenue Code;

· a withholding certificate from a person claiming to be a foreign partnership and the foreign partnership has received appropriate documentation to treat the payment as made to a foreign beneficial owner in accordance with these Treasury Regulations;

· a withholding certificate from a person representing to be a “qualified intermediary” that has assumed primary withholding responsibility under these Treasury Regulations and the qualified intermediary has received appropriate documentation from a foreign beneficial owner in accordance with its agreement with the IRS; or

· a statement, under penalties of perjury from an authorized representative of a financial institution, stating that the financial institution has received from the beneficial owner a withholding certificate described in these Treasury Regulations or that it has received a similar statement from another financial institution acting on behalf of the foreign beneficial owner and a copy of such withholding certificate.

In general, it will not be necessary for a Non-U.S. Holder to obtain or furnish a United States taxpayer identification number to APCo or its paying agent in order to claim the foregoing exemption from United States withholding tax on payments of interest.  Interest paid to a Non-U.S. Holder will be subject to a United States withholding tax of 30% upon the actual payment of interest income, except as described above and except where an applicable income tax treaty provides for the reduction or elimination of the withholding tax and the Non-U.S. Holder provides a withholding certificate properly establishing such reduction of exemption.  A Non-U.S. Holder generally will be taxable in the same manner as a United States corporation or resident with respect to interest income if the income is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States).  Effectively connected income received by a Non-U.S. Holder that is a corporation may in some circumstances be subject to an additional “branch profits tax” at a30%rate, or if applicable, a lower rate provided by an income tax treaty.  To avoid having the 30% withholding tax imposed on effectively connected interest income, the Non-U.S. Holder must provide a withholding certificate on which the Non-U.S. Holder certifies, among other facts, that payments on the bonds are effectively connected with the conduct of a trade or business in the United States.

Capital Gains Tax Issues

Subject to the discussions of backup withholding and recently enacted legislation below, a Non-U.S. Holder generally will not be subject to United States federal income or withholding tax on gain realized on the sale or exchange of bonds, unless:

· the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year and this gain is from United States sources; or

· the gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States).

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Backup Withholding

Backup withholding of United States federal income tax may apply to payments made in respect of the bonds to registered owners who are not “exempt recipients” and who fail to provide certain identifying information (such as the registered owner’s taxpayer identification number) in the required manner.  Generally, individuals are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients.  Payments made in respect of the bonds to a U.S. Holder must be reported to the IRS, unless the U.S. Holder is an exempt recipient or establishes an exemption.  A U.S. Holder can obtain a complete exemption from the backup withholding tax by providing a properly completed Form W-9 (Payer’s Request for Taxpayer Identification Number and Certification).  Compliance with the identification procedures described above under “—Tax Consequences to Non-U.S. Holders—Withholding Taxation on Interest” would establish an exemption from backup withholding for those Non-U.S. Holders who are not exempt recipients.

In addition, backup withholding of United States federal income tax may apply upon the sale of a bond to (or through) a broker, unless either (1) the broker determines that the seller is a corporation or other exempt recipient or (2) the seller provides, in the required manner, certain identifying information and, in the case of a Non-U.S. Holder, certifies that the seller is a Non-U.S. Holder (and certain other conditions are met).  The sale may also be reported by the broker to the IRS, unless either (a) the broker determines that the seller is an exempt recipient or (b) the seller certifies its non-U.S. status (and certain other conditions are met).  Certification of the seller’s non-U.S. status would be made normally on an IRS Form W-8BEN signed under penalty of perjury, although in certain cases it may be possible to submit other documentary evidence.  A sale of a bond to (or through) a non-U.S. office of a broker generally will not be subject to information reporting or backup withholding unless the broker is a United States person or has certain connections to the United States.

Any amounts withheld under the backup withholding rules from a payment to a beneficial owner would be allowed as a refund or a credit against such beneficial owner’s U.S. federal income tax provided the required information is timely furnished to the IRS.

Recently Enacted Legislation

Recently enacted legislation imposes a 3.8% tax on the net investment income (which includes interest and any gains from a disposition of bonds) of certain U.S. Holders who are individuals, trusts and estates.

Recently enacted legislation will impose a 30% withholding tax on bond payments made to foreign entities and intermediaries unless they comply with reporting obligations that require them to identify to the IRS accounts and investments held for U.S. persons.  This tax will apply to interest paid after June 30, 2014, and to gross proceeds, including the return of principal, from the sale, exchange or retirement of a bond made after December 31, 2016.  In general, under a grandfathering provision, the withholding tax will not apply to obligations that are issued prior to July 1, 2014. Thus, the withholding tax should not apply to the bonds unless the bonds are modified on or after July 1, 2014 in such a way that they are considered to be re-issued for U.S. federal income tax purposes. In that case, the 30% withholding tax would apply to interest payments and gross proceeds payments with respect to the bonds as described above.  U.S. Holders that own their interests in a bond through foreign entities and intermediaries, and Non-U.S. Holders are encouraged to consult their tax advisor regarding foreign account tax compliance.

ERISA CONSIDERATIONS

General

The Employee Retirement Income Security Act of 1974, known as ERISA, and Section 4975 of the Internal Revenue Code impose certain requirements on plans subject to ERISA or Section 4975 of the Internal Revenue Code.  ERISA and the Internal Revenue Code also impose certain requirements on fiduciaries of a plan in connection with the investment of the assets of the plan.  For purposes of this discussion, “plans” include employee benefit plans and other plans and arrangements that provide retirement income, including individual retirement accounts and annuities and Keogh plans, as well as some collective investment funds and insurance company general or separate accounts or other entities in which the assets of those plans, accounts or arrangements are invested.  A fiduciary of an investing plan is any person who in connection with the assets of the plan:

· has discretionary authority or control over the management or disposition of assets, or

· provides investment advice for a fee.

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Some plans, such as governmental plans, and certain church plans, and the fiduciaries of those plans, are not subject to ERISA requirements.  Accordingly, assets of these plans may be invested in the bonds without regard to the ERISA considerations described below, subject to the provisions of other applicable federal and state law.  Any such plan which is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code, however, is subject to the prohibited transaction rules in Section 503 of the Internal Revenue Code.

ERISA imposes certain general fiduciary requirements on fiduciaries, including:

· investment prudence and diversification, and

· the investment of the assets of the plan in accordance with the documents governing the plan.

Section 406 of ERISA and Section 4975 of the Internal Revenue Code also prohibit a broad range of transactions involving the assets of a plan and persons who have certain specified relationships to the plan, referred to as “parties in interest,” unless a statutory or administrative exemption is available.  Parties in interest include parties in interest under ERISA and disqualified persons under the Internal Revenue Code.  The types of transactions that are prohibited include:

· sales, exchanges or leases of property;

· loans or other extensions of credit; and

· the furnishing of goods or services.

Certain persons that participate in a prohibited transaction may be subject to an excise tax under Section 4975 of the Internal Revenue Code or a penalty imposed under Section 501(i) of ERISA, unless a statutory or administrative exemption is available.  In addition, the persons involved in the prohibited transaction may have to cancel the transaction and pay an amount to the plan for any losses realized by the plan or profits realized by these persons.  In addition, individual retirement accounts involved in the prohibited transaction may be disqualified which would result in adverse tax consequences to the owner of the account.

Regulation of Assets Included in a Plan

A fiduciary’s investment of the assets of a plan in the bonds may cause our assets to be deemed assets of the plan.  Section 2510.3-101 of the regulations of the United States Department of Labor, as modified by Section 3(42) of ERISA (the “plan asset regulations”), provides that the assets of an entity will be deemed to be assets of a plan that purchases an interest in the entity if the interest that is purchased by the plan is an equity interest, equity participation by benefit plan investors is significant and none of the other exceptions contained in Section 2510.3-101 of the regulations applies.  An equity interest is defined in Section 2510.3-101 of the regulations as an interest in an entity other than an instrument which is treated as indebtedness under applicable local law and which has no substantial equity features.  Although there is no authority directly on point and unless otherwise stated in the prospectus supplement, it is anticipated that the bonds will be treated as indebtedness under local law without any substantial equity features.

If the bonds were deemed to be equity interests in us and none of the exceptions contained in Section 2510.3-101 of the regulations were applicable, then our assets would be considered to be assets of any plans that purchase the bonds.  The extent to which the bonds are owned by benefit plan investors (as defined in the plan asset regulations) will not be monitored.  If our assets were deemed to constitute “plan assets” pursuant to Section 2510.3-101 of the regulations, transactions we might enter into, or may have entered into in the ordinary course of business, might constitute non-exempt prohibited transactions under ERISA and or Section 4975 of the Internal Revenue Code.

In addition, the acquisition or holding of the bonds by or on behalf of a plan could give rise to a prohibited transaction if we or the trustee, APCo, any other servicer, AEP, any underwriter or certain of their affiliates has, or acquires, a relationship to an investing plan.  Each purchaser of a bond will be deemed to have represented and warranted by virtue of its acquisition and holding of a bond that either (1) it is not and is not acting on behalf of, or using assets of, an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, a plan (as defined in Section 4975(e)(1) of the Internal Revenue Code) that is subject to Section 4975 of the Internal Revenue Code or an entity that holds or is deemed to hold the assets of such an employee benefit plan or plan by virtue of such employee benefit plan’s or plan’s investment in such entity or (2) its purchase and holding of the bond will not result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.

Before purchasing any bonds by or on behalf of a plan, you should consider whether the purchase and holding of bonds might result in a prohibited transaction under ERISA or Section 4975 of the Internal Revenue Code and, if so, whether any prohibited transaction exemption might apply to the purchase and holding of the bonds.

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Prohibited Transaction Exemptions

If you are a fiduciary of a plan or any other person proposing to purchase the bonds on behalf of or using assets of a plan, before purchasing any bonds, you should consider the availability of one of the Department of Labor’s prohibited transaction class exemptions, referred to as PTCEs, or one of the statutory exemptions provided by ERISA or Section 4975 of the Internal Revenue Code, which include:

· PTCE 75-1, which exempts certain transactions between a plan and certain broker-dealers, reporting dealers and banks;

· PTCE 84-14, which exempts certain transactions effected on behalf of a plan by a “qualified professional asset manager;”

· PTCE 90-1, which exempts certain transactions between insurance company separate accounts and parties in interest;

· PTCE 91-38, which exempts certain transactions between bank collective investment funds and parties in interest;

· PTCE 95-60, which exempts certain transactions between insurance company general accounts and parties in interest;

· PTCE 96-23, which exempts certain transactions effected on behalf of a plan by an “in-house asset manager;” and

· the statutory service provider exemption provided by Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Internal Revenue Code, which exempts certain transactions between plans and parties in interest that are not fiduciaries with respect to the transaction.

We cannot provide any assurance that any of these class exemptions or statutory exemptions will apply with respect to any particular investment in the bonds by, on behalf of, or using assets of a plan or, even if it were deemed to apply, that any exemption would apply to all transactions that may occur in connection with the investment.  Even if one of these class exemptions or statutory exemptions were deemed to apply, bonds may not be purchased with assets of any plan if we or the trustee, APCo, any other servicer, AEP, any underwriter or any of their affiliates:

· has investment discretion over the assets of the plan used to purchase the bonds;

· has authority or responsibility to give, or regularly gives, investment advice regarding the assets of the plan used to purchase the bonds, for a fee and under an agreement or understanding that the advice will serve as a primary basis for investment decisions for the assets of the plan, and will be based on the particular investment needs of the plan; or

· unless PTCE 90-1 or 91-38 applied to the purchase and holding of the bonds, is an employer maintaining or contributing to the plan.

Consultation with Counsel

If you are a fiduciary of a plan or any other person which proposes to purchase the bonds on behalf of or with assets of a plan, you should consult with your legal counsel as to the potential applicability of the plan asset regulations, the general fiduciary responsibility provisions of ERISA or the prohibited transaction provisions of ERISA and Section 4975 of the Internal Revenue Code to any such investment and the availability of any prohibited transaction exemption in connection with any investment.

PLAN OF DISTRIBUTION

We may sell the bonds to or through the underwriters named in the prospectus supplement by a negotiated firm commitment underwriting and public reoffering by the underwriters or another underwriting arrangement specified in the prospectus supplement.  We may also offer or place the bonds either directly or through agents.  We intend that bonds will be offered through these various methods from time to time and that offerings may be made concurrently through more than one of these methods or that an offering of the bonds may be made through a combination of these methods.

The distribution of the bonds may be effected in one or more transactions at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to prevailing market prices or in negotiated transactions or otherwise at varying prices to be determined at the time of sale.

In connection with the sale of the bonds, underwriters or agents may receive compensation in the form of discounts, concessions or commissions.  Underwriters may sell bonds to dealers at prices less a concession.  Underwriters may allow, and the dealers may reallow, a concession to other dealers.  Underwriters, dealers and agents that participate in the distribution of the bonds may be deemed to be underwriters and any discounts or commissions received by them from the issuing entity and

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any profit on the resale of the bonds by them may be deemed to be underwriting discounts and commissions under the Securities Act of 1933.  We will identify any of these underwriters or agents, and describe any compensation we give them, in the prospectus supplement.

RATINGS FOR THE CONSUMER RATE RELIEF BONDS

We expect that the bonds will receive credit ratings from two NRSROs.  A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning NRSRO.  Each rating should be evaluated independently of any other rating.  No person is obligated to maintain the rating on any bonds and, accordingly, we can give no assurance that the ratings assigned to any tranche of the bonds upon initial issuance will not be lowered or withdrawn by a NRSRO at any time thereafter.  If a rating of any  tranche of bonds is lowered or withdrawn, the liquidity of this tranche of the bonds may be adversely affected.  In general, ratings address credit risk and do not represent any assessment of any particular rate of principal payments on the bonds other than the payment in full of each  tranche of the bonds by the final maturity date or tranche final maturity date, as well as the timely payment of interest.

Under Rule 17g-5 of the Exchange Act, NRSROs providing the sponsor with the requisite certification will have access to all information posted on a website by the sponsor for the purpose of determining the initial rating and monitoring the rating after the closing date in respect of the bonds.  As a result, an NRSRO other than the NRSRO hired by the sponsor (hired NRSRO) may issue ratings on the bonds (Unsolicited Ratings), which may be lower, and could be significantly lower, than the ratings assigned by the hired NRSROs.  The Unsolicited Ratings may be issued prior to, or after, the closing date in respect of the bonds.  Issuance of any Unsolicited Rating will not affect the issuance of the bonds.  Issuance of an Unsolicited Rating lower than the ratings assigned by the hired NRSRO on the bonds might adversely affect the value of the bonds and, for regulated entities, could affect the status of the bonds as a legal investment or the capital treatment of the bonds.  Investors in the bonds should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO.

A portion of the fees paid by APCo to a NRSRO which is hired to assign a rating on the bonds is contingent upon the issuance of the bonds.  In addition to the fees paid by APCo to a NRSRO at closing, APCo will pay a fee to the NRSRO for ongoing surveillance for so long as the bonds are outstanding.  However, no NRSRO is under any obligation to continue to monitor or provide a rating on the bonds.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement we and APCo have filed with the SEC relating to the bonds.  This prospectus and each prospectus supplement describe the material terms of some of the documents we have filed as exhibits to the registration statement.  However, this prospectus and each prospectus supplement do not contain all of the information contained in the registration statement and the exhibits.  Any statements contained in this prospectus or the prospectus supplement concerning the provisions of any document filed as an exhibit to the registration statement or otherwise filed with the SEC are not necessarily complete.  Each statement concerning those provisions is qualified in its entirety by reference to the respective exhibit.  Information filed with the SEC can be inspected at the SEC’s Internet site located at http://www.sec.gov.  You may also read and copy the registration statement, the exhibits and any other documents we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549.  You may obtain further information regarding the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330.  You may also obtain a copy of our filings with the SEC at no cost, by writing to or telephoning us at the following address:

Appalachian Consumer Rate Relief Funding LLC

One Riverside Plaza

28th Floor

Columbus, Ohio 43215

(614) 716-3627

Our SEC Securities Act file number is 333-191392 and 333-191392-01.

We or APCo as sponsor will also file with the SEC all of the periodic reports we or the sponsor are required to file under the Securities Exchange Act and the rules, regulations or orders of the SEC thereunder; however, neither we nor APCo as sponsor intend to file any such reports relating to the bonds following completion of the reporting period required by Rule 15d-1 or Regulation 15D  under the Exchange Act, unless required by law.  Unless specifically stated in the report, the reports and any information included in the report will neither be examined nor reported on by an independent public accountant.  A more detailed description of the information to be included in these periodic reports, please read “Description of the Consumer Rate Relief Bonds—Website Disclosure.”

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The SEC allows us to “incorporate by reference” into this prospectus information we or the sponsor file with the SEC.  This means we can disclose important information to you by referring you to the documents containing the information.  The information we incorporate by reference is considered to be part of this prospectus, unless we update or supersede that information by the information contained in a prospectus supplement or information that we or the sponsor file subsequently that is incorporated by reference into this prospectus.  We are incorporating into this prospectus any future filings which we or APCo, solely in its capacity as our sponsor, make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act until the offering of the bonds is completed.  These reports will be filed under our own name as issuing entity.  Any statement contained in this prospectus, in the prospectus supplement or in a document incorporated or deemed to be incorporated by reference in this prospectus or the prospectus supplement will be deemed to be modified or superseded for purposes of this prospectus and the prospectus supplement to the extent that a statement contained in this prospectus, the prospectus supplement or in any separately filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes that statement.  Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute part of this prospectus or the prospectus supplement.

LEGAL MATTERS

Certain legal matters relating to the bonds, including certain federal income tax matters, will be passed on by Sidley Austin LLP, counsel to APCo and us.  Certain other legal matters relating to the bonds will be passed on by Robinson & McElwee, PLLC, West Virginia regulatory counsel to APCo and us, by Jackson Kelly PLLC, West Virginia counsel to APCo and us, by Richards, Layton & Finger, special Delaware counsel to us, and by Hunton & Williams LLP, counsel to the underwriters. Hunton & Williams LLP acts as counsel to our affiliates from time to time.

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GLOSSARY OF DEFINED TERMS

Set forth below is a list of the defined terms used in this prospectus which, except as otherwise noted in a prospectus supplement, are also used in the prospectus supplement:

AEP means American Electric Power Company, Inc.

APCo means Appalachian Power Company.

Bankruptcy Code means Title 11 of the United States Code, as amended.

Basic documents means the Administration Agreement, Sale Agreement and the bill of sale, the LLC agreement, the Servicing Agreement, Indenture, any Intercreditor Agreement, the series supplement, the letter of representations, the underwriting agreement and all other documents and certificates delivered in connection with the offering.

Business day means any day other than a Saturday, a Sunday or a day on which banking institutions in Charleston, West Virginia, New York, New York, or Columbus, Ohio are, or DTC or the office of the trustee is, authorized or obligated by law, regulation or executive order to remain closed.

Clearstream means Clearstream Banking, Luxembourg, S.A.

Collateral means all of our assets pledged to the trustee for the benefit of the holders of the bonds, which includes the CRR property, all rights of the issuing entity under the sale agreement, the servicing agreement and the other documents entered into in connection with the bonds, all rights to the collection account and the subaccounts of the collection account, and all other property of the issuing entity relating to the bonds, including all proceeds.

Collection account means the segregated trust account relating to the bonds designated the collection account  and held by the trustee under the indenture.

CRR charges means, with regard to APCo, the amounts authorized in the financing order to be collected from retail electric customers in order to pay and secure the debt service payments on the bonds and associated financing costs.  CRR charges shall not include any local tax surcharge or other tax adjustment that APCo or any successor servicer is entitled to (and does) include in its bills to retail electric customers for the benefit of any municipal corporation, other tax levying corporation or other governmental authority, notwithstanding that a portion of such surcharges or adjustments may be computed on the basis of the CRR charges included in such bills, and all such tax surcharges or tax adjustments, including any compensation for additional state gross receipts taxes resulting therefrom, shall belong to APCo or the successor servicer, as applicable, for the benefit of the applicable tax levying corporation or governmental authority, and APCo (or such successor servicer, as applicable) shall retain sole responsibility to cause such adjustments and surcharges to be forwarded to the applicable governmental authority.  If, for any reason APCo or any successor servicer is no longer including any such tax surcharges or adjustments in its bills to retail electric customers or we are otherwise responsible for payment of any taxes, franchise fees or license fees imposed on CRR charges, then the CRR charges shall be grossed up in accordance with Section 24-2-4f(b)(11)(G) of the Recovery Act to include any such taxes, franchise fees or license fees.

CRR property means, with regard to APCo or an issuing entity (such as us), all of APCo’s property right, title, and interest in and to certain property established pursuant to a financing order which is then transferred to the issuing entity (such as us), including the irrevocable right to impose, charge and collect CRR charges payable by existing and future retail electric customers (other than certain exempted customers) in an amount sufficient to pay the principal and interest on the bonds and ongoing financing costs and to make deposits to the various subaccounts within the collection account and including the right to obtain true-up adjustments to those charges, and any revenues, receipts, collections, rights to payment, payments, moneys, claims, or other proceeds arising from the rights and interests created under the financing order; provided, that CRR Property shall not include any local tax surcharge or other tax adjustments which are excluded from the definition of CRR Charges.  Unless the context otherwise requires, when we refer to CRR property in this prospectus we mean the CRR property authorized under the financing order.

CRR rate class means one of the eleven separate rate classes to whom CRR charges are allocated for ratemaking purpose in accordance with the financing order.

CRR revenue group means a group of retail electric customers consisting of residential customers, commercial customers or industrial customers, as the case may be.

DTC means The Depository Trust Company and its nominee holder, Cede & Co. or any successor thereto.

Eligible institution means (a) the corporate trust department of the trustee, so long as any of the securities of the trustee have either a short-term credit rating from Moody’s of at least “P-1” or a long-term unsecured debt rating from Moody’s of at least “A2” and have a credit rating from each other rating agency in one of its generic rating categories which signifies investment grade; or (b) a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank), which (i) has either (A) a long-term issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s or (B) a short-term issuer rating of “A-1+” or higher by S&P and “P-1” or higher by Moody’s or any other long-term, short-term or certificate of deposit rating acceptable to the rating agencies and (ii) whose deposits are insured by the FDIC.  If so qualified under clause (b) above, the trustee may be considered an eligible institution for clause (a) above.

ENEC Costs means the expanded net energy costs allowed to be recovered by APCo or Wheeling Power.

ERISA means the Employee Retirement Income Security Act of 1974, as amended.

Euroclear means the Euroclear System.

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Excess funds subaccount means that subaccount of the collection account into which funds collected by the servicer in excess of amounts necessary to make the payments specified on a given payment date.

Exchange Act means the Securities Exchange Act of 1934, as amended.

Financing order means, unless the context indicates otherwise, the final financing order issued by the PSC to APCo on September 20, 2013, Case No. 12-1188-E-PC authorizing the creation of the CRR property.

Indenture means the indenture to be entered into between the issuing entity and the trustee, providing for the issuance of bonds, as the same may be amended and supplemented from time to time.

Intercreditor agreement means any intercreditor agreement that may be entered into among the issuing entity, the trustee, the servicer, and certain other parties to accounts receivable financing arrangements or other issuances, if any, similar to the bonds by other subsidiaries of the servicer, whereby the servicer acts as a collection agent or servicer on behalf of third parties for amounts to be collected from customers along with the CRR Charges.

Internal Revenue Code means the Internal Revenue Code of 1986, as amended.

Issuing entity means Appalachian Consumer Rate Relief Funding LLC.

kW means kilowatt.

kWh means kilowatt-hour.

Moody’s means Moody’s Investors Service, Inc. or any successor in interest.

MWh means megawatt-hour.

Nonbypassable means that the payment of CRR charges must be paid by any West Virginia retail electric customer that receives electric delivery service from APCo or its successors for as long as the bonds are outstanding, subject to very limited exceptions provided in the financing order.

Non-U.S. Holder means a holder of bonds that is neither a U.S. Holder nor subject to rules applicable to former citizens and residents of the United States.

NRSRO means a nationally recognized statistical rating organization.

Ongoing financing costs means the costs of servicing the bonds over their life, and includes administration fees, servicer fees, replenishment of the capital subaccount (if required), trustee, legal, accounting and rating agency fees, and miscellaneous fees and expenses relating to servicing the bonds.  Ongoing financing costs also include payment to APCo of a return on its equity investment equal to 5.85% per annum on the initial amount deposited by it into the capital subaccount.

Payment date means the date or dates on which interest and principal are to be payable on the bonds.

PSC means the Public Service Commission of West Virginia.

PTCE means a prohibited transaction class exemption of the United States Department of Labor.

Rating agencies means Moody’s and S&P .

Rating agency condition means, with respect to any action, not less than ten business days’ prior written notification to each rating agency of such action, and written confirmation from each of S&P and Moody’s to the servicer, the trustee and us that such action will not result in a suspension, reduction or withdrawal of the then current rating by such rating agency of any tranche of the bonds issued by us and that prior to the taking of the proposed action no other rating agency shall have provided written notice to us that such action has resulted or would result in the suspension, reduction or withdrawal of the then current rating of any such tranche of bonds; provided, that if within such ten business day period, any rating agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such rating agency is reviewing and considering the notification, then (i) we shall be required to confirm that such rating agency has received the rating agency condition request, and if it has, promptly request the related rating agency condition confirmation and (ii) if the rating agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five business days following such second request, the applicable rating agency condition requirement shall not be deemed to apply to such rating agency.  For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a rating agency’s right to review or consent).

Record date means the date or dates with respect to each payment date on which it is determined the person in whose name each bond is registered will be paid on the respective payment date.

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Recovery Act means the Code of West Virginia, 1931, Section 24-2-4f, as amended from time to time.

Regulation AB means the rules of the SEC promulgated under Subpart 229.1100 – Asset-Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such may be amended from time to time.

Required capital level means the amount required to be funded in the capital subaccount, which will equal 0.50% of the initial principal amount of the bonds issued by us unless otherwise specified in the prospectus supplement.

Retail electric customer means a retail user of electricity and related services provided by APCo or its successors in the state of West Virginia.

S&P means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business or any successor in interest.

Sale agreement means the CRR property purchase and sale agreement to be entered into between the issuing entity and APCo, pursuant to which APCo sells and Appalachian Consumer Rate Relief Funding LLC buys the CRR property.

Service territory means, with regard to APCo, the service area in the state of West Virginia of APCo or its successors within which APCo may recover consumer rate relief costs through nonbypassable CRR charges assessed on retail electric customers within that area.

Series supplement means the indenture supplement to the indenture that authorizes the issuance of the bonds.

Servicer means APCo, acting as the servicer, and any successor servicer, which will service the CRR property under a servicing agreement with the issuing entity.

Servicing agreement means the CRR property servicing agreement to be entered into between the issuing entity and APCo, as the same may be amended and supplemented from time to time, pursuant to which APCo undertakes to service the CRR property.

Treasury Regulations means proposed or issued regulations promulgated from time to time under the Internal Revenue Code.

True-up means an adjustment to the CRR charges pursuant to the true-up mechanism.

True-up Mechanism means the mechanism required by the Recovery Act and the financing order whereby the servicer will apply to the PSC for adjustments to the applicable CRR charges based on actual collected CRR charges and updated assumptions by the servicer as to future collections of CRR charges.  The PSC will approve properly filed adjustments.  Adjustments will immediately be reflected in the customers’ next billing cycle.

Trust Indenture Act means the Trust Indenture Act of 1939, as amended.

U.S. Holder means a holder of a bond that is (i) a citizen or resident of the United States.  (ii) a partnership or corporation (or other entity treated like a corporation for federal income tax purposes) organized in or under the laws of the United States, any State thereof or the District of Columbia, (iii) an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source, (iv) a trust with respect to which both (A) a court in the United States is able to exercise primary authority over its administration and (B) one or more United States persons have the authority to control all of its substantial decisions or (v) a trust that has elected to be treated as a United States person under applicable Treasury Regulations.

Wheeling Power means Wheeling Power Company.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*

The following is an itemized list of the estimated expenses to be incurred in connection with the offering of the securities being offered hereunder other than underwriting discounts and commissions.

Registration Fee	$	49,201.60
Printing Expenses		30,000.00
Trustee Fees and Expenses		14,000.00
Legal Fees and Expenses		1,723,000.00
Accountants’ Fees and Expenses		170,000.00
Rating Agencies’ Fees and Expenses		371,231.00
Miscellaneous		694,984.40
Total	$	3,052,417.00

ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC

Section 18-108 of the Delaware Limited Liability Company Act provides that subject to such standards and restrictions, if any, as are set forth in the limited liability company agreement of a limited liability company, a limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever.  Under our limited liability company agreement, we will indemnify our managers to the fullest extent permitted by law against any liability incurred with respect to their services as managers under our limited liability company agreement, except for liabilities arising from their own fraud, gross negligence or willful misconduct.

APPALACHIAN POWER COMPANY

The Bylaws of Appalachian Power Company (the “Company”)  provide that the Company shall indemnify any person who was or is a party to any threatened, pending or completed action, suit or proceeding because such person is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability in connection with such proceeding if (a) such person conducted him or herself in good faith; (b) such person believed, in the case of conduct in such person’s official capacity with the Company (as defined), that his or her conduct was in the best interests of the Company, and, in all other cases, that his or her conduct was at least not opposed to its best interests; (c) with respect to any criminal action or proceeding, such person had no reasonable cause to believe his or her conduct was unlawful; and (d) such person was not grossly negligent or guilty of willful misconduct.  Such indemnification in connection with a proceeding by or in the right of the Company is limited to reasonable expenses incurred in connection with the proceeding.  Any such indemnification (unless ordered by a court) shall be made by the Company only as authorized in the specific case upon a determination that indemnification of the director is proper in the circumstances because such person has met the applicable standard of conduct.

Section 13.1-698 of the Code of Virginia provides that unless limited by the articles of incorporation, a corporation shall indemnify a director who entirely prevails in the defense of any proceeding to which such person was a party because such person is or was a director of the corporation against reasonable expenses incurred in connection with such proceeding.  Section 13.1-699 provides that a corporation may pay for or reimburse reasonable expenses incurred by a director who is a party to such a proceeding in advance of final disposition of such proceeding if (a) the director furnishes a signed written statement of his or her good faith belief that the standard of conduct described in Section 13.1-697 has been met; and (b) the director furnishes the corporation a signed written undertaking by or on behalf of the director to repay any funds advanced if the director is not entitled to mandatory

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indemnification under Section 13.1.698 and it is ultimately determined under Sections 13.1.700.1 or 13.1-701 that the director has not met the relevant standard of conduct.  Section 13.1-700.1 provides procedures which allow directors to apply to a court for an order directing advances, reimbursement or indemnification.

Section 13.1-702 provides that unless limited by the articles of incorporation, (a) officers are entitled to mandatory indemnification under Section 13.1-698 and to apply for court ordered indemnification under Section 13.1-700.1 to the same extent as a director, and (b) that a corporation may indemnify and advance expenses to an officer to the same extent as to a director.  Section 13.1-704 provides that any corporation shall have the power to make any further indemnity to any director or officer that may be authorized by the articles of incorporation or any bylaw made by the stockholders or any resolution adopted, before or after the event, by the stockholders, except an indemnity against willful misconduct or a knowing violation of criminal law.  Any such provision that obligates the corporation to provide indemnification to the fullest extent permitted by law shall be deemed, unless the articles of incorporation or any such bylaw or resolution expressly provides otherwise, also to obligate the corporation to advance funds to pay for or reimburse expenses to the fullest extent permitted by law except that the applicable standard shall be conduct that does not constitute willful misconduct or a knowing violation of criminal law.

The above is a general summary of certain provisions of the Company’s Bylaws and the Code of Virginia and is subject in all respects to the specific and detailed provisions of the Company’s Bylaws and the Code of Virginia.

Reference is made to the Underwriting Agreement to be filed as Exhibit 1.1 hereto, which provides for indemnification of the Company, certain of its directors and officers, and persons who control the Company, under certain circumstances.

The Company maintains insurance policies insuring its directors and officers against certain obligations that may be incurred by them.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENTS

(a)           All financial statements, schedules and historical financial information have been omitted as they are not applicable.

1.1 Form of Underwriting Agreement.

3.1 Certification of Formation of Appalachian Consumer Rate Relief Funding LLC.*

3.2 Form of Amended and Restated Limited Liability Company Agreement of Appalachian Consumer Rate Relief Funding LLC.

4.1 Form of Indenture between Appalachian Consumer Rate Relief Funding LLC and the Indenture Trustee (including forms of the Senior Secured Consumer Rate Relief Bonds).

5.1 Opinion of Sidley Austin llp with respect to legality.

8.1 Opinion of Sidley Austin llp with respect to federal tax matters.

23.1 Consent of Sidley Austin llp (included in its opinions filed as Exhibits 5.1 and 8.1).

24.1 Power of Attorney and Resolutions of Appalachian Power Company.

24.2 Power of Attorney and Resolutions of Appalachian Consumer Rate Relief Funding LLC.

25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of U.S. Bank National Association.

99.1 Form of Servicing Agreement.

99.2 Form of Consumer Rate Relief Property Sale Agreement.

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99.3 Form of Administration Agreement.

99.4 Financing Order.*

99.5 Form of Opinion of Sidley Austin LLP with respect to constitutional matters.

99.6 Form of Opinion of Jackson Kelly, PLLC with respect to constitutional matters.

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* Filed on September 26, 2013.

ITEM 17.  UNDERTAKINGS

(A) (a) As to Rule 415:

Each undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made of the securities registered hereby, a post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);

(ii) to reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b), if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

(iii) to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement;

provided, however, that the undertakings set forth in clauses (i), (ii) and (iii) above do not apply if the information required to be included in a post-effective amendment by those clauses is contained in reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are incorporated by reference in this registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) of the Securities Act that is part of this registration statement; and provided further, however, that the undertakings set forth in clauses (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those clauses is provided pursuant to Item 1100(c) of Regulation AB.

(2) That, for the purpose of determining any liability under the Securities Act each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act to any purchaser, if the Registrants are relying on Rule 430B:

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(i) each prospectus filed by the Registrants pursuant to Rule 424(b)(3), shall be deemed to be part of this registration statement as of the date the filed prospectus was deemed part of and included in this registration statement; and

(ii) each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in this registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.

(5) That for purposes of determining liability of the Registrants under the Securities Act to any purchaser in the initial distribution of the securities, each Registrant undertakes that in a primary offering of securities of such Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the Registrants will be sellers to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) any preliminary prospectus or prospectus of the undersigned Registrants relating to the offering required to be filed pursuant to Rule 424;

(ii) any free writing prospectus relating to the offering prepared by or on behalf of the Registrants or used or referred to by the Registrants;

(iii) the portion of any other free writing prospectus relating to the offering containing material information about the Registrants or the securities provided by or on behalf of the Registrants; and

(iv) any other communication that is an offer in the offering made by the Registrants to the purchaser.

(b) As to qualification of trust indentures:

The Registrants hereby undertake to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”) in accordance with the rules and regulations prescribed by the SEC under Section 305(b)(2) of the Trust Indenture Act.

(c) As to documents subsequently filed that are incorporated by reference:

The Registrants hereby undertake that, for purposes of determining any liability under the Securities Act each filing of the Registrants’ annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(d) As to indemnification:

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of each Registrant pursuant to the provisions described under Item 15 above, or otherwise, each Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.  In the event that

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a claim for indemnification against such liabilities (other than the payment by a Registrant of expenses incurred or paid by a director, officer or controlling person of such Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each Registrant will, unless in the opinion of its respective counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in such Securities Act and will be governed by the final adjudication of such issue.

(e) As to incorporating by reference subsequent Exchange Act documents by third parties:

The Registrants hereby undertake that, for purposes of determining any liability under the Securities Act each filing of an annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act of a third party that is incorporated by reference in this registration statement in accordance with Item 1100(c)(1) of Regulation AB shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrants certify that they have reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Columbus and State of Ohio, on the 24th day of October, 2013.

APPALACHIAN POWER COMPANY
/s/ Julia A. Sloat
By:	Julia A. Sloat
Title:	Treasurer

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC
/s/ Julia A. Sloat
By:	Julia A. Sloat
Title:	Treasurer

Pursuant to the requirements of the Securities Act of 1933, as amended, this Form S-3 Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

Appalachian Power Company

Signature	Title	Date
(i) Principal Executive Officer: Nicolas K. Akins*	Chief Executive Officer	October 24, 2013
(ii) Principal Financial Officer: /s/ Brian X. Tierney	Vice President and Chief Financial Officer	October 24, 2013
Brian X. Tierney (iii) Principal Accounting Officer: /s/ Joseph M. Buonaiuto	Controller and Chief Accounting Officer	October 24, 2013
Joseph M. Buonaiuto (iv) A Majority of the Directors: Nicholas K. Akins* Lisa M. Barton* David M. Feinberg* Lana L. Hillebrand* Mark C. McCullough* Robert P. Powers* Brian X. Tierney* Dennis E. Welch*	Directors	October 24, 2013
		October 24, 2013
By:           Brian X. Tierney Attorney-in-Fact

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Appalachian Consumer Rate Relief Funding LLC

Signature	Title	Date
(i) Principal Executive Officer: /s/ Brian X. Tierney
Brian X. Tierney (ii) Principal Financial Officer: /s/ Julia A. Sloat	President Vice President and Treasurer	October 24, 2013 October 24, 2013
Julia A. Sloat (iii) Principal Accounting Officer: /s/ Joseph M. Buonaiuto	Controller and Chief	October 24, 2013
Joseph M. Buonaiuto (iv) A Majority of the Managers:	Accounting Officer
Brian X. Tierney* Renee V. Hawkins* Julia A. Sloat* Victor A. Duva* Kenneth J. Uva*	Managers	October 24, 2013
/s/ Brian X. Tierney		October 24, 2013
By:           Brian X. Tierney Attorney-in-Fact

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EXHIBIT INDEX

EXHIBIT

NO. DESCRIPTION OF EXHIBIT

1.1 Form of Underwriting Agreement.

3.1 Certification of Formation of Appalachian Consumer Rate Relief Funding LLC.*

3.2 Form of Amended and Restated Limited Liability Company Agreement of Appalachian Consumer Rate Relief Funding LLC.

4.1 Form of Indenture between Appalachian Consumer Rate Relief Funding LLC and the Indenture Trustee (including forms of the Senior Secured Consumer Rate Relief Bonds).

5.1 Opinion of Sidley Austin llp with respect to legality.

8.1 Opinion of Sidley Austin llp with respect to federal tax matters.

23.1 Consent of Sidley Austin llp (included in its opinions filed as Exhibits 5.1 and 8.1).

24.1 Power of Attorney and Resolutions of Appalachian Power Company.

24.2 Power of Attorney and Resolutions of Appalachian Consumer Rate Relief Funding LLC.

25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of U.S. Bank National Association.

99.1 Form of Servicing Agreement.

99.2 Form of Consumer Rate Relief Property Sale Agreement.

99.3 Form of Administration Agreement.

99.4 Financing Order.*

99.5 Form of Opinion of Sidley Austin LLP with respect to constitutional matters.

99.6 Form of Opinion of Jackson Kelly, PLLC with respect to constitutional matters.

---------------

* Filed on September 26, 2013.

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EX-1.1

EXHIBIT 1.1

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC

APPALACHIAN POWER COMPANY

$[            ] CONSUMER RATE RELIEF BONDS

UNDERWRITING AGREEMENT

[       ], 2013

To the Representatives named in Schedule I hereto

of the Underwriters named in Schedule II hereto

Ladies and Gentlemen:

1.Introduction.  Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company (the “Issuer”), proposes to issue and sell $[         ] aggregate principal amount of its Consumer Rate Relief Bonds, (the “Bonds”), identified in Schedule I hereto.  The Issuer and Appalachian Power Company, a Virginia corporation and the Issuer’s direct parent (“APCo”), hereby confirm their agreement with the several Underwriters (as defined below) as set forth herein.

The term “Underwriters” as used herein shall be deemed to mean the entity or several entities named in Schedule II hereto and any underwriter substituted as provided in Section 7 hereof and the term “Underwriter” shall be deemed to mean any one of such Underwriters.  If the entity or entities identified in Schedule I hereto as representatives (the “Representatives”) are the same as the entity or entities listed in Schedule II hereto, then the terms “Underwriters” and “Representatives”, as used herein, shall each be deemed to refer to such entity or entities.  All obligations of the Underwriters hereunder are several and not joint.  If more than one entity is named in Schedule I hereto, any action under or in respect of this underwriting agreement (“Underwriting Agreement”) may be taken by such entities jointly as the Representatives or by one of the entities acting on behalf of the Representatives and such action will be binding upon all the Underwriters.

Capitalized terms used and not otherwise defined in this Underwriting Agreement shall have the meanings given to them in the Indenture (as defined below).

2.Description of the Bonds.  The Bonds will be issued pursuant to an indenture to be dated as of November [1], 2013, as supplemented by one or more series supplements thereto (as so supplemented, the “Indenture”), between the Issuer and U.S. Bank National Association as indenture trustee (the “Indenture Trustee”).  The Bonds will be senior secured obligations of the Issuer and will be supported by consumer rate relief property (as more fully described in the Financing Order relating to the Bonds, “CRR Property”), to be sold to the Issuer by APCo pursuant to the CRR Property Purchase and Sale Agreement, to be dated on or

about November [1], 2013, between APCo and the Issuer (the “Sale Agreement”).  The CRR Property securing the Bonds will be serviced pursuant to the CRR Property Servicing Agreement, to be dated on or about November [1], 2013, between APCo, as servicer, and the Issuer, as owner of the CRR Property sold to it pursuant to the Sale Agreement (the “Servicing Agreement”).

3.Representations and Warranties of the Issuer.  The Issuer represents and warrants to the several Underwriters that:

(a)The Issuer and the Bonds meet the requirements for the use of Form S-3 under the Securities Act of 1933, as amended (the “Securities Act”).  The Issuer, in its capacity as co-registrant and issuing entity with respect to the Bonds, and APCo, in its capacity as co-registrant and as sponsor for the Issuer, have filed with the Securities and Exchange Commission (the “Commission”) a registration statement on such form on September 26, 2013 (Registration Nos. 333-191392 and 333-191392-01), as amended by Amendment No. 1 thereto dated October [  ], 2013 [and Amendment No. 2 thereto dated [        ], 2013], including a prospectus and a form of prospectus supplement, for the registration under the Securities Act of up to $382,000,000 aggregate principal amount of the Bonds.  Such registration statement, as amended (“Registration Statement Nos. 333-191392 and 333-191392-01”), has been declared effective by the Commission and no stop order suspending such effectiveness has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Issuer, threatened by the Commission.  No consumer rate relief bonds registered with the Commission under the Securities Act pursuant to Registration Statement Nos. 333-191392 and 333-191392-01 have been previously issued.  References herein to the term “Registration Statement” shall be deemed to refer to Registration Statement Nos. 333-191392 and 333-191392-01, including any amendment thereto, all documents incorporated by reference therein pursuant to Item 12 of Form S-3 (“Incorporated Documents”) and any information in a prospectus or a prospectus supplement deemed or retroactively deemed to be a part thereof pursuant to Rule 430B (“Rule 430B”) under the Securities Act that has not been superseded or modified.  “Registration Statement” without reference to a time means the Registration Statement as of the Applicable Time (as defined below), which the parties agree is the time of the first contract of sale (as used in Rule 159 under the Securities Act) for the Bonds, and shall be considered the “Effective Date” of the Registration Statement relating to the Bonds.  For the purpose of this definition, information contained in a form of prospectus or prospectus supplement that is deemed retroactively to be a part of the Registration Statement pursuant to Rule 430B shall be considered to be included in the Registration Statement as of the time specified in Rule 430B.  The final prospectus and the final prospectus supplement relating to the Bonds, as filed with the Commission pursuant to Rule 424(b) under the Securities Act, are referred to herein as the “Final Prospectus”; and the most recent preliminary prospectus and prospectus supplement that omitted information to be included upon pricing in a form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act and that was used after the initial effectiveness of the Registration Statement and prior to the Applicable Time (as defined below) is referred to herein as the “Pricing Prospectus”.  The Pricing Prospectus and the Issuer Free

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Writing Prospectuses identified in Section B of Schedule III hereby considered together, are referred to herein as the “Pricing Package”.

(b)(i) At the earliest time after the filing of the Registration Statement that the Issuer or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act) of the Bonds and (ii) at the date hereof, the Issuer was and is not an “ineligible issuer,” as defined in Rule 405 under the Securities Act.

(c)At the time the Registration Statement initially became effective, at the time of each amendment (whether by post-effective amendment, incorporated report or form of prospectus) and on the Effective Date relating to the Bonds, the Registration Statement, fully complied, and the Final Prospectus, both as of its date and at the Closing Date, and the Indenture, at the Closing Date, will fully comply in all material respects with the applicable provisions of the Securities Act and the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), and, in each case, the applicable instructions, rules and regulations of the Commission thereunder; the Registration Statement, at each of the aforementioned dates, did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; the Final Prospectus, both as of its date and at the Closing Date, will not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading; and on said dates the Incorporated Documents, taken together as a whole, fully complied or will fully comply in all material respects with the applicable provisions of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the applicable rules and regulations of the Commission thereunder; provided that the foregoing representations and warranties in this paragraph (c) shall not apply to statements or omissions made in reliance upon and in conformity with any Underwriter Information as defined in Section 11(b) below or to any statements in or omissions from any Statements of Eligibility on Form T-1 (or amendments thereto) of the Indenture Trustee under the Indenture filed as exhibits to the Registration Statement or Incorporated Documents or to any statements or omissions made in the Registration Statement or the Final Prospectus relating to The Depository Trust Company (“DTC”) Book-Entry System that are based solely on information contained in published reports of the DTC.

(d)As of its date, at the Applicable Time (as defined below) and on the date of its filing, if applicable, the Pricing Prospectus and each Issuer Free Writing Prospectus (as defined below) (other than the Pricing Term Sheet, as defined in Section 5(b) below), did not include any untrue statement of a material fact nor when considered together, omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading (except that the principal amount of the Bonds, the tranches, the initial principal balances, the scheduled final payment dates, the final maturity dates, the expected average lives, the Expected Amortization Schedule and the Expected Sinking Fund Schedule described in the Pricing Prospectus were subject to completion or change based on market conditions and the interest rate, price to the public and underwriting discounts and commissions for each

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tranche was not included in the Pricing Prospectus).  The Pricing Package, at the Applicable Time did not, and at all subsequent times through the completion of the offer and the sale of the Bonds on the Closing Date will not, include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances in which they are made, not misleading.  The two preceding sentences do not apply to statements in or omissions from the Pricing Prospectus, the Pricing Term Sheet or any other Issuer Free Writing Prospectus in reliance upon and in conformity with any Underwriter Information.  “Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433(h), relating to the Bonds, in the form filed or required to be filed with the Commission or, if not required to be filed, in the form required to be retained in the Issuer’s records pursuant to Rule 433(g) of the Securities Act.  References to the term “Free Writing Prospectus” shall mean a free writing prospectus, as defined in Rule 405 under the Securities Act.  References to the term “Applicable Time” mean [  :     AM/PM], eastern time, on the date hereof, except that if, subsequent to such Applicable Time, the Issuer, APCo and the Underwriters have determined that the information contained in the Pricing Prospectus or any Issuer Free Writing Prospectus issued prior to such Applicable Time included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading and the Issuer, APCo and the Underwriters have agreed to terminate the old purchase contracts and have entered into new purchase contracts with purchasers of the Bonds, then “Applicable Time” will refer to the first of such times when such new purchase contracts are entered into.  The Issuer represents, warrants and agrees that it has treated and agrees that it will treat each of the free writing prospectuses listed on Schedule III hereto as an Issuer Free Writing Prospectus, and that each such Issuer Free Writing Prospectus has fully complied and will fully comply with the applicable requirements of Rules 164 and 433, including timely Commission filing where required, legending and record keeping.

(e)Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the offer and sale of the Bonds on the Closing Date or until any earlier date that the Issuer notified or notifies the Representatives as described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information then contained in the Registration Statement.  If at any time following issuance of an Issuer Free Writing Prospectus an event or development has occurred or occurs, the result of which is that such Issuer Free Writing Prospectus conflicts or would conflict with the information then contained in the Registration Statement or includes or would include an untrue statement of a material fact or, when considered together with the Pricing Prospectus, omits or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, (i) APCo or the Issuer has promptly notified or will promptly notify the Representatives and (ii) APCo or the Issuer has promptly amended or will promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.  The foregoing two sentences do not apply to

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statements in or omissions from any Issuer Free Writing Prospectus in reliance upon and in conformity with any Underwriter Information.

(f)The Issuer has been duly formed and is validly existing as a limited liability company in good standing under the Limited Liability Company Act of the State of Delaware, as amended, with full limited liability company power and authority to execute, deliver and perform its obligations under this Underwriting Agreement, the Bonds, the Sale Agreement and the Bill of Sale, the Servicing Agreement, the Indenture, the LLC Agreement, the Administration Agreement and the other agreements and instruments contemplated by the Pricing Prospectus (collectively, the “Issuer Documents”) and to own its properties and conduct its business as described in the Pricing Prospectus; the Issuer has been duly qualified as a foreign limited liability company for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where failure to so qualify or to be in good standing would not have a material adverse effect on the business, properties or financial condition of the Issuer; the Issuer has conducted and will conduct no business in the future that would be inconsistent with the description of the Issuer’s business set forth in the Pricing Prospectus; the Issuer is not a party to or bound by any agreement or instrument other than the Issuer Documents and other agreements or instruments incidental to its formation; the Issuer has no material liabilities or obligations other than those arising out of the transactions contemplated by the Issuer Documents and as described in the Pricing Prospectus; APCo is the beneficial owner of all of the limited liability company interests of the Issuer; and based on current law, the Issuer is not classified as an association taxable as a corporation for United States federal income tax purposes.

(g)The issuance and sale of the Bonds by the Issuer, the purchase of the CRR Property by the Issuer from APCo and the consummation of the transactions herein contemplated by the Issuer, and the fulfillment of the terms hereof on the part of the Issuer to be fulfilled, will not result in a breach of any of the terms or provisions of, or constitute a default under the Issuer’s certificate of formation or limited liability company agreement (collectively, the “Issuer Charter Documents”), or any indenture, mortgage, deed of trust or other agreement or instrument to which the Issuer is now a party.

(h)This Underwriting Agreement has been duly authorized, executed and delivered by the Issuer, which has the necessary limited liability company power and authority to execute, deliver and perform its obligations under this Underwriting Agreement.

(i)The Issuer (i) is not in violation of the Issuer Charter Documents, (ii) is not in default and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust or other  agreement or instrument to which it is a party or by which it is bound or to which any of its properties is subject, except for any such defaults that would not, individually or in the aggregate, have a material adverse effect on its business, property or financial condition,

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and (iii) is not in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property may be subject, except for any such violations that would not, individually or in the aggregate, have a material adverse effect on its business, property or financial condition.

(j)The Indenture has been duly authorized by the Issuer, and, on the Closing Date, will have been duly executed and delivered by the Issuer and will be a valid and binding instrument, enforceable against the Issuer in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other similar laws relating to or affecting creditors’ or secured parties’ rights generally and by general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law; and limitations on enforceability of rights to indemnification by federal or state securities laws or regulations or by public policy.  On the Closing Date, the Indenture will (i) comply as to form in all material respects with the requirements of the Trust Indenture Act and (ii) conform in all material respects to the description thereof in the Pricing Prospectus and Final Prospectus.

(k)The Bonds have been duly authorized by the Issuer for issuance and sale to the Underwriters pursuant to this Underwriting Agreement and, when executed by the Issuer and authenticated by the Indenture Trustee in accordance with the Indenture and delivered to the Underwriters against payment therefor in accordance with the terms of this Underwriting Agreement, will constitute valid and binding obligations of the Issuer entitled to the benefits of the Indenture and enforceable against the Issuer in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other similar laws relating to or affecting creditors’ or secured parties’ rights generally and by general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law; and limitations on enforceability of rights to indemnification by federal or state securities laws or regulations or by public policy, and the Bonds conform in all material respects to the description thereof in the Pricing Prospectus and Final Prospectus.  The Issuer has all requisite limited liability company power and authority to issue, sell and deliver the Bonds in accordance with and upon the terms and conditions set forth in this Underwriting Agreement and in the Pricing Prospectus and Final Prospectus.

(l)There is no litigation or governmental proceeding to which the Issuer is a party or to which any property of the Issuer is subject or which is pending or, to the knowledge of the Issuer, threatened against the Issuer that could reasonably be expected to, individually or in the aggregate, result in a material adverse effect on the Issuer’s business, property or financial condition.

(m)Other than the filing of the issuance advice letter and non-action on the part of the West Virginia Public Service Commission (“WVPSC”) contemplated by Ordering Section B of the financing order issued by the WVPSC on September 20, 2013 to the Company (the “Financing Order”), no approval, authorization, consent or order of

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any public board or body (except such as have been already obtained and other than in connection or in compliance with the provisions of applicable blue-sky laws or securities laws of any state, as to which the Issuer makes no representations or warranties), is legally required for the issuance and sale by the Issuer of the Bonds.

(n)The Issuer is not, and, after giving effect to the sale and issuance of the Bonds, will not be an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”).

(o)The nationally recognized accounting firm which has performed certain procedures with respect to certain statistical and structural information contained in the Pricing Prospectus and the Final Prospectus, are independent public accountants.

(p)Each of the Sale Agreement, the Servicing Agreement, the Administration Agreement and LLC Agreement has been duly authorized by the Issuer, and when executed and delivered by the Issuer and the other parties thereto, will constitute a valid and legally binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other similar laws relating to or affecting creditors’ or secured parties’ rights generally and by general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law, and limitations on enforceability of rights to indemnification by federal or state securities laws or regulations or by public policy.

(q)The Issuer has complied with the written representations, acknowledgements and covenants (the “17g-5 Representations”) relating to compliance with Rule 17g-5 under the Exchange Act set forth in the (i) undertaking, dated as of [       ], 2013, by the Issuer to Moody’s (as defined below) and (ii) letter, dated [         ], 2013, from the Issuer to S&P (as defined below, and together with Moody’s, the “Rating Agencies”) and the Issuer (collectively, the “Rating Agency Letters”), other than (x) any noncompliance of the 17g-5 Representations that would not have a material adverse effect on the rating of the Bonds or the Bonds or (y) any noncompliance arising from the breach by an Underwriter of the representations and warranties and covenants set forth in Section 13 hereof.

(r)The Issuer will comply, and has complied, in all material respects, with its diligence and disclosure obligations in respect to the Bonds under Rule 193 of the Act and Items 1111(a)(7) and 1111(a)(8) of Regulation AB.

4.Representations and Warranties of APCo. APCo represents and warrants to the several Underwriters that:

(a)APCo, in its capacity as co-registrant and sponsor with respect to the Bonds, meets the requirements to use Form S-3 under the Securities Act and has filed with the Commission Registration Statement Nos. 333-191392 and 333-191392-01 for the registration under the Securities Act of up to $382,000,000 aggregate principal

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amount of the Bonds.  Registration Statement Nos. 333-191392 and 333-191392-01 have been declared effective by the Commission and no stop order suspending such effectiveness has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of APCo, threatened by the Commission.

(b)(i) At the earliest time after the filing of the Registration Statement that the Issuer or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2)) of the Bonds and (ii) at the date hereof, APCo was not and it is not an “ineligible issuer”, as defined in Rule 405 under the Securities Act.

(c)At the time the Registration Statement initially became effective, at the time of each amendment (whether by post-effective amendment, incorporated report or form of prospectus) and on the Effective Date relating to the Bonds, the Registration Statement fully complied, and the Final Prospectus, both as of its date and at the Closing Date, and the Indenture, at the Closing Date, will fully comply in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act, and, in each case, the applicable instructions, rules and regulations of the Commission thereunder; the Registration Statement, at the date it initially became effective and at the Effective Date, did not contain an untrue statement of a material fact, or omit to state a material fact required to be stated therein or necessary to make the statements therein, not misleading; the Final Prospectus, both as of its date and at and as of the Closing Date, will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading; provided, that the foregoing representations and warranties in this paragraph (c) shall not apply to statements or omissions made in reliance upon and in conformity with any Underwriter Information or to any statements in or omissions from any Statement of Eligibility on Form T-1, or amendments thereto, of the Indenture Trustee under the Indenture filed as exhibits to the Registration Statement or Incorporated Documents or to any statements or omissions made in the Registration Statement or the Final Prospectus relating to The Depository Trust Company (“DTC”) Book-Entry System that are based solely on information contained in published reports of the DTC.

(d)As of its date, at the Applicable Time and on the date of its filing, if applicable, the Pricing Prospectus and each Issuer Free Writing Prospectus (other than the Pricing Term Sheet), considered together, did not include any untrue statement of a material fact or when considered together, did not, does not and will not omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading (except that (i) the principal amount of the Bonds, the tranches, the initial principal balances, the scheduled final payment dates, the final maturity dates, the expected average lives, the Expected Amortization Schedule and the Expected Sinking Fund Schedule described in the Pricing Prospectus were subject to change based on market conditions, and the interest rate, price to the public and underwriting discounts and commissions for each tranche was not included in the Pricing Prospectus).  The Pricing Package, at the Applicable Time, and at

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all subsequent times through the completion of the offer and the sale of the Bonds on the Closing Date will not, include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading.  The two preceding sentences do not apply to statements in or omissions from the Pricing Prospectus, the Pricing Term Sheet or any other Issuer Free Writing Prospectus in reliance upon and in conformity with any Underwriter Information.  APCo represents, warrants and agrees that it has treated and agrees that it will treat each of the free writing prospectuses listed on Schedule III hereto as an Issuer Free Writing Prospectus, and that each such Issuer Free Writing Prospectus has fully complied and will fully comply with the applicable requirements of Rules 164 and 433, including timely Commission filing where required, legending and record keeping.

(e)Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the offer and sale of the Bonds on the Closing Date or until any earlier date that the Issuer or APCo notified or notifies the Representatives as described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information then contained in the Registration Statement.  If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information then contained in the Registration Statement or included or would include an untrue statement of a material fact or, when considered together with the Pricing Prospectus, omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, (i) APCo or the Issuer has promptly notified or will promptly notify the Representatives and (ii) APCo or the Issuer has promptly amended or will promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.  The foregoing two sentences do not apply to statements in or omissions from any Issuer Free Writing Prospectus in reliance upon and in conformity with any Underwriter Information.

(f)APCo has been duly formed and is validly existing as a corporation in good standing under the laws of the jurisdiction of its formation, has the corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as set forth in or contemplated by the Pricing Prospectus, and is qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not have a material adverse effect on the business, property or financial condition of APCo and its subsidiaries considered as a whole, and has all requisite power and authority to sell CRR Property as described in the Pricing Prospectus and to execute, deliver and otherwise perform its obligation under any Issuer Document to which it is a party.  APCo is the beneficial owner of all of the limited liability company interests of the Issuer.

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(g)APCo has no significant subsidiaries within the meaning of Rule 1-02(w) of Regulation S-X.

(h)The transfer by APCo of all of its rights and interests under the Financing Order relating to the Bonds to the Issuer and the consummation of the transactions herein contemplated by APCo, and the fulfillment of the terms hereof on the part of APCo to be fulfilled, will not result in a breach of any of the terms or provisions of, or constitute a default under, APCo’s articles of incorporation or bylaws (collectively, the “APCo Charter Documents”), or in a material breach of any of the terms of, or constitute a material default under, any indenture, mortgage, deed of trust or other agreement or instrument to which APCo is now a party.

(i)This Underwriting Agreement has been duly authorized, executed and delivered by APCo, which has the necessary corporate power and authority to execute, deliver and perform its obligations under this Underwriting Agreement.

(j)APCo (i) is not in violation of the APCo Charter Documents, (ii) is not in default and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties is subject, except for any such defaults that would not, individually or in the aggregate, have a material adverse effect on the business, property or financial condition of APCo and its subsidiaries considered as a whole, or (iii) is not in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property may be subject, except for any such violations that would not, individually or in the aggregate, have a material adverse effect on the business, property or financial condition of APCo and its subsidiaries considered as a whole.

(k)Except as set forth or contemplated in the Pricing Prospectus, there is no litigation or governmental proceeding to which APCo or any of its subsidiaries is a party or to which any property of APCo or any of its subsidiaries is subject or which is pending or, to the knowledge of APCo, threatened against APCo or any of its subsidiaries that would reasonably be expected to, individually or in the aggregate, result in a material adverse effect on the Issuer’s business, property, or financial condition or on APCo’s ability to perform its obligations under the Sale Agreement, the Administration Agreement and the Servicing Agreement.

(l)Other than the filing of the issuance advice letter and non-action on the part of the WVPSC contemplated by Ordering Section B of the Financing Order, no approval, authorization, consent or order of any public board or body (except such as have been already obtained and other than in connection or in compliance with the provisions of applicable blue-sky laws or securities laws of any state, as to which APCo makes no representations or warranties), is legally required for the issuance and sale by the Issuer of the Bonds.

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(m)APCo is not and after giving effect to the sale and issuance of the Bonds, neither APCo or the Issuer will be, an “investment company” within the meaning of the 1940 Act.

(n)Each of the Sale Agreement and Servicing Agreement and Administration Agreement has been duly and validly authorized by APCo, and when executed and delivered by APCo and the other parties thereto will constitute a valid and legally binding obligation of APCo, enforceable against APCo in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other similar laws relating to or affecting creditors’ or secured parties’ rights generally and by general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law, and limitations on enforceability of rights to indemnification by federal or state securities laws or regulations or by public policy.

(o)There are no West Virginia transfer taxes related to the transfer of the CRR Property or the issuance and sale of the Bonds to the Underwriters pursuant to this Underwriting Agreement required to be paid at or prior to the Closing Date by APCo or the Issuer.

(p)The nationally recognized accounting firm referenced in Section 3(o) and 9(t) is a firm of independent public accountants with respect to APCo as required by the Securities Act and the rules and regulations of the Commission thereunder.

(q)APCo, in its capacity as sponsor with the respect to the Bonds, has caused the Issuer to comply with the 17g-5 Representations, other than (x) any noncompliance of the 17g-5 Representations that would not have a material adverse effect on the rating of the Bonds or the Bonds or (y) any noncompliance arising from the breach by an Underwriter of the representations and warranties and covenants set forth in Section 13 hereof.

(r)APCo will comply, and has complied, in all material respects, with its diligence and disclosure obligations in respect to the Bonds under Rule 193 of the Act and Items 1111(a)(7) and 1111(a)(8) of Regulation AB.

(s)APCo is not party to any accounts receivable sale or financing transactions for the sale or financing of receivables generated by its West Virginia electric distribution business.

5.Investor Communications.

(a)Issuer and APCo each represents and agrees that, unless it has obtained or obtains the prior consent of the Representatives, and each Underwriter represents and agrees that, unless it has obtained or obtains the prior consent of the Issuer and APCo and the Representatives, it has not made and will not make any offer relating to the Bonds that would constitute an Issuer Free Writing Prospectus, or that would otherwise

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constitute a “free writing prospectus,” required to be filed by the Issuer or APCo, as applicable, with the Commission or retained by the Issuer or APCo, as applicable, under Rule 433 under the Securities Act; provided that the prior written consent of the parties hereto shall be deemed to have been given in respect of the Term Sheets and each other Free Writing Prospectus identified in Schedule III hereto.

(b)APCo and the Issuer (or the Representatives at the direction of the Issuer) will prepare a final pricing term sheet relating to the Bonds (the “Pricing Term Sheet”), containing only information that describes the final pricing terms of the Bonds and otherwise in a form consented to by the Representatives, and will file the Pricing Term Sheet within the period required by Rule 433(d)(5)(ii) under the Securities Act following the date such final pricing terms have been established for all classes of the offering of the Bonds.  The Pricing Term Sheet is an Issuer Free Writing Prospectus for purposes of this Underwriting Agreement.

(c)Each Underwriter may provide to investors one or more of the Free Writing Prospectuses, including the preliminary term sheet, as filed by the Issuer with the Commission on November [  ], 2013 and the Pricing Term Sheet (collectively, the “Term Sheets”), subject to the following conditions:

(i)Unless preceded or accompanied by a prospectus satisfying the requirements of Section 10(a) of the Securities Act, an Underwriter shall not convey or deliver any Written Communication (as defined herein) to any person in connection with the initial offering of the Bonds, unless such Written Communication (i) is made in reliance on Rule 134 under the Securities Act, (ii) constitutes a prospectus satisfying the requirements of Rule 430B under the Securities Act, (iii) constitutes “ABS informational and computational information” as defined in Item 1101 of Regulation AB, (iv)  is an Issuer Free Writing Prospectus listed on Schedule III hereto or (v) is an Underwriter Free Writing Prospectus (as defined below).  “Written Communication” has the same meaning as that term is defined in Rule 405 under the Securities Act.

An “Underwriter Free Writing Prospectus” means any free writing prospectus that contains only preliminary or final terms of the Bonds and is not required to be filed by APCo or the Issuer pursuant to Rule 433 and that contains information substantially the same as the information contained in the Pricing Prospectus or Pricing Term Sheet (including, without limitation, (i) the class, size, rating, price, CUSIPs, coupon, yield, spread, benchmark, status and/or legal maturity date of the Bonds, the weighted average life, expected first and final payment dates, trade date, settlement date, transaction parties, credit enhancement, logistical details related to the location and timing of access to the roadshow, ERISA eligibility, legal investment status and payment window of one or more classes of Bonds and (ii) a column or other entry showing the status of the subscriptions for the Bonds, both for the Bonds as a whole and for each Underwriter’s retention, and/or expected pricing parameters of the Bonds).

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(ii)Each Underwriter shall comply with all applicable laws and regulations in connection with the use of Free Writing Prospectuses and Term Sheets, including but not limited to Rules 164 and 433 under the Securities Act.

(iii)All Free Writing Prospectuses provided to investors, whether or not filed with the Commission, shall bear a legend including substantially the following statement:

The Issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates.  Before you invest, you should read the prospectus in that registration statement and other documents the Issuer has filed with the SEC for more complete information about the Issuer and the offering.  You may get these documents for free by visiting EDGAR on the SEC web site at www.sec.gov.  Alternatively, Issuer, any underwriter or any dealer participating in the offering will arrange to send you the base prospectus if you request it by calling toll free at [1-866-718-1649].

The Issuer and the Representatives shall have the right to require additional specific legends or notations to appear on any Free Writing Prospectus, the right to require changes regarding the use of terminology and the right to determine the types of information appearing therein with the approval of, in the case of the Issuer, Representatives and, in the case of the Representatives, the Issuer (which in either case shall not be unreasonably withheld).

(iv)Each Underwriter covenants with the Issuer and APCo that after the Final Prospectus is available such Underwriter shall not distribute any written information concerning the Bonds to an investor unless such information is preceded or accompanied by the Final Prospectus or by notice to the investor that the Final Prospectus is available for free by visiting EDGAR on the SEC website at www.sec.gov.

(v)Each Underwriter covenants that if an Underwriter shall use an Underwriter Free Writing Prospectus that contains information in addition to (x) “issuer information”, including information with respect to APCo, as defined in Rule 433(h)(2) or (y) the information in the Pricing Package, the liability arising from its use of such additional information shall be the sole responsibility of the Underwriter using such Underwriting Free Writing Prospectus unless the Underwriter Free Writing Prospectus (or any information contained therein) was consented to in advance by APCo; provided, however, that, for the avoidance of doubt, this clause (v) shall not be interpreted as tantamount to the indemnification obligations contained in Section 11(b) hereof.

6.Purchase and Sale.  On the basis of the representations and warranties herein contained, and subject to the terms and conditions herein set forth, the Issuer shall sell to each of the Underwriters, and each Underwriter shall purchase from the Issuer, at the time and place herein specified, severally and not jointly, at the purchase price set forth in Schedule I hereto, the principal amount of the Bonds set forth opposite such Underwriter’s name in

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Schedule II hereto.  The Underwriters agree to make a public offering of the Bonds.  The Issuer shall pay (in the form of a discount to the principal amount of the offered Bonds) to the Underwriters a commission equal to $[          ].

7.Time and Place of Closing.  Delivery of the Bonds against payment of the aggregate purchase price therefor by wire transfer in federal funds shall be made at the place, on the date and at the time specified in Schedule I hereto, or at such other place, time and date as shall be agreed upon in writing by the Issuer and the Representatives.  The hour and date of such delivery and payment are herein called the “Closing Date”.  The Bonds shall be delivered to DTC or to U.S. Bank National Association, as custodian for DTC, in fully registered global form registered in the name of Cede & Co., for the respective accounts specified by the Representatives not later than the close of business on the business day preceding the Closing Date or such other time as may be agreed upon by the Representatives.  The Issuer agrees to make the Bonds available to the Representatives for checking purposes not later than 1:00 P.M. New York Time on the last business day preceding the Closing Date at the place specified for delivery of the Bonds in Schedule I hereto, or at such other place as the Issuer may specify.

If any Underwriter shall fail or refuse to purchase and pay for the aggregate principal amount of Bonds that such Underwriter has agreed to purchase and pay for hereunder, the Issuer shall immediately give notice to the other Underwriters of the default of such Underwriter, and the other Underwriters shall have the right within 24 hours after the receipt of such notice to determine to purchase, or to procure one or more others, who are members of the Financial Industry Regulatory Authority  (“FINRA”) (or, if not members of the FINRA, who are not eligible for membership in the FINRA and who agree (i) to make no sales within the United States, its territories or its possessions or to persons who are citizens thereof or residents therein and (ii) in making sales to comply with the FINRA’s Conduct Rules) and satisfactory to the Issuer, to purchase, upon the terms herein set forth, the aggregate principal amount of Bonds that the defaulting Underwriter had agreed to purchase.  If any non-defaulting Underwriter or Underwriters shall determine to exercise such right, such Underwriter or Underwriters shall give written notice to the Issuer of the determination in that regard within 24 hours after receipt of notice of any such default, and thereupon the Closing Date shall be postponed for such period, not exceeding three business days, as the Issuer shall determine.  If in the event of such a default no non-defaulting Underwriter shall give such notice, then this Underwriting Agreement may be terminated by the Issuer, upon like notice given to the non-defaulting Underwriters, within a further period of 24 hours.  If in such case the Issuer shall not elect to terminate this Underwriting Agreement it shall have the right, irrespective of such default:

(a)to require each non-defaulting Underwriter to purchase and pay for the respective aggregate principal amount of Bonds that it had agreed to purchase hereunder as hereinabove provided and, in addition, the aggregate principal amount of Bonds that the defaulting Underwriter shall have so failed to purchase up to an aggregate principal amount of Bonds equal to one-ninth (1/9) of the aggregate principal amount of Bonds that such non-defaulting Underwriter has otherwise agreed to purchase hereunder, and/or

(b)to procure one or more persons, reasonably acceptable to the Representatives, who are members of the FINRA (or, if not members of the FINRA, who are not eligible for membership in the FINRA and who agree (i) to make no sales within

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the United States, its territories or its possessions or to persons who are citizens thereof or residents therein and (ii) in making sales to comply with the FINRA’s Conduct Rules), to purchase, upon the terms herein set forth, either all or a part of the aggregate principal amount of Bonds that such defaulting Underwriter had agreed to purchase or that portion thereof that the remaining Underwriters shall not be obligated to purchase pursuant to the foregoing clause (a).

In the event the Issuer shall exercise its rights under (a) and/or (b) above, the Issuer shall give written notice thereof to the non-defaulting Underwriters within such further period of 24 hours, and thereupon the Closing Date shall be postponed for such period, not exceeding three business days, as the Issuer shall determine.

In the computation of any period of 24 hours referred to in this Section 7, there shall be excluded a period of 24 hours in respect of each Saturday, Sunday or legal holiday that would otherwise be included in such period of time.

Any action taken by the Issuer or APCo under this Section 7 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Underwriting Agreement.  Termination of this Underwriting Agreement pursuant to Section 7 shall be without any liability on the part of the Issuer, APCo or any non-defaulting Underwriter, except as otherwise provided in Sections 8(a)(vi) and 11 hereof.

8.Covenants.

(a)Covenants of the Issuer.  The Issuer covenants and agrees with the several Underwriters that:

(i)The Issuer will upon request promptly deliver to the Representatives and Counsel to the Underwriters a conformed copy of the Registration Statement, certified by an officer of the Issuer to be in the form as originally filed, including all Incorporated Documents and exhibits and all amendments thereto.

(ii)The Issuer will deliver to the Underwriters, as soon as practicable after the date hereof, as many copies of the Pricing Prospectus and Final Prospectus as they may reasonably request.

(iii)The Issuer will cause or has caused the Final Prospectus to be filed with the Commission pursuant to Rule 424 as soon as practicable and will advise the Underwriters of any stop order suspending the effectiveness of the Registration Statement or the institution of any proceeding therefor of which Issuer shall have received notice.  The Issuer will use its reasonable best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as possible the withdrawal thereof.  The Issuer has complied and will comply with Rule 433 under the Securities Act in connection with the offering of the Bonds.

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(iv)If, during such period of time (not exceeding nine months) after the Final Prospectus has been filed with the Commission pursuant to Rule 424 as in the opinion of Counsel for the Underwriters a prospectus covering the Bonds is required by law to be delivered in connection with sales by an Underwriter or dealer (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), any event relating to or affecting the Issuer, the Bonds or the CRR Property or of which the Issuer shall be advised in writing by the Representatives shall occur that in the Issuer’s reasonable judgment after consultation with Counsel for the Underwriters (as defined below) should be set forth in a supplement to, or an amendment of the Pricing Package or the Final Prospectus in order to make the Pricing Package or the Final Prospectus not misleading in the light of the circumstances when it is delivered to a purchaser (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), the Issuer will, at its expense, amend or supplement the Pricing Package or the Final Prospectus by either (A) preparing and furnishing to the Underwriters at the Issuer’s expense a reasonable number of copies of a supplement or supplements or an amendment or amendments to the Pricing Package or the Final Prospectus or (B) making an appropriate filing pursuant to Section 13 or Section 15 of the Exchange Act, which will supplement or amend the Pricing Package or the Final Prospectus so that, as supplemented or amended, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances when the Pricing Package or the Final Prospectus is delivered to a purchaser (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), not misleading; provided that should such event relate solely to the activities of any of the Underwriters, then such Underwriters shall assume the expense of preparing and furnishing any such amendment or supplement.  The Issuer will also fulfill its obligations set out in Section 3(e) above.

(v)The Issuer will furnish such proper information as may be lawfully required and otherwise cooperate in qualifying the Bonds for offer and sale under the blue-sky laws of the states of the United States as the Representatives may designate; provided that the Issuer shall not be required to qualify as a foreign limited liability company or dealer in securities, to file any consents to service of process under the laws of any jurisdiction, or meet any other requirements deemed by the Issuer to be unduly burdensome.

(vi)The Issuer or APCo will, except as herein provided, pay or cause to be paid all expenses and taxes (except transfer taxes) in connection with (i) the preparation and filing by it of the Registration Statement, Pricing Prospectus and Final Prospectus (including any amendments and supplements thereto) and any Issuer Free Writing Prospectuses, (ii) the issuance and delivery of the Bonds as provided in Section 7 hereof (including, without limitation, reasonable fees and disbursements of Counsel for the Underwriters and all trustee, rating agency and WVPSC advisor fees), (iii) the qualification of the Bonds under blue-sky laws (including counsel fees not to exceed $15,000), (iv) the printing and delivery to

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the Underwriters of reasonable quantities of the Registration Statement and, except as provided in Section 8(a)(iv) hereof, of the Pricing Package and Final Prospectus. If the obligation of the Underwriters to purchase the Bonds terminates in accordance with the provisions of Sections 7 (but excluding terminations arising thereunder out of an Underwriter default), 9, 10 or 12 hereof, the Issuer or APCo (i) will reimburse the Underwriters for the reasonable fees and disbursements of Counsel for the Underwriters, and (ii) will reimburse the Underwriters for their reasonable out-of-pocket expenses, such out-of pocket expenses in an aggregate amount not exceeding $200,000, incurred in contemplation of the performance of this Underwriting Agreement.  The Issuer shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits.

(vii)During the period from the date of this Underwriting Agreement to the date that is five days after the Closing Date, the Issuer will not, without the prior written consent of the Representatives, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any asset-backed securities (other than the Bonds).

(viii)To the extent, if any, that any rating necessary to satisfy the condition set forth in Section 9(w) of this Underwriting Agreement is conditioned upon the furnishing of documents or the taking of other actions by the Issuer on or after the Closing Date, the Issuer shall furnish such documents and take such other actions.

(ix)For a period from the date of this Underwriting Agreement until the retirement of the Bonds or until such time as the Underwriters shall cease to maintain a secondary market in the Bonds, whichever occurs first, the Issuer shall file with the Commission, and to the extent permitted by and consistent with the Issuer’s obligations under applicable law, make available on the website associated with the Issuer’s parent, such periodic reports, if any, as are required (without regard to the number of holders of Bonds to the extent permitted by and consistent with the Issuer’s obligations under applicable law) from time to time under Section 13 or Section 15(d) of the Exchange Act; provided that the Issuer shall not voluntarily suspend or terminate its filing obligations with the Commission unless permitted under applicable law and the terms of the Basic Documents.  The Issuer shall also, to the extent permitted by and consistent with the Issuer’s obligations under applicable law, include in the periodic and other reports to be filed with the Commission as provided above or posted on the website associated with the Issuer’s parent, such information as required by Section 3.07(g) of the Indenture with respect to the Bonds.  To the extent that the Issuer’s obligations are terminated or limited by an amendment to Section 3.07(g) of the Indenture, or otherwise, such obligations shall be correspondingly terminated or limited hereunder.

(x)The Issuer and APCo will not file any amendment to the Registration Statement or amendment or supplement to the Final Prospectus or

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amendment or supplement to the Pricing Package during the period when a prospectus relating to the Bonds is required to be delivered under the Securities Act, without prior notice to the Underwriters, or to which Hunton & Williams LLP, who are acting as counsel for the Underwriters (“Counsel for the Underwriters”), shall reasonably object by written notice to APCo and the Issuer.

(xi)So long as any of the Bonds are outstanding, the Issuer will furnish to the Representatives, if and to the extent not posted on the Issuer or its affiliate’s website, (A) as soon as available, a copy of each report of the Issuer filed with the Commission under the Exchange Act or mailed to the Bondholders (to the extent such reports are not publicly available on the Commission’s website), (B) a copy of any filings with the WVPSC pursuant to the Financing Order including, but not limited to, any issuance advice letter or any annual, semi-annual or more frequent True-Up Adjustment filings, and (C) from time to time, any information concerning the Issuer as the Representatives may reasonably request.

(xii)So long as the Bonds are rated by any Rating Agency, the Issuer will comply with the 17g-5 Representations, other than (x) any noncompliance of the 17g-5 Representations that would not have a material adverse effect on the rating of the Bonds or the Bonds or (y) any noncompliance arising from the breach by an Underwriter of the representations and warranties and covenants set forth in Section 13 hereof.

(b)Covenants of APCo.  APCo covenants and agrees with the several Underwriters that, to the extent that the Issuer has not already performed such act pursuant to Section 8(a):

(i)To the extent permitted by applicable law and the agreements and instruments that bind APCo, APCo will use its reasonable best efforts to cause the Issuer to comply with the covenants set forth in Section 8(a) hereof.

(ii)APCo will use its reasonable best efforts to prevent the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement and, if issued, to obtain as soon as possible the withdrawal thereof.

(iii)If, during such period of time (not exceeding nine months) after the Final Prospectus has been filed with the Commission pursuant to Rule 424 as in the opinion of Counsel for the Underwriters a prospectus covering the Bonds is required by law to be delivered in connection with sales by an Underwriter or dealer (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), any event relating to or affecting APCo, the Bonds or the CRR Property or of which APCo shall be advised in writing by the Representatives shall occur that in APCo’s reasonable judgment after consultation with Counsel for the Underwriters should be set forth in a supplement to, or an amendment of, the Final Prospectus in order to make the Final Prospectus not misleading in the light of the circumstances when it is delivered to a purchaser (including in circumstances where such requirement may

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be satisfied pursuant to Rule 172 under the Securities Act), APCo will cause the Issuer, at APCo’s or the Issuer’s expense, to amend or supplement the Final Prospectus, as applicable, by either (A) preparing and furnishing to the Underwriters at APCo’s or the Issuer’s expense a reasonable number of copies of a supplement or supplements or an amendment or amendments to the Final Prospectus or (B) causing the Issuer to make an appropriate filing pursuant to Section 13 or Section 15 of the Exchange Act, which will supplement or amend the Final Prospectus so that, as supplemented or amended, it will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances when the Final Prospectus is delivered to a purchaser (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), not misleading; provided that should such event relate solely to the activities of any of the Underwriters, then such Underwriters shall assume the expense of preparing and furnishing any such amendment or supplement.  APCo will also fulfill its obligations set out in Section 4(d).

(iv)During the period from the date of this Underwriting Agreement to the date that is five days after the Closing Date, APCo will not, without the prior written consent of the Representatives, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any asset-backed securities (other than the Bonds).

(v)APCo will cause the proceeds for the issuance and sale of the Bonds to be applied for the purposes described in the Pricing Prospectus.

(vi)As soon as practicable, but not later than 16 months, after the date hereof, the APCo will make generally available (by posting on its website or otherwise) to its security holders, an earnings statement (which need not be audited) that will satisfy the provisions of Section 11(a) of the Securities Act.

(vii)To the extent, if any, that any rating necessary to satisfy the condition set forth in Section 9(w) of this Underwriting Agreement is conditioned upon the furnishing of documents or the taking of other actions by APCo on or after the Closing Date, APCo shall furnish such documents and take such other actions.

(viii)The initial CRR Charge will be calculated in accordance with the Financing Order.

(ix)So long as the Bonds are rated by a Rating Agency, APCo, in its capacity as sponsor with respect to the Bonds, will cause the Issuer to comply with the 17g-5 Representations, other than (x) any noncompliance of the 17g-5 Representations that would not have a material adverse effect on the rating of the Bonds or the Bonds or (y) any noncompliance arising from the breach by an Underwriter of the representations and warranties and covenants set forth in Section 13 hereof.

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9.Conditions to the Obligations of the Underwriters.  The obligations of the Underwriters to purchase the Bonds shall be subject to the accuracy of the representations and warranties on the part of the Issuer and APCo contained in this Underwriting Agreement, on the part of APCo contained in Article III of the Sale Agreement, and on the part of APCo contained in Section 6.01 of the Servicing Agreement as of the Closing Date, to the accuracy of the statements of the Issuer and APCo made in any certificates pursuant to the provisions hereof, to the performance by the Issuer and APCo of their obligations hereunder, and to the following additional conditions:

(a)The Final Prospectus shall have been filed with the Commission pursuant to Rule 424 no later than the second business day following the date it is first used after effectiveness in connection with the sale of the Bonds.  In addition, all material required to be filed by the Issuer or APCo pursuant to Rule 433(d) under the Securities Act that was prepared by either of them or that was prepared by any Underwriter and timely provided to the Issuer or APCo shall have been filed with the Commission within the applicable time period prescribed for such filing by such Rule 433(d).

(b)No stop order suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for that purpose shall be pending before, or threatened by, the Commission on the Closing Date; and the Underwriters shall have received one or more certificates, dated the Closing Date and signed by an officer of APCo and the Issuer, as appropriate, to the effect that no such stop order is in effect and that no proceedings for such purpose are pending before, or to the knowledge of APCo or the Issuer, as the case may be, threatened by, the Commission.

(c)Hunton & Williams LLP, counsel for the Underwriters, shall have furnished to the Representatives their written opinion, dated the Closing Date, with respect to the issuance and sale of the Bonds, the Indenture, the other Issuer Documents, the Registration Statement and other related matters; and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters.

(d)Richards, Layton & Finger, P.A., special Delaware counsel for the Issuer, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (d) hereto), dated the Closing Date, regarding the authority to file a voluntary bankruptcy petition.

(e)Richards, Layton & Finger, P.A., special Delaware counsel for the Issuer, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (e) hereto), dated the Closing Date, regarding certain Delaware Uniform Commercial Code matters.

(f)Sidley Austin LLP, counsel for the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (f) hereto), dated the Closing Date, regarding certain aspects of the transactions

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contemplated by the Issuer Documents, including the Indenture and the Trustee’s security interest under the Uniform Commercial Code.

(g)Sidley Austin LLP, counsel for the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (g) hereto), dated the Closing Date, regarding negative assurances and other corporate matters.

(h)Sidley Austin LLP, counsel for the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (h) hereto), dated the Closing Date, i) to the effect that a court sitting in bankruptcy would not order the substantive consolidation of the assets and liabilities of the Issuer with those of APCo in connection with a bankruptcy, reorganization or other insolvency proceeding involving APCo, ii) that if APCo were to become a debtor in such insolvency proceeding, such court would hold that the CRR Property is not property of the estate of APCo and iii) regarding bankruptcy and corporate governance matters.

(i)Jackson Kelly PLLC, counsel for the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (i) hereto), dated the Closing Date, regarding certain West Virginia constitutional matters relating to the CRR Property.

(j)Sidley Austin LLP, counsel for the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (j) hereto), dated the Closing Date, regarding certain federal tax matters.

(k)Woods Rogers PLC, Virginia Counsel for APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (k) hereto), dated the Closing Date, with respect to additional corporate matters and UCC matters].

(l)Jackson Kelly PLLC, counsel for the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (l) hereto), dated the Closing Date, with respect to the characterization of the transfer of the CRR Property by APCo to the Issuer as a “true sale” for West Virginia law purposes.

(m)Sidley Austin LLP, counsel for the Issuer and APCo, shall have furnished to the Representatives its written respective opinions (substantially in the form attached as Annex I (m) hereto), dated the Closing Date, regarding certain federal constitutional matters relating to the CRR Property.

(n)Dorsey & Whitney LLP, counsel for the Indenture Trustee, shall have furnished to the Representatives their written opinions (each substantially in the form attached as Annex I (n) hereto), dated the Closing Date, regarding certain matters relating to the Indenture Trustee.

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(o)Robinson & McElwee, PLLC, counsel for APCo and the Issuer, shall have furnished to the representatives their opinion (substantially in the form attached as Annex I (o) hereto), dated the Closing Date, regarding certain West Virginia regulatory issues.

(p)Jackson Kelly PLLC, counsel for the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (p) hereto), dated the Closing Date, regarding enforceability and certain West Virginia perfection and priority issues.

(q)Sidley Austin LLP, counsel for the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (q) hereto), dated the Closing Date, regarding certain bankruptcy matters relating to the Issuer.

(r)Richards, Layton & Finger, P.A., counsel for the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (r) hereto), dated the Closing Date, regarding certain matters of Delaware law.

(s)Robinson & McElwee, PLLC, counsel to the Issuer and APCo, shall have furnished to the Representatives their written opinion (substantially in the form attached as Annex I (t) hereto), dated the Closing Date, regarding certain West Virginia tax matters.

(t)On or before the date of this Underwriting Agreement and on or before the Closing Date, a nationally recognized accounting firm reasonably acceptable to the Representatives shall have furnished to the Representatives one or more reports regarding certain calculations and computations relating to the Bonds, in form or substance reasonably satisfactory to the Representatives, in each case in respect of which the Representatives shall have made specific requests therefor and shall have provided acknowledgment or similar letters to such firm reasonably necessary in order for such firm to issue such reports.

(u)The LLC Agreement, the Administration Agreement, the Sale Agreement, the Servicing Agreement and the Indenture and any amendment or supplement to any of the foregoing shall have been executed and delivered.

(v)Since the respective dates as of which information is given in each of the Registration Statement and in the Pricing Prospectus and as of the Closing Date there shall have been no (i) material adverse change in the business, property or financial condition of APCo and its subsidiaries, taken as a whole, whether or not in the ordinary course of business, or of the Issuer or (ii) adverse development concerning the business or assets of APCo and its subsidiaries, taken as a whole, or of the Issuer which would be reasonably likely to result in a material adverse change in the prospective business, property or financial condition of APCo and its subsidiaries, taken as a whole, whether or not in the ordinary course of business, or the of Issuer or (iii) development which would

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be reasonably likely to result in a material adverse change, in the CRR Property, the Bonds or the Financing Order.

(w)At the Closing Date, (i) the Bonds shall be rated at least the ratings set forth in the Pricing Term Sheet by Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”), respectively, and the Issuer shall have delivered to the Underwriters a letter from each such rating agency, or other evidence satisfactory to the Underwriters, confirming that the Bonds have such ratings, and (ii) neither  Moody’s nor S&P shall have, since the date of this Underwriting Agreement, downgraded or publicly announced that it has under surveillance or review, with possible negative implications, its ratings of the Bonds.

(x)The Issuer and APCo shall have furnished or caused to be furnished to the Representatives at the Closing Date certificates of officers of APCo and the Issuer, reasonably satisfactory to the Representatives, as to the accuracy of the representations and warranties of the Issuer and APCo herein, in the Sale Agreement, Servicing Agreement and the Indenture at and as of the Closing Date, as to the performance by the Issuer and APCo of all of their obligations hereunder to be performed at or prior to such Closing Date, as to the matters set forth in subsections (b) and (y) of this Section and as to such other matters as the Representatives may reasonably request.

(y)The final issuance advice letter, in a form consistent with the provisions of the Financing Order, shall have been filed with the WVPSC and the period during which the WVPSC may issue a disapproval letter shall have expired without the issuance thereof.

(z)On or prior to the Closing Date, the Issuer shall have delivered to the Representatives evidence, in form and substance reasonably satisfactory to the Representatives, that appropriate filings have been or are being made in accordance with the West Virginia Securitization Law (W. Va. Code § 24-2-4f), the Financing Order and other applicable law reflecting the grant of a security interest by the Issuer in the collateral relating to the Bonds to the Indenture Trustee, including the filing of the requisite notices in the office of the Secretary of State of the State of West Virginia, [the Secretary of State of the State of Delaware and the State Corporation Commission of the Commonwealth of Virginia].

(aa)On or prior to the Closing Date, APCo shall have funded the capital subaccount of the Issuer with cash in an amount equal to $[           ].

(bb)The Issuer and APCo shall have furnished or caused to be furnished or agree to furnish to the Rating Agencies at the Closing Date such opinions and certificates as the Rating Agencies shall have reasonably requested prior to the Closing Date.  Any opinion letters delivered on the Closing Date to the Rating Agencies beyond those being delivered to the Underwriters above shall either (x) include the Underwriters as

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addressees or (y) be accompanied by reliance letters addressed to the Underwriters referencing such letters.

If any of the conditions specified in this Section 9 shall not have been fulfilled when and as provided in this Underwriting Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Underwriting Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and Counsel for the Underwriters, all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives.  Notice of such cancellation shall be given to the Issuer in writing or by telephone or facsimile confirmed in writing.

10.Conditions of Issuer’s Obligations.  The obligation of the Issuer to deliver the Bonds shall be subject to the conditions that no stop order suspending the effectiveness of the Registration Statement shall be in effect at the Closing Date and no proceeding for that purpose shall be pending before, or threatened by, the Commission at the Closing Date and the condition set forth in Section 9(y) shall have been satisfied.  In case these conditions shall not have been fulfilled, this Underwriting Agreement may be terminated by the Issuer upon notice thereof to the Underwriters.  Any such termination shall be without liability of any party to any other party except as otherwise provided in Sections 8(a)(vi) and 11 hereof.

11.Indemnification and Contribution.

(a)APCo and the Issuer, jointly and severally, shall indemnify, defend and hold harmless each Underwriter, each Underwriter’s officers and directors and each person who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act or Exchange Act or any other statute or common law and shall reimburse each such Underwriter and controlling person for any reasonable legal or other expenses (including, to the extent hereinafter provided, reasonable counsel fees) as and when incurred by them in connection with investigating any such losses, claims, damages or liabilities or in connection with defending any actions, insofar as such losses, claims, damages, liabilities, expenses or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the Pricing Prospectus, each Issuer Free Writing Prospectus, the Pricing Package, the Final Prospectus or, in each case, any amendment or supplement thereto, collectively, or any omission or alleged omission to state therein a material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading or (iii) any information prepared by or on behalf of APCo or the Issuer and provided to the Underwriters; provided, however, that the indemnity agreement contained in this Section 11 shall not apply to any such losses, claims, damages, liabilities, expenses or actions arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, in each case if such statement or omission was made in reliance upon and in conformity with any Underwriter Information

-24-

(as defined in Section 11(b) hereof), or arising out of, or based upon, statements in or omissions from that part of the Registration Statement that shall constitute the Statement of Eligibility under the Trust Indenture Act of the Indenture Trustee with respect to any indenture qualified pursuant to the Registration Statement; provided, further that the indemnity agreement contained in this Section 11 shall not inure to the benefit of any Underwriter (or of any officer or director of such Underwriter or of any person controlling such Underwriter within the meaning of Section 15 of the Securities Act) on account of any such losses, claims, damages, liabilities, expenses or actions, joint or several, arising from the sale of the Bonds to any person to whom such Underwriter has sold Bonds if a copy of the Pricing Prospectus (including any amendment or supplement thereto if any amendments or supplements thereto shall have been furnished to the Underwriters reasonably prior to the time of the sale involved) (exclusive of the Incorporated Documents) shall, if then available and not yet filed with the Commission pursuant to Rule 424, not have been given or sent to such person by or on behalf of such Underwriter at the time of or prior to the sale of the Bonds to such person unless the alleged omission or alleged untrue statement was not corrected in the Pricing Prospectus (including any amendment or supplement thereto if any amendments or supplements thereto have been furnished to the Underwriters reasonably prior to the time of the sale involved) at the time of such sale.  The indemnity agreement of APCo and Issuer contained in this Section 11 and the representations and warranties of the Issuer and APCo contained in Sections 3 and 4 hereof shall remain operative and in full force and effect regardless of any termination of this Underwriting Agreement or of any investigation made by or on behalf of any Underwriter, its officers or its directors or any such controlling person, and shall survive the delivery of the Bonds.

(b)Each Underwriter shall severally and not jointly indemnify, defend and hold harmless APCo and the Issuer, each of APCo’s and Issuer’s respective officers, directors, and managers, and each person who controls the Issuer or APCo within the meaning of Section 15 of the Securities Act, from and against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act or any other statute or common law and shall reimburse each of them for any reasonable legal or other expenses (including, to the extent hereinafter provided, reasonable counsel fees) as and when incurred by them in connection with investigating any such losses, claims, damages or liabilities or in connection with defending any actions, insofar as such losses, claims, damages, liabilities, expenses or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with the Underwriter Information or (ii) any untrue statement or alleged untrue statement of a material fact contained in the Final Prospectus, each Issuer Free Writing Prospectus, the Pricing Package, collectively, or any omission or alleged omission to state therein a material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; if such statement or omission was made in reliance upon and in conformity with the Underwriter Information.  The only such information furnished to APCo by the Underwriters in writing expressly

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for use in such foregoing documents is set forth in Schedule IV hereto (the “Underwriter Information”).  The indemnity agreement of the respective Underwriters contained in this Section 11 and the representations and warranties of the Underwriters contained in Sections 5 and 13 hereof shall remain operative and in full force and effect regardless of any termination of this Underwriting Agreement or of any investigation made by or on behalf of APCo or the Issuer, their directors, managers or officers, any such Underwriter, or any such controlling person, and shall survive the delivery of the Bonds.

(c)APCo, the Issuer and the several Underwriters each shall, upon the receipt of notice of the commencement of any action against it or any person controlling it as aforesaid, in respect of which indemnity may be sought on account of any indemnity agreement contained herein, promptly give written notice of the commencement thereof to the party or parties against whom indemnity shall be sought under (a) or (b) above, but the failure to notify such indemnifying party or parties of any such action shall not relieve such indemnifying party or parties from any liability hereunder to the extent such indemnifying party or parties is/are not materially prejudiced as a result of such failure to notify and in any event shall not relieve such indemnifying party or parties from any liability which it or they may have to the indemnified party otherwise than on account of such indemnity agreement.  In case such notice of any such action shall be so given, such indemnifying party shall be entitled to participate at its own expense in the defense, or, if it so elects, to assume (in conjunction with any other indemnifying parties) the defense of such action, in which event such defense shall be conducted by counsel chosen by such indemnifying party or parties and reasonably satisfactory to the indemnified party or parties who shall be defendant or defendants in such action, and such defendant or defendants shall bear the fees and expenses of any additional counsel retained by them; but if the indemnifying party shall elect not to assume the defense of such action, such indemnifying party will reimburse such indemnified party or parties for the reasonable fees and expenses of any counsel retained by them; provided, however, if the defendants in any such action (including impleaded parties) include both the indemnified party and the indemnifying party and counsel for the indemnifying party shall have reasonably concluded that there may be a conflict of interest involved in the representation by a single counsel of both the indemnifying party and the indemnified party, the indemnified party or parties shall have the right to select separate counsel, satisfactory to the indemnifying party, whose reasonable fees and expenses shall be paid by such indemnifying party, to participate in the defense of such action on behalf of such indemnified party or parties (it being understood, however, that the indemnifying party shall not be liable for the fees and expenses of more than one separate counsel (in addition to local counsel) representing the indemnified parties who are parties to such action).  Each of APCo, Issuer and the several Underwriters agrees that without the other party’s prior written consent, which consent shall not be unreasonably withheld, it will not settle, compromise or consent to the entry of any judgment in any claim in respect of which indemnification may be sought under the indemnification provisions of this Underwriting Agreement, unless such settlement, compromise or consent (i) includes an unconditional release of such other party from all liability arising out of such claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of such other party.

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(d)If the indemnification provided for in subparagraph (a) or (b) above shall be unavailable to or insufficient to hold harmless an indemnified party, each indemnifying party agrees to contribute to such indemnified party with respect to any and all losses, claims, damages, liabilities and expenses for which each such indemnification provided for in subparagraph (a) or (b) above shall be unavailable or insufficient, in such proportion as shall be appropriate to reflect (i) the relative benefits received by APCo and the Issuer on the one hand and the Underwriters on the other hand from the offering of the Bonds pursuant to this Underwriting Agreement or (ii) if an allocation solely on the basis provided by clause (i) is not permitted by applicable law or is inequitable or against public policy, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of each indemnifying party on the one hand and the indemnified party on the other in connection with the statements or omissions which have resulted in such losses, claims, damages, liabilities and expenses and (iii) any other relevant equitable considerations; provided, however, that no indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party not guilty of such fraudulent misrepresentation.  Relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or the indemnified party and each such party’s relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission.  APCo, the Issuer and each of the Underwriters agree that it would not be just and equitable if contributions pursuant to this subparagraph (d) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above.  Notwithstanding the provisions of this Section 11, no Underwriter shall be required to contribute in excess of the amount equal to the excess of (i) the total underwriting discount and commissions received by it, over (ii) the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission.  The obligations of each Underwriter to contribute pursuant to this Section 11 are several and not joint and shall be in the same proportion as such Underwriter’s obligation to underwrite Bonds is to the total number of Bonds set forth in Schedule II hereto.

12.Termination.  This Underwriting Agreement may be terminated, at any time prior to the Closing Date with respect to the Bonds by the Representatives by written notice to the Issuer if after the date hereof and at or prior to the Closing Date (a) there shall have occurred any general suspension of trading in securities on the New York Stock Exchange (“NYSE”) or there shall have been established by the NYSE, or by the Commission any general limitation on prices for such trading or any general restrictions on the distribution of securities, or a general banking moratorium declared by New York or federal authorities or (b) there shall have occurred any (i) material outbreak of hostilities (including, without limitation, an act of terrorism) or (ii) declaration by the United States of war or national or international calamity or crisis, including, but not limited to, a material escalation of hostilities that existed prior to the date of this Underwriting Agreement or (iii) material adverse change in the financial markets in the United States, and the effect of any such event specified in clause (a) or (b) above on the

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financial markets of the United States shall be such as to materially and adversely affect, in the reasonable judgment of the Representatives, their ability to proceed with the public offering or the delivery of the Bonds on the terms and in the manner contemplated by the Final Prospectus.  Any termination hereof pursuant to this Section 12 shall be without liability of any party to any other party except as otherwise provided in Sections 8(a)(vi) and 11 hereof.

13.Representations, Warranties and Covenants of the Underwriters.  The Underwriters, severally and not jointly,  represent, warrant and agree with the Issuer and APCo that, unless the Underwriters obtained, or will obtain, the prior written consent of the Issuer or APCo, the Representatives (x) have not delivered, and will not deliver, any Rating Information (as defined below) to any Rating Agency until and unless the Issuer or APCo advises the Underwriters that such Rating Information is posted to the Issuer’s website maintained by the Issuer pursuant to paragraph (a)(3)(iii)(B) of Rule 17g-5 under the Exchange Act in the same form as it will be provided to such Rating Agency, and (y) have not participated, and will not participate, with any Rating Agency in any oral communication of any Rating Information without the participation of a representative of the Issuer or APCo.  For purposes of this Section 13, “Rating Information” means any information provided to a Rating Agency for the purpose of determining an initial credit rating on the Bonds. 

14.Absence of Fiduciary Relationship.  Each of the Issuer and APCo acknowledges and agrees that the Underwriters are acting solely in the capacity of an arm’s length contractual counterparty to the Issuer and APCo with respect to the offering of the Bonds contemplated hereby (including in connection with determining the terms of the offering) and not as a financial advisor or a fiduciary to, or an agent of, the Issuer or APCo.  Additionally, none of the Underwriters is advising the Issuer or APCo as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction.  The Issuer and APCo shall consult with their own advisors concerning such matters and shall be responsible for making their own independent investigation and appraisal of the transactions contemplated hereby, and the Underwriters shall have no responsibility or liability to the Issuer or APCo with respect thereto.  Any review by the Underwriters of the Issuer or APCo, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Underwriters and shall not be on behalf of the Issuer or APCo.

15.Notices.  All communications hereunder will be in writing and may be given by United States mail, courier service, telecopy, telefax or facsimile (confirmed by telephone or in writing in the case of notice by telecopy, telefax or facsimile) or any other customary means of communication, and any such communication shall be effective when delivered, or if mailed, three days after deposit in the United States mail with proper postage for ordinary mail prepaid, and if sent to the Representatives, to it at the address specified in Schedule I hereto; and if sent to the Issuer, to it at 707 Virginia East, Suite 1000, Charleston, West Virginia, 25327, Attention: Manager; and if sent to APCo, to it at 1 Riverside Plaza, Columbus, Ohio 43215, Attention: Treasurer.  The parties hereto, by notice to the others, may designate additional or different addresses for subsequent communications.

16.Successors.  This Underwriting Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors

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and controlling persons referred to in Section 11 hereof, and no other person will have any right or obligation hereunder.

17.Applicable Law.  This Underwriting Agreement will be governed by and construed in accordance with the laws of the State of New York.

18.Counterparts.  This Underwriting Agreement may be signed in any number of counterparts, each of which shall be deemed an original, which taken together shall constitute one and the same instrument.

19.Integration.  This Agreement supersedes all prior agreements and understandings (whether written or oral) among the Issuer, APCo and the Underwriters, or any of them, with respect to the subject matter hereof.

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among APCo, the Issuer and the several Underwriters.

Very truly yours,

APPALACHIAN POWER COMPANY

By:

Name:

Title:

APPALACHIAN CONSUMER RATE RELIEF

FUNDING LLC

By:

Name:

Title:

The foregoing Underwriting Agreement is hereby confirmed and accepted by the

Representatives on behalf of the Underwriters as of the date specified in Schedule I hereto.

MORGAN STANLEY & CO. LLC

By:

Name:

Title:

RBS SECURITIES INC.

By:

Name:

Title:

SCHEDULE I

Underwriting Agreement dated November [  ], 2013

Registration Statement Nos. 333-191392 and 333-191392-01

Representatives: Morgan Stanley & Co. LLC and RBS Securities Inc.

c/o Morgan Stanley & Co. LLC

Address:   1585 Broadway

New York, New York 10036

Attention: [Patrick Collins]

Title, Purchase Price and Description of Bonds:

Title: Appalachian Consumer Rate Relief Funding LLC Senior Secured Consumer Rate Relief Bonds

	Total Principal Amount of Tranche	Bond Rate		Price to Public	Underwriting Discounts and Commissions	Proceeds to Issuer
Per Tranche A-1 Bond		$	%	%	%	$
Per Tranche A-2 Bond		$	%	%	%	$
Per Tranche A-3 Bond		$	%	%	%	$
Total		$				$

Original Issue Discount (if any): $[     ]

Redemption provisions:                                           None

Other provisions:                                None

Closing Date, Time and Location: [         ], 2013, 10:00 a.m.; offices of Sidley Austin LLP; One South Dearborn Street, Chicago, Illinois 60603 and simultaneously in the offices of Hunton & Williams LLP, 200 Park Avenue, New York, New York 10166

I-1

SCHEDULE II

Principal Amount of Bonds to be Purchased

Underwriter	Tranche A-1	Tranche A-2	Tranche A-3	Total
Morgan Stanley & Co. LLC	$	$	$	$
RBS Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith                      Incorporated
PNC Capital Markets LLC
Wells Fargo Securities, LLC
Total	$	$	$	$

II-1

SCHEDULE III

Schedule of Issuer Free Writing Prospectuses

A.   Free Writing Prospectuses not required to be filed

Electronic Road Show

B.   Free Writing Prospectuses required to be filed pursuant to Rule 433

Preliminary Term Sheet

Pricing Term Sheet, dated [        ], 2013

III-1

SCHEDULE IV

Descriptive List of Underwriter Provided Information

[Subject to confirmation based on final form]

A.   Pricing Prospectus

(a)under the heading “UNDERWRITING THE BONDS” in the Preliminary Prospectus Supplement: (i) the third sentence under the caption “No Assurance as to Resale Price or Resale Liquidity for the Bonds”; (ii) the entire first full paragraph under the caption “Various Types of Underwriter Transactions Which May Affect the Price of the Bonds” (except the last sentence thereof); and (iii) the second sentence of the second full paragraph and the last sentence of the fourth full paragraph under the caption “Various Types of Underwriter Transactions Which May Affect the Price of the Bonds”; and (b) under the heading “OTHER RISKS ASSOCIATED WITH AN INVESTMENT IN THE CONSUMER RATE RELIEF BONDS” in the Prospectus, the first sentence under the caption “The Absence of a Secondary Market for a Series of Consumer Rate Relief Bonds Might Limit Your Ability to Resell Your Consumer Rate Relief Bonds of Such Series.”

B.   Final Prospectus

(a)the first sentence and the fourth sentence of the last full paragraph on the cover page of the Prospectus Supplement; (b) under the heading “UNDERWRITING THE BONDS” in the Prospectus Supplement: (i) the entire two paragraphs under the caption “The Underwriters’ Sales Price for the Bonds”; (ii) the third sentence under the caption “No Assurance as to Resale Price or Resale Liquidity for the Bonds”; (iii) the entire first full paragraph under the caption “Various Types of Underwriter Transactions Which May Affect the Price of the Bonds” (except the last sentence thereof); and (iv) the second sentence of the second full paragraph and the last sentence of the fourth full paragraph under the caption “Various Types of Underwriter Transactions Which May Affect the Price of the Bonds”; and (c) under the heading “OTHER RISKS ASSOCIATED WITH AN INVESTMENT IN THE CONSUMER RATE RELIEF BONDS” in the Prospectus, the first sentence under the caption “The Absence of a Secondary Market for a Series of Consumer Rate Relief Bonds Might Limit Your Ability to Resell Your Consumer Rate Relief Bonds of Such Series.”

IV-1

Annex I (s) 1

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC

Dated and Effective as of

[filing date]

TABLE OF CONTENTS

	Page
ARTICLE I GENERAL PROVISIONS	1
SECTION 1.01 Definitions	1
SECTION 1.02 Sole Member; Registered Office and Agent	2
SECTION 1.03 Other Offices	3
SECTION 1.04 Name	3
SECTION 1.05 Purpose; Nature of Business Permitted; Powers	3
SECTION 1.06 Limited Liability Company Agreement; Certificate of Formation	5
SECTION 1.07 Separate Existence	5
SECTION 1.08 Limitation on Certain Activities	8
SECTION 1.09 No State Law Partnership	9
ARTICLE II CAPITAL	9
SECTION 2.01 Initial Capital	9
SECTION 2.02 Additional Capital Contributions	10
SECTION 2.03 Capital Account	10
SECTION 2.04 Interest	10
ARTICLE III ALLOCATIONS; BOOKS	10
SECTION 3.01 Allocations of Income and Loss	10
SECTION 3.02 Company to be Disregarded for Tax Purposes	11
SECTION 3.03 Books of Account	11
SECTION 3.04 Access to Accounting Records	11
SECTION 3.05 Annual Tax Information	11
SECTION 3.06 Internal Revenue Service Communications	12
ARTICLE IV MEMBER	12
SECTION 4.01 Powers	12
SECTION 4.02 Compensation of Member	13
SECTION 4.03 Other Ventures	13
SECTION 4.04 Actions by the Member	14
ARTICLE V OFFICERS	14
SECTION 5.01 Designation; Term; Qualifications	14
SECTION 5.02 Removal and Resignation	15
SECTION 5.03 Vacancies	15
SECTION 5.04 Compensation	15

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ARTICLE VI MEMBERSHIP INTEREST	16
SECTION 6.01 General	16
SECTION 6.02 Distributions	16
SECTION 6.03 Rights on Liquidation, Dissolution or Winding Up	16
SECTION 6.04 Redemption	16
SECTION 6.05 Voting Rights	16
SECTION 6.06 Transfer of Membership Interests	16
SECTION 6.07 Admission of Transferee as Member	17
ARTICLE VII MANAGERS	17
SECTION 7.01 Managers	17
SECTION 7.02 Powers of the Managers	18
SECTION 7.03 Compensation	19
SECTION 7.04 Removal of Managers	19
SECTION 7.05 Resignation of Manager	20
SECTION 7.06 Vacancies	20
SECTION 7.07 Meetings of the Managers	20
SECTION 7.08 Electronic Communications	20
SECTION 7.09 Committees of Managers	21
SECTION 7.10 Limitations on Independent Managers	21
ARTICLE VIII EXPENSES	21
SECTION 8.01 Expenses	21
ARTICLE IX PERPETUAL EXISTENCE; DISSOLUTION, LIQUIDATION AND WINDING-UP	22
SECTION 9.01 Existence	22
SECTION 9.02 Dissolution	23
SECTION 9.03 Accounting	23
SECTION 9.04 Certificate of Cancellation	23
SECTION 9.05 Winding Up	23
SECTION 9.06 Order of Payment of Liabilities Upon Dissolution	23
SECTION 9.07 Limitations on Payments Made in Dissolution	24
SECTION 9.08 Limitation on Liability	24
ARTICLE X INDEMNIFICATION	24
SECTION 10.01 Indemnity	24
SECTION 10.02 Indemnity for Actions By or In the Right of the Company	24
SECTION 10.03 Indemnity If Successful	25
SECTION 10.04 Expenses	25
SECTION 10.05 Advance Payment of Expenses	25
SECTION 10.06 Other Arrangements Not Excluded	26

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ARTICLE XI MISCELLANEOUS PROVISIONS	26
SECTION 11.01 No Bankruptcy Petition; Dissolution	26
SECTION 11.02 Amendments	27
SECTION 11.03 Commission Condition	28
SECTION 11.04 Governing Law	29
SECTION 11.05 Headings	29
SECTION 11.06 Severability	29
SECTION 11.07 Assigns	29
SECTION 11.08 Enforcement by Each Independent Manager	29
SECTION 11.09 Waiver of Partition; Nature of Interest	29
SECTION 11.10 Benefits of Agreement; No Third-Party Rights	30

EXHIBITS, SCHEDULES AND APPENDIX

Schedule A	Schedule of Capital Contribution of Member
Schedule B	Initial Managers
Schedule C	Initial Officers
Exhibit A	Management Agreement
Appendix A	Definitions

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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC

This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) of APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, a Delaware limited liability company (the “Company”), is made and entered into as of [filing date] by APPALACHIAN POWER COMPANY, a Virginia corporation (including any additional or successor members of the Company other than Special Members, the “Member”).

WHEREAS, the Member has caused to be filed a Certificate of Formation with the Secretary of State of the State of Delaware to form the Company under and pursuant to the LLC Act and has entered into a Limited Liability Company Agreement of the Company, dated as of August 19, 2013 (the “Original LLC Agreement”); and

WHEREAS, in accordance with the LLC Act, the Member desires to enter into this Agreement to amend and restate in its entirety the Original LLC Agreement and to set forth the rights, powers and interests of the Member with respect to the Company and its Membership Interest therein and to provide for the management of the business and operations of the Company.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Member, intending to be legally bound, hereby agrees to amend and restate in its entirety the Original LLC Agreement as follows:

ARTICLE I

GENERAL PROVISIONS

SECTION 1.01  Definitions.

(a)           Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in Appendix A attached hereto.

(b)           All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

(c)           The words “hereof,” “herein,” “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, Schedule, Exhibit, Annex and Attachment references contained in this Agreement are references to Sections, Schedules, Exhibits, Annexes and Attachments in or to this Agreement unless otherwise specified; and the terms “includes” and “including” shall mean “includes without limitation” and “including without limitation”, respectively.

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(d)           The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.

(e)           Non-capitalized terms used herein which are defined in the LLC Act, shall, as the context requires, have the meanings assigned to such terms in the LLC Act as of the date hereof, but without giving effect to amendments to the LLC Act.

SECTION 1.02  Sole Member; Registered Office and Agent.

(a)           The initial sole member of  the Company shall be Appalachian Power Company, a Virginia corporation, or any successor as sole member pursuant to Sections 1.02(c), 6.06 and 6.07.  The registered office and registered agent of the Company in the State of Delaware shall be The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.  The Member may change said registered office and agent from one location to another in the State of Delaware.  The Member shall provide notice of any such change to the Indenture Trustee.

(b)           Upon the occurrence of any event that causes the Member to cease to be a member of the Company (other than upon continuation of the Company without dissolution upon the transfer or assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee or an additional member of the Company pursuant to Sections 6.06 and 6.07), each Person acting as an Independent Manager (as defined herein) pursuant to the terms of this Agreement shall, without any action of any Person and simultaneously with the Member ceasing to be a member of the Company, automatically be admitted to the Company as a Special Member and shall continue the Company without dissolution.  No Special Member may resign from the Company or transfer its rights as Special Member unless (i) a successor Special Member has been admitted to the Company as Special Member by executing a counterpart to this Agreement, and (ii) such successor has also accepted its appointment as an Independent Manager pursuant to this Agreement; provided, however, the Special Members shall automatically cease to be members of the Company upon the admission to the Company of a substitute Member.  Each Special Member shall be a member of the Company that has no interest in the profits, losses and capital of the Company and has no right to receive any distributions of Company assets (and no Special Member shall be treated as a member of the Company for federal income tax purposes).  Pursuant to Section 18-301 of the LLC Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive a limited liability company interest in the Company.  A Special Member, in its capacity as Special Member, may not bind the Company.  Except as required by any mandatory provision of the LLC Act, each Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including the merger, consolidation or conversion of the Company.  In order to implement the admission to the Company of each Special Member, each  Person acting as an Independent Manager pursuant to this Agreement shall execute a counterpart to this Agreement.  Prior to its admission to the Company as Special Member, each Person acting as an Independent Manager pursuant to this Agreement shall not be a member of the Company.  A “Special Member” means, upon such Person’s admission to the Company as a member of the Company pursuant to this Section 1.02(b), a Person acting as an Independent Manager, in such Person’s capacity as a member of the Company.  A Special Member shall only have the rights

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and duties expressly set forth in this Agreement.  For purposes of this Agreement, a Special Member is not included within the defined term “Member”.

(c)           The Company may admit additional Members with the affirmative vote of a majority of the Managers, which vote must include the affirmative vote of each Independent Manager.  Notwithstanding the preceding sentence, it shall be a condition to the admission of any additional Member that the sole Member shall have received an opinion of outside tax counsel (as selected by the Member in form and substance reasonably satisfactory to the Member and the Indenture Trustee) that the admission of such additional Member shall not cause the Company to be treated, for federal income tax purposes, as having more than a “sole owner” and that the Company shall not be treated, for federal income tax purposes, as an entity separate from such “sole owner”.

SECTION 1.03  Other Offices.  The Company may have an office at 707 Virginia Street East, Suite 1000, Charleston, West Virginia, 25327, or at any other offices that may at any time be established by the Member at any place or places within or outside the State of Delaware.  The Member shall provide notice to the Indenture Trustee of any change in the location of the Company’s office.

SECTION 1.04  Name.  The name of the Company shall be “Appalachian Consumer Rate Relief Funding LLC”.  The name of the Company may be changed from time to time by the Member with ten (10) days’ prior written notice to the Managers and the Indenture Trustee, and the filing of an appropriate amendment to the Certificate of Formation with the Secretary of State as required by the LLC Act.

SECTION 1.05  Purpose; Nature of Business Permitted; Powers.  The Company is intended to qualify as an “Assignee” as defined in Section 24-2-4f(b)(3) of the Securitization Law.  The purposes for which the Company is formed are limited to:

(a)           acquire, own, hold, administer, service or enter into agreements regarding the receipt and servicing of CRR Property and the other CRR Bond Collateral, along with certain other related assets;

(b)           manage, sell, assign, pledge, collect amounts due on or otherwise deal with the CRR Property and the other CRR Bond Collateral and related assets to be so acquired in accordance with the terms of the Basic Documents;

(c)           negotiate, authorize, execute, deliver, assume the obligations under, and perform its duties under, the Basic Documents and any other agreement or instrument or document relating to the activities set forth in clauses (a) and (b) above; provided, that each party to any such agreement under which material obligations are imposed upon the Company shall covenant that it shall not, prior to the date which is one year and one day after the termination of the Indenture and the payment in full of the Consumer Rate Relief Bonds and any other amounts owed under the Indenture, acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Company under any federal or state bankruptcy, insolvency or similar

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law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company; or ordering the winding up or liquidation of the affairs of the Company; and provided, further, that the Company shall be permitted to incur additional indebtedness or other liabilities payable to service providers and trade creditors in the ordinary course of business in connection with the foregoing activities;

(d)           file with the U.S. Securities and Exchange Commission one or more registration statements, including any pre-effective or post-effective amendments thereto and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (including any prospectus supplement, prospectus and exhibits contained therein) and file such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents necessary or desirable to register the Consumer Rate Relief Bonds under the securities or “Blue Sky” laws of various jurisdictions;

(e)           authorize, execute, deliver, issue and register the Consumer Rate Relief Bonds;

(f)           make payments on the Consumer Rate Relief Bonds;

(g)           pledge its interest in CRR Property and other CRR Bond Collateral to the Indenture Trustee under the Indenture in order to secure the Consumer Rate Relief Bonds; and

(h)           engage in any lawful act or activity and exercise any powers permitted to limited liability companies formed under the laws of the State of Delaware that, in either case, are incidental to, or necessary, suitable or convenient for the accomplishment of the above-mentioned purposes.

The Company shall engage only in any activities related to the foregoing purposes or required or authorized by the terms of the Basic Documents or other agreements referenced above.  The Company shall have all powers reasonably incidental, necessary, suitable or convenient to effect the foregoing purposes, including all powers granted under the LLC Act.  The Company, the Member, any Manager (other than an Independent Manager), or any officer of the Company, acting singly or collectively, on behalf of the Company, may enter into and perform the Basic Documents and all registration statements, documents, agreements, certificates or financing statements contemplated thereby or related thereto, all without any further act, vote or approval of any Member, Manager or other Person, notwithstanding any other provision of this Agreement, the LLC Act, or other applicable law, rule or regulation. Notwithstanding any other provision of this Agreement, the LLC Act or other applicable law, any Basic Document executed prior to the date hereof by any Member, Manager or officer on behalf of the Company is hereby ratified and approved in all respects.  The authorization set forth in the preceding sentence shall not be deemed a restriction on the power and authority of the Member or any Manager, including any Independent Manager, to enter into other agreements or documents on behalf of the Company as authorized pursuant to this Agreement and the LLC Act. The Company shall possess and may exercise all the powers and privileges granted by the LLC Act or by any other

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law or by this Agreement, together with any powers incidental thereto, insofar as such powers and privileges are incidental, necessary, suitable or convenient to the conduct, promotion or attainment of the business purposes or activities of the Company.

SECTION 1.06  Limited Liability Company Agreement; Certificate of Formation.  This Agreement shall constitute a “limited liability company agreement” within the meaning of the LLC Act.  Julia A. Sloat, as an authorized person within the meaning of the LLC Act, has caused a certificate of formation of the Company to be executed and filed in the office of the Secretary of State of the State of Delaware on August 19, 2013 (such execution and filing being hereby ratified and approved in all respects).  The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate of Formation of the Company as provided in the LLC Act.

SECTION 1.07  Separate Existence.  Except for financial reporting purposes (to the extent required by generally accepted accounting principles) and for federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, the Member and the Managers shall take all steps necessary to continue the identity of the Company as a separate legal entity and to make it apparent to third Persons that the Company is an entity with assets and liabilities distinct from those of the Member, Affiliates of the Member or any other Person, and that, the Company is not a division of any of the Affiliates of the Company or any other Person. In that regard, and without limiting the foregoing in any manner, the Company shall:

(a)           maintain office space separate and clearly delineated from the office space of any Affiliate;

(b)           maintain the assets of the Company in such a manner that it is not costly or difficult to segregate, identify or ascertain its individual assets from those of any other Person, including any Affiliate;

(c)           maintain a separate telephone number;

(d)           conduct all transactions with Affiliates on an arm’s-length basis;

(e)           not guarantee, become obligated for or pay the debts of any Affiliate or hold the credit of the Company out as being available to satisfy the obligations of any Affiliate or other Person (nor, except as contemplated in the Basic Documents, indemnify any Person for losses resulting therefrom), nor, except as contemplated in the Basic Documents, have any of its obligations guaranteed by any Affiliate or hold the Company out as responsible for the debts of any Affiliate or other Person or for the decisions or actions with respect to the business and affairs of any Affiliate, nor seek or obtain credit or incur any obligation to any third Party based upon the creditworthiness or assets of any Affiliate or any other Person (i.e. other than based on the assets of the Company) nor allow any Affiliate to do such things based on the credit of the Company;

(f)           except as expressly otherwise permitted hereunder or under any of the Basic Documents, not permit the commingling or pooling of the Company’s funds or other assets with the funds or other assets of any Affiliate;

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(g)           maintain separate deposit and other bank accounts and funds (separately identifiable from those of the Member or any other Person) to which no Affiliate has any access, which accounts shall be maintained in the name and, to the extent not inconsistent with applicable federal tax law, with the tax identification number of the Company;

(h)           maintain full books of accounts and records (financial or other) and financial statements separate from those of its Affiliates or any other Person, prepared and maintained in accordance with generally accepted accounting principles (including, all resolutions, records, agreements or instruments underlying or regarding the transactions contemplated by the Basic Documents or otherwise) and audited annually by an independent accounting firm which shall provide such audit to the Indenture Trustee;

(i)           pay its own liabilities out of its own funds, including fees and expenses of the Administrator pursuant to the Administration Agreement and the Servicer pursuant to any Servicing Agreement;

(j)           not hire or maintain any employees, but shall compensate (either directly or through reimbursement of the Company’s allocable share of any shared expenses) all consultants, agents and Affiliates, to the extent applicable, for services provided to the Company by such consultants, agents or Affiliates, in each case, from the Company’s own funds;

(k)           allocate fairly and reasonably the salaries of and the expenses related to providing the benefits of officers shared with the Member, any Special Member or any Manager;

(l)           allocate fairly and reasonably any overhead shared with the Member, any Special Member or any Manager;

(m)           pay from its own bank accounts for accounting and payroll services, rent, lease and other expenses (or the Company’s allocable share of any such amounts provided by one or more other Affiliate) and not have such operating expenses (or the Company’s allocable share thereof) paid by any Affiliates; provided, that the Member shall be permitted to pay the initial organization expenses of the Company and certain of the expenses related to the transactions contemplated by the Basic Documents as provided therein;

(n)           maintain adequate capitalization to conduct its business and affairs considering the Company’s size and the nature of its business and intended purposes and, after giving effect to the transactions contemplated by the Basic Documents, refrain from engaging in a business for which its remaining property represents an unreasonably small capital;

(o)           conduct all of the Company’s business (whether in writing or orally) solely in the name of the Company through the Member and the Company’s Managers, officers and agents and hold the Company out as an entity separate from any Affiliate;

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(p)           not make or declare any distributions of cash or property to the Member except in accordance with appropriate limited liability company formalities and only consistent with sound business judgment to the extent that it is permitted pursuant to the Basic Documents and not violative of any applicable law;

(q)           otherwise practice and adhere to all limited liability company procedures and formalities to the extent required by this Agreement or all other appropriate constituent documents;

(r)           not appoint an Affiliate or any employee of an Affiliate as an agent of the Company, except as otherwise permitted in the Basic Documents (although such Persons can qualify as a Manager or as an officer of the Company);

(s)           not acquire obligations or securities of or make loans or advances to or pledge its assets for the benefit of any Affiliate, the Member or any Affiliate of the Member;

(t)           not permit the Member or any Affiliate to acquire obligations of or make loans or advances to the Company;

(u)           except as expressly provided in the Basic Documents, not permit the Member or any Affiliate to guarantee, pay or become liable for the debts of the Company nor permit any such Person to hold out its creditworthiness as being available to pay the liabilities and expenses of the Company nor, except for the indemnities in this Agreement and the Basic Documents, indemnify any Person for losses resulting therefrom;

(v)           maintain separate minutes of the actions of the Member and the Managers, including the transactions contemplated by the Basic Documents;

(w)           cause (i) all written and oral communications, including letters, invoices, purchase orders, and contracts, of the Company to be made solely in the name of the Company, (ii) the Company to have its own tax identification number (to the extent not inconsistent with applicable federal tax law), stationery, checks and business forms, separate from those of any Affiliate, (iii) all Affiliates not to use the stationery or business forms of the Company, and cause the Company not to use the stationery or business forms of any Affiliate, and (iv) all Affiliates not to conduct business in the name of the Company, and cause the Company not to conduct business in the name of any Affiliate;

(x)           direct creditors of the Company to send invoices and other statements of account of the Company directly to the Company and not to any Affiliate and cause the Affiliates to direct their creditors not to send invoices and other statements of accounts of such Affiliates to the Company;

(y)           cause the Member to maintain as official records all resolutions, agreements, and other instruments underlying or regarding the transactions contemplated by the Basic Documents;

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(z)           disclose, and cause the Member to disclose, in its financial statements the effects of all transactions between the Member and the Company in accordance with generally accepted accounting principles, and in a manner which makes it clear that (i) the Company is a separate legal entity, (ii) the assets of the Company (including the CRR Property transferred to the Company pursuant to the Sale Agreement) are not assets of any Affiliate and are not available to pay creditors of any Affiliate and (iii) neither the Member nor any other Affiliate is liable or responsible for the debts of the Company;

(aa)         treat and cause the Member to treat the transfer of CRR Property from the Member to the Company as a sale under the Securitization Law;

(bb)         except as described herein with respect to tax purposes and financial reporting, describe and cause each Affiliate to describe the Company, and hold the Company out as a separate legal entity and not as a division or department of any Affiliate, and promptly correct any known misunderstanding regarding the Company’s identity separate from any Affiliate or any Person;

(cc)          so long as any of the Consumer Rate Relief Bonds are outstanding, treat the Consumer Rate Relief Bonds as debt for all purposes and specifically as debt of the Company, other than for financial reporting, state or federal regulatory or tax purposes;

(dd)          solely for purposes of federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Consumer Rate Relief Bonds are outstanding, treat the Consumer Rate Relief Bonds as indebtedness of the Member secured by the CRR Bond Collateral unless otherwise required by appropriate taxing authorities;

(ee)           file its own tax returns, if any, as may be required under applicable law, to the extent (i) not part of a consolidated group filing a consolidated return or returns or (ii) not treated as a division or disregarded entity for tax purposes of another taxpayer, and pay any taxes so required to be paid under applicable law;

(ff)            maintain its valid existence in good standing under the laws of the State of Delaware and maintain its qualification to do business under the laws of such other jurisdictions as its operations require;

(gg)          not form, or cause to be formed, any subsidiaries;

(hh)          comply with all laws applicable to the transactions contemplated by this Agreement and the Basic Documents; and

(ii)            cause the Member to observe in all material respects all limited liability company procedures and formalities, if any, required by its constituent documents and the laws of its state of formation and all other appropriate jurisdictions.

SECTION 1.08  Limitation on Certain Activities.  Notwithstanding any other provisions of this Agreement, the Company, and the Member or Managers on behalf of the Company, shall not:

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(a)           engage in any business or activity other than as set forth in Article I hereof;

(b)           without the affirmative vote of its Member and the affirmative vote of all of the Managers, including each Independent Manager, file a voluntary petition for relief under the Bankruptcy Code or similar law, consent to the institution of insolvency or bankruptcy proceedings against the Company or otherwise institute insolvency or bankruptcy proceedings with respect to the Company or take any company action in furtherance of any such filing or institution of a proceeding;

(c)           without the affirmative vote of all Managers, including each Independent Manager, and then only to the extent permitted by the Basic Documents, convert, merge or consolidate with any other Person or sell all or substantially all of its assets or acquire all or substantially all of the assets or capital stock or other ownership interest of any other Person;

(d)           take any action, file any tax return, or make any election inconsistent with the treatment of the Company, for purposes of federal income taxes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the Member;

(e)           incur any indebtedness or assume or guarantee any indebtedness of any Person (other than the indebtedness incurred under the Basic Documents);

(f)            issue any bonds other than the Consumer Rate Relief Bonds contemplated by the Basic Documents; or

(g)           to the fullest extent permitted by law, without the affirmative vote of its Member and the affirmative vote of all Managers, including each Independent Manager, execute any dissolution, liquidation, or winding up of the Company.

So long as any of the Consumer Rate Relief Bonds are outstanding, the Company and the Member shall give written notice to each applicable Rating Agency of any action described in clauses (b), (c) or (g) of this Section 1.08 which is taken by or on behalf of the Company with the required affirmative vote of the Member and all Managers as therein described.

SECTION 1.09  No State Law Partnership.   No provisions of this Agreement shall be deemed or construed to constitute a partnership (including a limited partnership) or joint venture, or the Member a partner or joint venturer of or with any Manager or the Company, for any purposes.

ARTICLE II

CAPITAL

SECTION 2.01  Initial Capital. The initial capital of the Company shall be the sum of cash contributed to the Company by the Member (the “Capital Contribution”) in the

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amount set out opposite the name of the Member on Schedule A hereto, as amended from time to time and incorporated herein by this reference.

SECTION 2.02  Additional Capital Contributions. The assets of the Company are expected to generate a return sufficient to satisfy all obligations of the Company under this Agreement and the Basic Documents and any other obligations of the Company. It is expected that no capital contributions to the Company will be necessary after the purchase of the CRR Property.  On or prior to the date of issuance of the Consumer Rate Relief Bonds, the Member shall make an additional contribution to the Company in an amount equal to at least 0.50% of the initial principal amount thereof or such greater amount as agreed to by the Member in connection with the issuance by the Company of the Consumer Rate Relief Bonds, which amount the Company shall deposit into the Capital Subaccount established by the Indenture Trustee as provided in the Indenture.  No capital contribution by the Member to the Company will be made for the purpose of mitigating losses on CRR Property that has previously been transferred to the Company, and all capital contributions shall be made in accordance with all applicable limited liability company procedures and requirements, including proper record keeping by the Member and the Company. Each capital contribution will be acknowledged by a written receipt signed by any one of the Managers. The Managers acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, such additional contribution will be managed by an investment manager selected by the Indenture Trustee who shall invest such amounts only in investments eligible pursuant to the Basic Documents, and all income earned thereon shall be allocated or paid by the Indenture Trustee in accordance with the provisions of the Indenture.

SECTION 2.03  Capital Account.  A Capital Account shall be established and maintained for the Member on the Company’s books (the “Capital Account”).

SECTION 2.04  Interest on Capital Account.  Except for the Permitted Return, no interest shall be paid or credited to the Member on its Capital Account or upon any undistributed profits left on deposit with the Company.  Except as provided herein or by law, the Member shall have no right to demand or receive the return of its Capital Contribution.

ARTICLE III

ALLOCATIONS; BOOKS

SECTION 3.01  Allocations of Income and Loss.

(a)           Book Allocations.  The net income and net loss of the Company shall be allocated entirely to the Member.

(b)           Tax Allocations. Because the Company is not making (and will not make) an election to be treated as an association taxable as a corporation under Section 301.7701-3(a) of the Treasury Regulations, and because the Company is a business entity that has a single owner and is not a corporation, it is expected to be disregarded as an entity separate from its owner for federal income tax purposes under Section 301.7701-3(b)(1) of the Treasury Regulations.  Accordingly, all items of income, gain, loss, deduction and credit of the Company for all taxable periods will be treated for federal income tax purposes, and for state and local

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income and other tax purposes to the extent permitted by applicable law, as realized or incurred directly by the Member.  To the extent not so permitted, all items of income, gain, loss, deduction and credit of the Company shall be allocated entirely to the Member as permitted by applicable tax law, and the Member shall pay (or indemnify the Company, the Indenture Trustee and each of their officers, managers, employees or agents for, and defend and hold harmless each such person from and against its payment of) any taxes levied or assessed upon all or any part of the Company’s property or assets based on existing law as of the date hereof, including any sales, gross receipts, general corporation, personal property, privilege, franchise or license taxes (but excluding any taxes  imposed as a result of a failure of such person to properly withhold or remit taxes imposed with respect to payments on any Consumer Rate Relief Bond).  The Indenture Trustee (on behalf of the Secured Parties) shall be a third party beneficiary of the Member’s obligations set forth in this Section 3.01, it being understood that Bondholders shall be entitled to enforce their rights against the Member under this Section 3.01 solely through a cause of action brought for their benefit by the Indenture Trustee.

SECTION 3.02  Company to be Disregarded for Tax Purposes.  The Company shall comply with the applicable provisions of the Code and the applicable Treasury Regulations thereunder in the manner necessary to effect the intention of the parties that the Company be treated, for federal income tax purposes, as a disregarded entity that is not separate from the Member pursuant to Treasury Regulations Section 301.7701-1 et seq. and that the Company be accorded such treatment until its dissolution pursuant to Article IX hereof and shall take all actions, and shall refrain from taking any action, required by the Code or Treasury Regulations thereunder in order to maintain such status of the Company.  In addition, for federal income tax purposes, the Company may not claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Consumer Rate Relief Bonds (other than amounts properly withheld from such payments under the Code or other tax laws) or assert any claim against any present or former Bondholder by reason of the payment of the taxes levied or assessed upon any part of the CRR Bond Collateral.

SECTION 3.03  Books of Account.  At all times during the continuance of the Company, the Company shall maintain or cause to be maintained full, true, complete and correct books of account in accordance with generally accepted accounting principles, using the fiscal year and taxable year of the Member.  In addition, the Company shall keep all records required to be kept pursuant to the LLC Act.

SECTION 3.04  Access to Accounting Records.  All books and records of the Company shall be maintained at any office of the Company or at the Company’s principal place of business, and the Member, and its duly authorized representative, shall have access to them at such office of the Company and the right to inspect and copy them at reasonable times.

SECTION 3.05  Annual Tax Information.  The Managers shall cause the Company to deliver to the Member all information necessary for the preparation of the Member’s federal income tax return.

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SECTION 3.06  Internal Revenue Service Communications.  The Member shall communicate and  negotiate with the Internal Revenue Service on any federal tax matter on behalf of  the Member and the Company.

ARTICLE IV

MEMBER

SECTION 4.01  Powers.  Subject to the provisions of this Agreement and the LLC Act, all powers shall be exercised by or under the authority of, and the business and affairs of the Company shall be controlled by, the Member pursuant to Section 4.04.  The Member may delegate any or all such powers to the Managers.  Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the Member shall have the following powers:

(a)           To select and remove the Managers and all officers and agents of the Company, prescribe such powers and duties for them as may be consistent with the LLC Act and other applicable law and this Agreement, fix their compensation, and require from them security for faithful service; provided, that, except as provided in Section 7.06, at all times the Company shall have at least two Independent Managers.  Prior to issuance of any Consumer Rate Relief Bonds, the Member shall appoint at least two Independent Managers.  An “Independent Manager” means an individual who (1) has prior experience as an independent director, independent manager or independent member, (2) is employed by a nationally-recognized company that provides professional Independent Managers and other corporate services in the ordinary course of its business, (3) is duly appointed as an Independent Manager and (4) is not and has not been for at least five years from the date of his or her or its appointment, and will not while serving as Independent Manager, be any of the following:

(i) a member, partner, equityholder, manager, director, officer or employee of the Company or any of its equityholders or Affiliates (other than as an independent director, independent manager or special member of the Company or an Affiliate of the Company that is not in the direct chain of ownership of the Company and that is required by a creditor to be a single purpose bankruptcy remote entity); provided, that the indirect or beneficial ownership of stock of the Member or its Affiliates through a mutual fund or similar diversified investment vehicle with respect to which the owner does not have discretion or control over the investments held by such diversified investment vehicle shall not preclude such owner from being an Independent Manager;

(ii) a creditor, supplier or service provider (including provider of professional services) to the Company, the Member or any of their respective equityholders or Affiliates (other than a nationally-recognized company that routinely provides professional Independent Managers and other corporate services to the Company, the Member or any of its Affiliates in the ordinary course of its business);

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(iii) a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider; or

(iv) a Person that controls (whether directly, indirectly or otherwise) any of (i), (ii) or (iii) above.

A natural person who otherwise satisfies the foregoing definition and satisfies subparagraph (i) by reason of being the independent manager or independent director of a “special purpose entity” affiliated with the Company shall be qualified to serve as an Independent Manager of the Company, provided that the fees that such individual earns from serving as an independent manager or independent director of affiliates of the Company in any given year constitute in the aggregate less than five percent (5%) of such individual’s annual income for that year.  For purposes of this paragraph, a “special purpose entity” is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve such entity’s separateness that are substantially similar to the Special Purpose Provisions (as hereinafter defined) of this Agreement.

The Company shall pay each Independent Manager annual fees totaling not more than $[5,000] per year (the “Independent Manager Fee”).  Such fees shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company.  Each Manager, including each Independent Manager, is hereby deemed to be a “manager” within the meaning 18-101(10) of the LLC Act.

Promptly following any resignation or replacement of any Independent Manager, the Member shall give written notice to each applicable Rating Agency of any such resignation or replacement.

(b)           Subject to Sections 1.07 and 1.08 and Article VII hereof, to conduct, manage and control the affairs and business of the Company, and to make such rules and regulations therefor consistent with the LLC Act and other applicable law and this Agreement.

(c)           To change the registered agent and office of the Company in Delaware from one location to another; to fix and locate from time to time one or more other offices of the Company; and to designate any place within or without the State of Delaware for the conduct of the business of the Company.

SECTION 4.02  Compensation of Member.  To the extent permitted by applicable law, the Company shall have authority to reimburse the Member for out-of-pocket expenses incurred by the Member in connection with its service to the Company.  It is understood that the compensation paid to the Member under the provisions of this Section 4.02 shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered an Ongoing Financing Cost of the Company subject to the limitations on such expenses set forth in the Financing Order.

SECTION 4.03  Other Ventures.  Notwithstanding any duties (including fiduciary duties) otherwise existing at law or in equity, it is expressly agreed that the Member, the

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Managers and any Affiliates, officers, directors, managers, stockholders, partners or employees of the Member, may engage in other business ventures of any nature and description, whether or not in competition with the Company, independently or with others, and the Company shall not have any rights in and to any independent venture or activity or the income or profits derived therefrom.

SECTION 4.04  Actions by the Member.  All actions of the Member may be taken by written resolution of the Member which shall be signed on behalf of the Member by an authorized officer of the Member and filed with the records of the Company.

ARTICLE V

OFFICERS

SECTION 5.01  Designation; Term; Qualifications.

(a)           Officers.  Subject to the last sentence of this Section 5.01(a), the Managers may, from time to time, designate one or more Persons to be officers of the Company.  Any officer so designated shall have such title and authority and perform such duties as the Managers may, from time to time, delegate to them.  Each officer shall hold office for the term for which such officer is designated and until its successor shall be duly designated and shall qualify or until its death, resignation or removal as provided in this Agreement. Any Person may hold any number of offices.  No officer need be a Manager, the Member, a Delaware resident, or a United States citizen. The Member hereby appoints the Persons identified on Schedule C to be the officers of the Company.

(b)           President.  The President shall be the chief executive officer of the Company, shall preside at all meetings of the Managers, shall be responsible for the general and active management of the business of the Company and shall see that all orders and resolutions of the Managers are carried into effect.  The President or any other officer authorized by the President or the Managers may execute all contracts, except:  (i) where required or permitted by law or this Agreement to be otherwise signed and executed, including Section 1.08; and (ii) where signing and execution thereof shall be expressly delegated by the Managers to some other officer or agent of the Company.

(c)           Vice President.  In the absence of the President or in the event of the President’s inability to act, the Vice President, if any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Managers, or in the absence of any designation, then in the order of their election), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.  The Vice Presidents, if any, shall perform such other duties and have such other powers as the Managers may from time to time prescribe.

(d)           Secretary and Assistant Secretary.  The Secretary shall be responsible for filing legal documents and maintaining records for the Company.  The Secretary shall attend all meetings of the Managers and record all the proceedings of the meetings of the Company and of the Managers in a book to be kept for that purpose and shall perform like duties for the standing

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committees when required.  The Secretary shall give, or shall cause to be given, notice of all meetings of the Member, if any, and special meetings of the Managers, and shall perform such other duties as may be prescribed by the Managers or the President, under whose supervision the Secretary shall serve.  The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Managers (or if there be no such determination, then in order of their designation), shall, in the absence of the Secretary or in the event of the Secretary’s inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Managers may from time to time prescribe.

(e)           Treasurer and Assistant Treasurer.  The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Manager.  The Treasurer shall disburse the funds of the Company as may be ordered by the Manager, taking proper vouchers for such disbursements, and shall render to the President and to the Managers, at its regular meetings or when the Managers so require, an account of all of the Treasurer’s transactions and of the financial condition of the Company.  The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Managers (or if there be no such determination, then in the order of their designation), shall, in the absence of the Treasurer or in the event of the Treasurer’s inability to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Managers may from time to time prescribe.

(f)           Officers as Agents.  The officers of the Company, to the extent their powers as set forth in this Agreement or otherwise vested in them by action of the Managers are not inconsistent with this Agreement, are agents of the Company for the purpose of the Company’s business and, subject to Section 1.08, the actions of the officers taken in accordance with such powers shall bind the Company.

(g)          Duties of Managers and Officers.  Except to the extent otherwise provided herein, each Manager (other than the Independent Managers) and officer of the Company shall have a fiduciary duty of loyalty and care similar to that of directors and officers of business corporations organized under the General Corporation Law of the State of Delaware.

SECTION 5.02  Removal and Resignation.  Any officer of the Company may be removed as such, with or without cause, by the Managers at any time.  Any officer of the Company may resign as such at any time upon written notice to the Company.  Such resignation shall be made in writing and shall take effect at the time specified therein or, if no time is specified therein, at the time of its receipt by the Managers.

SECTION 5.03  Vacancies.  Any vacancy occurring in any office of the Company may be filled by the Managers.

SECTION 5.04  Compensation.  The compensation, if any, of the officers of the Company shall be fixed from time to time by the Managers.  Such compensation shall be determined without regard to the income of the Company, shall not be deemed to constitute

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distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company subject to the limitations on such expenses set forth in the Financing Order.

ARTICLE VI

MEMBERSHIP INTEREST

SECTION 6.01  General.  “Membership Interest” means the limited liability company interest of the Member in the Company. The Membership Interest constitutes personal property and, subject to Section 6.06, shall be freely transferable and assignable in whole but not in part upon registration of such transfer and assignment on the books of the Company in accordance with the procedures established for such purpose by the Managers of the Company.

SECTION 6.02  Distributions.  The Member shall be entitled to receive, out of the assets of the Company legally available therefor, distributions payable in cash in such amounts, if any, as the Managers shall declare.  Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to the Member on account of its interest in the Company if such distribution would violate Section 18-607 of the LLC Act or any other applicable law or any Basic Document.

SECTION 6.03  Rights on Liquidation, Dissolution or Winding Up.

(a)           In the event of any liquidation, dissolution or winding up of the Company, the Member shall be entitled to all remaining assets of the Company available for distribution to the Member after satisfaction (whether by payment or reasonable provision for payment) of all liabilities, debts and obligations of the Company.

(b)           Neither the sale of all or substantially all of the property or business of the Company, nor the merger or consolidation of the Company into or with another Person or other entity, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this Section 6.03.

SECTION 6.04  Redemption.  The Membership Interest shall not be redeemable.

SECTION 6.05  Voting Rights.  Subject to the terms of this Agreement, the Member shall have the sole right to vote on all matters as to which members of a limited liability company shall be entitled to vote pursuant to the LLC Act and other applicable law.

SECTION 6.06  Transfer of Membership Interests.

(a)           The Member may transfer its Membership Interest, in whole but not in part, but the transferee shall not be admitted as a Member except in accordance with Section 6.07.  Until the transferee is admitted as a Member, the Member shall continue to be the sole member of the Company (subject to Section 1.02) and to be entitled to exercise any rights or powers of a Member of the Company with respect to the Membership Interest transferred.

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(b)           To the fullest extent permitted by law, any purported transfer of any Membership Interest in violation of the provisions of this Agreement shall be wholly void and shall not effectuate the transfer contemplated thereby.  Notwithstanding anything contained herein to the contrary and to the fullest extent permitted by law, the Member may not transfer any Membership Interest in violation of any provision of this Agreement or in violation of any applicable federal or state securities laws.

SECTION 6.07  Admission of Transferee as Member.

(a)           A transferee of a Membership Interest desiring to be admitted as a Member must execute a counterpart of, or an agreement adopting, this Agreement and, except as permitted by paragraph (b) below, shall not be admitted without unanimous affirmative vote of the Managers, which vote must include the affirmative vote of each Independent Manager.  Upon admission of the transferee as a Member, the transferee shall have the rights, powers and duties and shall be subject to the restrictions and liabilities of the Member under this Agreement and the LLC Act.  The transferee shall also be liable, to the extent of the Membership Interest transferred, for the unfulfilled obligations, if any, of the transferor Member to make capital contributions to the Company, but shall not be obligated for liabilities unknown to the transferee at the time such transferee was admitted as a Member and that could not be ascertained from this Agreement.  Except as set forth in paragraph (b) below, whether or not the transferee of a Membership Interest becomes a Member, the Member transferring the Membership Interest is not released from any liability to the Company under this Agreement or the LLC Act.

(b)           The approval of the Managers, including each Independent Manager, shall not be required for the transfer of the Membership Interest from the Member to any successor pursuant to Section 5.02 of the Sale Agreement or the admission of such Person as a Member.  Once the transferee of a Membership Interest pursuant to this paragraph (b) becomes a Member, the prior Member shall cease to be a member of the Company and shall be released from any liability to the Company under this Agreement and the LLC Act.

ARTICLE VII

MANAGERS

SECTION 7.01  Managers.

(a)           Subject to Sections 1.07 and 1.08, the business and affairs of the Company shall be managed by or under the direction of two or more Managers designated by the Member.  Subject to the terms of this Agreement, the Member may determine at any time in its sole and absolute discretion the number of Managers.  Subject in all cases to the terms of this Agreement, the authorized number of Managers may be increased or decreased by the Member at any time in its sole and absolute discretion, upon notice to all Managers; provided, that, except as provided in Section 7.06, at all times the Company shall have at least two Independent Managers.  The initial number of Managers shall be five, two of which shall be Independent Managers.  Each Manager designated by the Member shall hold office until a successor is elected and qualified or until such Manager’s earlier death, resignation, expulsion or removal.  Each Manager shall execute and deliver the Management Agreement in the form attached hereto as Exhibit A.  

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Managers need not be a Member.  The initial Managers designated by the Member are listed on Schedule B hereto.

(b)           Each Manager shall be designated by the Member and shall hold office for the term for which designated and until a successor has been designated.

(c)           The Managers shall be obliged to devote only as much of their time to the Company’s business as shall be reasonably required in light of the Company’s business and objectives.  Subject to Section 7.02, a Manager shall perform his or her duties as a Manager in good faith, in a manner he or she reasonably believes to be in the best interests of the Company, and with such care as an ordinarily prudent Person in a like position would use under similar circumstances.

(d)           Except as otherwise provided in this Agreement, the Managers shall act by the affirmative vote of a majority of the Managers.  Each Manager shall have the authority to sign duly authorized agreements and other instruments on behalf of the Company without the joinder of any other Manager.

(e)           Subject to the terms of this Agreement, any action may be taken by the Managers without a meeting and without prior notice if authorized by the written consent of a majority of the Managers (or such greater number as is required by this Agreement), which written consent shall be filed with the records of the Company.

(f)           Every Manager is an agent of the Company for the purpose of its business, and the act of every Manager, including the execution in the Company name of any instrument for carrying on the business of the Company, binds the Company, unless such act is in contravention of this Agreement or unless the Manager so acting otherwise lacks the authority to act for the Company and the Person with whom he or she is dealing has knowledge of the fact that he or she has no such authority.

(g)  To the extent permitted by law, the Managers shall not be personally liable for the Company’s debts, obligations or liabilities.

SECTION 7.02  Powers of the Managers.  Subject to the terms of this Agreement, the Managers shall have the right and authority to take all actions which the Managers deem incidental, necessary, suitable or convenient for the day-to-day management and conduct of the Company’s business.

Each Independent Manager may not delegate their duties, authorities or responsibilities hereunder.  If any Independent Manager resigns, dies or becomes incapacitated, or such position is otherwise vacant, no action requiring the unanimous affirmative vote of the Managers shall be taken until a successor Independent Manager is appointed by the Member and qualifies and approves such action.

To the fullest extent permitted by law, including Section 18-1101(c) of the LLC Act, and notwithstanding any duty otherwise existing at law or in equity, the Independent Managers shall consider only the interests of the Company, including its creditors, in acting or otherwise voting on the matters referred to in Section 1.08.  Except for duties to the Company as

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set forth in the immediately preceding sentence (including duties to the Member and the Company’s creditors solely to the extent of their respective economic interests in the Company but excluding (i) all other interests of the Member, (ii) the interests of other Affiliates of the Company, and (iii) the interests of any group of Affiliates of which the Company is a part), the Independent Managers shall not have any fiduciary duties to the Member, any Manager or any other Person bound by this Agreement; provided, however, the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing.  To the fullest extent permitted by law, including Section 18-1101(e) of the LLC Act, an Independent Manager shall not be liable to the Company, the Member or any other Person bound by this Agreement for breach of contract or breach of duties (including fiduciary duties), unless the Independent Manager acted in bad faith or engaged in willful misconduct.

No Independent Manager shall at any time serve as trustee in bankruptcy for any Affiliate of the Company.

Subject to the terms of this Agreement, the Managers may exercise all powers of the Company and do all such lawful acts and things as are not prohibited by the LLC Act, other applicable law or this Agreement directed or required to be exercised or done by the Member.  All duly authorized instruments, contracts, agreements and documents providing for the acquisition or disposition of property of the Company shall be valid and binding on the Company if executed by one or more of the Managers.

Notwithstanding the terms of Section 7.01, 7.07 or 7.09 or any provision of this Agreement to the contrary, (x) no meeting or vote with respect to any action described in clauses (b), (c) or (g) of Section 1.08 or any amendment to any of the Special Purpose Provisions (as hereinafter defined) shall be conducted unless each Independent Manager is present and (y) neither the Company nor the Member, any Manager or any officer on behalf of the Company shall (i) take any action described in clauses (b), (c) or (g) of Section 1.08  or (ii) adopt any amendment to any of the Special Purpose Provisions unless each Independent Manager has consented thereto.  The vote or consent of an Independent Manager with respect to any such action or amendment shall not be dictated by the Member or any other Manager or officer of the Company.

SECTION 7.03  Compensation.  To the extent permitted by applicable law, the Company may reimburse any Manager, directly or indirectly, for out-of-pocket expenses incurred by such Manager in connection with its services rendered to the Company.  Such compensation shall be determined by the Managers without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company subject to the limitations on such expenses set forth in the Financing Order.

SECTION 7.04  Removal of Managers.

(a)           Subject to Section 4.01, the Member may remove any Manager with or without cause at any time.

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(b)           Subject to Sections 4.01 and 7.05, any removal of a Manager shall become effective on such date as may be specified by the Member and in a notice delivered to any remaining Managers or the Manager designated to replace the removed Manager (except that it shall not be effective on a date earlier than the date such notice is delivered to the remaining Managers or the Manager designated to replace the removed Manager).  Should a Manager be removed who is also the Member, the Member shall continue to participate in the Company as the Member and receive its share of the Company’s income, gains, losses, deductions and credits pursuant to this Agreement.

SECTION 7.05  Resignation of Manager.  A Manager other than an Independent Manager may resign as a Manager at any time by thirty (30) days’ prior notice to the Member.  An Independent Manager may not withdraw or resign as a Manager of the Company without the consent of the Member.  No resignation or removal of an Independent Manager, and no appointment of a successor Independent Manager, shall be effective until such successor (i) shall have accepted his or her appointment as an Independent Manager by a written instrument, which may be a counterpart signature page to the Management Agreement, and (ii) shall have executed a counterpart to this Agreement.

SECTION 7.06  Vacancies.  Subject to Section 4.01, any vacancies among the Managers may be filled by the Member.  In the event of a vacancy in the position of Independent Manager, the Member shall, as soon as practicable, appoint a successor Independent Manager.  Notwithstanding anything to the contrary contained in this Agreement, no Independent Manager shall be removed or replaced unless the Company provides the Indenture Trustee with no less than two (2) Business Days’ prior written notice of (a) any proposed removal of such Independent Manager, and (b) the identity of the proposed replacement Independent Manager, together with a certification that such replacement satisfies the requirements for a Independent Manager set forth in this Agreement.

SECTION 7.07  Meetings of the Managers.  The Managers may hold meetings, both regular and special, within or outside the State of Delaware.  Regular meetings of the Managers may be held without notice at such time and at such place as shall from time to time be determined by the Managers.  Special meetings of the Managers may be called by the President on not less than one day’s notice to each Manager by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President or Secretary in like manner and with like notice upon the written request of any one or more of the Managers.

SECTION 7.08  Electronic Communications.  Managers, or any committee designated by the Managers, may participate in meetings of the Managers, or any committee, by means of telephone conference or similar communications equipment that allows all Persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in Person at the meeting.  If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.

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SECTION 7.09  Committees of Managers.

(a)           The Managers may, by resolution passed by a majority of the Managers, designate one or more committees, each committee to consist of one or more of the Managers.  The Managers may designate one or more Managers as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

(b)           In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another Manager to act at the meeting in the place of any such absent or disqualified member.  Any such committee, to the extent provided in the resolution of the Managers, shall have and may exercise all the powers and authority of the Managers in the management of the business and affairs of the Company.  Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Managers.  Each committee shall keep regular minutes of its meetings and report the same to the Managers when required.

SECTION 7.10  Limitations on Independent Managers.  All right, power and authority of each Independent Manager shall be limited to the extent necessary to exercise those rights and perform those duties specifically set forth in this Agreement.

ARTICLE VIII

EXPENSES

SECTION 8.01  Expenses.  Except as otherwise provided in this Agreement or the Basic Documents, the Company shall be responsible for all expenses and the allocation thereof including without limitation:

(a)           all expenses incurred by the Member or its Affiliates in organizing the Company;

(b)           all expenses related to the business of the Company and all routine administrative expenses of the Company, including the maintenance of books and records of the Company, the preparation and dispatch to the Member of checks, financial reports, tax returns and notices required pursuant to this Agreement;

(c)           all expenses incurred in connection with any litigation or arbitration involving the Company (including the cost of any investigation and preparation) and the amount of any judgment or settlement paid in connection therewith;

(d)           all expenses for indemnity or contribution payable by the Company to any Person;

(e)           all expenses incurred in connection with the collection of amounts due to the Company from any Person;

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(f)           all expenses incurred in connection with the preparation of amendments to this Agreement;

(g)           all expenses incurred in connection with the liquidation, dissolution and winding up of the Company; and

(h)           all expenses otherwise allocated in good faith to the Company by the Managers.

ARTICLE IX

PERPETUAL EXISTENCE; DISSOLUTION, LIQUIDATION AND WINDING-UP

SECTION 9.01  Existence.

(a)           The Company shall have a perpetual existence.  So long as any of the Consumer Rate Relief Bonds are outstanding, the Member shall not be entitled to consent to the dissolution of the Company.

(b)  Notwithstanding any provision of this Agreement, the Bankruptcy of the Member or Special Member will not cause such Member or Special Member, respectively, to cease to be a member of the Company, and upon the occurrence of such an event, the business of the Company shall continue without dissolution.  For purposes of this Section 9.01(b), “Bankruptcy” means, with respect to any Person (A) if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in  any proceeding of this nature, or (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties, or (B) if 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed or if within 90 days after the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated.  The foregoing definition of “Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set for in Sections 18-101(1) and 18-304 of the LLC Act.  Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company or that causes the Member to cease to be a member of the Company (other than a continuation of the Company without dissolution upon an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to Sections 6.06 and 6.07), to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing (i) to continue the Company and (ii) to the

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admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining member of the Company or the Member in the Company.

SECTION 9.02  Dissolution.  The Company shall be dissolved and its affairs shall be wound up upon the occurrence of the earliest of the following events:

(a)           subject to Section 1.08, the election to dissolve the Company made in writing by the Member and each Manager, including each Independent Manager, as permitted under the Basic Documents and after the discharge in full of the Consumer Rate Relief Bonds;

(b)           the termination of the legal existence of the last remaining member of the Company or the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company unless the business of the Company is continued without dissolution in a manner permitted by the LLC Act or this Agreement; or

(c)           the entry of a decree of judicial dissolution of the Company pursuant to Section 18-802 of the LLC Act.

SECTION 9.03  Accounting.  In the event of the dissolution, liquidation and winding-up of the Company, a proper accounting shall be made of the Capital Account of the Member and of the net income or net loss of the Company from the date of the last previous accounting to the date of dissolution.

SECTION 9.04  Certificate of Cancellation.  As soon as possible following the occurrence of any of the events specified in Section 9.02 and the completion of the winding up of the Company, the Person winding up the business and affairs of the Company, as an authorized person, shall cause to be executed a Certificate of Cancellation of the Certificate of Formation and file the Certificate of Cancellation of the Certificate of Formation as required by the LLC Act.

SECTION 9.05  Winding Up.  Upon the occurrence of any event specified in Section 9.02, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors.  The Member, or if there is no Member, the Managers, shall be responsible for overseeing the winding up and liquidation of the Company, shall take full account of the liabilities of the Company and its assets, shall either cause its assets to be sold or distributed, and if sold as promptly as is consistent with obtaining the fair market value thereof, shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed as provided in Section 9.06.

SECTION 9.06  Order of Payment of Liabilities Upon Dissolution.  After determining that all debts and liabilities of the Company, including all contingent, conditional or unmatured liabilities of the Company, in the process of winding-up, including, without limitation, debts and liabilities to the Member in the event it is a creditor of the Company to the

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extent otherwise permitted by law, have been paid or adequately provided for, the remaining assets shall be distributed in cash or in kind to the Member.

SECTION 9.07  Limitations on Payments Made in Dissolution.  Except as otherwise specifically provided in this Agreement, the Member shall only be entitled to look solely to the assets of Company for the return of its positive Capital Account balance and shall have no recourse for its Capital Contribution and/or share of net income (upon dissolution or otherwise) against any Manager.

SECTION 9.08  Limitation on Liability.  Except as otherwise provided by the LLC Act and except as otherwise characterized for tax and financial reporting purposes, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member or Manager shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or a Manager.

ARTICLE X

INDEMNIFICATION

SECTION 10.01  Indemnity.  Subject to the provisions of Section 10.04  hereof, to the fullest extent permitted by law, the Company shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Company, by reason of the fact that such Person is or was a Manager, Member, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, partnership, corporation, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with the action, suit or proceeding if such Person acted in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to a criminal action or proceeding, had no reasonable cause to believe such Person’s conduct was unlawful; provided that such Person shall not be entitled to indemnification if such judgment, penalty, fine or other expense was directly caused by such Person’s fraud, gross negligence or willful misconduct or, in the case of an Independent Manager, bad faith or willful misconduct.

SECTION 10.02  Indemnity for Actions By or In the Right of the Company.  Subject to the provisions of Section 10.04 hereof, to the fullest extent permitted by law, the Company shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the rights of the Company to procure a judgment in its favor by reason of the fact that such Person is or was a Member, Manager, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses, including

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amounts paid in settlement and attorneys’ fees actually and reasonably incurred by such Person in connection with the defense or settlement of the actions or suit if such Person acted in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Company; provided that such Person shall not be entitled to indemnification if such judgment, penalty, fine or other expense was directly caused by such Person’s fraud, gross negligence or willful misconduct or, in the case of an Independent Manager, bad faith or willful misconduct.  Indemnification may not be made for any claim, issue or matter as to which such Person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

SECTION 10.03  Indemnity If Successful.  To the fullest extent permitted by law, the Company shall indemnify any Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against expenses, including reasonable attorneys’ fees, actually and reasonably incurred by him or her in connection with the defense of any action, suit or proceeding referred to in Sections 10.01 and 10.02 or in defense of any claim, issue or matter therein, to the extent that such Person has been successful on the merits.

SECTION 10.04  Expenses.  Any indemnification under Sections 10.01 and 10.02, as well as the advance payment of expenses permitted under Section 10.05 unless ordered by a court or advanced pursuant to Section 10.05 below, must be made by the Company only as authorized in the specific case upon a determination that indemnification of the Manager, Member, officer, controlling Person, legal representative or agent is proper in the circumstances.  The determination must be made:

(a)           by the Member if the Member was not a party to the act, suit or proceeding; or

(b)           if the Member was a party to the act, suit or proceeding by independent legal counsel in a written opinion.

SECTION 10.05  Advance Payment of Expenses.  The expenses of each Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, incurred in defending a civil or criminal action, suit or proceeding may be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such Person to repay the amount if it is ultimately determined by a court of competent jurisdiction that such Person is not entitled to be indemnified by the Company.  The provisions of this Section 10.05 shall not affect any rights to advancement of

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expenses to which personnel other than the Member or the Managers (other than each Independent Manager) may be entitled under any contract or otherwise by law.

SECTION 10.06  Other Arrangements Not Excluded.  The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article X:

(a)           does not exclude any other rights to which a Person seeking indemnification or advancement of expenses may be entitled under any agreement, decision of the Member or otherwise, for either an action of any Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, in the official capacity of such Person or an action in another capacity while holding such position, except that indemnification and advancement, unless ordered by a court pursuant to Section 10.05 above, may not be made to or on behalf of such Person if a final adjudication established that its acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action; and

(b)           continues for a Person who has ceased to be a Member, Manager, officer, legal representative or agent and inures to the benefit of the successors, heirs, executors and administrators of such a Person.

ARTICLE XI

MISCELLANEOUS PROVISIONS

SECTION 11.01  No Bankruptcy Petition; Dissolution.

(a)           To the fullest extent permitted by law, the Member, each Special Member and each Manager hereby covenant and agree (or shall be deemed to have hereby covenanted and agreed) that, prior to the date which is one year and one day after the termination of the Indenture and the payment in full of the Consumer Rate Relief Bonds and any other amounts owed under the Indenture, it will not acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Company under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company; provided, however, that nothing in this Section 11.01 shall constitute a waiver of any right to indemnification, reimbursement or other payment from the Company pursuant to this Agreement.  This Section 11.01 is not intended to apply to the filing of a voluntary bankruptcy petition on behalf of the Company which is governed by Section 1.08 of this Agreement.

(b)           To the fullest extent permitted by law, the Member, each Special Member and each Manager hereby covenants and agrees (or shall be deemed to have hereby covenanted and agreed) that, until the termination of the Indenture and the payment in full of the Consumer Rate Relief Bonds and any other amounts owed under the Indenture, the Member, such Special

26

Member and such Manager will not consent to, or make application for, or institute or maintain any action for, the dissolution of the Company under Section 18-801 or 18-802 of the LLC Act or otherwise.

(c)           In the event that the Member, any Special Member or any Manager takes action in violation of this Section 11.01, the Company agrees that it shall file an answer with the court or otherwise properly contest the taking of such action and raise the defense that the Member, the Special Member or Manager, as the case may be, has agreed in writing not to take such action and should be estopped and precluded therefrom and such other defenses, if any, as its counsel advises that it may assert.

(d)           The provisions of this Section 11.01 shall survive the termination of this Agreement and the resignation, withdrawal or removal of the Member, any Special Member or any Manager.  Nothing herein contained shall preclude participation by the Member, any Special Member or a Manager in assertion or defense of its claims in any such proceeding involving the Company.

SECTION 11.02  Amendments.

(a)           The power to alter, amend or repeal this Agreement shall be only with the consent of the Member, provided, that the Company shall not alter, amend or repeal any provision of  Sections 1.02(b) and (c), 1.05, 1.07, 1.08, 3.01(b), 3.02, 6.06, 6.07, 7.02, 7.05, 7.06, 9.01, 9.02, 11.02 and 11.07 of this Agreement or the definition of “Independent Manager” contained herein or the requirement that at all times the Company have at least two Independent Managers (collectively, the “Special Purpose Provisions”) without, in each case, the affirmative vote of a majority of the Managers, which vote must include the affirmative vote of each Independent Manager.

So long as any of the Consumer Rate Relief Bonds are outstanding, the Company and the Member shall give written notice to each applicable Rating Agency of any amendment to this Agreement.  The effectiveness of any amendment of the Special Purpose Provisions shall be subject to the Rating Agency notice conditions set forth in the Basic Documents (other than an amendment which is necessary: (i) to cure any ambiguity or (ii) to correct or supplement any such provision in a manner consistent with the intent of this Agreement).

(b)           The Company’s power to alter or amend the Certificate of Formation shall be vested in the Member.  Upon obtaining the approval of any amendment, supplement or restatement as to the Certificate of Formation, the Member on behalf of the Company shall cause a Certificate of Amendment or Amended and Restated Certificate of Formation to be prepared, executed and filed in accordance with the LLC Act.

(c)  Notwithstanding anything in this Agreement to the contrary, including Section 11.02(a) and (b), unless and until the Consumer Rate Relief Bonds are issued and outstanding, the Member may, without the need for any consent or action of, or notice to, any other Person, including any Manager, any officer, the Indenture Trustee or any Rating Agency, alter, amend or repeal this Agreement in any manner.

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SECTION 11.03  Commission Condition.  Notwithstanding anything to the contrary in Section 11.02, no amendment or modification of Sections 4.01 (with respect to the Independent Manager Fee described in subsection (a)), 4.02, 5.04, and 7.03 of this Agreement shall be effective unless the process set forth in this Section 11.03 has been followed.

(a)  At least thirty-one (31) days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in Section 11.02 above (except that the consent of the Indenture Trustee may be subject to the consent of Holders if such consent is required or sought by the Indenture Trustee in connection with such amendment), the Member shall have delivered to the Commission’s executive secretary and general counsel written notification of any proposed amendment or modification, which notification shall contain:

(i) a reference to Case No. 12-1188-E-PC;

(ii) an Officer’s Certificate stating that the proposed amendment or modification has been approved by all parties to this Agreement; and

(iii) a statement identifying the person to whom the Commission or its authorized representative is to address any response to the proposed amendment or modification or to request additional time.

(b)           The Commission or its authorized representative shall, within thirty (30) days of receiving the notification complying with Section 11.03(a) above, either:

(i) provide notice of its determination that the proposed amendment or modification will not under any circumstances have the effect of increasing the Ongoing Financing Costs related to the Consumer Rate Relief Bonds,

(ii) provide notice of its consent or lack of consent to the person specified in Section 11.03(a)(iii) above, or

(iii) be conclusively deemed to have consented to the proposed amendment or modification,

unless, within thirty (30) days of receiving the notification complying with Section 11.03(a) above, the Commission or its authorized representative delivers to the office of the person specified in Section 11.03(a)(iii) above a written statement requesting an additional amount of time not to exceed thirty (30) days in which to consider whether to consent to the proposed amendment or modification.  If the Commission or its authorized representative requests an extension of time in the manner set forth in the preceding sentence, then the Commission shall either provide notice of its consent or lack of consent or notice of its determination that the proposed amendment or modification will not under any circumstances increase Ongoing Financing Costs to the person specified in Section 11.03(a)(iii) above no later than the last day of such extension of time or be conclusively deemed to have consented to the proposed amendment or modification on the last day of such extension of time.  Any amendment or modification requiring the consent of the Commission shall become effective on the later of (i) the date

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proposed by the parties to such amendment or modification and (ii) the first day after the expiration of the thirty day period provided for in this Section 11.03(b), or, if such period has been extended pursuant hereto, the first day after the expiration of such period as so extended.

(c)           Following the delivery of a notice to the Commission by the Member under Section 11.03(a) above, the Member shall have the right at any time to withdraw from the Commission further consideration of any notification of a proposed amendment or modification.  Such withdrawal shall be evidenced by the prompt written notice thereof by the Member to the Commission, the Indenture Trustee, each Independent Manager and the Servicer.

(d)           For the purpose of this Section 11.03, an “authorized representative” of the Commission means any person authorized to act on behalf of the Commission.

SECTION 11.04  Governing Law.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 11.05  Headings.  The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

SECTION 11.06  Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 11.07  Assigns.  Each and all of the covenants, terms, provisions and agreements contained in this Agreement shall be binding upon and inure to the benefit of the Member, and its permitted successors and assigns.

SECTION 11.08  Enforcement by Each Independent Manager.  Notwithstanding any other provision of this Agreement, the Member agrees that this Agreement constitutes a legal, valid and binding agreement of the Member, and is enforceable against the Member by each Independent Manager in accordance with its terms.

SECTION 11.09  Waiver of Partition; Nature of Interest.  Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each of the Member and the Special Members hereby irrevocably waives any right or power that such Person might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of the Company.  The Member shall not have any interest in any specific assets of

29

the Company, and the Member shall not have the status of a creditor with respect to any distribution pursuant to this Agreement.

SECTION 11.10  Benefits of Agreement; No Third-Party Rights.  Except for the Indenture Trustee with respect to the Special Purpose Provisions and Persons entitled to indemnification hereunder, none of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of the Member or Special Member.  Nothing in this Agreement shall be deemed to create any right in any Person (other than the Indenture Trustee with respect to the Special Purpose Provisions and Persons entitled to indemnification hereunder) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, this Agreement is hereby executed by the undersigned as the sole Member of the Company and is effective as of the date first written above.

APPALACHIAN POWER COMPANY
By:
	Name
	Title

ACKNOWLEDGED AND AGREED:

Victor A. Duva,

as Independent Manager

___________________________

Kenneth J. Uva,

as Independent Manager

___________________________

Signature Page to

Limited Liability Company Agreement

SCHEDULE A

SCHEDULE OF CAPITAL CONTRIBUTIONS OF MEMBER

MEMBER’S NAME	CAPITAL CONTRIBUTION	MEMBERSHIP INTEREST PERCENTAGE	CAPITAL ACCOUNT
Appalachian Power Company	$100	100%	$100

SCHEDULE A

1

SCHEDULE B

INITIAL MANAGERS

Brian X. Tierney

Renee V. Hawkins

Victor A. Duva

Kenneth J. Uva

Julia A. Sloat

SCHEDULE B

1

SCHEDULE C

INITIAL OFFICERS

Name	Office
Brian X. Tierney	President
Julia A. Sloat	Vice President and Treasurer
Joseph M. Buonaiuto David M. Feinberg	Controller and Chief Accounting Officer Secretary
Renee V. Hawkins	Assistant Treasurer
Jeffrey D. Cross	Assistant Secretary
Thomas G. Berkemeyer	Assistant Secretary

SCHEDULE C

1

EXHIBIT A

MANAGEMENT AGREEMENT

[filing date]

Appalachian Consumer Rate Relief Funding LLC

707 Virginia Street East, Suite 1000,

Charleston, West Virginia, 25327

Re:  Management Agreement — Appalachian Consumer Rate Relief Funding LLC

Ladies and Gentlemen:

For good and valuable consideration, each of the undersigned Persons, who have been designated as managers of Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company (the “Company”), in accordance with the Amended and Restated Limited Liability Company Agreement of the Company, dated as of August 19, 2013 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “LLC Agreement”), hereby agree as follows:

1.           Each of the undersigned accepts such Person’s rights and authority as a Manager under the LLC Agreement and agrees to perform and discharge such Person’s duties and obligations as a Manager under the LLC Agreement, and further agrees that such rights, authorities, duties and obligations under the LLC Agreement shall continue until such Person’s successor as a Manager is designated or until such Person’s resignation or removal as a Manager in accordance with the LLC Agreement.  Each of the undersigned agrees and acknowledges that it has been designated as a “manager” of the Company within the meaning of the Delaware Limited Liability Company Act.

2.           Until a year and one day has passed since the date that the last obligation under the Basic Documents was paid, to the fullest extent permitted by law, each of the undersigned agrees, solely in its capacity as a creditor of the Company on account of any indemnification or other payment owing to the undersigned by the Company, not to acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Company under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company.

3.           THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

EXHIBIT A

1

Capitalized terms used and not otherwise defined herein have the meanings set forth in the LLC Agreement.

This Management Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Management Agreement and all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as of the day and year first above written.

Brian X. Tierney

Julia A. Sloat

Renee V. Hawkins

Kenneth J. Uva

Victor A. Duva

EXHIBIT A

2

APPENDIX A

DEFINITIONS

As used in this Agreement, the following terms have the following meanings:

“Administrator” means APCo, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.

“Administration Agreement” means an administration agreement to be entered into between the Company and the Administrator pursuant to which the Administrator will provide certain management services to the Company.

“Affiliate” means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person.  For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“APCo” means Appalachian Power Company, a Virginia corporation, and any of its successors or permitted assigns.

“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.), as amended from time to time.

“Basic Documents” means the Indenture, the Administration Agreement, the Sale Agreement and the Bill of Sale, the Original LLC Agreement, this Agreement, the Servicing Agreement and all other documents and certificates delivered in connection therewith.

“Bill of Sale” means the bill of sale in connection with the sale of the CRR Property pursuant to the Sale Agreement.

“Bondholder” means the Person in whose name a Consumer Rate Relief Bond is registered.

“Capital Account” is defined in Section 2.03 of this Agreement.

“Capital Contribution” is defined in Section 2.01 of this Agreement.

“Certificate of Formation” means the Certificate of Formation filed with the Secretary of State of the State of Delaware on August 19, 2013 pursuant to which the Company was formed.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collection Account” means the account established and maintained by the Indenture Trustee in connection with the Indenture and any subaccounts contained therein.

APPENDIX A

1

“Commission” means the Public Service Commission of West Virginia, or any Governmental Authority succeeding to the duties of such agency.

“Company” has the meaning set forth in the preamble to this Agreement.

“Consumer Rate Relief Bonds” means the Consumer Rate Relief Bonds authorized by the Financing Order and issued under the Indenture.

 “CRR Bond Collateral ” means the CRR Property created under and pursuant to the Financing Order and the Securitization Law, and transferred by the Seller to the Company pursuant to the Sale Agreement (including, to the fullest extent permitted by law, the right to impose, collect and receive CRR Charges, all revenues, receipts, collections, claims, rights, payments, money or proceeds of or arising from the CRR Charges authorized in the Financing Order and any contractual rights to collect such CRR Charges from customers), (b) all CRR Charges related to the CRR Property, (c) the Sale Agreement and the Bill of Sale executed in connection therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the CRR Property and the Consumer Rate Relief Bonds, (d) the Servicing Agreement, the Administration Agreement, each intercreditor agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing CRR Property and the Consumer Rate Relief Bonds, (e) the Collection Account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, (f) all rights to compel the Servicer to file for and obtain adjustments to the CRR Charges in accordance with Section 24-2-4f(k)(1) of the Securitization Law, the Financing Order or any Tariff filed in connection therewith, (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute CRR Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (h) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing and (i) all payments on or under, and all proceeds in respect of, any or all of the foregoing.

“CRR Charge” means any CRR charge as defined in Section 24-2-4f(b)(7) of the Securitization Law that is authorized by the Financing Order.

“CRR Property” means all CRR Property as defined in Section 24-2-4f(b)(9) of the Securitization Law created pursuant to the Financing Order and under the Securitization Law, including the right to impose, charge and collect the CRR Charges authorized in the Financing Order from customers of APCo or any successor and the right to obtain adjustments to those charges, and any revenues, receipts, collections, rights to payment, payments, moneys, claims or other proceeds arising from the rights and interests created under the Financing Order.

APPENDIX A

2

“Financing Order” means the Final Financing Order dated September 20, 2013 issued by the Commission pursuant to the Securitization Law in Docket No. 12-1188-E-PC authorizing the creation of the CRR Property.

“Governmental Authority” means any nation or government, any federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

“Indenture” means an Indenture to be entered into between the Company and the Indenture Trustee authorizing the issuance of the Consumer Rate Relief Bonds, as originally executed and, as from time to time supplemented or amended by any supplements or indentures supplemental thereto entered into pursuant to the applicable provisions of the Indenture, as so supplemented or amended, or both, and shall include the forms and terms of the Consumer Rate Relief Bonds established thereunder.

“Indenture Trustee” means U.S. Bank National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any successor indenture trustee under the Indenture.

“Independent Manager” is defined in Section 4.01(a) of this Agreement.

“Independent Manager Fee” is defined in Section 4.01(a) of this Agreement.

“LLC Act” means the Delaware Limited Liability Company Act, as amended.

“Manager” means each manager of the Company under this Agreement.

“Member” has the meaning set forth in the preamble to this Agreement.

“Membership Interest” is defined in Section 6.01 of this Agreement.

 “Operating Expenses” means all unreimbursed fees, costs and out-of-pocket expenses of the Company, including all amounts owed by the Company to the Indenture Trustee, any Manager, fees of the Servicer pursuant to the Servicing Agreement, fees of the Administrator pursuant to the Administration Agreement, legal and accounting fees, Rating Agency fees, costs and expenses of the Company and the Seller and any franchise or other taxes owed by the Company, including on investment income in the Collection Account.

“Original LLC Agreement” has the meaning set forth in the preamble to this Agreement.

“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof.

 “Rating Agency” with respect to the Consumer Rate Relief Bonds, means each of Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services, a Standard & Poor’s

APPENDIX A

3

Financial Services LLC business or Fitch Ratings, or any successors thereto, which provides a rating with respect to the Consumer Rate Relief Bonds.  If no such organization or successor is any longer in existence, “Rating Agency” shall be a nationally recognized statistical rating organization or other comparable Person designated by the Company, notice of which designation shall be given to the Indenture Trustee and the Servicer.

 “Sale Agreement” means a sale agreement to be entered into pursuant to which the Seller will sell its rights and interests in the CRR Property to the Company.

“Secured Parties” means the Indenture Trustee, the Bondholders and any credit enhancer described in the Basic Documents.

“Securitization Law” means the Code of West Virginia, 1931, as amended, §24-2-4f, as may be amended from time to time.

 “Seller” means APCo.

 “Servicer” means APCo, as Servicer under the Servicing Agreement, or any successor Servicer to the extent permitted under the Servicing Agreement.

“Special Member” is defined in Section 1.02(b) of this Agreement.

“Special Purpose Provisions” is defined in Section 11.02(a) of this Agreement.

““Tariff” means APCo’s P.S.C. W.VA. Tariff No. 13 filed with the Commission, as the same may be amended, restated, supplemented or otherwise modified from time to time, including, without limitation, with respect to any successor.

 “Treasury Regulations” means the regulations, including proposed or temporary regulations, promulgated under the Code.

APPENDIX A

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EX-4.1

Exhibit 4.1

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC,

Issuer,

and

U.S. BANK NATIONAL ASSOCIATION,

Indenture Trustee and Securities Intermediary

______________________________

INDENTURE

Dated as of [closing date]

______________________________

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE		2
SECTION 1.01.	Definitions	2
SECTION 1.02.	Incorporation by Reference of Trust Indenture Act	2
SECTION 1.03.	Rules of Construction	2
ARTICLE II THE CONSUMER RATE RELIEF BONDS		3
SECTION 2.01.	Form	3
SECTION 2.02.	Denominations of Consumer Rate Relief Bonds	3
SECTION 2.03.	Execution, Authentication and Delivery	4
SECTION 2.04.	Temporary Consumer Rate Relief Bonds	5
SECTION 2.05.	Registration; Registration of Transfer and Exchange of Consumer Rate Relief Bonds	5
SECTION 2.06.	Mutilated, Destroyed, Lost or Stolen Consumer Rate Relief Bonds	7
SECTION 2.07.	Persons Deemed Owner	8
SECTION 2.08.	Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved	8
SECTION 2.09.	Cancellation	9
SECTION 2.10.	Outstanding Amount; Authentication and Delivery of Consumer Rate Relief Bonds	9
SECTION 2.11.	Book-Entry Consumer Rate Relief Bonds	12
SECTION 2.12.	Notices to Clearing Agency	13
SECTION 2.13.	Definitive Consumer Rate Relief Bonds	13
SECTION 2.14.	CUSIP Number	14
SECTION 2.15.	Letter of Representations	14
SECTION 2.16.	Tax Treatment	14
SECTION 2.17.	State Pledge	14
SECTION 2.18.	Security Interests	15
ARTICLE III COVENANTS		16
SECTION 3.01.	Payment of Principal, Premium, if any, and Interest	16
SECTION 3.02.	Maintenance of Office or Agency	16
SECTION 3.03.	Money for Payments To Be Held in Trust	17
SECTION 3.04.	Existence	18
SECTION 3.05.	Protection of CRR Bond Collateral	18
SECTION 3.06.	Opinions as to CRR Bond Collateral	19
SECTION 3.07.	Performance of Obligations; Servicing; SEC Filings	20
SECTION 3.08.	Certain Negative Covenants	22
SECTION 3.09.	Annual Statement as to Compliance	23
SECTION 3.10.	Issuer May Consolidate, etc., Only on Certain Terms	24
SECTION 3.11.	Successor or Transferee	26
SECTION 3.12.	No Other Business	26
SECTION 3.13.	No Borrowing	26
SECTION 3.14.	Servicer’s Obligations	26

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Page

SECTION 3.15.	Guarantees, Loans, Advances and Other Liabilities	26
SECTION 3.16.	Capital Expenditures	27
SECTION 3.17.	Restricted Payments	27
SECTION 3.18.	Notice of Events of Default	27
SECTION 3.19.	Further Instruments and Acts	27
SECTION 3.20.	[Reserved]	27
SECTION 3.21.	Inspection	27
SECTION 3.22.	Sale Agreement, Servicing Agreement and Administration Agreement Covenants	28
SECTION 3.23.	Taxes	30
ARTICLE IV SATISFACTION AND DISCHARGE; DEFEASANCE		30
SECTION 4.01.	Satisfaction and Discharge of Indenture; Defeasance	30
SECTION 4.02.	Conditions to Defeasance	32
SECTION 4.03.	Application of Trust Money	33
SECTION 4.04.	Repayment of Moneys Held by Paying Agent	34
ARTICLE V REMEDIES		34
SECTION 5.01.	Events of Default	34
SECTION 5.02.	Acceleration of Maturity; Rescission and Annulment	35
SECTION 5.03.	Collection of Indebtedness and Suits for Enforcement by Indenture Trustee	36
SECTION 5.04.	Remedies; Priorities	38
SECTION 5.05.	Optional Preservation of the CRR Bond Collateral	39
SECTION 5.06.	Limitation of Suits	40
SECTION 5.07.	Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest	40
SECTION 5.08.	Restoration of Rights and Remedies	41
SECTION 5.09.	Rights and Remedies Cumulative	41
SECTION 5.10.	Delay or Omission Not a Waiver	41
SECTION 5.11.	Control by Holders	41
SECTION 5.12.	Waiver of Past Defaults	42
SECTION 5.13.	Undertaking for Costs	42
SECTION 5.14.	Waiver of Stay or Extension Laws	42
SECTION 5.15.	Action on Consumer Rate Relief Bonds	43
ARTICLE VI THE INDENTURE TRUSTEE		43
SECTION 6.01.	Duties of Indenture Trustee	43
SECTION 6.02.	Rights of Indenture Trustee	45
SECTION 6.03.	Individual Rights of Indenture Trustee	46
SECTION 6.04.	Indenture Trustee’s Disclaimer	46
SECTION 6.05.	Notice of Defaults	46
SECTION 6.06.	Reports by Indenture Trustee to Holders	47
SECTION 6.07.	Compensation and Indemnity	48
SECTION 6.08.	Replacement of Indenture Trustee and Securities Intermediary	48
SECTION 6.09.	Successor Indenture Trustee by Merger	49
SECTION 6.10.	Appointment of Co-Trustee or Separate Trustee	50
SECTION 6.11.	Eligibility; Disqualification	51

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Page

SECTION 6.12.	Preferential Collection of Claims Against Issuer	51
SECTION 6.13.	Representations and Warranties of Indenture Trustee	51
SECTION 6.14.	Annual Report by Independent Registered Public Accountants	52
SECTION 6.15.	Custody of CRR Bond Collateral	52
ARTICLE VII HOLDERS’ LISTS AND REPORTS		52
SECTION 7.01.	Issuer To Furnish Indenture Trustee Names and Addresses of Holders	52
SECTION 7.02.	Preservation of Information;  Communications to Holders	53
SECTION 7.03.	Reports by Issuer	53
SECTION 7.04.	Reports by Indenture Trustee	54
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES		54
SECTION 8.01.	Collection of Money	54
SECTION 8.02.	Collection Account	54
SECTION 8.03.	General Provisions Regarding the Collection Account	57
SECTION 8.04.	Release of CRR Bond Collateral	59
SECTION 8.05.	Opinion of Counsel	59
SECTION 8.06.	Reports by Independent Registered Public Accountants	60
ARTICLE IX SUPPLEMENTAL INDENTURES		60
SECTION 9.01.	Supplemental Indentures Without Consent of Holders	60
SECTION 9.02.	Supplemental Indentures with Consent of Holders	62
SECTION 9.03.	Commission Condition	63
SECTION 9.04.	Execution of Supplemental Indentures	65
SECTION 9.05.	Effect of Supplemental Indenture	65
SECTION 9.06.	Conformity with Trust Indenture Act	65
SECTION 9.07.	Reference in Consumer Rate Relief Bonds to Supplemental Indentures	65
ARTICLE X MISCELLANEOUS		65
SECTION 10.01.	Compliance Certificates and Opinions, etc.	65
SECTION 10.02.	Form of Documents Delivered to Indenture Trustee	67
SECTION 10.03.	Acts of Holders	68
SECTION 10.04.	Notices, etc., to Indenture Trustee, Issuer and Rating Agencies	68
SECTION 10.05.	Notices to Holders; Waiver	69
SECTION 10.06.	[Reserved]	70
SECTION 10.07.	Conflict with Trust Indenture Act	70
SECTION 10.08.	Effect of Headings and Table of Contents	70
SECTION 10.09.	Successors and Assigns	70
SECTION 10.10.	Severability	70
SECTION 10.11.	Benefits of Indenture	71
SECTION 10.12.	Legal Holidays	71
SECTION 10.13.	GOVERNING LAW	71
SECTION 10.14.	Counterparts	71
SECTION 10.15.	Recording of Indenture	71
SECTION 10.16.	Issuer Obligation	71
SECTION 10.17.	No Recourse to Issuer	72
SECTION 10.18.	Basic Documents	72

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Page

SECTION 10.19.	No Petition.	72
SECTION 10.20.	Securities Intermediary.	72

iv

EXHIBITS AND SCHEDULES

EXHIBIT A	Form of Consumer Rate Relief Bonds
EXHIBIT B	Form of Series Supplement
EXHIBIT C	Servicing Criteria to be Addressed by Indenture Trustee in Assessment of Compliance
EXHIBIT D	Form of Intercreditor Agreement

APPENDIX

APPENDIX A Definitions

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TRUST INDENTURE ACT CROSS REFERENCE TABLE

TIA Section		Indenture Section
310	(a)(1)	6.11
	(a)(2)	6.11
	(a)(3)	6.10(b)(i)
	(a)(4)	N.A.
	(a)(5)	6.11
	(b)	6.11
311	(a)	6.12
	(b)	6.12
312	(a)	7.01 and 7.02
	(b)	7.02(b)
	(c)	7.02(c)
313	(a)	7.04
	(b)(1)	7.04
	(b)(2)	7.04
	(c)	7.03(a) and 7.04
	(d)	N.A.
314	(a)	3.09, 4.01, and 7.03(a)
	(b)	3.06 and 4.01
	(c)(1)	2.10, 4.01, 8.04(b) and 10.01(a)
	(c)(2)	2.10, 4.01, 8.04(b) and 10.01(a)
	(c)(3)	2.10 4.01 and 10.01(a)
	(d)	2.10, 8.04(b) and 10.01(b)
	(e)	10.01(a)
	(f)	10.01(a)
315	(a)	6.01(b)(i) and (ii)
	(b)	6.05

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TIA Section		Indenture Section
	(c)	6.01 (a)
	(d)	6.01(c)(i)-(iii)
	(e)	5.13
316	(a) (last sentence)	Appendix A – definition of “Outstanding”
	(a)(1)(A)	5.11
	(a)(1)(B)	5.12
	(a)(2)	N/A
	(b)	5.07
	(c)	Appendix A – definition of “Record Date”
317	(a)(1)	5.03(a)
	(a)(2)	5.03(c)(iv)
	(b)	3.03
318	(a)	10.07
	(b)	10.07
	(c)	10.07

_______

**           “N.A.”  shall mean “not applicable.”

THIS CROSS REFERENCE TABLE SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE PART OF THIS INDENTURE.

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This INDENTURE dated as of [closing date], by and between APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, a Delaware limited liability company (the “Issuer”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, in its capacity as indenture trustee (the “Indenture Trustee”) for the benefit of the Secured Parties (as defined herein) and in its separate capacity as a securities intermediary (the “Securities Intermediary”).

In consideration of the mutual agreements herein contained, each party agrees as follows for the benefit of the other and each of the Holders:

RECITALS OF THE ISSUER

The Issuer has duly authorized the execution and delivery of this Indenture and the creation and issuance of the Consumer Rate Relief Bonds issuable hereunder, which will be of substantially the tenor set forth herein and in the Series Supplement.

The Consumer Rate Relief Bonds shall be non-recourse obligations and shall be secured by and payable solely out of the proceeds of the CRR Property and the other CRR Bond Collateral.  If and to the extent that such proceeds of CRR Property and the other CRR Bond Collateral are insufficient to pay all amounts owing with respect to the Consumer Rate Relief Bonds, then, except as otherwise expressly provided hereunder, the Holders shall have no Claim in respect of such insufficiency against the Issuer or the Indenture Trustee, and the Holders, by their acceptance of the Consumer Rate Relief Bonds, waive any such Claim.

All things necessary to (a) make the Consumer Rate Relief Bonds, when executed by the Issuer and authenticated and delivered by the Indenture Trustee hereunder and duly issued by the Issuer, valid obligations, and (b) make this Indenture a valid agreement of the Issuer, in each case, in accordance with their respective terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That the Issuer, in consideration of the premises herein contained and of the purchase of the Consumer Rate Relief Bonds by the Holders and of other good and lawful consideration, the receipt and sufficiency of which are hereby acknowledged, and to secure, equally and ratably without prejudice, priority or distinction, except as specifically otherwise set forth in this Indenture, the payment of the Consumer Rate Relief Bonds, the payment of all other amounts due under or in connection with this Indenture (including, without limitation, all fees, expenses, counsel fees and other amounts due and owing to the Indenture Trustee) and the performance and observance of all of the covenants and conditions contained herein or in the Consumer Rate Relief Bonds, has hereby executed and delivered this Indenture and by these presents does hereby and under the Series Supplement will convey, grant and assign, transfer and pledge, in each case, in and unto the Indenture Trustee, its successors and assigns forever, for the benefit of the Secured Parties, all and singular the property described in the Series Supplement (such property hereinafter referred to as the “CRR Bond Collateral”).  The Series Supplement will more particularly describe the obligations of the Issuer secured by the CRR Bond Collateral.

AND IT IS HEREBY COVENANTED, DECLARED AND AGREED between the parties hereto that all Consumer Rate Relief Bonds are to be issued, countersigned and delivered and that all of the CRR Bond Collateral is to be held and applied, subject to the further covenants, conditions, releases, uses and trusts hereinafter set forth, and the Issuer, for itself and any successor, does hereby covenant and agree to and with the Indenture Trustee and its successors in said trust, for the benefit of the Secured Parties, as follows:

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.  Definitions.  Except as otherwise specified herein or as the context may otherwise require, the capitalized terms used herein shall have the respective meanings set forth in Appendix A attached hereto and made a part hereof for all purposes of this Indenture.

SECTION 1.02.  Incorporation by Reference of Trust Indenture Act.  Whenever this Indenture refers to a provision of the TIA, that provision is incorporated by reference in and made a part of this Indenture.  The following TIA terms used in this Indenture have the following meanings:

“indenture securities” means the Consumer Rate Relief Bonds.

“indenture security holder” means a Holder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Indenture Trustee.

“obligor” on the indenture securities means the Issuer and any other obligor on the indenture securities.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

SECTION 1.03.  Rules of Construction.  Unless the context otherwise requires:

(i)         a term has the meaning assigned to it;

(ii)         an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in the United States of America as in effect from time to time;

(iii)         “or” is not exclusive;

(iv)         “includes” and “including” means “includes without limitation” and “including without limitation”, respectively;

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(v)         words in the singular include the plural and words in the plural include the singular; and

(vi)         the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

ARTICLE II

THE CONSUMER RATE RELIEF BONDS

SECTION 2.01.  Form.  The Consumer Rate Relief Bonds and the Indenture Trustee’s certificate of authentication shall be in substantially the forms set forth in Exhibit A, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or by the Series Supplement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing the Consumer Rate Relief Bonds, as evidenced by their execution of the Consumer Rate Relief Bonds.  Any portion of the text of any Consumer Rate Relief Bond may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Consumer Rate Relief Bond.

The Consumer Rate Relief Bonds shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing the Consumer Rate Relief Bonds, as evidenced by their execution of the Consumer Rate Relief Bonds.

Each Consumer Rate Relief Bond shall be dated the date of its authentication.  The terms of the Consumer Rate Relief Bonds set forth in Exhibit A are part of the terms of this Indenture.

SECTION 2.02.  Denominations of Consumer Rate Relief Bonds.  The Consumer Rate Relief Bonds shall be issuable in the Minimum Denomination specified in the Series Supplement and, except as otherwise provided in the Series Supplement in integral multiples thereof.

The Consumer Rate Relief Bonds may, at the election of and as authorized by a Responsible Officer of the Issuer, be issued in one or more Tranches, and shall be designated generally as the “Consumer Rate Relief Bonds” of the Issuer, with such further particular designations added or incorporated in such title for the Consumer Rate Relief Bonds of any particular Tranche as a Responsible Officer of the Issuer may determine.  Each Consumer Rate Relief Bond shall bear upon its face the designation so selected for the Tranche to which it belongs.  All Consumer Rate Relief Bonds shall be identical in all respects except for the denominations thereof, unless the Consumer Rate Relief Bonds are comprised of one or more Tranches, in which case all Consumer Rate Relief Bonds of the same Tranche shall be identical in all respects except for the denominations thereof.  All Consumer Rate Relief Bonds of a particular Tranche shall be in all respects equally and ratably entitled to the benefits hereof

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without preference, priority, or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Indenture.

The Consumer Rate Relief Bonds shall be created by the Series Supplement authorized by a Responsible Officer of the Issuer, which Series Supplement shall specify and establish the terms and provisions thereof.  The several Tranches thereof may differ as between Tranches, in respect of any of the following matters:

(1)           designation of the Tranches thereof;

(2)           the principal amount;

(3)           the Bond Interest Rate;

(4)           the Payment Dates;

(5)           the Scheduled Payment Dates;

(6)           the Scheduled Final Payment Date;

(7)           the Final Maturity Date;

(8)           the place or places for the payment of interest, principal and premium, if any;

(9)           the Minimum Denominations;

(10)         the Expected Amortization Schedule;

(11)         provisions with respect to the definitions set forth in Appendix A hereto;

(12)         whether or not the Consumer Rate Relief Bonds are to be Book-Entry Consumer Rate Relief Bonds and the extent to which Section 2.11 should apply; and

(13)         any other provisions expressing or referring to the terms and conditions upon which the Consumer Rate Relief Bonds of any Tranche are to be issued under this Indenture that are not in conflict with the provisions of this Indenture and as to which the Rating Agency Condition is satisfied.

SECTION 2.03.  Execution, Authentication and Delivery.  The Consumer Rate Relief Bonds shall be executed on behalf of the Issuer by any of its Responsible Officers.  The signature of any such Responsible Officer on the Consumer Rate Relief Bonds may be manual or facsimile.

Consumer Rate Relief Bonds bearing the manual or facsimile signature of individuals who were at any time Responsible Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of the Consumer Rate Relief Bonds or did not hold such offices at the date of the Consumer Rate Relief Bonds.

4

At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Consumer Rate Relief Bonds executed by the Issuer to the Indenture Trustee pursuant to an Issuer Order for authentication; and the Indenture Trustee shall authenticate and deliver the Consumer Rate Relief Bonds as in this Indenture provided and not otherwise.

No Consumer Rate Relief Bond shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Consumer Rate Relief Bond a certificate of authentication substantially in the form provided for therein executed by the Indenture Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Consumer Rate Relief Bond shall be conclusive evidence, and the only evidence, that such Consumer Rate Relief Bond has been duly authenticated and delivered hereunder.

SECTION 2.04.  Temporary Consumer Rate Relief Bonds.

Pending the preparation of Definitive Consumer Rate Relief Bonds pursuant to Section 2.13, the Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee shall authenticate and deliver, Temporary Consumer Rate Relief Bonds which are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the Definitive Consumer Rate Relief Bonds in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture as the officers executing the Consumer Rate Relief Bonds may determine, as evidenced by their execution of the Consumer Rate Relief Bonds.

If Temporary Consumer Rate Relief Bonds are issued, the Issuer will cause Definitive Consumer Rate Relief Bonds to be prepared without unreasonable delay.  After the preparation of Definitive Consumer Rate Relief Bonds, the Temporary Consumer Rate Relief Bonds shall be exchangeable for Definitive Consumer Rate Relief Bonds upon surrender of the Temporary Consumer Rate Relief Bonds at the office or agency of the Issuer to be maintained as provided in Section 3.02, without charge to the Holder.  Upon surrender for cancellation of any one or more Temporary Consumer Rate Relief Bonds, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor a like principal amount of Definitive Consumer Rate Relief Bonds of authorized denominations.  Until so delivered in exchange, the Temporary Consumer Rate Relief Bonds shall in all respects be entitled to the same benefits under this Indenture as Definitive Consumer Rate Relief Bonds.

SECTION 2.05.  Registration; Registration of Transfer and Exchange of Consumer Rate Relief Bonds.

The Issuer shall cause to be kept a register (the “CRR Bond Register”) in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Consumer Rate Relief Bonds and the registration of transfers of Consumer Rate Relief Bonds.  The Indenture Trustee shall be “CRR Bond Registrar” for the purpose of registering Consumer Rate Relief Bonds and transfers of Consumer Rate Relief Bonds as herein provided.  Upon any resignation of any CRR Bond Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of CRR Bond Registrar.

If a Person other than the Indenture Trustee is appointed by the Issuer as CRR Bond Registrar, the Issuer will give the Indenture Trustee prompt written notice of the

5

appointment of such CRR Bond Registrar and of the location, and any change in the location, of the CRR Bond Register, and the Indenture Trustee shall have the right to inspect the CRR Bond Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely conclusively upon a certificate executed on behalf of the CRR Bond Registrar by a Responsible Officer thereof as to the names and addresses of the Holders and the principal amounts and number of the Consumer Rate Relief Bonds (separately stated by Tranche).

Upon surrender for registration of transfer of any Consumer Rate Relief Bond at the office or agency of the Issuer to be maintained as provided in Section 3.02, provided that the requirements of Section 8-401 of the UCC are met, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Consumer Rate Relief Bonds in any Minimum Denominations, of the same Tranche and aggregate principal amount.

At the option of the Holder, Consumer Rate Relief Bonds may be exchanged for other Consumer Rate Relief Bonds in any Minimum Denominations, of the same Tranche and aggregate principal amount, upon surrender of the Consumer Rate Relief Bonds to be exchanged at such office or agency as provided in Section 3.02.  Whenever any Consumer Rate Relief Bonds are so surrendered for exchange, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute and, upon any such execution, the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, the Consumer Rate Relief Bonds which the Holder making the exchange is entitled to receive.

All Consumer Rate Relief Bonds issued upon any registration of transfer or exchange of other Consumer Rate Relief Bonds shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Consumer Rate Relief Bonds surrendered upon such registration of transfer or exchange.

Every Consumer Rate Relief Bond presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by (a) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder thereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an institution which is a member of one of the following recognized Signature Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other guarantee program acceptable to the Indenture Trustee, and (b) such other documents as the Indenture Trustee may require.

No service charge shall be made to a Holder for any registration of transfer or exchange of Consumer Rate Relief Bonds, but the Issuer or the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge or any fees or expenses of the Indenture Trustee that may be imposed in connection with any registration of transfer or exchange of Consumer Rate Relief Bonds, other than exchanges pursuant to Sections 2.04 or 2.06 not involving any transfer.

The preceding provisions of this Section 2.05 notwithstanding, the Issuer shall not be required to make, and the CRR Bond Registrar need not register transfers or exchanges of any

6

Consumer Rate Relief Bond that has been submitted within fifteen (15) days preceding the due date for any payment with respect to such Consumer Rate Relief Bond until after such due date has occurred.

SECTION 2.06.  Mutilated, Destroyed, Lost or Stolen Consumer Rate Relief Bonds.  If (i) any mutilated Consumer Rate Relief Bond is surrendered to the Indenture Trustee, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Consumer Rate Relief Bond and (ii) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the CRR Bond Registrar or the Indenture Trustee that such Consumer Rate Relief Bond has been acquired by a Protected Purchaser, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute and, upon the Issuer’s written request, the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Consumer Rate Relief Bond, a replacement Consumer Rate Relief Bond of like Tranche, tenor and principal amount, bearing a number not contemporaneously outstanding; provided, however, that if any such destroyed, lost or stolen Consumer Rate Relief Bond, but not a mutilated Consumer Rate Relief Bond, shall have become or within seven (7) days shall be due and payable, instead of issuing a replacement Consumer Rate Relief Bond, the Issuer may pay such destroyed, lost or stolen Consumer Rate Relief Bond when so due or payable without surrender thereof.  If, after the delivery of such replacement Consumer Rate Relief Bond or payment of a destroyed, lost or stolen Consumer Rate Relief Bond pursuant to the proviso to the preceding sentence, a Protected Purchaser of the original Consumer Rate Relief Bond in lieu of which such replacement Consumer Rate Relief Bond was issued presents for payment such original Consumer Rate Relief Bond, the Issuer and the Indenture Trustee shall be entitled to recover such replacement Consumer Rate Relief Bond (or such payment) from the Person to whom it was delivered or any Person taking such replacement Consumer Rate Relief Bond from such Person to whom such replacement Consumer Rate Relief Bond was delivered or any assignee of such Person, except a Protected Purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith.

Upon the issuance of any replacement Consumer Rate Relief Bond under this Section 2.06, the Issuer and/or the Indenture Trustee may require the payment by the Holder of such Consumer Rate Relief Bond of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee and the CRR Bond Registrar) connected therewith.

Every replacement Consumer Rate Relief Bond issued pursuant to this Section 2.06 in replacement of any mutilated, destroyed, lost or stolen Consumer Rate Relief Bond shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Consumer Rate Relief Bond shall be found at any time or enforced by any Person, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Consumer Rate Relief Bonds duly issued hereunder.

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The provisions of this Section 2.06 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Consumer Rate Relief Bonds.

SECTION 2.07.  Persons Deemed Owner.  Prior to due presentment for registration of transfer of any Consumer Rate Relief Bond, the Issuer, the Indenture Trustee, the CRR Bond Registrar and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Consumer Rate Relief Bond is registered (as of the day of determination) as the owner of such Consumer Rate Relief Bond for the purpose of receiving payments of principal of and premium, if any, and interest on such Consumer Rate Relief Bond and for all other purposes whatsoever, whether or not such Consumer Rate Relief Bond be overdue, and neither the Issuer, the Indenture Trustee nor any agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary.

SECTION 2.08.  Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved.

(a)           The Consumer Rate Relief Bonds shall accrue interest as provided in the Series Supplement at the applicable Bond Interest Rate, and such interest shall be payable on each applicable Payment Date.  Any installment of interest, principal or premium, if any, payable on any Consumer Rate Relief Bond which is punctually paid or duly provided for on the applicable Payment Date shall be paid to the Person in whose name such Consumer Rate Relief Bond (or one or more Predecessor Consumer Rate Relief Bonds) is registered on the Record Date for such Payment Date by wire transfer to an account maintained by such Holder in accordance with payment instructions delivered to the Indenture Trustee by such Holder, and with respect to Book-Entry Consumer Rate Relief Bonds, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Consumer Rate Relief Bond unless and until such Global Consumer Rate Relief Bond is exchanged for Definitive Consumer Rate Relief Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to such Consumer Rate Relief Bond on a Payment Date which shall be payable as provided below.  The funds represented by any such checks returned undelivered shall be held in accordance with Section 3.03.

(b)           The principal of each Consumer Rate Relief Bond of each Tranche shall be paid, to the extent funds are available therefor in the Collection Account, in installments on each Payment Date specified in the Series Supplement; provided that installments of principal not paid when scheduled to be paid in accordance with the Expected Amortization Schedule shall be paid upon receipt of money available for such purpose, in the order set forth in the Expected Amortization Schedule.  Failure to pay principal in accordance with such Expected Amortization Schedule because moneys are not available pursuant to Section 8.02 to make such payments shall not constitute a Default or Event of Default under this Indenture; provided, however that failure to pay the entire unpaid principal amount of the Consumer Rate Relief Bonds of a Tranche upon the Final Maturity Date for the Consumer Rate Relief Bonds of such Tranche shall constitute an Event of Default under this Indenture as set forth in Section 5.01.  Notwithstanding the foregoing, the entire unpaid principal amount of the Consumer Rate Relief Bonds shall be due and payable, if not previously paid, on the date on which an Event of Default shall have

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occurred and be continuing, if the Indenture Trustee or the Holders of the Consumer Rate Relief Bonds representing not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds have declared the Consumer Rate Relief Bonds to be immediately due and payable in the manner provided in Section 5.02.  All payments of principal and premium, if any, on the Consumer Rate Relief Bonds shall be made pro rata to the Holders entitled thereto unless otherwise provided in the Series Supplement.  The Indenture Trustee shall notify the Person in whose name a Consumer Rate Relief Bond is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and premium, if any, and interest on such Consumer Rate Relief Bond will be paid.  Such notice shall be mailed no later than five (5) days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of such Consumer Rate Relief Bond and shall specify the place where such Consumer Rate Relief Bond may be presented and surrendered for payment of such installment.

(c)           If interest on the Consumer Rate Relief Bonds is not paid when due, such defaulted interest shall be paid (plus interest on such defaulted interest at the applicable Bond Interest Rate to the extent lawful)  to the Persons who are Holders on a subsequent Special Record Date, which date shall be at least fifteen (15) Business Days prior to the Special Payment Date.  The Issuer shall fix or cause to be fixed any such Special Record Date and Special Payment Date, and, at least ten (10) days before any such Special Record Date, the Issuer shall mail to each affected Holder a notice that states the Special Record Date, the Special Payment Date and the amount of defaulted interest (plus interest on such defaulted interest) to be paid.

SECTION 2.09.  Cancellation.  All Consumer Rate Relief Bonds surrendered for payment, registration of transfer or exchange shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by the Indenture Trustee.  The Issuer may at any time deliver to the Indenture Trustee for cancellation any Consumer Rate Relief Bonds previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Consumer Rate Relief Bonds so delivered shall be promptly canceled by the Indenture Trustee.  No Consumer Rate Relief Bonds shall be authenticated in lieu of or in exchange for any Consumer Rate Relief Bonds canceled as provided in this Section 2.09, except as expressly permitted by this Indenture.  All canceled Consumer Rate Relief Bonds may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time.

SECTION 2.10.  Outstanding Amount; Authentication and Delivery of Consumer Rate Relief Bonds.  The aggregate Outstanding Amount of Consumer Rate Relief Bonds that may be authenticated and delivered under this Indenture shall not exceed the aggregate of the amounts of Consumer Rate Relief Bonds that are authorized in the Financing Order but otherwise shall be unlimited.

Consumer Rate Relief Bonds created and established by the Series Supplement may at any time be executed by the Issuer and delivered to the Indenture Trustee for authentication and thereupon the same shall be authenticated and delivered by the Indenture Trustee upon Issuer Request and upon delivery by the Issuer to the Indenture Trustee, and receipt by the Indenture Trustee, or the causing to occur by the Issuer, of the following; provided,

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however, that compliance with such conditions and delivery of such documents shall only be required in connection with the original issuance of the Consumer Rate Relief Bonds:

(1)           Issuer Action.  An Issuer Order authorizing and directing the authentication and delivery of the Consumer Rate Relief Bonds by the Indenture Trustee and specifying the principal amount of Consumer Rate Relief Bonds to be authenticated.

(2)           Authorizations.  Copies of (x) the Financing Order which shall be in full force and effect and be Final, (y) certified resolutions of the Managers or Member of the Issuer authorizing the execution and delivery of the Series Supplement and the execution, authentication and delivery of the Consumer Rate Relief Bonds and (z) a duly executed Series Supplement.

(3)           Opinions.  An opinion or opinions, portions of which may be delivered by one or more Independent counsel for the Issuer, portions of which may be delivered by one or more Independent counsel for the Servicer, and portions of which may be delivered by one or more Independent counsel for the Seller, dated the Closing Date, in each case subject to the customary exceptions, qualifications and assumptions contained therein, to the collective effect, that (a) all conditions precedent provided for in this Indenture relating to (i) the authentication and delivery of the Issuer’s Consumer Rate Relief Bonds and (ii) the execution of the Series Supplement to this Indenture dated as of the date of this Indenture, have been complied with, and (b) the execution of the Series Supplement to this Indenture dated as of the date of this Indenture is permitted by this Indenture, together with the other Opinions of Counsel set forth in Sections [9(d)-(f), 9(h)-(j) and 9(l)-(w)] of the Underwriting Agreement relating to the Issuer’s Consumer Rate Relief Bonds.

(4)           Authorizing Certificate.  An Officer’s Certificate, dated the Closing Date, of the Issuer certifying that (a) the Issuer has duly authorized the execution and delivery of this Indenture and the Series Supplement and the execution and delivery of the Consumer Rate Relief Bonds and (b) that the Series Supplement is in the form attached thereto, and it shall comply with the requirements of Section 2.02.

(5)           The CRR Bond Collateral.  The Issuer shall have made or caused to be made all filings with the Commission and the West Virginia Secretary of State pursuant to the Financing Order and the Securitization Law and all other filings necessary to perfect the Grant of the CRR Bond Collateral to the Indenture Trustee and the Lien of this Indenture.

(6)           Certificates of the Issuer and the Seller.

(a)           An Officer’s Certificate from the Issuer, dated as of the Closing Date:

(i)                 to the effect that (A) the Issuer is not in Default under this Indenture and that the issuance of the Consumer Rate Relief Bonds will not result in any Default or in any breach of any of the terms, conditions or provisions of or constitute a default under the Financing Order or any indenture, mortgage, deed of trust or other agreement or instrument to which the Issuer is a party or by which it

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or its property is bound or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it or its property may be bound or to which it or its property may be subject and (B) that all conditions precedent provided in this Indenture relating to the execution, authentication and delivery of the Consumer Rate Relief Bonds have been complied with;

(ii)                to the effect that the Issuer has not assigned any interest or participation in the CRR Bond Collateral except for the Grant contained in the Indenture and the Series Supplement; the Issuer has the power and right to Grant the CRR Bond Collateral to the Indenture Trustee as security hereunder and thereunder; and the Issuer, subject to the terms of this Indenture, has Granted to the Indenture Trustee a first priority perfected security interest in all of its right, title and interest in and to such CRR Bond Collateral free and clear of any Lien, mortgage, pledge, charge, security interest, adverse claim or other encumbrance arising as a result of actions of the Issuer or through the Issuer, except Permitted Liens;

(iii)               to the effect that the Issuer has appointed the firm of Independent registered public accountants as contemplated in Section 8.06;

(iv)               to the effect that attached thereto are duly executed, true and complete copies of the Sale Agreement, the Servicing Agreement and the Administration Agreement, which are, to the knowledge of the Issuer, in full force and effect and, to the knowledge of the Issuer, that no party is in default of its obligations under such agreements; and

(v)                stating that all filings with the Commission, the West Virginia Secretary of State and the Delaware Secretary of State pursuant to the Securitization Law, the UCC and the Financing Order and all UCC financing statements with respect to the CRR Bond Collateral which are required to be filed by the terms of the Financing Order, the Securitization Law, the Sale Agreement, the Servicing Agreement and this Indenture have been filed as required.

(b)           An officer’s certificate from the Seller, dated as of the Closing Date, to the effect that, in the case of the CRR Property identified in the Bill of Sale, immediately prior to the conveyance thereof to the Issuer pursuant to the Sale Agreement:

(i)                  the Seller was the original and the sole owner of such CRR Property, free and clear of any Lien; the Seller had not assigned any interest or participation in such CRR Property and the proceeds thereof other than to the Issuer pursuant to the Sale Agreement; the Seller has the power, authority and right to own, sell and assign such CRR Property and the proceeds thereof to the Issuer; and the Seller, subject to the terms of the Sale Agreement, has validly sold and assigned to the Issuer all of its right, title and interest in and to such CRR Property and the proceeds thereof, free and clear of any Lien (other than Permitted Liens) and such sale and assignment is absolute and irrevocable and has been perfected; and

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(ii)                 the attached copy of the Financing Order creating such CRR Property is true and complete and is in full force and effect.

(7)           Accountant’s Certificate or Letter.  One or more certificates or letters, addressed to the Issuer, of a firm of Independent registered public accountants of recognized national reputation to the effect that (a) such accountants are Independent with respect to the Issuer within the meaning of this Indenture, and are independent public accountants within the meaning of the standards of The American Institute of Certified Public Accountants, and (b) with respect to the CRR Bond Collateral, they have applied such procedures as instructed by the addressees of such certificate or letter.

(8)           Rating Agency Condition.  The Indenture Trustee shall receive evidence reasonably satisfactory to it that the Consumer Rate Relief Bonds have received the ratings from the Rating Agencies required by the Underwriting Agreement as a condition to the issuance of the Consumer Rate Relief Bonds.

(9)  Requirements of Series Supplement.  Such other funds, accounts, documents, certificates, agreements, instruments or opinions as may be required by the terms of the Series Supplement.

(10)           Required Capital Level.  Evidence satisfactory to the Indenture Trustee that the Required Capital Level has been credited to the Capital Subaccount.

(11)           Other Requirements.  Such other documents, certificates, agreements, instruments or opinions as the Indenture Trustee may reasonably require.

The Indenture Trustee may, upon payment of the purchase price for the Consumer Rate Relief Bonds by the Underwriters, conclusively assume the satisfaction of the conditions set forth in clauses (g) and (h) above of this Section 10.

SECTION 2.11.  Book-Entry Consumer Rate Relief Bonds.  Unless the Series Supplement provides otherwise, all of the Consumer Rate Relief Bonds shall be issued in Book-Entry Form, and the Issuer shall execute and the Indenture Trustee shall, in accordance with this Section 2.11 and the Issuer Order, authenticate and deliver one or more Global Consumer Rate Relief Bonds, evidencing the Consumer Rate Relief Bonds which (i) shall be an aggregate original principal amount equal to the aggregate original principal amount of the Consumer Rate Relief Bonds to be issued pursuant to the Issuer Order, (ii) shall be registered in the name of the Clearing Agency therefor or its nominee, which shall initially be Cede & Co., as nominee for The Depository Trust Company, the initial Clearing Agency, (iii) shall be delivered by the Indenture Trustee pursuant to such Clearing Agency’s or such nominee’s instructions, and (iv) shall bear a legend substantially to the effect set forth in Exhibit A.

Each Clearing Agency designated pursuant to this Section 2.11 must, at the time of its designation and at all times while it serves as Clearing Agency hereunder, be a “clearing agency” registered under the Exchange Act and any other applicable statute or regulation.

No Holder of Consumer Rate Relief Bonds issued in Book-Entry Form shall receive a Definitive Consumer Rate Relief Bond representing such Holder’s interest in any of the

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Consumer Rate Relief Bonds, except as provided in Section 2.13.  Unless (and until) certificated, fully registered Consumer Rate Relief Bonds (the “Definitive Consumer Rate Relief Bonds”) have been issued to the Holders pursuant to Section 2.13 or pursuant to the Series Supplement relating thereto:

(a)           the provisions of this Section 2.11 shall be in full force and effect;

(b)           the Issuer, the Servicer, the Paying Agent, the CRR Bond Registrar and the Indenture Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Consumer Rate Relief Bonds and the giving of instructions or directions hereunder) as the authorized representative of the Holders;

(c)           to the extent that the provisions of this Section 2.11 conflict with any other provisions of this Indenture, the provisions of this Section 2.11 shall control;

(d)           the rights of Holders shall be exercised only through the Clearing Agency and the Clearing Agency Participants and shall be limited to those established by law and agreements between such Holders and the Clearing Agency and/or the Clearing Agency Participants.  Pursuant to the Letter of Representations, unless and until Definitive Consumer Rate Relief Bonds are issued pursuant to Section 2.13, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest on the Book-Entry Consumer Rate Relief Bonds to such Clearing Agency Participants; and

(e)           whenever this Indenture requires or permits actions to be taken based upon instruction or directions of the Holders evidencing a specified percentage of the Outstanding Amount of Consumer Rate Relief Bonds, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from the Holders and/or the Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Consumer Rate Relief Bonds and has delivered such instructions to a Responsible Officer of the Indenture Trustee.

SECTION 2.12.  Notices to Clearing Agency.  Unless and until Definitive Consumer Rate Relief Bonds shall have been issued to Holders pursuant to Section 2.13, whenever notice, payment, or other communications to the holders of Book-Entry Consumer Rate Relief Bonds is required under this Indenture, the Indenture Trustee, the Servicer and the Paying Agent, as applicable, shall give all such notices and communications specified herein to be given to Holders to the Clearing Agency.

SECTION 2.13.  Definitive Consumer Rate Relief Bonds.  If (a) (i) the Issuer advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities under any Letter of Representations and (ii) the Issuer is unable to locate a qualified successor Clearing Agency, (b) the Issuer, at its option, advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) after the occurrence of an Event of Default hereunder, Holders holding Consumer Rate Relief Bonds aggregating not less than a majority of the aggregate Outstanding Amount of Consumer Rate Relief Bonds maintained as Book-Entry Consumer Rate Relief Bonds

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advise the Indenture Trustee, the Issuer and the Clearing Agency (through the Clearing Agency Participants) in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Holders, the Issuer shall notify the Clearing Agency, the Indenture Trustee and all such Holders in writing of the occurrence of any such event and of the availability of Definitive Consumer Rate Relief Bonds to the Holders requesting the same.  Upon surrender to the Indenture Trustee of the Global Consumer Rate Relief Bonds by the Clearing Agency accompanied by registration instructions from such Clearing Agency for registration, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver, Definitive Consumer Rate Relief Bonds in accordance with the instructions of the Clearing Agency.  None of the Issuer, the CRR Bond Registrar, the Paying Agent or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions.  Upon the issuance of Definitive Consumer Rate Relief Bonds, the Indenture Trustee shall recognize the Holders of the Definitive Consumer Rate Relief Bonds as Holders hereunder.

Definitive Consumer Rate Relief Bonds will be transferable and exchangeable at the offices of the Consumer Rate Relief Bonds Registrar.

SECTION 2.14.  CUSIP Number.  The Issuer in issuing any Consumer Rate Relief Bonds may use a “CUSIP” number and, if so used, the Indenture Trustee shall use the CUSIP number provided to it by the Issuer in any notices to the Holders thereof as a convenience to such Holders; provided, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Consumer Rate Relief Bonds and that reliance may be placed only on the other identification numbers printed on the Consumer Rate Relief Bonds.  The Issuer shall promptly notify the Indenture Trustee in writing of any change in the CUSIP number with respect to any Consumer Rate Relief Bond.

SECTION 2.15.  Letter of Representations.  The parties hereto shall comply with the terms of each Letter of Representations applicable to such party.

SECTION 2.16.  Tax Treatment.  The Issuer and the Indenture Trustee, by entering into this Indenture, and the Holders and any Persons holding a beneficial interest in any Consumer Rate Relief Bond, by acquiring any Consumer Rate Relief Bond or interest therein, (a) express their intention that, solely for the purposes of federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purposes of state, local and other taxes, the Consumer Rate Relief Bonds qualify under applicable tax law as indebtedness of the Member secured by the CRR Bond Collateral and (b) solely for the purposes of federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Consumer Rate Relief Bonds are outstanding, agree to treat the Consumer Rate Relief Bonds as indebtedness of the Member secured by the CRR Bond Collateral unless otherwise required by appropriate taxing authorities.

SECTION 2.17.  State Pledge.  Under the laws of the State of West Virginia in effect on the Closing Date, pursuant to Section 24-2-4f(s)(1) of the Securitization Law, the State of West Virginia has pledged to and agrees with the Bondholders, assignees and financing parties under the Financing Order that the State will not take or permit any action that impairs the value of CRR Property under the Financing Order or revises the CRR Costs for which

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recovery is authorized under the Financing Order or, except for the adjustment mechanism provided under Section 24-2-4f (k) of the Securitization Law, reduce, alter or impair CRR Charges that are imposed, charged, collected or remitted for the benefit of the Bondholders, assignees and financing parties, until any principal, interest and redemption premium in respect of Consumer Rate Relief Bonds, all financing costs and all amounts to be paid to any assignee or financing party under an ancillary agreement are paid or performed in full.

The Issuer hereby acknowledges that the purchase of any Consumer Rate Relief Bond by a Holder or the purchase of any beneficial interest in a Consumer Rate Relief Bond by any Person and the Indenture Trustee’s obligations to perform hereunder are made in reliance on such agreement and pledge by the State of West Virginia.

SECTION 2.18.  Security Interests.  The Issuer hereby makes the following representations and warranties.  Other than the security interests granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not pledged, granted, sold, conveyed or otherwise assigned any interests or security interests in the CRR Bond Collateral and no security agreement, financing statement or equivalent security or Lien instrument listing the Issuer as debtor covering all or any part of the CRR Bond Collateral is on file or of record in any jurisdiction, except such as may have been filed, recorded or made by the Issuer in favor of the Indenture Trustee on behalf of the Secured Parties in connection with this Indenture.  This Indenture constitutes a valid and continuing lien on, and first priority perfected security interest in, the CRR Bond Collateral in favor of the Indenture Trustee on behalf of the Secured Parties, which lien and security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing.  With respect to all CRR Bond Collateral, this Indenture, together with the Series Supplement, creates a valid and continuing first priority perfected security interest (as defined in the UCC and as such term is used in the Securitization Law) in such CRR Bond Collateral, which security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing.  The Issuer has good and marketable title to the CRR Bond Collateral free and clear of any Lien, claim or encumbrance of any Person other than Permitted Liens.  All of the CRR Bond Collateral constitutes either CRR Property or accounts, deposit accounts, investment property or general intangibles (as each such term is defined in the UCC) except that proceeds of the CRR Bond Collateral may also take the form of instruments.  The Issuer has taken, or caused the Servicer to take, all action necessary to perfect the security interest in the CRR Bond Collateral granted to the Indenture Trustee, for the benefit of the Secured Parties.  The Issuer has filed (or has caused the Servicer to file) all appropriate financing statements in the proper filing offices in the appropriate jurisdictions under applicable law in order to perfect the security interest in the CRR Bond Collateral granted to the Indenture Trustee. The Issuer has not authorized the filing of and is not aware, after due inquiry, of any financing statements against the Issuer that include a description of the CRR Bond Collateral other than those filed in favor of

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the Indenture Trustee.  The Issuer is not aware of any judgment or tax lien filings against the Issuer.  The Collection Account (including all subaccounts thereof) constitutes a “securities account” within the meaning of the UCC.  The Issuer has taken all steps necessary to cause the Securities Intermediary of each such securities account to identify in its records the Indenture Trustee as the person having a security entitlement against the Securities Intermediary in such securities account, no Collection Account is in the name of any person other than the Indenture Trustee, and the Issuer has not consented to the Securities Intermediary of the Collection Account to comply with entitlement orders of any person other than the Indenture Trustee.  All of the CRR Bond Collateral constituting investment property has been and will have been credited to the Collection Account or a subaccount thereof, and the Securities Intermediary for the Collection Account has agreed to treat all assets credited to the Collection Account as “financial assets” within the meaning of the UCC.  Accordingly, the Indenture Trustee has a first priority perfected security interest in the Collection Account, all funds and financial assets on deposit therein, and all securities entitlements relating thereto.  The representations and warranties set forth in this Section 2.18 shall survive the execution and delivery of this Indenture and the issuance of any Consumer Rate Relief Bonds, shall be deemed re-made on each date on which any funds in the Collection Account are distributed to Issuer or otherwise released from the Lien of the Indenture and may not be waived by any party hereto except pursuant to a supplemental indenture executed in accordance with Article IX and as to which the Rating Agency Condition has been satisfied.

ARTICLE III

COVENANTS

SECTION 3.01.  Payment of Principal, Premium, if any, and Interest.  The principal of and premium, if any, and interest on the Consumer Rate Relief Bonds shall be duly and punctually paid by the Issuer, or the Servicer on behalf of the Issuer, in accordance with the terms of the Consumer Rate Relief Bonds and this Indenture; provided, that except on a Final Maturity Date or upon the acceleration of the Consumer Rate Relief Bonds following the occurrence of an Event of Default, the Issuer shall only be obligated to pay the principal of the Consumer Rate Relief Bonds on each Payment Date therefor to the extent moneys are available for such payment pursuant to Section 8.02.  Amounts properly withheld under the Code or other tax laws by any Person from a payment to any Holder of interest or principal or premium, if any, shall be considered as having been paid by the Issuer to such Holder for all purposes of this Indenture.

SECTION 3.02.  Maintenance of Office or Agency.  The Issuer shall maintain in [city, state], an office or agency where Consumer Rate Relief Bonds may be surrendered for registration of transfer or exchange.  The Issuer shall give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency.  The Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes and the Corporate Trust Office of the Indenture Trustee shall serve as the offices provided in the prior sentence.  If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders may be made at the office of the Indenture Trustee located at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders.

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SECTION 3.03.  Money for Payments To Be Held in Trust.  As provided in Section 8.02(a), all payments of amounts due and payable with respect to any Consumer Rate Relief Bonds that are to be made from amounts withdrawn from the Collection Account pursuant to Section 8.02(d) shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from such Collection Account for payments with respect to any Consumer Rate Relief Bonds shall be paid over to the Issuer except as provided in this Section 3.03 and Section 8.02.

Each Paying Agent shall meet the eligibility criteria set forth for any Indenture Trustee under Section 6.11.  The Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.03, that such Paying Agent will:

(i)           hold all sums held by it for the payment of amounts due with respect to the Consumer Rate Relief Bonds in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

(ii)           give the Indenture Trustee and the Rating Agencies written notice of any Default by the Issuer of which it has actual knowledge in the making of any payment required to be made with respect to the Consumer Rate Relief Bonds;

(iii)           at any time during the continuance of any such Default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent;

(iv)           immediately, with notice to the Rating Agencies, resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Consumer Rate Relief Bonds if at any time the Paying Agent determines that it has ceased to meet the standards required to be met by a Paying Agent at the time of such determination; and

(v)           comply with all requirements of the Code and other tax laws with respect to the withholding from any payments made by it on any Consumer Rate Relief Bonds of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith.

The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money.

Subject to applicable laws with respect to escheat of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Consumer Rate Relief Bond and remaining unclaimed for two (2) years after such amount

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has become due and payable shall be discharged from such trust and be paid to the Issuer on an Issuer Request; and, subject to Section 10.16, the Holder of such Consumer Rate Relief Bond shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; provided, however, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer, cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer.  The Indenture Trustee may also adopt and employ, at the expense of the Issuer, any other reasonable means of notification of such repayment (including mailing notice of such repayment to Holders whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder).

SECTION 3.04.  Existence.  The Issuer shall keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other State or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the other Basic Documents, the Consumer Rate Relief Bonds, the CRR Bond Collateral and each other instrument or agreement referenced herein or therein.

SECTION 3.05.  Protection of CRR Bond Collateral.  The Issuer shall from time to time execute and deliver all such supplements and amendments hereto and all filings with the Commission, the Delaware Secretary of State, the Virginia State Corporation Commission or the West Virginia Secretary of State pursuant to the Financing Order or to the Securitization Law and all financing statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action necessary or advisable to:

(i)           maintain or preserve the Lien and security interest (and the priority thereof) of this Indenture and the Series Supplement or carry out more effectively the purposes hereof;

(ii)          perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture;

(iii)         enforce any of the CRR Bond Collateral;

(iv)         preserve and defend title to the CRR Bond Collateral and the rights of the Indenture Trustee and the Holders in such CRR Bond Collateral against the Claims of all Persons and parties, including, without limitation, the challenge by any party to the validity or enforceability of the Financing Order, the CRR Property or any proceeding

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relating thereto and institute any action or proceeding necessary to compel performance by the Commission or the State of West Virginia of any of its obligations or duties under the Securitization Law, the State Pledge, or the Financing Order; or

(v)          pay any and all taxes levied or assessed upon all or any part of the CRR Bond Collateral.

The Issuer hereby designates the Indenture Trustee its agent and attorney-in-fact to execute or authorize, as the case may be, any filings with the Commission, the Delaware Secretary of State, the Virginia State Corporation Commission or the West Virginia Secretary of State, financing statements, continuation statements or other instrument required pursuant to this Section 3.05, it being understood that the Indenture Trustee shall have no such obligation or any duty to prepare such documents.  The Indenture Trustee is specifically authorized to file financing statements covering the CRR Bond Collateral, including, without limitation, financing statements that describe the CRR Bond Collateral as “all assets” or “all personal property” of the Issuer.

SECTION 3.06.  Opinions as to CRR Bond Collateral.

(a)           On the Closing Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer either stating that, in the opinion of such counsel, such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto, and any other requisite documents, and with respect to the execution and filing of any filings with the Commission, the Delaware Secretary of State, the Virginia State Corporation Commission or the West Virginia Secretary of State pursuant to the Securitization Law and the Financing Order and any financing statements and continuation statements, as are necessary to perfect and make effective the Lien, and the first priority perfected security interest created by this Indenture and the Series Supplement, and no other Lien or security interest is equal or prior to the Lien and security interest of the Indenture Trustee in the CRR Bond Collateral, and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make effective such Lien and security interest.

(b)           Within ninety (90) days after the beginning of each calendar year beginning with the calendar year beginning January 1, 2014, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing of any filings with the Commission, the Delaware Secretary of State, the Virginia State Corporation Commission or the West Virginia Secretary of State pursuant to the Securitization Law and the Financing Order and any financing statements and continuation statements as are necessary to maintain the Lien and the first priority perfected security interest created by this Indenture and reciting the details of such action or stating that, in the opinion of such counsel, no such action is necessary to maintain such Lien and security interest.  Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any filings with the Commission, the Delaware Secretary of State, the Virginia State Corporation Commission or the West Virginia Secretary of State, financing statements and continuation statements that will, in the opinion of

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such counsel, be required within the twelve-month period following the date of such opinion to maintain the Lien and the first priority perfected security interest created by this Indenture and the Series Supplement.

(c)           Prior to the effectiveness of any amendment to the Sale Agreement or the Servicing Agreement, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer either (i) stating that, in the opinion of such counsel, all filings, including UCC financing statements and other filings with the Commission, the Delaware Secretary of State, the Virginia State Corporation Commission and the West Virginia Secretary of State pursuant to the Securitization Law or the Financing Order, have been executed and filed that are necessary fully to preserve and protect the Lien and security interest of the Issuer and the Indenture Trustee in the CRR Property and the CRR Bond Collateral, respectively, and the proceeds thereof, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (ii) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such Lien and security interest.

SECTION 3.07.  Performance of Obligations; Servicing; SEC Filings.

(a)           The Issuer (i) shall diligently pursue any and all actions to enforce its rights under each instrument or agreement included in the CRR Bond Collateral and (ii) shall not take any action and shall use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person’s covenants or obligations under any such instrument or agreement or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except, in each case, as expressly provided in this Indenture, the Series Supplement, the Sale Agreement, the Servicing Agreement, any Intercreditor Agreement or such other instrument or agreement.

(b)           The Issuer may contract with other Persons to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee herein or in an Officer’s Certificate shall be deemed to be action taken by the Issuer.  Initially, the Issuer has contracted with the Servicer to assist the Issuer in performing its duties under this Indenture.

(c)           The Issuer shall punctually perform and observe all of its obligations and agreements contained in this Indenture, the Series Supplement, the other Basic Documents and in the instruments and agreements included in the CRR Bond Collateral, including filing or causing to be filed all filings with the Commission, the Delaware Secretary of State, the Virginia State Corporation Commission or the West Virginia Secretary of State pursuant to the Securitization Law or the Financing Order, all UCC financing statements and continuation statements required to be filed by it by the terms of this Indenture, the Series Supplement, the Sale Agreement and the Servicing Agreement in accordance with and within the time periods provided for herein and therein.

(d)           If the Issuer shall have knowledge of the occurrence of a Servicer Default under the Servicing Agreement, the Issuer shall promptly give written notice thereof to the Indenture Trustee and the Rating Agencies, and shall specify in such notice the response or

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action, if any, the Issuer has taken or is taking with respect to such default.  If a Servicer Default shall arise from the failure of the Servicer to perform any of its duties or obligations under the Servicing Agreement with respect to the CRR Property, the CRR Bond Collateral or the CRR Charges, the Issuer shall take all reasonable steps available to it to remedy such failure.

(e)           As promptly as possible after the giving of notice of termination to the Servicer and the Rating Agencies of the Servicer’s rights and powers pursuant toSection 7.01 of the Servicing Agreement, the Indenture Trustee may and shall, at the written direction of the Holders evidencing not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds, appoint a successor Servicer (the “Successor Servicer”), and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Issuer and the Indenture Trustee.  A Person shall qualify as a Successor Servicer only if such Person satisfies the requirements of the Servicing Agreement and each Intercreditor Agreement.  If within thirty (30) days after the delivery of the notice referred to above, a new Servicer shall not have been appointed, the Indenture Trustee may petition the Commission or a court of competent jurisdiction to appoint a Successor Servicer.  In connection with any such appointment, APCo may make such arrangements for the compensation of such Successor Servicer as it and such successor shall agree, subject to the limitations set forth in Section 8.02 and in the Servicing Agreement.

(f)           Upon any termination of the Servicer’s rights and powers pursuant to the Servicing Agreement, the Indenture Trustee shall promptly notify the Issuer, the Holders and the Rating Agencies.  As soon as a Successor Servicer is appointed, the Indenture Trustee shall notify the Issuer, the Holders and the Rating Agencies of such appointment, specifying in such notice the name and address of such Successor Servicer.

(g)           The Issuer shall (or shall cause the Sponsor to) post on its website and, to the extent consistent with the Issuer’s and the Sponsor’s obligations under applicable law, file with or furnish to the SEC in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, and shall direct the Indenture Trustee to post on its website for investors the following information (other than any such information filed with the SEC and publicly available to investors unless the Issuer specifically requests such items to be posted) with respect to the Outstanding Consumer Rate Relief Bonds, in each case to the extent such information is reasonably available to the Issuer:

(i)           statements of any remittances of CRR Charges made to the Indenture Trustee (to be included in a Form 10-D or Form 10-K, or successor forms thereto);

(ii)           a statement reporting the balances in the Collection Account and in each subaccount of the Collection Account as of the end of each quarter or the most recent date available (to be included in a Form 10-D  or Form 10-K, or successor forms thereto);

(iii)           a statement showing the balance of Outstanding Consumer Rate Relief Bonds that reflects the actual periodic payments made on the Consumer

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Rate Relief Bonds during the applicable period (to be included in the next Form 10-D  or Form 10-K filed, or successor forms thereto);

(iv)          the Servicer’s Certificate as required to be submitted pursuant to the Servicing Agreement (to be filed with a Form 10-D, Form 10-K or Form 8-K, or successor forms thereto);

(v)           the Monthly Servicer’s Certificate as required to be submitted pursuant to the Servicing Agreement;

(vi)          the text (or a link to the website where a reader can find the text) of each filing of a True-Up Adjustment and the results of each such filing;

(vii)         any change in the long-term or short-term credit ratings of the Servicer assigned by the Rating Agencies;

(viii)        material legislative or regulatory developments directly relevant to the Outstanding Consumer Rate Relief Bonds (to be filed or furnished in a Form 8-K); and

(ix)  any reports and other information that the Issuer is required to file with the SEC under the Securities Exchange Act of 1934.

Notwithstanding the foregoing, nothing herein shall preclude the Issuer from voluntarily suspending or terminating its filing obligations as Issuer with the SEC to the extent permitted by applicable law.

The address of the Indenture Trustee’s website for investors is [to come].  The Indenture Trustee shall immediately notify the Issuer, the Bondholders and the Rating Agencies of any change to the address of the website for investors.

(h)           The Issuer shall make all filings required under the Securitization Law relating to the transfer of the ownership or security interest in the CRR Property other than those required to be made by the Seller or the Servicer pursuant to the Basic Documents.

SECTION 3.08.  Certain Negative Covenants.  So long as any Consumer Rate Relief Bonds are Outstanding, the Issuer shall not:

(i)           except as expressly permitted by this Indenture and the other Basic Documents, sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the CRR Bond Collateral, unless directed to do so by the Indenture Trustee in accordance with Article V;

(ii)           claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Consumer Rate Relief Bonds (other than amounts properly withheld from such payments under the Code or other tax laws) or assert any claim against any present or former Holder by reason of the payment of the taxes levied or assessed upon any part of the CRR Bond Collateral;

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(iii)           terminate its existence or dissolve or liquidate in whole or in part, except in a transaction permitted by Section 3.10;

(iv)           (A) permit the validity or effectiveness of this Indenture or the other Basic Documents to be impaired, or permit the Lien of this Indenture and the Series Supplement to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Consumer Rate Relief Bonds under this Indenture except as may be expressly permitted hereby, (B) permit any Lien (other than the Lien of this Indenture or the Series Supplement) to be created on or extend to or otherwise arise upon or burden the CRR Bond Collateral or any part thereof or any interest therein or the proceeds thereof (other than tax liens arising by operation of law with respect to amounts not yet due) or (C) permit the Lien of the Series Supplement not to constitute a valid first priority perfected security interest in the CRR Bond Collateral;

(v)           enter into any swap, hedge or similar financial instrument;

(vi)          elect to be classified as an association taxable as a corporation for federal income tax purposes or otherwise take any action, file any tax return, or make any election inconsistent with the treatment of the Issuer, for purposes of federal taxes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the sole owner of the Issuer;

(vii)         change its name, identity or structure or the location of its chief executive office, unless at least ten (10) Business Days’ prior to the effective date of any such change the Issuer delivers to the Indenture Trustee (with copies to the Rating Agencies) such documents, instruments or agreements, executed by the Issuer, as are necessary to reflect such change and to continue the perfection of the security interest of this Indenture and the Series Supplement;

(viii)        take any action which is subject to a Rating Agency Condition without satisfying the Rating Agency Condition;

(ix)  except to the extent permitted by applicable law, voluntarily suspend or terminate its filing obligations with the SEC as described in Section 3.07(g); or

(x)            issue any consumer rate relief bonds under the Securitization Law  (other than the Consumer Rate Relief Bonds) or issue or incur any other debt obligations.

SECTION 3.09.  Annual Statement as to Compliance.  The Issuer will deliver to the Indenture Trustee and the Rating Agencies not later than March 30 of each year (commencing with March 30, 2014), an Officer’s Certificate stating, as to the Responsible Officer signing such Officer’s Certificate, that:

(i)           a review of the activities of the Issuer during the preceding twelve (12) months ended December 31 (or, in the case of the first such Officer’s Certificate, since the Closing Date) and of performance under this Indenture has been made; and

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(ii)           to the best of such Responsible Officer’s knowledge, based on such review, the Issuer has in all material respects complied with all conditions and covenants under this Indenture throughout such twelve-month period (or such shorter period in the case of the first such Officer’s Certificate), or, if there has been a default in the compliance of any such condition or covenant, specifying each such default known to such Responsible Officer and the nature and status thereof.

SECTION 3.10.  Issuer May Consolidate, etc., Only on Certain Terms.

(a)           The Issuer shall not consolidate or merge with or into any other Person, unless:

(i)           the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall (A) be a Person organized and existing under the laws of the United States of America or any State, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture and the Series Supplement on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, and (C) assume all obligations and succeed to all rights of the Issuer under the Sale Agreement, the Servicing Agreement and each other Basic Document to which the Issuer is a party;

(ii)           immediately after giving effect to such merger or consolidation, no Default, Event of Default or Servicer Default shall have occurred and be continuing;

(iii)          the Rating Agency Condition shall have been satisfied with respect to such merger or consolidation;

(iv)          the Issuer shall have delivered to APCo, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to APCo and the Indenture Trustee, and which may be based on a ruling from the Internal Revenue Service (unless the Internal Revenue Service has announced that it will not rule on the issues described in this paragraph)) to the effect that the consolidation or merger will not result in a material adverse federal or state income tax consequence to the Issuer, APCo, the Indenture Trustee or the then existing Bondholders;

(v)           any action as is necessary to maintain the Lien and the first priority perfected security interest in the CRR Bond Collateral created by this Indenture and the Series Supplement shall have been taken as evidenced by an Opinion of Counsel of external counsel of the Issuer delivered to the Indenture Trustee; and

(vi)          the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such consolidation or merger and such supplemental indenture comply with this Indenture, the Series Supplement and that all conditions precedent herein provided for in

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this Section 3.10(a) with respect to such transaction have been complied with (including any filing required by the Exchange Act).

(b)           Except as specifically provided herein, the Issuer shall not sell, convey, exchange, transfer or otherwise dispose of any of its properties or assets included in the CRR Bond Collateral, to any Person, unless:

(i)           the Person that acquires the properties and assets of the Issuer, the conveyance or transfer of which is hereby restricted shall (A) be a United States citizen or a Person organized and existing under the laws of the United States of America or any State, (B) expressly assumes, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, (C) expressly agrees by means of such supplemental indenture that all right, title and interest so sold, conveyed, exchanged, transferred or otherwise disposed of shall be subject and subordinate to the rights of Holders, (D) unless otherwise provided in the supplemental indenture referred to in clause (B) above, expressly agrees to indemnify, defend and hold harmless the Issuer and the Indenture Trustee against and from any loss, liability or expense arising under or related to this Indenture, the Series Supplement and the Consumer Rate Relief Bonds, (E) expressly agrees by means of such supplemental indenture that such Person (or if a group of Persons, then one specified Person) shall make all filings with the SEC (and any other appropriate Person) required by the Exchange Act in connection with the Consumer Rate Relief Bonds and (F) if such sale, conveyance, exchange, transfer or disposal relates to the Issuer’s rights and obligations under the Sale Agreement or the Servicing Agreement, assume all obligations and succeed to all rights of the Issuer under the Sale Agreement and the Servicing Agreement, as applicable;

(ii)           immediately after giving effect to such transaction, no Default, Event of Default or Servicer Default shall have occurred and be continuing;

(iii)           the Rating Agency Condition shall have been satisfied with respect to such transaction;

(iv)           the Issuer shall have delivered to APCo, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to APCo and the Indenture Trustee, and which may be based on a ruling from the Internal Revenue Service) to the effect that the disposition will not result in a material adverse federal or state income tax consequence to the Issuer, APCo, the Indenture Trustee or the then existing Bondholders;

(v)           any action as is necessary to maintain the Lien and the first priority perfected security interest in the CRR Bond Collateral created by this Indenture and the Series Supplement shall have been taken as evidenced by an Opinion of Counsel of external counsel of the Issuer delivered to the Indenture Trustee; and

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(vi)           the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such sale, conveyance, exchange,  transfer or other disposition and such supplemental indenture comply with this Indenture and the Series Supplement and that all conditions precedent herein provided for in this Section 3.10(b) with respect to such transaction have been complied with (including any filing required by the Exchange Act).

SECTION 3.11.  Successor or Transferee.

(a)           Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein.

(b)           Except as set forth in Section 6.07, upon a sale, conveyance, exchange, transfer or other disposition of all the assets and properties of the Issuer in accordance with Section 3.10(b), the Issuer will be released from every covenant and agreement of this Indenture and the other Basic Documents to be observed or performed on the part of the Issuer with respect to the Consumer Rate Relief Bonds and the CRR Property immediately following the consummation of such acquisition upon the delivery of written notice to the Indenture Trustee from the Person acquiring such assets and properties stating that the Issuer is to be so released.

SECTION 3.12.  No Other Business.  The Issuer shall not engage in any business other than purchasing, owning, administering and servicing the CRR Property and the other CRR Bond Collateral and the issuance of the Consumer Rate Relief Bonds in the manner contemplated by the Financing Order and this Indenture and the Basic Documents and activities incidental thereto.

SECTION 3.13.  No Borrowing.  The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for the Consumer Rate Relief Bonds and any other indebtedness expressly permitted by or arising under the Basic Documents.

SECTION 3.14.  Servicer’s Obligations.  The Issuer shall enforce the Servicer’s compliance with and performance of all of the Servicer’s material obligations under the Servicing Agreement.

SECTION 3.15.  Guarantees, Loans, Advances and Other Liabilities.  Except as otherwise contemplated by the Sale Agreement, the Servicing Agreement or this Indenture, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another’s payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person.

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SECTION 3.16.  Capital Expenditures.  Other than the purchase of CRR Property from the Seller on the Closing Date, the Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).

SECTION 3.17.  Restricted Payments.  Except as provided in Section 8.04(c), the Issuer shall not, directly or indirectly, (a) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer, (b) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or similar security or (c) set aside or otherwise segregate any amounts for any such purpose; provided, however, that, if no Event of Default shall have occurred and be continuing or would be caused thereby, the Issuer may make, or cause to be made, any such distributions to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer using funds distributed to the Issuer pursuant to Section 8.02(e)(x) to the extent that such distributions would not cause the balance of the Capital Subaccount to decline below the Required Capital Level.  The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the other Basic Documents.

SECTION 3.18.  Notice of Events of Default.  The Issuer agrees to give the Indenture Trustee, the Commission and the Rating Agencies prompt written notice of each Default or Event of Default hereunder as provided in Section 5.01, and each default on the part of the Seller or the Servicer of its obligations under the Sale Agreement or the Servicing Agreement, respectively.

SECTION 3.19.  Further Instruments and Acts.  Upon request of the Indenture Trustee, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture and to maintain the first priority perfected security interest of the Indenture Trustee in the CRR Bond Collateral.

SECTION 3.20.  [Reserved].

SECTION 3.21.  Inspection.  The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuer’s normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited annually by Independent registered public accountants, and to discuss the Issuer’s affairs, finances and accounts with the Issuer’s officers, employees and Independent registered public accountants, all at such reasonable times and as often as may be reasonably requested.  The Indenture Trustee shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder.  Notwithstanding anything herein to the contrary, the preceding sentence shall not be construed to prohibit (a) disclosure of any and all information that is or becomes publicly known, or information obtained by the Indenture Trustee from sources other than the Issuer, provided such parties are rightfully in possession of

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such information, (b) disclosure of any and all information (i) if required to do so by any applicable statute, law, rule or regulation, (ii) pursuant to any subpoena, civil investigative demand or similar demand or request of any court or regulatory authority exercising its proper jurisdiction, (iii) in any preliminary or final offering circular, registration statement or other document a copy of which has been filed with the SEC, (iv) to any affiliate, independent or internal auditor, agent, employee or attorney of the Indenture Trustee having a need to know the same, provided that such parties agree to be bound by the confidentiality provisions contained in this Section 3.21, or (v) to any Rating Agency or (c) any other disclosure authorized by the Issuer.

SECTION 3.22.  Sale Agreement, Servicing Agreement, Intercreditor Agreement and Administration Agreement Covenants.

(a)           The Issuer agrees to take all such lawful actions to enforce its rights under the Sale Agreement, the Servicing Agreement, each Intercreditor Agreement, the Administration Agreement and the other Basic Documents, and to compel or secure the performance and observance by the Seller, the Servicer, the Administrator and APCo of each of their respective obligations to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement, each Intercreditor Agreement, the Administration Agreement and the other Basic Documents in accordance with the terms thereof.  So long as no Event of Default occurs and is continuing, but subject to Section 3.22(f), the Issuer may exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement, each Intercreditor Agreement and the Administration Agreement; provided, that such action shall not adversely affect the interests of the Holders in any material respect.

(b)           If an Event of Default occurs and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing) of Holders of a majority of the Outstanding Amount of the Consumer Rate Relief Bonds of all Tranches affected thereby shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, APCo, the Administrator and the Servicer, as the case may be, under or in connection with the Sale Agreement, the Servicing Agreement, any Intercreditor Agreement and the Administration Agreement, including the right or power to take any action to compel or secure performance or observance by the Seller, APCo, the Administrator or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale Agreement, the Servicing Agreement, any Intercreditor Agreement and the Administration Agreement, and any right of the Issuer to take such action shall be suspended.

(c)           Except as set forth in Section 3.22(e), with the prior written consent of the Indenture Trustee, the Administration Agreement, the Sale Agreement, the Servicing Agreement and any Intercreditor Agreement may be amended in accordance with the provisions thereof, so long as the Rating Agency Condition is satisfied in connection therewith, at any time and from time to time, without the consent of the Holders of the Consumer Rate Relief Bonds; provided that all conditions precedent for such amendment have been satisfied, as evidenced by an Opinion of Counsel of external counsel of the Issuer.

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(d)           Except as set forth in Section 3.22(e), if the Issuer, the Seller, APCo, the Administrator, the Servicer or any other party to the respective agreement proposes to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, waiver, supplement, termination or surrender of, the terms of the Sale Agreement, the Administration Agreement, the Servicing Agreement or any Intercreditor Agreement, or waive timely performance or observance by the Seller, APCo, the Administrator, the Servicer or any other party under the Sale Agreement, the Administration Agreement, the Servicing Agreement or any Intercreditor Agreement, in each case in such a way as would materially and adversely affect the interests of any Holder of Consumer Rate Relief Bonds, the Issuer shall first notify the Rating Agencies of the proposed amendment, modification, waiver, supplement, termination or surrender and shall promptly notify the Indenture Trustee and the Commission in writing and the Indenture Trustee shall notify the Holders of the Consumer Rate Relief Bonds of the proposed amendment, modification, waiver, supplement, termination or surrender and whether the Rating Agency Condition has been satisfied with respect thereto.  The Indenture Trustee shall consent to such proposed amendment, modification, waiver, supplement, termination or surrender only if the Rating Agency Condition is satisfied and only with the prior written consent of the Holders of a majority of the Outstanding Amount of Consumer Rate Relief Bonds of the Tranches materially and adversely affected thereby.  If any such amendment, modification, waiver, supplement, termination or surrender shall be so consented to by the Indenture Trustee or such Holders, the Issuer agrees to execute and deliver, in its own name and at its own expense, such agreements, instruments, consents and other documents as shall be necessary or appropriate in the circumstances.

(e)           If the Issuer or the Servicer proposes to amend, modify, waive, supplement, terminate or surrender, or to agree to any amendment, modification, supplement, termination, waiver or surrender of, the process for True-Up Adjustments, the Issuer shall notify the Commission and the Indenture Trustee in writing and the Indenture Trustee shall notify the Holders of the Consumer Rate Relief Bonds of such proposal and the Indenture Trustee shall consent thereto only with the prior written consent of the Holders of a majority of the Outstanding Amount of Consumer Rate Relief Bonds of the Tranches affected thereby and only if the Rating Agency Condition has been satisfied with respect thereto.

(f)           Promptly following a default by the Seller under the Sale Agreement, by the Administrator under the Administration Agreement or by any party under any Intercreditor Agreement, or the occurrence of a Servicer Default under the Servicing Agreement, and at the Issuer’s expense, the Issuer agrees to take all such lawful actions as the Indenture Trustee may request to compel or secure the performance and observance by each of the Seller, the Administrator or the Servicer, and by such party to such Intercreditor Agreement, of their obligations under and in accordance with the Sale Agreement, the Servicing Agreement, the Administration Agreement and such Intercreditor Agreement, as the case may be, in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with such agreements to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of any default by the Seller, the Administrator or the Servicer, respectively, thereunder and the institution of legal or administrative actions or Proceedings to compel or secure performance of their obligations under the Sale Agreement, the Servicing Agreement, the Administration Agreement or  such Intercreditor Agreement, as applicable.

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Before consenting to any amendment, modification, supplement, termination, waiver or surrender under Sections 3.22(d) or (e), the Indenture Trustee shall be entitled to receive, and subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an Opinion of Counsel stating that such action is authorized or permitted by this Indenture.

SECTION 3.23.  Taxes. So long as any of the Consumer Rate Relief Bonds are Outstanding, the Issuer shall pay all taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the CRR Bond Collateral; provided that no such tax need be paid if the Issuer is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Issuer has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

ARTICLE IV

SATISFACTION AND DISCHARGE; DEFEASANCE

SECTION 4.01.  Satisfaction and Discharge of Indenture; Defeasance.

(a)           This Indenture shall cease to be of further effect with respect to the Consumer Rate Relief Bonds and the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Consumer Rate Relief Bonds, when:

(i)           either

(A)           all Consumer Rate Relief Bonds theretofore authenticated and delivered (other than (1) Consumer Rate Relief Bonds that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.06 and (2) Consumer Rate Relief Bonds for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in the last paragraph of Section 3.03) have been delivered to the Indenture Trustee for cancellation; or

(B)           either (1) the Scheduled Final Payment Date has occurred with respect to all Consumer Rate Relief Bonds not theretofore delivered to the Indenture Trustee for cancellation or (2) the Consumer Rate Relief Bonds will be due and payable on their respective Scheduled Final Payment Dates within one year, and in any such case, the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (i) cash and/or (ii) U.S. Government Obligations which through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Consumer Rate Relief Bonds not theretofore delivered to the Indenture Trustee for cancellation,

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other Ongoing Financing Costs and all other sums payable hereunder by the Issuer with respect to the Consumer Rate Relief Bonds when scheduled to be paid and to discharge the entire indebtedness on the Consumer Rate Relief Bonds when due;

(ii)           the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and

(iii)           the Issuer has delivered to the Indenture Trustee an Officer’s Certificate, an Opinion of Counsel of external counsel of the Issuer and (if required by the TIA or the Indenture Trustee) an Independent Certificate from a firm of registered public accountants, each meeting the applicable requirements of Section 10.01(a) and each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to Consumer Rate Relief Bonds have been complied with.

(b)           Subject to Sections 4.01(c) and 4.02, the Issuer at any time may terminate (i) all its obligations under this Indenture with respect to the Consumer Rate Relief Bonds (“Legal Defeasance Option”) or (ii) its obligations under Sections 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.10, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18 and 3.19 and the operation of Section 5.01(iii) (“Covenant Defeasance Option”) with respect to Consumer Rate Relief Bonds.  The Issuer may exercise the Legal Defeasance Option with respect to Consumer Rate Relief Bonds notwithstanding its prior exercise of the Covenant Defeasance Option.

If the Issuer exercises the Legal Defeasance Option, the maturity of the Consumer Rate Relief Bonds may not be accelerated because of an Event of Default.  If the Issuer exercises the Covenant Defeasance Option, the maturity of the Consumer Rate Relief Bonds may not be accelerated because of an Event of Default specified in Section 5.01(iii).

Upon satisfaction of the conditions set forth herein to the exercise of the Legal Defeasance Option or the Covenant Defeasance Option with respect to Consumer Rate Relief Bonds, the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of the obligations that are terminated pursuant to such exercise.

(c)           Notwithstanding Sections 4.01(a) and 4.01(b) above, (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Consumer Rate Relief Bonds, (iii) rights of Holders to receive payments of principal, premium, if any, and interest, (iv) Sections 4.03 and 4.04, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.07 and the obligations of the Indenture Trustee under Section 4.03) and (vi) the rights of Holders as beneficiaries hereof with respect to the property deposited with the Indenture Trustee payable to all or any of them, shall survive until this Indenture or certain obligations hereunder have been satisfied and discharged pursuant to Section 4.01(a) or 4.01(b) have been paid in full.  Thereafter the obligations in Sections 6.07 and 4.04 shall survive.

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SECTION 4.02.  Conditions to Defeasance.  The Issuer may exercise the Legal Defeasance Option or the Covenant Defeasance Option with respect to Consumer Rate Relief Bonds only if:

(a)           the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (i) cash and/or (ii) U.S. Government Obligations which through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Consumer Rate Relief Bonds not therefore delivered to the Indenture Trustee for cancellation and other Ongoing Financing Costs and all other sums payable hereunder by the Issuer with respect to the Consumer Rate Relief Bonds when scheduled to be paid and to discharge the entire indebtedness on the Consumer Rate Relief Bonds when due;

(b)           the Issuer delivers to the Indenture Trustee a certificate from a nationally recognized firm of Independent registered public accountants expressing its opinion that the payments of principal and interest on the deposited U.S. Government Obligations when due and without reinvestment plus any deposited cash will provide cash at such times and in such amounts (but, in the case of the Legal Defeasance Option only, not more than such amounts) as will be sufficient to pay in respect of the Consumer Rate Relief Bonds (i) principal in accordance with the Expected Amortization Schedule therefor, (ii) interest when due and (iii) other Ongoing Financing Costs and all other sums payable hereunder by the Issuer with respect to the Consumer Rate Relief Bonds;

(c)           in the case of the Legal Defeasance Option, ninety-five (95) days pass after the deposit is made and during the ninety-five (95)-day period no Default specified in Section 5.01(v) or (vi) occurs which is continuing at the end of the period;

(d)           no Default has occurred and is continuing on the day of such deposit and after giving effect thereto;

(e)           in the case of an exercise of the Legal Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer stating that (i) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Consumer Rate Relief Bonds will not recognize income, gain or loss for federal income tax purposes as a result of such legal defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred;

(f)           in the case of an exercise of the Covenant Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that the Holders of the Consumer Rate Relief Bonds will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred;

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(g)           the Issuer delivers to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent to the Legal Defeasance Option or the Covenant Defeasance Option, as applicable, have been complied with as required by this Article IV;

(h)           the Issuer delivers to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that (i) in a case under the Bankruptcy Code in which APCo (or any of its Affiliates, other than the Issuer) is the debtor, the court would hold that the deposited moneys or U.S. Government Obligations would not be in the bankruptcy estate of APCo (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations); and (ii) in the event APCo (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations) were to be a debtor in a case under the Bankruptcy Code, the court would not disregard the separate legal existence of APCo (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations) and the Issuer so as to order substantive consolidation under the Bankruptcy Code of the Issuer’s assets and liabilities with the assets and liabilities of APCo or such other Affiliate; and

(i)           the Rating Agency Condition shall have been satisfied with respect to the exercise of any Legal Defeasance Option or Covenant Defeasance Option.

Notwithstanding any other provision of this Section 4.02, no delivery of moneys or U.S. Government Obligations to the Indenture Trustee shall terminate any obligation of the Issuer to the Indenture Trustee under this Indenture or the Series Supplement or any obligation of the Issuer to apply such moneys or U.S. Government Obligations under Section 4.03 until principal of and premium, if any, and interest on the Consumer Rate Relief Bonds shall have been paid in accordance with the provisions of this Indenture and the Series Supplement.

SECTION 4.03.  Application of Trust Money.  All moneys or U.S. Government Obligations deposited with the Indenture Trustee pursuant to Section 4.01 or 4.02 shall be held in trust and applied by it, in accordance with the provisions of the Consumer Rate Relief Bonds and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Consumer Rate Relief Bonds for the payment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Servicing Agreement or required by law.  Notwithstanding anything to the contrary in this Article IV, the Indenture Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request any moneys or U.S. Government Obligations held by it pursuant to Section 4.02 which, in the opinion of a nationally recognized firm of Independent registered public accountants expressed in a written certification thereof delivered to the Indenture Trustee (and not at the cost or expense of the Indenture Trustee), are in excess of the amount thereof which would be required to be deposited for the purpose for which such moneys or U.S. Government Obligations were deposited, provided that any such payment shall be subject to the satisfaction of the Rating Agency Condition.

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SECTION 4.04.  Repayment of Moneys Held by Paying Agent.  In connection with the satisfaction and discharge of this Indenture or the Covenant Defeasance Option or Legal Defeasance Option with respect to the Consumer Rate Relief Bonds, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 3.03 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.

ARTICLE V

REMEDIES

SECTION 5.01.  Events of Default.  “Event of Default” wherever used herein, means any one or more of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(i)           default in the payment of any interest on any Consumer Rate Relief Bond when the same becomes due and payable (whether such failure to pay interest is caused by a shortfall in CRR Charges received or otherwise), and such default shall continue for a period of five (5) Business Days; or

(ii)           default in the payment of the then unpaid principal of any Consumer Rate Relief Bond of any Tranche on the Final Maturity Date for such Tranche; or

(iii)           default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than defaults specified in clauses (i) or (ii) above), and such default shall continue or not be cured, for a period of thirty (30) days after the earlier of (A) the date that there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least twenty-five (25) percent of the Outstanding Amount of the Consumer Rate Relief Bonds, a written notice specifying such default and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder or (B) the date that the Issuer has actual knowledge of the default; or

(iv)           any representation or warranty of the Issuer made in this Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and the circumstance or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise cured, within thirty (30) days after the earlier of (A) the date that there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least twenty-five (25) percent of the Outstanding Amount of the Consumer Rate Relief Bonds, a written notice specifying such incorrect representation or warranty and requiring it to be remedied and stating that

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such notice is a “Notice of Default” hereunder or (B) the date the Issuer has actual knowledge of the default, or

(v)           the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the CRR Bond Collateral in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the CRR Bond Collateral, or ordering the winding-up or liquidation of the Issuer’s affairs, and such decree or order shall remain unstayed and in effect for a period of ninety (90) consecutive days; or

(vi)           the commencement by the Issuer of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case or proceeding under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the CRR Bond Collateral, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing; or

(vii)           any act or failure to act by the State of West Virginia or any of its agencies (including the Commission), officers or employees which violates or is not in accordance with the State Pledge.

The Issuer shall deliver to a Responsible Officer of the Indenture Trustee and to the Rating Agencies, within five (5) days after a Responsible Officer of the Issuer has knowledge of the occurrence thereof, written notice in the form of an Officer’s Certificate of any event (I) which is an Event of Default under clauses (i), (ii), (vi), or (vii) or (II) which with the giving of notice, the lapse of time, or both, would become an Event of Default under clauses (iii), (iv) or (v), including, in each case, the status of such Default or Event of Default and what action the Issuer is taking or proposes to take with respect thereto.

SECTION 5.02.  Acceleration of Maturity; Rescission and Annulment.  If an Event of Default (other than an Event of Default under clause (vii) of Section 5.01) should occur and be continuing, then and in every such case the Indenture Trustee or the Holders representing not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds may declare the Consumer Rate Relief Bonds to be immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee if given by Holders), and upon any such declaration the unpaid principal amount of the Consumer Rate Relief Bonds, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable.

At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this Article V provided, the Holders representing not less than a

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majority of the Outstanding Amount of the Consumer Rate Relief Bonds, by written notice to the Issuer and the Indenture Trustee, may rescind and annul such declaration and its consequences if:

(i)           the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay:

(A)           all payments of principal of and premium, if any, and interest on all Consumer Rate Relief Bonds due and owing at such time as if such Event of Default had not occurred and was not continuing and all other amounts that would then be due hereunder or upon the Consumer Rate Relief Bonds if the Event of Default giving rise to such acceleration had not occurred; and

(B)           all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel; and

(ii)           all Events of Default, other than the nonpayment of the principal of the Consumer Rate Relief Bonds that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12.

No such rescission shall affect any subsequent default or impair any right consequent thereto.

SECTION 5.03.  Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.

(a)           If an Event of Default under Section 5.01(i) or (ii) has occurred and is continuing, subject to Section 10.19, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and, subject to the limitations on recourse set forth herein, may enforce the same against the Issuer or other obligor upon the Consumer Rate Relief Bonds and collect in the manner provided by law out of the property of the Issuer or other obligor upon the Consumer Rate Relief Bonds, wherever situated the moneys payable, or the CRR Bond Collateral and the proceeds thereof, the whole amount then due and payable on the Consumer Rate Relief Bonds for principal, premium, if any, and interest, with interest upon the overdue principal and premium, if any, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the respective rate borne by the Consumer Rate Relief Bonds or the applicable Tranche and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel.

(b)           If an Event of Default (other than Event of Default under clause (vii) of Section 5.01) occurs and is continuing, the Indenture Trustee shall, as more particularly provided in Section 5.04, proceed to protect and enforce its rights and the rights of the Holders, by such appropriate Proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other

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proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture and the Series Supplement or by law, including foreclosing or otherwise enforcing the Lien of the CRR Bond Collateral securing the Consumer Rate Relief Bonds or applying to a court of competent jurisdiction for sequestration of revenues arising with respect to the CRR Property.

(c)           If an Event of Default under Section 5.01(v) or (vi) has occurred and is continuing, the Indenture Trustee, irrespective of whether the principal of any Consumer Rate Relief Bonds shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section 5.03, shall be entitled and empowered, by intervention in any Proceedings related to such Event of Default or otherwise:

(i)           to file and prove a claim or claims for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Consumer Rate Relief Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in such Proceedings;

(ii)           unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee in bankruptcy, a standby trustee or Person performing similar functions in any such Proceedings;

(iii)           to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and

(iv)           to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders allowed in any judicial proceeding relative to the Issuer, its creditors and its property;

and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith.

(d)           Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Consumer Rate Relief Bonds or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect

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of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.

(e)           All rights of action and of asserting claims under this Indenture, or under any of the Consumer Rate Relief Bonds, may be enforced by the Indenture Trustee without the possession of any of the Consumer Rate Relief Bonds or the production thereof in any trial or other Proceedings relative thereto, and any such action or proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Consumer Rate Relief Bonds.

(f)           In any Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all the Holders of the Consumer Rate Relief Bonds, and it shall not be necessary to make any Holder a party to any such Proceedings.

SECTION 5.04.  Remedies; Priorities.

(a)           If an Event of Default (other than an Event of Default under clause (vii) of Section 5.01) shall have occurred and be continuing, the Indenture Trustee may do one or more of the following (subject to Section 5.05):

(i)           institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Consumer Rate Relief Bonds or under this Indenture with respect thereto, whether by declaration of acceleration or otherwise, and, subject to the limitations on recovery set forth herein, enforce any judgment obtained, and collect from the Issuer or any other obligor moneys adjudged due upon the Consumer Rate Relief Bonds;

(ii)           institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the CRR Bond Collateral;

(iii)           exercise any remedies of a secured party under the UCC, the Securitization Law or any other applicable law and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Holders of the Consumer Rate Relief Bonds;

(iv)           at the written direction of the Holders of a majority of the Outstanding Amount of the Consumer Rate Relief Bonds, either sell the CRR Bond Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law or elect that the Issuer maintain possession of all or a portion of the CRR Bond Collateral pursuant to Section 5.05 and continue to apply the CRR Charge Collection as if there has been no declaration of acceleration; and

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(v)           exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, the Administrator or the Servicer under or in connection with, and pursuant to the terms of, the Sale Agreement, the Administration Agreement or the Servicing Agreement;

provided, however, that the Indenture Trustee may not sell or otherwise liquidate any portion of the CRR Bond Collateral following such an Event of Default, other than an Event of Default described in Section 5.01(i), or (ii), unless (A) the Holders of 100 percent of the Outstanding Amount of the Consumer Rate Relief Bonds consent thereto, (B) the proceeds of such sale or liquidation distributable to the Holders are sufficient to discharge in full all amounts then due and unpaid upon the Consumer Rate Relief Bonds for principal, premium, if any, and interest after taking into account payment of all amounts due prior thereto pursuant to the priorities set forth in Section 8.02(e) or (C) the Indenture Trustee determines that the CRR Bond Collateral will not continue to provide sufficient funds for all payments on the Consumer Rate Relief Bonds  as they would have become due if the Consumer Rate Relief Bonds had not been declared due and payable, and the Indenture Trustee obtains the written consent of Holders of 66-2/3 percent of the Outstanding Amount of the Consumer Rate Relief Bonds.  In determining such sufficiency or insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the CRR Bond Collateral for such purpose.

(b)           If an Event of Default under clause (vii) of Section 5.01 shall have occurred and be continuing, the Indenture Trustee, for the benefit of the Secured Parties, shall be entitled and empowered to the extent permitted by applicable law, to institute or participate in Proceedings necessary to compel performance of or to enforce the State Pledge and to collect any monetary damages incurred by the Holders or the Indenture Trustee as a result of any such Event of Default, and may prosecute any such Proceeding to final judgment or decree.  Such remedy shall be the only remedy that the Indenture Trustee may exercise if the only Event of Default that has occurred and is continuing is an Event of Default under Section 5.01(vii).

(c)           If the Indenture Trustee collects any money pursuant to this Article V, it shall pay out such money in accordance with the priorities set forth in Section 8.02(e).

SECTION 5.05.  Optional Preservation of the CRR Bond Collateral.  If the Consumer Rate Relief Bonds have been declared to be due and payable under Section 5.02 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of all or a portion of the CRR Bond Collateral.  It is the desire of the parties hereto and the Holders that there be at all times sufficient funds for the payment of principal of and premium, if any, and interest on the Consumer Rate Relief Bonds, and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the CRR Bond Collateral.  In determining whether to maintain possession of the CRR Bond Collateral or sell or liquidate the same, the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the CRR Bond Collateral for such purpose.

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SECTION 5.06.  Limitation of Suits.  No Holder of any Consumer Rate Relief Bond shall have any right to institute any Proceeding, judicial or otherwise, to avail itself of any remedies provided in the Securitization Law or to avail itself of the right to foreclose on the CRR Bond Collateral or otherwise enforce the Lien and the security interest on the CRR Bond Collateral with respect to this Indenture and the Series Supplement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

(i)           such Holder previously has given written notice to the Indenture Trustee of a continuing Event of Default;

(ii)           the Holders of not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds  have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder;

(iii)           such Holder or Holders have offered to the Indenture Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request;

(iv)           the Indenture Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and

(v)           no direction inconsistent with such written request has been given to the Indenture Trustee during such sixty-day period by the Holders of a majority of the Outstanding Amount of the Consumer Rate Relief Bonds;

it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided.

In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders, each representing less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds, the Indenture Trustee in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture.

SECTION 5.07.  Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest.  Notwithstanding any other provisions in this Indenture, the Holder of any Consumer Rate Relief Bond shall have the right, which is absolute and unconditional, (a) to receive payment of (i) the interest, if any, on such Consumer Rate Relief Bond on the due dates thereof expressed in such Consumer Rate Relief Bond or in this Indenture or (ii) the unpaid principal, if any, of the Consumer Rate Relief Bonds on the Final Maturity Date therefor and (b) to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder.

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SECTION 5.08.  Restoration of Rights and Remedies.  If the Indenture Trustee or any Holder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Holder, then and in every such case the Issuer, the Indenture Trustee and the Holders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Holders shall continue as though no such Proceeding had been instituted.

SECTION 5.09.  Rights and Remedies Cumulative.  No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

SECTION 5.10.  Delay or Omission Not a Waiver.  No delay or omission of the Indenture Trustee or any Holder to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein.  Every right and remedy given by this Article V or by law to the Indenture Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Holders, as the case may be.

SECTION 5.11.  Control by Holders.  The Holders of not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds of an affected Tranche or Tranches shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Consumer Rate Relief Bonds of such Tranche or Tranches or exercising any trust or power conferred on the Indenture Trustee with respect to such Tranche or Tranches; provided, that:

(i)           such direction shall not be in conflict with any rule of law or with this Indenture and shall not involve the Indenture Trustee in any personal liability or expense;

(ii)           subject to other conditions specified in Section 5.04, any direction to the Indenture Trustee to sell or liquidate any CRR Bond Collateral shall be by the Holders representing not less than 100 percent of the Outstanding Amount of the Consumer Rate Relief Bonds;

(iii)           if the conditions set forth in Section 5.05 have been satisfied and the Indenture Trustee elects to retain the CRR Bond Collateral pursuant to Section 5.05, then any direction to the Indenture Trustee by Holders representing less than 100 percent of the Outstanding Amount of the Consumer Rate Relief Bonds to sell or liquidate the CRR Bond Collateral shall be of no force and effect; and

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(iv)  the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction;

provided, however, that, the Indenture Trustee’s duties shall be subject to Section 6.01, and the Indenture Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Holders not consenting to such action.  Furthermore and without limiting the foregoing, the Indenture Trustee shall not be required to take any action for which it reasonably believes that it will not be indemnified to its satisfaction against any cost, expense or liabilities.

SECTION 5.12.  Waiver of Past Defaults.  Prior to the declaration of the acceleration of the maturity of the Consumer Rate Relief Bonds as provided in Section 5.02, the Holders representing not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds of an affected Tranche, together with the Commission, may waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of or premium, if any, or interest on any of the Consumer Rate Relief Bonds or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Consumer Rate Relief Bond of all Tranches affected.  In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto.

Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto.

SECTION 5.13.  Undertaking for Costs.  All parties to this Indenture agree, and each Holder of any Consumer Rate Relief Bond by such Holder’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.13 shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Holder, or group of Holders, in each case holding in the aggregate more than ten (10) percent of the Outstanding Amount of the Consumer Rate Relief Bonds or (c) any suit instituted by any Holder for the enforcement of the payment of (i) interest on any Consumer Rate Relief Bond on or after the due dates expressed in such Consumer Rate Relief Bond and in this Indenture or (ii) the unpaid principal, if any, of any Consumer Rate Relief Bond on or after the Final Maturity Date therefor.

SECTION 5.14.  Waiver of Stay or Extension Laws.  The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law

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wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

SECTION 5.15.  Action on Consumer Rate Relief Bonds.  The Indenture Trustee’s right to seek and recover judgment on the Consumer Rate Relief Bonds or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture.  Neither the Lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Holders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the CRR Bond Collateral or any other assets of the Issuer.

ARTICLE VI

THE INDENTURE TRUSTEE

SECTION 6.01.  Duties of Indenture Trustee.

(a)           If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b)           Except during the continuance of an Event of Default:

(i)           the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and

(ii)           in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture.

(c)           The Indenture Trustee may not be relieved from liability for its own negligent action, its own bad faith, its own negligent failure to act or its own willful misconduct, except that:

(i)           this paragraph (c) does not limit the effect of paragraph (b) of this Section 6.01;

(ii)           the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and

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(iii)           the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it hereunder.

(d)           Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section 6.01.

(e)           The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer.

(f)           Money held in trust by the Indenture Trustee need not be segregated from other funds held by the Indenture Trustee except to the extent required by law or the terms of this Indenture, the Sale Agreement, the Servicing Agreement or the Administration Agreement.

(g)           No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it.

(h)           Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section 6.01 and to the provisions of the TIA.

(i)           In the event that the Indenture Trustee is also acting as Paying Agent or CRR Bond Registrar hereunder, the protections of this Article VI shall also be afforded to the Indenture Trustee in its capacity as Paying Agent or CRR Bond Registrar.

(j)           Except for the express duties of the Indenture Trustee with respect to the administrative functions set forth in the Basic Documents, the Indenture Trustee shall have no obligation to administer, service or collect CRR Property or to maintain, monitor or otherwise supervise the administration, servicing or collection of the CRR Property.

(k)           Under no circumstance shall the Indenture Trustee be liable for any indebtedness of the Issuer, the Servicer or the Seller evidenced by or arising under the Consumer Rate Relief Bonds or the Basic Documents.

(l)           Commencing with March 15, 2014, on or before March 15th of each fiscal year ending December 31, so long as the Issuer is required to file Exchange Act reports, the Indenture Trustee shall (i) deliver to the Issuer a report (in form and substance reasonably satisfactory to the Issuer and addressed to the Issuer and signed by an authorized officer of the Indenture Trustee) regarding the Indenture Trustee’s assessment of compliance, during the immediately preceding fiscal year ending December 31, with each of the applicable servicing criteria specified on Exhibit C hereto as required under Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB and (ii) deliver to the Issuer a report of an Independent registered public accounting firm reasonably acceptable to the Issuer that attests to and reports on, in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act, the assessment of compliance made by the Indenture Trustee and delivered pursuant to clause (i).

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SECTION 6.02.  Rights of Indenture Trustee.

(a)           The Indenture Trustee may conclusively rely and shall be fully protected in relying on any document believed by it to be genuine and to have been signed or presented by the proper person.  The Indenture Trustee need not investigate any fact or matter stated in such document.

(b)           Before the Indenture Trustee acts or refrains from acting, it may require and shall be entitled to receive an Officer’s Certificate or an Opinion of Counsel of external counsel of the Issuer (at no cost or expense to the Indenture Trustee) that such action is required or permitted hereunder.  The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel.

(c)           The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder.  The Indenture Trustee shall give prompt written notice to the Rating Agencies of the appointment of any such agent, custodian or nominee to whom it delegates any of its express duties under this Agreement; provided, that the Indenture Trustee shall not be obligated to give such notice (i) if the Issuer or the Holders have directed the Indenture Trustee to appoint such agent, custodian or nominee (in which event the Issuer shall give prompt notice to the Rating Agencies of any such direction) or (ii) of the appointment of any agents, custodians or nominees made at any time that an Event of Default on account of non-payment of principal or interest on the Consumer Rate Relief Bonds or insolvency of the Issuer has occurred and is continuing.

(d)           The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Indenture Trustee’s conduct does not constitute willful misconduct, negligence or bad faith.

(e)           The Indenture Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Consumer Rate Relief Bonds shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

(f)           The Indenture Trustee shall be under no obligation to take any action or exercise any of the rights or powers vested in it by this Indenture or any other Basic Document, or to institute, conduct or defend any litigation hereunder or thereunder or in relation hereto or thereto, at the request, order or direction of any of the Bondholders pursuant to the provisions of this Indenture and the Series Supplement or otherwise, unless it shall have grounds to believe in its discretion that security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby is to its satisfaction assured to it.

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SECTION 6.03.  Individual Rights of Indenture Trustee.  The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Consumer Rate Relief Bonds and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee.  Any Paying Agent, CRR Bond Registrar, co-registrar or co-paying agent or agent appointed under Section 3.02 may do the same with like rights.  However, the Indenture Trustee must comply with Sections 6.11 and 6.12.

SECTION 6.04.  Indenture Trustee’s Disclaimer.  The Indenture Trustee shall not be responsible for and makes no representation (other than as set forth in Section 6.13) as to the validity or adequacy of this Indenture or the Consumer Rate Relief Bonds, it shall not be accountable for the Issuer’s use of the proceeds from the Consumer Rate Relief Bonds, and it shall not be responsible for any statement of the Issuer in the Indenture or in any document issued in connection with the sale of the Consumer Rate Relief Bonds or in the Consumer Rate Relief Bonds other than the Indenture Trustee’s certificate of authentication.  The Indenture Trustee shall not be responsible for the form, character, genuineness, sufficiency, value or validity of any of the CRR Bond Collateral, or for or in respect of the Consumer Rate Relief Bonds (other than the certificate of authentication for the Consumer Rate Relief Bonds) or the Basic Documents and the Indenture Trustee shall in no event assume or incur any liability, duty or obligation to any Holder, other than as expressly provided in this Indenture.  The Indenture Trustee shall not be liable for the default or misconduct of the Issuer, the Seller, or the Servicer under the Basic Documents or otherwise, and the Indenture Trustee shall have no obligation or liability to perform the obligations of such Persons.

SECTION 6.05.  Notice of Defaults.

(a)           If a Default occurs and is continuing and if it is actually known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall mail to the Commission, each Rating Agency and each Bondholder notice of the Default within ten (10) Business Days after actual notice of such Default was received by a Responsible Officer of the Indenture Trustee (provided that the Indenture Trustee shall give the Rating Agencies prompt notice of any payment default in respect of the Consumer Rate Relief Bonds).  Except in the case of a Default in payment of principal of and premium, if any, or interest on any Consumer Rate Relief Bond, the Indenture Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that prompt notice of  the Default is not likely to be material to Holders and the Default is likely to be cured and therefore that withholding the notice is in the interests of Holders.  Except for an Event of Default under Sections 5.01(i) or (ii) that occur at a time when the Indenture Trustee is acting as the Paying Agent, and except as provided in the first sentence of this Section 6.05, in no event shall the Indenture Trustee be deemed to have knowledge of a Default.

(b)           If a Default occurs and is continuing and if it is actually known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall promptly, but no more frequently than monthly, mail to the Commission notice of any legal fees or other expenses incurred by the Indenture Trustee in defending or prosecuting any actual or threatened litigation, including any administrative proceeding, in respect of the Consumer Rate Relief Bonds or the CRR Bond Collateral.

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SECTION 6.06.  Reports by Indenture Trustee to Holders.

(a)           So long as Consumer Rate Relief Bonds are Outstanding and the Indenture Trustee is the CRR Bond Registrar and Paying Agent, upon the written request of any Holder or the Issuer, within the prescribed period of time for tax reporting purposes after the end of each calendar year, it shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its federal income and any applicable local or state tax returns.  If the CRR Bond Registrar and Paying Agent is other than the Indenture Trustee, such CRR Bond Registrar and Paying Agent, within the prescribed period of time for tax reporting purposes after the end of each calendar year, shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its federal income and any applicable local or state tax returns.

(b)           On or prior to each Payment Date or Special Payment Date therefor, the Indenture Trustee will deliver to each Holder of the Consumer Rate Relief Bonds on such Payment Date or Special Payment Date a statement as provided and prepared by the Servicer which will include (to the extent applicable) the following information (and any other information so specified in the Series Supplement) as to the Consumer Rate Relief Bonds with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:

(i)           the amount of the payment to Holders allocable to principal, if any;

(ii)           the amount of the payment to Holders allocable to interest;

(iii)           the aggregate Outstanding Amount of the Consumer Rate Relief Bonds, before and after giving effect to any payments allocated to principal reported under clause (i) above;

(iv)           the difference, if any, between the amount specified in clause (iii) above and the Outstanding Amount specified in the related Expected Amortization Schedule;

(v)           any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and

(vi)           the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments.

(c)           The Issuer shall send a copy of each of the Certificate of Compliance delivered to it pursuant to Section 3.03 of the Servicing Agreement and the Annual Accountant’s Report delivered to it pursuant to Section 3.04 of the Servicing Agreement to the Rating Agencies and to the Servicer for posting on its website in accordance with Rule 17g-5 of the SEC.  A copy of such certificate and report may be obtained by any Holder by a request in writing to the Indenture Trustee.

(d)           The Indenture Trustee may consult with counsel, and the advice or opinion of such counsel with respect to legal matters relating to this Indenture and the Consumer Rate

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Relief Bonds shall be full and complete authorization and protection from liability with respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

SECTION 6.07.  Compensation and Indemnity.  The Issuer shall pay to the Indenture Trustee from time to time reasonable compensation for its services.  The Indenture Trustee’s compensation shall not, to the extent permitted by law, be limited by any law on compensation of a trustee of an express trust.  The Issuer shall reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services.  Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee’s agents, counsel, accountants and experts.  The Issuer shall indemnify and hold harmless the Indenture Trustee and its officers, directors, employees and agents against any and all cost, damage, loss, liability, tax or expense (including reasonable attorney’s fees and expenses) incurred by it in connection with the administration and the enforcement of this Indenture, the Series Supplement and the Basic Documents and the Indenture Trustee’s rights, powers and obligations under this Indenture, the Series Supplement and the Basic Documents and the performance of its duties hereunder and obligations under or pursuant to this Indenture, the Series Supplement and the Basic Documents.  The Indenture Trustee shall notify the Issuer as soon as is reasonably practicable of any claim for which it may seek indemnity.  Failure by the Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder.  The Issuer shall defend the claim and the Indenture Trustee may have separate counsel and the Issuer shall pay the reasonable fees and expenses of such counsel.  The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee’s own willful misconduct, negligence or bad faith.  The rights of the Indenture Trustee set forth in this Section 6.07 are subject to and limited by the priority of payments set forth in Section 8.02(e).

The payment obligations to the Indenture Trustee pursuant to this Section 6.07 shall survive the discharge of this Indenture and the Series Supplement or the earlier resignation or removal of the Indenture Trustee.  When the Indenture Trustee incurs expenses after the occurrence of a Default specified in Section 5.01(v) or (vi) with respect to the Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Code or any other applicable federal or state bankruptcy, insolvency or similar law.

SECTION 6.08.  Replacement of Indenture Trustee and Securities Intermediary.

(a)           The Indenture Trustee may resign at any time upon thirty (30) days’ prior written notice to the Issuer subject to clause (c) below.  The Holders of a majority of the Outstanding Amount of the Consumer Rate Relief Bonds may remove the Indenture Trustee by so notifying the Indenture Trustee and may appoint a successor Indenture Trustee.  The Issuer shall remove the Indenture Trustee if:

(i)           the Indenture Trustee fails to comply with Section 6.11;

(ii)           the Indenture Trustee is adjudged a bankrupt or insolvent;

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(iii)           a receiver or other public officer takes charge of the Indenture Trustee or its property;

(iv)           the Indenture Trustee otherwise becomes incapable of acting; or

(v)           the Indenture Trustee fails to provide to the Issuer any information reasonably requested by the Issuer pertaining to the Indenture Trustee and necessary for the Issuer or the Sponsor to comply with its reporting obligations under the Exchange Act and Regulation AB and such failure is not resolved to the Issuer’s and the Indenture Trustee’s mutual satisfaction within a reasonable period of time.

Any removal or resignation of the Indenture Trustee shall also constitute a removal or resignation of the Securities Intermediary.

(b)           If the Indenture Trustee gives notice of resignation or is removed or if a vacancy exists in the office of Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall promptly appoint a successor Indenture Trustee and Securities Intermediary.

(c)           A successor Indenture Trustee shall deliver a written acceptance of its appointment as the Indenture Trustee and as the Securities Intermediary to the retiring Indenture Trustee and to the Issuer.  Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee and Securities Intermediary, as applicable, under this Indenture and the other Basic Documents.  No resignation or removal of the Indenture Trustee pursuant to this Section 6.08 shall become effective until acceptance of the appointment by a successor Indenture Trustee having the qualifications set forth in Section 6.11.  Notice of any such appointment shall be promptly given to each Rating Agency by the successor Indenture Trustee.  The successor Indenture Trustee shall mail a notice of its succession to Holders.  The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee.

(d)           If a successor Indenture Trustee does not take office within sixty (60) days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the Consumer Rate Relief Bonds may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.

(e)           If the Indenture Trustee fails to comply with Section 6.11, any Holder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.

(f)           Notwithstanding the replacement of the Indenture Trustee pursuant to this Section 6.08, the Issuer’s obligations under Section 6.07 shall continue for the benefit of the retiring Indenture Trustee.

SECTION 6.09.  Successor Indenture Trustee by Merger.  If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust

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business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Indenture Trustee; provided, however, that if such successor Indenture Trustee is not eligible under Section 6.11, then the successor Indenture Trustee shall be replaced in accordance with Section 6.08.  Notice of any such event shall be promptly given to each Rating Agency by the successor Indenture Trustee.

In case at the time such successor or successors by merger, conversion, consolidation or transfer shall succeed to the trusts created by this Indenture any of the Consumer Rate Relief Bonds shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver the Consumer Rate Relief Bonds so authenticated; and in case at that time any of the Consumer Rate Relief Bonds shall not have been authenticated, any successor to the Indenture Trustee may authenticate the Consumer Rate Relief Bonds either in the name of any predecessor hereunder or in the name of the successor to the Indenture Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Consumer Rate Relief Bonds or in this Indenture provided that the certificate of the Indenture Trustee shall have.

SECTION 6.10.  Appointment of Co-Trustee or Separate Trustee.

(a)           Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the trust created by this Indenture or the CRR Bond Collateral may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the trust created by this Indenture or the CRR Bond Collateral, and to vest in such Person or Persons, in such capacity and for the benefit of the Secured Parties, such title to the CRR Bond Collateral, or any part hereof, and, subject to the other provisions of this Section 6.10, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable.  No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to Holders of the appointment of any co-trustee or separate trustee shall be required under Section 6.08.  Notice of any such appointment shall be promptly given to each Rating Agency and the Commission by the Indenture Trustee.

(b)           Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

(i)           all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the CRR Bond Collateral or any portion thereof in any such jurisdiction) shall be exercised and

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performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee;

(ii)           no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and

(iii)           the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

(c)           Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them.  Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI.  Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee.  Every such instrument shall be filed with the Indenture Trustee.

(d)           Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name.  If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

SECTION 6.11.  Eligibility; Disqualification.  The Indenture Trustee shall at all times satisfy the requirements of TIA § 310(a)(1) and § 310(a)(5) and Section 26(a)(1) of the Investment Company Act.  The Indenture Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and it shall have a long term debt rating of “Baa3” or better by Moody’s “BBB-” or better by Standard & Poor’s and, if Fitch provides a rating thereon, “BBB-” or better by Fitch.  The Indenture Trustee shall comply with TIA § 310(b), including the optional provision permitted by the second sentence of TIA § 310(b)(9); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(1) are met.

SECTION 6.12.  Preferential Collection of Claims Against Issuer.  The Indenture Trustee shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b).  An Indenture Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

SECTION 6.13.  Representations and Warranties of Indenture Trustee.  The Indenture Trustee hereby represents and warrants that:

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(a)           the Indenture Trustee is a national banking association validly existing and in good standing under the laws of the United States; and

(b)           the Indenture Trustee has full power, authority and legal right to execute, deliver and perform this Indenture and the Basic Documents to which the Indenture Trustee is a party and has taken all necessary action to authorize the execution, delivery, and performance by it of this Indenture and such Basic Documents.

SECTION 6.14.  Annual Report by Independent Registered Public Accountants.  The Indenture Trustee hereby covenants that it will cooperate fully with the firm of Independent registered public accountants performing the procedures required under Section 3.04 of the Servicing Agreement; it being understood and agreed that the Indenture Trustee will so cooperate in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures.

SECTION 6.15.  Custody of CRR Bond Collateral.  The Indenture Trustee shall hold such of the CRR Bond Collateral (and any other collateral that may be granted to the Indenture Trustee) as consists of instruments, deposit accounts, negotiable documents, money, goods, letters of credit, and advices of credit in the State of New York.  The Indenture Trustee shall hold such of the CRR Bond Collateral as constitute investment property through the Securities Intermediary (which, as of the date hereof, is U.S. Bank National Association).  The initial Securities Intermediary, hereby agrees (and each future Securities Intermediary shall agree) with the Indenture Trustee that (a) such investment property shall at all times be credited to a securities account of the Indenture Trustee, (b) the Securities Intermediary shall treat the Indenture Trustee as entitled to exercise the rights that comprise each financial asset credited to such securities account, (c) all property credited to such securities account shall be treated as a financial asset, (d) the Securities Intermediary shall comply with entitlement orders originated by the Indenture Trustee without the further consent of any other person or entity, (e) the Securities Intermediary will not agree with any person other than the Indenture Trustee to comply with entitlement orders originated by such other person, (f) such securities accounts and the property credited thereto shall not be subject to any Lien or right of set-off in favor of the Securities Intermediary or anyone claiming through it (other than the Indenture Trustee), and (g) such agreement shall be governed by the internal laws of the State of New York.  Terms used in the preceding sentence that are defined in the UCC and not otherwise defined herein shall have the meaning set forth in the UCC.  Except as permitted by this Section 6.15, or elsewhere in this Indenture, the Indenture Trustee shall not hold CRR Bond Collateral through an agent or a nominee.

ARTICLE VII

HOLDERS’ LISTS AND REPORTS

SECTION 7.01.  Issuer To Furnish Indenture Trustee Names and Addresses of Holders.  The Issuer will furnish or cause to be furnished to the Indenture Trustee (a) not more than five (5) days after the earlier of (i) each Record Date and (ii) six (6) months after the last Record Date, a list, in such form as the Indenture Trustee may reasonably require, of the names

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and addresses of the Holders as of such Record Date, (b) at such other times as the Indenture Trustee may request in writing, within thirty (30) days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than ten (10) days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee is the CRR Bond Registrar, no such list shall be required to be furnished.

SECTION 7.02.  Preservation of Information;  Communications to Holders.

(a)           The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders contained in the most recent list furnished to the Indenture Trustee as provided in Section 7.01 and the names and addresses of Holders received by the Indenture Trustee in its capacity as CRR Bond Registrar.  The Indenture Trustee may destroy any list furnished to it as provided in such Section 7.01 upon receipt of a new list so furnished.

(b)           Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or under the Consumer Rate Relief Bonds.  In addition, upon the written request of any Holder or group of Holders of Outstanding Consumer Rate Relief Bonds evidencing not less than 10 percent of the Outstanding Amount of the Consumer Rate Relief Bonds, the Indenture Trustee shall afford the Holder or Holders making such request a copy of a current list of Holders for purposes of communicating with other Holders with respect to their rights hereunder.

(c)           The Issuer, the Indenture Trustee and the CRR Bond Registrar shall have the protection of TIA § 312(c).

SECTION 7.03.  Reports by Issuer.

(a)           The Issuer shall:

(i)           so long as the Issuer or the Sponsor is required to file such documents with the SEC, provide to the Indenture Trustee, within fifteen (15) days after the Issuer is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Issuer or the Sponsor may be required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act;

(ii)           provide to the Indenture Trustee and file with the SEC, in accordance with rules and regulations prescribed from time to time by the SEC such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and

(iii)           supply to the Indenture Trustee (and the Indenture Trustee shall transmit by mail to all Holders described in TIA § 313(c)), such summaries of any information, documents and reports required to be filed by the Issuer pursuant to clauses (i) and (ii) of

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this Section 7.03(a) as may be required by rules and regulations prescribed from time to time by the SEC.

(b)           Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year.

SECTION 7.04.  Reports by Indenture Trustee.  If required by TIA § 313(a), within sixty (60) days after March 30 of each year, commencing with March 30, 2014, the Indenture Trustee shall mail to each Bondholder as required by TIA § 313(c) a brief report dated as of such date that complies with TIA § 313(a). The Indenture Trustee also shall comply with TIA § 313(b); provided, however, that the initial report so issued shall be delivered not more than twelve (12) months after the initial issuance of the Consumer Rate Relief Bonds.

A copy of each report at the time of its mailing to Holders shall be filed by the Servicer with the SEC and each stock exchange, if any, on which the Consumer Rate Relief Bonds are listed.  The Issuer shall notify the Indenture Trustee in writing if and when the Consumer Rate Relief Bonds are listed on any stock exchange.

ARTICLE VIII

ACCOUNTS, DISBURSEMENTS AND RELEASES

SECTION 8.01.  Collection of Money.  Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture and the other Basic Documents.  The Indenture Trustee shall apply all such money received by it as provided in this Indenture.  Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the CRR Bond Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, subject to Article VI, including the institution and prosecution of appropriate Proceedings.  Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V.

SECTION 8.02.  Collection Account.

(a)           Prior to the Closing Date, the Issuer shall open or cause to be opened with the Securities Intermediary located at the Indenture Trustee’s office located at the Corporate Trust Office, or at another Eligible Institution, one or more segregated trust accounts in the Indenture Trustee’s name for the deposit of CRR Charge Collections and all other amounts received with respect to the CRR Bond Collateral (the “Collection Account”).  The Collection Account will consist of three subaccounts: a general subaccount (the “General Subaccount”), an excess funds subaccount (the “Excess Funds Subaccount”) and a capital subaccount (the “Capital Subaccount” and, together with the General Subaccount and the Excess Funds Subaccount, the “Subaccounts”).  For administrative purposes, the Subaccounts may be established by the Securities Intermediary as separate accounts.  Such separate accounts will be recognized

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individually as a Subaccount and collectively as the “Collection Account.” Prior to or concurrently with the issuance of Consumer Rate Relief Bonds, the Member shall deposit into the Capital Subaccount an amount equal to the Required Capital Level.  All amounts in the Collection Account not allocated to any other subaccount shall be allocated to the General Subaccount.  Prior to the initial Payment Date, all amounts in the Collection Account (other than funds deposited into the Capital Subaccount, up to the Required Capital Level) shall be allocated to the General Subaccount.  All references to the Collection Account shall be deemed to include reference to all subaccounts contained therein.  Withdrawals from and deposits to each of the foregoing subaccounts of the Collection Account shall be made as set forth in Section 8.02(d) and (e).  The Collection Account shall at all times be maintained in an Eligible Account, will be under the sole dominion and exclusive control of the Indenture Trustee, through the Securities Intermediary, and only the Indenture Trustee shall have access to the Collection Account for the purpose of making deposits in and withdrawals from the Collection Account in accordance with this Indenture.  Funds in the Collection Account shall not be commingled with any other moneys. All moneys deposited from time to time in the Collection Account, all deposits therein pursuant to this Indenture, and all investments made in Eligible Investments as directed in writing by the Issuer with such moneys, including all income or other gain from such investments, shall be held by the Securities Intermediary in the Collection Account as part of the CRR Bond Collateral as herein provided.  The Securities Intermediary shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction.

(b)           The Securities Intermediary hereby confirms that (i) the Collection Account is, or at inception will be established as, a “securities account” as such term is defined in Section 8-501(a) of the UCC, (ii) it is a “securities intermediary” (as such term is defined in Section 8-102(a) (14) of the UCC) and is acting in such capacity with respect to such accounts, and (iii) the Indenture Trustee for the benefit of the Secured Parties is the sole “entitlement holder” (as such term is defined in Section 8-102(a)(7) of the UCC) with respect to such accounts and no other Person shall have the right to give “entitlement orders” (as such term is defined in Section 8-102(a)(8)) with respect to such accounts.  The Securities Intermediary hereby further agrees that each item of property (whether investment property, financial asset, security, instrument or cash) received by it will be credited to the Collection Account and shall be treated by it as a “financial asset” within the meaning of Section 8-102(a)(9) of the UCC.  Notwithstanding anything to the contrary, New York State shall be deemed to be the jurisdiction of the Securities Intermediary for purposes of Section 8-110 of the UCC, and the Collection Account (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York.

(c)           The Indenture Trustee shall have sole dominion and exclusive control over all moneys in the Collection Account through the Securities Intermediary and shall apply such amounts therein as provided in this Section 8.02.

(d)           CRR Charge Collections shall be deposited in the General Subaccount as provided in Section 6.11 of the Servicing Agreement.  All deposits to and withdrawals from the Collection Account, all allocations to the subaccounts of the Collection Account and any amounts to be paid to the Servicer under Section 8.02(c) shall be made by the Indenture Trustee

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in accordance with the written instructions provided by the Servicer in the Monthly Servicer’s Certificate or the Servicer’s Certificate.

(e)           On each Payment Date, the Indenture Trustee shall apply all amounts on deposit in the Collection Account, including all Investment Earnings thereon, to pay the following amounts, in accordance with the Servicer’s Certificate, in the following priority:

(i)           all amounts owed by the Issuer to the Indenture Trustee (including indemnities and legal fees and expenses) shall be paid to the Indenture Trustee (subject to Section 6.07) in an amount not to exceed annually the amount set forth in the Series Supplement;

(ii)           the Servicing Fee with respect to such Payment Date and all unpaid Servicing Fees for prior Payment Dates shall be paid to the Servicer;

(iii)           the Administration Fee for such Payment Date shall be paid to the Administrator and the Independent Manager Fee for such Payment Date shall be paid to the Independent Managers, and in each case with any unpaid Administration Fees or Independent Manager Fees from prior Payment Dates;

(iv)           all other ordinary and periodic Operating Expenses for such Payment Date not described above shall be paid to the parties to which such Operating Expenses are owed;

(v)           Periodic Interest for such Payment Date, including any overdue Periodic Interest (together with, to the extent lawful, interest on such overdue Periodic Interest at the applicable Bond Interest Rate), with respect to the Consumer Rate Relief Bonds shall be paid to the Holders of Consumer Rate Relief Bonds;

(vi)           principal due and payable on the Consumer Rate Relief Bonds as a result of an Event of Default or on the Final Maturity Date of the Consumer Rate Relief Bonds shall be paid to the Holders of Consumer Rate Relief Bonds;

(vii)           Periodic Principal for such Payment Date, including any previously unpaid Periodic Principal, with respect to the Consumer Rate Relief Bonds shall be paid to the Holders of Consumer Rate Relief Bonds, pro rata;

(viii)           any other unpaid Operating Expenses, fees, expenses and indemnity amounts owed to the Indenture Trustee;

(ix)           the amount, if any, by which the Required Capital Level exceeds the amount in the Capital Subaccount as of such Payment Date shall be allocated to the Capital Subaccount;

(x)           the Permitted Return then due and payable shall be paid to APCo;

(xi)           the balance, if any, shall be allocated to the Excess Funds Subaccount; and

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(xii)           after principal of and premium, if any, and interest on all the Consumer Rate Relief Bonds, and all of the other foregoing amounts, have been paid in full, including, without limitation, amounts due and payable to the Indenture Trustee under Section 6.07 or otherwise, the balance (including all amounts then held in the Capital Subaccount and the Excess Funds Subaccount), if any, shall be paid to the Issuer, free from the Lien of this Indenture and the Series Supplement.

All payments to the Holders of the Consumer Rate Relief Bonds pursuant to clauses (v), (vi) and (vii) above shall be made to such Holders pro rata based on the respective amounts of interest and/or principal owed, unless, in the case of Consumer Rate Relief Bonds comprised of two or more Tranches, the Series Supplement provides otherwise.  Payments in respect of principal of and premium, if any, and interest on any Tranche of Consumer Rate Relief Bonds will be made on a pro rata basis among all the Holders of such Tranche.  In the case of an Event of Default, then, in accordance with Section 5.04(c), moneys will be applied pursuant to clauses (v) and (vi), in such order, on a pro rata basis, based upon the interest or the principal owed.

The amounts paid during any calendar year pursuant to clauses (i) and (iv) may not exceed the amounts, if any, set forth in the Series Supplement.

(f)           If on any Payment Date, or for any amounts payable under clauses (i) through (iv) above, on any Business Day, funds on deposit in the General Subaccount are insufficient to make the payments contemplated by clauses (i) through (viii) of Section 8.02(e) above, the Indenture Trustee shall (i) first, draw from amounts on deposit in the Excess Funds Subaccount and (ii) second, draw from amounts on deposit in the Capital Subaccount, in each case, up to the amount of such shortfall in order to make the payments contemplated by clauses (i) through (viii) of Section 8.02(e).  In addition, if on any Payment Date funds on deposit in the General Subaccount are insufficient to make the allocations contemplated by clause (ix) of Section 8.02(e) above, the Indenture Trustee shall draw from amounts on deposit in the Excess Funds Subaccount to make such allocations.

(g)           On any Business Day upon which the Indenture Trustee receives a written request from the Administrator stating that any Operating Expense payable by the Issuer (but only as described in clauses(i) through (iv) above) will become due and payable prior to the next succeeding Payment Date, and setting forth the amount and  nature of such Operating Expense, as well as any supporting documentation that the Indenture Trustee may reasonably request, the Indenture Trustee upon receipt of such information, will make payment of such Operating Expenses on or before the date such payment is due from amounts on deposit in the General Subaccount, the Excess Funds Subaccount and the Capital Subaccount, in that order and only to the extent required to make such payment.

SECTION 8.03.  General Provisions Regarding the Collection Account.

(a)           So long as no Default or Event of Default shall have occurred and be continuing, all or a portion of the funds in the Collection Account shall be invested in Eligible Investments and reinvested by the Indenture Trustee upon Issuer Order; provided, however, that (i) such Eligible Investments shall not mature or be redeemed later than the Business Day prior to the next Payment Date or Special Payment Date, if applicable, for the Consumer Rate Relief

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Bonds and (ii) such Eligible Investments shall not be sold, liquidated or otherwise disposed of at a loss prior to the maturity or the date of redemption thereof.  All income or other gain from investments of moneys deposited in the Collection Account shall be deposited by the Indenture Trustee in such Collection Account, and any loss resulting from such investments shall be charged to such Collection Account.  The Issuer will not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in the Collection Account unless the security interest Granted and perfected in such account will continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer (at the Issuer’s cost and expense) to such effect.  In no event shall the Indenture Trustee be liable for the selection of Eligible Investments or for investment losses incurred thereon.  The Indenture Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction.  The Indenture Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of written investment direction pursuant to an Issuer Order.

(b)           Subject to Section 6.01(c), the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in the Collection Account resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee’s failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms.

(c)           If (i) the Issuer shall have failed to give written investment directions for any funds on deposit in the Collection Account to the Indenture Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the Issuer and Indenture Trustee) on any Business Day; or (ii) a Default or Event of Default shall have occurred and be continuing with respect to the Consumer Rate Relief Bonds but the Consumer Rate Relief Bonds shall not have been declared due and payable pursuant to Section 5.02, then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in such Collection Account in the money market fund (described under clause (d) of the definition of “Eligible Investments”) specified in the most recent written investment directions delivered by the Issuer to the Indenture Trustee with respect to such type of Eligible Investments; provided that if the Issuer has never delivered written investment directions to the Indenture Trustee, the Indenture Trustee shall not invest or reinvest such funds in any investments.

(d)           The parties hereto acknowledge that the Servicer may, pursuant to the Servicing Agreement, select Eligible Investments on behalf of the Issuer.

(e)           Except as otherwise provided hereunder or agreed in writing among the parties hereto, the  Issuer shall retain the authority to institute, participate and join in any plan of reorganization, readjustment, merger or consolidation with respect to the issuer of any Eligible Investments held hereunder, and, in general, to exercise each and every other power or right with respect to each such asset or investment as individuals generally have and enjoy with respect to their own assets and investment, including power to vote upon any Eligible Investments.

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(f)           The Indenture Trustee is authorized to deposit uninvested funds in non-interest bearing, unsecured demand deposit accounts at affiliated banks, purchase and sell investment securities through or from affiliated banks and broker-dealers, invest funds in registered investment companies that receive investment management and custodial services from the trustee or its affiliates, and receive and hold letters of credit issued by affiliated banks as security for the Consumer Rate Relief Bonds.

SECTION 8.04.  Release of CRR Bond Collateral.

(a)           So long as the Issuer is not in default hereunder and no Default hereunder would occur as a result of such action, the Issuer, through the Servicer, may collect, sell or otherwise dispose of written-off receivables, at any time and from time to time in the ordinary course of business, without any notice to, or release or consent by, the Indenture Trustee, but only as and to the extent permitted by the Basic Documents; provided, however, that any and all proceeds of such dispositions shall become CRR Bond Collateral and be deposited to the General Subaccount immediately upon receipt thereof by the Issuer or any other Person, including the Servicer.  Without limiting the foregoing, the Servicer, may, at any time and from time to time without any notice to, or release or consent by, the Indenture Trustee, sell or otherwise dispose of any CRR Bond Collateral previously written-off as a defaulted or uncollectible account in accordance with the terms of the Servicing Agreement and the requirements of the proviso in the immediately preceding sentence.

(b)           The Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the Lien of this Indenture, or convey the Indenture Trustee’s interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture.  No party relying upon an instrument executed by the Indenture Trustee as provided in this Article VIII shall be bound to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys.  The Indenture Trustee shall release property from the Lien of this Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer Request accompanied by an Officer’s Certificate, an Opinion of Counsel of external counsel of the Issuer (at the Issuer’s cost and expense) and (if required by the TIA) Independent Certificates in accordance with TIA §§ 314(c) and 314(d)(1) meeting the applicable requirements of Section 10.01.

(c)           The Indenture Trustee shall, at such time as there are no Consumer Rate Relief Bonds Outstanding and all sums payable to the Indenture Trustee pursuant to Section 6.07 or otherwise have been paid, release any remaining portion of the CRR Bond Collateral that secured the Consumer Rate Relief Bonds from the Lien of this Indenture, release to the Issuer or any other Person entitled thereto any funds or investments then on deposit in or credit to the Collection Account.

SECTION 8.05.  Opinion of Counsel.  The Indenture Trustee shall receive at least seven (7) days’ notice when requested by the Issuer to take any action pursuant to Section 8.04, accompanied by copies of any instruments involved, and the Indenture Trustee shall also require, as a condition to such action, an Opinion of Counsel of external counsel of the Issuer, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action,

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outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Consumer Rate Relief Bonds or the rights of the Holders in contravention of the provisions of this Indenture and the Series Supplement; provided, however, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the CRR Bond Collateral.  Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action.

SECTION 8.06.  Reports by Independent Registered Public Accountants.  As of the Closing Date, the Issuer shall appoint a firm of Independent registered public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture and the Series Supplement.  In the event such firm requires the Indenture Trustee to agree to the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree; it being understood and agreed that the Indenture Trustee will deliver such letter of agreement in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures.  Upon any resignation by, or termination by the Issuer of, such firm the Issuer shall provide written notice thereof to the Indenture Trustee and shall promptly appoint a successor thereto that shall also be a firm of Independent registered public accountants of recognized national reputation.  If the Issuer shall fail to appoint a successor to a firm of Independent registered public accountants that has resigned or been terminated within fifteen (15) days after such resignation or termination, the Indenture Trustee shall promptly notify the Issuer of such failure in writing.  If the Issuer shall not have appointed a successor within ten (10) days thereafter the Indenture Trustee shall promptly appoint a successor firm of Independent registered public accountants of recognized national reputation; provided that the Indenture Trustee shall have no liability with respect to such appointment.  The fees of such Independent registered public accountants and its successor shall be payable by the Issuer.

ARTICLE IX

Supplemental Indentures

SECTION 9.01.  Supplemental Indentures Without Consent of Holders.

(a)           Without the consent of the Holders of any Consumer Rate Relief Bonds but with prior notice to the Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer Order and, if the contemplated amendment may in the judgment of the Commission increase Ongoing Financing Costs, with the consent of the Commission pursuant to Section 9.03 (which consent shall not be required with regard to the Series Supplement), at any time and from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the TIA as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes:

(i)           to correct or amplify the description of any property, including, without limitation, the CRR Bond Collateral, at any time subject to the Lien of this Indenture, or

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better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the Lien of this Indenture and the Series Supplement, or to subject to the Lien of this Indenture and the Series Supplement additional property;

(ii)           to evidence the succession, in compliance with the applicable provisions hereof, of another person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Consumer Rate Relief Bonds;

(iii)           to add to the covenants of the Issuer, for the benefit of the Secured Parties, or to surrender any right or power herein conferred upon the Issuer;

(iv)           to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee;

(v)           to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture, including the Series Supplement, which may be inconsistent with any other provision herein or in any supplemental indenture, including the Series Supplement, or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; provided that (i) such action shall not, as evidenced by an Opinion of Counsel of external counsel of the Issuer, adversely affect in any material respect the interests of the Holders of the Consumer Rate Relief Bonds and (ii) the Rating Agency Condition shall have been satisfied with respect thereto;

(vi)           to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Consumer Rate Relief Bonds and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI;

(vii)           to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar or successor federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by the TIA;

(viii)           to evidence the final terms of the Consumer Rate Relief Bonds in the Series Supplement;

(ix)           to qualify the Consumer Rate Relief Bonds for registration with a Clearing Agency; or

(x)           to satisfy any Rating Agency requirements.

The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained.

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(b)           The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Consumer Rate Relief Bonds, with the consent of the Commission pursuant to Section 9.03, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Consumer Rate Relief Bonds under this Indenture; provided, however, that (i) such action shall not, as evidenced by an Opinion of Counsel of nationally recognized counsel of the Issuer experienced in structured finance transactions, adversely affect in any material respect the interests of the Holders and (ii) the Rating Agency Condition shall have been satisfied with respect thereto.

SECTION 9.02.  Supplemental Indentures with Consent of Holders.  The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may, with the consent of the Commission pursuant to Section 9.03, with prior notice to the Rating Agencies and with the consent of the Holders of not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds of each Tranche to be affected, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Consumer Rate Relief Bonds under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Consumer Rate Relief Bond of each Tranche affected thereby:

(i)           change the date of payment of any installment of principal of or premium, if any, or interest on any Consumer Rate Relief Bond of such Tranche, or reduce the principal amount thereof, the interest rate thereon or premium, if any, with respect thereto, change the provisions of this Indenture and the Series Supplement relating to the application of collections on, or the proceeds of the sale of, the CRR Bond Collateral to payment of principal of or premium, if any, or interest on the Consumer Rate Relief Bonds, or change any place of payment where, or the coin or currency in which, any Consumer Rate Relief Bond or the interest thereon is payable;

(ii)           reduce the percentage of the Outstanding Amount of the Consumer Rate Relief Bonds or of a Tranche thereof, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture;

(iii)           reduce the percentage of the Outstanding Amount of the Consumer Rate Relief Bonds or Tranche thereof required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the CRR Bond Collateral pursuant to Section 5.04;

(iv)           modify any provision of this Section 9.02 or any provision of the other Basic Documents similarly specifying the rights of the Holders to consent to modification thereof, except to increase any percentage specified herein or to provide that those provisions of this Indenture or the other Basic Documents referenced in this Section 9.02

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cannot be modified or waived without the consent of the Holder of each Outstanding Consumer Rate Relief Bond affected thereby;

(v)           modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest, principal or premium, if any, due on any Consumer Rate Relief Bond on any Payment Date (including the calculation of any of the individual components of such calculation) or change the Expected Amortization Schedule or Final Maturity Date of any Tranche of Consumer Rate Relief Bonds;

(vi)           decrease the Required Capital Level;

(vii)           permit the creation of any Lien ranking prior to or on a parity with the Lien of this Indenture with respect to any part of the CRR Bond Collateral or, except as otherwise permitted or contemplated herein, terminate the Lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Consumer Rate Relief Bond of the security provided by the Lien of this Indenture; or

(viii)           cause any material adverse federal income tax consequence to the Seller, the Issuer, the Managers, the Indenture Trustee or the then existing Holders; or

(ix)           impair the right to institute suit for the enforcement of the provisions of this Indenture regarding payment or application of funds.

It shall not be necessary for any Act of Holders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.02, the Issuer shall mail to the Rating Agencies a copy of such supplemental indenture and to the Holders of the Consumer Rate Relief Bonds to which such supplemental indenture relates either a copy of such supplemental indenture or a notice setting forth in general terms the substance of such supplemental indenture.  Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

SECTION 9.03.  Commission Condition.  Notwithstanding anything to the contrary in Section 9.01 or 9.02, no supplemental indenture (other than the Series Supplement) that would result in an increase to Ongoing Financing Costs shall be effective unless the process set forth in this Section 9.03 has been followed.

(a)           At least thirty-one (31) days prior to the effectiveness of any such supplemental indenture and after obtaining the other necessary approvals set forth in Section 9.01 or 9.02, as applicable, except for the consent of the Indenture Trustee and the Holders if the consent of the Holders is required or sought by the Indenture Trustee in connection with such supplemental indenture, the Issuer shall have delivered to the Commission’s executive secretary and general counsel written notification of any proposed supplemental indenture, which notification shall contain:

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(i)           a reference to Case No. 12-1188-E-PC;

(ii)           an Officer’s Certificate stating that the proposed supplemental indenture has been approved by all parties to this Indenture; and

(iii)           a statement identifying the person to whom the Commission or its authorized representative is to address any response to the proposed supplemental indenture or to request additional time.

(b)           The Commission or its authorized representative shall, within thirty (30) days of receiving the notification complying with Section 9.03(a) above, either:

(i)           provide notice of its determination that the proposed supplemental indenture will not under any circumstances have the effect of increasing the Ongoing Financing Costs,

(ii)           provide notice of its consent or lack of consent to the person specified in Section 9.03(a)(iii) above, or

(iii)           be conclusively deemed to have consented to the proposed supplemental indenture,

unless, within thirty (30) days of receiving the notification complying with Section 9.03(a) above, the Commission or its authorized representative delivers to the office of the person specified in Section 9.03(a)(iii) above a written statement requesting an additional amount of time not to exceed thirty (30) days in which to consider whether to consent to the proposed supplemental indenture.  If the Commission or its authorized representative requests an extension of time in the manner set forth in the preceding sentence, then the Commission shall either provide notice of its consent or lack of consent or notice of its determination that the proposed supplemental indenture will not under any circumstances increase Ongoing Financing Costs to the person specified in Section 9.03(a)(iii) above no later than the last day of such extension of time or be conclusively deemed to have consented to the proposed supplemental indenture on the last day of such extension of time.  Any supplemental indenture requiring the consent of the Commission shall become effective on the later of (i) the date proposed by the parties to such supplemental indenture and (ii) the first day after the expiration of the thirty day period provided for in this Section 9.03(b), or, if such period has been extended pursuant hereto, the first day after the expiration of such period as so extended.

(c)           Following the delivery of a notice to the Commission  by the Issuer under Section 9.03(a) above, the Issuer shall have the right at any time to withdraw from the Commission further consideration of any notification of a proposed supplemental indenture.  Such withdrawal shall be evidenced by the prompt written notice thereof by the Issuer to the Commission, the Indenture Trustee and the Servicer.

(d)           For the purpose of this Section 9.03, an “authorized representative” of the Commission means any person authorized to act on behalf of the Commission.

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SECTION 9.04.  Execution of Supplemental Indentures.  In executing any supplemental indenture permitted by this Article IX or the modifications thereby of the trust created by this Indenture, the Indenture Trustee shall be fully protected in relying upon an Opinion of Counsel stating that the execution of such supplemental indenture is authorized and permitted by this Indenture and all conditions precedent, if any, provided for in this Indenture relating to such supplemental indenture or modification have been satisfied.  The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s own rights, duties, liabilities or immunities under this Indenture or otherwise.  All fees and expenses in connection with any such supplemental indenture shall be paid by the requesting party.

SECTION 9.05.  Effect of Supplemental Indenture.  Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to each Tranche of Consumer Rate Relief Bonds affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

SECTION 9.06.  Conformity with Trust Indenture Act.  Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the TIA as then in effect so long as this Indenture shall then be qualified under the TIA.

SECTION 9.07.  Reference in Consumer Rate Relief Bonds to Supplemental Indentures.  Consumer Rate Relief Bonds authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture.  If the Issuer or the Indenture Trustee shall so determine, new Consumer Rate Relief Bonds so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Consumer Rate Relief Bonds.

ARTICLE X

Miscellaneous

SECTION 10.01.  Compliance Certificates and Opinions, etc.

(a)           Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel the amendment is authorized and permitted

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and all such conditions precedent, if any, have been complied with and (iii) (if required by the TIA) an Independent Certificate from a firm of registered public accountants meeting the applicable requirements of this Section 10.01, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished.

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

(i)           a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto;

(ii)           a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(iii)           a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(iv)           a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with.

(b)           (i)  Prior to the deposit of any CRR Bond Collateral or other property or securities with the Indenture Trustee that is to be made the basis for the release of any property or securities subject to the Lien of this Indenture, the Issuer shall, in addition to any obligation imposed in Section 10.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within ninety (90) days of such deposit) to the Issuer of the CRR Bond Collateral or other property or securities to be so deposited.

(ii)           Whenever the Issuer is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is ten percent or more of the Outstanding Amount of the Consumer Rate Relief Bonds, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officer’s Certificate is less than the lesser of (A) $25,000 or (B) one percent of the Outstanding Amount of the Consumer Rate Relief Bonds.

(iii)           Whenever any property or securities are to be released from the Lien of this Indenture other than pursuant to Section 8.02(e), the Issuer shall also furnish to the

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Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within ninety (90) days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof.

(iv)           Whenever the Issuer is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signatory thereof as to the matters described in clause (iii) above, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities with respect thereto, or securities released from the Lien of this Indenture (other than pursuant to Section 8.02(e)) since the commencement of the then-current calendar year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10 percent or more of the Outstanding Amount of the Consumer Rate Relief Bonds, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer’s Certificate is less than the lesser of (A) $25,000 or (B) one percent of the then Outstanding Amount of the Consumer Rate Relief Bonds.

(v)           Notwithstanding any other provision of this Section 10.01, the Indenture Trustee may (A) collect, liquidate, sell or otherwise dispose of the CRR Property and the other CRR Bond Collateral as and to the extent permitted or required by the Basic Documents and (B) make cash payments out of the Collection Account as and to the extent permitted or required by the Basic Documents.

SECTION 10.02.  Form of Documents Delivered to Indenture Trustee.  In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of a Responsible Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous.  Any such certificate of a Responsible Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer or the Issuer stating that the information with respect to such factual matters is in the possession of the Servicer or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer’s compliance with any

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term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report.  The foregoing shall not, however, be construed to affect the Indenture Trustee’s right to rely conclusively upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

SECTION 10.03.  Acts of Holders.

(a)           Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer.  Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments.  Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 10.03.

(b)           The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient.

(c)           The ownership of Consumer Rate Relief Bonds shall be proved by the CRR Bond Register.

(d)           Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Consumer Rate Relief Bonds shall bind the Holder of every Consumer Rate Relief Bond issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Consumer Rate Relief Bond.

SECTION 10.04.  Notices, etc., to Indenture Trustee, Issuer and Rating Agencies.

(a)           Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other documents provided or permitted by this Indenture to be made upon, given or furnished to or filed with:

(i)           the Indenture Trustee by any Holder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing by facsimile

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transmission, first-class mail or overnight delivery service to or with the Indenture Trustee at the Corporate Trust Office,

(ii)           the Issuer by the Indenture Trustee or by any Holder shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage prepaid, to the Issuer addressed to: Appalachian Consumer Rate Relief Funding LLC at 707 Virginia Street East, Suite 1000, Charleston, West Virginia, 25327, Attention: Manager, Telephone: [phone], Facsimile: [fax], or at any other address previously furnished in writing to the Indenture Trustee by the Issuer.  The Issuer shall promptly transmit any notice received by it from the Holders to the Indenture Trustee, or

(iii)           the Commission by the Seller, the Issuer or the Indenture Trustee shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage prepaid, to:  Public Service Commission of West Virginia, 201 Brooks Street, Charleston, West Virginia, 25301, Attention: Executive Secretary, Telephone: 1-800-344-5113, Facsimile:  (304) 340-0325;

(b)           Notices required to be given to the Rating Agencies by the Issuer or the Indenture Trustee shall be in writing, facsimile, personally delivered or mailed by certified mail, return receipt requested to:

(i)           in the case of Moody’s, to: Moody’s Investors Service, Inc., ABS/RMBS  Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich, New York, New York 10007, Email: ServicerReports@moodys.com (all such notices to be delivered to Moody’s in writing by email);

(ii)           in the case of Standard & Poor’s, to Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@standardandpoors.com (all such notices to be delivered to Standard & Poor’s in writing by email);

(iii)           in the case of Fitch, to Fitch Ratings, One State Street Plaza, New York, New York 10004, Attention: ABS Surveillance, Telephone: (212) 908-0500, Facsimile: (212) 908-0355; and

(iv)           as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.

Any notice, report or other communication given hereunder may be in writing and addressed as follows or to the extent receipt is confirmed telephonically sent by Electronic Means to the address provided above.

SECTION 10.05.  Notices to Holders; Waiver.  Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Holder affected by such event, at such Holder’s address as it appears on the CRR Bond Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice.  In

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any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be filed with the Indenture Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver.

In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice.

Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default.

SECTION 10.06.  [Reserved]

SECTION 10.07.  Conflict with Trust Indenture Act.  If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the TIA, such required provision shall control.

The provisions of TIA §§ 310 through 317 that impose duties on any person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein.

SECTION 10.08.  Effect of Headings and Table of Contents.  The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 10.09.  Successors and Assigns.  All covenants and agreements in this Indenture and the Consumer Rate Relief Bonds by the Issuer shall bind its successors and assigns, whether so expressed or not.  All agreements of the Indenture Trustee in this Indenture shall bind its successors.

SECTION 10.10.  Severability.  Any provision in this Indenture or in the Consumer Rate Relief Bonds that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

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SECTION 10.11.  Benefits of Indenture.  Nothing in this Indenture or in the Consumer Rate Relief Bonds, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the CRR Bond Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture.

SECTION 10.12.  Legal Holidays.  In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Consumer Rate Relief Bonds or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date.

SECTION 10.13.  GOVERNING LAW.   THIS INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,  WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND SECTIONS 9-301 THROUGH 9-306 OF THE NY UCC), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED THAT THE CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED HEREUNDER IN CRR PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE TRUSTEE AND THE HOLDERS WITH RESPECT TO THE CRR PROPERTY, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF WEST VIRGINIA.

SECTION 10.14.  Counterparts.  This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

SECTION 10.15.  Recording of Indenture.   If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel at the Issuer’s cost and expense (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee or, if requested by the Indenture Trustee, external counsel of the Issuer) to the effect that such recording is necessary either for the protection of the Holders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture.

SECTION 10.16.  Issuer Obligation.  No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Consumer Rate Relief Bonds or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) any owner of a membership interest in the Issuer (including APCo) or (ii) any shareholder, partner, owner, beneficiary, agent, officer, or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including APCo) in its respective individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed in writing.  Each Holder by accepting a Consumer Rate Relief Bond

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specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Consumer Rate Relief Bonds.

SECTION 10.17.  No Recourse to Issuer.  Notwithstanding any provision of this Indenture or the Series Supplement to the contrary, Holders shall look only to the CRR Bond Collateral with respect to any amounts due to the Holders hereunder and under the Consumer Rate Relief Bonds and, in the event such CRR Bond Collateral is insufficient to pay in full the amounts owed on the Consumer Rate Relief Bonds, shall have no recourse against the Issuer in respect of such insufficiency. Each Holder by accepting a Consumer Rate Relief Bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Consumer Rate Relief Bonds.

SECTION 10.18.  Basic Documents.  The Indenture Trustee is hereby authorized to execute and deliver the Servicing Agreement and to execute and deliver any other Basic Document which it is requested to acknowledge including, upon receipt of an Issuer Request, an Intercreditor Agreement, so long as such Intercreditor Agreement is substantially in the form of Exhibit D hereto.  Such request shall be accompanied by an Opinion of Counsel of external counsel of the Issuer, upon which the Indenture Trustee may rely conclusively with no duty of independent investigation or inquiry, to the effect that all conditions precedent for the execution of an Intercreditor Agreement have been satisfied.  Any such Intercreditor Agreement shall be binding on the Holders.

SECTION 10.19.  No Petition.  The Indenture Trustee, by entering into this Indenture, each Holder, by accepting a Consumer Rate Relief Bond (or interest therein) issued hereunder, hereby covenant and agree that they shall not, prior to the date which is one year and one day after the termination of this Indenture, acquiesce, petition or otherwise invoke or cause the Issuer or any Manager to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer under any insolvency law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its respective property, or ordering the dissolution, winding up or liquidation of the affairs of the Issuer. Nothing in this paragraph shall preclude, or be deemed to estop, such Holder or the Indenture Trustee (A) from taking or omitting to take any action prior to such date in (i) any case or proceeding voluntarily filed or commenced by or on behalf of the Issuer under or pursuant to any such law or (ii) any involuntary case or proceeding pertaining to the Issuer which is filed or commenced by or on behalf of a Person other than such Holder and is not joined in by such Holder (or any person to which such holder shall have assigned, transferred or otherwise conveyed any part of the obligations of the Issuer hereunder) under or pursuant to any such law, or (B) from commencing or prosecuting any legal action which is not an involuntary case or proceeding under or pursuant to any such law against the Issuer or any of its properties.

SECTION 10.20.  Securities Intermediary.  The Securities Intermediary, in acting under this Indenture, is entitled to all rights, benefits, protections, immunities and indemnities accorded U.S. Bank National Association, a national banking association, in its capacity as Indenture Trustee under this Indenture.

72

SECTION 10.21.  Rule 17g-5 Compliance.  (a)  The Indenture Trustee agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Indenture Trustee to any Rating Agency under this Indenture or any other Basic Document to which it is a party for the purpose of determining or confirming the credit rating of the Consumer Rate Relief Bonds or undertaking credit rating surveillance of the Consumer Rate Relief Bonds shall be provided, substantially concurrently, to the Servicer for posting on a password-protected website (the “17g-5 Website”).  The Servicer shall be responsible for posting all of the information on the 17g-5 Website.

(b) The Indenture Trustee will not be responsible for creating or maintaining the 17g-5 Website, posting any information to the 17g-5 Website or assuring that the 17g-5 Website complies with the requirements of this Indenture, Rule 17g-5 or any other law or regulation. In no event shall the Indenture Trustee be deemed to make any representation in respect of the content of the 17g-5 Website or compliance by the 17g-5 Website with this Indenture, Rule 17g-5 or any other law or regulation. The Indenture Trustee shall have no obligation to engage in or respond to any oral communications with respect to the transactions contemplated hereby, any transaction documents relating hereto or in any way relating to the Consumer Rate Relief Bonds or for the purposes of determining the initial credit rating of the Consumer Rate Relief Bonds or undertaking credit rating surveillance of the Consumer Rate Relief Bonds with any Rating Agency or any of its respective officers, directors or employees. The Indenture Trustee shall not be responsible or liable for the dissemination of any identification numbers or passwords for the 17g-5 Website, including by the Servicer, the Rating Agencies, a nationally recognized statistical rating organization (“NRSRO”), any of their respective agents or any other party. Additionally, the Indenture Trustee shall not be liable for the use of the information posted on the 17g-5 Website, whether by the Servicer, the Rating Agencies, an NRSRO or any other third party that may gain access to the 17g-5 Website or the information posted thereon.

[SIGNATURE PAGE FOLLOWS]

73

IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Securities Intermediary have caused this Indenture to be duly executed by their respective officers thereunto duly authorized and duly attested, all as of the day and year first above written.

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, as Issuer
By:
	Name:
	Title:

U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee and as Securities Intermediary
By:
	Name:
	Title:

Signature Page to

Indenture

STATE OF [STATE]	)
	) ss:
COUNTY OF [COUNTY]	)

On the ____ day of [Month], 2013, before me, ________________, a Notary Public in and for said county and state, personally appeared __________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person and officer whose name is subscribed to the within instrument and acknowledged to me that such person executed the same in such person’s authorized capacity, and that by the signature on the instrument U.S. Bank National Association, a national banking association, and the entity upon whose behalf the person acted, executed this instrument.

WITNESS my hand and official seal.

Notary Public

My commission expires: _______

STATE OF OHIO	)
	) ss:
COUNTY OF FRANKLIN	)

On the ____ day of [month], 2013, before me, ___________________, a Notary Public in and for said county and state, personally appeared __________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity as a manager of Appalachian Consumer Rate Relief Funding LLC, and that by his signature on the instrument Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company and the entity upon whose behalf such person acted, executed this instrument.

WITNESS my hand and official seal.

Notary Public

My commission expires: _______

EXHIBIT A

FORM OF CONSUMER RATE RELIEF BOND

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.  UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 REGISTERED No. _____   $________

SEE REVERSE FOR CERTAIN DEFINITIONS

CUSIP NO.

THE PRINCIPAL OF THIS TRANCHE [  -  ] CONSUMER RATE RELIEF BOND (“THIS TRANCHE [  -   ] CONSUMER RATE RELIEF BOND”) WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS TRANCHE [  -  ] CONSUMER RATE RELIEF BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.  THE HOLDER OF THIS CONSUMER RATE RELIEF BOND HAS NO RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK ONLY TO THE CRR BOND COLLATERAL, AS DESCRIBED IN THE INDENTURE, FOR PAYMENT OF ANY AMOUNTS DUE HEREUNDER.  ALL OBLIGATIONS OF THE ISSUER OF THIS TRANCHE [  -  ] CONSUMER RATE RELIEF BOND UNDER THE TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL HEREOF OR AS OTHERWISE PROVIDED IN SECTION 3.10(b) OR ARTICLE IV OF THE INDENTURE.  THE HOLDER OF THIS TRANCHE [  -  ] CONSUMER RATE RELIEF BOND HEREBY COVENANTS AND AGREES THAT PRIOR TO THE DATE WHICH IS ONE (1) YEAR AND ONE (1) DAY AFTER THE PAYMENT IN FULL OF THE TRANCHE [  -  ] CONSUMER RATE RELIEF BONDS, IT WILL NOT INSTITUTE AGAINST, OR JOIN ANY

EXHIBIT A

1

OTHER PERSON IN INSTITUTING AGAINST, THE ISSUER ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY OR LIQUIDATION PROCEEDINGS OR OTHER SIMILAR PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES.  NOTHING IN THIS PARAGRAPH SHALL PRECLUDE, OR BE DEEMED TO ESTOP, SUCH HOLDER (A) FROM TAKING OR OMITTING TO TAKE ANY ACTION PRIOR TO SUCH DATE IN (I) ANY CASE OR PROCEEDING VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE ISSUER UNDER OR PURSUANT TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR PROCEEDING PERTAINING TO THE ISSUER WHICH IS FILED OR COMMENCED BY OR ON BEHALF OF A PERSON OTHER THAN SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY PERSON TO WHICH SUCH HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE CONVEYED ANY PART OF THE OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT TO ANY SUCH LAW, OR (B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION WHICH IS NOT AN INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST THE ISSUER OR ANY OF ITS PROPERTIES.

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC CONSUMER RATE RELIEF BONDS,

TRANCHE [  -  ].

BOND INTEREST RATE ORIGINAL PRINCIPAL AMOUNT FINAL MATURITY DATE

Appalachian Consumer Rate Relief Funding LLC, a limited liability company created under the laws of the State of Delaware (herein referred to as the “Issuer”), for value received, hereby promises to pay to [      ], or registered assigns, the Original Principal Amount shown above [in semi-annual installments] on the Payment Dates and in the amounts specified on the reverse hereof or, if less, the amounts determined pursuant to Section 8.02 of the Indenture, in each year, commencing on the date determined as provided on the reverse hereof and ending on or before the Final Maturity Date shown above and to pay interest, at the Bond Interest Rate shown above, on each __________ and __________ or if any such day is not a Business Day, the next succeeding Business Day, commencing on [   ] and continuing until the earlier of the payment in full of the principal hereof and the Final Maturity Date (each a “Payment Date”), on the principal amount of this Tranche [  -  ] Consumer Rate Relief Bond (hereinafter referred to as this “Tranche [  -  ] Consumer Rate Relief Bond”).  Interest on this Tranche [  -  ] Consumer Rate Relief Bond will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the date of issuance. Interest will be computed on the basis of [specify method of computation].  Such principal of and interest on this Tranche [  -  ] Consumer Rate Relief Bond shall be paid in the manner specified on the reverse hereof.

EXHIBIT A

2

The principal of and interest on this Tranche [  -  ] Consumer Rate Relief Bond are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.  All payments made by the Issuer with respect to this Tranche [  -  ] Consumer Rate Relief Bond shall be applied first to interest due and payable on this Tranche [  -  ] Consumer Rate Relief Bond as provided above and then to the unpaid principal of and premium, if any, on this Tranche [  -  ] Consumer Rate Relief Bond, all in the manner set forth in the Indenture.

Reference is made to the further provisions of this Tranche [  -  ] Consumer Rate Relief Bond set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Tranche [  -  ] Consumer Rate Relief Bond.

Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Tranche [  -  ] Consumer Rate Relief Bond shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Responsible Officer.

	APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, as Issuer
Date:	By:
		Name:
		Title:

EXHIBIT A

3

INDENTURE TRUSTEE’S CERTIFICATE OF AUTHENTICATION

Dated:  __________ ___, ____

This is one of the Tranche [  -  ] Consumer Rate Relief Bonds, designated above and referred to in the within-mentioned Indenture.

U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee
By:
	Name:
	Title:

EXHIBIT A

4

REVERSE OF CONSUMER RATE RELIEF BOND*1

This Tranche [  -  ] Consumer Rate Relief Bond is one of a duly authorized issue of Consumer Rate Relief Bonds of the Issuer (herein called the “Consumer Rate Relief Bonds”), which Consumer Rate Relief Bonds are issuable in one or more Tranches.  The Consumer Rate Relief Bonds consist of [    ] Tranches, including the Tranche [  -  ] Consumer Rate Relief Bonds, which include this Bond (herein called the “Tranche [  -  ] Consumer Rate Relief Bonds”), all issued and to be issued under that certain Indenture dated as of [closing date], (as supplemented by the Series Supplement (as defined below), the “Indenture”), between the Issuer and U.S. Bank National Association, in its capacity as indenture trustee (the “Indenture Trustee”, which term includes any successor indenture trustee under the Indenture) and in its separate capacity as a securities intermediary (the “Securities Intermediary”, which term includes any successor securities intermediary under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Consumer Rate Relief Bonds.  For purposes herein, “Series Supplement” means that certain Series Supplement dated as of [closing date], between the Issuer and the Indenture Trustee.  All terms used in this Tranche [  -  ] Consumer Rate Relief Bond that are defined in the Indenture, as amended, restated, supplemented or otherwise modified from time to time, shall have the meanings assigned to such terms in the Indenture.

All Tranches of Consumer Rate Relief Bonds are and will be equally and ratably secured by the CRR Bond Collateral pledged as security therefor as provided in the Indenture.

The principal of this Tranche [  -  ] Consumer Rate Relief Bond shall be payable on each Payment Date only to the extent that amounts in the Collection Account are available therefor, and only until the outstanding principal balance thereof on the preceding Payment Date (after giving effect to all payments of principal, if any, made on the preceding Payment Date) has been reduced to the principal balance specified in the Expected Amortization Schedule which is attached to the Series Supplement as Schedule A, unless payable earlier because an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Bondholders representing not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds have declared the Consumer Rate Relief Bonds to be immediately due and payable in accordance with Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture).  However, actual principal payments may be made in lesser than expected amounts and at later than expected times as determined pursuant to Section 8.02 of the Indenture.  The entire unpaid principal amount of this Tranche [  -  ] Consumer Rate Relief Bond shall be due and payable on the Final Maturity Date hereof.  Notwithstanding the foregoing, the entire unpaid principal amount of the Consumer Rate Relief Bonds shall be due and payable, if not then previously paid, on the date on which an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders of the

*The form of the reverse of a Consumer Rate Relief Bond is substantially as follows, unless otherwise specified in the Series Supplement.

EXHIBIT A

5

Consumer Rate Relief Bonds representing not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds have declared the Consumer Rate Relief Bonds to be immediately due and payable in the manner provided in Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture).  All principal payments on the Tranche [  -  ] Consumer Rate Relief Bonds shall be made pro rata to the Tranche [  -  ] Holders entitled thereto based on the respective principal amounts of the Tranche [  -  ] Consumer Rate Relief Bonds held by them.

Payments of interest on this Tranche [  -  ] Consumer Rate Relief Bond due and payable on each Payment Date, together with the installment of principal or premium, if any, shall be made by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder of this Tranche [  -  ] Consumer Rate Relief Bond (or one or more Predecessor Consumer Rate Relief Bonds) on the CRR Bond Register as of the close of business on the Record Date or in such other manner as may be provided in the Indenture or the Series Supplement, except that (i) upon application to the Indenture Trustee by any Holder owning a Global Consumer Rate Relief Bond evidencing this Tranche [  -  ] Consumer Rate Relief Bond in the principal amount of $10,000,000 or more not later than the applicable Record Date payment will be made by wire transfer to an account maintained by such Holder and (ii) if this Tranche [  -  ] Consumer Rate Relief Bond is held in Book-Entry Form, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Consumer Rate Relief Bond evidencing this Tranche [  -  ] Consumer Rate Relief Bond unless and until such Global Consumer Rate Relief Bond is exchanged for Definitive Consumer Rate Relief Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to this Tranche [  -  ] Consumer Rate Relief Bond on a Payment Date which shall be payable as provided below.  Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the CRR Bond Register as of the applicable Record Date without requiring that this Tranche [  -  ] Consumer Rate Relief Bond be submitted for notation of payment.  Any reduction in the principal amount of this Tranche [  -  ] Consumer Rate Relief Bond (or any one or more Predecessor Consumer Rate Relief Bonds) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Tranche [  -  ] Consumer Rate Relief Bond and of any Consumer Rate Relief Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon.  If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Tranche [  -  ] Consumer Rate Relief Bond on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed no later than five (5) days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of this Tranche [  -  ] Consumer Rate Relief Bond and shall specify the place where this Tranche [  -  ] Consumer Rate Relief Bond may be presented and surrendered for payment of such installment.

The Issuer shall pay interest on overdue installments of interest at the Bond Interest Rate to the extent lawful.

EXHIBIT A

6

This Consumer Rate Relief Bond is a “consumer rate relief bond” as such term is defined in the Securitization Law.  Principal and interest due and payable on this Consumer Rate Relief Bond are payable from and secured primarily by CRR Property created and established by the Financing Order obtained from the Public Service Commission of West Virginia pursuant to the Securitization Law.  CRR Property consists of the rights and interests of the Seller in the Financing Order, including the right of APCo and any Successor to impose, collect and recover certain charges (defined in the Securitization Law as “consumer rate relief charges”) to be included in regular electric utility bills of existing and future West Virginia electric retail customers of APCo, or any Successor, as more fully described in the Financing Order.

Under the laws of the State of West Virginia in effect on the Closing Date, pursuant to Section 24-2-4f(s)(1) of the Securitization Law, the State of West Virginia has pledged to and agrees with the Bondholders, assignees and financing parties under the Financing Order that the State will not take or permit any action that impairs the value of CRR Property under the Financing Order or revises the CRR Costs for which recovery is authorized under the Financing Order or, except as allowed under Section 24-2-4f (k) of the Securitization Law, reduce, alter or impair CRR Charges that are imposed, charged, collected or remitted for the benefit of the Bondholders, assignees and financing parties under the Financing Order, until any principal, interest and redemption premium in respect of Consumer Rate Relief Bonds, all financing costs and all amounts to be paid to any assignee or financing party under an ancillary agreement are paid or performed in full.

The Issuer and APCo hereby acknowledge that the purchase of this Consumer Rate Relief Bond by the Holder hereof or the purchase of any beneficial interest herein by any Person are made in reliance on the foregoing pledge.

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Tranche [    -    ] Consumer Rate Relief Bond may be registered on the CRR Bond Register upon surrender of this Tranche [    -    ] Consumer Rate Relief Bond for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by (a) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an institution which is a member of one of the following recognized Signature Guaranty Programs:  (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee program acceptable to the Indenture Trustee, and (b) such other documents as the Indenture Trustee may require, and thereupon one or more new Tranche [    -    ] Consumer Rate Relief Bonds of Minimum Denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees.  No service charge will be charged for any registration of transfer or exchange of this Tranche [    -    ] Consumer Rate Relief Bond, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange, other than exchanges pursuant to Sections 2.04 or 2.06 of the Indenture not involving any transfer.

EXHIBIT A

7

Each Consumer Rate Relief Bond holder, by acceptance of a Consumer Rate Relief Bond, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Consumer Rate Relief Bonds or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) any owner of a membership interest in the Issuer (including APCo) or (ii) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including APCo) in its respective individual or corporate capacities, or of any successor or assign of any of them in their individual or corporate capacities, except as any such Person may have expressly agreed in writing. Each Holder by accepting a Consumer Rate Relief Bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Consumer Rate Relief Bonds.

Prior to the due presentment for registration of transfer of this Tranche [    -    ] Consumer Rate Relief Bond, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Tranche [    -    ] Consumer Rate Relief Bond is registered (as of the day of determination) as the owner hereof for the purpose of receiving payments of principal of and premium, if any, and interest on this Tranche [    -    ] Consumer Rate Relief Bond and for all other purposes whatsoever, whether or not this Tranche [    -    ] Consumer Rate Relief Bond be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Consumer Rate Relief Bonds under the Indenture at any time by the Issuer with the consent of the Bondholders representing not less than a majority of the Outstanding Amount of all Consumer Rate Relief Bonds at the time outstanding of each Tranche to be affected.  The Indenture also contains provisions permitting the Bondholders representing specified percentages of the Outstanding Amount of the Consumer Rate Relief Bonds, on behalf of the Holders of all the Consumer Rate Relief Bonds, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.  Any such consent or waiver by the Holder of this Tranche [  -  ] Consumer Rate Relief Bond (or any one of more Predecessor Consumer Rate Relief Bonds) shall be conclusive and binding upon such Holder and upon all future Holders of this Tranche [  -  ] Consumer Rate Relief Bond and of any Consumer Rate Relief Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Tranche [  -  ] Consumer Rate Relief Bond.  The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Consumer Rate Relief Bonds issued thereunder.

The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Issuer on this Tranche [  -  ] Consumer Rate Relief Bond and (b) certain restrictive covenants and the related Events of Default, upon compliance by the Issuer with certain conditions set forth herein, which provisions apply to this Tranche [  -  ] Consumer Rate Relief Bond.

EXHIBIT A

8

The term “Issuer” as used in this Tranche [  -  ] Consumer Rate Relief Bond includes any successor to the Issuer under the Indenture.

The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Bondholders under the Indenture.

The Tranche [  -  ] Consumer Rate Relief Bonds are issuable only in registered form in denominations as provided in the Indenture and the Series Supplement subject to certain limitations therein set forth.

THIS TRANCHE [  -  ] CONSUMER RATE RELIEF BOND, THE INDENTURE AND THE SERIES SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND SECTIONS 9-301 THROUGH 9-306 OF THE NY UCC), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED THAT THE CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED UNDER THE INDENTURE IN CRR PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE TRUSTEE AND THE HOLDERS WITH RESPECT TO THE CRR PROPERTY, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF WEST VIRGINIA.

No reference herein to the Indenture and no provision of this Tranche [  -  ] Consumer Rate Relief Bond or of the Indenture shall alter or impair the obligation, which is absolute and unconditional, to pay the principal of and interest on this Tranche [  -  ] Consumer Rate Relief Bond at the times, place, and rate, and in the coin or currency herein prescribed.

The Issuer and the Indenture Trustee, by entering into the Indenture, and the Holders and any Persons holding a beneficial interest in any Tranche [  -  ] Consumer Rate Relief Bond, by acquiring any Tranche [  -  ] Consumer Rate Relief Bond or interest therein, (i) express their intention that, solely for the purpose of federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purpose of state, local and other taxes, the Tranche [  -  ] Consumer Rate Relief Bonds qualify under applicable tax law as indebtedness of the sole owner of the Issuer secured by the CRR Bond Collateral and (ii) solely for purposes of federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Tranche [  -  ] Consumer Rate Relief Bonds are outstanding, agree to treat the Tranche [  -  ] Consumer Rate Relief Bonds as indebtedness of the sole owner of the Issuer secured by the CRR Bond Collateral unless otherwise required by appropriate taxing authorities.

EXHIBIT A

9

ABBREVIATIONS

The following abbreviations, when used in the inscription of the face of this Tranche [  -  ] Consumer Rate Relief Bond, shall be construed as though they were written out in full according to applicable laws or regulations.

TEN COM	as tenants in common
TEN ENT	as tenants by the entireties
JT TEN	as joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT	___________________ Custodian ______________________ (Custodian)                                                      (minor)
	Under Uniform Gifts to Minor Act (____________________) (State)

Additional abbreviations may also be used though not in the above list.

EXHIBIT A

10

ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee ____________

FOR VALUE RECEIVED, the undersigned2 hereby sells, assigns and transfers unto

(name and address of assignee)

the within Tranche [  -  ] Consumer Rate Relief Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ______             , attorney, to transfer said Tranche [  -  ] Consumer Rate Relief Bond on the books kept for registration thereof, with full power of substitution in the premises.

Dated: ________________	______________________________________ Signature Guaranteed:
	______________________________________

2           CONSUMER RATE RELIEF BOND:  The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Tranche [  -  ] Consumer Rate Relief Bond in every particular, without alteration, enlargement or any change whatsoever.

NOTE:  Signature(s) must be guaranteed by an institution which is a member of one of the following recognized Signature Guaranty Programs:  (i) The Securities Transfer Agent Medallion Program (STAMP), (ii) The New York Stock Exchange Medallion Program (MSP), (iii) the Stock Exchange Medallion Program (SEMP) or (iv) such other guarantee program acceptable to the Indenture Trustee.

EXHIBIT A

11

EXHIBIT B

FORM OF SERIES SUPPLEMENT

This SERIES SUPPLEMENT dated as of [closing date] (this “Supplement”), by and between APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, a limited liability company created under the laws of the State of Delaware (the “Issuer”), and U.S. Bank National Association, a national banking association  (“Bank”), in its capacity as indenture trustee (the “Indenture Trustee”) for the benefit of the Secured Parties under the Indenture dated as of [closing date], by and between the Issuer and U.S. Bank National Association, in its capacity as Indenture Trustee and in its separate capacity as a securities intermediary (the “Indenture”).

PRELIMINARY STATEMENT

Section 9.01 of the Indenture provides, among other things, that the Issuer and the Indenture Trustee may at any time enter into an indenture supplemental to the Indenture for the purposes of authorizing the issuance by the Issuer of the Consumer Rate Relief Bonds and specifying the terms thereof.  The Issuer has duly authorized the creation of the Consumer Rate Relief Bonds with an initial aggregate principal amount of $[    ] to be known as Appalachian Consumer Rate Relief Funding LLC Consumer Rate Relief Bonds (the “Consumer Rate Relief Bonds”), and the Issuer and the Indenture Trustee are executing and delivering this Supplement in order to provide for the Consumer Rate Relief Bonds.

All terms used in this Supplement that are defined in the Indenture, either directly or by reference therein, have the meanings assigned to them therein, except to the extent such terms are defined or modified in this Supplement or the context clearly requires otherwise.  In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Supplement shall govern.

GRANTING CLAUSE

With respect to the Consumer Rate Relief Bonds, the Issuer hereby Grants to the Indenture Trustee, as Indenture Trustee for the benefit of the Secured Parties of the Consumer Rate Relief Bonds, all of the Issuer’s right, title and interest (whether now owned or hereafter acquired or arising) in and to (a) the CRR Property created under and pursuant to the Financing Order and the Securitization Law, and transferred by the Seller to the Issuer pursuant to the Sale Agreement (including, to the fullest extent permitted by law, the right to impose, charge and collect the CRR Charges, the right to obtain adjustments to the CCR Charges, and all revenues, receipts, collections, rights to payment, payments, money, claims or other proceeds arising from rights and interests created under the Financing Order), (b) all CRR Charges related to the CRR Property, (c) the Sale Agreement and the Bill of Sale executed in connection therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the CRR Property and the Consumer Rate Relief Bonds, (d) the Servicing Agreement, the Administration Agreement, each Intercreditor Agreement and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing CRR Property and the Consumer Rate Relief Bonds, (e) the Collection Account,

EXHIBIT B

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all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, (f) all rights to compel the Servicer to file for and obtain adjustments to the CRR Charges in accordance with Section 24-2-4f(k)(1) of the Securitization Law, the Financing Order, (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute CRR Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (h) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, (i) all payments on or under, and all proceeds in respect of, any or all of the foregoing; it being understood that the following do not constitute CRR Bond Collateral: (i) cash that has been released pursuant to the terms of the Indenture, including Section 8.02(e)(x) of the Indenture and, following retirement of all Outstanding Consumer Rate Relief Bonds, pursuant to Section 8.02(e)(xii) of the Indenture and (ii) amounts deposited with the Issuer on the Closing Date, for payment of costs of issuance with respect to the Consumer Rate Relief Bonds (together with any interest earnings thereon), it being understood that such amounts described in clauses (i) and (ii) above shall not be subject to Section 3.17 of the Indenture.

The foregoing Grant is made in trust to secure the payment of principal of and premium, if any, interest on, and any other amounts owing in respect of, the Consumer Rate Relief Bonds and all fees, expenses, counsel fees and other amounts due and payable to the Indenture Trustee (collectively, the “Secured Obligations”) equally and ratably without prejudice, priority or distinction, except as expressly provided in the Indenture, to secure compliance with the provisions of the Indenture with respect to the Consumer Rate Relief Bonds, all as provided in the Indenture and to secure the performance by the Issuer of all of its obligations under the Indenture.  The Indenture and this Series Supplement constitutes a security agreement within the meaning of the Securitization Law and under the UCC to the extent that the provisions of the UCC are applicable hereto.

The Indenture Trustee, as indenture trustee on behalf of the Secured Parties of the Consumer Rate Relief Bonds, acknowledges such Grant and accepts the trusts under this Supplement and the Indenture in accordance with the provisions of this Supplement and the Indenture.

SECTION 1. Designation.  The Consumer Rate Relief Bonds shall be designated generally as the Consumer Rate Relief Bonds, and further denominated as Tranches [   ] through [   ].

SECTION 2. Initial Principal Amount; Bond Interest Rate; Scheduled Payment Date; Final Maturity Date.  The Consumer Rate Relief Bonds of each Tranche shall have the initial principal amount, bear interest at the rates per annum and shall have the Scheduled Payment Dates and the Final Maturity Dates set forth below:

EXHIBIT B

2

Tranche Initial Principal Amount Bond Interest Rate Scheduled Final Payment Date Final Maturity Date

The Bond Interest Rate shall be computed on the basis of a 360-day year of twelve 30-day months.

SECTION 3.  Authentication Date; Payment Dates; Expected Amortization Schedule for Principal; Periodic Interest; No Premium; Other Terms.

(a)           Authentication Date.  The Consumer Rate Relief Bonds that are authenticated and delivered by the Indenture Trustee to or upon the order of the Issuer on [    ] (the “Closing Date”) shall have as their date of authentication [       ].

(b)           Payment Dates.  The Payment Dates for the Consumer Rate Relief Bonds are __________ and __________ of each year or, if any such date is not a Business Day, the next succeeding Business Day, commencing on  [    ] and continuing until the earlier of repayment of the Tranche [     ] Consumer Rate Relief Bonds in full and the Final Maturity Date Tranche [     ] Consumer Rate Relief Bonds.

(c)           Expected Amortization Schedule for Principal.  Unless an Event of Default shall have occurred and be continuing on each Payment Date, the Indenture Trustee shall distribute to the Holders of record as of the related Record Date amounts payable pursuant to Section 8.02(e) of the Indenture as principal, in the following order and priority: [(1) to the holders of the Tranche A-1 Consumer Rate Relief Bonds, until the Outstanding Amount of such Tranche of Consumer Rate Relief Bonds thereof has been reduced to zero; (2) to the holders of the Tranche A-2 Consumer Rate Relief Bonds, until the Outstanding Amount of such Tranche of Consumer Rate Relief Bonds thereof has been reduced to zero; (3) to the holders of the Tranche A-3 Consumer Rate Relief Bonds, until the Outstanding Amount of such Tranche of Consumer Rate Relief Bonds thereof has been reduced to zero; (4) to the holders of the Tranche A-4 Consumer Rate Relief Bonds, until the Outstanding Amount of such Tranche of Consumer Rate Relief Bonds thereof has been reduced to zero; and (5) to the holders of the Tranche A-5 Consumer Rate Relief Bonds, until the Outstanding Amount of such Tranche of Consumer Rate Relief Bonds thereof has been reduced to zero;] provided, however, that in no event shall a principal payment pursuant to this Section 3(c) on any Tranche on a Payment Date be greater than the amount necessary to reduce the Outstanding Amount of such Tranche of Consumer Rate Relief Bonds to the amount specified in the Expected Amortization Schedule which is attached as Schedule A hereto for such Tranche and Payment Date.

(d)           Periodic Interest.  Periodic Interest will be payable on each Tranche of the Consumer Rate Relief Bonds on each Payment Date in an amount equal to [one-half] of the product of (i) the applicable Bond Interest Rate and (ii) the Outstanding Amount of the related Tranche of Consumer Rate Relief Bonds as of the close of business on the preceding Payment Date after giving effect to all payments of principal made to the Holders of the related Tranche of Consumer Rate Relief Bonds on such preceding Payment Date; provided, however, that with respect to the Initial Payment Date, or, if no payment has yet been made, interest on the

EXHIBIT B

3

outstanding principal balance will accrue from and including the Closing Date to, but excluding, the following Payment Date.

(e)           Book-Entry Consumer Rate Relief Bonds.  The Consumer Rate Relief Bonds shall be Book-Entry Consumer Rate Relief Bonds and the applicable provisions of Section 2.11 of the Indenture shall apply to the Consumer Rate Relief Bonds.

(f)           Waterfall Caps.  The amount payable with respect to the Consumer Rate Relief Bonds pursuant to Section 8.02(e)(i) shall not exceed $[100,000] annually.

SECTION 4.  Minimum Denominations.  The Consumer Rate Relief Bonds shall be issuable in the Minimum Denomination and integral multiples thereof.

SECTION 5.  Certain Defined Terms.  Article I of the Indenture provides that the meanings of certain defined terms used in the Indenture shall be as defined in Appendix A to the Indenture.  Additionally, Article II of the Indenture provides certain terms will have the meanings specified in the related Supplement.  With respect to the Consumer Rate Relief Bonds, the following definitions shall apply:

“Bond Interest Rate” has the meaning set forth in Section 2 of this Supplement.

“Closing Date” has the meaning set forth in Section 3(a) of this Supplement.

“Minimum Denomination” shall mean $100,000 or integral multiples of $1,000 in excess thereof, except for one bond of each tranche which may be of a smaller denomination.

“Payment Date” has the meaning set forth in Section 3(b) of this Supplement.

“Periodic Interest” has the meaning set forth in Section 3(d) of this Supplement.

SECTION 6.  Delivery and Payment for the Consumer Rate Relief Bonds; Form of the Consumer Rate Relief Bonds.  The Indenture Trustee shall deliver the Consumer Rate Relief Bonds to the Issuer when authenticated in accordance with Section 2.03 of the Indenture.  The Consumer Rate Relief Bonds of each Tranche shall be in the form of Exhibits [A-1 through A-_] hereto.

SECTION 7.  Ratification of Agreement.  As supplemented by this Supplement, the Indenture is in all respects ratified and confirmed and the Indenture, as so supplemented by this Supplement, shall be read, taken, and construed as one and the same instrument.  This Supplement amends, modifies and supplemented the Indenture only in so far as it relates to the Consumer Rate Relief Bonds.

SECTION 8.  Counterparts.  This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.

SECTION 9. GOVERNING LAW.  THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE

EXHIBIT B

4

STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND SECTIONS 9-301 THROUGH 9-306 OF THE NY UCC), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED THAT, EXCEPT AS SET FORTH IN SECTION 8.02(b) OF THE INDENTURE, THE CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED UNDER THE INDENTURE IN CRR PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE TRUSTEE AND THE HOLDERS WITH RESPECT TO THE CRR PROPERTY, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF WEST VIRGINIA.

SECTION 10.  Issuer Obligation.  No recourse may be taken directly or indirectly, by the Holders with respect to the obligations of the Issuer on the Consumer Rate Relief Bonds, under the Indenture or under this Supplement or any certificate or other writing delivered in connection herewith or therewith, against (i) any owner of a beneficial interest in the Issuer (including APCo) or (ii) any shareholder, partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee, the Managers or any owner of a beneficial interest in the Issuer (including APCo) in its individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed.  Each Holder by accepting a Consumer Rate Relief Bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Consumer Rate Relief Bonds.

EXHIBIT B

5

IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this Supplement to be duly executed by their respective officers thereunto duly authorized as of the first day of the month and year first above written.

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, as Issuer
By:
	Name:
	Title:

U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee
By:
	Name:
	Title:

EXHIBIT B

6

SCHEDULE A

EXPECTED AMORTIZATION SCHEDULE

OUTSTANDING PRINCIPAL BALANCE

DATE	TRANCHE	TRANCHE	TRANCHE	TRANCHE	TRANCHE
Closing Date	$	$	$	$	$
________ ___, 20__
________ ___, 20__
________ ___, 20__
________ ___, 20__

EXHIBIT B

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EXHIBIT C

SERVICING CRITERIA TO BE ADDRESSED

BY INDENTURE TRUSTEE IN ASSESSMENT OF COMPLIANCE

Reg AB Reference	Servicing Criteria	Applicable Indenture Trustee Responsibility
	General Servicing Considerations
1122(d)(1)(i)	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.
1122(d)(1)(ii)	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.
1122(d)(1)(iii)	Any requirements in the transaction agreements to maintain a back-up servicer for the pool assets are maintained.
1122(d)(1)(iv)	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.
	Cash Collection and Administration
1122(d)(2)(i)	Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two (2) business days following receipt, or such other number of days specified in the transaction agreements.	X
1122(d)(2)(ii)	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.	X
1122(d)(2)(iii)	Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.
1122(d)(2)(iv)	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.	X
1122(d)(2)(v)	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.	X
1122(d)(2)(vi)	Unissued checks are safeguarded so as to prevent unauthorized access.
1122(d)(2)(vii)	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are (A) mathematically accurate; (B) prepared within thirty (30) calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within ninety (90) calendar days of their original identification, or such other number of days specified in the transaction agreements.
	Investor Remittances and Reporting
1122(d)(3)(i)	Reports to investors, including those to be filed with the SEC, are maintained in accordance with the transaction agreements and applicable SEC requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the SEC as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of pool assets serviced by the servicer.
1122(d)(3)(ii)	Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.	X
1122(d)(3)(iii)	Disbursements made to an investor are posted within two (2) business days to the servicer’s investor records, or such other number of days specified in the transaction agreements.	X

EXHIBIT C

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Reg AB Reference	Servicing Criteria	Applicable Indenture Trustee Responsibility
1122(d)(3)(iv)	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.	X
	Pool Asset Administration
1122(d)(4)(i)	Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents.
1122(d)(4)(ii)	Pool assets and related documents are safeguarded as required by the transaction agreements.
1122(d)(4)(iii)	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.
1122(d)(4)(iv)	Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the servicer’s obligor records maintained no more than two (2) business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents.
1122(d)(4)(v)	The servicer’s records regarding the pool assets agree with the servicer’s records with respect to an obligor’s unpaid principal balance.
1122(d)(4)(vi)	Changes with respect to the terms or status of an obligor's pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.
1122(d)(4)(vii)	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.
1122(d)(4)(viii)	Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).
1122(d)(4)(ix)	Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.
1122(d)(4)(x)	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within thirty (30) calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.
1122(d)(4)(xi)	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least thirty (30) calendar days prior to these dates, or such other number of days specified in the transaction agreements.
1122(d)(4)(xii)	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.
1122(d)(4)(xiii)	Disbursements made on behalf of an obligor are posted within two (2) business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements.
1122(d)(4)(xiv)	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.
1122(d)(4)(xv)	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.

EXHIBIT C

2

EXHIBIT D

FORM OF INTERCREDITOR AGREEMENT

This INTERCREDITOR AGREEMENT (this “Agreement”) is made as of [date], by and among:

(a)           Appalachian Power Company (in its individual capacity, the“Company”), as a sub-servicer of the Receivables Servicer referred to below (including any successor in such capacity, the “Receivables Sub-Servicer”), in its separate capacity as the initial servicer of the Consumer Rate Relief Property referred to below (including any successor in such capacity, the “Initial Property Servicer”), [insert appropriate titles] and in its separate respective capacities as a collection agent for the benefit of each of the Initial Property Servicer and the Receivables Servicer in accordance with the terms of this Agreement;

(b)          Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company (the “Initial Bond Issuer”);

(c)           U.S. Bank National Association, a national banking association, in its capacity as indenture trustee (including any successor in such capacity, the “Initial Bond Trustee”) under the Initial Indenture referred to below;

(d)          AEP Credit, Inc. [insert name of affiliated purchaser if different] (“Buyer”), a Delaware corporation;

(e)          [American Electric Power Service Corporation, a New York corporation (“AEPSC”),] [insert name of affiliated servicer if different] in its capacity as the Receivables Servicer referred to below; and

(f)           [insert name of agent acing as representative of third-party receivables purchasers], as [Administrative] Agent (in such capacity, and including any successor agent, the “Administrative Agent”) for the Receivables Purchasers referred to below;

WHEREAS, pursuant to the terms of that certain [describe purchase agreement whereby Buyer acquires Receivables from Seller] (as it may hereafter from time to time be further amended, restated or modified and as supplemented from time to time, the “Purchase Agreement”), between Buyer and the Company, the Company has sold and may hereafter sell to Buyer all of the Company’s right, title and interest in and to certain [Outstanding Receivables] and [Collections] (as such terms are defined in the Purchase Agreement, which terms do not include Initial Customer Charges, as defined below, or collections thereof; and the Outstanding Receivables, Collections thereof, related property and all proceeds of the foregoing are collectively referred to herein as the “Receivables”); and

WHEREAS, pursuant to that certain [describe purchase agreement whereby Receivables Purchasers acquire security and/or ownership interests in the Receivables from the Buyer] (as it may hereafter from time to time be further amended, restated or modified and as supplemented from time to time, the “Receivables Purchase Agreement”), by and among the Buyer, the Receivables Servicer, the Administrative Agent and the financial institutions and other entities party thereto as purchasers (such purchasers and the Administrative Agent being

collectively referred to as the “Receivables Purchasers”), Buyer has sold and may hereafter sell undivided interests in the Receivables to the Administrative Agent for the benefit of the Receivables Purchasers; and

WHEREAS, pursuant to the terms of the Purchase Agreement, the Receivables Purchase Agreement and that certain [describe any agency or similar agreement comprising part of the receivables purchase document] (as it may hereafter from time to time be further amended, restated or modified and as supplemented from time to time, the “Agency Agreement”, and together with the Purchase Agreement and the Receivables Purchase Agreement, collectively, the “Receivables Agreements”), AESPC has been appointed as a servicer (the “Receivables Servicer”) and has agreed to provide certain servicing and collection functions with respect to the Receivables, and the Receivables Sub-Servicer has agreed to act as a sub-servicer on behalf of the Receivables Servicer in order to perform certain of the Receivables Servicer’s functions and duties under the Receivables Agreements;

WHEREAS, pursuant to the terms of that certain CRR Property Purchase and Sale Agreement, dated as of [date] (as it may hereafter from time to time be amended, restated or modified, the “Initial Sale Agreement”), between the Initial Bond Issuer and the Company in its capacity as seller, the Company has sold to the Initial Bond Issuer certain assets known as “Consumer Rate Relief Property” which includes the right to impose, charge and collect “Consumer Rate Relief Charges” as each such term is defined or as otherwise used in West Virginia Code Section 24-2-4f  (such Consumer Rate Relief Property, the “Initial Customer Property” and such Consumer Rate Relief Charges, the “Initial Customer Charges”);

WHEREAS, pursuant to the terms of that certain Indenture dated as of [date] (as it may hereafter from time to time be amended, restated or modified and as supplemented by the Series Supplement and any other supplemental indenture, the Series Supplement and Indenture, as supplemented, being collectively referred to herein as the “Initial Indenture”), between the Initial Bond Issuer and the Initial Bond Trustee, the Initial Bond Issuer, among other things, has granted to the Initial Bond Trustee a security interest in certain of its assets, including the Initial Customer Property, to secure, among other things, the notes issued pursuant to the Initial Indenture (the “Initial Bonds”);

WHEREAS, pursuant to the terms of that certain CRR Property Servicing Agreement dated as of [date] (as it may hereafter from time to time be amended, restated or modified, the “Initial Servicing Agreement,” and the Initial Servicing Agreement, together with the Initial Sale Agreement and the Initial Indenture, the “Initial Bond Agreements”), between the Initial Bond Issuer and the Initial Property Servicer, the Initial Property Servicer has agreed to provide for the benefit of the Initial Bond Issuer certain servicing and collection functions with respect to the Initial Customer Charges;

WHEREAS, the Receivables and the Initial Customer Charges will be invoiced collectively on single bills sent to the Company’s West Virginia retail customers (the “Customers”), which Customers are obligated to pay both the Receivables and the Initial Customer Charges, and the parties hereto wish to agree upon their respective rights relating to the Receivables and the Initial Customer Property and any bank accounts into which collections of the foregoing may be deposited, as well as other matters of common interest to them which

EXHIBIT D-2

arise under or result from the coexistence of the Initial Bond Agreements and the Receivables Agreements;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

SECTION 1.                           Acknowledgment of Ownership Interests and Security Interests.

(a)           Each of the parties hereto hereby acknowledges the ownership interest of the Initial Bond Issuer in the Initial Customer Property, including the Initial Customer Charges and the revenues, collections, claims, rights, payments, money and proceeds arising therefrom, and the security interests granted therein in favor of the Initial Bond Trustee for the benefit of itself and the holders of the Initial Bonds.  Each of the parties hereto hereby acknowledges the ownership interest and security interests of the Buyer and the Receivables Purchasers in the Receivables and the revenues, collections, claims, rights, payments, money and proceeds arising therefrom.  The parties hereto agree that the Initial Customer Property and the Receivables each shall constitute separate property rights notwithstanding that they may be evidenced by a single bill.  The Company and the Receivables Sub-Servicer further agree that they will not include the Initial Customer Property in calculating the amount of the Receivables sold or to be sold under the Receivables Agreements.  Accordingly, the Receivables Purchasers, the Receivables Sub-Servicer and the Receivables Servicer each acknowledge that, notwithstanding anything in the Receivables Agreements to the contrary, none of such parties has any interest in the Initial Customer Property, and each of the Initial Bond Trustee, the Initial Bond Issuer and the Initial Property Servicer further acknowledge that, notwithstanding anything in the Initial Bond Agreements to the contrary, none of such parties has any interest in the Receivables.

(b)           Each of the Administrative Agent and the Buyer hereby releases all liens and security interests of any kind whatsoever which the Administrative Agent or Buyer may hold or obtain in the Initial Customer Property. Each of the Administrative Agent and Buyer agrees, upon the reasonable request of the Company or the Initial Bond Trustee, to execute and deliver to the Initial Bond Trustee such UCC partial release statements and other documents and instruments, and to do such other acts and things, as the Company or the Initial Bond Trustee may reasonably request in order to evidence the release provided for in this Section 1(b) and/or to execute and deliver to the Initial Bond Trustee UCC financing statement amendments to exclude the Initial Customer Property from the assets covered by any existing UCC financing statements relating to the Receivables; provided, however, that failure to execute and deliver any such partial release statements, financing statement amendments, documents or instruments, or to do such acts and things, shall not affect or impair the release provided for in this Section 1(b).

(c)           Each of the Initial Bond Issuer and the Initial Bond Trustee hereby releases all liens and security interests of any kind whatsoever which either of them may hold or obtain in the Receivables. Each of the Initial Bond Issuer and the Initial Bond Trustee agrees, upon the reasonable request of the Administrative Agent or Buyer, to execute and deliver to the Administrative Agent or Buyer, as applicable, such UCC partial release statements and other documents and instruments, and to do such other acts and things, as the Administrative Agent or

EXHIBIT D-3

Buyer may reasonably request in order to evidence the release provided for in this Section 1(c) and/or to execute and deliver to the Administrative Agent or Buyer, as applicable, UCC financing statement amendments to exclude such Receivables from the assets covered by any existing UCC financing statements relating to the Initial Customer Property; provided, however, that failure to execute and deliver any such partial release statements, financing statement amendments, documents or instruments, or to do such acts and things, shall not affect or impair the release provided for in this Section 1(c).

SECTION 2.                           Deposit Accounts.

(a)           The parties hereto each acknowledge that collections with respect to the Initial Customer Property and the Receivables may from time to time be deposited into one or more designated accounts of the Company, the Receivables Servicer or the Buyer (the “Deposit Accounts”) and that such Deposit Accounts may be subject to a security interest of the Administrative Agent and account control agreements among the Company, the Buyer, the Administrative Agent and the applicable account bank.  Subject to Section 4, the Company, in its capacity as a collection agent for the benefit of the other parties hereto, agrees to:

(i)           maintain the collections in the Deposit Accounts for the benefit of the Initial Property Servicer, the Initial Bond Trustee, the Initial Bond Issuer, the Receivables Servicer, the Receivables Sub-Servicer, the Buyer, the Administrative Agent and the Receivables Purchasers, as their respective interests may appear;

(ii)           allocate and remit funds from the Deposit Accounts, whether or not commingled, (x) in the case of collections relating to the Initial Customer Property, at the times and in the manner specified in the Initial Bond Agreements to the Initial Bond Trustee; and (y) in the case of collections relating to the Receivables, allocate and remit funds to the Receivables Purchasers and the Buyer at the times and in the manner specified in the Receivables Agreements; provided, that:

(A)           to the extent the combined amounts of remittance are insufficient to satisfy amounts owed in respect of the Initial Customer Charges and the Receivables, such allocation and remittances shall be made on a pro rata basis as between the Initial Customer Charges and the Receivables based on the respective amounts of such Initial Customer Charges and Receivables then due and owing;

(B)           late payment penalties of the Receivables and the Initial Customer Charges shall be allocated (x) to the Initial Bond Trustee, if such late payment penalties are allocable to the Initial Customer Charges and are not allowed to be retained by the Company under the Initial Bond Agreements, (y) to the Receivables Purchasers to the extent that any such late payment penalties are included in the Receivables sold to the Receivables Purchasers, and (z) otherwise to the Company; and

(C)           to the extent the Administrative Agent has exercised exclusive control over any Deposit Account, it shall allocate the funds on deposit therein related to the Initial Customer Property in accordance with the information provided to it by the Company and consistent with this Section 2, and shall remit

EXHIBIT D-4

such collections related to the Initial Customer Property at the direction of the Initial Bond Trustee; and

(iii)           maintain records as to the amounts deposited into the Deposit Accounts, the amounts remitted therefrom and the allocation as provided above in this subsection (a).

(b)           The Initial Bond Trustee, the Initial Bond Issuer, the Buyer and the Receivables Purchasers shall each have the right to require an accounting from time to time of collections, deposits, allocations and remittances by the Company relating to the Deposit Accounts.  Because of difficulties inherent in allocating collections on a daily basis, the Initial Property Servicer may implement percentage-based estimates for the purposes of determining the amount of collections which are allocable to the Initial Customer Property, which allocations will be subject to monthly reconciliations but will otherwise be deemed conclusive, subject to reconciliation as provided in the following sentences.  In the event that the estimated remittances to the Initial Bond Issuer for any calendar month are less than the actual amounts of Initial Customer Charge collections, the Initial Bond Issuer shall look to the Initial Property Servicer for any such shortfall and shall have no claims against the Receivables Purchasers for such amounts.   In the event that the estimated remittances to the Initial Bond Issuer are greater than the actual amounts of Initial Customer Charge collections, the Initial Property Servicer shall have the right, in accordance with the terms of the Initial Bond Agreements, to net an amount equal to such excess collections out of monies otherwise to be paid to the Initial Bond Issuer or otherwise to receive such amounts from excess funds of the Initial Bond Issuer, and the Receivables Purchasers acknowledge that they shall look solely to the Initial Property Servicer for such excess collections and shall have no claims against the Initial Bond Issuer for such funds.  Notwithstanding the foregoing, nothing in this paragraph shall (i) eliminate the right of the Receivables Purchasers and the Administrative Agent,  as assignees of the Company under the Receivables Agreements, to cause any such reconciliation payments to be paid directly to the Administrative Agent or its designee or (ii) prohibit any party from netting any such reconciliation payments owing by such party (the “remitting party”) to another party (the “receiving party”) against the amounts to be paid hereunder to the remitting party by such receiving party.

(c)           The Initial Bond Trustee and the Initial Bond Issuer waive any interest in deposits to the Deposit Accounts to the extent that they are properly allocable to Collections with respect to Receivables, and the Administrative Agent and Buyer waive any interest in deposits to the Deposit Accounts to the extent that they are properly allocable to Initial Customer Charges. Each of the parties hereto acknowledges the respective ownership and security interests of the others in amounts on deposit in the Deposit Accounts to the extent of their respective interests as described in this Agreement.

(d)           In no event may the Initial Bond Trustee take any action with respect to the Initial Customer Charges in a manner that would result in the Initial Bond Trustee obtaining possession of, or any control over, Collections of Receivables or any Deposit Account.  In the event that the Initial Bond Trustee obtains possession of any Collections related to the Receivables, the Initial Bond Trustee shall notify the Administrative Agent of such fact, shall hold them in trust and shall promptly deliver them to the Administrative Agent upon request.  

EXHIBIT D-5

Except as contemplated by this Section 2 with respect to the Administrative Agent’s exercise of control over the Deposit Accounts, in no event may the Administrative Agent or Buyer take any action with respect to the collection of Receivables in a manner that would result in the Administrative Agent or Buyer, as applicable, obtaining possession of, or any control over, collections of Initial Customer Charges. In the event that the Administrative Agent or Buyer obtains possession of any collections of Initial Customer Charges, the Administrative Agent or Buyer, as applicable, shall notify the Initial Bond Trustee of such fact, shall hold them in trust and shall promptly deliver them to the Initial Bond Trustee upon request.

SECTION 3.                           Time or Order of Attachment.  The acknowledgments contained in Sections 1 and 2 are applicable irrespective of the time or order of attachment or perfection of security or ownership interests or the time or order of filing or recording of financing statements or mortgages or filings under applicable law.

SECTION 4.                           Servicing.

(a)           Pursuant to Section 2, the Company, in its role as collection agent hereunder, shall allocate and remit funds received from Customers for the benefit of the Initial Bond Issuer, the Initial Bond Trustee, the Buyer and the Receivables Purchasers, respectively, and shall control the movement of such funds out of the Deposit Accounts (such allocation, remittance and deposits hereafter called the “Allocation Services”) in accordance with the terms of this Agreement.  The same entity must always act as servicer in the performance of the Allocation Services as to both the Initial Bond Agreements and the Receivables Agreements.

(b)           In the event that the Initial Bond Trustee is entitled to and desires to exercise its right, pursuant to the Initial Bond Agreements, to replace the Company as Initial Property Servicer, or in the event that the Receivables Purchasers are entitled to and desire to exercise their right to replace the Company as Receivables Sub-Servicer, and therefore to terminate the role of the Company as the provider of the Allocation Services hereunder, the party desiring to exercise such right shall promptly give written notice to the other (the “Servicer Notice”) in accordance with the notice provisions of this Agreement and consult with the other with respect to the Person who would replace the Company in such capacities.  Any successor to the Company in such capacities shall be agreed to by the Initial Bond Trustee and the Administrative Agent within ten (10) Business Days of the date of the Servicer Notice, and such successor shall be subject to satisfaction of the Rating Agency Condition (as defined below) and otherwise satisfy the provisions of the Initial Servicing Agreement and the Receivables Agreements.  “Business Day” means any day other than a Saturday, Sunday, or any holiday for national banks or any New York banking corporation in Charleston, West Virginia, Columbus, Ohio, Chicago, Illinois or New York, New York.  The Person named as replacement collection agent in accordance with this Section 4 is referred to herein as the “Replacement Collection Agent.”  The parties hereto agree that any entity succeeding to the rights of the Company as Receivables Sub-Servicer or as Initial Property Servicer shall be the same entity.

(c)           Anything in this Agreement to the contrary notwithstanding, any action taken by the Initial Bond Trustee or the Administrative Agent to appoint a Replacement Servicer

EXHIBIT D-6

pursuant to this Section 4 shall be subject to the Rating Agency Condition and the consent, if required by law, of the West Virginia Public Service Commission.  For the purposes of this Agreement, the “Rating Agency Condition” has the meaning set forth in the Initial Indenture.  The parties hereto acknowledge and agree that the approval or the consent of the rating agencies which is required in order to satisfy the Rating Agency Condition is not subject to any standard of commercial reasonableness, and the parties are bound to satisfy this condition whether or not the rating agencies are unreasonable or arbitrary.

SECTION 5.                           Sharing of Information.  The parties hereto agree to cooperate with each other and make available to each other or any Replacement Collection Agent any and all records and other data relevant to the Initial Customer Property and the Receivables which they may from time to time possess or receive from the Company, the Initial Property Servicer or the Receivables Sub-Servicer or any successor hereto or thereto, including, without limitation, any and all computer programs, data files, documents, instruments, files and records and any receptacles and cabinets containing the same.  The Company hereby consents to the release of information regarding the Company pursuant to this Section 5.

SECTION 6.                           No Joint Venture; No Fiduciary Obligations; Etc..

(a)           Nothing herein contained shall be deemed as effecting a joint venture among any of the Company, the Initial Bond Issuer, the Initial Bond Trustee, the Initial Receivables Servicer, the Administrative Agent, the Receivables Servicer, the Receivables Sub-Servicer and the Buyer.

(b)           Neither Buyer nor the Administrative Agent is the agent of, or owes any fiduciary obligation to, the Initial Bond Trustee, the Initial Bond Issuer, the bondholders or any other party under this Agreement.  Each of the Initial Bond Trustee (on behalf of itself and the bondholders), the Initial Bond Issuer and the Company hereby waives any right that it may now have or hereafter acquire to make any claim against Buyer or the Administrative Agent, in their respective capacities as such, on the basis of any such fiduciary obligation hereunder.  Neither the Initial Bond Trustee nor the Initial Bond Issuer is the agent of, or owes any fiduciary obligation to, Buyer or the Administrative Agent or any other party under this Agreement.  Each of the Administrative Agent, the Company and Buyer hereby waives any right that it may now have or hereafter acquire to make any claim against the Initial Bond Trustee or the Initial Bond Issuer on the basis of any such fiduciary obligation hereunder.

(c)           Notwithstanding anything herein to the contrary, none of Buyer, the Administrative Agent, the Initial Bond Trustee or the Initial Bond Issuer shall be required to take any action that exposes it to personal liability or that is contrary to the Initial Indenture, the Servicing Agreement, any Receivables Agreement or applicable law.

(d)           None of Buyer, the Administrative Agent, the Initial Bond Trustee or the Initial Bond Issuer nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence, bad faith or willful misconduct.  Without limiting the foregoing, each of Buyer, the Administrative Agent, the Initial Bond Trustee and the Initial Bond Issuer: (i) may consult with legal counsel, independent public

EXHIBIT D-7

accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to any party and shall not be responsible to any party for any statements, warranties or representations made by any other party in connection with this Agreement or any other agreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any other agreement on the part of any other party; and (iv) shall incur no liability under or in respect of this Agreement by acting upon any writing (which may be by facsimile or other electronic transmission) believed by it in good faith to be genuine and signed or sent by the proper party or parties.

SECTION 7.                           Method of Adjustment and Allocation.  Each of the parties hereto acknowledges that the Initial Property Servicer will adjust, calculate and allocate payments of Initial Customer Charges in accordance with Section 4.01 of the Initial Servicing Agreement and Section 6 of Annex 1 of the Initial Servicing Agreement in the form attached thereto, and each of the parties hereto hereby acknowledges that neither the Administrative Agent nor any other Receivables Purchasers shall be deemed or required under this Agreement to have any knowledge of or responsibility for the terms of such documents or any such adjustment, calculation and allocation.  Accordingly, each of the Receivables Purchasers (i) may, solely for the purposes of this Agreement, conclusively rely on the accuracy of the calculations of the Initial Property Servicer in making such adjustments, calculations and allocations.  Such acknowledgement shall not relieve the Receivables Sub-Servicer or the Receivables Servicer of any of their respective obligations to make payments in accordance with the terms of the Receivables Agreements, nor shall it relieve the Initial Property Servicer of its obligations under the Initial Servicing Agreement.

SECTION 8.                           Termination.  This Agreement shall terminate upon the payment in full of the Initial Bonds, or, if earlier, the termination of the Receivables Agreements as to the Company and the release of the Company from all further obligations thereunder, except that the understandings and acknowledgements contained in Sections 1, 2, 3 and 15 shall survive the termination of this Agreement.

SECTION 9.                           Governing Law; Jurisdiction; Waiver of Jury Trial(a)           .

(a)           THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO THE LAW OF CONFLICTS) OF THE STATE OF NEW YORK.

(b)           In connection with any suit, claim, action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby, each party hereto hereby consents to the inpersonam jurisdiction of any court of the State of New York or any U.S. federal court located in the Borough of Manhattan in the City of New York, State of New York; each party hereto agrees that service by registered mail, or any other form equivalent thereto (or, in the alternative, by any other means sufficient under applicable law, rules and regulations) at the addresses set forth in Section 17 hereof shall be valid and sufficient for all

EXHIBIT D-8

purposes; and each party hereto agrees to, and irrevocably waives any objection based on forumnonconveniens or venue not to, appear in such state or U.S. federal court located in the Borough of Manhattan.  Each of the Company, Buyer, Initial Property Servicer, Receivables Servicer, Receivables Sub-Servicer and the Initial Bond Issuer irrevocably designates CT Corporation System, 111 Eighth Avenue, New York, NY 10011, as its agent and attorney-in-fact for the acceptance of service of process and making an appearance on its behalf in any such action or proceeding and taking all such acts as may be necessary or appropriate in order to confer jurisdiction over it by such state or U.S. federal court in the Borough of Manhattan, and each of such parties stipulates that such appointment is irrevocable and coupled with an interest.

(c)                  EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

SECTION 10.                           Further Assurances.  Each of the parties hereto agrees to execute any and all agreements, instruments, financing statements, releases and any and all other documents reasonably requested by any of the other parties hereto in order to effectuate the intent of this Agreement.  In each case where a release is to be given pursuant to this Agreement, the term release shall include any documents or instruments necessary to effect a release, as contemplated by this Agreement.  All releases, subordinations and other instruments submitted to the executing party are to be prepared at the expense of the Company.  Notwithstanding anything herein to the contrary, the Initial Bond Trustee shall not be required to execute any such agreements, instruments, releases or other documents unless directed to do so by an “Issuer Order,” as such term is defined in the Initial Indenture.

SECTION 11.                           Limitation on Rights of Others.  This Agreement is solely for the benefit of the parties hereto, the holders of the Initial Bonds and the Receivables Purchasers, and no other person or entity shall have any rights, benefits, priority or interest under or because of the existence of this Agreement.

SECTION 12.                           Amendments.  In the event that (x) the Company hereafter causes any property (“Additional Customer Property”) consisting of the right to impose specified charges on Customers to be created and sold and pledged by the buyer thereof for the benefit of bondholders pursuant to any financing order of the West Virginia Public Service Commission, and the Company acts as servicer for the bonds issued pursuant to such financing order, or (y) the Company enters into any new receivables program following the termination of the Receivables Agreements in which the Company participates as a seller or as a servicer or sub-servicer of receivables, then, in either such event, upon the written request of the Company, the other parties hereto agree that this Agreement may be amended and restated (i) to add as parties hereto the relevant issuer of such additional bonds, the indenture trustee therefor, and the servicer of such Additional Customer Property and/or the relevant purchasers and servicers under such replacement receivables program, as the case may be, and (ii) to reflect the rights and obligations of the parties with respect to such new receivables purchases on terms substantially similar to the rights and obligations of the Receivables Sub-Servicer, the Administrative Agent and the Receivables Purchasers hereunder and (iii) to reflect the rights and obligations of the parties with

EXHIBIT D-9

respect to any such Additional Customer Property on terms substantially similar to the rights and obligations of the Initial Bond Issuer, the Initial Bond Trustee and the Initial Servicer hereunder; provided that no such amendment shall be effective unless (x) evidenced by a written instrument signed by the parties hereto and such additional parties and (y) the Rating Agency Condition shall have been satisfied with respect thereto and provided, further, that no party hereto shall be required to execute any such amended agreement on terms which are materially more disadvantageous to it or to the holders of the Initial Bonds (in the case of the Initial Bond Trustee) or to the Receivables Purchasers (in the case of the Administrative Agent) than the terms contained herein.  In addition, the Initial Bond Trustee shall not be required to execute any such amendment unless directed to do so by an “Issuer Order,” as such term is defined in the Initial Indenture.

SECTION 13.                           Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.  If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (i) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (ii) the remainder of this Agreement and the application of such provision to other Persons, or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

SECTION 14.                            Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.  Delivery of an executed counterpart of a signature page to this Agreement by telecopier or other electronic means shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 15.                           Nonpetition Covenant.

(a)           Notwithstanding any prior termination of this Agreement or the Initial Indenture, each of the parties covenants that it shall not, prior to the date which is one year and one day after payment in full of the last outstanding Initial Bonds, acquiesce, petition or otherwise invoke or cause the Initial Bond Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Initial Bond Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Initial Bond Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Initial Bond Issuer.

(b)       Notwithstanding any prior termination of this Agreement or the Receivables Purchase Agreement, each of the parties hereto other than the Administrative Agent hereby covenants and agrees that it shall not, prior to the date which is one year and one day after the termination of the Receivables Purchase Agreement and the payment in full of all amounts owing by Buyer thereunder, acquiesce, petition or otherwise invoke or cause Buyer to invoke the

EXHIBIT D-10

process of any court or government authority for the purpose of commencing or sustaining a case against Buyer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of Buyer or any substantial part of the property of Buyer, or ordering the winding up or liquidation of the affairs of Buyer.

SECTION 16.                           Trustees.  U.S. Bank National Association, as Initial Bond Trustee, in acting hereunder, is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Initial Indenture.

SECTION 17.                           Notices, Etc..  Any notice provided or permitted by this Agreement to be made upon, given or furnished to or filed with any party hereto shall be shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing by facsimile transmission, first-class mail or overnight delivery service to the applicable party at its address set forth on Exhibit A hereto or, as to any party, at such other address as shall be designated by such party by written notice to the other parties hereto.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

EXHIBIT D-11

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

APPALACHIAN POWER COMPANY, as Company, as Initial Property Servicer, as Receivables Sub-Servicer and as a collection agent
By:
	Name
	Title

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC
By:
	Name
	Title

[AEP CREDIT, INC.], as Buyer
By:
	Name
	Title

[AMERICAN ELECTRIC POWER SERVICE CORPORATION], as Receivables Servicer
By:
	Name
	Title

U.S. BANK NATIONAL ASSOCIATION, as Initial Bond Trustee
By:
	Name
	Title

[Insert Admin Agent name]., as Administrative Agent
By:
	Name
	Title

Signature Page to

Intercreditor Agreement

EXHIBIT A

NOTICE ADDRESSES

Appalachian Power Company

One Riverside Plaza

Columbus, Ohio 43215

Attention:  Treasurer

Telephone: (614) 716-1000

Facsimile: (614) 716-2807

Appalachian Consumer Rate Relief Funding LLC

One Riverside Plaza

Columbus, Ohio 43215

Attention:  Treasurer

Telephone: (614) 716-3622

Facsimile: (614) 716-2807

[AEP Credit, Inc.

One Riverside Plaza

Columbus, Ohio 43215

Attention:  Treasurer

Telephone: (614) 716-1000

Facsimile: (614) 716-2807]

[American Electric Power Service Corporation

One Riverside Plaza

Columbus, Ohio 43215

Attention:  Treasurer

Telephone: (614) 716-1000

Facsimile: (614) 716-2807]

[Administrative Agent]

[U.S. Bank National Association

190 South LaSalle Street, 7th Floor

Chicago, Illinois 60604

Attention:  Melissa A. Rosal, Vice President

U.S. Bank Corporate Trust Services

Telephone: (312) 332-7496

Facsimile: (312) 332-7996]

APPENDIX A

DEFINITIONS

This is Appendix A to the Indenture.

A.           Defined Terms.  As used in the Indenture, the Sale Agreement, the LLC Agreement, the Servicing Agreement, the Series Supplement or any other Basic Document as hereinafter defined, as the case may be (unless the context requires a different meaning), the following terms have the following meanings:

“17g-5 Website” is defined in Section 10.21 of the Indenture.

“Act” is defined in Section 10.03(a) of the Indenture.

“Actual CRR Charge Collections” means, with respect to Billed CRR Charges in any Collection Period, the amount of CRR Charge Collections in respect of such Billed CRR Charges.

“Additional Interim True-Up Adjustment” means any Additional True-Up Adjustment made pursuant to Section 4.01(b)(iv) of the Servicing Agreement.

“Administration Agreement” means the Administration Agreement, dated as of [closing date], 2013, by and between APCo and the Issuer, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Administration Fee” is defined in Section 2 of the Administration Agreement.

“Administrator” means APCo, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.

“Affiliate” means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person.  For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agency Office” means the office of the Issuer maintained pursuant to Section 3.02 of the Indenture.

“Amendatory Schedule” means a revision to service riders or any other notice filing filed with the Commission in respect of the CRR Rate Schedule pursuant to a True-Up Adjustment.

“Annual Accountant’s Report” is defined in Section 3.04 of the Servicing Agreement.

“Annual True-Up Adjustment” means each adjustment to the CRR Charges made in accordance with Section 4.01(b)(i) of the Servicing Agreement.

“Annual True-Up Adjustment Date” means the first billing cycle of [month] of each year, commencing in [month], 2014.

“APCo” means Appalachian Power Company, a Virginia corporation, and any of its successors or permitted assigns.

“Application” means the Application of APCo for a Financing Order to securitize uncollected expanded net energy costs and associated financing costs and other CRR costs filed by APCo with the Commission and dated August 22, 2012, as modified by any supplemental submissions, or any subsequent similar Application of APCo.

“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.), as amended from time to time.

“Basic Documents” means the Indenture, the Administration Agreement, the Sale Agreement and the Bill of Sale, the Certificate of Formation, the LLC Agreement, the Servicing Agreement, any Intercreditor Agreement, the Series Supplement, the Letter of Representations, the Underwriting Agreement and all other documents and certificates delivered in connection therewith.

“Benefit Plan” means, with respect to any Person, any defined benefit plan (as defined in Section 3(35) of ERISA) that (a) is or was at any time during the past six years maintained by such Person or any ERISA Affiliate of such person, or to which contributions by any such Person are or were at any time during the past six (6) years required to be made or under which such Person has or could have any liability or (b) is subject to the provisions of Title IV of ERISA.

“Bill of Sale” means a bill of sale substantially in the form of Exhibit A to the Sale Agreement.

“Billed CRR Charges” is defined in Annex I to the Servicing Agreement.

“Billing Period” means the period created by dividing the calendar year into twelve (12) consecutive periods of approximately twenty-one (21) Servicer Business Days.

“Bills” means each of the regular monthly bills, summary bills, opening bills and closing bills issued to Customers by APCo in its capacity as Servicer.

“Bond Interest Rate” means, with respect to any Tranche of Consumer Rate Relief Bonds, the rate at which interest accrues on the Consumer Rate Relief Bonds of such Tranche, as specified in the Series Supplement.

“Book-Entry Consumer Rate Relief Bonds” means any Consumer Rate Relief Bonds issued in Book-Entry Form; provided, however, that after the occurrence of a condition whereupon book-entry registration and transfer are no longer permitted and Definitive Consumer

2

Rate Relief Bonds are to be issued to the Holder of such Consumer Rate Relief Bonds, such Consumer Rate Relief Bonds shall no longer be “Book-Entry Consumer Rate Relief Bonds.”

“Book-Entry Form” means, with respect to any Consumer Rate Relief Bond, that such Consumer Rate Relief Bond is not certificated and the ownership and transfers thereof shall be made through book entries by a Clearing Agency as described in Section 2.11 of the Indenture and the Series Supplement pursuant to which such Consumer Rate Relief Bond was issued.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Charleston, West Virginia, New York, New York, or Columbus, Ohio are, or DTC or the Corporate Trust Office is, authorized or obligated by law, regulation or executive order to be closed.

“Calculation Period” means, with respect to any True-Up Adjustment, the period comprised of the twelve (12) succeeding Collection Periods beginning with the Collection Period in which a True-Up Adjustment would go into effect; provided, that in the case of any True-Up Adjustment which will go into effect after the last Scheduled Final Payment Date, the Calculation Period shall begin on the date the True-Up Adjustment goes into effect and end on the Payment Date next following such True-Up Adjustment date; and provided further that for the purpose of calculating the first Periodic Payment Requirement as of the Closing Date, “Calculation Period” means, initially, the period commencing on the Closing Date and ending on the last day of the billing cycle of [month], 2013.

“Capital Contribution” means the amount of cash contributed to the Issuer by APCo as specified in the LLC Agreement.

“Capital Subaccount” is defined in Section 8.02(a) of the Indenture.

“Certificate of Compliance” means the certificate referred to in Section 3.03 of the Servicing Agreement and substantially in the form of Exhibit B attached to the Servicing Agreement.

“Certificate of Formation” means the Certificate of Formation filed with the Secretary of State of the State of Delaware on August 19, 2013 pursuant to which the Issuer was formed.

“Claim” means a “claim” as defined in Section 101(5) of the Bankruptcy Code.

“Clearing Agency” means an organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act.

“Clearing Agency Participant” means a securities broker, dealer, bank, trust company, clearing corporation or other financial institution or other Person for whom from time to time a Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency.

3

“Closing Date” means, [date], 2013, the date on which the Consumer Rate Relief Bonds are originally issued in accordance with Section 2.10 of the Indenture and the Series Supplement.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collection Account” means the account established and maintained by the Indenture Trustee in accordance with Section 8.02(a) of the Indenture and any subaccounts contained therein.

“Collection in Full of the CRR Charges” means the day on which the aggregate amounts on deposit in the General Subaccount and the Excess Funds Subaccount are sufficient to pay in full all the Outstanding Consumer Rate Relief Bonds and to replenish any shortfall in the Capital Subaccount.

“Collection Period” means any period commencing on the first Servicer Business Day of any Billing Period and ending on the last Servicer Business Day of such Billing Period.

“Commission” means the Public Service Commission of West Virginia, or any Governmental Authority succeeding to the duties of such agency.

“Commission Regulations” means any regulations, including proposed or temporary regulations, promulgated by the Commission under the Code of West Virginia, 1931, as amended.

“Consumer Rate Relief Bonds” means the Consumer Rate Relief Bonds authorized by the Financing Order and issued under the Indenture.

“Corporate Trust Office” means the office of the Indenture Trustee at which, at any particular time, its corporate trust business shall be administered, which office (for all purposes other than registration of transfer of Consumer Rate Relief Bonds) as of the Closing Date is located at 190 South LaSalle Street, MK-IL-SL7R, Chicago, Illinois 60603, Attention:

Corporate Trust Services/AEP West Virginia, Telephone: (312) 332-7496, Facsimile: (312) 332-7996, or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders of Consumer Rate Relief Bonds and the Issuer, or the principal corporate trust office of any successor trustee designated by like notice.

“Covenant Defeasance Option” is defined in Section 4.01(b) of the Indenture.

“CRR Bond Collateral” has the meaning specified in the preamble of the Indenture.

“CRR Bond Register” means the register maintained pursuant to Section 2.05 of the Indenture, providing for the registration of the Consumer Rate Relief Bonds and transfers and exchanges thereof.

“CRR Bond Registrar” means the registrar at any time of the CRR Bond Register, appointed pursuant to Section 2.05 of the Indenture.

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“CRR Charge” means any CRR charge as defined in Section 24-2-4f(b)(7) of the Securitization Law that is authorized by the Financing Order.  For the avoidance of doubt, CRR Charges shall not include any local tax surcharge or other tax adjustment that APCo or any successor Servicer is entitled to (and does) include in its Bills to Customers for the benefit of any municipal corporation, other tax levying corporation or other Governmental Authority, notwithstanding that a portion of such surcharges or adjustments may be computed on the basis of the CRR Charges included in such Bills, and all such tax surcharges or tax adjustments, including any compensation for additional state gross receipts taxes resulting therefrom, shall belong to APCo or the successor Servicer, as applicable, for the benefit of the applicable tax levying corporation or Governmental Authority, and APCo (or such successor Servicer, as applicable) shall retain sole responsibility to cause such adjustments and surcharges to be forwarded to the applicable Governmental Authority.  If, for any reason APCo or any successor Servicer is not including any such tax surcharges or adjustments in its Bills to Customers or the Issuer is otherwise responsible for payment of any taxes, franchise fees or license fees imposed on consumer rate relief charges, then the CRR Charge shall be grossed up in accordance with Section 24-2-4f(b)(11)(G) of the Securitization Law to include any such taxes, franchise fees or license fees.

“CRR Charge Collections” means CRR Charges actually received by the Servicer to be remitted to the Collection Account.

“CRR Charge Payments” means the payments made by Customers based on the CRR Charges.

“CRR Costs” means all CRR costs as defined in Section 24-2-4f(b)(8) of the Securitization Law.

“CRR Property” means all CRR Property as defined in Section 24-2-4f(b)(9) of the Securitization Law created pursuant to the Financing Order and under the Securitization Law, including the right to impose, charge and collect the CRR Charges, the right to obtain adjustments to those charges, and all revenues, receipts, collections, rights to payment, payments, moneys, claims or other proceeds arising from the rights and interests created under the Financing Order; provided, that so long as and to the extent that the Servicer is entitled to and does include any local tax surcharge or other tax adjustments in its Bills, CRR Property shall not include any amounts expressly excluded from CRR Charges pursuant to the penultimate sentence of the definition thereof.  As used in the Sale Agreement and the other Basic Documents with respect to APCo, the term “CRR Property” when used with respect to APCo means and includes the rights of APCo that exist prior to the time that such rights are first transferred in connection with the issuance of the Consumer Rate Relief Bonds so as to become CRR Property in accordance with Section 24-2-4f(e)(7) of the Securitization Law and the Financing Order.

“CRR Property Notices” means CRR Property notices filed with the Secretary of State of West Virginia pursuant to Section 24-2-4f(o)(4) of the Securitization Law.

“CRR Property Records” is defined in Section 5.01 of the Servicing Agreement.

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“CRR Rate Class” means each customer class or special contract customer identified as a separate rate class in the Financing Order.

“CRR Rate Schedule” means the Tariff sheets to be filed with the Commission stating the amounts of the CRR Charges, as such Tariff sheets may be amended or modified from time to time pursuant to a True-Up Adjustment.

“CRR Revenue Group” means each Residential, Commercial and Industrial revenue group, each as defined in the Financing Order.

“Customers” means all existing and future West Virginia electric retail customers of APCo or any Successor, including all existing and future West Virginia electric retail customers who are obligated to pay CRR Charges pursuant to the Financing Order.

“Daily Remittance” is defined in Section 6.11(a) of the Servicing Agreement.

“Default” means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default as defined in Section 5.01 of the Indenture.

“Definitive Consumer Rate Relief Bonds” means Consumer Rate Relief Bonds issued in definitive form in accordance with Section 2.13 of the Indenture.

“Delaware Financing Statements” means one or more Uniform Commercial Code financing statements to be filed in the appropriate filing office in the State of Delaware.

“Delaware UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of Delaware.

“DTC” means The Depository Trust Company or any successor thereto.

“Electronic Means” means telephone, telecopy, telegraph, telex, internet, electronic mail, facsimile transmission or any other similar means of electronic communication. Any communication by telephone as an Electronic Means shall be promptly confirmed in writing or by one of the other means of electronic communication authorized herein.

“Eligible Account” means a segregated non-interest-bearing trust account with an Eligible Institution.

“Eligible Institution” means:

(a)           the corporate trust department of the Indenture Trustee, so long as any of the securities of the Indenture Trustee have either a short-term credit rating from Moody’s of at least P-1 or a long term unsecured rating from Moody’s of at least A2 and have a credit rating from each other Rating Agency in one of its generic rating categories which signifies investment grade; or

(b)           a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank), which (i) has either

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(A) a long-term issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, and, if rated by Fitch,  the equivalent of the lower of those two ratings by Fitch or (B) a short-term issuer rating of “A-1+” or higher by S&P and “P-1” or higher by Moody’s and, if Fitch provides a rating thereon, F-1+” by Fitch, or any other long-term, short-term or certificate of deposit rating acceptable to the Rating Agencies and (ii) whose deposits are insured by the FDIC.

If so qualified under clause (b) above, the Indenture Trustee may be considered an Eligible Institution for the purposes of clause (a) of this definition.

“Eligible Investments” mean instruments or investment property which evidence:

(a)           direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;

(b)           demand or time deposits, unsecured certificates of deposit of, money market deposit accounts of , or bankers' acceptances issued by, any depository institution (including the Indenture Trustee, acting in its commercial capacity)  incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by federal or state banking authorities,  so long as the commercial paper or other short term debt obligations of such depository institution are, at the time of deposit, rated not less than A-1 and P-1 or their equivalents by each of S&P and Moody’s and, if Fitch provides a rating thereon, by Fitch, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Consumer Rate Relief Bonds;

(c)           commercial paper (including the Indenture Trustee, acting in its commercial capacity, and other than commercial paper of APCo or any of its Affiliates), which at the time of purchase is rated not less than A-1 and P-1 or their equivalents by each of S&P and Moody’s and, if Fitch provides a rating thereon, by Fitch, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Consumer Rate Relief Bonds;

(d)           investments in money market funds having a rating in the highest investment category granted thereby (including funds for which the Indenture Trustee or any of its Affiliates is investment manager or advisor) from Moody’s, S&P and Fitch, if rated by Fitch;

(e)           repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or certain of its agencies or instrumentalities, entered into with eligible institutions;

(f)           repurchase obligations with respect to any security or whole loan entered into with an Eligible Institution or with a registered broker dealer, acting as principal and that meets the ratings criteria set forth below:

(i)a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any broker/dealer being referred to in this

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definition as a “broker/dealer”), the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s, “A-1+” by Standard & Poor’s and, if Fitch provides a rating thereon, “F-1+” by Fitch at the time of entering into this repurchase obligation, or

(ii)an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s, “A-1+” by Standard & Poor’s and, if Fitch provides a rating thereon, “F-1+” by Fitch at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; and

(g)           any other investment permitted by each of the Rating Agencies;

in each case maturing not later than the Business Day immediately preceding the next Payment Date or Special Payment Date, if applicable (for the avoidance of doubt, investments in money market funds or similar instruments which are redeemable on demand shall be deemed to satisfy the foregoing requirement).  Notwithstanding the foregoing:  (1) no securities or investments which mature in 30 days or more shall be “Eligible Investments” unless the issuer thereof has either a short-term unsecured debt rating of at least P-1 from Moody’s or a long-term unsecured debt rating of at least A2 from Moody’s and also has a long-term unsecured debt rating of at least A+ from S&P; (2) no securities or investments described in clauses (b) through (d) above which have  maturities of more than 30 days but less than or equal to 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least A1 from Moody’s and a short-term unsecured debt rating of at least P-1 from Moody’s; (3) no securities or investments described in clauses (b) through (d) above which have maturities of more than 3 months shall be an “Eligible Investment” unless the issuer thereof has a long-term unsecured debt rating of at least Aa3 from Moody’s and a short-term unsecured debt rating of at least P1 from Moody’s.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means with respect to any Person at any time, each trade or business (whether or not incorporated) that would, at that time, be treated together with such Person as a single employer under Section 401 of ERISA or Section 414(b), (c), (m) or (o) of the Code.

“Estimated CRR Charge Collections” means the sum of the payments in respect of CRR Charges which are deemed to have been received by the Servicer in respect of billed CRR Charges, directly or indirectly, from or on behalf of Customers, calculated in accordance with Annex I of the Servicing Agreement.

“Event of Default” is defined in Section 5.01 of the Indenture.

“Excess Funds Subaccount” is defined in Section 8.02(a) of the Indenture.

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“Excess Remittance” means the amount, if any, calculated for a particular Collection Period, by which all Estimated CRR Charge Collections remitted to the Collection Account during such Collection Period exceed Actual CRR Charge Collections received by the Servicer during such Collection Period.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Expected Amortization Schedule” means, with respect to any Tranche, the expected amortization schedule related thereto set forth in the Series Supplement.

“FDIC” means the Federal Deposit Insurance Corporation or any successor thereto.

“Federal Book-Entry Regulations” means 31 C.F.R. Part 357 et seq. (Department of Treasury).

“Federal Book-Entry Securities” means securities issued in book-entry form by the United States Treasury.

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Servicer from three (3) federal funds brokers of recognized standing selected by it.

“Final” means, with respect to the Financing Order, that the Financing Order has become final, is not being appealed and that the time for filing an appeal thereof has expired.

“Final Maturity Date” means, with respect to each Tranche of Consumer Rate Relief Bonds, the Final Maturity Date therefor, as specified in the Series Supplement.

“Financial Asset” means “financial asset” as set forth in Section 8-102(a)(9) of the NY UCC.

“Financing Order” means the Final Financing Order dated September 20, 2013 issued by the Commission pursuant to the Securitization Law in Docket No. 12-1188-E-PC authorizing the creation of the CRR Property.

“Fitch” means Fitch Ratings or any successor thereto. References to Fitch are effective so long as Fitch is a Rating Agency.

“General Subaccount” is defined in Section 8.02(a) of the Indenture.

“Global Consumer Rate Relief Bond” means a Consumer Rate Relief Bond to be issued to the Holders thereof in Book-Entry Form, which Global Consumer Rate Relief Bond

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shall be issued to the Clearing Agency, or its nominee, in accordance with Section 2.11 of the Indenture and the Series Supplement.

“Governmental Authority” means any nation or government, any federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

“Grant” means  mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, grant, transfer, create, and grant a lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to the Indenture and the Series Supplement.  A Grant of the CRR Bond Collateral or of any other agreement or instrument included therein shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for payments in respect of the CRR Bond Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.

“Holder” or “Bondholder” means the Person in whose name a Consumer Rate Relief Bond is registered on the CRR Bond Register.

“Indemnified Losses” is defined in Section 5.03 of the Servicing Agreement.

“Indenture” means the Indenture, dated as of [date], 2013, by and between the Issuer and U.S. Bank National Association, a national banking association, as Indenture Trustee and as Securities Intermediary as originally executed and, as from time to time supplemented or amended by the Series Supplement or indentures supplemental thereto entered into pursuant to the applicable provisions of the Indenture, as so supplemented or amended, or both, and shall include the forms and terms of the Consumer Rate Relief Bonds established thereunder.

“Indenture Trustee” means U.S. Bank National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any successor indenture trustee under the Indenture.

“Independent” means, when used with respect to any specified Person, that the Person (a) is in fact independent of the Issuer, any other obligor on the Consumer Rate Relief Bonds, the Seller, the Servicer and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director (other than as an independent director or manager) or person performing similar functions.

“Independent Certificate” means a certificate or opinion to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the

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applicable requirements of Section 10.01 of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and consented to by the Indenture Trustee, and such opinion or certificate shall state that the signer has read the definition of “Independent” in the Indenture and that the signer is Independent within the meaning thereof.

“Independent Manager” is defined in Section 4.01(a) of the LLC Agreement.

“Independent Manager Fee” is defined in Section 4.01(a) of the LLC Agreement.

“Indirect Participant” means a securities broker, dealer, bank, trust company or other Person that clears through or maintains a custodial relationship with a Clearing Agency Participant, either directly or indirectly.

“Insolvency Event” means, with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

“Insolvency Law” means any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect.

“Intercreditor Agreement” means, as the context may require, any intercreditor agreement that the Seller, the Servicer, the Issuer and the Indenture Trustee enter into with either (i) the investors in any future accounts receivable or similar financing arrangement in substantially the form of Exhibit D to the Indenture concerning receivables payable by Customers or (ii) the trustee for any holders of bonds issued by Affiliates of APCo which are backed by property consisting of charges payable by Customers pursuant to the Securitization Law or any similar law, collections of which receivables or other charges will be commingled with the CRR Charge Collections, in each case subject to the terms of Section 10.18 of the Indenture.

“Interim True-Up Adjustment” means either a Semi-Annual Interim True-Up Adjustment  made in accordance with Section 4.01(b)(iii) of the Servicing Agreement or an Additional Interim True-Up Adjustment made in accordance with Section 4.01(b)(iv) of the Servicing Agreement.

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“Interim True-Up Adjustment Date” means the effective date of any Interim True-Up Adjustment.

“Internal Revenue Service” means the Internal Revenue Service of the United States of America, or any successor thereto.

“Investment Company Act” means the Investment Company Act of 1940, as amended.

“Investment Earnings” means investment earnings on funds deposited in the Collection Account net of losses and investment expenses.

“Issuance Advice Letter” means the Issuance Advice Letter filed with the Commission pursuant to the Securitization Law and the Financing Order with respect to the Consumer Rate Relief Bonds.

“Issuer” means Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company, named as such in the Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the Consumer Rate Relief Bonds.

“Issuer Order” and “Issuer Request” mean a written order or request signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.

“Legal Defeasance Option” is defined in Section 4.01(b) of the Indenture.

“Letter of Representations” means any applicable agreement between the Issuer and the applicable Clearing Agency, with respect to such Clearing Agency’s rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Consumer Rate Relief Bonds, as the same may be amended, supplemented, restated or otherwise modified from time to time.

“Lien” means a security interest, lien, mortgage, charge, pledge, claim, equity or encumbrance of any kind.

“LLC Act” means the Delaware Limited Liability Company Act, as amended.

“LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of Appalachian Consumer Rate Relief Funding LLC, dated as of August 19, 2013, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Manager” means each manager of the Issuer under the LLC Agreement.

 “Member” has the meaning specified in the first paragraph of the LLC Agreement.

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“Minimum Denomination” means, with respect to any Consumer Rate Relief Bond, the minimum denomination therefor specified in the Series Supplement, which minimum denomination shall be not less than $100,000 and, except as otherwise provided in the Series Supplement, integral multiples thereof, except for one Consumer Rate Relief Bond of each Tranche which may be of smaller denomination.

“Monthly Servicer’s Certificate” means a certificate, substantially in the form of Exhibit A to the Servicing Agreement, completed and executed by a Responsible Officer of the Servicer pursuant to Section 3.01(b)(i) of the Servicing Agreement.

“Moody’s” means Moody’s Investors Service, Inc. or any successor thereto. References to Moody’s are effective so long as Moody’s is a Rating Agency.

“Net Write-Off Percentage” for any Collection Period means the Servicer’s actual system wide charge-off percentage, as adjusted for recoveries on previously written-off bills.

“Net Write-Offs” means, for any Collection Period, an amount equal to the product of (i) the Net Write-Off Percentage for such period times (ii) total Billed CRR Charges attributable to such Collection Period.

“Nonstandard True-Up Adjustment” means any special adjustment to the CRR Charges to reallocate the respective percentages of such CRR Charges to be paid among CRR Revenue Groups in accordance with Section 4.01(b)(ii) of the Servicing Agreement.

“Nonstandard True-Up Adjustment Date” means the date revised CRR Charges are approved and effective pursuant to a final order of the Commission in the related Nonstandard True-Up Adjustment proceeding.

“Notice of Default” is defined in Section 5.01 of the Indenture.

“NY UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York.

“Officer’s Certificate” means a certificate signed by a Responsible Officer of the Issuer under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, and delivered to the Indenture Trustee.  Unless otherwise specified, any reference in the Indenture to an Officer’s Certificate shall be to an Officer’s Certificate of any Responsible Officer of the party delivering such certificate.

“Ongoing Financing Costs” means the costs of servicing the Consumer Rate Relief Bonds over their life allowed to be recovered as a component of CRR Charges under the Financing Order including, without limitation, the Permitted Return, Operating Expenses, the Servicing Fee, the Administration Fee, principal and interest on the Consumer Rate Relief Bonds and any other costs identified in the Basic Documents.

“Operating Expenses” means all unreimbursed fees, costs and out-of-pocket expenses of the Issuer, including all amounts owed by the Issuer to the Indenture Trustee (including indemnities, legal fees and expenses) or any Manager, the Servicing Fee, the

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Administration Fee, legal and accounting fees, Rating Agency fees and any franchise or other taxes owed by the Issuer, including on investment income in the Collection Account.

“Opinion of Counsel” means one or more written opinions of counsel who may, except as otherwise expressly provided in the Basic Documents, be employees of or counsel to the party providing such opinion of counsel, which counsel shall be reasonably acceptable to the party receiving such opinion of counsel, and shall be in form and substance reasonably acceptable to such party.

“Outstanding” means, as of the date of determination, all Consumer Rate Relief Bonds theretofore authenticated and delivered under this Indenture except:

(a)           Consumer Rate Relief Bonds theretofore canceled by the CRR Bond Registrar or delivered to the CRR Bond Registrar for cancellation;

(b)           Consumer Rate Relief Bonds or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Consumer Rate Relief Bonds; and

(c)           Consumer Rate Relief Bonds in exchange for or in lieu of other Consumer Rate Relief Bonds which have been issued pursuant to this Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Consumer Rate Relief Bonds are held by a Protected Purchaser;

provided, that in determining whether the Holders of the requisite Outstanding Amount of the Consumer Rate Relief Bonds or any Tranche thereof have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Basic Document, Consumer Rate Relief Bonds owned by the Issuer, any other obligor upon the Consumer Rate Relief Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Consumer Rate Relief Bonds that the Indenture Trustee actually knows to be so owned shall be so disregarded.  Consumer Rate Relief Bonds so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Consumer Rate Relief Bonds and that the pledgee is not the Issuer, any other obligor upon the Consumer Rate Relief Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons.

“Outstanding Amount” means the aggregate principal amount of all Consumer Rate Relief Bonds or, if the context requires, all Consumer Rate Relief Bonds of a Tranche, Outstanding at the date of determination.

“Paying Agent” means with respect to the Indenture, the Indenture Trustee and any other Person appointed as a paying agent for the Consumer Rate Relief Bonds pursuant to the Indenture.

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“Payment Date” means, with respect to any Tranche of Consumer Rate Relief Bonds, the dates specified in the Series Supplement; provided, that if any such date is not a Business Day, the Payment Date shall be the Business Day immediately succeeding such date.

“Periodic Billing Requirement” means, for any Calculation Period, the aggregate amount of CRR Charges calculated by the Servicer as necessary to be billed during such period in order to collect the Periodic Payment Requirement on a timely basis.

“Periodic Interest” means, with respect to any Payment Date, the periodic interest for such Payment Date as specified in the Series Supplement.

“Periodic Payment Requirement” for any Calculation Period means the total dollar amount of CRR Charge Collections reasonably calculated by the Servicer in accordance with Section 4.01 of the Servicing Agreement as necessary to be received during such period (after giving effect to the allocation and distribution of amounts on deposit in the Excess Funds Subaccount at the time of calculation and which are projected to be available for payments on the Consumer Rate Relief Bonds at the end of such Calculation Period and including any shortfalls in Periodic Payment Requirements for any prior Calculation Period) in order to ensure that, as of the last Payment Date occurring in such Calculation Period, (1) all accrued and unpaid interest on the Consumer Rate Relief Bonds then due shall have been paid in full on a timely basis, (2) the Outstanding Amount of the Consumer Rate Relief Bonds is equal to the Projected Unpaid Balance on each Payment Date during such Calculation Period, (3) the balance on deposit in the Capital Subaccount equals the aggregate Required Capital Level and (4) all other fees and expenses due and owing and required or allowed to be paid under Section 8.02 of the Indenture as of such date shall have been paid in full; provided, that with respect to any Annual True-Up Adjustment or Interim True-Up Adjustment occurring after the last Scheduled Final Payment Date for the Consumer Rate Relief Bonds, the Periodic Payment Requirements shall be calculated to ensure that sufficient CRR Charges will be collected to retire the Consumer Rate Relief Bonds in full as of the next Payment Date.

“Periodic Principal” means, with respect to any Payment Date, the excess, if any, of the Outstanding Amount of Consumer Rate Relief Bonds over the outstanding principal balance specified for such Payment Date on the Expected Amortization Schedule.

“Permitted Lien” means the Lien created by the Indenture.

“Permitted Return” shall mean, for any Payment Date with respect to any Calculation Period, the sum of (i) a rate of return payable to APCo on the amount of the Capital Contribution of 5.85% per annum plus (ii) any Permitted Return not paid on any prior Payment Date.

“Permitted Successor” is defined in Section 5.02 of the Sale Agreement.

“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof.

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“Predecessor Consumer Rate Relief Bond” means, with respect to any particular Consumer Rate Relief Bond, every previous Consumer Rate Relief Bond evidencing all or a portion of the same debt as that evidenced by such particular Consumer Rate Relief Bond, and, for the purpose of this definition, any Consumer Rate Relief Bond authenticated and delivered under Section 2.06 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Consumer Rate Relief Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Consumer Rate Relief Bond.

“Proceeding” means any suit in equity, action at law or other judicial or administrative proceeding.

“Projected Unpaid Balance” means, as of any Payment Date, the sum of the projected outstanding principal amount of each Tranche of Consumer Rate Relief Bonds for such Payment Date set forth in the Expected Amortization Schedule.

“Protected Purchaser” has the meaning specified in Section 8-303 of the UCC.

“Rating Agency” with respect to any Tranche of Consumer Rate Relief Bonds, means any of Moody’s, Standard & Poor’s or Fitch which provides a rating with respect to the Consumer Rate Relief Bonds.  If no such organization or successor is any longer in existence, “Rating Agency” shall be a nationally recognized statistical rating organization or other comparable Person designated by the Issuer, notice of which designation shall be given to the Indenture Trustee and the Servicer.

“Rating Agency Condition” means, with respect to any action, not less than ten (10) Business Days’ prior written notification to each Rating Agency of such action, and written confirmation from each of Standard & Poor’s and Moody’s to the Servicer, the Indenture Trustee and the Issuer that such action will not result in a suspension, reduction or withdrawal of the then current rating by such Rating Agency of any Tranche of Consumer Rate Relief Bonds and that prior to the taking of the proposed action no other Rating Agency shall have provided written notice to the Issuer that such action has resulted or would result in the suspension, reduction or withdrawal of the then current rating of any Tranche of Consumer Rate Relief Bonds; provided, that if within such ten (10) Business Day period, any Rating Agency (other than Standard & Poor’s) has neither replied to such notification nor responded in a manner that indicates that such Rating Agency is reviewing and considering the notification, then (i) the Issuer shall be required to confirm that such Rating Agency has received the Rating Agency Condition request, and if it has, promptly request the related Rating Agency Condition confirmation and (ii) if the Rating Agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five (5) Business Days following such second (2nd) request, the applicable Rating Agency Condition requirement shall not be deemed to apply to such Rating Agency.  For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a Rating Agency’s right to review or consent).

 “Record Date” means, with respect to a Payment Date, in the case of Definitive Consumer Rate Relief Bonds, the close of business on the last day of the calendar month

16

preceding the calendar month in which such Payment Date occurs, and in the case of Book-Entry Consumer Rate Relief Bonds, one Business Day prior to the applicable Payment Date.

“Registered Holder” means the Person in whose name a Consumer Rate Relief Bond is registered on the CRR Bond Register.

“Registration Statement” means the registration statement, Form S-3 Registration Nos. 333-[__] and 333-[__]-01, filed with the SEC for registration under the Securities Act relating to the offering and sale of the Consumer Rate Relief Bonds, and including all amendments thereto.

“Regulation AB” means the rules of the SEC promulgated under Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such may be amended from time to time.

“Remittance Requirement” means, with respect to any Third-Party Collector, any requirement that such Third-Party Collector remit CRR Charges to the Servicer within a prescribed number of days of billing by the Servicer in accordance with, if applicable, the Financing Order, the Tariff, other tariffs and any Commission Regulations.

“Remittance Shortfall” means the amount, if any, calculated for a particular Collection Period, by which Actual CRR Charge Collections received by the Servicer during such Collection Period exceed all Estimated CRR Charge Collections remitted to the Collection Account during such Collection Period.

“Required Capital Level” means an amount equal to 0.50% of the initial principal amount of the Consumer Rate Relief Bonds.

“Requirement of Law” means any foreign, federal, state or local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Authority or common law.

“Responsible Officer” means with respect to (a) the Issuer, any Manager or any duly authorized officer; (b) the Indenture Trustee, any officer within the Corporate Trust Office of such trustee (including the President, any Vice President, Assistant Vice President, Secretary or Assistant Treasurer, Trust Officer or any other officer of the Indenture Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, and that has direct responsibility for the administration of the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred to because of such officer’s knowledge and familiarity with the particular subject); (c) any corporation (other than the Indenture Trustee), the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Assistant Treasurer or any other duly authorized officer of such Person who has been authorized to act in the circumstances; (d) any partnership, any general partner thereof; and (e) any other Person (other than an individual or the Indenture Trustee), any duly authorized officer or member of such Person, as the context may require, who is authorized to act in matters relating to such Person.

17

“Restricted Plan” means (a) an “employee benefit plan” as defined in and subject to Title I of ERISA, (b) a “plan” as defined in and subject to section 4975 of the Code, (c) an entity whose underlying assets include the assets of such employee benefit plan or plan or (d) a governmental or church plan which is subject to any federal, state or local law that is substantially similar to the provisions of section 406 of ERISA or section 4975 of the Code.

“Sale Agreement” means the CRR Property Purchase and Sale Agreement, dated as of the Closing Date, by and between APCo and the Issuer, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Scheduled Final Payment Date” means with respect to each Tranche of Consumer Rate Relief Bonds, the date when all interest and principal is scheduled to be paid with respect to that Tranche in accordance with the Expected Amortization Schedule, as specified in the Series Supplement.  For the avoidance of doubt, the Scheduled Final Payment Date with respect to any Tranche shall be the last Scheduled Payment Date set forth in the Expected Amortization Schedule relating to such Tranche.  The “last Scheduled Final Payment Date” means the Scheduled Final Payment Date of the last maturing Tranche of Consumer Rate Relief Bonds.

“Scheduled Payment Date” means, with respect to each Tranche of Consumer Rate Relief Bonds, each Payment Day on which principal for such Tranche is to be paid in accordance with the Expected Amortization Schedule for such Tranche.

“SEC” means the U.S. Securities and Exchange Commission.

“Secretary of State” means the Secretary of State of the State of Delaware, the Virginia State Corporation Commission of the Commonwealth of Virginia or the Secretary of State of the State of West Virginia, as the case may be, or any Governmental Authority succeeding to the duties of such offices.

“Secured Obligations” is defined in the Series Supplement, a form of which is attached as Exhibit B to the Indenture.

“Secured Parties” means the Indenture Trustee, the Bondholders and any credit enhancer described in the Series Supplement.

“Securities Account” means the Collection Account (to the extent it constitutes a securities account as defined in the NY UCC and Federal Book-Entry Regulations).

“Securities Act” means the Securities Act of 1933, as amended.

“Securities Intermediary” means U.S. Bank National Association, a national banking association, solely in the capacity of a “securities intermediary” as defined in the NY UCC and Federal Book-Entry Regulations or any successor securities intermediary under the Indenture.

“Securitization Law” means the Code of West Virginia, 1931, as amended, §24-2-4f, as may be amended from time to time.

18

“Security Entitlement” means “security entitlement” (as defined in Section 8-102(a)(17) of the NY UCC) with respect to Financial Assets now or hereafter credited to the Securities Account and, pursuant to Federal Book-Entry Regulations, with respect to Federal Book-Entry Securities now or hereafter credited to the Securities Account, as applicable.

“Seller” is defined in the preamble to the Sale Agreement.

“Semi-Annual Interim True-Up Adjustment” means any Interim True-Up Adjustment made pursuant to Section 4.01(b)(iii) of the Servicing Agreement.

“Series Supplement” means the indenture supplemental to the Indenture in the form attached as Exhibit B to the Indenture that authorizes the issuance of the Consumer Rate Relief Bonds.

“Servicer” means APCo, as Servicer under the Servicing Agreement, or any successor Servicer to the extent permitted under the Servicing Agreement.

“Servicer Business Day” means any day other than a Saturday, Sunday or holiday, on which the Servicer maintains normal office hours and conducts business.

“Servicer Default” is defined in Section 7.01 of the Servicing Agreement.

“Servicer’s Certificate” means a certificate, substantially in the form of Exhibit C to the Servicing Agreement, completed and executed by a Responsible Officer of the Servicer pursuant to Section 4.01(c)(ii) of the Servicing Agreement.

“Servicing Agreement” means the CRR Property Servicing Agreement, dated as of the Closing Date, by and between the Issuer and APCo, as the same may be amended, restated, supplemented or otherwise modified from time to time.

“Servicing Fee” means the fee payable to the Servicer on each Payment Date for services rendered during the period from, but not including, the preceding Payment Date (or from the Closing Date in the case of the first Payment Date) to and including the current Payment Date, determined pursuant to Section 6.06 of the Servicing Agreement.

“Servicing Standard” means the obligation of the Servicer to calculate, apply, remit and reconcile proceeds of the CRR Property, including CRR Charge Payments, and all other CRR Bond Collateral for the benefit of the Issuer and the Holders (i) with the same degree of care and diligence as the Servicer applies with respect to payments owed to it for its own account, (ii) in accordance with all applicable procedures and requirements established by the Commission for collection of electric utility tariffs and (iii) in accordance with the other terms of the Servicing Agreement.

“Special Member” is defined in Section 1.02(b) of the LLC Agreement.

“Special Payment” means with respect to any Tranche of Consumer Rate Relief Bonds, any payment of principal of or interest on (including any interest accruing upon default),

19

or any other amount in respect of, the Consumer Rate Relief Bonds of such Tranche that is not actually paid within five (5) days of the Payment Date applicable thereto.

“Special Payment Date” means the date on which a Special Payment is to be made by the Indenture Trustee to the Holders.

“Special Record Date” means with respect to any Special Payment Date, the close of business on the fifteenth (15th) day (whether or not a Business Day) preceding such Special Payment Date.

“Sponsor” means APCo, in its capacity as “sponsor” of the Consumer Rate Relief Bonds within the meaning of Regulation AB.

“Standard & Poor’s” or “S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, or any successor thereto.  References to S&P are effective so long as S&P is a Rating Agency.

“State” means any one of the fifty states of the United States of America or the District of Columbia.

“State Pledge” means the pledge of the State of West Virginia as set forth in §24-2-4f(s)(1) of the Securitization Law.

“Subaccounts” is defined in Section 8.02(a) of the Indenture.

“Successor” has the meaning set forth in the Securitization Law and includes, without limitation, any entity resulting from the merger or consolidation of, or similar transaction with respect to, APCo and Wheeling Power Company.

“Successor Servicer” is defined in Section 3.07(e) of the Indenture.

“Tariff” means APCo’s P.S.C. W.VA. Tariff No. 13 filed with the Commission, as the same may be amended, restated, supplemented or otherwise modified from time to time, including, without limitation, with respect to any Successor.

“Temporary Consumer Rate Relief Bonds” means Consumer Rate Relief Bonds executed, and upon the receipt of an Issuer Order, authenticated and delivered by the Indenture Trustee pending the preparation of Definitive Consumer Rate Relief Bonds pursuant to Section 2.04 of the Indenture.

“Termination Notice” is defined in Section 7.01 of the Servicing Agreement.

“Third-Party Collector” means each electric utility, municipally owned utility and/or cooperative, which, pursuant to the Tariff, any other tariffs filed with the Commission, or any agreement with APCo, is obligated to bill, pay or collect CRR Charges.

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“Tranche” means any one of the groupings of Consumer Rate Relief Bonds differentiated by amortization schedule, interest rate or sinking fund schedule, as specified in the Series Supplement.

“Treasury Regulations” means the regulations, including proposed or temporary regulations, promulgated under the Code.  References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.

“True-Up Adjustment” means any Annual True-Up Adjustment, Interim True-Up Adjustment or Nonstandard True-Up Adjustment, as the case may be.

“Trust Indenture Act” or “TIA” means the Trust  Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, as in force on the Closing Date, unless otherwise specifically provided.

“UCC” means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time.

“Underwriters” means the underwriters who purchase Consumer Rate Relief Bonds of any Tranche from the Issuer and sell such Consumer Rate Relief Bonds in a public offering.

“Underwriting Agreement” means the Underwriting Agreement, dated as of [pricing date], 2013, by and among APCo, the representatives of the several Underwriters named therein and the Issuer, as the same may be amended, supplemented or modified from time to time.

“Unregistered Consumer Rate Relief Bonds” means any Consumer Rate Relief Bonds not registered under the Securities Act or the securities laws of any other jurisdiction.

“Upfront Financing Costs” means those financing costs incurred in connection with the issuance of the Consumer Rate Relief Bonds allowed under the Financing Order.

“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the option of the issuer thereof.

“Utilities Code” is defined in Section 1.01(e) of the Servicing Agreement.

“Weighted Average Days Outstanding” means the weighted average number of days APCo’s monthly bills to Customers remain outstanding during the calendar year immediately preceding the calculation thereof pursuant to Section 4.01(b)(i) of the Servicing Agreement.

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“West Virginia UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of West Virginia.

B.           Other Terms.  All accounting terms not specifically defined herein shall be construed in accordance with United States generally accepted accounting principles.  To the extent that the definitions of accounting terms in any Basic Document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in such Basic Document shall control.  As used in the Basic  Documents, the term “including” means “including without limitation,” and other forms of the verb “to include” have correlative meanings.  All references to any Person shall include such Person’s permitted successors.

C.           Computation of Time Periods.  Unless otherwise stated in any of the Basic Documents, as the case may be, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.”

D.           Reference; Captions.  The words “hereof,” “herein” and “hereunder” and words of similar import when used in any Basic Document shall refer to such Basic Document as a whole and not to any particular provision of such Basic Document; and references to “Section,” “subsection,” “Schedule” and “Exhibit” in any Basic Document are references to Sections, subsections, Schedules and Exhibits in or to such Basic Document unless otherwise specified in such Basic Document.  The various captions (including the tables of contents) in each Basic  Document are provided solely for convenience of reference and shall not affect the meaning or interpretation of any Basic Document.

E.           The definitions contained in this Appendix A are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter forms of such terms.

22

EX-5.1

	SIDLEY AUSTIN llp 787 SEVENTH AVENUE NEW YORK, NY 10019 (212) 839 5300 (212) 839 5599 FAX	BEIJING BOSTON BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA	HONG KONG HOUSTON LONDON LOS ANGELES NEW YORK PALO ALTO SAN FRANCISCO	SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C.
		FOUNDED 1866

Exhibit 5.1

October 24, 2013

Appalachian Power Company

Appalachian Consumer Rate Relief Funding LLC

1 Riverside Plaza

Columbus, Ohio 43215

Re: Appalachian Consumer Rate Relief Funding LLC

Ladies and Gentlemen:

We have acted as special counsel to Appalachian Power Company (“APCo”) and Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company (the “Company”), in connection with the preparation of the Registration Statement filed on Form S-3 (Registration Nos. 333-191392 and 333-191392-01) filed on September 26, 2013 and as amended by Amendment No. 1 filed October 24, 2013 (collectively, the “Registration Statement”) with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), relating to the proposed issuance of up to $382,000,000 of senior secured consumer rate relief bonds (the “Consumer Rate Relief Bonds”) of the Company to be offered in such manner as described in the form of the prospectus (the “Prospectus”) included as part of the Registration Statement.  The Consumer Rate Relief Bonds are to be issued under an Indenture (the “Base Indenture”) between the Company and U.S. Bank National Association, a national banking association, as indenture trustee (the “Indenture Trustee”), as supplemented by a Series Supplement (the “Series Supplement” and, together with the Base Indenture, the “Indenture”) between the Company and the Trustee, the form of each of which has been filed as an exhibit to the Registration Statement.

This opinion letter is being delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.

 We are familiar with the proceedings taken and proposed to be taken by the Company in connection with the proposed authorization, issuance and sale of the Consumer Rate Relief Bonds.  We have examined and relied upon originals, or copies of originals, certified or otherwise identified to our satisfaction of such records of the Company and such agreements, certificates of public officials, certificates of officers or other representatives of the Company and other instruments, and examined such questions of law and satisfied ourselves to such matters of fact as we deemed relevant or necessary as a basis for this letter.  In rendering the opinions expressed in this letter, we have assumed the legal capacity of all natural persons, the

Sidley Austin LLP is a limited liability partnership practicing in affiliation with other Sidley Austin partnerships

October 24, 2013

Page 2

genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the original documents of any copies thereof submitted to us for examination.  As to any facts material to the opinions expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Company or others.

Based on and subject to the foregoing and the other limitations, qualifications and assumptions set forth herein, we are of the opinion that:

 1.         The Company is a limited liability company validly existing and in good standing under the laws of the State of Delaware.

 2.         The Company has limited liability company power and authority to execute and deliver the Indenture and to authorize and issue the Consumer Rate Relief Bonds and to perform its obligations under the Indenture and the Consumer Rate Relief Bonds.

 3.         The Consumer Rate Relief Bonds will be validly issued and binding obligations of the Company when (i) the Registration Statement, as finally amended (including any post-effective amendments), shall have become effective under the Securities Act; (ii) the Indenture (including any necessary supplemental indenture) shall have been qualified under the Trust Indenture Act of 1939, as amended, and duly executed and delivered by the Company and the Indenture Trustee; and (iii) the Consumer Rate Relief Bonds shall have been duly executed and authenticated in accordance with the provisions of the Indenture and shall have been duly delivered to the purchasers thereof against payment of the agreed consideration therefor.

 Our opinion is subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent transfer and other similar laws relating to or affecting creditors’ rights generally and to general equitable principles (regardless of whether considered in a proceeding in equity or at law), including concepts of commercial reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief.

 This letter is limited to the Limited Liability Company Act of the State of Delaware and the laws of the State of New York (excluding the securities laws of the State of New York).  We express no opinion as to the laws, rules or regulations of any other jurisdiction, including, without limitation, the federal laws of the United States of America or any state securities or blue sky laws.

 We hereby consent to (i) the posting of a copy of this letter to an internet website required under Rule 17g-5 under the Exchange Act and maintained by APCo solely for the purpose of complying with such rule and (ii) the filing of this letter as an exhibit to the Registration Statement and to all references to our firm included in or made a part of the Registration Statement. In giving the foregoing consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act.

Very truly yours,

/s/ Sidley Austin LLP

EX-8.1

	SIDLEY AUSTIN llp 787 SEVENTH AVENUE NEW YORK, NY 10019 (212) 839 5300 (212) 839 5599 FAX	BEIJING BOSTON BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA	HONG KONG HOUSTON LONDON LOS ANGELES NEW YORK PALO ALTO SAN FRANCISCO	SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C.
		FOUNDED 1866

Exhibit 8.1

October 24, 2013

Appalachian Power Company

Appalachian Consumer Rate Relief Funding LLC

1 Riverside Plaza

Columbus, Ohio 43215

Re: Appalachian Consumer Rate Relief Funding LLC

Ladies and Gentlemen:

We have acted as special counsel to Appalachian Power Company (“APCo”) and Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company (the “Company”), in connection with the preparation of the Registration Statement filed on Form S-3 (Registration Nos. 333-191392 and 333-191392-01) filed on September 26, 2013 and as amended by Amendment No. 1 filed October 24, 2013 (collectively, the “Registration Statement”) with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), relating to the proposed issuance of up to $[__] of consumer rate relief bonds (the “Consumer Rate Relief Bonds”) of the Company to be offered in such manner as described in the form of the prospectus (the “Prospectus”) included as part of the Registration Statement.  The Consumer Rate Relief Bonds are to be issued under an Indenture (the “Indenture”) between the Company and U.S. Bank National Association, a national banking association, as indenture trustee (the “Indenture Trustee”).

We are familiar with the proceedings taken and proposed to be taken by the Company in connection with the proposed authorization, issuance and sale of the Consumer Rate Relief Bonds.  We have examined and relied upon originals, or copies of originals, certified or otherwise identified to our satisfaction of such records of the Company and such agreements, certificates of public officials, certificates of officers or other representatives of the Company and other instruments, and examined such questions of law and satisfied ourselves to such matters of fact as we deemed relevant or necessary as a basis for this letter.  In rendering the opinions expressed in this letter, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the original documents of any copies thereof submitted to us for examination.  As to any facts material to the opinions expressed herein that we have not

Sidley Austin LLP is a limited liability partnership practicing in affiliation with other Sidley Austin partnerships

October 24, 2013

Page 2

independently established or verified, we have relied upon statements and representations of officers and other representatives of the Company or others.

Based upon the foregoing, it is our opinion that for U.S. federal income tax purposes, (1) the Company will not be treated as a taxable entity separate and apart from APCo and (2) the Consumer Rate Relief Bonds will be treated as debt of APCo.

Our opinion is limited to the United States federal income tax matters specifically covered hereby, and we have not been asked to address, nor have we addressed, any other tax consequences regarding the transaction referred to above or any other transaction. This opinion is rendered as of the date hereof and is based on the current provisions of the Internal Revenue Code and the Treasury regulations issued or proposed thereunder, Revenue Rulings, Revenue Procedures and other published releases of the Internal Revenue Service and current case law, any of which can change at any time.  Any change could apply retroactively and modify the legal conclusions upon which our opinions are based.  This opinion is rendered as of the date hereof and we do not undertake, and hereby disclaim, any obligation to advise you of any changes in law or fact, whether or not material, that may be brought to our attention at a later date.

We are furnishing this opinion to you solely in connection with the issuance of the Consumer Rate Relief Bonds described above, and this opinion is not to be relied on, circulated, quoted or otherwise referred to for any other purpose. However, we hereby consent to (i) the posting of a copy of this letter to an internet website required under Rule 17g-5 under the Exchange Act and maintained by APCo solely for the purpose of complying with such rule and (ii) the filing of this opinion as an exhibit to the Registration Statement and to the references to this Firm in the Prospectus under the section captioned "Prospectus Summary— Federal Income Tax Status,” the Prospectus under the section captioned "Material U.S. Federal Income Tax Consequences,” the Prospectus under the section captioned "Legal Matters,” and the Prospectus Supplement under the section captioned "Material U.S. Federal Income Tax Consequences.” In giving such consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act, or the related rules and regulations of the Commission thereunder.

Very truly yours,

/s/ Sidley Austin LLP

EX-24.1

Exhibit 24.1

APPALACHIAN POWER COMPANY

POWER OF ATTORNEY

Each of the undersigned directors or officers of APPLALACHIAN POWER COMPANY, a Virginia corporation, which is to file with the Securities and Exchange Commission, Washington, D.C. 20549, under the provisions of the Securities Act of 1933, as amended (the “Act”), one or more Registration Statements for the registration thereunder of up to $400,000,000 aggregate principal amount of senior secured transition bonds to be issued by Appalachian Consumer Rate Relief Funding LLC, a wholly-owned subsidiary of the Company, or one or more post-effective Registration Statements, does hereby appoint. NICHOLAS K. AKINS, BRIAN X. TIERNEY, JULIA A. SLOAT and RENEE V. HAWKINS, his or her true and lawful attorneys, and each of them his or her true and lawful attorney, with power to act without the others, and with full power of substitution or resubstitution, to execute for him or her and in his or her name said Registration Statement(s) and any and all amendments thereto, whether said amendments add to, delete from or otherwise alter the Registration Statement(s) or the related Prospectus(es) included therein, or add or withdraw any exhibits or schedules to be filed therewith and any and all instruments necessary or incidental in connection therewith, hereby granting unto said attorneys and each of them full power and authority to do and perform in the name and on behalf of each of the undersigned, and in any and all capacities, every act and thing whatsoever required or necessary to be done in and about the premises, as fully and to all intents and purposes as each of the undersigned might or could do in person, hereby ratifying and approving the acts of said attorneys and each of them.

IN WITNESS WHEREOF the undersigned have hereunto set their hands and seals this 26th day of March, 2013.

/s/ Nicholas K. Akins		/s/ Mark C. McCullough
Nicholas K. Akins	L.S.	Mark C. McCullough	L.S.
/s/ Lisa M. Barton		/s/ Robert P. Powers
Lisa M. Barton	L.S.	Robert P. Powers	L.S.
/s/ David M. Feinberg		/s/ Brian X. Tierney
David M. Feinberg	L.S.	Brian X. Tierney	L.S.
/s/ Lana L. Hillebrand		/s/ Dennis E. Welch
Lana L. Hillebrand	L.S.	Dennis E. Welch	L.S.

APPALACHIAN POWER COMPANY

Board of Directors

March 26, 2013

The Chairman reminded the Board that the Company is seeking to raise up to $400,000,000 or such other amount as approved by the West Virginia Public Service Commission (“WVPSC”) in a structured financing (the “Transaction”) through the creation and issuance of securities (the “Bonds”).  In connection with the Transaction, the Company will form Appalachian Consumer Rate Relief Funding LLC (the “Purchaser”), which will (i) purchase from the Company certain uncollected expanded net energy and related costs (the “Property”) created pursuant to a financing order (the “Financing Order”) to be issued by the WVPSC, and (ii) be the issuer of the Bonds.  The Company (including in its capacity as the sole member of the Purchaser) will enter into agreements relating to (i) the sale of rights in and to the Property, (ii) the assignment by the Purchaser of its rights in, to and under the Property and the agreements relating to the servicing of the Property and certain other related assets as security for the issuance of the Bonds, (iii) the servicing of the Property, (iv) the providing of administration services to the Purchaser, and (v) the issuance and sale of up to $400,000,000 of Bonds or such other amount as approved by the WVPSC in one or more private placements or underwritten public offerings.  The Chairman stated that the Board should ratify and confirm the actions taken by the officers of the Company in connection with the Transaction and authorize the Company (including in its capacity as the sole member of the Purchaser) to complete the Transaction;

Thereupon, on motion duly made and seconded, it was unanimously

RESOLVED, that the Transaction and the related transactions, including, without limitation, the formation of the Purchaser, the entering into of agreements (including in its capacity as the sole member of the Purchaser) relating to the sale of the Property, the servicing of the Property, the providing of administration services to the Purchaser, and the issuance and sale of up to $400,000,000  of Bonds in one or more private placements or underwritten public offerings, are hereby authorized, ratified and approved; and further

RESOLVED, that the actions of the officers of the Company in preparing and filing with the WVPSC (i) the Company’s application (“Application”) for a WVPSC order requesting authorization in respect of the transactions contemplated in connection with the Transaction, including the creation of the Purchaser and the issuance of the Bonds, and (ii) all supplements to the Application are hereby ratified, confirmed and approved in all respects, and the officers of the Company are each hereby authorized and directed to prepare and file, or to cause to be prepared and filed, with the WVPSC any reports with respect to the Transaction as may be required by the WVPSC, including any issuance advice letter or tariff; and that the appropriate officers of the Company are directed to file in an appropriate location, properly identified, copies of such Application and of all supplements thereto, together with copies of the Financing Order or orders of the WVPSC relating to the Transaction.

Appalachian Power Company

March 26, 2013

Page 2

The Chairman stated that the Company (including in its capacity as the sole member of the Purchaser) has or will enter into various agreements and execute various documents in furtherance of the Transaction, including a Limited Liability Company Agreement of Appalachian Consumer Rate Relief Funding LLC (“LLC Agreement”), establishing, among other things, a management committee.

Thereupon, on motion duly made and seconded, it was unanimously

RESOLVED, that (i) the Chief Executive Officer, the Chief Financial Officer, the President, the Treasurer or the Assistant Treasurer of the Company, or (ii) any Executive Vice President of American Electric Power Service Corporation (each, an “Authorized Person” and collectively the “Authorized Persons”) are each authorized and directed for and on behalf and in the name of the Company (including in its capacity as the sole member of the Purchaser) to negotiate the terms and provisions of, and to acknowledge, approve, receive, execute and/or deliver, the LLC Agreement and any amendments or supplements thereto, any such officer’s approval of the form, content, necessity or desirability of any such document to be conclusively evidenced by such officer’s acknowledgment, approval, receipt, execution or delivery thereof on behalf of the Company; and further

RESOLVED, that the Authorized Persons are each authorized and directed for and on behalf and in the name of the Company (including in its capacity as the sole member of the Purchaser) to take and adopt such action as may be required or permitted under the LLC Agreement to appoint, or to ratify the appointment of, one or more managers (who may be one or more of such officers) for the Purchaser or otherwise to cause the taking of action by the Purchaser in connection with the Transaction or thereafter; and further

RESOLVED, that the Authorized Persons of the Company are each authorized and directed to do, or cause to be done, all acts and things, including, without limitation, the execution and delivery of all affidavits, agreements, acknowledgments, appointments, certificates, consents, directions, agreements, or other documents in such form, and containing such provisions, as may be considered necessary, appropriate or desirable, the approval on behalf of the Company (including in its capacity as the sole member of the Purchaser) of the form, content, necessity or desirability of any such affidavit, agreement, acknowledgment, appointment, certificate, consent, direction, agreement, or other document to be conclusively evidenced by any such Authorized Person’s execution thereof on behalf of the Company (including in its capacity as the sole member of the Purchaser) as may seem to such officer to be necessary, appropriate or desirable (i) to perform the Company’s obligations in respect of the Transaction, including the LLC Agreement, and (ii) to carry out the intent and purposes of these resolutions.

Appalachian Power Company

March 26, 2013

Page 3

The Chairman stated that the Company has determined that the Company should be a registrant on the Registration Statement on Form S-3 (the “Registration Statement”) for the Bonds to be filed with the Securities and Exchange Commission (“SEC”) pursuant to the applicable provisions of the Securities Act of 1933, as amended, and to register or qualify the securities to be sold pursuant to such financing program under the "blue sky" laws of various jurisdictions;

Thereupon, on motion duly made and seconded, it was unanimously:

RESOLVED, that the proper officers of this Company be, and they hereby are, authorized to execute and file with the Securities and Exchange Commission ("SEC") on behalf of the Company one or more Registration Statements pursuant to the applicable provisions of the Securities Act of 1933, as amended; and further

RESOLVED, that it is desirable and in the best interest of the Company that the Bonds be qualified or registered for sale in various jurisdictions; the Authorized Persons be, and they hereby are, authorized to determine the jurisdictions in which appropriate action shall be taken to qualify or register for sale all or such part of the Bonds as said Authorized Persons may deem advisable; that said Authorized Persons are hereby authorized to perform on behalf of the Company any and all such acts as they may deem necessary or advisable in order to comply with the applicable laws of any such jurisdictions, and in connection therewith to execute and file all requisite papers and documents, including, but not limited to, applications, reports, surety bonds, irrevocable consents and appointments of attorneys for service of process; and the execution by such Authorized Persons of any such paper or document or the doing by them of any act in connection with the foregoing matters shall conclusively establish their authority therefor from the Company and the approval and ratification by the Company of the papers and documents so executed and the action so taken; and further

RESOLVED, that the Authorized Persons be, and they hereby are, authorized and directed to take any and all further action in connection therewith, including the execution and filing of such amendment or amendments, supplement or supplements and exhibit or exhibits thereto as they may deem necessary or desirable.

The Chairman stated that, in connection with the filing with the SEC the Registration Statement relating to the proposed issuance and sale of Bonds, there is to be filed with the SEC a Power of Attorney, dated March 26, 2013, executed by certain of the officers and directors of this Company appointing Nicholas K. Akins, Brian X. Tierney, Julia A. Sloat and Renee V. Hawkins, or any one of them, their true and lawful attorneys, with the powers and authority set forth in said Power of Attorney;

Appalachian Power Company

March 26, 2013

Page 4

NOW, THEREFORE, BE IT

RESOLVED, that each and every one of said officers and directors be, and they hereby are, authorized to execute said Power of Attorney; and further

RESOLVED, that any and all action hereafter taken by any of said named attorneys under said Power of Attorney be, and the same hereby is, ratified and confirmed and that said attorneys shall have all the powers conferred upon them and each of them by said Power of Attorney; and further

RESOLVED, that the Registration Statement and any amendments thereto, hereafter executed by any of said attorneys under said Power of Attorney be, and the same hereby are, ratified and confirmed as legally binding upon this Company to the same extent as if the same were executed by each said officer and director of this Company personally and not by any of said attorneys.

EX-24.2

Exhibit 24.2

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC

POWER OF ATTORNEY

Each of the undersigned managers or officers of APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, a Delaware limited liability corporation, which is to file with the Securities and Exchange Commission, Washington, D.C. 20549, under the provisions of the Securities Act of 1933, as amended (the “Act”), one or more Registration Statements for the registration thereunder of up to $385,000,000 or such other amount as approved by the West Virginia Public Service Commission aggregate principal amount of its senior secured consumer rate relief bonds, or one or more pre- or post-effective Registration Statements, does hereby appoint. NICHOLAS K. AKINS, BRIAN X. TIERNEY, JULIA A. SLOAT and RENEE V. HAWKINS, his or her true and lawful attorneys, and each of them his or her true and lawful attorney, with power to act without the others, and with full power of substitution or resubstitution, to execute for him or her and in his or her name said Registration Statement(s) and any and all amendments thereto, whether said amendments add to, delete from or otherwise alter the Registration Statement(s) or the related Prospectus(es) included therein, or add or withdraw any exhibits or schedules to be filed therewith and any and all instruments necessary or incidental in connection therewith, hereby granting unto said attorneys and each of them full power and authority to do and perform in the name and on behalf of each of the undersigned, and in any and all capacities, every act and thing whatsoever required or necessary to be done in and about the premises, as fully and to all intents and purposes as each of the undersigned might or could do in person, hereby ratifying and approving the acts of said attorneys and each of them.

IN WITNESS WHEREOF the undersigned have hereunto set their hands and seals this 28th day of August, 2013.

/s/ Victor A. Duva
Victor A. Duva	L.S.
/s/ Renee V. Hawkins
Renee V. Hawkins	L.S.
/s/ Julia A. Sloat
Julia A. Sloat	L.S.
/s/ Brian X. Tierney
Brian X. Tierney	L.S.
/s/ Kenneth J. Uva
Kenneth J. Uva	L.S.

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC

WRITTEN CONSENT OF THE BOARD OF MANAGERS

The undersigned, being the all of the managers of the Board of Managers (the “Board”) of APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, a Delaware limited liability company (the “Company”), does hereby take the following actions and adopt the following resolutions, by written consent pursuant to Section 18-404 of the Delaware Limited Liability Company Act:

WHEREAS, pursuant to Section 8 of the Limited Liability Company Agreement of the Company, the Board desires to designate officers of the Company;

NOW, THEREFORE, BE IT:

RESOLVED, that the following person be, and they hereby are, nominated and elected, in accordance with and subject to the Limited Liability Company Agreement and the Delaware Limited Liability Company Act, to hold the offices set forth opposite their respective names until such time as their successors shall have been elected and qualified or their earlier resignation or removal by the Board:

Brian X. Tierney	-	President
Julia A. Sloat	-	Vice President and Treasurer
Joseph M. Buonaiuto	-	Controller and Chief Accounting Officer
David. M. Feinberg	-	Secretary
Renee V. Hawkins	-	Assistant Treasurer
Jeffrey D. Cross	-	Assistant Secretary
Thomas G. Berkemeyer  -	-	Assistant Secretary

WHEREAS, in connection with the filing with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-3 relating to the proposed issuance and sale of phase-in-recovery bonds (“Bonds”), there is to be filed with the SEC a Power of Attorney, dated August 28, 2013, executed by certain of the officers and directors of this Company appointing Nicholas K. Akins, Brian X. Tierney, Julia A. Sloat and Renee V. Hawkins, or any one of them, their true and lawful attorneys, with the powers and authority set forth in said Power of Attorney;

NOW, THEREFORE, BE IT

RESOLVED, that each and every one of said officers and directors be, and they hereby are, authorized to execute said Power of Attorney; and further

RESOLVED, that any and all action hereafter taken by any of said named attorneys under said Power of Attorney be, and the same hereby is, ratified and confirmed and that said attorneys shall have all the powers conferred upon them and each of them by said Power of Attorney; and further

RESOLVED, that the Registration Statement and any amendments thereto, hereafter executed by any of said attorneys under said Power of Attorney be, and the same hereby are, ratified and confirmed as legally binding upon this Company to the same extent as if the same were executed by each said officer and director of this Company personally and not by any of said attorneys.

IN WITNESS WHEREOF, the undersigned, constituting all of the members of the Board has executed this Written Consent as of August 20, 2013.

/s/ Victor A. Duva

Victor A. Duva

/s/ Renee V. Hawkins

Renee V. Hawkins

/s/ Julia A. Sloat

Julia A. Sloat

/s/ Brian X. Tierney

Brian X. Tierney

/s/ Kenneth J. Uva

Kenneth J. Uva

2

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC

WRITTEN CONSENT OF THE BOARD OF MANAGERS

The undersigned, being the all of the managers of the Board of Managers (the “Board”) of APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, a Delaware limited liability company (the “Company”), does hereby take the following actions and adopt the following resolutions, by written consent pursuant to Section 18-404 of the Delaware Limited Liability Company Act:

WHEREAS, the Company’s parent, Appalachian Power Company (“APCo”), is seeking to raise up to $385,000,000 in a structured financing (the “Securitization”) through the creation and issuance of securities (the “Consumer Rate ReliefBonds”) to be approved by the West Virginia Public Service Commission (the “WVPSC”);

WHEREAS, in connection with the Securitization, APCo formed the Company to (i) purchase from APCo certain consumer rate reliefproperty (the “Consumer Rate ReliefProperty”) created pursuant to a Financing Order (the “Financing Order”) to be issued by the WVPSC, and (ii) be the issuer of the Consumer Rate ReliefBonds;

WHEREAS,  APCo (including in its capacity as the sole member of the Company) and the Company will enter into agreements relating to (i) the sale of rights in and to the Consumer Rate Relief Property, (ii) the assignment by the Company of its rights in, to and under the Consumer Rate ReliefProperty and the agreements relating to the servicing of the Consumer Rate ReliefProperty and certain other related assets as security for the issuance of the Consumer Rate Relief Bonds, (iii) the servicing of the Consumer Rate ReliefProperty, (iv) the providing of administration services to the Company, and (v) the issuance and sale of up to $385,0000,000 of Consumer Rate ReliefBonds approved by the WVPSC in one or more underwritten public offering;

WHEREAS, the Company has entered into or will enter into various agreements and execute various documents in furtherance of the Securitization, including (i) an Amended and Restated Limited Liability Company Agreement of the Company (“Amended LLC Agreement”); (ii) a CRR Property Purchase and Sale Agreement between the Company and APCo (“Sale Agreement”) pursuant to which APCo will sell its rights in, to and under the Consumer Rate Relief Property and certain other related assets to the Company; (iii) a CRR Property Servicing Agreement between APCo, as Servicer, and the Company (“Servicing Agreement”); (iv) the Indenture and related Series Supplement (collectively, the “Indenture”) with US Bank, National Association (“US Bank”) or another bank, trust company or financial institution, as indenture trustee (the “Indenture Trustee”) relating to the Consumer Rate Relief Bonds; (v) an Administration Agreement between the Company and APCo (the “Administration Agreement”); and (vi) an Underwriting Agreement among the Company, APCo and the underwriters named therein (the “Underwriting Agreement”, and, together with the Sale Agreement, the Servicing Agreement, the Indenture, the Administration Agreement and the Amended LLC Agreement, the “Principal Agreements”);

Appalachian Consumer Rate Relief Funding LLC

August 28, 2013

Page 2

WHEREAS, the Board desires to ratify and confirm the actions taken by the officers of the Company in connection with the Securitization, authorize the filing of the Company’s and APCo’s Registration Statement on Form S-3 (as amended, the “Registration Statement”), and authorize the Company to complete the Securitization and authorize the appropriate officers of the Company to enter into the Principal Agreements;

NOW, THEREFORE, BE IT:

RESOLVED, that the Securitization, the filing of the Registration Statement and the related transactions, the entering into of agreements relating to the sale of the Consumer Rate Relief Property, the servicing of the Consumer Rate Relief Property, and the issuance and sale of up to $385,000,000 of Consumer Rate Relief Bonds in an underwritten public offering, are hereby authorized, ratified and approved; and further

RESOLVED, that the terms and provisions of the Consumer Rate Relief Bonds, as summarized in the Prospectus and Prospectus Supplement relating thereto (together, the “Prospectus”) in the form contained in the draft Registration Statement on Form S-3, are hereby authorized and approved with such changes therein or thereto, if any, as the officer or officers executing the final form thereof in connection with the filing of the same with the Securities and Exchange Commission shall consider necessary, appropriate or desirable, such officer’s or officers’ approval of any such changes to be conclusively evidenced by his or her execution thereof.; and further

RESOLVED, that the President, any Vice President, the Treasurer and any Assistant Treasurer and the Secretary and any Assistant Secretary of the Company (each, an “Authorized Officer” and collectively the “Authorized Officers”) are each authorized and directed for and on behalf and in the name of the Company to negotiate the terms and provisions of, and to acknowledge, approve, receive, execute and/or deliver, the Principal Agreements and any amendments or supplements thereto, any such officer’s approval of the form, content, necessity or desirability of any such document to be conclusively evidenced by such officer’s acknowledgment, approval, receipt, execution or delivery thereof on behalf of the Company; and further

RESOLVED, that the Authorized Officers are each authorized and directed for and on behalf and in the name of the Company to take and adopt such action as may be required or permitted under (i) the Indenture to establish the terms of the Consumer Rate Relief Bonds, and (ii) the Underwriting Agreement to cause the completion and closing of the Securitization; and further

RESOLVED, that the Authorized Officers of the Company are each authorized and directed to do, or cause to be done, all acts and things, including, without limitation, the execution and delivery of all affidavits, agreements,

Appalachian Consumer Rate Relief Funding LLC

August 28, 2013

Page 3

acknowledgments, appointments, certificates, consents, directions, agreements, or other documents in such form, and containing such provisions, as may be considered necessary, appropriate or desirable, the approval on behalf of the Company of the form, content, necessity or desirability of any such affidavit, agreement, acknowledgment, appointment, certificate, consent, direction, agreement, or other document to be conclusively evidenced by any such Authorized Officer’s execution thereof on behalf of the Company as may be necessary, appropriate or desirable (i) to perform the Company’s obligations in respect of the Securitization, including the Principal Agreements, and (ii) to carry out the intent and purposes of these resolutions.

WHEREAS, the Board desires to designate independent counsel for the successful bidder or bidders and/or agents of the Company for the Consumer Rate Relief Bonds to be issued and sold in connection with the Securitization;

NOW, THEREFORE, BE IT:

RESOLVED, that Hunton & Williams LLP be, and said firm hereby is, designated as independent counsel for the successful bidder or bidders and/or agents of the Company for the Consumer Rate Relief Bonds to be issued and sold in connection with the Securitization.

WHEREAS, in order to enable the Company to perform its obligations under the Indenture and any Underwriting Agreement approved at this meeting providing for the sale of up to $385,000,000 aggregate principal amount of Consumer Rate Relief Bonds, the Board desires to authorize the execution and delivery of one or more Series Supplements or Supplemental Indentures to the Indenture, in such form as shall be approved by the officer executing the same, such execution to be conclusive evidence of such approval;

WHEREAS, the Board desires to authorize the appropriate officers of the Company to determine the financial terms and conditions of the Consumer Rate Relief Bonds, including, without limitation, (i) the principal amount of the Consumer Rate Relief Bonds to be sold; (ii) the interest rate or rates on the Consumer Rate Relief Bonds; (iii) the maturity and sinking fund provisions of the Consumer Rate Relief Bonds; and (iv) such other terms and conditions as are contemplated or permitted by the Indenture, a Series Supplement or a Supplemental Indenture;

WHEREAS, the Board desires to authorize the appropriate officers of the Company to apply the proceeds in accordance with the Financing Order;

NOW, THEREFORE, BE IT:

RESOLVED, that the Authorized Officers, or any of them, are authorized, on behalf of the Company, (a) to determine, with respect to the Consumer Rate Relief Bonds, each and every term thereof, including the date or dates of issue and sale, the date or dates of maturity (which shall not exceed 18 years from the date

Appalachian Consumer Rate Relief Funding LLC

August 28, 2013

Page 4

of issue), the interest rate or rates per annum, the sale price or prices, any optional, special or mandatory redemption provisions, and sinking fund provisions and any other terms, and (b) to execute and deliver the Underwriting Agreement and any agreements, certificates, directions or other documents related thereto; and further

RESOLVED, that the Authorized Officers are each authorized and directed to do, or cause to be done, all acts and things, including, without limitation, the execution and delivery of all affidavits, agreements, acknowledgments, certificates, consents, directions or other documents in such form, and containing such provisions, as may be considered necessary, appropriate or desirable, the approval on behalf of the Company of the form, content, necessity or desirability of any such affidavit, agreement, acknowledgment, certificate, consent, direction or other document to be conclusively evidenced by any such officer’s execution thereof on behalf of the Company as may be necessary, appropriate or desirable (i) to perform the Company’s obligations in connection with the Securitization, and (ii) to carry out the intent and purposes of these resolutions; and further

RESOLVED, that the proceeds of the Consumer Rate Relief Bonds may be used for the purpose of (i) paying any and all costs and expenses incurred in connection with the Securitization and (ii) purchasing the Consumer Rate Relief Property from APCo.

Appalachian Consumer Rate Relief Funding LLC

August 28, 2013

Page 5

IN WITNESS WHEREOF, the undersigned, constituting all of the managers of the Company, have executed this Written Consent as of August 28, 2013.

/s/ Victor A. Duva

Victor A. Duva

/s/ Renee V. Hawkins

Renee V. Hawkins

/s/ Julia A. Sloat

Julia A. Sloat

/s/ Brian X. Tierney

Brian X. Tierney

/s/ Kenneth J. Uva

Kenneth J. Uva

EX-25.1

Exhibit 25.1

EX-99.1

Exhibit 99.1

CRR PROPERTY SERVICING AGREEMENT

by and between

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC,

Issuer

and

APPALACHIAN POWER COMPANY,

Servicer

Dated as of [closing date]

TABLE OF CONTENTS

ARTICLE I DEFINITIONS		1
SECTION 1.01.	Definitions	1

ARTICLE II APPOINTMENT AND AUTHORIZATION 2

SECTION 2.01.	Appointment of Servicer; Acceptance of Appointment	2
SECTION 2.02.	Authorization	2
SECTION 2.03.	Dominion and Control Over the CRR Property	2

ARTICLE III ROLE OF SERVICER 3

SECTION 3.01.	Duties of Servicer	3
SECTION 3.02.	Servicing and Maintenance Standards	5
SECTION 3.03.	Annual Reports on Compliance with Regulation AB	6
SECTION 3.04.	Annual Report by Independent Registered Public Accountants	6
SECTION 3.05.	Monitoring of Third-Party Collectors	7

ARTICLE IV SERVICES RELATED TO TRUE-UP ADJUSTMENTS  8

SECTION 4.01.	True-Up Adjustments	8
SECTION 4.02.	Limitation of Liability	12

ARTICLE V THE CRR PROPERTY 13

SECTION 5.01.	Custody of CRR Property Records	13
SECTION 5.02.	Duties of Servicer as Custodian	13
SECTION 5.03.	Custodian’s Indemnification	15
SECTION 5.04.	Effective Period and Termination	15

ARTICLE VI THE SERVICER 15

SECTION 6.01.	Representations and Warranties of Servicer	15
SECTION 6.02.	Indemnities of Servicer; Release of Claims	17
SECTION 6.03.	Binding Effect of Servicing Obligations	19
SECTION 6.04.	Limitation on Liability of Servicer and Others	20
SECTION 6.05.	APCo Not to Resign as Servicer	21
SECTION 6.06.	Servicing Compensation	21
SECTION 6.07.	Compliance with Applicable Law	22
SECTION 6.08.	Access to Certain Records and Information Regarding CRR Property	22
SECTION 6.09.	Appointments	23
SECTION 6.10.	No Servicer Advances	23
SECTION 6.11.	Remittances	23
SECTION 6.12.	Maintenance of Operations	24

ARTICLE VII DEFAULT 24

SECTION 7.01.	Servicer Default	24
SECTION 7.02.	Appointment of Successor	26
SECTION 7.03.	Waiver of Past Defaults	26
SECTION 7.04.	Notice of Servicer Default	27
SECTION 7.05.	Cooperation with Successor	27

1

ARTICLE VIII MISCELLANEOUS PROVISIONS  27

SECTION 8.01.	Amendment	27
SECTION 8.02.	Commission Condition	28
SECTION 8.03.	Maintenance of Accounts and Records	29
SECTION 8.04.	Notices	29
SECTION 8.05.	Assignment	30
SECTION 8.06.	Limitations on Rights of Others	30
SECTION 8.07.	Severability	30
SECTION 8.08.	Separate Counterparts	31
SECTION 8.09.	Headings	31
SECTION 8.10.	GOVERNING LAW	31
SECTION 8.11.	Assignment to Indenture Trustee	31
SECTION 8.12.	Nonpetition Covenants	31
SECTION 8.13.	Limitation of Liability	31

EXHIBITS AND SCHEDULES

Exhibit A	Form of Monthly Servicer’s Certificate
Exhibit B	Form of Semi-Annual Servicer’s Certificate
Exhibit C-1	Form of Servicer Certificate
Exhibit C-2	Form of Certificate of Compliance
Schedule 4.01(a)	Expected Amortization Schedule

ANNEXES

Annex I  Servicing Procedures

2 

This CRR PROPERTY SERVICING AGREEMENT (this “Agreement”), dated as of [closing date], is between APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, a Delaware limited liability company, as issuer (the “Issuer”), and APPALACHIAN POWER COMPANY (“APCo”), a Virginia corporation, as servicer (the “Servicer”).

RECITALS

WHEREAS, pursuant to the Securitization Law and the Financing Order, APCo, in its capacity as seller (the “Seller”), and the Issuer are concurrently entering into the Sale Agreement pursuant to which the Seller is selling and the Issuer is purchasing certain CRR Property created pursuant to the Securitization Law and the Financing Order described therein;

WHEREAS, in connection with its ownership of the CRR Property and in order to collect the associated CRR Charges, the Issuer desires to engage the Servicer to carry out the functions described herein and the Servicer desires to be so engaged;

WHEREAS, the Issuer desires to engage the Servicer to act on its behalf in obtaining True-Up Adjustments from the Commission and the Servicer desires to be so engaged;

WHEREAS, the CRR Charge Collections may be commingled with other funds collected by the Servicer;

WHEREAS, certain parties other than APCo and the Issuer may have an interest in such commingled collections, and such parties will be required to enter into an Intercreditor Agreement that allows APCo to allocate the collected, commingled funds according to each party’s interest; and

WHEREAS, the Commission has the right to enforce this Agreement for the benefit of the Customers to the extent permitted by law;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01.         Definitions.

(a)           Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in that certain Indenture (including Appendix A thereto) dated as of the date hereof between the Issuer and U.S. Bank National Association, a national banking association, in its capacity as the indenture trustee (the “Indenture Trustee”) and in its separate capacity as a securities intermediary (the “Securities Intermediary”), as the same may be amended, restated, supplemented or otherwise modified from time to time (the “Indenture”).

(b)           All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

(c)           The words “hereof,” “herein,” “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, Schedule, Exhibit, Annex and Attachment references contained in this Agreement are references to Sections, Schedules, Exhibits, Annexes and Attachments in or to this Agreement unless otherwise specified; and the terms “includes” and “including” shall mean “includes without limitation” and “including without limitation”, respectively.

(d)           The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.

(e)           Non-capitalized terms used herein which are defined in Chapter 24 of the West Virginia Code (the “Utilities Code”) shall, as the context requires, have the meanings assigned to such terms in the Utilities Code, but without giving effect to amendments to the Utilities Code after the date hereof which have a material adverse effect on the Issuer or the Holders.

ARTICLE II

APPOINTMENT AND AUTHORIZATION

SECTION 2.01.         Appointment of Servicer; Acceptance of Appointment.  The Issuer hereby appoints the Servicer, and the Servicer hereby accepts such appointment, to perform the Servicer’s obligations pursuant to this Agreement on behalf of and for the benefit of the Issuer or any assignee thereof in accordance with the terms of this Agreement and applicable law.  This appointment and the Servicer’s acceptance thereof may not be revoked except in accordance with the express terms of this Agreement.

SECTION 2.02.         Authorization.  With respect to all or any portion of the CRR Property, the Servicer shall be, and hereby is, authorized and empowered by the Issuer to (a) execute and deliver, on behalf of itself and/or the Issuer, as the case may be, any and all instruments, documents or notices, and (b) on behalf of itself and/or the Issuer, as the case may be, make any filing and participate in proceedings of any kind with any Governmental Authority, including with the Commission.  The Issuer shall execute and deliver to the Servicer such documents as have been prepared by the Servicer for execution by the Issuer and shall furnish the Servicer with such other documents as may be in the Issuer’s possession, in each case as the Servicer may determine to be necessary or appropriate to enable it to carry out its servicing and administrative duties hereunder.  Upon the Servicer’s written request, the Issuer shall furnish the Servicer with any powers of attorney or other documents necessary or appropriate to enable the Servicer to carry out its duties hereunder.

SECTION 2.03.         Dominion and Control Over the CRR Property. Notwithstanding any other provision herein, the Issuer shall have dominion and control over the CRR Property, and the Servicer, in accordance with the terms hereof, is acting solely as the servicing agent and custodian for the Issuer with respect to the CRR Property and the CRR Property Records.  The Servicer shall not take any action that is not authorized by this Agreement, that would contravene the Utilities Code, the Commission Regulations or the Financing Order, that is not consistent with its customary procedures and practices, or that shall

2

impair the rights of the Issuer or the Indenture Trustee (on behalf of the Holders) in the CRR Property, in each case unless such action is required by applicable law or court or regulatory order.

ARTICLE III

ROLE OF SERVICER

SECTION 3.01.         Duties of Servicer.  The Servicer, as agent for the Issuer, shall have the following duties:

(a)           Duties of Servicer Generally.  The Servicer’s duties in general shall include management, servicing and administration of the CRR Property; obtaining meter reads, calculating usage, billing, collections and posting of all payments in respect of the CRR Property or CRR Charges; responding to inquiries by Customers, the Commission, or any other Governmental Authority with respect to the CRR Property or CRR Charges; delivering Bills to Customers; investigating and handling delinquencies (and furnishing reports with respect to such delinquencies to the Issuer), processing and depositing collections and making periodic remittances; furnishing periodic reports to the Issuer, the Indenture Trustee and the Rating Agencies; making all filings with the Commission and taking such other action as may be necessary to perfect the Issuer’s ownership interests in and the Indenture Trustee’s first priority Lien on and security interest in the CRR Property; making all filings and taking such other action as may be necessary to perfect and maintain the perfection and priority of the Indenture Trustee’s Lien on and security interest in all CRR Bond Collateral; selling as the agent for the Issuer as its interests may appear defaulted or written off accounts in accordance with the Servicer’s usual and customary practices; taking all necessary action in connection with True-Up Adjustments as set forth herein; ensuring that any and all tax surcharges or tax adjustments billed by it to Customers on account of the CRR Charges or which are otherwise included in CRR Charges are paid to the appropriate taxing authority; and performing such other duties as may be specified under the Financing Order to be performed by it.  Anything to the contrary notwithstanding, the duties of the Servicer set forth in this Agreement shall be qualified in their entirety by any Commission Regulations, the Financing Order, and the federal securities laws and the rules and regulations promulgated thereunder, including without limitation, Regulation AB, as in effect at the time such duties are to be performed.  Without limiting the generality of this Section 3.01(a), in furtherance of the foregoing, the Servicer hereby agrees that it shall also have, and shall comply with, the duties and responsibilities relating to data acquisition, usage and bill calculation, billing, customer service functions, collections, payment processing and remittance set forth in Annex I hereto, as it may be amended from time to time.  For the avoidance of doubt, the term “usage” when used herein refers to both kilowatt-hour consumption and kilowatt demand.

(b)           Reporting Functions.

(i)           Monthly Servicer’s Certificate.  On or before the twenty-fifth calendar day of each month (or if such day is not a Servicer Business Day, on the immediately preceding Servicer Business Day), the Servicer shall prepare and deliver to the Issuer, the Indenture Trustee and the Rating Agencies a written report substantially in the form of Exhibit A hereto (a “Monthly Servicer’s

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Certificate”) setting forth certain information relating to CRR Charge Payments received by the Servicer during the Collection Period immediately preceding such date; provided, however, that for any month in which the Servicer is required to deliver a Servicer’s Certificate pursuant to Section 4.01(c)(ii), the Servicer shall prepare and deliver the Monthly Servicer’s Certificate no later than the date of delivery of such Servicer’s Certificate.

(ii)           Notification of Laws and Regulations.  The Servicer shall immediately notify the Issuer, the Indenture Trustee and the Rating Agencies in writing of any Requirements of Law or Commission Regulations hereafter promulgated that have a material adverse effect on the Servicer’s ability to perform its duties under this Agreement.

(iii)           Other Information.  Upon the reasonable request of the Issuer, the Indenture Trustee or any Rating Agency, the Servicer shall provide to the Issuer, the Indenture Trustee or such Rating Agency, as the case may be, any public financial information in respect of the Servicer, or any material information regarding the CRR Property to the extent it is reasonably available to the Servicer, as may be reasonably necessary and permitted by law to enable the Issuer, the Indenture Trustee or the Rating Agencies to monitor the performance by the Servicer hereunder.  In addition, so long as any of the Consumer Rate Relief Bonds are outstanding, the Servicer shall provide the Issuer and the Indenture Trustee, within a reasonable time after written request therefor, any information available to the Servicer or reasonably obtainable by it that is necessary to calculate the CRR Charges applicable to each CRR Rate Class.

(iv)           Preparation of Reports.  The Servicer shall prepare and deliver such additional reports as required under this Agreement, including a copy of each Servicer’s Certificate described in Section 4.01(c)(ii), the annual statements of compliance, attestation reports and other certificates described in Section 3.03, and the Annual Accountant’s Report described in Section 3.04.  In addition, the Servicer shall prepare, procure, deliver and/or file, or cause to be prepared, procured, delivered or filed, any reports, attestations, exhibits, certificates or other documents required to be delivered or filed with the SEC (and/or any other Governmental Authority) by the Issuer or the Sponsor under the federal securities or other applicable laws or in accordance with the Basic Documents, including, but without limiting the generality of foregoing, filing with the SEC, if applicable and required by applicable law, a copy or copies of (i) the Monthly Servicer’s Certificates described in Section 3.01(b)(i) (under Form 10-D or any other applicable form), (ii) the Servicer’s Certificates described in Section 4.01(c)(ii) (under Form 10-D or any other applicable form), (iii) the annual statements of compliance, attestation reports and other certificates described in Section 3.03, and (iv) the Annual Accountant’s Report (and any attestation required under Regulation AB) described in Section 3.04.  In addition, the appropriate officer or officers of the Servicer shall (in its separate capacity as Servicer) sign the Sponsor’s annual report on Form 10-K (and any other applicable SEC or other reports, attestations, certifications and other documents), to the extent that the

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Servicer’s signature is required by, and consistent with, the federal securities laws and/or any other applicable law.

(c)           Opinions of Counsel.  The Servicer shall obtain on behalf of the Issuer and deliver to the Issuer and the Indenture Trustee:

(i)           promptly after the execution and delivery of this Agreement and of each amendment hereto, an Opinion of Counsel from external counsel of the Issuer either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the Commission, the Virginia State Corporation Commission and the West Virginia Secretary of State and all filings pursuant to the UCC, that are necessary under the UCC and the Securitization Law to fully preserve, protect and perfect the Liens of the Indenture Trustee in the CRR Property have been authorized, executed and filed, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens; and

(ii)           within ninety (90) days after the beginning of each calendar year beginning with the first calendar year beginning more than three (3) months after the date hereof, an Opinion of Counsel from external counsel of the Issuer, dated as of a date during such ninety (90)-day period, either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the Commission, the Virginia State Corporation Commission and the West Virginia Secretary of State and all filings pursuant to the UCC, have been authorized, executed and filed that are necessary under the UCC and the Securitization Law to fully preserve, protect and perfect the Liens of the Indenture Trustee in the CRR Property, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens.

Each Opinion of Counsel referred to in clause (i) or (ii) above shall specify any action necessary (as of the date of such opinion) to be taken in the following year to preserve, protect and perfect such interest or Lien.  The costs of such Opinions of Counsel, are out-of-pocket costs of the Servicer which shall be reimbursable under the Indenture as Ongoing Financing Costs.

SECTION 3.02.         Servicing and Maintenance Standards.  On behalf of the Issuer, the Servicer shall (a) manage, service, administer and make collections in respect of the CRR Property with reasonable care and in material compliance with applicable Requirements of Law, including all applicable Commission Regulations and guidelines, using the same degree of care and diligence that the Servicer exercises with respect to similar assets for its own account and, if applicable, for others; (b) follow customary standards, policies and procedures for the industry in West Virginia in performing its duties as Servicer; (c) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the CRR Property and to bill and collect the CRR Charges; (d) comply with all Requirements of Law, including all applicable Commission Regulations and guidelines, applicable to and binding

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on it relating to the CRR Property; (e) file all Commission notices described in the Securitization Law and file and maintain the effectiveness of UCC financing statements with respect to the property transferred under the Sale Agreement, and (f) take such other action on behalf of the Issuer to ensure that the Lien of the Indenture Trustee on the CRR Bond Collateral remains perfected and of first priority.  The Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of all or any portion of the CRR Property, which, in the Servicer’s judgment, may include the taking of legal action, at the Issuer’s expense but subject to the priority of payments set forth in Section 8.02(e) of the Indenture.

SECTION 3.03.         Annual Reports on Compliance with Regulation AB.

(a)           The Servicer shall deliver to the Issuer, the Indenture Trustee and the Rating Agencies, on or before the earlier of (a) March 31 of each year or (b) with respect to each calendar year during which the Sponsor’s annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which the annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, certificates from a Responsible Officer of the Servicer (i) containing, and certifying as to, the statements of compliance required by Item 1123 (or any successor or similar items or rule) of Regulation AB, as then in effect and (ii) containing, and certifying as to, the statements and assessment of compliance required by Item 1122(a) (or any successor or similar items or rule) of Regulation AB, as then in effect.  These certificates may be in the form of, or shall include the forms attached hereto as Exhibit C-1 and Exhibit C-2 hereto, with, in the case of Exhibit C-1, such changes as may be required to conform to the applicable securities law.

(b)           The Servicer shall use commercially reasonable efforts to obtain from each other party participating in the servicing function any additional certifications as to the statements and assessment required under Item 1122 or Item 1123 of Regulation AB to the extent required in connection with the filing of the annual report on Form 10-K; provided, however, that a failure to obtain such certifications shall not be a breach of the Servicer’s duties hereunder.  The parties acknowledge that the Indenture Trustee’s certifications shall be limited to the Item 1122 certifications described in Exhibit C of the Indenture.

(c)           The initial Servicer, in its capacity as Sponsor, shall post on its website and file with or furnish to the SEC, in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the information described in Section 3.07(g) of the Indenture to the extent such information is reasonably available to the Sponsor.  Except to the extent permitted by applicable law, the initial Servicer, in its capacity as Sponsor, shall not voluntarily suspend or terminate its filing obligations as Sponsor with the SEC as described in this Section 3.03(c).  The covenants of the initial Servicer, in its capacity as Sponsor, pursuant to this Section 3.03(c) shall survive the resignation, removal or termination of the initial Servicer as Servicer hereunder.

SECTION 3.04.         Annual Report by Independent Registered Public Accountants.

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(a)           The Servicer shall cause a firm of Independent registered public accountants (which may provide other services to the Servicer or the Seller) to prepare annually, and the Servicer shall deliver annually to the Issuer, the Indenture Trustee and the Rating Agencies on or before the earlier of (i) March 31 of each year, beginning March 31, 2014, or (ii) with respect to each calendar year during which the Sponsor’s annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which the annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, a report addressed to the Servicer (the “Annual Accountant’s Report”) to the effect that such firm has performed certain procedures, agreed between the Servicer and such accountants, in connection with the Servicer’s compliance with its obligations under this Agreement during the preceding twelve (12) months ended December 31 (or, in the case of the first Annual Accountant’s Report to be delivered on or before March 31, 2014, the period of time from the date of this Agreement until December 31, 2013), identifying the results of such procedures and including any exceptions noted.  The costs of the Annual Accountant’s Report are out-of-pocket costs of the Servicer which shall be reimbursable under the Indenture as Ongoing Financing Costs.

(b)           The Annual Accountant’s Report delivered pursuant to Section 3.04(a) above shall also indicate that the accounting firm providing such report is independent of the Servicer in accordance with the Rules of the Public Company Accounting Oversight Board, and shall include any attestation report required under Item 1122(b) of Regulation AB (or any successor or similar items or rule), as then in effect.

SECTION 3.05.         Monitoring of Third-Party Collectors.  From time to time, until the Collection in Full of the CRR Charges, the Servicer shall, in accordance with the Servicing Standard, take all actions with respect to Third-Party Collectors required to be taken by the Servicer as set forth, if applicable, in any agreement with the Servicer, the Financing Order, Tariff, other tariffs and any Commission Regulations in effect from time to time and implement such additional procedures and policies as are necessary to ensure that the obligations of all Third-Party Collectors in connection with CRR Charges are properly enforced in accordance with, if applicable, the terms of any agreement with the Servicer, the Financing Order, Tariff, other tariffs and any Commission Regulations in effect from time to time.  Such procedures and policies shall include the following:

(a)           Maintenance of Records and Information.  In addition to any actions required by the Financing Order, the Tariff, Commission Regulations or applicable law, the Servicer shall:

(i)           maintain adequate records for promptly identifying and contacting each Third-Party Collector;

(ii)           maintain records of end-user Customers which are billed by Third-Party Collectors to permit prompt transfer of billing responsibilities in the event of default by such Third-Party Collectors;

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(iii)           maintain adequate records for enforcing compliance by all Third-Party Collectors with their obligations with respect to CRR Charges, including compliance with all Remittance Requirements; and

(iv)           provide to each Third-Party Collector such information necessary for such Third-Party Collector to confirm the Servicer’s calculation of CRR Charges and remittances, including, if applicable, charge-off amounts.

The Servicer shall update the records described above no less frequently than quarterly.

(b)           Credit and Collection Policies.  The Servicer shall, to the fullest extent permitted under the Financing Order, impose such terms with respect to credit and collection policies applicable to Third-Party Collectors as may be reasonably necessary to prevent the then-current rating of the Consumer Rate Relief Bonds from being downgraded, withdrawn or suspended.  The Servicer shall, in accordance with and to the extent permitted by the Utilities Code, applicable Commission Regulations and the terms of the Financing Order, include and impose the above-described terms in any tariffs filed under the Utilities Code which would allow other utilities to issue single bills which include CRR Charges to APCo’s Customers.

(c)           Affiliated Third-Party Collectors.  In performing its obligations under this Section 3.05, the Servicer shall deal with any Third-Party Collectors which are Affiliates of the Servicer on terms which are no more favorable in the aggregate to such affiliated Third-Party Collector than those used by the Servicer in its dealings with Third-Party Collectors that are not affiliates of the Servicer.

ARTICLE IV

SERVICES RELATED TO TRUE-UP ADJUSTMENTS

SECTION 4.01.         True-Up Adjustments.  From time to time, until the Collection in Full of the CRR Charges, the Servicer shall identify the need for Annual True-Up Adjustments, Semi-Annual Interim True-Up Adjustments, Additional Interim True-Up Adjustments and Nonstandard True-Up Adjustments and shall take all reasonable action to obtain and implement such True-Up Adjustments, all in accordance with the following:

(a)           Expected Amortization Schedule. The Expected Amortization Schedule for the Consumer Rate Relief Bonds is attached hereto as Schedule 4.01(a).  If the Expected Amortization Schedule is revised, the Servicer shall send a copy of such revised Expected Amortization Schedule to the Issuer, the Indenture Trustee and the Rating Agencies promptly thereafter.

(b)           True-Up Adjustments.

(i)           Annual True-Up Adjustments and Filings.  Each year no later than fifteen (15) days prior to the first billing cycle of [month] the Servicer shall:  (A) update the data and assumptions underlying the calculation of the CRR Charges, including projected electricity usage during the next Calculation Period for each CRR Rate Class and including Periodic Principal, interest and estimated expenses and fees of the Issuer to be paid during such period, the Weighted Average Days

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Outstanding and write-offs; (B) determine the Periodic Payment Requirements and Periodic Billing Requirement for the next Calculation Period based on such updated data and assumptions; (C) determine the CRR Charges to be allocated to each CRR Rate Class during the next Calculation Period based on such Periodic Billing Requirement and the terms of the Financing Order, the Tariff and any other tariffs filed pursuant thereto and in doing so the Servicer shall use the method of allocating CRR Charges then in effect, including as applicable, the result of the implementation of the most recent Nonstandard True-Up Adjustment; (D) make all required public notices and other filings with the Commission to reflect the revised CRR Charges, including any Amendatory Schedule, and (E) take all reasonable actions and make all reasonable efforts to effect such Annual True-Up Adjustment and to enforce the provisions of the Securitization Law and the Financing Order; provided, however, that if, at the time of such Annual True-Up Adjustment filing, there are, or the Servicer projects for an upcoming period that there will be, significant changes from historical conditions of operation, such as a loss of significant electric load or a merger of APCo with another utility and a resulting expansion of APCo’s customer base, or if at such time the Servicer experiences or projects a drop in electricity consumption or demand for one or more of the CRR Revenue Groups for an upcoming period by 10% or more (calculated by comparing the difference between the revised projected load and the original projected load), the Servicer shall initiate a proceeding with the Commission to implement a Nonstandard True-Up Adjustment in addition to such Annual True-Up Adjustment.  The Servicer shall implement the revised CRR Charges, if any, resulting from such Annual True-Up Adjustment as of the Annual True-Up Adjustment Date.  The Servicer will also initiate a Nonstandard True-Up Adjustment if APCo and Wheeling Power Company merge.

(ii)           Nonstandard True-Up Adjustments and Filings.  In the event that the Servicer determines that a Nonstandard True-Up Adjustment is required (including, without limitation (1) as a result of significant changes from historical conditions of operation, such as a loss of significant electric load or a merger of APCo with another utility and a resulting expansion of APCo’s customer base, (2) specifically if APCo experiences or projects a drop in the consumption of electricity for any CRR Revenue Group of 10% or more (calculated by comparing the difference between the revised forecasted load and the original projected load), or (3) if APCo and Wheeling Power Company merge), the Servicer shall promptly (A) recalculate the CRR Charges to reallocate the CRR Charges among CRR Revenue Groups in accordance with the procedures for Nonstandard True-Up Adjustments set forth in the Financing Order; (B) initiate a proceeding with the Commission to determine new allocation factors and make all required public notices and other filings with the Commission to implement the revised CRR Charges in a timely manner, including the filing of any revised Amendatory Rider necessary to begin the billing of such revised CRR Charges; and (C) take all reasonable actions and make all reasonable efforts to effect such Nonstandard True-Up Adjustment and to enforce the provisions of the Securitization Law and the Financing Order.  The Servicer shall implement the revised CRR Charges, if any, resulting from such Nonstandard True-Up Adjustment on the Nonstandard

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True-Up Adjustment Date.  For the avoidance of doubt, no Annual True-Up Adjustment or Interim True-Up Adjustment shall be considered a Nonstandard True-Up Adjustment solely because CRR Charges are allocated under such Annual True-Up Adjustment or Interim True-Up Adjustment in the same manner as in a preceding Nonstandard True-Up Adjustment.

(iii)           Semi-Annual Interim True-Up Adjustments and Filings.  Within the 30-day period ending on [Month] 1 of each year, commencing [Month] 1, 2014 and, if there are any Consumer Rate Relief Bonds Outstanding following the Scheduled Final Payment Date for the last maturing tranche, within 30 days of the dates which are three months, six months, nine months and one year after the Scheduled Final Payment Date for the last maturing tranche, the Servicer shall (A) update the data and assumptions underlying the calculation of the CRR Charges, including projected electricity usage during the next Calculation Period for each CRR Rate Class and including Periodic Principal, interest and estimated expenses and fees of the Issuer to be paid during such period, the rate of delinquencies and write-offs; (B) determine the Periodic Payment Requirement and Periodic Billing Requirement for the next Calculation Period based on such updated data and assumptions; and (C) based upon such updated data and requirements, project whether existing and projected CRR Charge Collections together with available fund balances in the Excess Funds Subaccount, will be sufficient, (i) to make on a timely basis all scheduled payments of Periodic Principal and interest in respect of each Outstanding Tranche of Consumer Rate Relief Bonds during such Calculation Period and (ii) to pay other Ongoing Financing Costs on a timely basis and to maintain the Capital Subaccount at the Required Capital Level; provided, that in the case of any Semi-Annual True-up Adjustment following the Scheduled Final Payment Date for the last maturing tranche of any Consumer Rate Relief Bonds, the True-Up Adjustment will be calculated to ensure that the CRR Charges are sufficient to pay the Consumer Rate Relief Bonds in full on the next Scheduled Payment Date.  If the Servicer determines that CRR Charges will not be sufficient for such purposes, the Servicer shall, no later than fifteen (15) days prior to the end of each such thirty (30) day period (1) determine the CRR Charges to be allocated to each CRR Rate Class during the next Calculation Period based on such Periodic Billing Requirement and the terms of the Financing Order and the Tariff, and in doing so the Servicer shall use the method of allocating CRR Charges then in effect, including as applicable, the result of the implementation of the most recent Nonstandard True-Up Adjustment; (2) make all required public notices and other filings with the Commission to reflect the revised CRR Charges, including any Amendatory Schedule; and (3) take all reasonable actions and make all reasonable efforts to effect such Interim True-Up Adjustment and to enforce the provisions of the Securitization Law and the Financing Order.

(iv)           Additional Interim True-Up Adjustments and Filings.  In addition to the True-Up Adjustments described above in Sections 4.01(b)(i), (ii) and (iii), the Servicer shall initiate a proceeding with the Commission to implement an Additional Interim True-Up Adjustment (in the same manner as provided for the

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Semi-Annual Interim True-Up Adjustments) at any time if the Servicer forecasts that CRR Charge Collections during the current or next succeeding Calculation Period will be insufficient (a) to make all scheduled payments of Periodic Principal and interest due in respect of the Consumer Rate Relief Bonds on a timely basis during such Calculation Period, (b) to pay other Ongoing Financing Costs on a timely basis and (c) to replenish any draws upon the Capital Subaccount.

(v)           Further True-Up Adjustment Calculation Considerations.  The following will be considered with respect to each type of True-Up Adjustment: (i) with respect to any Standard True-Up Adjustment, in the event that any CRR Charges cannot be allocated to a given CRR Rate Class, such CRR Charges shall be re-allocated as part of the Standard True-Up Adjustment to the remaining CRR Rate Classes within the given CRR Revenue Group, using the same ratable allocation to the CRR Rate Classes within such CRR Revenue Group excluding the CRR Rate Class for which allocation is no longer feasible and (ii) once a Nonstandard True-Up Adjustment has become effective, the modified allocation percentages set forth therein shall remain effective for all future Standard True-Up Adjustment filings unless and until a subsequent Nonstandard True-Up Adjustment is initiated.

(c)           Reports.

(i)           Notification of Amendatory Schedule Filings and True-Up Adjustments.  Whenever the Servicer files an Amendatory Schedule with the Commission or implements revised CRR Charges with notice to the Commission without filing an Amendatory Schedule if permitted by the Financing Order, the Servicer shall send a copy of such filing or notice (together with a copy of all notices and documents which, in the Servicer’s reasonable judgment, are material to the adjustments effected by such Amendatory Schedule or notice) to the Issuer, the Indenture Trustee and the Rating Agencies concurrently therewith.  If, for any reason any revised CRR Charges are not implemented and effective on the applicable date set forth herein, the Servicer shall notify the Issuer, the Indenture Trustee and each Rating Agency by the end of the second Servicer Business Day after such applicable date.

(ii)           Servicer’s Certificate.  Not later than five (5) Servicer Business Days prior to each Payment Date or Special Payment Date, the Servicer shall deliver a written report substantially in the form of Exhibit B hereto (the “Servicer’s Certificate”) to the Issuer, the Indenture Trustee and the Rating Agencies which shall include all of the following information (to the extent applicable and including any other information so specified in the Series Supplement) as to the Consumer Rate Relief Bonds with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:

(a)           the amount of the payment to Holders allocable to principal, if any;

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(b)           the amount of the payment to Holders allocable to interest;

(c) the aggregate Outstanding Amount of the Consumer Rate Relief Bonds, before and after giving effect to any payments allocated to principal reported under clause (a) above;

(d) the difference, if any, between the amount specified in clause (c) above and the Outstanding Amount specified in the Expected Amortization Schedule;

(e) any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and

(f) the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments.

(iii)           Reports to Customers.

(A)           After each revised CRR Charge has gone into effect pursuant to a True-Up Adjustment, the Servicer shall, to the extent and in the manner and time frame required by the Financing Order or any applicable Commission Regulations, cause to be prepared and delivered to Customers any required notices announcing such revised CRR Charges.

(B)           The Servicer shall comply with the requirements of the Financing Order with respect to the filing of the CRR Rate Schedule to ensure that the CRR Charges are separate and apart from the Servicer’s other charges and appear as a separate line item on the Bills sent to Customers.  In addition, at least once each year, in accordance with the Securitization Law the Servicer shall cause to be prepared and delivered to such Customers a “plain-English” explanation of the CRR Property, the CRR Charges and the CRR Rate Schedule, including that the CRR Property and the CRR Charges are owned by the Issuer and not the Seller.  Such notice shall be included either as an insert to or in the text of the Bills delivered to such Customers or shall be delivered to Customers by electronic means or such other means as the Servicer may from time to time use to communicate with its Customers.

SECTION 4.02.         Limitation of Liability.  (a) The Issuer and the Servicer expressly agree and acknowledge that:

(i)           In connection with any True-Up Adjustment, the Servicer is acting solely in its capacity as the servicing agent hereunder.

(ii)           Neither the Servicer nor the Issuer nor the Indenture Trustee is responsible in any manner for, and shall have no liability whatsoever as a result

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of, any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the Servicer’s failure to make any filings required by Section 4.01 in a timely and correct manner or any breach by the Servicer of its duties under this Agreement that adversely affects the CRR Property or the True-Up Adjustments), by the Commission in any way related to the CRR Property or in connection with any True-Up Adjustment, the subject of any filings under Section 4.01, any proposed True-Up Adjustment, or the approval of any revised CRR Charges and the scheduled adjustments thereto.

(iii)           Except to the extent that the Servicer is liable under Section 6.02, the Servicer shall have no liability whatsoever relating to the calculation of any revised CRR Charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculation regarding expected energy usage volume and the Weighted Average Days Outstanding, write-offs and estimated expenses and fees of the Issuer, so long as the Servicer has acted in good faith and has not acted in a negligent manner in connection therewith, nor shall the Servicer have any liability whatsoever as a result of any Person, including the Holders, not receiving any payment, amount or return anticipated or expected or in respect of any Consumer Rate Relief Bond generally.

(b)           Notwithstanding the foregoing, this Section 4.02 shall not relieve the Servicer of liability for any misrepresentation by the Servicer under Section 6.01 or for any breach by the Servicer of its other obligations under this Agreement.

ARTICLE V

THE CRR PROPERTY

SECTION 5.01.         Custody of CRR Property Records.  To assure uniform quality in servicing the CRR Property and to reduce administrative costs, the Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts such appointment, to act as the agent of the Issuer as custodian of any and all documents and records that the Seller shall keep on file, in accordance with its customary procedures, relating to the CRR Property, including copies of the Financing Order, Issuance Advice Letter, and Amendatory Schedules relating thereto and all documents filed with the Commission in connection with any True-Up Adjustment and computational records relating thereto (collectively, the “CRR Property Records”), which are hereby constructively delivered to the Indenture Trustee, as pledgee of the Issuer with respect to all CRR Property.

SECTION 5.02.         Duties of Servicer as Custodian.

(a)           Safekeeping.  The Servicer shall hold the CRR Property Records on behalf of the Issuer and the Indenture Trustee and maintain such accurate and complete accounts, records and computer systems pertaining to the CRR Property Records as shall enable the Issuer and the Indenture Trustee, as applicable, to comply with this Agreement, the Sale Agreement and the Indenture.  In performing its duties as custodian, the Servicer shall act with reasonable care, using that degree of care and diligence that the Servicer exercises with respect to comparable

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assets that the Servicer services for itself or, if applicable, for others.  The Servicer shall promptly report to the Issuer, the Indenture Trustee and the Rating Agencies any failure on its part to hold the CRR Property Records and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure.  Nothing herein shall be deemed to require an initial review or any periodic review by the Issuer or the Indenture Trustee of the CRR Property Records.  The Servicer’s duties to hold the CRR Property Records set forth in this Section 5.02, to the extent the CRR Property Records have not been previously transferred to a successor Servicer pursuant to Article VII, shall terminate one year and one day after the earlier of (i) the date on which the Servicer is succeeded by a successor Servicer in accordance with Article VII and (ii) the first date on which no Consumer Rate Relief Bonds are Outstanding.

(b)           Maintenance of and Access to Records.  The Servicer shall maintain the CRR Property Records at 1 Riverside Plaza, Columbus, Ohio 43215 or 707 Virginia Street, East, Charleston, West Virginia 25301, or at such other office as shall be specified to the Issuer and the Indenture Trustee by written notice at least thirty (30) days prior to any change in location.  The Servicer shall make available for inspection, audit and copying to the Issuer and the Indenture Trustee or their respective duly authorized representatives, attorneys or auditors the CRR Property Records at such times during normal business hours as the Issuer or the Indenture Trustee shall reasonably request and which do not unreasonably interfere with the Servicer’s normal operations.  Nothing in this Section 5.02(b) shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 5.02(b).

(c)           Release of Documents.  Upon instruction from the Indenture Trustee in accordance with the Indenture, the Servicer shall release any CRR Property Records to the Indenture Trustee, the Indenture Trustee’s agent or the Indenture Trustee’s designee, as the case may be, at such place or places as the Indenture Trustee may designate, as soon as practicable.  Nothing in this Section 5.02(c) shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 5.02(c).

(d)           Defending CRR Property Against Claims.  The Servicer, on behalf of the Issuer and the Holders, shall institute any action or proceeding necessary under the Securitization Law or the Financing Order with respect to the CRR Property, and the Servicer agrees to take such legal or administrative actions, including without limitation defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, as may be reasonably necessary to block or overturn any attempts to cause a repeal of, modification of, judicial invalidation of, or supplement to, the Securitization Law or the Financing Order which would be detrimental to the interests of the Holders or which would cause an impairment of the rights of the Issuer or the Holders.  The costs of any action described in this Section 5.02(d) shall be payable from CRR Charge Collections as an Operating Expense (and shall not be deemed to constitute a portion of the Servicing Fee) in accordance with the priorities set forth in Section 8.02(e) of the Indenture.  The Servicer’s obligations pursuant to this Section 5.02(d) shall survive and continue notwithstanding that payment of such Operating Expense may be delayed pursuant

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to the terms of the Indenture (it being understood that the Servicer may be required initially to advance its own funds to satisfy its obligations hereunder).

(e)           Additional Litigation to Defend CRR Property.  In addition to its obligations under Section 5.02(d), the Servicer shall, at its own expense, institute any action or proceeding necessary to compel performance by the Commission or the State of West Virginia of any of their respective obligations or duties under the Securitization Law and the Financing Order with respect to the CRR Property, and to compel performance by applicable parties under the Tariff or any agreement with the Servicer entered into pursuant to the Tariff.  In any proceedings related to the exercise of the power of eminent domain by any municipality or other person or entity to acquire a portion of APCo’s electric distribution facilities, the Servicer shall assert that the court ordering such condemnation must treat such municipality as a successor to APCo under the Securitization Law and Financing Order.

SECTION 5.03.         Custodian’s Indemnification.  The Servicer as custodian shall indemnify the Issuer, any Independent Manager and the Indenture Trustee (for itself and for the benefit of the Holders) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from and against, any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, of any kind whatsoever (collectively, “Indemnified Losses”) that may be imposed on, incurred by or asserted against each such Person as the result of any negligent act or omission in any way relating to the maintenance and custody by the Servicer, as custodian, of the CRR Property Records; provided, however, that the Servicer shall not be liable for any portion of any such amount resulting from the willful misconduct, bad faith or negligence of the Issuer, any Independent Manager or the Indenture Trustee, as the case may be.

Indemnification under this Section 5.03 shall survive resignation or removal of the Indenture Trustee or any Independent Manager and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorney’s fees and expenses).

SECTION 5.04.         Effective Period and Termination.  The Servicer’s appointment as custodian shall become effective as of the Closing Date and shall continue in full force and effect until terminated pursuant to this Section 5.04.  If the Servicer shall resign as Servicer in accordance with the provisions of this Agreement or if all of the rights and obligations of the Servicer shall have been terminated under Section 7.01, the appointment of the Servicer as custodian shall be terminated effective as of the date on which the termination or resignation of the Servicer is effective.  Additionally, if not sooner terminated as provided above, the Servicer’s obligations as Custodian shall terminate one year and one day after the date on which no Consumer Rate Relief Bonds are Outstanding.

ARTICLE VI

THE SERVICER

SECTION 6.01.         Representations and Warranties of Servicer.  The Servicer makes the following representations and warranties, as of the Closing Date, and as of such other dates as expressly provided in this Section 6.01, on which the Issuer and the Indenture Trustee

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are deemed to have relied in entering into this Agreement relating to the servicing of the CRR Property.  The representations and warranties shall survive the execution and delivery of this Agreement, the sale of any CRR Property and the pledge thereof to the Indenture Trustee pursuant to the Indenture.

(a)           Organization and Good Standing.  The Servicer is duly organized and validly existing and in good standing under the laws of the Commonwealth of Virginia and is in good standing under the laws of the State of West Virginia, with the requisite corporate or other power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted and to execute, deliver and carry out the terms of this Agreement and any Intercreditor Agreement, and had at all relevant times, and has, the requisite power, authority and legal right to service the CRR Property and to hold the CRR Property Records as custodian.

(b)           Due Qualification.  The Servicer is duly qualified to do business and is in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the CRR Property as required by this Agreement and any Intercreditor Agreement) shall require such qualifications, licenses or approvals (except where the failure to so qualify would not be reasonably likely to have a material adverse effect on the Servicer’s business, operations, assets, revenues or properties or to its servicing of the CRR Property).

(c)           Power and Authority.  The execution, delivery and performance of this Agreement and any Intercreditor Agreement have been duly authorized by all necessary action on the part of the Servicer under its organizational or governing documents and laws.

(d)           Binding Obligation.  This Agreement and any Intercreditor Agreement constitutes a legal, valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its terms, subject to applicable insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors’ rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.

(e)           No Violation.  The consummation of the transactions contemplated by this Agreement and any Intercreditor Agreement and the fulfillment of the terms of each such transaction will not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the organizational documents of the Servicer, or any indenture or other agreement or instrument to which the Servicer is a party or by which it or any of its property is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than any Lien that may be granted under the Basic Documents or any Lien created pursuant to Section 24-2-4f(o) of the Securitization Law); nor violate any existing law or any existing order, rule or regulation applicable to the Servicer of any Governmental Authority having jurisdiction over the Servicer or its properties.

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(f)           No Proceedings.  There are no proceedings pending and, to the Servicer’s knowledge, there are no proceedings threatened and, to the Servicer’s knowledge, there are no investigations pending or threatened, before any Governmental Authority having jurisdiction over the Servicer or its properties involving or relating to the Servicer or the Issuer or, to the Servicer’s knowledge, any other Person: (i) asserting the invalidity of this Agreement or any Intercreditor Agreement or any of the other Basic Documents, (ii) seeking to prevent the issuance of the Consumer Rate Relief Bonds or the consummation of any of the transactions contemplated by this Agreement or any of the other Basic Documents, (iii) seeking any determination or ruling that could reasonably be expected to materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, this Agreement, any of the other Basic Documents or the Consumer Rate Relief Bonds or (iv) seeking to adversely affect the federal income tax or state income or franchise tax classification of the Consumer Rate Relief Bonds as debt.

(g)           Approvals.  No governmental approval, authorization, consent, order or other action of, or filing with, any Governmental Authority is required in connection with the execution and delivery by the Servicer of this Agreement or any Intercreditor Agreement, the performance by the Servicer of the transactions contemplated hereby or thereby or the fulfillment by the Servicer of the terms of each, except those that have been obtained or made, those that the Servicer is required to make in the future pursuant to Article IV or Section 6.06 and those that the Servicer may need to file in the future to continue the effectiveness of any financing statement filed under the UCC.

(h)           Reports and Certificates.  Each report and certificate delivered in connection with the Issuance Advice Letter or delivered in connection with any filing made to the Commission by the Issuer with respect to the CRR Charges or True-Up Adjustments will constitute a representation and warranty by the Servicer that each such report or certificate, as the case may be, is true and correct in all material respects; provided, however, that to the extent any such report or certificate is based in part upon or contains assumptions, forecasts or other predictions of future events, the representation and warranty of the Servicer with respect thereto will be limited to the representation and warranty that such assumptions, forecasts or other predictions of future events are reasonable based upon historical performance (and facts known to the Servicer on the date such report or certificate is delivered).

SECTION 6.02.         Indemnities of Servicer; Release of Claims.  The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer under this Agreement.

(a)           The Servicer shall indemnify the Issuer, the Indenture Trustee (for itself and for the benefit of the Holders) and any Independent Manager, and each of their respective trustees, officers, directors, employees and agents (each, an “Indemnified Person”) for, and defend and hold harmless each such Person from and against, any and all Indemnified Losses imposed on, incurred by or asserted against any such Person as a result of (i) the Servicer’s willful misconduct, bad faith or negligence in the performance of its duties or observance of its covenants under this Agreement and any Intercreditor Agreement or its reckless disregard of its obligations and duties under this Agreement or any Intercreditor Agreement, (ii) the Servicer’s breach of any of its representations and warranties contained in this Agreement and any

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Intercreditor Agreement or (iii) any litigation or related expenses relating to the Servicer’s status or obligations as Servicer (other than any proceeding the Servicer is required to institute under the Servicing Agreement), except to the extent of Indemnified Losses either resulting from the willful misconduct, bad faith, recklessness or gross negligence of such Person seeking indemnification hereunder or resulting from a breach of a representation or warranty made by such Person seeking indemnification hereunder in any of the Basic Documents that gives rise to the Servicer’s breach.

(b)           For purposes of Section 6.02(a), in the event of the termination of the rights and obligations of APCo (or any successor thereto pursuant to Section 6.03) as Servicer pursuant to Section 7.01, or a resignation by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a successor Servicer pursuant to Section 7.02.

(c)           Indemnification under this Section 6.02 shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Securitization Law or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or any Independent Manager or the termination of this Agreement and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorney’s fees and expenses).

(d)           Except to the extent expressly provided in this Agreement or the other Basic Documents (including the Servicer’s claims with respect to the Servicing Fee, reimbursement for costs incurred pursuant to Section 5.02(d) and the payment of the purchase price of CRR Property), the Servicer hereby releases and discharges the Issuer, any Independent Manager and the Indenture Trustee, and each of their respective officers, directors and agents (collectively, the “Released Parties”) from any and all actions, claims and demands whatsoever, whenever arising, which the Servicer, in its capacity as Servicer or otherwise, shall or may have against any such Person relating to the CRR Property or the Servicer’s activities with respect thereto other than any actions, claims and demands arising out of the willful misconduct, bad faith or gross negligence of the Released Parties.

(e)           The Servicer shall not be required to indemnify an Indemnified Person for any amount paid or payable by such Indemnified Person in the settlement of any action, proceeding or investigation without the written consent of the Servicer, which consent shall not be unreasonably withheld.  Promptly after receipt by an Indemnified Person of notice (or, in the case of the Indenture Trustee, receipt of notice by a Responsible Officer only) of the commencement of any action, proceeding or investigation, such Indemnified Person shall, if a claim in respect thereof is to be made against the Servicer under this Section 6.02, notify the Servicer in writing of the commencement thereof.  Failure by an Indemnified Person to so notify the Servicer shall relieve the Servicer from the obligation to indemnify and hold harmless such Indemnified Person under this Section 6.02 only to the extent that the Servicer suffers actual prejudice as a result of such failure. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this Section 6.02, the Servicer shall be entitled to conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to such Indemnified Person, the defense of any such action, proceeding or investigation (in which case the Servicer shall not thereafter be responsible for the

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fees and expenses of any separate counsel retained by the Indemnified Person except as set forth below); provided that the Indemnified Person shall have the right to participate in such action, proceeding or investigation through counsel chosen by it and at its own expense. Notwithstanding the Servicer’s election to assume the defense of any action, proceeding or investigation, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Servicer shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the defendants in any such action include both the Indemnified Person and the Servicer and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Servicer, (ii) the Servicer shall not have employed counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action, (iii) the Servicer shall authorize the Indemnified Person to employ separate counsel at the expense of the Servicer or (iv) in the case of the Indenture Trustee, such action exposes the Indenture Trustee to a material risk of criminal liability or forfeiture or a Servicer Default has occurred and is continuing.  Notwithstanding the foregoing, the Servicer shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for the Indemnified Persons other than one local counsel, if appropriate.  The Servicer will not, without the prior written consent of the Indemnified Person, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought under this Section 6.02 (whether or not the Indemnified Person is an actual or potential party to such claim or action) unless such settlement, compromise or consent includes an unconditional release of the Indemnified Person from all liability arising out of such claim, action, suit or proceeding.

(f)           The Servicer shall indemnify the Commission (for the benefit of Customers) for, and defend and hold harmless the Commission against, any and all Indemnified Losses that may be imposed upon, incurred by or asserted against the Commission, including any increase in the Servicing Fee that becomes payable pursuant to Section 6.06, as a result of the Servicer’s willful misconduct, bad faith or negligence in performance of its duties or by reason of reckless disregard of its obligations and duties under this Agreement or the Servicer’s failure to remit any required payment of CRR Charge Collections.  The indemnification obligation set forth in this paragraph may be enforced by the Commission but is not enforceable by any Customer.  Any indemnity payments made to the Commission under this paragraph for the benefit of Customers shall be remitted to the Indenture Trustee promptly for deposit into the Collection Account.

SECTION 6.03.         Binding Effect of Servicing Obligations.  The obligations to continue to provide service and to collect and account for CRR Charges will be binding upon the Servicer, any Successor, and any other entity that provides distribution services or direct wire services to a Person that is a West Virginia retail customer of APCo or any Successor so long as the Consumer Rate Relief Bonds are Outstanding.  Any Person (a) into which the Servicer may be merged, converted or consolidated and which is a Permitted Successor, (b) that may result from any merger, conversion or consolidation to which the Servicer shall be a party and which is a Permitted Successor, (c) that may succeed to the properties and assets of the Servicer substantially as a whole and which is a Permitted Successor, or (d) which otherwise is a Permitted Successor, which Person in any of the foregoing cases executes an agreement of assumption to perform all of the obligations of the Servicer hereunder, shall be the successor to

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the Servicer under this Agreement without further act on the part of any of the parties to this Agreement; provided, however, that (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 6.01 shall have been breached and no Servicer Default and no event which, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (ii) the Servicer shall have delivered to the Issuer and the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel from external counsel stating that such consolidation, conversion, merger or succession and such agreement of assumption complies with this Section 6.03 and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, (iii) the Servicer shall have delivered to the Issuer, the Indenture Trustee and the Rating Agencies an Opinion of Counsel from external counsel of the Servicer either (A) stating that, in the opinion of such counsel, all filings to be made by the Servicer, including filings with the Commission pursuant to the Securitization Law and the UCC, have been executed and filed and are in full force and effect that are necessary to fully preserve, perfect and maintain the priority of the interests of the Issuer and the Liens of the Indenture Trustee in the CRR Property and reciting the details of such filings or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interests, (iv) the Servicer shall have delivered to the Issuer, the Indenture Trustee, the Rating Agencies and the Commission an Opinion of Counsel from independent tax counsel stating that, for federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in a material federal income tax consequence to the Issuer or the Holders of Consumer Rate Relief Bonds and (v) the Servicer shall have given the Rating Agencies prior written notice of such transaction.  When any Person (or more than one Person) acquires the properties and assets of the Servicer substantially as a whole or otherwise becomes the successor, by merger, conversion, consolidation, sale, transfer, lease or otherwise, to all or substantially all the assets of the Servicer in accordance with the terms of this Section 6.03, then upon satisfaction of all of the other conditions of this Section 6.03, the preceding Servicer shall automatically and without further notice be released from all its obligations hereunder (except for responsibilities for its actions prior to such release).

Notwithstanding the foregoing, Wheeling Power Company will be allowed to merge into APCo without satisfying the conditions specified in this Section 6.03 so long as APCo is the entity surviving the merger.

SECTION 6.04.         Limitation on Liability of Servicer and Others.  Except as otherwise provided under this Agreement, neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be liable to the Issuer or any other Person for any action taken or for refraining from the taking of any action pursuant to this Agreement or for good faith errors in judgment; provided, however, that this provision shall not protect the Servicer or any such person against any liability that would otherwise be imposed by reason of willful misconduct, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations and duties under this Agreement.  The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on the advice of counsel reasonably acceptable to the Indenture Trustee or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising under this Agreement.

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Except as provided in this Agreement, including but not limited to Sections 5.02(d) and (e), the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action relating to the CRR Property that is not directly related to one of the Servicer’s enumerated duties in this Agreement or related to its obligation to pay indemnification, and that in its reasonable opinion may cause it to incur any expense or liability; provided, however, that the Servicer may, in respect of any Proceeding, undertake any action that it is not specifically identified in this Agreement as a duty of the Servicer but that the Servicer reasonably determines  is necessary or desirable in order to protect the rights and duties of the Issuer or the Indenture Trustee under this Agreement and the interests of the Holders and Customers under this Agreement.  The Servicer’s costs and expenses incurred in connection with any such proceeding shall be payable from CRR Charge Collections as an Operating Expense (and shall not be deemed to constitute a portion of the Servicing Fee) in accordance with the Indenture.  The Servicer’s obligations pursuant to this Section 6.04 shall survive and continue notwithstanding that payment of such Operating Expense may be delayed pursuant to the terms of the Indenture (it being understood that the Servicer may be required initially to advance its own funds in making expenditures pursuant to this paragraph).

SECTION 6.05.         APCo Not to Resign as Servicer.  Subject to the provisions of Section 6.03, APCo shall not resign from the obligations and duties hereby imposed on it as Servicer under this Agreement unless APCo delivers to the Indenture Trustee and the Commission an opinion of external counsel to the effect that APCo’s performance of its duties under this Agreement shall no longer be permissible under applicable law.  No such resignation shall become effective until a successor Servicer shall have assumed the responsibilities and obligations of APCo in accordance with Section 7.02.

SECTION 6.06.         Servicing Compensation.

(a)           In consideration for its services hereunder, until the Collection in Full of the CRR Charges, the Servicer shall receive an annual fee (the “Servicing Fee”) in an amount equal to (i) 0.05% of the aggregate initial principal amount of all Consumer Rate Relief Bonds for so long as APCo or an Affiliate of APCo is the Servicer or (ii) if APCo or any of its Affiliates is not the Servicer, an amount agreed upon by the Successor Servicer and the Indenture Trustee, provided that any amount in excess of 1.25% of the aggregate initial principal amount of all Consumer Rate Relief Bonds must either be approved by the Commission or, if the Commission does not act to either approve or disapprove the new servicing fee, by the date which is forty-five (45) days after notice of the replacement servicer’s proposed fee is provided to the Commission, shall be deemed approved. The Servicing Fee owing shall be calculated based on the initial principal amount of the Consumer Rate Relief Bonds and shall be paid semi-annually with half of the Servicing Fee being paid on each Payment Date.  The Servicer also shall be entitled to retain as additional compensation (i) any interest earnings on CRR Charge Payments received by the Servicer and invested by the Servicer during each Collection Period prior to remittance to the Collection Account and (ii) all late payment charges, if any, collected from Customers to the extent consistent with the Servicer’s Tariff; provided, however, that if the Servicer has failed to remit the Daily Remittance to the General Subaccount of any Collection Account on the Servicer Business Day that such payment is to be made pursuant to Section 6.11 on more than three (3) occasions during the period that the Consumer Rate Relief Bonds are outstanding, then thereafter the Servicer will be required to pay to the Indenture Trustee interest on each Daily Remittance

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accrued at the Federal Funds Rate from the Servicer Business Day on which such Daily Remittance was required to be made to the date that such Daily Remittance is actually made.

(b)           The Servicing Fee set forth in Section 6.06(a) shall be paid to the Servicer by the Indenture Trustee, on each Payment Date in accordance with the priorities set forth in Section 8.02(e) of the Indenture, by wire transfer of immediately available funds from the Collection Account to an account designated by the Servicer.  Any portion of the Servicing Fee not paid on any such date should be added to the Servicing Fee payable on the subsequent Payment Date.  In no event shall the Indenture Trustee be liable for the payment of any Servicing Fee or other amounts specified in this Section 6.06; provided that this Section 6.06 does not relieve the Indenture Trustee of any duties it has to allocate funds for payment for such fees under Section 8.02 of the Indenture.

(c)           Except as expressly provided elsewhere in this Agreement, the Servicer shall be required to pay from its own account expenses incurred by the Servicer in connection with its activities hereunder (including any fees to and disbursements by its accountants, counsel, or any other Person, any taxes imposed on the Servicer and any expenses incurred in connection with reports to Holders) out of the compensation retained by or paid to it pursuant to this Section 6.06, and shall not be entitled to any extra payment or reimbursement therefor.

(d)           The foregoing Servicing Fees constitute a fair and reasonable compensation for the obligations to be performed by the Servicer.  Such Servicing Fee shall be determined without regard to the income of the Issuer, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Issuer and shall be considered a fixed Operating Expense of the Issuer subject to the limitations on such expenses set forth in the Financing Order.

SECTION 6.07.         Compliance with Applicable Law.  The Servicer covenants and agrees, in servicing the CRR Property, to comply in all material respects with all laws applicable to, and binding upon, the Servicer and relating to the CRR Property the noncompliance with which would have a material adverse effect on the value of the CRR Property; provided, however, that the foregoing is not intended to, and shall not, impose any liability on the Servicer for noncompliance with any Requirement of Law that the Servicer is contesting in good faith in accordance with its customary standards and procedures.  It is expressly acknowledged that the payment of fees to the Rating Agencies shall be at the expense of the Issuer, and that if the Servicer advances such payments to the Rating Agencies, the Issuer shall reimburse the Servicer for any such advances

SECTION 6.08.         Access to Certain Records and Information Regarding CRR Property.  The Servicer shall provide to the Indenture Trustee access to the CRR Property Records as is reasonably required for the Indenture Trustee to perform its duties and obligations under the Indenture and the other Basic Documents, and shall provide access to such records to the Holders as required by applicable law.  Access shall be afforded without charge, but only upon reasonable request and during normal business hours at the offices of the Servicer.  Nothing in this Section 6.08 shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding

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Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 6.08.

SECTION 6.09.         Appointments.  The Servicer may at any time appoint any Person to perform all or any portion of its obligations as Servicer hereunder, including a collection agent acting pursuant to any Intercreditor Agreement; provided, however, that, unless such Person is an Affiliate of APCo, the Rating Agency Condition shall have been satisfied in connection therewith; provided further that the Servicer shall remain obligated and be liable under this Agreement for the servicing and administering of the CRR Property in accordance with the provisions hereof without diminution of such obligation and liability by virtue of the appointment of such Person and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the CRR Property.  The fees and expenses of any such Person shall be as agreed between the Servicer and such Person from time to time and none of the Issuer, the Indenture Trustee, the Holders or any other Person shall have any responsibility therefor or right or claim thereto.  Any such appointment shall not constitute a Servicer resignation under Section 6.05.

SECTION 6.10.         No Servicer Advances.  The Servicer shall not make any advances of interest on or principal of the Consumer Rate Relief Bonds.

SECTION 6.11.         Remittances.

(a)           On each Servicer Business Day the Servicer shall remit to the General Subaccount of the Collection Account the total CRR Charge Payments estimated to have been received by the Servicer from or on behalf of Customers on such Servicer Business Day in respect of all previously billed CRR Charges (the “Daily Remittance”), which Daily Remittance shall be calculated according to the procedures set forth in Annex I hereto and remitted as soon as reasonably practicable to the General Subaccount of the Collection Account but in no event later than the second Servicer Business Day after such payments are estimated to have been received.  Prior to each remittance to the General Subaccount of the Collection Account pursuant to this Section 6.11, the Servicer shall provide written notice to the Indenture Trustee of each such remittance (including the exact dollar amount to be remitted).  The Servicer shall also, promptly upon receipt, remit to the Collection Account any other proceeds of the CRR Bond Collateral which it may receive from time to time.

(b)           The Servicer agrees and acknowledges that it holds all CRR Charge Payments collected by it and any other proceeds for the CRR Bond Collateral received by it for the benefit of the Indenture Trustee and the Holders and that all such amounts will be remitted by the Servicer in accordance with this Section 6.11 without any surcharge, fee, offset, charge or other deduction except for late fees permitted by Section 6.06.  The Servicer further agrees not to make any claim to reduce its obligation to remit all CRR Charge Payments collected by it in accordance with this Agreement except for late fees permitted by Section 6.06.

(c)           On or before the twenty-fifth calendar day of each calendar month (or, if such day is not a Servicer Business Day, the immediately preceding Servicer Business Day), the Servicer shall calculate the amount of any Remittance Shortfall or Excess Remittance for the immediately preceding Collection Period, and (A) if a Remittance Shortfall exists, the Servicer

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shall make a supplemental remittance to the General Subaccount of the Collection Account within two (2) Servicer Business Days, or (B) if an Excess Remittance exists, the Servicer shall be entitled either (i) to reduce the amount of each Daily Remittance which the Servicer subsequently remits to the General Subaccount of the Collection Account for application to the amount of such Excess Remittance until the balance of such Excess Remittance has been reduced to zero, the amount of such reduction becoming the property of the Servicer or (ii) so long as such withdrawal would not cause the amounts on deposit in the General Subaccount and the Excess Funds Subaccount to be insufficient for the payment of the next installment of interest on the Consumer Rate Relief Bonds or principal due at maturity on the next Payment Date or upon acceleration on or before the next Payment Date, to be paid immediately from the General Subaccount or Excess Funds Subaccount the amount of such Excess Remittance, such payment becoming the property of the Servicer.  If there is a Remittance Shortfall, the amount which the Servicer remits to the General Subaccount of the Collection Account on the relevant date set forth above shall be increased by the amount of such Remittance Shortfall, such increase coming from the Servicer’s own funds.

(d)           Unless otherwise directed to do so by the Issuer, the Servicer shall be responsible for selecting Eligible Investments in which the funds in each Collection Account shall be invested pursuant to Section 8.03 of the Indenture.

SECTION 6.12.         Maintenance of Operations.  Subject to Section 6.03, APCo agrees to continue, unless prevented by circumstances beyond its control, to operate its electric distribution system to provide service (or, if transmission and distribution are split, to provide wire service directly to its customers) so long as it is acting as the Servicer under this Agreement.

ARTICLE VII

DEFAULT

SECTION 7.01.         Servicer Default.  If any one or more of the following events (a “Servicer Default”) shall occur and be continuing:

(a)           any failure by the Servicer to remit to the Collection Account on behalf of the Issuer any required remittance that shall continue unremedied for a period of five (5) Business Days after written notice of such failure is received by the Servicer from the Issuer or the Indenture Trustee or after discovery of such failure by an officer of the Servicer; or

(b)           any failure on the part of the Servicer or, so long as the Servicer is APCo or an Affiliate thereof, any failure on the part of APCo, as the case may be, duly to observe or to perform in any material respect any covenants or agreements of the Servicer or APCo, as the case may be, set forth in this Agreement (other than as provided in clause (a) or (c) of this Section 7.01) or any other Basic Document to which it is a party, which failure shall (i) materially and adversely affect the rights of the Holders and (ii) continue unremedied for a period of sixty (60) days after the date on which (A) written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer or APCo, as the case may be, by the Issuer (with a copy to the Indenture Trustee) or to the Servicer or APCo, as the case may be, by the Indenture Trustee or (B) such failure is discovered by an officer of the Servicer; or

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(c)           any failure by the Servicer duly to perform its obligations under Section 4.01(b) of this Agreement in the time and manner set forth therein, which failure continues unremedied for a period of five (5) days; or

(d)           any representation or warranty made by the Servicer in this Agreement or any Basic Document shall prove to have been incorrect in a material respect when made, which has a material adverse effect on the Holders and which material adverse effect continues unremedied for a period of sixty (60) days after the date on which (A) written notice thereof, requiring the same to be remedied, shall have been delivered to the Servicer (with a copy to the Indenture Trustee) by the Issuer or the Indenture Trustee or (B) such failure is discovered by an officer of the Servicer; or

(e)           an Insolvency Event occurs with respect to the Servicer or APCo;

then, and in each and every case, so long as the Servicer Default shall not have been remedied, either the Indenture Trustee may (if it is actually known by a Responsible Officer of the Indenture Trustee), or shall upon the instruction of Holders evidencing not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds, subject to the terms of any Intercreditor Agreement, by notice then given in writing to the Servicer (and to the Indenture Trustee if given by the Holders) (a “Termination Notice”), terminate all the rights and obligations (other than the obligations set forth in Section 6.02 and the obligation under Section 7.02 to continue performing its functions as Servicer until a successor Servicer is appointed) of the Servicer under this Agreement and under any Intercreditor Agreement.  In addition, upon a Servicer Default described in Section 7.01(a), the Holders and the Indenture Trustee as financing parties under the Securitization Law (or any of their representatives) shall be entitled to (i) apply to the Commission for sequestration and payment of revenues arising with respect to the CRR Property, (ii) foreclose on or otherwise enforce the lien and security interests in any CRR Property and (iii) apply to the Commission for an order that amounts arising from the CRR Charges be transferred to a separate account for the benefit of the Secured Parties, in accordance with the Securitization Law.  On or after the receipt by the Servicer of a Termination Notice, all authority and power of the Servicer under this Agreement, whether with respect to the Consumer Rate Relief Bonds, the CRR Property, the CRR Charges or otherwise, shall, without further action, pass to and be vested in such successor Servicer as may be appointed under Section 7.02; and, without limitation, the Indenture Trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such Termination Notice, whether to complete the transfer of the CRR Property Records and related documents, or otherwise.  The predecessor Servicer shall cooperate with the successor Servicer, the Issuer and the Indenture Trustee in effecting the termination of the responsibilities and rights of the predecessor Servicer under this Agreement, including the transfer to the successor Servicer for administration by it of all CRR Property Records and all cash amounts that shall at the time be held by the predecessor Servicer for remittance, or shall thereafter be received by it with respect to the CRR Property or the CRR Charges.  As soon as practicable after receipt by the Servicer of such Termination Notice, the Servicer shall deliver the CRR Property Records to the successor Servicer.  In case a successor Servicer is appointed as a result of a Servicer Default, all reasonable costs and expenses (including reasonable attorney’s fees and expenses) incurred in connection with transferring the

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CRR Property Records to the successor Servicer and amending this Agreement and any Intercreditor Agreement to reflect such succession as Servicer pursuant to this Section 7.01 shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs and expenses. Termination of APCo as Servicer shall not terminate APCo’s rights or obligations under the Sale Agreement (except rights thereunder deriving from its rights as the Servicer hereunder).

SECTION 7.02.         Appointment of Successor.

(a)           Upon the Servicer’s receipt of a Termination Notice pursuant to Section 7.01 or the Servicer’s resignation or removal in accordance with the terms of this Agreement, the predecessor Servicer shall continue to perform its functions as Servicer under this Agreement, and shall be entitled to receive the requisite portion of the Servicing Fee, until a successor Servicer shall have assumed in writing the obligations of the Servicer hereunder as described below.  In the event of the Servicer’s removal or resignation hereunder, the Indenture Trustee may at the written direction and with the consent of the Holders of at least a majority of the Outstanding Amount of the Consumer Rate Relief Bonds shall appoint a successor Servicer with the Issuer’s prior written consent thereto (which consent shall not be unreasonably withheld), and the successor Servicer shall accept its appointment by a written assumption in form reasonably acceptable to the Issuer and the Indenture Trustee and provide prompt written notice of such assumption to the Issuer and the Rating Agencies. If within thirty (30) days after the delivery of the Termination Notice, a new Servicer shall not have been appointed, the Indenture Trustee may petition the Commission or a court of competent jurisdiction to appoint a successor Servicer under this Agreement.  A Person shall qualify as a successor Servicer only if (i) such Person is permitted under Commission Regulations to perform the duties of the Servicer, (ii) the Rating Agency Condition shall have been satisfied, (iii) such Person enters into a servicing agreement with the Issuer having substantially the same provisions as this Agreement and (iv) such Person agrees to perform the obligations of the Servicer under each Intercreditor Agreement (if any).  In no event shall the Indenture Trustee be liable for its appointment of a successor Servicer.  The Indenture Trustee’s expenses incurred under this Section 7.02(a) shall be at the sole expense of the Issuer and payable from the Collection Account as provided in Section 8.02 of the Indenture.

(b)           Upon appointment, the successor Servicer shall be the successor in all respects to the predecessor Servicer and shall be subject to all the responsibilities, duties and liabilities arising thereafter placed on the predecessor Servicer and shall be entitled to the Servicing Fee and all the rights granted to the predecessor Servicer by the terms and provisions of this Agreement.

SECTION 7.03.         Waiver of Past Defaults.  The Commission, together with Holders evidencing not less than a majority of the Outstanding Amount of the Consumer Rate Relief Bonds may, on behalf of all Holders, direct the Indenture Trustee to waive in writing any default by the Servicer in the performance of its obligations hereunder and its consequences, except a default in making any required deposits to the Collection Account in accordance with this Agreement.  Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement.  No such waiver shall extend to any subsequent or other default or impair any

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right consequent thereto.  Promptly after the execution of any such waiver, the Servicer shall furnish copies of such waiver to each of the Rating Agencies.

SECTION 7.04.         Notice of Servicer Default.  The Servicer shall deliver to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies, promptly after having obtained knowledge thereof, but in no event later than five (5) Business Days thereafter, written notice of any event which with the giving of notice or lapse of time, or both, would become a Servicer Default under Section 7.01.

SECTION 7.05.         Cooperation with Successor.  The Servicer covenants and agrees with the Issuer that it will, on an ongoing basis, cooperate with the successor Servicer and provide whatever information is, and take whatever actions are, reasonably necessary to assist the successor Servicer in performing its obligations hereunder.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

SECTION 8.01.         Amendment.

(a)           This Agreement may be amended in writing by the Servicer and the Issuer with the prior written consent of the Indenture Trustee, the satisfaction of the Rating Agency Condition and, if the contemplated amendment may in the judgment of the Commission increase Ongoing Financing Costs, the consent of the Commission pursuant to Section 8.02; provided that any such amendment may not adversely affect the interest of any Holder in any material respect without the consent of the Holders of a majority of the Outstanding Amount.  Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

(b)           Notwithstanding Section 8.01(a) or anything to the contrary in this Agreement, the Servicer and the Issuer may amend Annex I to this Agreement in writing with prior written notice given to the Indenture Trustee and the Rating Agencies, but without the consent of the Indenture Trustee, any Rating Agency or any Holder, solely to address changes to the Servicer’s method of calculating Estimated CRR Charge Collections as a result of changes to the Servicer’s current computerized customer information system, including changes which would replace the remittances contemplated by the estimation procedures set forth in Annex I with remittances of CRR Charge Collections determined to have been actually received; provided that any such amendment shall not have a material adverse effect on the Holders of then Outstanding Consumer Rate Relief Bonds.

(c)           Prior to the execution of any amendment to this Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel of external counsel stating that such amendment is authorized and permitted by this Agreement, and all conditions precedent, if any, provided for in this Agreement relating to such amendment have been satisfied and upon the Opinion of Counsel from external counsel referred to in Section 3.01(c)(i).  The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects their own rights, duties, indemnities or immunities under this Agreement or otherwise.

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SECTION 8.02.         Commission Condition.  Notwithstanding anything to the contrary in Section 8.01, no amendment or modification of this Agreement that would result in an increase to Ongoing Financing Costs shall be effective unless the process set forth in this Section 8.02 has been followed.

(a)           At least thirty-one (31) days (or forty-six (46) days, in the case of any proposed increase in the annual Servicing Fee above 1.25% times the aggregate initial principal amount of the Consumer Rate Relief Bonds) prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in Section 8.01 (except that the consent of the Indenture Trustee may be subject to the consent of Holders if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification), the Servicer shall have delivered to the Commission’s executive secretary and general counsel written notification of any proposed amendment, which notification shall contain:

(i)           a reference to Case No. 12-1188-E-PC;

(ii)           an Officer’s Certificate stating that the proposed amendment or modification has been approved by all parties to this Agreement; and

(iii)           a statement identifying the person to whom the Commission or its authorized representative is to address any response to the proposed amendment or modification or to request additional time.

(b)           The Commission or its authorized representative shall, within thirty (30) days (or forty-five (45) days, in the case of any proposed increase in the annual Servicing Fee above 1.25% times the aggregate initial principal amount of the Consumer Rate Relief Bonds)  of receiving the notification complying with Section 8.02(a), either:

(i)           provide notice of its determination that the proposed amendment or modification will not under any circumstances have the effect of increasing the Ongoing Financing Costs,

(ii)           provide notice of its consent or lack of consent to the person specified in Section 8.02(a)(iii), or

(iii)           be conclusively deemed to have consented to the proposed amendment or modification,

unless, within thirty (30) days of receiving the notification complying with Section 8.02(a) (or forty-five (45) days in the case of any proposed increase in the annual Servicing Fee above 1.25% times the aggregate initial principal amount of the Consumer Rate Relief Bonds), the Commission or its authorized representative delivers to the office of the person specified in Section 8.02(a)(iii) a written statement requesting an additional amount of time not to exceed thirty (30) days in which to consider whether to consent to the proposed amendment or modification.  If the Commission or its authorized representative requests an extension of time in the manner set forth in the preceding sentence, then the Commission shall either provide notice

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of its consent or lack of consent or notice of its determination that the proposed amendment or modification will not under any circumstances increase Ongoing Financing Costs to the person specified in Section 8.02(a)(iii) no later than the last day of such extension of time or be conclusively deemed to have consented to the proposed amendment or modification on the last day of such extension of time.  Any amendment or modification requiring the consent of the Commission shall become effective on the later of (i) the date proposed by the parties to such amendment or modification and (ii) the first day after the expiration of the thirty or forty-five day period, as applicable, provided for in this Section 8.02(b), or, if such period has been extended pursuant hereto, the first day after the expiration of such period as so extended.

(c)           Following the delivery of a notice to the Commission by the Servicer under Section 8.02(a), the Servicer and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any notification of a proposed amendment.  Such withdrawal shall be evidenced by the Servicer’s giving prompt written notice thereof to the Commission, the Issuer and the Indenture Trustee.

(d)           For the purpose of this Section 8.02, an “authorized representative” of the Commission means any person authorized to act on behalf of the Commission.

SECTION 8.03.         Maintenance of Accounts and Records.

(a)           The Servicer shall maintain accounts and records as to the CRR Property accurately and in accordance with its standard accounting procedures and in sufficient detail to permit reconciliation between CRR Charge Payments received by the Servicer and CRR Charge Collections from time to time deposited in the Collection Account.

(b)           The Servicer shall permit the Indenture Trustee and its agents at any time during normal business hours, upon reasonable notice to the Servicer and to the extent it does not unreasonably interfere with the Servicer’s normal operations, to inspect, audit and make copies of and abstracts from the Servicer’s records regarding the CRR Property and the CRR Charges.  Nothing in this Section 8.03(b) shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 8.03(b).

SECTION 8.04.         Notices.  Unless otherwise specifically provided herein, all demands, notices and communications upon or to the Servicer, the Issuer, the Indenture Trustee or the Rating Agencies under this Agreement shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented delivery service or, to the extent receipt is confirmed telephonically, sent by telecopy or other form of electronic transmission:

(a)           in the case of the Servicer, to Appalachian Power Company, at 1 Riverside Plaza, Columbus, Ohio 43215, Attention: Treasurer, Telephone: (614) 716-1000, Facsimile:  (614) 716-2807;

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(b)           in the case of the Issuer, to Appalachian Consumer Rate Relief Funding LLC at 707 Virginia Street East, Suite 1000, Charleston, West Virginia, 25327, Attention: Director of Rates, Telephone: (304) 348-4141, Facsimile:  [__];

(c)           in the case of the Indenture Trustee, to the Corporate Trust Office;

(d)           in the case of the Commission, to the Public Service Commission of West Virginia, 201 Brooks Street, Charleston, West Virginia, 25301, Attention: Executive Secretary, Telephone: 1-800-344-5113, Facsimile:  (304) 340-0325;

(e)           in the case of Moody’s, to Moody’s Investors Service, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: ServicerReports@moodys.com (all such notices to be delivered to Moody’s in writing by email);

(f)           in the case of Standard & Poor’s, to Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@standardandpoors.com (all such notices to be delivered to Standard & Poor’s in writing by email); or

(g)           as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.

SECTION 8.05.         Assignment.  Notwithstanding anything to the contrary contained herein, except as provided in Section 6.03 and as provided in the provisions of this Agreement concerning the resignation of the Servicer, this Agreement may not be assigned by the Servicer.

SECTION 8.06.         Limitations on Rights of Others.  The provisions of this Agreement are solely for the benefit of the Servicer and the Issuer and, to the extent provided herein or in the Basic Documents, Customers, the Indenture Trustee and the Holders, and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant provisions of this Agreement.  Nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the CRR Property or CRR Bond Collateral or under or in respect of this Agreement or any covenants, conditions or provisions contained herein.  Notwithstanding anything to the contrary contained herein, for the avoidance of doubt, any right, remedy or claim to which any Customer may be entitled pursuant to the Financing Order and to this Agreement may be asserted or exercised only by the Commission (or by its counsel in the name of the Commission) for the benefit of such Customer.

SECTION 8.07.         Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such a construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

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SECTION 8.08.         Separate Counterparts.  This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

SECTION 8.09.         Headings.  The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

SECTION 8.10.         GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 8.11.         Assignment to Indenture Trustee.  (a) The Servicer hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Secured Parties pursuant to the Indenture of any or all of the Issuer’s rights hereunder and (b) in no event shall the Indenture Trustee have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates delivered pursuant hereto, as to all of which any recourse shall be had solely to the assets of the Issuer subject to the availability of funds therefor under Section 8.02 of the Indenture.

SECTION 8.12.         Nonpetition Covenants.  Notwithstanding any prior termination of this Agreement or the Indenture, the Servicer shall not, prior to the date which is one year and one day after the satisfaction and discharge of the Indenture, acquiesce, petition or otherwise invoke or cause the Issuer to invoke or join with any Person in provoking the process of any Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer for any substantial part of the property of the Issuer or ordering the dissolution, winding up or liquidation of the affairs of the Issuer.

SECTION 8.13.         Limitation of Liability.   It is expressly understood and agreed by the parties hereto that this Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee in the exercise of the powers and authority conferred and vested in it, and that the Indenture Trustee, in acting hereunder, is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

SECTION 8.14.         Rule 17g-5 Compliance.  The Servicer agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Servicer to any Rating Agency under this Agreement or any other Basic Document to which it is a party for the purpose of determining the initial credit rating of

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the Consumer Rate Relief Bonds or undertaking credit rating surveillance of the Consumer Rate Relief Bonds with any Rating Agency, or satisfy the Rating Agency Condition, shall be substantially concurrently posted by the Servicer on the 17g-5 Website.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.

	APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, as Issuer
	By: ________________________________ Name: Title:
	APPALACHIAN POWER COMPANY, as Servicer
	By: ________________________________ Name: Title:
ACKNOWLEDGED AND ACCEPTED:
U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee
By:  ______________________________ Name: Title:

Signature Page to

CRR Property Servicing Agreement

EXHIBIT A

MONTHLY SERVICER’S CERTIFICATE

See Attached.

EXHIBIT A

1

Remittance Dates

Monthly Servicer's Certificate

(to be delivered each month pursuant to Section 3.01 (b) of the CRR Property Servicing Agreement)

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC

Appalachian Power Company, as Servicer

Pursuant to the CRR Property Servicing Agreement dated as of [closing date] (the "CRR Property Servicing Agreement") between

Appalachian Power Company, as Servicer, and Appalachian Consumer Rate Relief Funding LLC, as Issuer, the Servicer does hereby certify as follows:

Collection Period:

Remittance Dates:

CRR Rate Class                               Total a. CRR Charges in Effect b. Billed CRR Charges c. Estimated CRR Charge Collections Received  

Collection Period:

Customer Rate Class                 Total d. Estimated CRR Charge Collections Received Total                 e. Actual CRR Charge Collections  Received f. Remittance Shortfall g. Excess Remittance  

h. Daily remittances previously made by the Servicer to the Collection Account in respect of this Collection Period (c):

i. The amount to be remitted by the Servicer to the Collection Account for this Collection Period is (c + f - g):

j. If (i>h), (i-h) equals net amount due from the Servicer to the Collection Amount:

k. If (h>i), (h-i) equals net amount due to the Servicer from the Collection Amount:

Capitalized terms used herein have their respective meanings set forth in the CRR Property Servicing Agreement.

In WITNESS HEREOF, the undersigned has duly executed and delivered this Monthly Servicer's Certificate the     day of

APPALACHIAN POWER COMPANY, as Servicer

Title:  Assistant Treasurer

EXHIBIT B

FORM OF SEMI-ANNUAL SERVICER’S CERTIFICATE

Pursuant to Section 4.01(C)(ii) of the CRR Property Servicing Agreement, dated as of [closing date] (the “Servicing Agreement”), between, APPALACHIAN POWER COMPANY, as servicer and APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, the Servicer does hereby certify, for the ________, 20__ Payment Date (the “Current Payment Date”), as follows:

Capitalized terms used herein have their respective meanings as set forth in the Indenture (as defined in the Servicing Agreement).  References herein to certain sections and subsections are references to the respective sections of the Servicing Agreement or the Indenture, as the context indicates.

Collection Periods:	____ to ______$_________
Payment Date:	_____________

1. Collections Allocable and Aggregate Amounts Available for the Current Payment Date::

i.	Remittances for the ___ Collection Period	$_________
ii.	Remittances for the ___ Collection Period	$_________
iii.	Remittances for the ___ Collection Period	$_________
iv.	Remittances for the ___ Collection Period	$_________
v.	Remittances for the ___ Collection Period	$_________
vi.	Remittances for the ___ Collection Period	$_________
vii.	Investment Earnings on Collection Account
	viii.       Investment Earnings on Capital Subaccount ix.          Investment Earnings on Excess Funds Subaccount x.           Investment Earnings on General Subaccount	$_________ $_________ $_________
xi.	General Subaccount Balance (sum of  i through x above)	$_________
xii.	Excess Funds Subaccount Balance as of Prior Payment Date	$_________
xiii.	Capital Subaccount Balance as of Prior Payment Date	$_________
xiv.	Collection Account Balance (sum of  xii through xiii above)	$_________

2. Outstanding Amounts of as of Prior Payment Date:

i.	Tranche A-1 Outstanding Amount	$__________
ii.	Tranche A-2 Outstanding Amount	$__________
iii.	Tranche A-3 Outstanding Amount	$__________
iv.
v.	Aggregate Outstanding Amount of all Tranches:	$__________

EXHIBIT B

1

3. Required Funding/Payments as of Current Payment Date:

Principal					Principal Due
i.	Tranche A-1				$__________
ii.	Tranche A-2				$__________
iii.	Tranche A-3				$__________
iv.	For all Tranches:				$__________
Interest
Tranche		Interest Rate	Days in Interest Period1	Principal Balance	Interest Due
v. Tranche A-1					$__________
vi.Tranche A-2					$__________
vii. Tranche A-3					$__________
viii.		For all Tranches:			$__________
				Required Level	Funding Required
ix. Capital Subaccount

4.  Allocation of Remittances as of Current Payment Date Pursuant to 8.02(e) of Indenture
i.  Trustee Fees and Expenses; Indemnity Amounts2				$_____________
ii. Servicing Fee				$_____________
iii. Administration Fee				$_____________
iv. Operating Expenses				$_____________
v.  Semi-Annual Interest (including any past-due for prior periods)					$___________
Tranche	Aggregate		Per $1000 of Original Principal Amount
1. Tranche A-1 Interest Payment		$_____________	$_____________
2. Tranche A-2 Interest Payment		$_____________	$_____________
3. Tranche A-3 Interest Payment		$_____________	$_____________
		$_____________
vi.  Principal Due and Payable as a Result of an Event of Default or on Final Maturity Date					$___________
1. Tranche A-1 Principal Payment	$_____________		$_____________

1On 30/360 day basis for initial payment date; otherwise use one-half of annual rate.

 

2Subject to $_____ cap

EXHIBIT B

2

2. Tranche A-2 Principal Payment	$_____________	$_____________
3. Tranche A-3 Principal Payment	$_____________	$_____________
	$_____________
vii.  Semi-Annual Principal			$___________
Tranche	Aggregate	Per $1000 of Original Principal Amount
Tranche A-1 Principal Payment	$_____________	$_____________
Tranche A-2 Principal Payment	$_____________	$_____________
Tranche A-3 Principal Payment	$_____________	$_____________
viii. Other unpaid Operating Expenses ix. Funding of Capital Subaccount (to required level)			$_____________ $_____________
x. Permitted Return to APCo			$_____________
xi. Deposit to Excess Funds Subaccount			$_____________
xii. Released to Issuer upon Retirement of all Consumer Rate Relief Bonds			$_____________
xiii.           Aggregate Remittances as of Current Payment Date			$_____________

5.  Outstanding Amount and Collection Account Balance as of Current Payment Date (after giving effect to payments to be made on such Payment Date):

i.	Tranche A-1	$_____________
ii.	Tranche A-2	$_____________
iii.	Tranche A-3	$_____________
iv.	Aggregate Outstanding Amount of all Tranches:	$_____________
v.	Excess Funds Subaccount Balance	$_____________
vi.	Capital Subaccount Balance	$_____________
vii.	Aggregate Collection Account Balance	$_____________

6.  Subaccount Withdrawals as of Current Payment (if applicable, pursuant to Section 8.02(e) of Indenture:

i.	Excess Funds Subaccount	$_____________
ii.	Capital Subaccount	$_____________
iii.	Total Withdrawals	$_____________

EXHIBIT B

3

7.  Shortfalls in Interest and Principal Payments as of Current Payment Date

i.	Semi-annual Interest
Tranche A-1 Interest Payment		$_____________
Tranche A-2 Interest Payment		$_____________
Tranche A-3 Interest Payment		$_____________
		$_____________
ii.	Semi-annual Principal
Tranche A-1 Principal Payment		$_____________
Tranche A-2 Principal Payment		$_____________
Tranche A-3 Principal Payment		$_____________
		$_____________

8.  Shortfalls in Payment of Permitted Return as of Current Payment Date

i.   Permitted Return $_____________

9.  Shortfalls in Required Subaccount Levels as of Current Payment Date

i.   Capital Subaccount $_____________

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Servicer’s Certificate this __ day of __________.

APPALACHIAN POWER COMPANY,
	as Servicer
By:
	Name:
	Title:

EXHIBIT B

4

EXHIBIT C-1

SERVICER’S CERTIFICATE

The undersigned hereby certifies that he/she is the duly elected and acting [__________] of [APPALACHIAN POWER COMPANY], as servicer (the “Servicer”) under the CRR Property Servicing Agreement dated as of [closing date] (the “Servicing Agreement”) between the Servicer and Appalachian Consumer Rate Relief Funding LLC (the “Issuer”) and further that:

1.           The undersigned is responsible for assessing the Servicer’s compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB (the “Servicing Criteria”).

2.           With respect to each of the Servicing Criteria, the undersigned has made the following assessment of the Servicing Criteria in accordance with Item 1122(d) of Regulation AB, with such discussion regarding the performance of such Servicing Criteria during the fiscal year covered by the Sponsor’s annual report on Form 10-K Report (such fiscal year, the “Assessment Period”):

	Servicing Criteria	Applicable Servicing Criteria
Reference	Criteria
	General Servicing Considerations
1122(d)(1)(i)	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.	Applicable; assessment below.
1122(d)(1)(ii)	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.	Not applicable; no servicing activities were outsourced.
1122(d)(1)(iii)	Any requirements in the transaction agreements to maintain a back-up servicer for pool assets are maintained.	Not applicable; documents do not provide for a back-up servicer.
1122(d)(1)(iv)	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.	Not applicable; documents do not require a fidelity bond or errors and omissions policy.

EXHIBIT C-1

1

	Servicing Criteria	Applicable Servicing Criteria
Reference	Criteria
	Cash Collection and Administration
1122(d)(2)(i)	Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements.	Applicable
1122(d)(2)(ii)	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.	Applicable
1122(d)(2)(iii)	Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.	Applicable; no advances by the Servicer are permitted under the transaction agreements, except for payments of certain indemnities
1122(d)(2)(iv)	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.	Applicable, but no current assessment is required since transaction accounts are maintained by and in the name of the Indenture Trustee.
1122(d)(2)(v)	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.	Applicable, but no current assessment required;  all “custodial accounts” are maintained by the Indenture Trustee.
1122(d)(2)(vi)	Unissued checks are safeguarded so as to prevent unauthorized access.	Not applicable; all transfers made by wire transfer.
1122(d)(2)(vii)	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain	Applicable; assessment below.

EXHIBIT C-1

2

	Servicing Criteria	Applicable Servicing Criteria
Reference	Criteria
	explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.
	Investor Remittances and Reporting
1122(d)(3)(i)	Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of pool assets serviced by the Servicer.	Applicable; assessment below.
1122(d)(3)(ii)	Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.	Not applicable; investor records maintained by Indenture Trustee.
1122(d)(3)(iii)	Disbursements made to an investor are posted within two business days to the Servicer’s investor records, or such other number of days specified in the transaction agreements.	Applicable
1122(d)(3)(iv)	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.	Applicable; assessment below.
	Pool Asset Administration
1122(d)(4)(i)	Collateral or security on pool assets is maintained as required by the transaction agreements or related documents.	Applicable; assessment below.
1122(d)(4)(ii)	Pool assets and related documents are safeguarded as required by the transaction agreements.	Applicable; assessment below.
1122(d)(4)(iii)	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.	Not applicable; no removals or substitutions of CRR Property are contemplated or allowed under the transaction documents.

EXHIBIT C-1

3

	Servicing Criteria	Applicable Servicing Criteria
Reference	Criteria
1122(d)(4)(iv)	Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related transaction agreements.	Applicable; assessment below.
1122(d)(4)(v)	The Servicer’s records regarding the pool assets agree with the Servicer’s records with respect to an obligor’s unpaid principal balance.	Not applicable; because underlying obligation (CRR charge) is not an interest bearing instrument.
1122(d)(4)(vi)	Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.	Applicable; assessment below
1122(d)(4)(vii)	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.	Applicable; limited assessment below. Servicer actions governed by Commission regulations.
1122(d)(4)(viii)	Records documenting collection efforts are maintained during the period any pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).	Applicable, but does not require assessment since no explicit documentation  requirement with respect to delinquent accounts are imposed under the transactional documents due to availability of “true-up” mechanism.
1122(d)(4)(ix)	Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.	Not applicable; CRR charges are not interest bearing instruments.

EXHIBIT C-1

4

	Servicing Criteria	Applicable Servicing Criteria
Reference	Criteria
1122(d)(4)(x)	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.	Not applicable.
1122(d)(4)(xi)	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.	Not applicable; Servicer does not make payments on behalf of obligors.
1122(d)(4)(xii)	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.	Not applicable; Servicer cannot make advances of its own funds on behalf of customers under the transaction documents.
1122(d)(4)(xiii)	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements.	Not applicable; Servicer cannot make advances of its own funds on behalf of customers to pay principal or interest on the bonds.
1122(d)(4)(xiv)	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.	Applicable; assessment below.
1122(d)(4)(xv)	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.	Not applicable; no external enhancement is required under the transaction documents.

3.           To the best of the undersigned’s knowledge, based on such review, the Servicer is in compliance in all material respects with the applicable servicing criteria set forth above as of and for the period ending the end of the fiscal year covered by the Sponsor’s annual

EXHIBIT C-1

5

report on Form 10-K.  [If not true, include description of any material instance of noncompliance.]

Executed as of this ______________ day of _________________, ____.

[APPALACHIAN POWER COMPANY]

By: ________________________________

Name:

Title:

EXHIBIT C-1

6

EXHIBIT C-2

CERTIFICATE OF COMPLIANCE

The undersigned hereby certifies that he/she is the duly elected and acting [__________] of [NAME OF SERVICER], as servicer (the “Servicer”) under the CRR Property Servicing Agreement dated as of [closing date] (the “Servicing Agreement”) between the Servicer and Appalachian Consumer Rate Relief Funding LLC (the “Issuer”) and further that:

1.           A review of the activities of the Servicer and of its performance under the Servicing Agreement during the twelve months ended [________], [] has been made under the supervision of the undersigned pursuant to Section 3.03 of the Servicing Agreement; and

2.           To the best of the undersigned’s knowledge, based on such review, the Servicer has fulfilled all of its obligations in all material respects under the Servicing Agreement throughout the twelve months ended [________],[ _____], except as set forth on Annex A hereto.

Executed as of this ______________ day of _________________, ____.

[NAME OF SERVICER]

By: ________________________________

Name:

Title:

EXHIBIT C-2

1

ANNEX A

TO CERTIFICATE OF COMPLIANCE

LIST OF SERVICER DEFAULTS

The following Servicer Defaults, or events which with the giving of notice, the lapse of time, or both, would become Servicer Defaults known to the undersigned occurred during the year ended [__________]:

Nature of Default Status

EXHIBIT C-2

2

SCHEDULE 4.01(a)

EXPECTED AMORTIZATION SCHEDULE

See Attached.

SCHEDULE 4.01(a)

1

ANNEX I

The Servicer agrees to comply with the following servicing procedures:

SECTION 1.  DEFINITIONS.

(a)           Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the CRR Property Servicing Agreement (the “Agreement”).

(b)           Whenever used in this Annex I, the following words and phrases shall have the following meanings:

“Applicable MDMA” means with respect to each Customer, the meter data management agent providing meter reading services for that Customer’s account.

“Billed CRR Charges” means the amounts of CRR Charges billed by the Servicer.

“Servicer Policies and Practices” means, with respect to the Servicer’s duties under this Annex I, the policies and practices of the Servicer applicable to such duties that the Servicer follows with respect to comparable assets that it services for itself and, if applicable, others.

SECTION 2.  DATA ACQUISITION.

(a)           Installation and Maintenance of Meters.  The Servicer shall cause to be installed, replaced and maintained meters in such places and in such condition as will enable the Servicer to obtain usage measurements for each Customer at least once every Billing Period, absent extraordinary circumstances.

(b)           Meter Reading.  At least once each Billing Period, the Servicer shall obtain usage measurements from the Applicable MDMA for each Customer; provided, however, that the Servicer may estimate any Customer’s usage determined in accordance with applicable Commission Regulations, Tariff terms and conditions of service, and customary practices and procedures.

(c)           Cost of Metering.  The Issuer shall not be obligated to pay any costs associated with the routine metering duties set forth in this Section 2, including the costs of installing, replacing and maintaining meters, nor shall the Issuer be entitled to any credit against the Servicing Fee for any cost savings realized by the Servicer as a result of new metering and/or billing technologies.

SECTION 3.  USAGE AND BILL CALCULATION.

The Servicer shall (a) obtain a calculation of each Customer’s usage (which may be based on data obtained from such Customer’s meter read or on usage estimates) at least once each Billing Period; and (b) calculate such Customers’ respective CRR Charges as such charges may change from time to time pursuant to the True-Up Adjustments.

ANNEX I

1

SECTION 4.  BILLING.

The Servicer shall implement the CRR Charges as of the Closing Date and shall thereafter bill each Customer or, with respect to Customers billed by a Third-Party Collector, the Third-Party Collector, for the respective Customer’s outstanding current and past due CRR Charges accruing through the date on which the CRR Charges may no longer be billed under the Tariff, all in accordance with the following:

(a)           Frequency of Bills; Billing Practices.  In accordance with the Servicer’s then-existing Servicer Policies and Practices for its own charges, as such Servicer Policies and Practices may be modified from time to time, the Servicer shall generate and issue a Bill to each Customer, or, where a Third-Party Collector is responsible for billing the Customers, to the Third-Party Collector, for such Customers’ CRR Charges once every applicable Billing Period, at the same time, with the same frequency and on the same Bill as that containing the Servicer’s own charges to such Customers or Third-Party Collectors, as the case may be.  In the event that the Servicer makes any material modification to these practices, it shall notify the Issuer, the Indenture Trustee, and the Rating Agencies prior to the effectiveness of any such modification; provided, however, that the Servicer may not make any modification that will materially adversely affect the Holders.

(b)           Format.

(i)           Each Bill issued by the Servicer shall contain the charge corresponding to the respective CRR Charges as set forth in the CRR Rate Schedule owed by such Customer for the applicable Billing Period.  Additionally the Servicer shall provide Customers with the annual notice required by Section 4.01(c)(iii)(B) of the Servicing Agreement.

(ii)           The Servicer shall conform to such requirements in respect of the format, structure and text of Bills delivered to Customers in accordance with the Financing Order, the Tariff, any other tariffs, if applicable, and any Commission Regulations.  To the extent that Bill format, structure and text are not prescribed by the Financing Order, the Utilities Code or by applicable Commission Regulations or the Tariff, the Servicer shall, subject to clause (i) above, determine the format, structure and text of all Bills in accordance with its reasonable business judgment, its Servicer Policies and Practices with respect to its own charges and prevailing industry standards.

(c)           Delivery.  The Servicer shall deliver all Bills issued by it (i) by United States mail in such class or classes as are consistent with the Servicer Policies and Practices followed by the Servicer with respect to its own charges to its customers or (ii) by any other means, whether electronic or otherwise, that the Servicer may from time to time use to present its own charges to its customers.

SECTION 5.  CUSTOMER SERVICE FUNCTIONS.

The Servicer shall handle all Customer inquiries and other Customer service matters according to the same procedures it uses to service Customers with respect to its own charges.

ANNEX I

2

SECTION 6.  COLLECTIONS; PAYMENT PROCESSING; REMITTANCE.

(a)           Collection Efforts, Policies, Procedures.

(i)           The Servicer shall use reasonable efforts to collect all Billed CRR Charges from Customers and Third-Party Collectors as and when the same become due and shall follow such collection procedures as it follows with respect to comparable assets that it services for itself or others, including with respect to the following:

(A) The Servicer shall prepare and deliver overdue notices to Customers in accordance with applicable Commission Regulations, Tariff provisions and Servicer Policies and Practices.

(B) The Servicer shall apply late payment charges to outstanding Customer balances in accordance with the Servicer’s Tariff and as required by the Financing Order.

(C) The Servicer shall deliver notices of delinquency and possible disconnection in accordance with applicable Commission Regulations and Servicer Policies and Practices.

(D) The Servicer shall adhere to and carry out disconnection policies in accordance with the Utilities Code, the Financing Order, applicable Commission Regulations, Tariff provisions and the Servicer Policies and Practices.

(E) The Servicer may employ the assistance of collection agents to collect any past-due CRR Charges in accordance with applicable Commission Regulations, Tariff provisions and Servicer Policies and Practices.

(F) The Servicer shall apply Customer deposits to the payment of delinquent accounts in accordance with applicable Commission Regulations, Tariff provisions and Servicer Policies and Practices and according to the priorities set forth in Section 6(b)(ii), (iii), (iv) and (v) of this Annex I.

(ii)           The Servicer shall not waive any late payment charge or any other fee or charge relating to delinquent payments, if any, or waive, vary or modify any terms of payment of any amounts payable by a Customer, in each case unless such waiver or action: (A) would be in accordance with the Servicer’s customary practices or those of any successor Servicer with respect to comparable assets that it services for itself and for others; (B) would not materially adversely affect the rights of the Holders; and (C) would comply with applicable law; provided, however, that notwithstanding anything in the Agreement or this Annex I to the contrary, the Servicer is authorized to write off any Billed CRR Charges, in accordance with its Servicer Policies and Practices, that have remained outstanding for one hundred eighty (180) days or more.

ANNEX I

3

(iii)           The Servicer shall accept payment from Customers in respect of Billed CRR Charges in such forms and methods and at such times and places as it accepts payment of its own charges.

(b)           Payment Processing; Allocation; Priority of Payments.

(i)           The Servicer shall post all payments received to Customer accounts as promptly as practicable, and, in any event, substantially all payments shall be posted no later than two (2) Business Days after receipt.

(ii)           Subject to clause (iii) below, the Servicer shall apply payments received from a Customer to such Customer’s account in proportion to the total amounts owed by such Customer.

(iii)           Any amounts collected by the Servicer that represent partial payments of the total amounts owed by a Customer shall be allocated as follows: (A) first to amounts owed to the Issuer, APCo and any other affiliate of APCo which is owed “consumer rate relief charges” as defined in Section 24-2-4f(b)(7) of the Securitization Law (excluding any late fees and interest charges), regardless of age, pro rata based on the amount of such charges as a percentage of the total amounts owed by such Customer; then (B) all late charges shall be allocated to the Servicer; provided that penalty payments owed on late payments of CRR Charges shall be allocated to the Servicer to the extent consistent with the Terms and Conditions of Service included in the Tariff.  If, after the date hereof, the Issuer or any Affiliate issues bonds that are backed by property consisting of charges payable by Customers under West Virginia law to be collected by the Servicer, the Servicer shall allocate, or cause to the allocated, amounts owed to the Issuer and to each other issuer of bonds ratably based upon the total amount of charges on such bill which were billed in respect to each such issue of bonds.

(iv)           The Servicer shall hold all over-payments for the benefit of the Issuer and APCo and shall apply such funds to future Bill charges in accordance with clauses (ii) and (iii) as such charges become due.

(v)           For Customers on a budget billing plan, the Servicer shall treat CRR Charge Payments received from such Customers as if such Customers had been billed for their respective CRR Charges in the absence of the applicable budget billing plan; partial payment of a budget billing plan payment shall be allocated according to clause (iii) and overpayment of a budget billing plan payment shall be allocated according to clause (iv).

(c)           Accounts; Records.

The Servicer shall maintain accounts and records as to the CRR Property accurately and in accordance with its standard accounting procedures and in sufficient detail (i) to permit reconciliation between payments or recoveries with respect to the CRR Property and the amounts from time to time remitted to the Collection Account in respect of the CRR Property and (ii) to permit the CRR Charge Collections held by the Servicer to be accounted for separately from the funds with which they may be commingled, so that the dollar amounts of CRR Charge Collections commingled with the Servicer’s funds may be properly identified and traced.

ANNEX I

4

(d)           Investment of CRR Charge Payments Received.

Prior to each Daily Remittance, the Servicer may invest CRR Charge Payments received at its own risk and (except as required by applicable Commission Regulations) for its own benefit.  So long as the Servicer complies with its obligations under Section 6(c), neither such investments nor such funds shall be required to be segregated from the other investment and funds of the Servicer.

(e)           Calculation of Daily Remittance.

(i)           For purposes of calculating the Daily Remittance, (i) all Billed CRR Charges shall be deemed to be collected the same number of days after billing as is equal to the Weighted Average Days Outstanding then in effect and (ii) the Servicer will, on each Servicer Business Day, remit to the Indenture Trustee for deposit in the Collection Account an amount equal to the product of the applicable Billed CRR Charges multiplied by one hundred percent less the system wide charge-off percentage used by the Servicer to calculate the most recent Periodic Billing Requirement. Such product shall constitute the amount of Estimated CRR Charge Collections for such Servicer Business Day.  Pursuant to Section 6.11(c) of the Agreement, commencing no later than ____, 2014, the Servicer shall calculate in each Monthly Servicer’s Certificate the amount of Actual CRR Charge Collections for the immediately preceding calendar month as compared to the Estimated CRR Charge Collections forwarded to the Collection Account in respect of such calendar month.   No Excess Remittance shall be withdrawn from the Collection Account if such withdrawal would cause the amounts on deposit in the General Subaccount and the Excess Funds Subaccount to be insufficient for the payment of the next installment of interest or principal due at maturity on the next Payment Date or upon acceleration on or before the next Payment Date on the Consumer Rate Relief Bonds.

(ii)           On or before February 15 of each year in accordance with Section 4.01(b) of the Agreement, the Servicer shall, in a timely manner so as to perform all required calculations under such Section 4.01(b), update the Weighted Average Days Outstanding and the system-wide charge-off percentage in order to be able to calculate the Periodic Billing Requirement for the next True-Up Adjustment and to calculate any change in the Daily Remittances for the next Calculation Period.

(iii)           The Servicer and the Issuer acknowledge that, as contemplated in Section 8.01(b) of the Agreement, the Servicer may make certain changes to its current computerized customer information system, which changes, when functional, would affect the Servicer’s method of calculating the Estimated CRR Charge Collections estimated to have been received by the Servicer during each Collection Period as set forth in this Annex I.  Should these changes to the computerized customer information system become functional during the term of the Agreement, the Servicer and the Issuer agree that they shall review the procedures used to calculate the Estimated CRR Charge Collections so estimated to have been received in light of the capabilities of such new system and shall amend this Annex I in writing to make such modifications and/or substitutions to such procedures as may be appropriate in the interests of efficiency, accuracy, cost and/or system capabilities; provided, however, that the Servicer may not make any modification or substitution that will materially adversely affect the Holders.  The

ANNEX I

5

Servicer must also give prior written notice to the Indenture Trustee and the Rating Agencies before any Customer accounts are being billed under such new system.

(iv)           All calculations of collections, each update of the Weighted Average Days Outstanding or system-wide charge off percentage and any changes in procedures used to calculate the Estimated CRR Charge Collections pursuant to this Section 6(e) shall be made in good faith, and in the case of any update pursuant to clause (ii) above or any change in procedures pursuant to clause (iii) above, in a manner reasonably intended to provide estimates and calculations that are at least as accurate as those that would be provided on the Closing Date utilizing the initial procedures.

(f)           Remittances.

(i)           The Issuer shall cause to be established the Collection Account in the name of the Indenture Trustee in accordance with the Indenture.

(ii)           The Servicer shall make remittances to the Collection Account in accordance with Section 6.11 of the Agreement.

(iii)           In the event of any change of account or change of institution affecting any Collection Account, the Issuer shall provide written notice thereof to the Servicer and the Rating Agencies not later than five (5) Business Days from the effective date of such change.

ANNEX I

6

EX-99.2

Exhibit 99.2

CRR PROPERTY PURCHASE AND SALE AGREEMENT

by and between

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC,

Issuer

and

APPALACHIAN POWER COMPANY,

Seller

Dated as of [closing date]

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS		1
SECTION 1.01.	Definitions.	1
SECTION 1.02.	Other Definitional Provisions.	2

ARTICLE II CONVEYANCE OF CRR PROPERTY		2
SECTION 2.01.	Conveyance of CRR Property.	2
SECTION 2.02.	Conditions to Conveyance of CRR Property.	3

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER 4

SECTION 3.01.	Organization and Good Standing.	4
SECTION 3.02.	Due Qualification.	5
SECTION 3.03.	Power and Authority.	5
SECTION 3.04.	Binding Obligation.	5
SECTION 3.05.	No Violation.	5
SECTION 3.06.	No Proceedings.	5
SECTION 3.07.	Approvals.	6
SECTION 3.08.	The CRR Property.	6
SECTION 3.09.	Limitations on Representations and Warranties.	9

 ARTICLE IV COVENANTS OF THE SELLER 10

SECTION 4.01.	Existence.	10
SECTION 4.02.	No Liens.	10
SECTION 4.03.	Delivery of Collections.	10
SECTION 4.04.	Notice of Liens.	10
SECTION 4.05.	Compliance with Law.	10
SECTION 4.06.	Covenants Related to Consumer Rate Relief Bonds and CRR Property.	11
SECTION 4.07.	Protection of Title.	12
SECTION 4.08.	Nonpetition Covenants.	12
SECTION 4.09.	Taxes.	13
SECTION 4.10.	Issuance Advice Letter.	13
SECTION 4.11.	Notice of Breach to Rating Agencies, Etc.	13
SECTION 4.12.	Use of Proceeds.	13
SECTION 4.13.	Further Assurances.	13

ARTICLE V THE SELLER		14
SECTION 5.01.	Liability of Seller; Indemnities.	14
SECTION 5.02.	Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller.	16
SECTION 5.03.	Limitation on Liability of Seller and Others.	17

ARTICLE VI MISCELLANEOUS PROVISIONS		17
SECTION 6.01.	Amendment.	17

i

SECTION 6.02.	Commission Condition	17
SECTION 6.03.	Notices.	19
SECTION 6.04.	Assignment.	19
SECTION 6.05.	Limitations on Rights of Third Parties.	19
SECTION 6.06.	Severability.	20
SECTION 6.07.	Separate Counterparts.	20
SECTION 6.08.	Headings.	20
SECTION 6.09.	Governing Law.	20
SECTION 6.10.	Assignment to Indenture Trustee.	20
SECTION 6.11.	Limitation of Liability.	20
SECTION 6.12.	Waivers.	20

EXHIBITS

Exhibit A                                Form of Bill of Sale

ii

This CRR PROPERTY PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as of [closing date], is between Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company (the “Issuer”), and Appalachian Power Company, a Virginia corporation (together with its successors in interest to the extent permitted hereunder, the “Seller”).

RECITALS

WHEREAS, the Issuer desires to purchase the CRR Property created pursuant to the Securitization Law;

WHEREAS, the Seller is willing to sell its rights and interests under the Financing Order to the Issuer, whereupon such rights and interests will become the CRR Property;

WHEREAS, the Issuer, in order to finance the purchase of the CRR Property, will issue the Consumer Rate Relief Bonds under the Indenture; and

WHEREAS, the Issuer, to secure its obligations under the Consumer Rate Relief Bonds and the Indenture, will pledge, among other things, all right, title and interest of the Issuer in and to the CRR Property and this Agreement to the Indenture Trustee for the benefit of the Secured Parties.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01.Definitions.

(a)Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in that certain Indenture (including Appendix A thereto) dated as of the date hereof between the Issuer and U.S. Bank National Association, a national banking association, in its capacity as indenture trustee (the “Indenture Trustee”) and in its separate capacity as a securities intermediary (the “Securities Intermediary”), as the same may be amended, restated, supplemented or otherwise modified from time to time.

(b)Whenever used in this Agreement, the following words and phrases shall have the following meanings:

“Bill of Sale” means a bill of sale substantially in the form of Exhibit A hereto delivered pursuant to Section 2.02(i).

“Losses” means (i) any and all amounts of principal and interest on the Consumer Rate Relief Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amounts of any deposits by or to the Issuer required to have been made in accordance with the terms of the Basic Documents or the Financing Order which are not made when so required

and (ii) any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses of any kind whatsoever.

SECTION 1.02.Other Definitional Provisions.

(a)All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

(b)The words “hereof,” “herein,” “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, Schedule and Exhibit references contained in this Agreement are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the terms “includes” and “including” shall mean “includes without limitation” and “including without limitation”, respectively.

(c)The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.

ARTICLE II

CONVEYANCE OF CRR PROPERTY

SECTION 2.01.Conveyance of CRR Property.

(a)In consideration of the Issuer’s delivery to or upon the order of the Seller of $[__], subject to the conditions specified in Section 2.02, the Seller does hereby irrevocably sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse or warranty, except as set forth herein, all right, title and interest of the Seller in and to the CRR Property (such sale, transfer, assignment, setting over and conveyance of the CRR Property includes, to the fullest extent permitted by the Securitization Law, the property, rights and interests of APCo under the Financing Order, including the right of APCo and any Successor to impose, charge and collect CRR Charges from Customers, and including the right to obtain True-Up Adjustments, and all revenues, receipts, collections, rights to payment, payments, money, claims or other proceeds arising from the rights and interests created under the Financing Order). Such sale, transfer, assignment, setting over and conveyance is hereby expressly stated to be a sale and, pursuant to Section 24-2-4f(p)(1) of the Securitization Law, shall be treated as an absolute transfer of all of the Seller’s right, title and interest in and to (as in a true sale), and not as a pledge or other financing of, the CRR Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and conveyance contemplated hereby the Seller has no right, title or interest in or to the CRR Property to which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right, title and interest in and to the CRR Property to the Issuer, (ii) as provided in Section 24-2-4f(e)(7) of the Securitization Law, such rights will become CRR Property when conveyed hereunder and (iii) as provided in Section 24-2-4f(o)(4) of the Securitization Law, appropriate financing statements have been filed and such transfer is perfected against all third parties, including subsequent judicial or other lien creditors.  If such sale, transfer, assignment, setting over and conveyance is held by any court of competent jurisdiction not to be a true sale as

provided in Section 24-2-4f(p)(1) of the Securitization Law, then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of the CRR Property and as the creation of a security interest (within the meaning of the Securitization Law and the UCC) in the CRR Property and, without prejudice to its position that it has absolutely transferred all of its rights in the CRR Property to the Issuer, the Seller hereby grants a security interest in the CRR Property to the Issuer (and to the Indenture Trustee for the benefit of the Secured Parties) to secure their respective rights under the Basic Documents to receive the CRR Charges and all other CRR Property.

(b)Subject to Section 2.02, the Issuer does hereby purchase the CRR Property from the Seller for the consideration set forth in Section 2.01(a).

SECTION 2.02.Conditions to Conveyance of CRR Property.  The obligation of the Issuer to purchase CRR Property on the Closing Date shall be subject to the satisfaction of each of the following conditions:

(i)on or prior to the Closing Date, the Seller shall have delivered to the Issuer a duly executed Bill of Sale identifying the CRR Property to be conveyed on the Closing Date;

(ii)on or prior to the Closing Date, the Seller shall have obtained the Financing Order creating the CRR Property;

(iii)as of the Closing Date, the Seller is not insolvent and will not have been made insolvent by such sale and the Seller is not aware of any pending insolvency with respect to itself;

(iv)as of the Closing Date, the representations and warranties of the Seller set forth in this Agreement shall be true and correct with the same force and effect as if made on the Closing Date (except to the extent that they relate to an earlier date); on and as of the Closing Date no breach of any covenant or agreement of the Seller contained in this Agreement has occurred and is continuing; and no Servicer Default shall have occurred and be continuing;

(v)as of the Closing Date, (A) the Issuer shall have sufficient funds available to pay the purchase price for the CRR Property to be conveyed on such date and (B) all conditions to the issuance of the Consumer Rate Relief Bonds intended to provide such funds set forth in the Indenture shall have been satisfied or waived;

(vi)on or prior to the Closing Date, the Seller shall have taken all action required to transfer to the Issuer ownership of the CRR Property to be conveyed on such date, free and clear of all Liens other than Liens created by the Issuer pursuant to the Basic Documents and to perfect such transfer, including, without limitation, filing any statements or filings under the Securitization Law or the UCC; and the Issuer or the Servicer, on behalf of the Issuer, shall have taken any action required for the Issuer to grant the Indenture Trustee a first priority perfected security interest in the CRR Bond Collateral and maintain such security interest as of such date;

(vii)the Seller shall have delivered to the Rating Agencies and the Issuer any Opinions of Counsel required by the Rating Agencies;

(viii)the Seller shall have received and delivered to the Issuer and the Indenture Trustee an opinion or opinions of outside tax counsel (as selected by the Seller, and in form and substance reasonably satisfactory to the Issuer and the Indenture Trustee) to the effect that (i) the Issuer will not be subject to United States federal income tax as an entity separate from its sole owner and that the Consumer Rate Relief Bonds will be treated as debt of the Issuer's sole owner for United States federal income tax purposes, and (ii) for U.S. federal income tax purposes, the issuance of the Consumer Rate Relief Bonds will not result in gross income to the Seller.  The opinion of outside tax counsel described above may, if the Seller so chooses, be conditioned on the receipt by the Seller of one or more letter rulings from the Internal Revenue Service (unless the Internal Revenue Service has announced that it will not rule on the issues described in this paragraph) and in rendering such opinion outside tax counsel shall be entitled to rely on the rulings contained in such letter rulings and to rely on the representations made, and information supplied, to the Internal Revenue Service in connection with such letter rulings;

(ix)on and as of the Closing Date, each of the LLC Agreement, the Servicing Agreement, this Agreement, the Indenture, the Financing Order, and the Securitization Law shall be in full force and effect;

(x)the Consumer Rate Relief Bonds shall have received a rating or ratings required by the Financing Order;

(xi)the Seller shall have delivered to the Indenture Trustee and the Issuer an Officer’s Certificate confirming the satisfaction of each condition precedent specified in this Section 2.02; and

(xii)the Issuance Advice Letter shall have been filed and become effective in accordance with the Financing Order.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Subject to Section 3.09, the Seller makes the following representations and warranties, as of the Closing Date, and the Seller acknowledges that the Issuer has relied thereon in acquiring the CRR Property.  The representations and warranties shall survive the sale and transfer of CRR Property to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture.  The Seller agrees that (i) the Issuer may assign the right to enforce the following representations and warranties to the Indenture Trustee and (ii) the representations and warranties inure to the benefit of the Issuer and the Indenture Trustee.

SECTION 3.01.Organization and Good Standing.  The Seller is a corporation duly organized and validly existing and is in good standing under the laws of the state of its organization, with the requisite corporate or other power and authority to own its properties as such properties are currently owned and to conduct its business as such business is now conducted by it, and has the requisite corporate or other power and authority to obtain the Financing Order and own the rights and interests under the Financing Order and to sell and

assign those rights and interests to the Issuer, whereupon (subject to the effectiveness of the Issuance Advice Letter) such rights and interests shall become “consumer rate relief property” as defined in Section 24-2-4f(b)(9) of the Securitization Law.

SECTION 3.02.Due Qualification.  The Seller is duly qualified to do business and is in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications, licenses or approvals (except where the failure to so qualify or obtain such licenses and approvals would not be reasonably likely to have a material adverse effect on the Seller’s business, operations, assets, revenues or properties).

SECTION 3.03.Power and Authority.  The Seller has the requisite corporate or other power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Seller under its organizational or governing documents and laws.

SECTION 3.04.Binding Obligation.  This Agreement constitutes a legal, valid and binding obligation of the Seller enforceable against it in accordance with its terms, subject to applicable insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors’ or secured parties’ rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.

SECTION 3.05.No Violation.  The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not and will not: (i) conflict with or result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the Seller’s organizational documents, or any indenture or other agreement or instrument to which the Seller is a party or by which it or any of its property is bound; (ii) result in the creation or imposition of any Lien upon any of the Seller’s properties pursuant to the terms of any such indenture, agreement or other instrument (other than any Lien that may be granted in the Issuer’s favor or any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to Section 24-2-4f(o) of the Securitization Law or any Lien that may be granted under the Basic Documents); or (iii) violate any existing law or any existing order, rule or regulation applicable to the Seller issued by any Governmental Authority having jurisdiction over the Seller or its properties.

SECTION 3.06.No Proceedings.  There are no proceedings pending and, to the Seller’s knowledge, there are no proceedings threatened and, to the Seller’s knowledge, there are no investigations pending or threatened, before any Governmental Authority having jurisdiction over the Seller or its properties involving or relating to the Seller or the Issuer or, to the Seller’s knowledge, any other Person: (i) asserting the invalidity of the Securitization Law, the Financing Order, this Agreement, any of the other Basic Documents or the Consumer Rate Relief Bonds, (ii) seeking to prevent the issuance of the Consumer Rate Relief Bonds or the consummation of any of the transactions contemplated by this Agreement or any of the other Basic Documents,

(iii) seeking any determination or ruling that could reasonably be expected to materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of the Securitization Law, the Financing Order, this Agreement, any of the other Basic Documents or the Consumer Rate Relief Bonds or (iv) seeking to adversely affect the federal income tax or state income or franchise tax classification of the Consumer Rate Relief Bonds as debt.

SECTION 3.07.Approvals.  No approval, authorization, consent, order or other action of, or filing with, any Governmental Authority is required in connection with the execution and delivery by the Seller of this Agreement, the performance by the Seller of the transactions contemplated hereby or the fulfillment by the Seller of the terms hereof, except those that have been obtained or made and those that the Seller, in its capacity as Servicer under the Servicing Agreement, is required to make in the future pursuant to the Servicing Agreement.

SECTION 3.08.The CRR Property.

(a)Information.  Subject to subsection (f) below, at the Closing Date, all written information, as amended or supplemented from time to time, provided by the Seller to the Issuer with respect to the CRR Property (including the Expected Amortization Schedule, the Financing Order and the Issuance Advice Letter relating thereto) is true and correct in all material respects.

(b)Title.  It is the intention of the parties hereto that (other than for federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes) the transfers and assignments herein contemplated each constitute a sale and absolute transfer of the CRR Property from the Seller to the Issuer and that no interest in, or right or title to, the CRR Property shall be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law.  No portion of the CRR Property has been sold, transferred, assigned or pledged or otherwise conveyed by the Seller to any Person other than the Issuer, and no security agreement, financing statement or equivalent security or lien instrument listing the Seller as debtor covering all or any part of the CRR Property is on file or of record in any jurisdiction, except such as may have been filed, recorded or made in favor of the Issuer or the Indenture Trustee in connection with the Basic Documents.  The Seller has not authorized the filing of and is not aware (after due inquiry) of any financing statement against it  that includes a description of collateral including the CRR Property other than any financing statement filed, recorded or made in favor of the Issuer or the Indenture Trustee in connection with the Basic Documents.  The Seller is not aware (after due inquiry) of any judgment or tax lien filings against either the Seller or the Issuer.  At the Closing Date, immediately prior to the sale of the CRR Property hereunder, the Seller is the original and the sole owner of the CRR Property free and clear of all Liens and rights of any other Person, and no offsets, defenses or counterclaims exist or have been asserted with respect thereto.

(c)Transfer Filings.  On the Closing Date, immediately upon the sale hereunder, the CRR Property shall be validly transferred and sold to the Issuer, the Issuer shall own all the CRR Property free and clear of all Liens (except for the Lien created in favor of the Indenture Trustee granted under the Indenture and perfected pursuant to Section 24-2-4f(o)(4) of the Securitization Law) and all filings and actions to be made or taken by the Seller (including, without limitation, filings with the Secretary of State of the State of West Virginia under the

Securitization Law) necessary in any jurisdiction to give the Issuer a perfected ownership interest (subject to any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to the Indenture and perfected pursuant to Section 24-2-4f(o)(4) of the Securitization Law) in the CRR Property have been made or taken.  No further action is required to maintain such ownership interest (subject to any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to the Indenture and perfected pursuant to Section 24-2-4f(o)(4) of the Securitization Law) and to give the Indenture Trustee a first priority perfected security interest in the CRR Property.  All filings and action have also been made or taken to perfect the security interest in the CRR Property granted by the Seller to the Issuer (subject to any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to the Indenture and perfected pursuant to Section 24-2-4f(o)(4) of the Securitization Law) and, to the extent necessary, the Indenture Trustee pursuant to Section 2.01.

(d)Financing Order, Issuance Advice Letter; Other Approvals.  On the Closing Date, under the laws of the State of West Virginia and the United States in effect on the Closing Date, (i) the Financing Order pursuant to which the rights and interests of the Seller, including the right of APCo and any Successor to impose, charge and collect the CRR Charges and, in and to the CRR Property transferred on such date have been created, is Final and non-appealable and is in full force and effect; (ii) as of the issuance of the Consumer Rate Relief Bonds, the Consumer Rate Relief Bonds are entitled to the protection of the Securitization Law and, accordingly, the Financing Order, the CRR Charges and the Issuance Advice Letter are not revocable by the Commission; (iii) as of the issuance of the Consumer Rate Relief Bonds, the CRR Rate Schedule has been filed and is in full force and effect and is not subject to modification by the Commission except as provided under Section 24-2-4f(k) of the Securitization Law; (iv) the process by which the Financing Order creating the CRR Property transferred on such date was adopted and approved, and the Financing Order, CRR Rate Schedule and Issuance Advice Letter comply with all applicable laws, rules and regulations; (v) the Issuance Advice Letter has been filed in accordance with the Financing Order creating the CRR Property transferred on such date and an officer of the Seller has provided the certification to the Commission required by the Issuance Advice Letter; and (vi) no other approval, authorization, consent, order or other action of, or filing with any Governmental Authority is required in connection with the creation of the CRR Property transferred on such date, except those that have been obtained or made.

(e)State Action.  Under the laws of the State of West Virginia in effect on the Closing Date, pursuant to Section 24-2-4f(s)(1) of the Securitization Law, the State of West Virginia has pledged to and agrees with the Bondholders, assignees and financing parties under the Financing Order that the State will not take or permit any action that impairs the value of CRR Property under the Financing Order or revises the CRR Costs for which recovery is authorized under the Financing Order or, except as allowed under Section 24-2-4f (j) of the Securitization Law, reduce, alter or impair CRR Charges that are imposed, charged, collected or remitted for the benefit of the Bondholders, assignees and financing parties under the Financing Order, until any principal, interest and redemption premium in respect of Consumer Rate Relief Bonds, all financing costs and all amounts to be paid to any assignee or financing party under an ancillary agreement are paid or performed in full. Under the contract clauses of the United States and West Virginia Constitutions, the State of West Virginia could not, absent

a demonstration that such action was necessary to serve a significant and legitimate public purpose, repeal or amend the Securitization Law nor could the State of West Virginia (or the Commission in exercising its legislative powers) take any action in contravention of the State Pledge if the repeal or amendment, or the action, would substantially limit, alter, impair or reduce the value of the CRR Property.  Under the takings clauses of the United States and West Virginia Constitutions, the State of West Virginia could not repeal or amend the Securitization Law or take any other action in contravention of the State Pledge without paying just compensation to the Holders, as determined by a court of competent jurisdiction if doing so would constitute a permanent appropriation of a substantial property interest of the Holders in the CRR Property and deprive the Holders of their reasonable expectations arising from their investments in the Consumer Rate Relief Bonds.  There is no assurance, however, that, even if a court were to award just compensation it would be sufficient to pay the full amount of principal and interest on the Consumer Rate Relief Bonds.

(f)Assumptions.  On the Closing Date, based upon the information available to the Seller on such date, the assumptions used in calculating the CRR Charges are reasonable and are made in good faith.  Notwithstanding the foregoing, the Seller makes no representation or warranty, express or implied, that amounts actually collected arising from those CRR Charges will in fact be sufficient to meet the payment obligations on the related Consumer Rate Relief Bonds or that the assumptions used in calculating such CRR Charges will in fact be realized.

(g)Creation of CRR Property.  Upon the effectiveness of the Financing Order, the Issuance Advice Letter and the transfer of the CRR Property pursuant to this Agreement: (i) the rights and interests of the Seller under the Financing Order, including the right of APCo and any Successor to impose, charge and collect the CRR Charges authorized in the Financing Order, become “consumer rate relief property” as defined in Section 24-2-4f(b)(9) of the Securitization Law; (ii) the CRR Property constitutes a present property right vested in the Issuer; (iii) the CRR Property includes  (A) the property, rights and interests of the Seller in the Financing Order, including the right of APCo and any Successor to impose, charge and collect CRR Charges from Customers, and including the right to obtain True-Up Adjustments, and all revenues, receipts, collections, rights to payment, payments, money, claims or other proceeds arising from rights and interests created under the Financing Order, and (B) the right of APCo and any Successor to impose, charge and collect periodic adjustments (with respect to adjustments, in the manner and with the effect provided in Section 4.01(b) of the Servicing Agreement) of such CRR Charges, and the rates and other charges authorized by the Financing Order and all revenues, collections, claims, payments, money or proceeds of or arising from the CRR Charges; (iv) the owner of the CRR Property is legally entitled to bill CRR Charges and collect payments in respect of the CRR Charges in the aggregate sufficient to pay the interest on and principal of the Consumer Rate Relief Bonds in accordance with the Indenture, to pay Upfront Financing Costs, the fees and expenses of servicing the Consumer Rate Relief Bonds and other Ongoing Financing Costs, to replenish the Capital Subaccount to the Required Capital Level until the Consumer Rate Relief Bonds are paid in full; and (v) the CRR Property is not subject to any Lien other than any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to the Indenture and perfected pursuant to Section 24-2-4f(o)(4) of the Securitization Law.

(h)Nature of Representations and Warranties.  The representations and warranties set forth in this Section 3.08, insofar as they involve conclusions of law, are made not on the basis that the Seller purports to be a legal expert or to be rendering legal advice, but rather to reflect the parties’ good faith understanding of the legal basis on which the parties are entering into this Agreement and the other Basic Documents and the basis on which the Holders are purchasing the Consumer Rate Relief Bonds, and to reflect the parties’ agreement that, if such understanding turns out to be incorrect or inaccurate, the Seller will be obligated to indemnify the Issuer and its permitted assigns (to the extent required by and in accordance with Section 5.01), and that the Issuer and its permitted assigns will be entitled to enforce any rights and remedies under the Basic Documents, on account of such inaccuracy to the same extent as if the Seller had breached any other representations or warranties hereunder.

(i)Prospectus.  As of the date hereof, the information describing the Seller under the caption “The Seller, Initial Servicer and Sponsor” in the prospectus dated [date of final prospectus] relating to the Consumer Rate Relief Bonds is true and correct in all material respects.

(j)Solvency.  After giving effect to the sale of the CRR Property hereunder, the Seller:

(i)is solvent and expects to remain solvent;

(ii)is adequately capitalized to conduct its business and affairs considering its size and the nature of its business and intended purpose;

(iii)is not engaged in nor does it expect to engage in a business for which its remaining property represents unreasonably small capital;

(iv)reasonably believes that it will be able to pay its debts as they come due; and

(v)is able to pay its debts as they mature and does not intend to incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity.

(k)No Court Order.  There is no order by any court providing for the revocation, alteration, limitation or other impairment of the Securitization Law, the Financing Order, the Issuance Advice Letter, the CRR Property or the CRR Charges or any rights arising under any of them or that seeks to enjoin the performance of any obligations under the Financing Order.

(l)Survival of Representations and Warranties  The representations and warranties set forth in this Section 3.08 shall survive the execution and delivery of this Agreement and may not be waived by any party hereto except pursuant to a written agreement executed in accordance with Article VI and as to which the Rating Agency Condition has been satisfied.

SECTION 3.09.Limitations on Representations and Warranties.

  Without prejudice to any of the other rights of the parties, the Seller will not be in breach of any representation or warranty, as a result of a change in law by means of any legislative enactment, constitutional amendment or voter initiative.  THE SELLER MAKES NO REPRESENTATION OR

WARRANTY, EXPRESS OR IMPLIED, THAT BILLED CRR CHARGES WILL BE ACTUALLY COLLECTED FROM CUSTOMERS.

ARTICLE IV

COVENANTS OF THE SELLER

SECTION 4.01.Existence.  Subject to Section 5.02, so long as any of the Consumer Rate Relief Bonds are Outstanding, the Seller (a) will keep in full force and effect its existence and remain in good standing under the laws of the jurisdiction of its organization, (b) will obtain and preserve its qualification to do business, in each case to the extent that in each such jurisdiction such existence or qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the other Basic Documents to which the Seller is a party and each other instrument or agreement necessary or appropriate to the proper administration of this Agreement and the transactions contemplated hereby or to the extent necessary for the Seller to perform its obligations hereunder or thereunder and (c) will continue to operate its electric distribution system to provide service to its Customers.

SECTION 4.02.No Liens.  Except for the conveyances hereunder or any Lien pursuant to the Indenture in favor of the Indenture Trustee for the benefit of the Holders and any Lien that may be granted under the Basic Documents, the Seller will not sell, pledge, assign or transfer, or grant, create, incur, assume or suffer to exist any Lien on, any of the CRR Property, or any interest therein, and the Seller shall defend the right, title and interest of the Issuer and the Indenture Trustee, on behalf of the Secured Parties, in, to and under the CRR Property against all claims of third parties claiming through or under the Seller.  APCo, in its capacity as Seller, will not at any time assert any Lien against, or with respect to, any of the CRR Property.

SECTION 4.03.Delivery of Collections.  In the event that the Seller receives any CRR Charge Collections or other payments in respect of the CRR Charges or the proceeds thereof other than in its capacity as the Servicer, the Seller agrees to pay to the Servicer, on behalf of the Issuer, all payments received by it in respect thereof as soon as practicable after receipt thereof.  Prior to such remittance to the Servicer by the Seller, the Seller agrees that such amounts are held by it in trust for the Issuer and the Indenture Trustee.

SECTION 4.04.Notice of Liens.  The Seller shall notify the Issuer and the Indenture Trustee promptly after becoming aware of any Lien on any of the CRR Property, other than the conveyances hereunder and any Lien pursuant to the Basic Documents, including the Lien in favor of the Indenture Trustee for the benefit of the Holders.

SECTION 4.05.Compliance with Law.  The Seller hereby agrees to comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any Governmental Authority applicable to it, except to the extent that failure to so comply would not materially adversely affect the Issuer’s or the Indenture Trustee’s interests in the CRR Property or under any of the other Basic Documents to which the Seller is party or the Seller’s performance of its obligations hereunder or under any of the other Basic Documents to which it is party.

SECTION 4.06.Covenants Related to Consumer Rate Relief Bonds and CRR Property.

(a)So long as any of the Consumer Rate Relief Bonds are outstanding, the Seller shall treat the CRR Property as the Issuer’s property for all purposes other than financial reporting, state or federal regulatory or tax purposes, and treat the Consumer Rate Relief Bonds as debt for all purposes and specifically as debt of the Issuer, other than for financial reporting, state or federal regulatory or tax purposes.

(b)Solely for the purposes of federal taxes and, to the extent consistent with applicable state, local and other tax law, for purposes of state, local and other taxes, so long as any of the Consumer Rate Relief Bonds are outstanding, the Seller agrees to treat the Consumer Rate Relief Bonds as indebtedness of the Seller (as the sole owner of the Issuer) secured by the CRR Bond Collateral unless otherwise required by appropriate taxing authorities.

(c)So long as any of the Consumer Rate Relief Bonds are outstanding, the Seller shall disclose in its financial statements that the Issuer and not the Seller is the owner of the CRR Property and that the assets of the Issuer are not available to pay creditors of the Seller or its Affiliates (other than the Issuer).

(d)So long as any of the Consumer Rate Relief Bonds are outstanding, the Seller shall not own or purchase any Consumer Rate Relief Bonds.

(e)So long as the Consumer Rate Relief Bonds are outstanding, the Seller shall disclose the effects of all transactions between the Seller and the Issuer in accordance with generally accepted accounting principles.

(f)The Seller agrees that, upon the sale by the Seller of the CRR Property to the Issuer pursuant to this Agreement, (i) to the fullest extent permitted by law, including applicable Commission Regulations and the Securitization Law, the Issuer shall have all of the rights originally held by the Seller with respect to the CRR Property, including the right (subject to the terms of the Servicing Agreement) to exercise any and all rights and remedies to collect any amounts payable by any Customer in respect of the CRR Property, notwithstanding any objection or direction to the contrary by the Seller (and the Seller agrees not to make any such objection or to take any such contrary action) and (ii) any payment by any Customer directly to the Issuer shall discharge such Customer’s obligations, if any, in respect of the CRR Property to the extent of such payment, notwithstanding any objection or direction to the contrary by the Seller.

(g)So long as any of the Consumer Rate Relief Bonds are outstanding, (i) in all proceedings relating directly or indirectly to the CRR Property, the Seller shall affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial reporting or tax purposes), (ii) the Seller shall not make any statement or reference in respect of the CRR Property that is inconsistent with the ownership interest of the Issuer (other than for financial accounting or tax purposes or as required by state or federal regulatory purposes), (iii) the Seller shall not take any action in respect of the CRR Property

except solely in its capacity as the Servicer thereof pursuant to the Servicing Agreement or as otherwise contemplated by the Basic Documents, (iv) the Seller shall not sell property similar to the CRR Property under a separate financing order in connection with the issuance of additional consumer rate relief bonds unless the Rating Agency Condition shall have been satisfied, and (v) neither the Seller nor the Issuer shall take any action, file any tax return, or make any election inconsistent with the treatment of the Issuer, for purposes of federal taxes and, to the extent consistent with applicable state, local and other tax law, for purposes of state, local and other taxes, as a disregarded entity that is not separate from the Seller (or, if relevant, from another sole owner of the Issuer).

SECTION 4.07.Protection of Title.  The Seller shall execute and file such filings, including, without limitation, filings with the Secretary of State of the State of West Virginia pursuant to the Securitization Law, and cause to be executed and filed such filings, all in such manner and in such places as may be required by law to fully preserve, maintain, protect and perfect the ownership interest of the Issuer, and the back-up precautionary security interest of the Issuer pursuant to Section 2.01 hereof, and the first priority security interest of the Indenture Trustee in the CRR Property, including, without limitation, all filings required under the Securitization Law and the UCC relating to the transfer of the ownership of the rights and interest in the CRR Property by the Seller to the Issuer or the pledge of the Issuer’s interest in the CRR Property to the Indenture Trustee. The Seller shall deliver or cause to be delivered to the Issuer and the Indenture Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. The Seller shall institute any action or proceeding necessary to compel performance by the Commission, the State of West Virginia or any of their respective agents, of any of their obligations or duties under the Securitization Law, the Financing Order or the Issuance Advice Letter, and the Seller agrees to take such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, in each case as may be reasonably necessary (i) to seek to protect the Issuer and the Secured Parties from claims, state actions or other actions or proceedings of third parties which, if successfully pursued, would result in a breach of any representation set forth in Article III or any covenant set forth in Article IV and (ii) to seek to block or overturn any attempts to cause a repeal of, modification of or supplement to the Securitization Law, the Financing Order, the Issuance Advice Letter or the rights of Holders by legislative enactment or constitutional amendment that would be materially adverse to the Issuer or the Secured Parties or which would otherwise cause an impairment of the rights of the Issuer or the Secured Parties.  The costs of any such actions or proceedings will be payable by the Seller.

SECTION 4.08.Nonpetition Covenants.  Notwithstanding any prior termination of this Agreement or the Indenture, the Seller shall not, prior to the date which is one year and one day after the termination of the Indenture and payment in full of the Consumer Rate Relief Bonds or any other amounts owed under the Indenture, petition or otherwise invoke or cause the Issuer to invoke the process of any Government Authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the Issuer.

SECTION 4.09.Taxes.  So long as any of the Consumer Rate Relief Bonds are outstanding, the Seller shall, and shall cause each of its subsidiaries to, pay all taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the CRR Property; provided that no such tax need be paid if the Seller or one of its Affiliates is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Seller or such Affiliate has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

SECTION 4.10.Issuance Advice Letter.  The Seller hereby agrees not to withdraw the filing of any Issuance Advice Letter with the Commission.

SECTION 4.11.Notice of Breach to Rating Agencies, Etc.  Promptly after obtaining knowledge thereof, in the event of a breach in any material respect (without regard to any materiality qualifier contained in such representation, warranty or covenant) of any of the Seller’s representations, warranties or covenants contained herein, the Seller shall promptly notify the Issuer, the Indenture Trustee, the Commission and the Rating Agencies of such breach.  For the avoidance of doubt, any breach which would adversely affect scheduled payments on the Consumer Rate Relief Bonds will be deemed to be a material breach for purposes of this Section 4.11.

SECTION 4.12.Use of Proceeds.  The Seller shall use the proceeds of the sale of the CRR Property in accordance with the Financing Order and the Securitization Law.

SECTION 4.13.Further Assurances.  Upon the request of the Issuer, the Seller shall execute and deliver such further instruments and do such further acts as may be reasonably necessary to carry out the provisions and purposes of this Agreement.

SECTION 4.14.Intercreditor Agreement.  The Seller shall not become a party to (i) any future trade receivables purchase and sale arrangement or similar arrangement under which it sells all or any portion of its accounts receivables owing from Customers or (ii) any sale agreement selling to any other Affiliate property consisting of charges similar to the CRR charges sold pursuant to this Agreement, payable by Customers pursuant to the Securitization Law or any similar law, unless (x) the terms of the documentation evidencing any such trade receivables purchase and sale arrangement or similar arrangement described in clause (i) or sale agreement described in clause (ii) expressly excludes the CRR Property from any receivables or other assets pledged or sold under such arrangement and (y) the Seller and the other parties to such arrangement shall have entered into an Intercreditor Agreement in connection with any agreement or similar arrangement described in either clause (i) or clause (ii).

ARTICLE V

THE SELLER

SECTION 5.01.Liability of Seller; Indemnities.

(a)The Seller shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Seller under this Agreement.

(b)The Seller shall indemnify the Issuer and the Indenture Trustee (for the benefit of the Secured Parties) and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Consumer Rate Relief Bond) that may at any time be imposed on or asserted against any such Person as a result of the sale of the CRR Property to the Issuer, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Consumer Rate Relief Bond; it being understood that the Holders shall be entitled to enforce their rights against the Seller under this Section 5.01(b) solely through a cause of action brought for their benefit by the Indenture Trustee.

(c)The Seller shall indemnify the Issuer and the Indenture Trustee (for the benefit of the Secured Parties) and each of their respective officers, directors, employees, trustees, managers, and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Consumer Rate Relief Bond) that may at any time  be imposed on or asserted against any such Person as a result of the Issuer’s ownership and assignment of the CRR Property, the issuance and sale by the Issuer of the Consumer Rate Relief Bonds or the other transactions contemplated in the Basic Documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Consumer Rate Relief Bond.

(d)The Seller shall indemnify the Issuer, the Indenture Trustee (for the benefit of the Secured Parties) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from and against all Losses that may be imposed on, incurred by or asserted against each such Person, in each such case, as a result of the Seller’s breach of any of its representations, warranties or covenants contained in this Agreement.

(e)Indemnification under Sections 5.01(b), 5.01(c), 5.01(d) and 5.01(f) shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorney’s fees and expenses), except as otherwise expressly provided in this Agreement.

(f)The Seller shall indemnify the Indenture Trustee (for itself) and each Independent Manager, and any of their respective officers, directors, employees and agents (each, an “Indemnified Person”) for, and defend and hold harmless each such Person from and against,

any and all Losses incurred by any of such Indemnified Persons as a result of the Seller’s breach of any of its representations and warranties or covenants contained in this Agreement, except to the extent of Losses either resulting from the willful misconduct, bad faith or gross negligence of such Indemnified Person or resulting from a breach of a representation or warranty made by such Indemnified Person in any of the Basic Documents that gives rise to the Seller’s breach. The Seller shall not be required to indemnify an Indemnified Person for any amount paid or payable by such Indemnified Person in the settlement of any action, proceeding or investigation without the prior written consent of the Seller which consent shall not be unreasonably withheld. Promptly after receipt by an Indemnified Person of notice of the commencement of any action, proceeding or investigation, such Indemnified Person shall, if a claim in respect thereof is to be made against the Seller under this Section 5.01(f), notify the Seller in writing of the commencement thereof. Failure by an Indemnified Person to so notify the Seller shall relieve the Seller from the obligation to indemnify and hold harmless such Indemnified Person under this Section 5.01(f) only to the extent that the Seller suffers actual prejudice as a result of such failure. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this Section 5.01(f), the Seller shall be entitled to conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to such Indemnified Person, the defense of any such action, proceeding or investigation (in which case the Seller shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person except as set forth below); provided that the Indemnified Person shall have the right to participate in such action, proceeding or investigation through counsel chosen by it and at its own expense. Notwithstanding the Seller’s election to assume the defense of any action, proceeding or investigation, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Seller shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the defendants in any such action include both the Indemnified Person and the Seller and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Seller, (ii) the Seller shall not have employed counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action, (iii) the Seller shall authorize the Indemnified Person to employ separate counsel at the expense of the Seller or (iv) in the case of the Indenture Trustee, such action exposes the Indenture Trustee to a material risk of criminal liability or forfeiture or a Servicer Default has occurred and is continuing.  Notwithstanding the foregoing, the Seller shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for the Indemnified Persons other than one local counsel, if appropriate.

(g)The Seller shall indemnify the Servicer (if the Servicer is not the Seller) for the costs of any action instituted by the Servicer pursuant to Section 5.02(d) of the Servicing Agreement which are not paid as Operating Expenses in accordance with the priorities set forth in Section 8.02(e) of the Indenture.

(h)The remedies provided in this Agreement are the sole and exclusive remedies against the Seller for breach of its representations and warranties in this Agreement.

(i)Indemnification under this Section 5.01 shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Securitization Law or the Financing Order

and shall survive the resignation or removal of the Indenture Trustee or the termination of this Agreement and will rank in priority with other general, unsecured obligations of the Seller.  The Seller shall not indemnify any party under this Section 5.01 for any changes  in law after the Closing Date, whether such changes in law are effected by means of any legislative enactment, constitutional amendment or any final and non-appealable judicial decision.

SECTION 5.02.Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller.

  Any Person (a) into which the Seller may be merged, converted or consolidated and which is a Permitted Successor, (b) that may result from any merger, conversion or consolidation to which the Seller shall be a party and which is a Permitted Successor, (c) that may succeed to the properties and assets of the Seller substantially as a whole and which is a Permitted Successor, or (d) which otherwise succeeds to all or substantially all of the assets of the Seller (a “Permitted Successor”) and which Person in any of the foregoing cases executes an agreement of assumption to perform all of the obligations of the Seller hereunder (including the Seller’s obligations under Section 5.01 incurred at any time prior to or after the date of such assumption), shall be the successor to the Seller under this Agreement without further act on the part of any of the parties to this Agreement; provided, however, that (i) immediately after giving effect to such transaction, no representation, warranty or covenant made pursuant to Article III or Article IV shall be breached and no Servicer Default, and no event which, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (ii) the Seller shall have delivered to the Issuer, the Indenture Trustee and each Rating Agency an Officer’s Certificate and an Opinion of Counsel from external counsel stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 5.02 and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, (iii) the Seller shall have delivered to the Issuer, the Indenture Trustee and each Rating Agency an Opinion of Counsel from external counsel of the Seller either (A) stating that, in the opinion of such counsel, all filings to be made by the Seller and the Issuer, including filings with the Commission pursuant to the Securitization Law, have been authorized, executed and filed that are necessary to fully preserve and protect the respective interest of the Issuer and the Indenture Trustee in all of the CRR Property and reciting the details of such filings, or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interests, (iv) the Seller shall have delivered to the Issuer, the Indenture Trustee, the Rating Agencies and the Commission an Opinion of Counsel from independent tax counsel stating that, for federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in a material federal income tax consequence to the Issuer or the Holders of Consumer Rate Relief Bonds and (v) the Seller shall have given the Rating Agencies prior written notice of such transaction. When any Person (or more than one Person) acquires the properties and assets of the Seller substantially as a whole or otherwise becomes the successor, whether by merger, conversion, consolidation, sale, transfer, lease, management contract or otherwise, to all or substantially all of the assets of the Seller in accordance with the terms of this Section 5.02, then upon satisfaction of all of the other conditions of this Section 5.02, the preceding Seller shall automatically and without further notice be released from all of its obligations hereunder.

Notwithstanding the foregoing, Wheeling Power Company will be allowed to merge into APCo without satisfying the conditions specified in this Section 5.02 so long as APCo is the entity surviving the merger.

SECTION 5.03.Limitation on Liability of Seller and Others.

  The Seller and any director, officer, employee or agent of the Seller may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising hereunder.  Subject to Section 4.07, the Seller shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability.

ARTICLE VI

MISCELLANEOUS PROVISIONS

SECTION 6.01.Amendment.

  This Agreement may be amended in writing by the Seller and the Issuer, with (i) the prior written consent of the Indenture Trustee, (ii) the satisfaction of the Rating Agency Condition, (iii) if such amendment may in the judgment of the Commission increase Ongoing Financing Costs, the consent of the Commission pursuant to Section 6.02 and (iv) if any amendment would adversely affect in any material respect the interest of any Holder of the Consumer Rate Relief Bonds, the consent of a majority of the Holders of each affected Tranche of Consumer Rate Relief Bonds.  In determining whether a majority of Holders have consented, Consumer Rate Relief Bonds owned by the Issuer or any Affiliate of the Issuer or Seller shall be disregarded, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such consent, the Indenture Trustee shall only be required to disregard any Consumer Rate Relief Bonds it actually knows to be so owned.  Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

Prior to the execution of any amendment to this Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and rely upon an Opinion of Counsel from external counsel of the Seller stating that the execution of such amendment is authorized and permitted by this Agreement and that all conditions precedent provided for in this Agreement relating to such amendment have been complied with, and the Opinion of Counsel referred to in Section 3.01(c)(i) of the Servicing Agreement. The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects the Indenture Trustee’s own rights, duties or immunities under this Agreement or otherwise.

SECTION 6.02.Commission Condition.  Notwithstanding anything to the contrary in Section 6.01, no amendment or modification of this Agreement that would result in an increase to Ongoing Financing Costs shall be effective unless the process set forth in this Section 6.02 has been followed.

(a)At least thirty-one (31) days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in Section 6.01 (except that the consent of the Indenture Trustee may be subject to the consent of the Holders if such

consent is required or sought by the Indenture Trustee in connection with such amendment or modification), the Seller shall have delivered to the Commission’s executive secretary and general counsel written notification of any proposed amendment or modification, which notification shall contain:

(i)a reference to Case No. 12-1188-E-PC;

(ii)an Officer’s Certificate stating that the proposed amendment or modification has been approved by all parties to this Agreement; and

(iii)a statement identifying the person to whom the Commission or its authorized representative is to address any response to the proposed amendment or modification or to request additional time.

(b)The Commission or its authorized representative shall, within thirty (30) days of receiving the notification complying with Section 6.02(a) above, either:

(i)provide notice of its determination that the proposed amendment or modification will not under any circumstances have the effect of increasing the Ongoing Financing Costs,

(ii)provide notice of its consent or lack of consent to the person specified in Section 6.02(a)(iii) above, or

(iii)be conclusively deemed to have consented to the proposed amendment or modification,

unless, within thirty (30) days of receiving the notification complying with Section 6.02(a) above, the Commission or its authorized representative delivers to the office of the person specified in Section 6.02(a)(iii) above a written statement requesting an additional amount of time not to exceed thirty (30) days in which to consider whether to consent to the proposed amendment or modification.  If the Commission or its authorized representative requests an extension of time in the manner set forth in the preceding sentence, then the Commission shall either provide notice of its consent or lack of consent or notice of its determination that the proposed amendment or modification will not under any circumstances increase Ongoing Financing Costs to the person specified in Section 6.02(a)(iii) no later than the last day of such extension of time or be conclusively deemed to have consented to the proposed amendment or modification on the last day of such extension of time.  Any amendment or modification requiring the consent of the Commission shall become effective on the later of (i) the date proposed by the parties to such amendment or modification and (ii) the first day after the expiration of the thirty day period provided for in this Section 6.02(b), or, if such period has been extended pursuant hereto, the first day after the expiration of such period as so extended.

(c)Following the delivery of a notice to the Commission by the Seller under Section 6.02(a), the Seller and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any notification of a proposed amendment or modification.  Such withdrawal shall be evidenced by the prompt written notice thereof by the Seller to the Commission, the Indenture Trustee, the Issuer and the Servicer.

 (d) For the purpose of this Section 6.02, an “authorized representative” of the Commission means any person authorized to act on behalf of the Commission.

SECTION 6.03.Notices.  All demands, notices and communications upon or to the Seller, the Issuer, the Indenture Trustee, the Commission or the Rating Agencies under this Agreement shall be sufficiently given for all purposes hereunder if in writing, and delivered  personally, sent by documented delivery service or, to the extent receipt is confirmed telephonically, sent by telecopy or other form of electronic transmission:

(a)in the case of the Seller, to Appalachian Power Company, at 1 Riverside Plaza, Columbus, Ohio 43215, Attention: Treasurer, Telephone: (614) 716-1000, Facsimile:  (614) 716-2807;

(b)in the case of the Issuer, to Appalachian Consumer Rate Relief Funding LLC at 707 Virginia Street East, Suite 1000, Charleston, West Virginia, 25327, Attention: Manager, Telephone: [phone], Facsimile: [fax];

(c)in the case of the Indenture Trustee, to the Corporate Trust Office;

(d)in the case of the Commission, to the Public Service Commission of West Virginia, 201 Brooks Street, Charleston, West Virginia, 25301, Attention: Executive Secretary, Telephone: 1-800-344-5113, Facsimile:  (304) 340-0325;

(e)in the case of Moody’s, to Moody’s Investors Service, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: ServicerReports@moodys.com (all such notices to be delivered to Moody’s in writing by email);

(f)in the case of Standard & Poor’s, to Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@standardandpoors.com (all such notices to be delivered to Standard & Poor’s in writing by email);

(g)in the case of Fitch, to Fitch Ratings, One State Street Plaza, New York, NY 10004, Attention: ABS Surveillance, Telephone: (212) 908-0500, Facsimile: (212) 908-0355; or

(h)as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.

SECTION 6.04.Assignment.  Notwithstanding anything to the contrary contained herein, except as provided in Section 5.02, this Agreement may not be assigned by the Seller.

SECTION 6.05.Limitations on Rights of Third Parties.  The provisions of this Agreement are solely for the benefit of the Seller, the Issuer, the Indenture Trustee (for the benefit of the Secured Parties) and the other Persons expressly referred to herein, and such

Persons shall have the right to enforce the relevant provisions of this Agreement. Nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the CRR Property or under or in respect of this Agreement or any covenants, conditions or provisions contained herein.

SECTION 6.06.Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 6.07.Separate Counterparts.  This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

SECTION 6.08.Headings.  The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

SECTION 6.09.Governing Law.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WEST VIRGINIA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 6.10.Assignment to Indenture Trustee.  The Seller hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Secured Parties of all right, title and interest of the Issuer in, to and under this Agreement, the CRR Property and the proceeds thereof and the assignment of any or all of the Issuer’s rights hereunder to the Indenture Trustee for the benefit of the Secured Parties.

SECTION 6.11.Limitation of Liability.  It is expressly understood and agreed by the parties hereto that this Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee on behalf of the Secured Parties, in the exercise of the powers and authority conferred and vested in it.  The Indenture Trustee in acting hereunder is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

SECTION 6.12.Waivers.  Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof; provided, however, that no such waiver delivered by the Issuer shall be effective unless the Indenture Trustee has given its prior written consent thereto.  Any such waiver shall

be validly and sufficiently authorized for the purposes of this Agreement if, as to any party, it is authorized in writing by an authorized representative of such party, with prompt written notice of any such waiver to be provided to the Rating Agencies.  The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision.  No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.

	APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, as Issuer
	By: ________________________________ Name: Title:
	APPALACHIAN POWER COMPANY, as Seller
	By: ________________________________ Name: Title:
ACKNOWLEDGED AND ACCEPTED:
U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee
By:  ______________________________ Name: Title:

Signature Page to

CRR Property Purchase and Sale Agreement

EXHIBIT A

FORM OF BILL OF SALE

This Bill of Sale is being delivered pursuant to the CRR Property Purchase and Sale Agreement, dated as of [closing date] (the “Sale Agreement”), by and between Appalachian Power Company (the “Seller”) and Appalachian Consumer Rate Relief Funding LLC (the “Issuer”).  All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Sale Agreement.

In consideration of the Issuer’s delivery to or upon the order of the Seller of $[_____], the Seller does hereby irrevocably sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse or warranty, except as set forth in the Sale Agreement, all right, title and interest of the Seller in and to the CRR Property identified on Schedule 1 hereto (such sale, transfer, assignment, setting over and conveyance of the CRR Property includes, to the fullest extent permitted by the Securitization Law, the property, rights and interests of APCo under the Financing Order, including the right of APCo and any Successor to impose, charge and collect CRR Charges from Customers, and including the right to obtain True-Up Adjustments, and all revenues, receipts, collections, rights to payment, payments, money, claims or other proceeds arising from rights and interests created under the Financing Order, as the same may be adjusted from time to time).  Such sale, transfer, assignment, setting over and conveyance is hereby expressly stated to be a sale and, pursuant to Section 24-2-4f(p)(1) of the Securitization Law, shall be treated as an absolute transfer of all of the Seller’s right, title and interest in and to (as in a true sale), and not as a pledge or other financing of, the CRR Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and conveyance contemplated hereby the Seller has no right, title or interest in or to the CRR Property to which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right in and to the CRR Property to the Issuer, (ii) as provided in Section 24-2-4f(p)(1) of the Securitization Law, such rights become CRR Property when conveyed hereunder and (iii) as provided in Section 24-2-4f(o)(4) of the Securitization Law, appropriate financing statements have been filed and such transfer is perfected against all third parties, including subsequent judicial or other lien creditors.  If such sale, transfer, assignment, setting over and conveyance is held by any court of competent jurisdiction not to be a true sale as provided in Section 24-2-4f(p)(1) of the Securitization Law, then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of the CRR Property and as the creation of a security interest (within the meaning of the Securitization Law and the UCC) in the CRR Property and, without prejudice to its position that it has absolutely transferred all of its rights in the CRR Property to the Issuer, the Seller hereby grants a security interest in the CRR Property to the Issuer (and to the Indenture Trustee for the benefit of the Secured Parties) to secure their respective rights under the Basic Documents to receive the CRR Charges and all other CRR Property.

The Issuer does hereby purchase the CRR Property from the Seller for the consideration set forth in the preceding paragraph.

EXHIBIT A

1

The Seller and the Issuer each acknowledge and agree that the purchase price for the CRR Property sold pursuant to this Bill of Sale and the Sale Agreement is equal to its fair market value at the time of sale.

The Seller confirms that (i) each of the representations and warranties on the part of the Seller contained in the Sale Agreement are true and correct in all respects on the date hereof as if made on the date hereof and (ii) each condition precedent that must be satisfied under Section 2.02 of the Sale Agreement has been satisfied upon or prior to the execution and delivery of this Bill of Sale by the Seller.

This Bill of Sale may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

THIS BILL OF SALE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WEST VIRGINIA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAW.

EXHIBIT A

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IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this Bill of Sale as of the ___ day of ___________, ______.

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC

By: ________________________________

Name:

Title:

APPALACHIAN POWER COMPANY

By: ________________________________

Name:

Title:

EXHIBIT A

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SCHEDULE 1

to

BILL OF SALE

CRR PROPERTY

All CRR Property created or arising under the Financing Order entered September 20, 2013, issued by the Public Service Commission of West Virginia under the Securitization Law.

EXHIBIT A

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EX-99.3

Exhibit 99.3

ADMINISTRATION AGREEMENT

This ADMINISTRATION AGREEMENT, dated as of [closing date] (this “Administration Agreement”), is entered into by and between APPALACHIAN POWER COMPANY (“APCo”), as administrator (in such capacity, the “Administrator”), and APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, a Delaware limited liability company (the “Issuer”). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in Appendix A to the Indenture (as defined below).

W I T N E S S E T H:

WHEREAS, the Issuer is issuing Consumer Rate Relief Bonds pursuant to that certain Indenture (including Appendix A thereto) dated as of the date hereof (the “Indenture”), by and between the Issuer and U.S. Bank National Association, a national banking association, in its capacity as indenture trustee (the “Indenture Trustee”) and in its separate capacity as a securities intermediary (the “Securities Intermediary”), as the same may be amended, restated, supplemented or otherwise modified from time to time, and the Series Supplement;

WHEREAS, the Issuer has entered into certain agreements in connection with the issuance of the Consumer Rate Relief Bonds, including (i) the Indenture, (ii) the CRR Property Servicing Agreement, dated as of the Closing Date (the “Servicing Agreement”), by and between the Issuer and APCo, as Servicer, (iii) the CRR Property Purchase and Sale Agreement, dated as of the Closing Date (the “Sale Agreement”), by and between the Issuer and APCo, as Seller, and (iv) the other Basic Documents to which the Issuer is a party, relating to the Consumer Rate Relief Bonds (the Indenture, the Servicing Agreement, the Sale Agreement and the other Basic Documents to which the Issuer is a party, as such agreements may be amended and supplemented from time to time, being referred to hereinafter collectively as the “Related Agreements”);

WHEREAS, pursuant to the Related Agreements, the Issuer is required to perform certain duties in connection with the Related Agreements, the Consumer Rate Relief Bonds and the CRR Bond Collateral pledged to the Indenture Trustee pursuant to the Indenture;

WHEREAS, the Issuer has no employees, other than its officers and managers, and does not intend to hire any employees, and consequently desires to have the Administrator perform certain of the duties of the Issuer referred to in the preceding clauses and to provide such additional services consistent with the terms of this Administration Agreement and the Related Agreements as the Issuer may from time to time request; and

WHEREAS, the Administrator has the capacity to provide the services and the facilities required thereby and is willing to perform such services and provide such facilities for the Issuer on the terms set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.           Duties of the Administrator – Management Services.  The Administrator hereby agrees to provide the following corporate management services to the Issuer and to cause third parties to provide professional services required for or contemplated by such services in accordance with the provisions of this Administration Agreement:

(a)           furnish the Issuer with ordinary clerical, bookkeeping and other corporate administrative services necessary and appropriate for the Issuer, including, without limitation, the following services:

(i)           maintain at the Premises (as defined below) general accounting records of the Issuer (the “Account Records”), subject to year-end audit, in accordance with generally accepted accounting principles, separate and apart from its own accounting records, prepare or cause to be prepared such quarterly and annual financial statements as may be necessary or appropriate and arrange for year-end audits of the Issuer’s financial statements by the Issuer’s independent accountants;

(ii)           prepare and, after execution by the Issuer, file with the Securities and Exchange Commission (the “SEC”) and any applicable state agencies documents required to be filed by the Issuer with the SEC and any applicable state agencies, including, without limitation, periodic reports required to be filed under the Securities Exchange Act of 1934, as amended;

(iii)           prepare for execution by the Issuer and cause to be filed such income, franchise or other tax returns of the Issuer as shall be required to be filed by applicable law (the “Tax Returns”) and cause to be paid on behalf of the Issuer from the Issuer’s funds any taxes required to be paid by the Issuer under applicable law;

(iv)           prepare or cause to be prepared for execution by the Issuer’s Managers minutes of the meetings of the Issuer’s Managers and such other documents deemed appropriate by the Issuer to maintain the separate limited liability company existence and good standing of the Issuer (the “Company Minutes”) or otherwise required under the Related Agreements (together with the Account Records, the Tax Returns, the Company Minutes, the LLC Agreement, and the Certificate of Formation, the “Issuer Documents”); and any other documents deliverable by the Issuer thereunder or in connection therewith; and

(v)           hold, maintain and preserve at the Premises (hereinafter defined) (or such other place as shall be required by any of the Related Agreements) executed copies (to the extent applicable) of the Issuer Documents and other documents executed by the Issuer thereunder or in connection therewith;

(b)           take such actions on behalf of the Issuer, as are necessary or desirable for the Issuer to keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware and obtain and preserve its qualification to do business in each jurisdiction in which it becomes necessary to be so qualified;

(c)           take such actions on the behalf of the Issuer as are necessary for the issuance and delivery of the Consumer Rate Relief Bonds;

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(d)           provide for the performance by the Issuer of its obligations under each of the Related Agreements, and prepare, or cause to be prepared, all documents, reports, filings, instruments, notices, certificates and opinions that it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Related Agreements;

(e)           to the full extent allowable under applicable law, enforce each of the rights of the Issuer under the Related Agreements, at the direction of the Indenture Trustee;

(f)           provide for the defense, at the direction of the Issuer’s Managers, of any action, suit or proceeding brought against the Issuer or affecting the Issuer or any of its assets;

(g)           provide office space (the “Premises”) for the Issuer and such reasonable ancillary services as are necessary to carry out the obligations of the Administrator hereunder, including telecopying, duplicating and word processing services;

(h)           undertake such other administrative services as may be appropriate, necessary or requested by the Issuer; and

(i)           provide such other services as are incidental to the foregoing or as the Issuer and the Administrator may agree.

In providing the services under this Section 1 and as otherwise provided under this Administration Agreement, the Administrator will not knowingly take any actions on behalf of the Issuer which (i) the Issuer is prohibited from taking under the Related Agreements, or (ii) would cause the Issuer to be in violation of any federal, state or local law or the LLC Agreement.

In performing its duties hereunder, the Administrator shall use the same degree of care and diligence that the Administrator exercises with respect to performing such duties for its own account and, if applicable, for others.

2.           Compensation.  As compensation for the performance of the Administrator’s obligations under this Administration Agreement (including the compensation of Persons serving as Manager(s), other than the Independent Manager(s), and officers of the Issuer, but, for the avoidance of doubt, excluding the performance by APCo of its obligations in its capacity as Servicer), the Administrator shall be entitled to $100,000 annually (the “Administration Fee”), payable by the Issuer in installments of $50,000 on each Payment Date.  In addition, the Administrator shall be entitled to be reimbursed by the Issuer for all costs and expenses of services performed by unaffiliated third parties and actually incurred by the Administrator in connection with the performance of its obligations under this Administration Agreement in accordance with Section 3 (but, for the avoidance of doubt, excluding any such costs and expenses incurred by APCo in its capacity as Servicer), to the extent that such costs and expenses are supported by invoices or other customary documentation and are reasonably allocated to the Issuer (“Reimbursable Expenses”).

3.           Third Party Services.  Any services required for or contemplated by the performance of the above-referenced services by the Administrator to be provided by unaffiliated third parties (including independent accountants’ fees and counsel fees) may, if provided for or otherwise contemplated by the Financing Order and if the Issuer deems it necessary or desirable,

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be arranged by the Issuer or by the Administrator at the direction (which may be general or specific) of the Issuer.  Costs and expenses associated with the contracting for such third-party professional services may be paid directly by the Issuer or paid by the Administrator and reimbursed by the Issuer in accordance with Section 2, or otherwise as the Administrator and the Issuer may mutually arrange.

4.           Additional Information to be Furnished to the Issuer.  The Administrator shall furnish to the Issuer from time to time such additional information regarding the CRR Bond Collateral as the Issuer shall reasonably request.

5.           Independence of the Administrator.  For all purposes of this Administration Agreement, the Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer with respect to the manner in which it accomplishes the performance of its obligations hereunder.  Unless expressly authorized by the Issuer, the Administrator shall have no authority, and shall not hold itself out as having the authority, to act for or represent the Issuer in any way and shall not otherwise be deemed an agent of the Issuer.

6.           No Joint Venture.  Nothing contained in this Administration Agreement (a) shall constitute the Administrator and the Issuer as partners or co-members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (b) shall be construed to impose any liability as such on either of them or (c) shall be deemed to confer on either of them any express, implied or apparent authority to incur any obligation or liability on behalf of the other.

7.           Other Activities of Administrator.  Nothing herein shall prevent the Administrator or any of its members, managers, officers, employees, subsidiaries or affiliates from engaging in other businesses or, in its sole discretion, from acting in a similar capacity as an Administrator for any other person or entity even though such person or entity may engage in business activities similar to those of the Issuer.

8.           Term of Agreement; Resignation and Removal of Administrator.

(a)           This Administration Agreement shall continue in force until the payment in full of the Consumer Rate Relief Bonds and any other amount which may become due and payable under the Indenture, upon which event this Administration Agreement shall automatically terminate.

(b)           Subject to Sections 8(e) and 8(f), the Administrator may resign its duties hereunder by providing the Issuer and the Rating Agencies with at least sixty (60) days’ prior written notice.

(c)           Subject to Sections 8(e) and 8(f), the Issuer may remove the Administrator without cause by providing the Administrator and the Rating Agencies with at least sixty (60) days’ prior written notice.

(d)           Subject to Sections 8(e) and 8(f), at the sole option of the Issuer, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator and the Rating Agencies if any of the following events shall occur:

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(i)           the Administrator shall default in the performance of any of its duties under this Administration Agreement and, after notice of such default, shall fail to cure such default within ten (10) days (or, if such default cannot be cured in such time, shall (A) fail to give within ten (10) days such assurance of cure as shall be reasonably satisfactory to the Issuer and (B) fail to cure such default within thirty (30) days thereafter);

(ii)           a court of competent jurisdiction shall enter a decree or order for relief, and such decree or order shall not have been vacated within sixty (60) days, in respect of the Administrator in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or such court shall appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or

(iii)           the Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Administrator or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due.

The Administrator agrees that if any of the events specified in clauses (ii) or (iii) of this Section 8(d) shall occur, it shall give written notice thereof to the Issuer and the Indenture Trustee as soon as practicable but in any event within seven (7) days after the happening of such event.

(e)           No resignation or removal of the Administrator pursuant to this Section 8 shall be effective until a successor Administrator has been appointed by the Issuer, and such successor Administrator has agreed in writing to be bound by the terms of this Administration Agreement in the same manner as the Administrator is bound hereunder.

(f)           The appointment of any successor Administrator shall be effective only after satisfaction of the Rating Agency Condition with respect to the proposed appointment.

9.           Action upon Termination, Resignation or Removal.  Promptly upon the effective date of termination of this Administration Agreement pursuant to Section 8(a), the resignation of the Administrator pursuant to Section 8(b) or the removal of the Administrator pursuant to Sections 8(c) or 8(d), the Administrator shall be entitled to be paid a pro-rated portion of the annual fee described in Section 2 hereof through the date of termination and all Reimbursable Expenses incurred by it through the date of such termination, resignation or removal.  The Administrator shall forthwith upon such termination pursuant to Section 8(a) deliver to the Issuer all property and documents of or relating to the CRR Bond Collateral then in the custody of the Administrator.  In the event of the resignation of the Administrator pursuant to Section 8(b) or the removal of the Administrator pursuant to Sections 8(c) or 8(d), the Administrator shall

5

cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Administrator.

10.           Administrator’s Liability.  Except as otherwise provided herein, the Administrator assumes no liability other than to render or stand ready to render the services called for herein, and neither the Administrator nor any of its members, managers, officers, employees, subsidiaries or affiliates shall be responsible for any action of the Issuer or any of the members, managers, officers, employees, subsidiaries or affiliates of the Issuer (other than the Administrator itself).  The Administrator shall not be liable for nor shall it have any obligation with regard to any of the liabilities, whether direct or indirect, absolute or contingent of the Issuer or any of the members, managers, officers, employees, subsidiaries or affiliates of the Issuer (other than the Administrator itself).

11.           INDEMNITY.

(a)           SUBJECT TO THE PRIORITY OF PAYMENTS SET FORTH IN THE INDENTURE, THE ISSUER SHALL INDEMNIFY THE ADMINISTRATOR, ITS MEMBERS, MANAGERS, OFFICERS, EMPLOYEES AND AFFILIATES AGAINST ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL EXPENSES OF LITIGATION OR PREPARATION THEREFOR WHETHER OR NOT THE ADMINISTRATOR IS A PARTY THERETO) WHICH ANY OF THEM MAY PAY OR INCUR ARISING OUT OF OR RELATING TO THIS ADMINISTRATION AGREEMENT AND THE SERVICES CALLED FOR HEREIN; PROVIDED, HOWEVER, THAT SUCH INDEMNITY SHALL NOT APPLY TO ANY SUCH LOSS, CLAIM, DAMAGE, PENALTY, JUDGMENT, LIABILITY OR EXPENSE RESULTING FROM THE ADMINISTRATOR’S NEGLIGENCE OR WILLFUL MISCONDUCT IN THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER.

(b)           THE ADMINISTRATOR SHALL INDEMNIFY THE ISSUER, ITS MEMBERS, MANAGERS, OFFICERS AND EMPLOYEES AGAINST ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL EXPENSES OF LITIGATION OR PREPARATION THEREFOR WHETHER OR NOT THE ISSUER IS A PARTY THERETO) WHICH ANY OF THEM MAY INCUR AS A RESULT OF THE ADMINISTRATOR’S NEGLIGENCE OR WILLFUL MISCONDUCT IN THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER.

12.           Notices.  Any notice, report or other communication given hereunder shall be in writing and addressed as follows:

(a)           if to the Issuer, to:

Appalachian Consumer Rate Relief Funding LLC

707 Virginia Street East, Suite 1000

Charleston, West Virginia, 25327

Attention: Manager

Telephone: [phone]

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Facsimile: [fax]

(b)           if to the Administrator, to:

Appalachian Power Company

1 Riverside Plaza

Columbus, Ohio 43215

Attention: Treasurer

Telephone: (614) 716-1000

Facsimile:  (614) 716-2807

(c) if to the Indenture Trustee, to the Corporate Trust Office;

or to such other address as any party shall have provided to the other parties in writing. Any notice required to be in writing hereunder shall be deemed given if such notice is mailed by certified mail, postage prepaid, or hand-delivered to the address of such party as provided above.

13.           Amendments.  This Administration Agreement may be amended from time to time by a written amendment duly executed and delivered by each of the Issuer and the Administrator, with the prior written consent of the Indenture Trustee, the satisfaction of the Rating Agency Condition and, if the contemplated amendment may in the judgment of the Servicer increase Ongoing Financing Costs, the consent of the Commission pursuant to Section 14; provided, that any such amendment may not adversely affect the interest of any Holder in any material respect without the consent of the Holders of a majority of the outstanding principal amount of the Consumer Rate Relief Bonds.  Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

14.           Commission Condition.  Notwithstanding anything to the contrary in Section 13, no amendment or modification of this Agreement that would result in an increase to Ongoing Financing Costs shall be effective unless the process set forth in this Section 14 has been followed.

(a)           At least thirty-one (31) days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in Section 13 (except that the consent of the Indenture Trustee may be subject to the consent of Holders if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification), the Servicer shall have delivered to the Commission’s executive secretary and general counsel written notification of any proposed amendment, which notification shall contain:

(i)           a reference to Case No. 12-1188-E-PC;

(ii)           an Officer’s Certificate stating that the proposed amendment or modification has been approved by all parties to this Agreement; and

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(iii)           a statement identifying the person to whom the Commission or its authorized representative is to address any response to the proposed amendment or modification or to request additional time.

(b)           The Commission or its authorized representative shall, within thirty (30) days of receiving the notification complying with Section 14(a), either:

(i)           provide notice of its determination that the proposed amendment or modification will not under any circumstances have the effect of increasing the Ongoing Financing Costs,

(ii)           provide notice of its consent or lack of consent to the person specified in Section 14(a)(iii), or

(iii)           be conclusively deemed to have consented to the proposed amendment or modification,

unless, within thirty (30) days of receiving the notification complying with Section 14(a), the Commission or its authorized representative delivers to the office of the person specified in Section 14(a)(iii) a written statement requesting an additional amount of time not to exceed thirty (30) days in which to consider whether to consent to the proposed amendment or modification.  If the Commission or its authorized representative requests an extension of time in the manner set forth in the preceding sentence, then the Commission shall either provide notice of its consent or lack of consent or notice of its determination that the proposed amendment or modification will not under any circumstances increase Ongoing Financing Costs to the person specified in Section 14(a)(iii) no later than the last day of such extension of time or be conclusively deemed to have consented to the proposed amendment or modification on the last day of such extension of time.  Any amendment or modification requiring the consent of the Commission shall become effective on the later of (i) the date proposed by the parties to such amendment or modification and (ii) the first day after the expiration of the thirty day period, as applicable, provided for in this Section 14(b), or, if such period has been extended pursuant hereto, the first day after the expiration of such period as so extended.

(c)           Following the delivery of a notice to the Commission by the Servicer under Section 14(a), the Servicer and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any notification of a proposed amendment.  Such withdrawal shall be evidenced by the Servicer’s giving prompt written notice thereof to the Commission, the Issuer and the Indenture Trustee.

(d)           For the purpose of this Section 14, an “authorized representative” of the Commission means any person authorized to act on behalf of the Commission.

15.           Successors and Assigns.  This Administration Agreement may not be assigned by the Administrator unless such assignment is previously consented to in writing by the Issuer and the Indenture Trustee and subject to the satisfaction of the Rating Agency Condition in connection therewith.  Any assignment with such consent and satisfaction, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Administrator is bound hereunder. Notwithstanding the foregoing, this Administration Agreement may be assigned by

8

the Administrator without the consent of the Issuer or the Indenture Trustee and without satisfaction of the Rating Agency Condition to a corporation or other organization that is a successor (by merger, reorganization, consolidation or purchase of assets) to the Administrator, including without limitation any Permitted Successor; provided that such successor or organization executes and delivers to the Issuer an Agreement in which such corporation or other organization agrees to be bound hereunder by the terms of said assignment in the same manner as the Administrator is bound hereunder.  Subject to the foregoing, this Administration Agreement shall bind any successors or assigns of the parties hereto.  Upon satisfaction of all of the conditions of this Section 15, the preceding Administrator shall automatically and without further notice be released from all of its obligations hereunder.  Notwithstanding the foregoing, Wheeling Power Company will be allowed to merge into APCo without satisfying the conditions specified in this Section 15 so long as APCo is the entity surviving the merger.

16.           Governing Law.  This Administration Agreement shall be construed in accordance with the laws of the State of West Virginia, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

17.           Headings.  The Section headings hereof have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction or effect of this Administration Agreement.

18.           Counterparts.  This Administration Agreement may be executed in counterparts, each of which when so executed shall be an original, but all of which together shall constitute but one and the same Administration Agreement.

19.           Severability.  Any provision of this Administration Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

20.           Nonpetition Covenant.  Notwithstanding any prior termination of this Administration Agreement, the Administrator covenants that it shall not, prior to the date which is one year and one day after payment in full of the Consumer Rate Relief Bonds, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer.

21.           Assignment to Indenture Trustee.  The Administrator hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Secured Parties pursuant to the Indenture of any or all of the Issuer’s rights hereunder and the assignment of any or all of the Issuer’s rights hereunder to the Indenture Trustee for the benefit of the Secured Parties.

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IN WITNESS WHEREOF, the parties have caused this Administration Agreement to be duly executed and delivered as of the day and year first above written.

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC, as Issuer

By: ________________________________

Name:

Title:

APPALACHIAN POWER COMPANY, as Administrator

By: ________________________________

Name:

Title:

Signature Page to

Administration Agreement

EX-99.5

	SIDLEY AUSTIN llp ONE SOUTH DEARBORN STREET CHICAGO, IL 60603 (312) 853 7000 (312) 853 7036 FAX	BEIJING BOSTON BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA	HONG KONG HOUSTON LONDON LOS ANGELES NEW YORK PALO ALTO SAN FRANCISCO	SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C.
		FOUNDED 1866

Exhibit 99.5

November [__], 2013

To Each of the Persons Listed

on Schedule A Attached Hereto

Re:           Appalachian Consumer Rate Relief Funding LLC

Senior Secured Consumer Rate Relief Bonds

Federal Constitution Issues

Ladies and Gentlemen:

We have served as special counsel to Appalachian Power Company, a Virginia corporation (“APCo”), in connection with the issuance and sale on the date hereof by Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company (the “Issuer”), of $[__] aggregate principal amount of the Issuer’s Senior Secured Consumer Rate Relief Bonds (the “Bonds”), which are more fully described in the Prospectus Supplement dated November [__], 2013.  The Bonds are being sold pursuant to the provisions of the Underwriting Agreement dated November [__], 2013 among APCo, the Issuer and Morgan Stanley & Co. LLC and RBS Securities Inc. as representatives of the underwriters named in Schedule I to such Underwriting Agreement.  The Bonds are being issued pursuant to the provisions of the Indenture dated as of November [__], 2013, as supplemented by the Trustee’s Issuance Certificate dated as of November [__], 2013 (together with the Indenture, the “Indenture”), between the Issuer and U.S. Bank National Association, a national banking association, as trustee (the “Indenture Trustee”).  Under the Indenture, the Indenture Trustee holds, among other things, consumer rate relief property as described below (the “CRR Property”) as collateral security for the payment of the Bonds.  Capitalized terms used in this opinion without definition have the respective meanings set forth in the Indenture.

West Virginia Code Section 24-2-4f (as amended, the “Recovery Act”) provides for electric distribution utilities in West Virginia to recover their “expanded net energy costs” through securitization, assigns certain powers and duties to the Public Service Commission of West Virginia (the “PSC”) in connection with such securitization and provides for the creation of “consumer rate relief property” concurrently with the sale of the CRR Property to the Issuer consumer rate relief.  The CRR Property was created in favor of APCo, pursuant to a financing

Sidley Austin LLP is a limited liability partnership practicing in affiliation with other Sidley Austin partnerships

To Each Person Listed on

   Schedule A Attached Hereto

November [__], 2013

Page 2

order (as amended, the “Order”) issued on September 20, 2013 by the PSC in Case Number 12-1188-E-PC, pursuant to its authority under the Recovery Act. The CRR Property was assigned to the Issuer pursuant to the provisions of the CRR Property Purchase and Sale Agreement dated as of November [__], 2013 between APCo and the Issuer in consideration for the payment by the Issuer to APCo of the proceeds of the sale of the Bonds, net of certain issuance costs.  The CRR Property includes the right to impose and receive certain “non-bypassable” charges described in the Order (the “CRR Charges”).  The CRR Charges constitute consumer rate relief charges within the meaning of the Recovery Act and may be periodically adjusted, in the manner authorized in the Order, in order to enhance the probability that the revenues received by the Issuer from the CRR Charges are sufficient to (i) amortize the Bonds pursuant to the amortization schedule to be followed in accordance with the provisions of the Bonds and the Indenture, (ii) pay interest thereon and related fees and expenses and (iii) maintain the required reserves for the payment of the Bonds.

The Order was issued in response to an application for its issuance that was filed by APCo with the PSC pursuant to the provisions of the Recovery Act.  The Order became final and not subject to further appeal on October 21, 2013.  APCo filed its Issuance Advice Letter with the PSC on [date], 2013, as required by the Order, and its CRR rate schedule to its existing tariff relating to the CRR Charges on [date], 2013, as required by the Order.

Questions Presented and Opinions

Legislative Repeal, Amendment or Revocation

You have requested our opinion as to:

(a)           whether the State Pledge creates a contractual relationship between the State of West Virginia (the “State”) and the holders of the Bonds (the “Bondholders”);

(b)           whether the Bondholders could challenge successfully under the “contract clause” of the United States Constitution (Article I, Section 10 (the “Federal Contract Clause”)) the constitutionality of any legislation passed by the West Virginia legislature (the “Legislature”) which becomes law or any action of the PSC exercising legislative powers (any such legislation which becomes law or action of the PSC exercising legislative powers being referred to herein as “Legislative Action”) that in either case limits, alters, impairs or reduces the value of the CRR Property or the CRR Charges so as to impair (i) the terms of the Indenture or the Bonds or (ii) the rights and remedies of the Bondholders (or the Indenture Trustee acting on their behalf) (any impairment described

To Each Person Listed on

   Schedule A Attached Hereto

November [__], 2013

Page 3

in clause (i) or (ii) being referred to herein as an “Impairment”) prior to the time that the Bonds are fully paid and discharged1;

(c)           whether preliminary injunctive relief would be available under federal law to delay implementation of Legislative Action that limits, alters, impairs or reduces the value of the CRR Property or the CRR Charges so as to cause an Impairment pending final adjudication of a claim challenging such Legislative Action under the Federal Contract Clause and, assuming a favorable final adjudication of such claim, whether relief would be available to prevent permanently the implementation of the challenged Legislative Action; and

(d)  whether, under the Fifth Amendment to the United States Constitution (made applicable to the State by the Fourteenth Amendment to the United States Constitution), which provides in part “nor shall private property be taken for public use, without just compensation” (the “Federal Takings Clause”), the State could repeal or amend the Recovery Act or take any other action in contravention of the State Pledge without paying just compensation to the Bondholders, as determined by a court of competent jurisdiction, if doing so (a) constituted a permanent appropriation of a substantial property interest of the Bondholders in the CRR Property or denied all economically productive use of the CRR Property; (b) destroyed the CRR Property other than in response to emergency conditions; or (c) substantially reduced, altered or impaired the value of the CRR Property so as to unduly interfere with the reasonable expectations of the Bondholders arising from their investments in the Bonds (a “Taking”).

Based upon our review of relevant judicial authority, as set forth in this letter, but subject to the qualifications, limitations and assumptions (including the assumption that any Impairment would be “substantial”) set forth in this letter, it is our opinion that a reviewing court  of competent jurisdiction, in a properly prepared and presented case:

(i)           would conclude that the State Pledge constitutes a contractual relationship between the Bondholders and the State;

(ii)           would conclude that, absent a demonstration by the State that an Impairment is necessary to further a significant and legitimate public purpose, the Bondholders (or the Indenture Trustee acting on their behalf) could successfully challenge under the Federal Contract Clause the constitutionality of any Legislative

1 As discussed in more detail in the opinion of Jackson Kelly PLLC of even date herewith, the PSC has acknowledged that it is bound by the State Pledge.  Assuming that the PSC is bound by the State Pledge as a matter of West Virginia law, a breach of the State Pledge by the PSC exercising legislative powers should be treated the same as a breach of the State Pledge by the Legislature under the Federal Contract Clause.

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Action determined by such court to limit, alter, impair or reduce the value of the CRR Property or the CRR Charges so as to cause an Impairment prior to the time that the Bonds are fully paid and discharged;

(iii)           should conclude that permanent injunctive relief is available under federal law to prevent implementation of Legislative Action hereafter taken and determined by such court to limit, alter, impair or reduce the value of the CRR Property or the CRR Charges so as to cause an Impairment in violation of the Federal Contract Clause; and although sound and substantial arguments support the granting of preliminary injunctive relief, the decision to do so will be in the discretion of the court requested to take such action, which will be exercised on the basis of the considerations discussed in subpart B of Part II below; and

(iv)           would conclude that the State would be required to pay just compensation to Bondholders if the State’s repeal or amendment of the Recovery Act, or the PSC’s amendment or revocation of the financing order, or taking of any other action by the State of the PSC in contravention of the State Pledge (a) constituted a permanent appropriation of a substantial property interest of the Bondholders in the CRR Property or denied all economically productive use of the CRR Property; (b) destroyed the CRR Property other than in response to emergency conditions; or (c) substantially reduced, altered or impaired the value of the CRR Property so as to unduly interfere with the reasonable expectations of the Bondholders arising from their investments in the Bonds.

Our opinion in the immediately preceding paragraph (ii) is based upon our evaluation of existing judicial decisions and arguments related to the factual circumstances likely to exist at the time of a Federal Contract Clause challenge to Legislative Action; such precedents and such circumstances could change materially from those discussed below in this letter.  Accordingly, such opinion is intended to express our belief as to the result that should be obtainable through the proper application of existing judicial decisions in a properly prepared and presented case.

We also note, with respect to such opinion, that existing case law indicates that the State would have to establish that any Impairment is necessary and reasonably tailored to address a significant public purpose, such as remedying or providing relief for a broad, widespread economic or social problem.  The cases also indicate that the State’s justification would be subjected to a higher degree of scrutiny, and that the State would bear a more substantial burden, if the Legislative Action impairs a contract to which the State is a party (which we believe to be the case here), as contrasted to a contract solely between private parties.

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Discussion

I.           Protection of State Pledge Under the Federal Contract Clause

Section 24-2-4f(s)(1) of the Recovery Act provides:

The state pledges to and agrees with the bondholders, assignees and financing parties under a final financing order that the state will not take or permit any action that impairs the value of consumer rate relief property under the final financing order or revises the consumer rate relief costs for which recovery is authorized under the final financing order or, except as allowed under subsection (k) of this section, reduce, alter or impair consumer rate relief charges that are imposed, charged, collected or remitted for the benefit of the bondholders, assignees and financing parties, until any principal, interest and redemption premium in respect of consumer rate relief bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid or performed in full.

This language is referred to in this letter as the “State Pledge.”  As authorized by the foregoing statutory provision and the Order, the language of the State Pledge has been included in the Indenture and in the Bonds.  Based on our analysis of relevant judicial authority, as set forth below, it is our opinion, subject to all of the qualifications, limitations and assumptions (including the assumption that any Impairment would be “substantial”) set forth in this letter, that, absent a demonstration by the State that an Impairment is necessary to further a significant and legitimate public purpose, a reviewing court would conclude that the State Pledge provides a basis upon which the Bondholders (or the Indenture Trustee acting on their behalf) could challenge successfully, under the Federal Contract Clause, the constitutionality of any Legislative Action determined by such court to reduce, alter, or impair the value of the CRR Property or the CRR Charges so as to cause an Impairment prior to the time that the Bonds are fully paid and discharged.

Article I, Section 10 of the United States Constitution prohibits any state from impairing the “obligation of contracts,” whether among private parties or among state and private parties.2  The general purpose of the Federal Contract Clause is “to encourage trade and credit by

2 Article I, Section 10, provides, in relevant part, “No State shall . . . pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, . . . .”  U.S. Const. art. I, § 10.  Please see opinion of Jackson Kelly PLLC, of even date herewith, with respect to the Contract Clause in the West Virginia Constitution.

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promoting confidence in the stability of contractual obligations.”3 The law is well-settled that “the [Federal] Contract Clause limits the power of the States to modify their own contracts as well as to regulate those between private parties.”4  Although the Federal Contract Clause appears literally to proscribe any impairment, the United States Supreme Court has made it clear that the proscription is not absolute:  “Although the language of the Federal Contract Clause is facially absolute, its prohibition must be accommodated to the inherent police power of the State ‘to safeguard the vital interests of its people.’”5

For many years, the United States Supreme Court has applied a three-part analysis to determine whether a particular legislative action violates the Federal Contract Clause:6

(1) whether the legislative action operates as a substantial impairment of a contractual relationship;

(2) assuming such an impairment, whether the legislative action is justified by a significant and legitimate public purpose; and

(3) whether the adjustment of the rights and responsibilities of the contracting parties is reasonable and appropriate given the public purpose behind the legislative action.

The first inquiry contains three components:7

(1) does a contractual relationship exist;

(2) does the change in law impair that contractual relationship; and

(3) is the impairment substantial.

3 See United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 15 (1977) (cited in the text as “U.S. Trust”).

4 Id. at 17 (citations omitted).

5 Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 410 (1983) (cited in the text as “Energy Reserves”) (citing Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 434 (1934) (cited in the text as “Blaisdell”)).

6 Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411-12 (1983).  See also Toledo Area AFL-CIO Council v. Pizza, 154 F.3d 307, 323 (6th Cir. 1998) (stating the three-part analysis).

7 General Motors Corp. v. Romein, 503 U.S. 181, 186 (1991).

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In addition, to succeed with a Federal Contract Clause claim involving a contract with the state itself, a party must show that the contractual relationship is not an invalid attempt by the state to “surrender[] an essential attribute of its sovereignty.”8

The following three subparts address:  (i) whether a contract exists between the State and the holders of the Bonds; (ii) if so, whether such contract violates the “reserved powers” doctrine, which would render such contract unenforceable; and (iii) the State’s burden in justifying an impairment.  The determination of whether a particular Legislative Action constitutes a substantial impairment of a particular contract is a fact-specific analysis, and nothing in this letter expresses any opinion as to how a court would resolve the issue of “substantial impairment” with respect to the Order, the CRR Property or the Bonds vis-a-vis a particular Legislative Action.  Therefore, we have assumed for purposes of this letter that any Impairment resulting from the Legislative Action being challenged under the Federal Contract Clause would be substantial.9  In the final subpart of this Part I, we address what relief would be likely to be granted if a Federal Contract Clause challenge were successfully asserted.

A.           Existence of a Contractual Relationship

The courts have recognized the general presumption that, absent some clear indication that a legislature intends to bind itself contractually, “a law is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise.”10  This presumption is based on the fact that the legislature’s principal function is not to make contracts, but to make laws that establish the policy of the state.  Thus, a person asserting the creation of a contract with the State must overcome this presumption.

This general presumption can be overcome where the language of the statute indicates an intention to create contractual rights.  In determining whether a contract has been

8 See United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 23 (1977).

9 We note, however, that in U.S. Trust the United States Supreme Court found a substantial impairment where the States of New York and New Jersey repealed outright an ”important security provision” securing repayment of bonds without any form of compensation to the bondholders, even in the absence of a finding of the extent of financial loss suffered by the bondholders as a result of the repeal.  431 U.S. 1, 19 (1977).  See also Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 429-35  (1934).

10 National R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 466 (1985) (cited in the text as “Nat’l R.R.”)  (quoting Dodge v. Board of Educ., 302 U.S. 74, 78 (1937) (cited in the text as “Dodge”)).

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created by statute, “it is of first importance to examine the language of the statute.”11    The courts have ruled that a statute creates a contractual relationship between a state and private parties if the statutory language contains sufficient words of contractual undertaking.12  The United States Supreme Court has stated that a contract is created “when the language and circumstances evince a legislative intent to create private rights of a contractual nature enforceable against the State.”13

In U.S. Trust, the United States Supreme Court affirmed the trial court’s finding, which was not contested on appeal, that a statutory covenant of two states for the benefit of the holders of certain bonds gave rise to a contractual obligation between such states and the bondholders.14  The covenant at issue limited the ability of the Port Authority of New York and New Jersey to subsidize rail passenger transportation from revenues and reserves pledged as security for such bonds.  In finding the existence of a contract between such states and bondholders, the Court stated “[t]he intent to make a contract is clear from the statutory language:  ‘The two States covenant and agree with each other and with the holders of any affected bonds. . . . ’”15  Later, in Nat’l R.R., the Court discussed the U.S. Trust covenant and noted: “[r]esort need not be had to a dictionary or case law to recognize the language of contract” in such covenant.16

Similarly, in Brand, the United States Supreme Court determined that the Indiana Teachers’ Tenure Act created a contract between the state and specified teachers because the statutory language demonstrated a clear legislative intent to contract.  The Court based its decision, in part, on the legislature’s use of the word “contract” throughout the statute to describe the legal relationship between the state and such teachers.17

11 Dodge v. Board of Educ., 302 U.S. 74, 78 (1937).

12 See Indiana ex rel. Anderson v. Brand, 303 U.S. 95, 104-05 (1938) (cited in the text as “Brand”) (noting “the cardinal inquiry is as to the terms of the statute supposed to create such a contract”); United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 18 (1977).

13 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 17 n.14 (1977).

14 Id. at 18.

15 Id. at 17.  Although the issue of whether a contract existed between such states and the bondholders was never disputed on appeal, the Court reviewed the language of the covenant and the circumstances surrounding the covenant, and stated, “We therefore have no doubt that the 1962 covenant has been properly characterized as a contractual obligation of the two States.”  Id. at 18.

16 See National R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 470 (1985).

17 Indiana ex rel. Anderson v. Brand, 303 U.S. 95, 105 (1938).   However, the mere use of the word “contract” in a statute will not necessarily evince the requisite legislative intent.  As the Court cautioned in

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Like the language of the covenant considered in U.S. Trust, the language of the State Pledge plainly manifests the Legislature’s intent to bind the State.18  Indeed, the biggest difference between such language and the U.S. Trust statute is the use of the verb “pledge,” rather than “covenant,” but that difference is not, in our view, material.  The definition of the Legislature’s term – “pledge” – is “to bind by a promise.”19  Accordingly, this slight variation between the State Pledge and the language contained in the U.S. Trust statute appears inconsequential and not to provide a basis for distinguishing the wording of the two statutes. Unlike the statute construed in Nat’l R.R., the Recovery Act expressly includes language indicating the State’s obligation with respect to consumer rate relief bond transactions.  See Recovery Act Section 24-2-4f(s)(1) (“The state pledges . . . that the state will not take or permit any action that impairs the value of consumer rate relief property . . . or revises the consumer rate relief costs for which recovery is authorized . . . . or . . . reduce, alter, or impair consumer rate relief charges that are imposed, charged, collected, or remitted  . . . until any principal, interest, and redemption premium in respect of consumer rate relief bonds, all financing costs, and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid or performed in full”).  Id.  (emphasis added).  Moreover, it is important to note that the State also authorizes an issuer of consumer rate relief bonds to include the State Pledge in contracts with the holders of consumer rate relief bonds (such as the Bonds).  Recovery Act Section 24-2-4f(s)(2).

In summary, the language of the State Pledge supports the conclusion that it constitutes a contractual relationship between the State and the Bondholders.  We are not aware

Nat’l R.R., the use of the word “contract” alone would not signify the existence of a contract with the government.  National R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451,  470 (1985).  In Nat’l R.R., the Court found that use of the word “contract” in the Rail Passenger Service Act defined only the relationship between the newly-created nongovernmental corporation (Amtrak) and the railroads, not the relationship between the United States and the railroads. The Court determined that “[l]egislation outlining the terms on which private parties may execute contracts does not on its own constitute a statutory contract.”  Id.,  at 467.

18 It could be contended that the factual situation in the U.S. Trust case is distinguishable from the factual situation surrounding the issuance of the Bonds.  In U.S. Trust, the bonds were issued by the Port Authority – a governmental agency – while the Bonds are being issued by a private entity.  However, the Recovery Act dictates that a utility must obtain a financing order before any “consumer rate relief bonds” such as the Bonds are issued.  The authority to issue such an order rests with the State, acting through the PSC, and therefore the Pledge, made in connection with an essential state-law predicate to issuance of the Bonds, is closely analogous to the commitment made by the Port Authority in U.S. Trust.

19 Webster’s New World Dictionary 573 (2d ed. 1982).

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of any circumstances surrounding enactment of the Recovery Act that suggests that the Legislature did not intend to bind the State contractually by the State Pledge.20

B.           Reserved Powers Doctrine

The “reserved powers” doctrine limits the State’s ability to bind itself contractually in a manner which surrenders an essential attribute of its sovereignty.21  Under this doctrine, if a contract purports to surrender a state’s “reserved powers” – powers that cannot be contracted away – such contract is void.22  Although the scope of the “reserved powers” doctrine has not been precisely defined by the courts, case law has established that a state cannot enter into contracts that forbid future exercises of its police powers or its power of eminent domain.23  In contrast, the United States Supreme Court has stated that a state’s “power to enter into effective financial contracts cannot be questioned”24  and that promises which are “purely financial” may not be said to fall within the State’s reserved powers that cannot be contracted away.”25

Under existing case law, the State Pledge does not, in our view, purport to surrender an essential attribute of the State’s sovereignty.  Although the State Pledge limits the State’s regulatory authority to some degree, it does not purport to contract away, or forbid future exercises of, the State’s power of eminent domain or its police power to

20 In addition to the State Pledge, the PSC’s financing order contains the following language: “This Financing Order shall be irrevocable and the Commission shall not reduce, impair, postpone, terminate or otherwise adjust the consumer rate relief charges approved in this Financing Order or impair the consumer rate relief property or the collection of consumer rate relief charges or the recovery of the Total Stipulation Securitization Amount (including Upfront Financing Costs) and Ongoing Financing Costs. No adjustment through the true-up adjustment mechanism shall affect the irrevocability of this Financing Order.  The Commission guarantees that it will act pursuant to this Financing Order to ensure that expected consumer rate relief charges are sufficient to pay on a timely basis scheduled principal of and interest on the consumer rate relief bonds issued pursuant to this Financing Order and the Ongoing Financing Costs in connection with the consumer rate relief bonds.”  We refer you to the opinion with respect to constitutional law issues of Jackson Kelly PLLC of even date herewith for a discussion of this language.

21 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 23 (1977).

22 Id.  See generally United States v. Winstar Corp., 518 U.S. 839, 888-90 (1996).

23 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 24 n.21 (1977) (citing Stone v. Mississippi, 101 U.S. 814, 817 (1880), and West River Bridge Co. v. Dix, 47 U.S. 507, 525-26 (1848)).

24 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 24 (1977).

25 Id. at 25.  See also Lipscomb v. Columbus Municipal Separate School Dist., 269 F.3d 494. 505 (5th Cir. 2001) (“[p]urely financial obligations … do not surrender aspects of the State’s sovereignty, and thus are subject to the Contract Clause”).

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protect the public health and safety.  Through “financing orders” (such as the Order), the State authorizes electric utilities to issue “consumer rate relief bonds” (such as the Bonds) and pledges not to impair the value of the “consumer rate relief property” (such as the CRR Property) securing such instruments.  In other words, the State Pledge constitutes an agreement made by the State not to impair the financial security for consumer rate relief bonds in order to foster the capital markets’ acceptance of such bonds, which are expressly authorized and will be issued as part of the Recovery Act.  The State Pledge is clearly an inducement offered by the State to investors to purchase the Bonds.  As such, we believe that the State Pledge is akin to the type of “financial contract” involved in U.S. Trust, a promise that revenues and reserves securing the bonds at issue there would not be depleted beyond a certain level.26

C.           State’s Burden to Justify an Impairment

To survive scrutiny under the Federal Contract Clause, a substantial impairment by a state of a valid state contract must be justified by “a significant and legitimate public purpose . . . , such as the remedying of a broad and general social or economic problem,”27 and the state action causing that impairment must be both “reasonable and necessary to serve” such a public purpose.28

The contours of this test are illustrated by several decisions of the United States Supreme Court.  In Blaisdell,29 which the Court has described as “the leading case in the modern era of [Federal] Contract Clause interpretation,”30 the Court addressed a Contract Clause challenge to a Minnesota law that, in response to economic conditions caused by the Depression, (i) authorized county courts to extend the period of redemption from foreclosure sales on mortgages previously made “for such additional time as the court may deem to be just and equitable,” subject to certain limitations, and (ii) limited actions for deficiency judgments.31  The

26 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 25 (1977).

27 Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411-12 (1983).

28 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 25 (1977).

29 Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398 (1934).

30 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 15 (1977).

31 The mortgagor was required to continue to pay the reasonable income or rental value of the property, as determined by the court, toward payment of taxes, insurance, interest and principal.  The law stated that it was to remain in effect only during the current emergency and no later than May 1, 1935; no redemption period could be extended beyond the expiration of the law.  Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. at 415-18.

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Court stated that the “reserved powers” doctrine could not be construed to “permit the State to adopt as its policy the repudiation of debts or the destruction of contracts or the denial of means to enforce them.”32  On the other hand, the Court also indicated that the Federal Contract Clause could not be construed33

to prevent limited and temporary interpositions with respect to the enforcements [of contracts] if made necessary by a great public calamity such as fire, flood, or earthquake.  [citation omitted]  The reservation of state power appropriate to such extraordinary conditions may be deemed to be as much a part of all contracts, as is the reservation of state power to protect the public interest in other situations to which we have referred.  And if state power exists to give temporary relief from the enforcement of contracts in the presence of disasters due to physical causes such as fire, flood or earthquake, that power cannot be said to be non-existent when the urgent public need demanding such relief is produced by other and economic causes.

In upholding the Minnesota law, the Court relied on the following:  (1) an economic emergency existed which threatened the loss of homes and lands which furnish those persons in possession with necessary shelter and means of subsistence; (2) the law was not enacted for the benefit of particular individuals but for the protection of a basic interest of society; (3) the relief provided by the law was appropriate to the emergency, and could only be granted upon reasonable conditions; (4) the conditions on which the period of redemption was extended by the law did not appear to be unreasonable; and (5) the law was temporary in operation and limited to the emergency on which it was based.34  In several contemporaneous cases, the United States Supreme Court struck down other laws passed in response to the economic emergency created by the Great Depression,35 thus reinforcing the notion that, to be justified, the impairment must be the result of a reasonable, necessary and tailored response to a broad and significant public concern.

The deference to be given by a court to a legislature’s determination of the need for a particular impairment depends on whether the contract is purely private or the state is a

32 Id. at 439.

33 Id. at 439-40.

34 Id. at 444-47.

35 See  Treigle v. Acme Homestead Ass’n, 297 U.S. 189 (1936); W.B. Worthen Co. v. Kavanaugh, 295 U.S. 56 (1935) (cited in the text as “Worthen”); W.B. Worthen Co. v. Thomas, 292 U.S. 426 (1934).

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contracting party.  Although courts ordinarily defer to legislative judgment as to the necessity and reasonableness of a particular action,36 the Supreme Court has noted that such deference “is not appropriate” when a state’ is a contracting party.37 In that circumstance, a “stricter standard” of justification should apply.38  Indeed, in Energy Reserves Group, Inc. v. Kansas Power & Light Co., the Court noted that “[i]n almost every case, the Court has held a governmental unit to its contractual obligations when it enters financial or other markets.”39

The leading case addressing impairment of contracts to which the state is a party is U.S. Trust.  As noted, there the state had covenanted that revenues and reserves securing certain bonds would not be depleted below a certain level.40  The state thereafter repealed that

36 Keystone Bituminous Coat Ass’n v. DeBenedictis,  480 U.S. 470 (1987) (cited in the text as “DeBenedictis”) (upholding against Contract Clause challenge a law authorizing revocation of a coal mine operator’s mining permit as a reasonable and necessary response to the “devastating effects” of subsidence caused by underground mining).

37 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 26 (1977).

38 Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 412-13 n.14 (1983); Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244 n.15 (1978).  SeealsoUnited States v. Winstar Corp., 518 U.S. 839, 876 (1996) (noting “heightened Contract Clause scrutiny when States abrogate their own contractual obligations”).  Winstar addressed whether a contract claim against the federal government was barred by the “sovereign acts” doctrine, i.e., the doctrine that the government’s “public and general” acts cannot amount to a breach of contract.  Although the legislation alleged to constitute a contractual breach had as its purposes “preventing the collapse of the [thrift] industry, attacking the root causes of the crisis, and restoring public confidence,” id. at 856, the Court held that a “sovereign acts” defense was unavailable, because “the extent to which this reform relieved the Government of its own contractual obligations precludes a finding that the statute is a ‘public and general’ act for purposes of the sovereign acts defense.”  Id. at 903.

39 Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 412 n.14 (1983) (citing United States Trust Co. of New York v. New Jersey, 431 U.S. 1 (1977); W.B. Worthen Co. v. Kavanaugh, 295 U.S. 56 (1935); and Murray v. Charleston, 96 U.S. 432 (1878) (cited in the text as “Murray”)).  In Worthen, the United States Supreme Court reversed a decision of the Arkansas Supreme Court upholding the validity of legislative enactments which, in the words of the former, take “from [the] mortgage [securing bonds issued by municipal improvement districts pursuant to state law] the quality of an acceptable investment for a rational investor” by making it much more difficult and time consuming to foreclose upon the collateral posted as security for the mortgage.  295 U.S. at 60.  Such enactments were accompanied by a legislative “declaration of an emergency, which was stated to endanger the peace, health and safety of a multitude of citizens.”  In Murray, the United States Supreme Court reversed a judgment of the Supreme Court of South Carolina upholding an ordinance of the City of Charleston which permitted the City to withhold, as a tax, a portion of the interest that was otherwise payable with respect to bonds issued by the City.  This “tax” was held to violate the Federal Contract Clause:  “no municipality of a State can, by its own ordinances, under the guise of taxation, relieve itself from performing to the letter all that it has expressly promised to its creditors.”  96 U.S. at 448.

40 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 25 (1977).

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promise in order to finance new mass transit projects, claiming that the repeal was justified by the need to promote, and encourage additional use of, mass transportation in response to energy shortages and environmental concerns.41  The Court ruled that the state’s action was nevertheless invalid under the Contract Clause because repeal of the covenant was “neither necessary to achievement of the plan nor reasonable in light of the circumstances.”42  The Court stated that a modification less drastic than total repeal would have permitted the states to achieve their plan to improve commuter rail service, and, in fact, the states could have achieved that goal without modifying the covenant at all.43   For example, the states “could discourage automobile use through taxes on gasoline or parking . . . and use the revenues to subsidize mass transit projects.”44

The U.S. Trust Court contrasted the legislation under consideration with the statute challenged in El Paso v. Simmons,45 which limited to five years the reinstatement rights of defaulting purchasers of land from the state.  For many years prior to the enactment of this statute, defaulting purchasers had been allowed to reinstate their claims upon written request and payment of delinquent interest, unless the rights of third parties had intervened.  In the judgment of the U.S. Trust Court, this older (19th century) statute “had effects that were unforeseen and unintended by the legislature when originally adopted,” i.e., “speculators were placed in a position to obtain windfall benefits,” and therefore adoption of a statute of limitations was reasonable to restrict parties to gains reasonably expected from the contract when the original statute was adopted.46  In contrast, the U.S. Trust Court stated that the need for mass transportation was not a new development and the likelihood that publicly owned commuter railroads would produce substantial deficits was well known when the covenant was adopted.47  Although, the Court noted, public perception of the importance of mass transit undoubtedly grew between 1962, when the covenant was adopted, and 1974, when it was repealed, “these concerns were not unknown in 1962, and the subsequent changes were of degree and not of kind . . . . and

41 Id. at 28-29.  The Court noted that when the bills to repeal the covenant were pending “a national energy crisis was developing.”  Id. at 13-14.

42 Id. at 29.

43 Id. at 30.

44 Id. at 30 n.29.

45 El Paso v. Simmons, 379 U.S. 497 (1965).

46 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 31 (1977).

47 Id. at 31-32.

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[did not] cause the covenant to have a substantially different impact in 1974 than when it was adopted in 1962.”48

The U.S. Trust Court also distinguished its earlier decision in Faitoute Iron & Steel Co. v. City of Asbury Park,49 which, according to the Court, was the “only time in this century that alteration of a municipal bond contract has been sustained.”50  Faitoute involved a state municipal reorganization act under which bankrupt local governments could be placed in receivership by a state agency.  Pursuant to that act, the holders of certain municipal revenue bonds received new securities bearing lower interest rates and later maturities.  According to the Court in U.S. Trust, the earlier decision rejected the dissenting bondholders’ Federal Contract Clause claims on the theory that the “old bonds represented only theoretical rights; as a practical matter the city could not raise its taxes enough to pay off its creditors under the old contract terms,” and thus the plan “enabled the city to meet its financial obligations more effectively.”51  The U.S. Trust Court further quoted Faitoute to the effect that the obligation in that case was “discharged, not impaired” by the plan.52

Thus, the relevant case law demonstrates that a state bears a substantial burden  when attempting to justify an impairment of a contract to which it is a party.  As noted above, State contracts which are financial in nature do not involve reserved State policy powers and, “[i]n almost every case, the [Supreme] Court has held a governmental unit to its contractual obligations when it enters financial or other markets.”53  A mere recitation that the impairment is in the public interest is thus insufficient.  Instead, a state action that impairs contracts to which it is a party must further a significant, legitimate and broad public purpose, not the interests of a narrow group; that public purpose must be served by a reasonable, necessary and carefully tailored measure, as “a state is not free to impose a drastic impairment when an evident and more moderate course would serve its purposes equally well.”54

48 Id. at 32.

49 Faitoute Iron & Steel Co. v. City of Asbury Park, 316 U.S. 502 (1942) (cited in the text as “Faitoute”).

50 United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 27 (1977).

51 Id. at 28.

52 Id. (quoting 316 U.S. at 511).

53 See footnote 39 above.

54 United States Trust Co. of New York v. New Jersey, 431 U.S. 1,  31 (1977).

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II.           Relief Granted in a Federal Contract Clause Challenge

A.           Permanent Injunctive Relief

In a Federal Contract Clause challenge to Legislative Action alleged to cause an Impairment, the remedies which the plaintiff would be expected to seek are (i) a declaration of the invalidity of such Legislative Action and (ii) an order permanently enjoining State officials from enforcing the provisions of such Legislative Action; a claim for money damages against the State would appear less likely.  Whether such a declaration of invalidity could be obtained will depend on application of the principles discussed in Part I, as well as a demonstration that such law effected a substantial impairment.  If such a declaration were obtained, the plaintiff would then have to meet several requirements in order to obtain a permanent injunction.  West Virginia law would govern the requirements for issuance of a permanent injunction if the case were brought in State court,55 while federal law would govern those requirements if the case were brought in federal court. The following discussion relates to federal law only.

Federal case law balances the following factors in determining whether to grant permanent injunctive relief: (i) the threat of irreparable harm to the moving party; (ii) the balance of harms with any injury an injunction might inflict on other parties; (iii) actual success on the merits; and (iv) the public interest.56  The Fourth Circuit, which includes West Virginia, applies a substantially similar test:  “a plaintiff seeking a permanent injunction must demonstrate:  (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.”57  Generally, “irreparable injury is suffered when monetary damages are . . . inadequate.”58 It seems doubtful that the Bondholders (or the Indenture Trustee acting on their behalf) could obtain adequate money damages from the State or its officials.  We understand that retrospective monetary claims

55 Please see the Jackson Kelly PLLC opinion, of even date herewith, for an analysis of West Virginia law and permanent injunctive relief.

56 Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 506-07 (1959).

57 Legend Night Club v. Miller, 637 F.3d 291, 297 (4th Cir. 2011) (citing eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006)); Christopher Phelps & Associates, LLC v. Galloway, 492 F.3d 532, 543 (4th Cir. 2007).

58 Multi–Channel TV Cable Co. v. Charlottesville Quality Cable Operating Co., 22 F.3d 546, 551 (4th Cir. 1994)

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brought against the State of West Virginia are generally barred by sovereign immunity.59  In addition, depending on the nature of the impairment, a legal remedy may be inadequate or the injury may be irreparable because the amount of damages may be difficult or impossible to measure,60 or because the injury is of a continuing nature such that the Bondholders would be forced to sue for damages each time they suffer injury (e.g., non-receipt of a scheduled interest payment).61  The Bondholders thus likely could satisfy these traditional requirements for injunctive relief, and an injunction to prevent a violation of the Contracts Clause would be an available remedy.62  Moreover, even if the Bondholders cannot establish the inadequacy of a damages remedy, where a “constitutional violation is established, usually no further showing of irreparable injury is necessary” to obtain a permanent injunction.63

B.           Preliminary Injunctive Relief

Whether a preliminary injunction delaying implementation of Legislative Action being challenged under the Federal Contract Clause as a substantial Impairment could be obtained by the Bondholders (or the Indenture Trustee acting on their behalf) pending an adjudication on the merits of such claim will depend on several considerations.  As noted in subpart A of this Part II with respect to the availability of permanent injunctive relief, an action

59 We do not undertake to express any opinions on matters of West Virginia law herein and refer you to the opinion of Jackson Kelly PLLC addressed to you of even date herewith with respect to issues of West Virginia law.

60 Phillips v. Crown Cent. Petroleum Corp., 602 F.2d 616, 630 (4th Cir. 1979) (injury of an “incalculable magnitude is irreparable harm”).  See also Multi–Channel TV Cable Co., 22 F.3d at 551 (holding that “generally irreparable injury is suffered when monetary damages are difficult to ascertain or inadequate”).

61 See, e.g.,  Galloway, 492 F.3d at 544 (continuing nature of violation makes monetary damages inadequate and injury irreparable); see also,  Janvey v. Alguire, 647 F.3d 585, 600 (5th Cir. 2011) (noting that a remedy at law is inadequate if legal redress may be obtained only by pursuing a multiplicity of actions).

62 Lipscomb v. Columbus Municipal Separate School Dist., 269 F.3d 494. 502 (5th Cir. 2001).

63 11ACharles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure§ 2944, at 94 (2d ed. 1995).  See, e.g., Johnson v. Bergland, 586 F.2d 993, 995 (4th Cir. 1978) (“Violations of first amendment rights constitute per se irreparable injury.”); Faulkner v. Jones, 10 F.3d 226, 229-30, 233 (4th Cir. 1993) (upholding injunction based on irreparable harm caused by denial of constitutional rights); cf. Ross v. Meese, 818 F.2d 1132, 1135 (4th Cir. 1987) (“the denial of a constitutional right, if denial is established, constitutes irreparable harm for purposes of equitable jurisdiction”). .  Application of this general rule is more complicated, however, in the context of a takings claim.  Under the Contracts Clause, the constitutional violation occurs at the time of an unjustified substantial impairment of a contract.  By contrast, under the Takings Clause, the constitutional violation occurs not merely when a state takes protected property, but when it denies compensation for that taking.  See infra.

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challenging such Legislative Action, and therefore an accompanying request for preliminary injunctive relief, could be brought in either a West Virginia court or a federal court, and West Virginia law or federal law, respectively, would provide the basis for determining whether such relief should be granted.  The following discussion relates to federal law only.

The function of preliminary injunctive relief is to preserve the latest uncontested status quo prior to the action which is the subject of the legal challenge.64  The latest uncontested status quo with respect to the Bonds prior to the challenged Legislative Action would appear to be the continued effectiveness of the Order and the validity of the CRR Property and CRR Charges.  On a request for preliminary injunctive relief, a plaintiff must establish:  “[1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.”65  Each factor must be independently “satisfied and articulated.”66  Given the limited purpose of a preliminary injunction, a party seeking a preliminary injunction “is not required to prove his case in full” under the same procedures and evidentiary requirements that would apply at a trial on the merits.67

Assuming that the injunction is not adverse to the public interest and that the Federal Contract Clause claim appears to the court to be meritorious (based on the application of the principles discussed in Part I), the requirement of likelihood of success on the merits should be met.  The irreparable harm requirement, however, may pose a greater challenge, as decisions in several federal courts have found that a delay in the scheduled receipt of payments until final judgment is not the type of “irreparable harm” which a preliminary injunction seeks to prevent, absent countervailing circumstances – such as the possibility that such delay could result in the insolvency or the destruction of the business of the party seeking the preliminary injunction or could result in the other party’s insolvency (thereby rendering a judgment worthless).68

64 University of Texas v. Camenisch, 451 U.S. 390, 395 (1981) (“The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held.”);United States v. S. Carolina, 720 F.3d 518, 524 (4th Cir. 2013).

65 The Real Truth About Obama, Inc. v. F.E.C., 575 F.3d 342, 346 (4th Cir. 2009), vacated on other grounds, 130 S. Ct. 2371 (2010), aff’d, The Real Truth About Obama, Inc. v. F.E.C., 607 F.3d 355 (4th Cir. 2010) (citing Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 19 (2008)).

66 Pashby v. Delia, 709 F.3d 307, 321 (4th Cir. 2013) (citing The Real Truth About Obama, 585 F.3d at 347).

67 AttorneyFirst, LLC v. Ascension Entm’t, Inc., 144 F. App’x 283, 288 (4th Cir. 2005).

68 See, e.g., Fed. Leasing, Inc. v. Underwriters at Lloyd’s, 650 F.2d 495, 500 (4th Cir. 1981) (holding that plaintiffs were entitled to preliminary injunctive relief where the economic losses threatened the very existence of the business) (citing Semmes Motors, Inc., v. Ford Motor Co., 429 F.2d 1197, 1205 (2d Cir. 1970)).  See also Centurion Reinsurance Co. v. Singer, 810 F.2d 140 (7th Cir. 1987); Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 386 and n.1 (7th Cir. 1984).

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Notwithstanding these decisions, there are arguments why payment delays on the Bonds should be accepted as “irreparable harm.”  As just noted, Bondholders may be able to establish that they will suffer irreparable harm in the absence of a preliminary injunction because the state enjoys sovereign immunity, the amount of damages may be difficult or impossible to measure, or because the injury is of a continuing nature such that the Bondholders would be forced to sue for damages each time they suffer injury.  In addition, federal courts often do not require a showing of irreparable harm to enjoin constitutional violations.  Unlike permanent injunctions, however, which are issued only after the court has found a constitutional violation, preliminary injunctions are issued before the court has reached and resolved the merits of the constitutional claim.  Accordingly, the likelihood of obtaining preliminary injunctive relief depends heavily on the strength of the Bondholders showing on the merits of their Contracts Clause claim.

III.           Federal Takings Clause

The Takings Clause of the Fifth Amendment of the United States Constitution – “nor shall private property be taken for public use, without just compensation” – is made applicable to state action via the Fourteenth Amendment.  Webb’s Fabulous Pharmacies v. Beckwith, 449 U.S. 155, 160 (1980).  The Federal Takings Clause covers both tangible and intangible property.  Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003.69  Rights under contracts can be property for purposes of the Federal Takings Clause.  Lynch v. United States, 292 U.S. 571, 577 (1934), but legislation that “disregards or destroys” contract rights does not always constitute a taking.  Connolly v. Pension Benefit Guaranty Corporation, 475 U.S. 211, 224 (1986).  Where intangible property is at issue, state law will determine whether a property right exists.  If a court determines that an intangible asset is property, a court will next look to whether the owner of the property interest had a “reasonable investment-backed expectation” that the property right would be protected.70

69 The Monsanto case involved a federal law requiring disclosure of certain data related to Monsanto products.  The Supreme Court was asked to determine whether Monsanto had a property interest in this information as a trade secret and whether that property interest was protected under the Federal Takings Clause.  One focus of the Supreme Court’s analysis was whether Monsanto had a reasonable investment-backed expectation in the privacy of this property.  The Court concluded that at most times prior to the enactment of the law and at all times after the enactment of the law, Monsanto did not have and would not have a reasonable expectation that its information would be kept private.  However, the Court noted that for a six year period from 1972 to 1978, federal law had provided that an entity submitting information to the government could designate such information as a trade secret and that federal law guaranteed such information would be kept a secret.  Accordingly, the Court concluded that with respect to such information designated as a trade secret from 1972 to 1978, Monsanto had a property interest that was protected by the Federal Takings Clause.

70 2 Rotunda and Nowack, Treatise on Constitutional Law: Substance and Procedure 702 (3d ed. 1999).

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The United States Supreme Court has suggested that the Federal Takings Clause may be implicated by a diverse range of government actions, including when the government (a) permanently appropriates or denies all economically productive use of property71; (b) destroys property other than in response to emergency conditions;72 or (c) reduces, alters or impairs the

71 Connolly v. Pension Benefit Guaranty Corporation, 475 U.S. at 225 (noting that in that case the government did not “permanently appropriate” any of the employer’s assets for its own use); Palazzolo v. Rhode Island, 533 U.S. 606, 607 (“regulation which ‘denies all economically beneficial or productive use of land’ will require compensation under the Takings Clause”) (citing Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015 (1992), which notes that for personal property, however, some regulations that limit use of personal property may not be compensable takings given the state’s “traditionally high degree of economic control over commercial dealings”); U.S. v. Security Industrial Bank, 459 U.S. 70, 77 (1982), citing Armstrong v. U.S., 364 U.S. 40, 48 (1960) (“The total destruction by the Government of all values of these liens, which constitute compensable property, has every possible element of a Fifth Amendment ‘taking’ and is not a mere ‘consequential incidence’ of a valid regulatory measure”).  See also Lingle v. Chevron USA, 544 U.S. 528, 538 (2005) (noting that regulatory action will be deemed a per se taking of property if it requires an owner to suffer a “permanent” physical invasion of property or completely deprives the owner of all economically beneficial use of such property).   The Supreme Court has also held that legislation that terminates a property interest can be considered a taking for which compensation is due.  Hodel v. Irving, 481 U.S. 704 (1987) (federal law escheating certain fractional interests in tribal property to an Indian tribe was a compensable taking).  Seealso 2 Rotunda and Nowack, Treatise on Constitutional Law: Substance and Procedure 746 (3d ed. 1999).

72 The emergency exception to the just compensation requirement of the Federal Takings Clause appears in several Supreme Court decisions.  Seegenerally Rotunda and Novack Volume 2 at 738.  Several of these decisions involve the government’s activities during military hostilities.  Seefor example, United States v. Caltex, Inc., 344 U.S. 149 (1952), rehearing denied 344 U.S. 919 (1953) (no compensable taking when Army destroys property to prevent enemy forces from obtaining it); United States v. Central Eureka Mining Co., 357 U.S. 155 (1958), rehearing denied 358 U.S. 858 (1958) (no compensable taking when government forces gold mines to cease operations to conserve resources for war effort); National Board of Young Men’s Christian Associations v. United States, 395 U.S. 85 (1969) (no compensable taking where private property destroyed when US troops take shelter there).  CompareUnited States v. Pewee Coal Co., 341 U.S. 114 (1951) (compensable taking when occupation is physical rather than regulatory, emergency notwithstanding).  The emergency exception is not limited to wartime activities, however.  Seefor exampleMiller v. Schoene, 276 U.S. 272 (1928) (no compensable taking where trees destroyed to prevent disease from spreading to other trees); Dames & Moore v. Regan, 453 U.S. 654 (1981) (no compensable taking resulting from executive order nullifying attachments on Iranian assets and permitting those assets to be transferred out of the country).  The emergency exception is not limited to the physical destruction of property by the government, seeCentral Eureka Mining, 357 U.S. at 168, but the Supreme Court has suggested it does not apply to physical occupation of property, see Pewee, 341 U.S. at 116-17, or permanent appropriation, seeLingle, 544 U.S. at 538, both of which constitute a per se taking.  Moreover, we believe that a permanent appropriation of property by the government would be generally inconsistent with the concept of an “emergency.”  SeeCentral Eureka, 357 U.S. at 168 (describing wartime restrictions as “temporary in character”).

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value of property so as to unduly interfere with reasonable investment-backed expectations.73  In determining what is an undue interference, a court would consider the nature of the governmental action and weigh the public purpose served thereby against the degree to which it interferes with legitimate property interests and distinct investment-backed expectations of bondholders.

The Supreme Court has identified two categories where regulatory action constitutes a per se taking – regulations that require an owner to suffer a permanent physical invasion of property and regulations  that deprive of the owner of all economically beneficial use of the property.  Lingle v. Chevron U.S.A., 544 U.S. 528, 538 (2005).  Outside these two narrow categories, challenges to regulations that interfere with protected property interests are governed by the three-part test set forth in Penn Central Transportation Co. v. New York, 438 U.S. 104, 124 (1978).  Under that test, a regulation constitutes a taking if it denies a property owner “economically viable use” of that property, which is determined by three factors:  (i) the character of the governmental action; (ii) the economic impact of the regulation on the claimant; and (iii) the extent to which the regulation has interfered with distinct investment-backed expectations.  Penn Central, 438 U.S. at 124.

The first factor requires the court to examine “the purpose and importance of the public interest reflected in the regulatory imposition” and “to balance the liberty interest of the private property owner against the Government’s need to protect the public interest through imposition of the restraint.”  Loveladies Harbor, Inc. v. U.S., 28 F.3d 1171, 1176 (Fed. Cir. 1994); see Keystone Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470 (1987).

The second factor incorporates the principle enunciated by Justice Holmes:  “Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law.”  Penn Coal Co. v. Mahon, 260 U.S. 393 (1922); Loveladies, 28 F.3d at 1176-77.  “Not every destruction or injury to property by governmental action has been held to be a ‘taking’ in the constitutional sense,” Armstrong v. U.S., 364 U.S. 40, 48 (1960).  Diminution in property value alone, thus, does not constitute a taking; there must be serious economic harm.

The third factor is “a way of limiting recovery under the Federal Takings Clause to owners who could demonstrate that they bought their property in reliance on a state of affairs that did not include the challenged regulatory regime.”  Loveladies, 28 F.3d at 1177.  The burden

73 Connolly v. Pension Benefit Guaranty Corporation, 475 U.S. at 225 (noting that one point of Federal Takings Clause analysis is “the extent to which the regulation has interfered with distinct investment-backed expectations”) (citing Penn Central Transportation Co., 438 U.S. at 124); Central Eureka Mining, 357 U.S. at 155, rehearing denied 358 U.S. 858 (1958) (no compensable taking when government forces gold mines to cease operations to conserve resources for war effort).

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of showing such interference is a heavy one.  Keystone, 480 U.S. at 493.  Thus, a reasonable investment-backed expectation “must be more than a ‘unilateral expectation or an abstract need.”   Monsanto, 467 U.S. at 1005.  Further, “[l]egislation adjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations.”  Usery v. Turner Elkhorn Mining Co., 428 U.S. 1 (1976).  “[T]he fact that legislation disregards or destroys existing contractual rights does not always transform the regulation into an illegal taking…. This is not to say that contractual rights are never property rights or that the Government may always take them for its own benefit without compensation.”  Connolly, 475 U.S. at 223-24.  In order to sustain a claim under the Federal Takings Clause, the private party must show that it had a “reasonable expectation” at the time the contract was entered that it “would proceed without possible hindrance” arising from changes in government policy.  Chang v. U.S., 859 F.2d 893 (Fed. Cir. 1988).

We are not aware of any case law which addresses the applicability of the Federal Takings Clause in the context of exercise by a state of its police power to abrogate or impair contracts otherwise binding on the state.  The outcome of any claim that interference by the State with the value of the CRR Property without compensation is unconstitutional would likely depend on factors such as the State interest furthered by that interference and the extent of financial loss to Bondholders caused by that interference, as well as the extent to which courts would consider that Bondholders had a reasonable expectation that changes in government policy and regulation would not interfere with their investment.  With respect to this latter factor, we note that the Recovery Act expressly provides for the creation of CRR Property in connection with the sale of the CRR Property to the Issuer, and further provides that the Order, once final, is irrevocable.  Moreover, through the State Pledge, the State has pledged to and agreed with “the bondholders, assignees and financing parties under a final financing order” not to impair the value of such CRR Property.  Given the foregoing, we believe it would be hard to dispute that Bondholders have reasonable investment expectations with respect to their investments in the Bonds.

Based on our analysis of relevant judicial authority, it is our opinion, as set forth above, subject to all of the qualifications, limitations and assumptions set forth in this letter, that, under the Federal Takings Clause, a reviewing court would hold that the State would be required to pay just compensation to Bondholders if the State’s repeal or amendment of the Recovery Act or the PSC’s amendment or revocation of the financing order, or the taking of any other action by the State or the PSC in contravention of the State Pledge (a) constituted a permanent appropriation of a substantial property interest of the Bondholders in the CRR Property or denied all economically productive use of the CRR Property; (b) destroyed the CRR Property other than in response to emergency conditions; or (c) substantially reduced, altered or impaired the value of the CRR Property so as to unduly interfere with the reasonable expectations of the Bondholders arising from their investments in the Bonds.  As noted earlier, in determining what is an undue interference, a court would consider the nature of the governmental action and weigh the public

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purpose served thereby against the degree to which it interferes with the legitimate property interests and distinct investment-backed expectations of the Bondholders.  There can be no assurance, however, that any such award of just compensation would be sufficient to pay the full amount of principal of and interest on the Bonds.74

* * * * *

We note that judicial analysis of issues relating to the Federal Contract Clause has typically proceeded on a case-by-case basis and that the court’s determination, in most instances, is usually strongly influenced by the facts and circumstances of the particular case.  We further note that there are no reported controlling judicial precedents of which we are aware directly on point. Our analysis is necessarily a reasoned application of judicial decisions involving similar or analogous circumstances.  Moreover, the application of equitable principles (including the availability of injunctive relief or the issuance of a stay pending appeal) is subject to the discretion of the court which is asked to apply them.  We cannot predict the facts and circumstances that will be present in the future and may be relevant to the exercise of such discretion.  Consequently, there can be no assurance that a court will follow our reasoning or reach the conclusions which we believe current judicial precedent supports.  It is our and your understanding that none of the foregoing opinions is intended to be a guaranty as to what a particular court would actually hold; rather each such opinion is only an expression as to the decision a court ought to reach if the issue were properly prepared and presented to it and the court followed what we believe to be the applicable legal principles under existing judicial precedent. The recipients of this letter should take these considerations into account in analyzing the risks associated with the subject transaction.

74 A takings claim is generally not ripe until (1) the government has made a final decision as to how a regulation will be applied to the property at issue and (2) the owner has sought and been denied compensation through whatever adequate procedures or mechanisms state law provides.  Williamson County Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 186 (1985); Holliday Amusement Co. of Charleston, Inc. v. S. Carolina, 493 F.3d 404, 406-07 (4th Cir. 2007) (applying the two-prong Williamson test).  The Fourth Circuit has applied these factors even where a property owner seeks unquantifiable items such as future lost profits in connection with an alleged taking.  See id. at 405-07.  See also Henry v. Jefferson Cnty. Planning Comm’n, 34 F. App’x 92, 96 (4th Cir. 2002) (Williamson does not require exhaustion of state procedures to ripen federal takings claim); Washlefske v. Winston, 234 F.3d 179, 183 (4th Cir. 2000) (same).  We express no opinion as to whether West Virginia provides any administrative or judicial procedures for seeking just compensation for a taking of the type of contract rights the Bondholders possess, or whether such procedures would be “adequate.” To the extent that there is a taking and state procedures for seeking just compensation are inadequate, Bondholders (or the Indenture Trustee on their behalf) or the Issuer could seek to enjoin enforcement of the State action by suing individual officers under Ex Parte Young, 42 U.S.C. §123 (1908) and 42 U.S.C. §1983.

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Any opinion expressed herein with respect to enforceability is subject to the qualifications, limitations and assumptions set forth in the bankruptcy opinion, of even date herewith, addressed to you.

This letter is limited to the federal laws of the United States of America.

While a copy of this letter may be posted to an internet website required under Rule 17g-5 under the Securities and Exchange Act of 1934, as amended, and maintained by APCo solely for the purpose of complying with such rule, this letter is solely for your benefit in connection with the transactions described in the first paragraph above and may not be quoted, used or relied upon by, nor may copies be delivered to, any other person (including without limitation, any governmental or regulatory agency and  all purchasers of Bonds other than the underwriters named in Schedule II to the Underwriting Agreement), nor may you rely on this letter for any other purpose, without our prior written consent.

This letter is being delivered solely for the benefit of the persons to whom it is addressed; accordingly, it may not be quoted, filed with any governmental authority or other regulatory agency or otherwise circulated or utilized for any other purpose without our prior written consent.  We hereby consent to the filing of this letter as an exhibit to the Registration Statement filed with the Securities and Exchange Commission (the “Commission”) on September 26, 2013[, as amended by Amendment No. 1 and Amendment No. 2 thereto, filed on [date], 2013 and [date], 2013] (the “Registration Statement”), and to all references to our firm included in or made a part of the Registration Statement.  In giving the foregoing consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the related rules and regulations of the Commission.  We assume no obligation to update or supplement this letter to reflect any facts or circumstances which may hereafter come to our attention with respect to the opinions or statements expressed above, including any changes in applicable law which may hereafter occur.

Very truly yours,

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SCHEDULE A

[addressees to be confirmed]

U.S. Bank National Association

as Indenture Trustee

190 South LaSalle Street, 7th Floor

Chicago, Illinois  60603

Moody’s Investors Service

7 World Trade Center at

250 Greenwich Street, 24th Floor

New York, New York 10007

Standard & Poor’s Ratings Service

55 Water Street, 40th Floor

New York, New York 10041

Appalachian Power Company

707 Virginia Street East

Charleston, West Virginia  25327

Appalachian Consumer Rate Relief Funding LLC

707 Virginia Street East, Suite 1000

Charleston, West Virginia  25327

For itself and as Representatives of the

Underwriters of the Bonds:

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

RBS Securities Inc.

600 Washington Boulevard
Stamford, Connecticut 06901

EX-99.6

Exhibit 99.6

[date], 2013

To Each Person Listed on

the Attached Schedule I

Re: Appalachian Consumer Rate Relief Funding LLC

$___________ Consumer Rate Relief Bonds

West Virginia Constitutional Issues

Ladies and Gentlemen:

We have acted as special counsel in the State of West Virginia to Appalachian Power Company, a Virginia corporation (“APCo”), in connection with: the issuance of a financing order on September 20, 2013 (the “Financing Order”), to APCo by the Public Service Commission of West Virginia (the “PSCWV”); the transfer and sale by APCo of all of its right, title and interest in certain property (the “CRR Property”) to Appalachian Consumer Rate Relief Funding LLC, a Delaware limited liability company (the “Issuer”); the issuance by the Issuer of its Consumer Rate Relief Bonds (the “Consumer Rate Relief Bonds”), referred to and described below; and other related transactions.

Generally, the CRR Property is a property right created under W. Va. Code § 24-2-4f (the “Securitization Law”).  The Financing Order authorized the creation, transfer, and sale of the CRR Property, which consists of the irrevocable right of APCo or its assignees to collect certain consumer rate relief charges (the “CRR Charges”) from all retail electric service customers of APCo in the State of West Virginia, subject to the limited exceptions set forth in the Financing Order for specified customers.  The Consumer Rate Relief Bonds will be secured by a security interest in the CRR Property, together with certain other property of the Issuer.

THE TRANSACTION

On the date hereof, APCo has transferred and sold the CRR Property to the Issuer under an CRR Property Purchase and Sale Agreement, dated as of [date], 2013 between APCo and the Issuer, and a related Bill of Sale, dated as of [date], 2013 (collectively referred to herein as the “Sale Agreement”).  APCo, in its capacity as Servicer, and the Issuer have entered into a CRR Property Servicing Agreement, dated as of [date], 2013 (the “Servicing Agreement”), under which APCo has agreed to service the CRR Property.  APCo, as Administrator (“Administrator”), has entered into an Administration Agreement with the Issuer, dated as of [date], 2013, under which the Administrator has agreed to perform certain administrative services for the Issuer (the “Administration Agreement”).

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On the date hereof, the Issuer issued the Consumer Rate Relief Bonds, under the Indenture, dated as of [date], 2013 between the Issuer and U.S. Bank National Association, as indenture trustee (the “Indenture Trustee”), as supplemented by the Series Supplement dated as of [date], 2013 between the Issuer and the Indenture Trustee (the Indenture and Series Supplement collectively referred to herein as the “Indenture”).

Pursuant to the Underwriting Agreement dated [date], 2013 (the “Underwriting Agreement”) by and among APCo, the representatives of the several Underwriters named therein, and the Issuer, such Underwriters have agreed to underwrite the issuance of the Consumer Rate Relief Bonds.

As used herein, the term “Transaction Documents” means the above-referenced documents to which the Issuer is a party, and “Transaction” means the transactions contemplated by the Transaction Documents.  Capitalized terms used herein that are not otherwise defined shall have the meanings assigned to them in the Indenture.

FACTS AND ASSUMPTIONS

In connection with the opinions set forth below, we have examined and relied upon originals or copies, certified or otherwise identified to our satisfaction, of:

(a)           the Transaction Documents;

(b)           The Registration Statement (file numbers 333-191392 and 333-191392-01) filed by the Issuer with the Securities and Exchange Commission (the “Commission”) on Form S-3 under the Securities Act of 1933, as amended, [and Amendment No. 1 thereto] with respect to the Consumer Rate Relief Bonds, including the final prospectus filed with the Commission on [date], 2013 (the “Registration Statement”);

(c)           the Securitization Law;

(d)           the Financing Order;

(e)           the opinion letter of Sidley Austin LLP, on Federal Constitutional Issues, of even date herewith (the “Sidley Constitutional Opinion”); and

(f)           such other documents relating to the Transaction as we have deemed necessary or advisable as a basis for such opinions.

In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents.  In making our examination of these documents, we have assumed: 1) that the parties to such documents had the power, corporate or other, to enter into and perform all obligations thereunder; 2) the due authorization

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thereof by all requisite action, corporate or other; 3) the due execution and delivery of the Transaction Documents by the parties thereto; 4) the validity and binding effect thereof upon such parties; and 5) the enforceability thereof against such parties.

We have made no independent investigation of the facts referred to herein, and with respect to such facts, we have relied, for the purpose of rendering this opinion and except as otherwise stated herein, exclusively on the factual statements contained and matters provided for in the Transaction Documents referenced above, as we deemed advisable, including the factual representations, warranties and covenants contained therein as made by the respective parties thereto.

We express no opinion herein as to the laws of any jurisdiction other than the State of West Virginia.

OPINION REQUESTED

You have requested our opinion on the issues of:

1.           whether the State Pledge creates a contractual relationship between the State of West Virginia and the Bondholders (as defined below);

2.           whether the Supreme Court of Appeals of West Virginia (“West Virginia Supreme Court”), a West Virginia Circuit Court, or a Federal District Court sitting in West Virginia and applying West Virginia substantive law (each a “West Virginia Court”) would conclude, under applicable State of West Virginia constitutional principles relating to the impairment of contracts, that the West Virginia Legislature could not enact legislation (other than a law passed by the West Virginia Legislature in the valid exercise of the state’s police power to safeguard the vital interests of its people, including preservation of community order, health, safety, morals or economic well being) that: (A) repeals the State Pledge, (B) repeals the Securitization Law, (C) impairs the value of the CRR Property, or (D) reduces, alters or impairs the collection of the CRR Charges so as to significantly impair: (i) the terms of the Indenture or the Consumer Rate Relief Bonds or (ii) the rights and remedies of the holders of the Consumer Rate Relief Bonds (the “Bondholders”) (or the Indenture Trustee acting on their behalf) if such repeal, amendment or other action (an “Impairment Action”) would prevent the payment of the Consumer Rate Relief Bonds or would significantly affect the security for the Consumer Rate Relief Bonds (an “Impairment”);

3.           whether the State of West Virginia would be required to pay just compensation to the Bondholders if the State of West Virginia, including the PSCWV exercising its legislative powers,undertook an Impairment Action and created an Impairment that: (a) constituted a permanent appropriation of a substantial property interest of the Bondholders in the CRR Property or denied all economically beneficial or productive use of the CRR Property; (b) destroyed the CRR Property, other than in response to emergency conditions; or (c) substantially reduced, altered or impaired the value of the CRR Property so as to unduly interfere with the reasonable expectations of the Bondholders arising from their investment in the Consumer Rate Relief Bonds;

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4.           whether the Securitization Law has been duly enacted by the West Virginia Legislature in accordance with all applicable laws and is in full force and effect, whether the effectiveness or constitutionality of the Securitization Law under the Constitution of the State of West Virginia (insofar as it relates to the Consumer Rate Relief Bonds and the Transaction) is, to the best of our knowledge, the subject of any pending appeal or litigation, and if the constitutionality of the Securitization Law were challenged, whether a West Virginia Court applying West Virginia substantive law, would conclude, under applicable State of West Virginia constitutional principles, that the Securitization Law is constitutional.

5.  whether the State of West Virginia, acting through direct voter initiative or referendum, could implement a voter initiative or referendum having the same effect as an Impairment Action; and

6.  whether Bondholders could obtain from a West Virginia Court a preliminary injunction to delay the implementation of an Impairment Action pending final adjudication of a claim challenging the constitutionality of such Impairment Action or a permanent injunction in the event of a final adjudication that such Impairment Action was unconstitutional.

OPINION 1 – REGARDING THE CONTRACT CLAUSE OF THE WEST VIRGINIA CONSTITUTION

The Securitization Law provides:

(s) Pledge of state.

(1) The state pledges to and agrees with the bondholders, assignees and financing parties under a final financing order that the state will not take or permit any action that impairs the value of consumer rate relief property under the final financing order or revises the consumer rate relief costs for which recovery is authorized under the final financing order or, except as allowed under subsection (k) of this section, reduce, alter or impair consumer rate relief charges that are imposed, charged, collected or remitted for the benefit of the bondholders, assignees and financing parties, until any principal, interest and redemption premium in respect of consumer rate relief bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid or performed in full.

(2) A person who issues consumer rate relief bonds is permitted to include the pledge specified in subdivision (1) of this subsection in the consumer rate relief bonds, ancillary agreements and documentation related to the issuance and marketing of the consumer rate relief bonds.

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We note that the State Pledge is set forth on the Consumer Rate Relief Bonds and in the Indenture.

Article III, Section 4 of the West Virginia Constitution states in part that:  “No . . . law impairing the obligation of a contract, shall be passed” (the “State Contract Clause”).  The State Contract Clause is consistent with the Contract Clause of the United States Constitution, Article I, Section 10, which provides that “no State shall . . . pass any . . .  Law impairing the Obligation of Contracts”  (the “Federal Contract Clause,” and together with the State Contract Clause, the “Contract Clauses”).  In general, West Virginia Courts that have addressed the issue of whether an act of the Legislature violates the State Contract Clause have followed the decisions of the United States Supreme Court interpreting the Federal Contract Clause.

To determine whether state legislation impairs a contractual obligation in violation of the State Contract Clause, the threshold issue is whether the parties have contractually vested property rights.  In Wagoner v. Gainer, 167 W. Va. 139, 279 S.E.2d 636 (1981), the issue was whether a bill passed by the Legislature affecting the amount of the pension benefit to which retired judges were entitled under the State of West Virginia judicial retirement system violated the Federal Contract Clause.  In 1949, the West Virginia Legislature created a retirement plan for judges.  West Virginia Code § 51-9-6 provided that a retired judge, eligible for benefits under the system, shall be paid “annual retirement benefits so long as he shall live, in an amount equal to seventy-five percent of the annual salary of the office from which he has retired . . . as such salary may be changed from time to time during the period of his retirement.”  In 1979, the West Virginia Legislature increased the salaries of sitting judges.  In the same act, the Legislature froze retirement benefits for retired judges at the levels determined by the salaries of active judges prior to the 1979 salary increases.  The case reached the West Virginia Supreme Court on appeal from a Writ of Mandamus ordering the West Virginia State Auditor and West Virginia State Treasurer to compute the retired judges’ increased retirement benefits based on the raises given by the Legislature to active judges.

The West Virginia Supreme Court reasoned that the State of West Virginia judicial retirement system creates contractually vested property rights for retired and active participating plan members.  Such rights are enforceable in the courts and cannot be impaired or diminished by the Legislature.  The West Virginia Supreme Court rejected the freezing of judges’ retirement benefits, holding that when the Legislature attempts to change important provisions of an existing contract, outside the limits of the reserved state powers, the legislation will be declared unconstitutional as impairing existing contractual obligations under the Federal Contract Clause.

For purposes of evaluating contractual impairment cases brought under the Contract Clauses, the West Virginia Supreme Court has adopted a three-prong test:

The initial inquiry is whether the statute has substantially impaired the contractual rights of the parties.  If a substantial impairment is shown, the second step of the test is to determine whether there is a significant and legitimate public purpose behind the legislation.  Finally, if a legitimate

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public purpose is demonstrated, the court must determine whether the adjustment of the rights and responsibilities of contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation’s adoption.

West Virginia Regional Jail and Correctional Facility Authority v. West Virginia Investment Management Board, 203 W. Va. 413, 508 S.E.2d 130 (1998); see also City of Charleston v. Public Service Commission of West Virginia, 57 F.3d 385 (4th Cir. 1995); Syllabus Point 4, in part, Shell v. Metropolitan Life Ins. Co., 181 W.Va. 16, 380 S.E.2d 183 (1989).

In analyzing State Contract Clause cases, the West Virginia Supreme Court has generally focused on the following issues: 1) whether the statute has “substantially impaired” the contract rights of the parties; and, if so, 2) whether the impairment is justified by a “significant and legitimate public purpose.”  In West Virginia Regional Jail and Correctional Facility Authority v. West Virginia Investment Management Board, 203 W. Va. 413, 508 S.E.2d 130 (1998), the beneficiaries of the West Virginia Public Employees Retirement System (“PERS”) challenged legislation authorizing the Investment Management Board to invest PERS funds in debt or obligations of the Regional Jail Authority.  The PERS beneficiaries claimed that such investments would create an impairment of the contract that existed between the State of West Virginia and the PERS beneficiaries.

The West Virginia Supreme Court first determined that a contract between the State of West Virginia and the beneficiaries existed.  The West Virginia Supreme Court refused, however, to overturn the statute.  In rejecting the argument that the legislation substantially impaired the State of West Virginia’s contractual obligations, the West Virginia Supreme Court concluded that the Investment Management Board’s investment was for a limited amount, for a limited time, and was required to be repaid at an interest rate essentially equal to the rate on other authorized investments.  508 S.E.2d at 137.

In City of Charleston v. Public Service Commission of West Virginia, 57 F.3d 385 (4th Cir. 1995), the Cities of Charleston and South Charleston, West Virginia had outstanding sewer revenue bonds.  The bond contracts empowered the Cities in each instance to collect delinquent sewer charges by imposing a lien on premises served, including leased properties, even if only the tenant was delinquent in the payment of the sewer fees.  In 1989 and 1990, bills passed by the West Virginia Legislature added termination of water service as a remedy for the nonpayment of delinquent sewer fees and repealed the right to place a lien on real property as a remedy.  In 1992, the PSCWV ruled that the City of Charleston could not require termination of water service to landlords because their previous tenants had failed to pay sewer charges.  The Cities brought an action against the PSCWV asserting that the amendments to the Code and the PSCWV orders violated their existing contractual rights under the Contracts Clauses.  Citing  Federal Contract Clause precedent, the United States Court of Appeals for the Fourth Circuit concluded that any impairment created by the inability of the Cities to terminate water service to landlords was insubstantial and not likely to cause the Cities to default on their bond obligations.  Accordingly, the West Virginia Supreme Court entered summary judgment in favor of the PSCWV.  The West Virginia Supreme Court’s decision upholding the constitutionality of the

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legislation in this case was clearly influenced by the de minimis effect of the potential impairment created.

In Shell v. Metropolitan Life Ins. Co., 181 W.Va. 16, 380 S.E.2d 183 (1989), the issue was whether a statute prohibiting an insurance company from discharging its agents except for “good cause” created an unconstitutional impairment of existing contractual rights between the insurance companies and their agents.  The West Virginia Supreme Court struck down the statute, holding that it did substantially impair existing contractual obligations because it altered the “at will” nature of the employment relationship.  The West Virginia Supreme Court further held that the legislation was not justified by a significant and legitimate public purpose, because it was designed to protect a narrow class of citizens (i.e., insurance agents), rather than a broad societal interest.

In the Shell case, the West Virginia Supreme Court stated that: “in construing our state constitutional provision prohibiting any ‘law impairing the obligation of a contract,’ W. Va. Const. Art. III, § 4, we have generally accepted the United States Supreme Court’s interpretation of the similar provision contained in Article I, Section 10, Clause 1 of the United States Constitution.”  The Sidley Constitutional Opinion analyses whether under Federal constitutional principles the Bondholders could successfully challenge an action of the West Virginia Legislature, or of the PSCWV acting in its legislative capacity, repealing or substantially amending the Securitization Law.  Based upon the West Virginia Supreme Court’s reasoning in Shell, the analysis and conclusions set forth in the Sidley Constitutional Opinion should apply equally to a challenge to the Securitization Law under the West Virginia Constitution.

The West Virginia cases demonstrate that the West Virginia Courts tend to follow federal case law in determining whether there has been a prohibited impairment of existing contractual rights.  Where a West Virginia Court has determined that new legislation substantially impacts existing contractual rights, the Court has not hesitated to declare the legislation unconstitutional.  However, where the impact of the impairment has been slight, West Virginia Courts have not granted relief under the State Contract Clause.

           In order for an Impairment Action to violate the State Contract Clause, the existence of a contractual relationship between the State of West Virginia and the Bondholders, any assignee, or any financing party must be established.  In the present case, we believe that the West Virginia Legislature’s intent to make such a contractual relationship is clear from the statutory language.

The state pledges to and agrees with the bondholders, any assignees, and financing parties under a final financing order that the state will not take or permit any action that impairs the value of the consumer rate relief property under the final financing order or, . . . reduce, alter or impair consumer rate relief charges that are imposed, charged, collected or remitted for the benefit of the bondholders, assignees, and financing parties.

West Virginia Code § 24-2-4f(s).

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The State Pledge, which the Securitization Law explicitly authorizes to be included in the documentation with respect to the Consumer Rate Relief Bonds (and which is included therein), is an inducement offered by the State of West Virginia to investors to purchase the Consumer Rate Relief Bonds.  The Securitization Law constitutes, among other things, an undertaking of the State of West Virginia to: 1) encourage and facilitate the recovery of expanded net energy costs from the utility’s customers at a lower cost than would be afforded by traditional utility financing mechanisms; and 2) increase the financial security for and gain the capital markets’ acceptance of the Consumer Rate Relief Bonds.

We believe that, if presented with the issue, a West Virginia Court would find that the Securitization Law, the Financing Order, and the State Pledge, taken together, give rise to a contractual obligation between the State of West Virginia and the Bondholders, any assignee, or any financing party for purposes of the State Contract Clause.  We also believe that all prohibitions applicable to the State of West Virginia under the State Contract Clause would also apply to actions by the State of West Virginia, acting through the PSCWV.  The West Virginia Legislature has delegated its regulatory power over utilities to the PSCWV.  The PSCWV’s power arises from delegated legislative authority and the procedure for its exercise is legislative in character.  Randall Gas Co. v. Star Glass Co., 88 S.E. 840, 78 W.Va. 252 (1916).  Moreover, Subsection (a) of the Securitization Law (W. Va. Code § 24-2-4f(a)) evidences legislative authority and a legislative directive to make alternative financing mechanisms available under specified circumstances. We do not believe that the State of West Virginia, acting indirectly through the PSCWV, could effectively undertake any Impairment Action that it would be constitutionally barred from taking directly.

While there is no case law in West Virginia which considers the application of the State Contract Clause to the Securitization Law or the State Pledge, existing West Virginia case law and the federal case law cited in the Sidley Constitutional Opinion concerning the application of Federal Contract Clause to similar legislation is instructive.  Based upon our review of the relevant State of West Virginia judicial authority as discussed in this opinion, but subject to the qualifications, limitations and assumptions (including the assumption that the Impairment Action in question would be “substantial”) set forth herein and in the Sidley Constitutional Opinion, it is our opinion that a West Virginia Court, if presented with this issue in a properly prepared and presented case, would conclude:

(1)  that the State Pledge constitutes a contractual relationship between the Bondholders and the State of West Virginia; and

(2)  under applicable State of West Virginia constitutional principles relating to the impairment of contracts, that the West Virginia Legislature could not enact legislation (other than a law passed by the West Virginia Legislature in the valid exercise of the state’s police power to safeguard the vital interests of its people, including preservation of community order, health, safety, morals or economic well being) that: (A) repeals the State Pledge; (B) repeals the Securitization Law; (C) impairs the value of the CRR Property; or (D) reduces, alters or impairs the

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collection of the CRR Charges so as to substantially impair: (i) the terms of the Indenture or the Consumer Rate Relief Bonds; or (ii) the rights and remedies of the Bondholders (or the Indenture Trustee acting on their behalf) if such repeal, amendment or other action would prevent the payment of the Consumer Rate Relief Bonds or would substantially affect the security for the Consumer Rate Relief Bonds.

OPINION # 2 – REGARDING THE TAKINGS CLAUSE OF THE WEST VIRGINIA CONSTITUTION.

The Fifth Amendment of the United States Constitution provides, in part: “nor shall private property be taken for public use, without just compensation” (the “Federal Takings Clause”).  The Fourteenth Amendment of the United States Constitution makes the Fifth Amendment, including the Federal Takings Clause, applicable to any state action.  Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980).  There have been numerous United States Supreme Court cases analyzing and evaluating Federal Takings Clause claims.  The Sidley Constitutional Opinion contains a detailed analysis of the issue of whether the State of West Virginia could be required to compensate the Bondholders under the Federal Takings Clause if the State of West Virginia, exercising its legislative powers, takes an Impairment Action.  There have been few similar cases in the West Virginia Courts, and those that have been decided have generally adopted the analysis of similar cases decided under the Federal Takings Clause.

Article III, Section 9 of the West Virginia Constitution (the “State Takings Clause”) states:

Private property shall not be taken or damaged for public use, without just compensation; nor shall the same be taken by any company, incorporated for the purposes of internal improvement, until just compensation shall have been paid, or secured to be paid, to the owner; and when private property shall be taken, or damaged, for public use, or for the use of such corporation, the compensation to the owner shall be ascertained in such manner, as may be prescribed by general law; provided, that when required by either of the parties, such compensation shall be ascertained by an impartial jury of twelve freeholders.

In Verizon West Virginia , Inc. v. West Virginia Bureau of Employment Programs, Worker’s Compensation Division, 214 W. Va. 95, 586 S.E.2d 170 (2003), a group of self-insured employers claimed that the methodology used by the Bureau’s Workers’ Compensation Division to calculate premium rates amounted to an impermissible regulatory taking under both the federal and state constitutions.  Citing Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998), the West Virginia Supreme Court recognized that “the issue of whether compensation is compelled in the instance of ‘economic injuries caused by public action’. . . is essentially an ad hoc and fact intensive undertaking.”  586 S.E.2d at 193.  In analyzing the takings issues raised by this case, the West Virginia Supreme Court found that the governmental action (specifically, the Workers’ Compensation Fund rate increases on self-insured employers) was made in response to the compelling state interest of keeping the Fund

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afloat and the related interest of preventing a lowering of the State of West Virginia’s bond ratings.  The West Virginia Supreme Court ultimately held that: “[u]pon careful and thorough review of the applicable authority, we find that the formula developed by the Performance Council . . . assessing the workers’ compensation premium tax for self-insured employers does not constitute an undue taking without compensation in violation of either the federal or state constitution.”  Id. 586 S.E.2d at 196.

Similarly, in upholding a local zoning ordinance that prohibited the operation of a gasoline service station in a Commercial A zone, the West Virginia Supreme Court ruled that: “land-use regulations will not constitute an impermissible taking of property under the Fifth Amendment to the United States Constitution and Section 9 of Article III of the West Virginia Constitution if such regulations can be reasonably found to promote the health, safety, morals, or general welfare of the public and the regulations do not destroy all economic uses of the property.”  Syllabus, pt. 6, McFillan v. Berkeley County Planning Commission, 190 W. Va. 458, 438 S.E.2d 801 (1993).

Finally, in Columbia Gas v. Public Service Commission of West Virginia,173 W. Va. 19, 311 S.E.2d 137 (1983), the West Virginia Supreme Court upheld a legislatively imposed nine-month moratorium on rate increases for natural gas utilities from challenges under the Federal and State Taking Clauses.  In Columbia Gas, the West Virginia Supreme Court determined that the additional nine-month moratorium did not offend just compensation provisions of the Federal and State constitutions because the West Virginia Legislature had provided for emergency rate hardship procedures for utilities to address situations of extreme financial hardship, which adequately would protect against the confiscation of private property without just compensation.  Columbia Gas, 311 S.E.2d at 143.

While there is no case law in West Virginia that considers the application of the State Takings Clause to the Securitization Law, the Financing Order or the State Pledge, we have considered existing West Virginia case law and the federal case law cited in the Sidley Constitutional Opinion concerning the application of the Federal Takings Clause to similar situations.  We believe that the rulings of the West Virginia Supreme Court in the cases discussed above are consistent with the Federal Takings Clause analysis contained in the Sidley Constitutional Opinion.  Thus, it is our opinion that the analysis set forth in the Sidley Constitutional Opinion discussing federal law taking issues would apply to a similar challenge made pursuant to the State Takings Clause.

Based on our review of relevant judicial authority discussed in this opinion, but subject to the qualifications, limitations and assumptions set forth herein and in the Sidley Constitutional Opinion, it is our opinion that, if presented with this issue in a properly prepared and presented case, a West Virginia Court would conclude that the State of West Virginia would be required to pay just compensation to the Bondholders if the State of West Virginia, including the PSCWV exercising its legislative powers, undertook an Impairment Action and created an Impairment that: (a) constituted a permanent appropriation of a substantial property interest of the Bondholders in the CRR Property or denied all economically beneficial or productive use of the CRR Property; (b) destroyed the CRR Property, other than in response to emergency

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conditions; or (c) substantially reduced, altered or impaired the value of the CRR Property so as to unduly interfere with the reasonable expectations of the Bondholders arising from their investment in the Consumer Rate Relief Bonds.

OPINION # 3 -- REGARDING THE CONSTITUTIONALITY OF THE SECURITIZATION LAW

It is difficult to predict the range of legal theories and claims upon which a challenge to the constitutionality of the Securitization Law could conceivably be based.  However, given our familiarity with the Securitization Law, the nature of constitutional challenges to similar statutes in other states, and the types of procedural challenges that have been raised alleging deficiencies in the statutory enactment process, we have identified a number of potential theories upon which a challenge to the Securitization Law under the West Virginia Constitution could be based.  Such a challenge could conceivably be based on the State Contract Clause; the State Takings Clause; the due process clause contained in Article III, Section 10 of the West Virginia Constitution (the “State Due Process Clause”); or the provisions of Article VI, Sections 29, 30, or 31 of the West Virginia Constitution which respectively require: 1) that bills be read on three different days in each house; 2) that acts embrace but one object; and 3) that bills passed by one house and amended by the other be again voted on by the house which originally passed the bill.  Our examination of these constitutional provisions leads us to conclude that the Securitization Law would likely survive challenges based on these provisions.

1.  State Contract Clause.

In at least one other jurisdiction, legislation providing for securitization financing similar to the financing mechanism created in the Securitization Law was challenged as an impairment of an existing contract.  Public Service Electric and Gas Company’s Rate Unbundling, Stranded Costs and Restructuring Filings, 748 A.2d 1161 (N.J. App. 2000), aff’d, 771 A.2d 1163 (N.J. 2001)(denying certification of Contracts Clause issue), involved a challenge to the Electric Discount and Energy Competition Act of 1999, N.J.S.A. 48:3-49 to -98, L. 1999, c. 23, enacted by the New Jersey Legislature effective February 9, 1999 (the “NJ Act”), which deregulated and restructured the electric power industry in New Jersey. The NJ Act permitted a utility to recover stranded costs the utility was at risk of losing when the supply market was opened to competition, through securitization backed by a transition bond charge imposed on all electric customers purchasing power within the utility’s service area.

This case arose when one of PSE&G’s largest customers, who was purchasing power from PSE&G under the terms of a special contract, filed an appeal from a final order of the New Jersey Board of Public Utilities allowing PSE&G to recover its stranded costs by imposing a transition charge on its customers’ bills.  Petitioner argued that the charge was an unconstitutional impairment of its existing contract with PSE&G.  The Court rejected the challenge holding that “[t]he prohibition against impairment of contracts under the federal and state constitutions is not absolute. It must be accommodated to the inherent police power of the states to safeguard the vital interests of their residents.  The contract clause does not deprive the states of their power to adopt general regulatory measures even if those regulatory measures

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result in the impairment or destruction of private contracts.” 771 A.2d at 1175-76 (citations omitted).

Generally, courts will uphold legislation from contracts clause challenges, as long as there is a significant and legitimate public purpose behind the legislation  As previously discussed, the West Virginia Supreme Court has adopted a three-prong test for the purpose of evaluating contractual impairment cases:

The initial inquiry is whether the statute has substantially impaired the contractual rights of the parties.  If a substantial impairment is shown, the second step of the test is to determine whether there is a significant and legitimate public purpose behind the legislation.  Finally, if a legitimate public purpose is demonstrated, the court must determine whether the adjustment of the rights and responsibilities of contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation’s adoption.

Syllabus pt. 4, Shell v. Metropolitan Life Ins. Co., 181 W.Va. 16, 380 S.E.2d 183 (1989).

In the present case, the Securitization Law was enacted to provide certain public utilities an alternative mechanism to recover expanded net energy costs from their customers.  The Legislative findings contained in W. Va. Code § 24-2-4f(a) provide that the Securitization Law is in the interest of the state and its citizens because it will encourage and facilitate the use of alternative financing mechanisms that will enable electric utilities to recover expanded net energy costs at the lowest reasonably practical cost.

In the Financing Order, the PSCWV specifically found that the issuance of the Consumer Rate Relief Bonds: a) satisfies the Lowest Cost Objective as collectively defined at page 2 of the Financing Order; and b) “will result in overall costs to the Applicants’ respective consumers in the State of West Virginia that (i) are lower than would result from the use of traditional utility financing mechanisms, and (ii) are just and reasonable.”  In summary, the Legislature and the WVPSC have determined that the Securitization Law will reduce the cost to the West Virginia customers of APCo of recovering expanded net energy costs.  Even if the Securitization Law was found to substantially impair the contractual rights of a party challenging the legislation, the Securitization Law appears to be appropriately conceived to fulfill a legitimate public purpose.  In addition, as is noted below, the Securitization Law and the issuance of the Financing Order thereunder are likely to be considered to be legitimate exercises of valid ratemaking functions.  For these reasons, in our judgment it is reasonable to conclude that the Securitization Law would likely withstand a challenge under the State Contract Clause.

2.  State Takings Clause.

In other jurisdictions, challenges to statutes similar to the Securitization Law based on the Takings Clause have generally arisen in the context of the deregulation of the electric power industry.  For example, in City of Corpus Christi v. Public Utility Commission, 51 S.W.3d 231 (Tex. 2001), the statute in question authorized the existing regulated utility to issue

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bonds to recover certain stranded costs and regulatory assets during a period of transition to deregulation.  The bonds were repaid by a transition charge assessed on all customers within the existing regulated utility’s service area.  Competing electric generating companies challenged the deregulation plan on the basis that the imposition of the transition charge on their customers constituted a taking.  The Texas Supreme Court denied the relief sought by the competing power generators, holding that the transition charge was valid because its imposition was a reasonable exercise of state ratemaking authority.

In the present case, the CRR Charges are not akin to a competitive transition charge imposed as part of the restructuring of the West Virginia electric power industry.  Rather, the Securitization Law was enacted to provide certain regulated public utilities operating in West Virginia an alternative mechanism for financing the recovery of expanded net energy costs.  Accordingly, we would anticipate that a West Virginia Court reviewing any challenge to the Securitization Law asserting an impermissible taking of property would carefully consider whether the Securitization Law can be reasonably found to promote the health, safety, morals, or general welfare of the public.  McFillan v. Berkeley County Planning Commission, 190 W. Va. 458, 438 S.E.2d 801 (1993).

In the public utility regulation arena, both the United States Supreme Court and the West Virginia Supreme Court have held that as long as rates are reasonable, conform to statutory authorization and are intended to balance investor and consumer interests, they are constitutionally permissible. In re Permian Area Rate Cases, 390 U.S. 747, 88 S. Ct. 1344, 20 L. Ed.2d 312 (1968), Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S. Ct. 281, 88 L. Ed. 333 (1944), Columbia Gas of West Virginia, Inc. v. Public Service Commission, 173 W. Va. 19, 311 S.E. 2d 137 (1983).  The West Virginia Legislature and the PSCWV have both found that the Securitization Law would lower the cost to consumers of financing the utility’s recovery of expanded net energy costs.  Moreover, we are aware of no set of circumstances that is likely to present a plausible claim that the Securitization Law would constitute an impermissible taking of private property.  For the reasons discussed above, in our judgment it is reasonable to conclude that the Securitization Law would likely withstand a challenge under the State Takings Clause.

3.  State Due Process Clause.

It is possible that a constitutional challenge to the Securitization Law could be raised on due process grounds.  Where the issue involves the constitutionality of legislation, the act must be found to bear a reasonable relationship to a proper legislative purpose and be neither arbitrary nor discriminatory. Hartsock-Flesher Candy Co. v. Wheeling Wholesale Grocery Co., 174 W. Va. 538, 328 S.E.2d 144 (1984).  In addition, due process considerations involve whether a party has been accorded the right to be heard.  Segal v. Beard, 181 W. Va. 92, 380 S.E.2d 444 (1989).   Based upon our previous discussion of the legislative objectives of the Securitization Law and the fact that the proceedings before the PSCWV that culminated in the issuance of the Financing Order were open to all interested parties and all parties participating in that proceeding supported, by executing a Joint Stipulation and Agreement for Settlement, the issuance of the

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Financing Order, in our judgment it is reasonable to conclude that the Securitization Law would likely withstand a State Due Process Clause challenge.

4.  Validity of Enactment.

We have reviewed the legislative history of the enactment of the Securitization Law, 2012 Acts of the Legislature, c 156.  Based on this review, in our judgment it is reasonable to conclude that the Securitization Law would likely withstand a constitutional challenge based on: a) Article VI, Section 29 of the West Virginia Constitution requiring that bills be read on three different days in each house; b) Article VI, Section 30 of the West Virginia Constitution requiring that acts embrace only one object in the title; and c) Article VI, Section 31 of the West Virginia Constitution requiring that bills passed by one house and amended by the other be again voted on by the house which originally passed the bill.

For the reasons discussed above and subject to the qualifications, limitations and assumptions set forth herein, it is our opinion that: i) the Securitization Law has been duly enacted by the West Virginia Legislature in accordance with all applicable laws and is in full force and effect; ii) the effectiveness or constitutionality of the Securitization Law under the Constitution of the State of West Virginia (insofar as it relates to the Consumer Rate Relief Bonds and to the Transaction) was, to the best of our knowledge as of _____________, 2013, not the subject of any pending appeal or litigation (although we cannot assure you that a lawsuit challenging the validity of the Securitization Law will not be filed in the future or that, if filed, will not be successful); and iii) if the constitutionality of the Securitization Law were challenged, a West Virginia Court applying West Virginia substantive law would conclude under applicable State of West Virginia constitutional principles that the Securitization Law is constitutional.

OPINION #4 -- REGARDING THE ABILITY OF WEST VIRGINIA VOTERS THROUGH DIRECT INITIATIVE OR REFERENDUM TO REPEAL THE STATE PLEDGE OR TAKE ANY OTHER ACTION CONSTITUTING AN IMPAIRMENT ACTION

Initiative is a state constitutional power allowing voters to place proposals for enactment of new laws or constitutional amendments or the ballot by collecting signatures of a certain number of citizens.  Referendum is a state constitutional power allowing voters to place proposals to repeal a law that was previously enacted by the Legislature or the ballot by collecting signatures of a certain number of citizens.

Article VI § 1 of the West Virginia Constitution vests the power to enact or repeal laws solely in the Legislature.  The West Virginia Constitution does not contain any provision allowing voters to directly undertake either the enactment of new laws or constitutional amendments or the repeal of existing laws.  In West Virginia the power of enacting legislation is vested solely in the Legislature.  State ex rel. Carson v. Wood, 175 S.E.2d 142, 154 W.Va. 397 (1970); State v. Huber, 40 S.E.2d 11, 129 W.Va. 198 (1946).  Given the provisions of the West Virginia Constitution, we conclude that the voters of West Virginia could not through direct voter initiative or referendum perform any action that would have the same effect as an Impairment Action.

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OPINION # 5 -- WHETHER BONDHOLDERS CAN OBTAIN INJUNCTIVE RELIEF FROM A WEST VIRGINIA COURT TO ENJOIN AN IMPAIRMENT ACTION.

1.           Preliminary Injunctive Relief.

The standard for the issuance of preliminary injunctive relief is set forth in Jefferson Cnty. Bd. of Educ. v. Jefferson Cnty Educ. Ass’n, 393 S.E.2d 653 (W.Va. 1990).  In that case, the West Virginia Supreme Court ratified the standard articulated by the Fourth Circuit in Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189 (4th Cir. 1977).  Relying on Blackwelder,1 West Virginia employs a “balance of hardship” test, under which a West Virginia Court must consider, in “flexible interplay,” four factors: (1) the likelihood of irreparable harm to the plaintiff without the injunction; (2) the likelihood of harm to the defendant with an injunction; (3) the plaintiff's likelihood of success on the merits; and (4) the public interest. Jefferson County, 393 S.E.2d 653, 662 (quoting Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bradley, 756 F.2d 1048, 1054 (4th Cir.1985).

  At present, West Virginia law regarding preliminary injunctive relief may to be somewhat unsettled, stemming from the Fourth Circuit’s modification of Blackwelder in Real Truth About Obama, Inc. v. Fed. Election Comm'n, 575 F.3d 342 (4th Cir. 2009).  In Real Truth, the Fourth Circuit Court of Appeals modified the Blackwelder standard by holding that “[b]ecause a preliminary injunction affords, on a temporary basis, the relief that can be granted permanently after trial, the party seeking the preliminary injunction must demonstrate by “a clear showing” that, among other things, it is likely to succeed on the merits at trial.” Id. at 345 (citing Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 22 (2008)).  Before Real Truth, the Fourth Circuit required “that the likelihood-of-success requirement be considered, if at all, only after a balancing of hardships is conducted and then only under the relaxed standard of showing that “grave or serious questions are presented for litigation.” Blackwelder, 550 F.2d at 195-96 (internal quotes omitted).  The Fourth Circuit now requires “that the plaintiff make a clear showing as to each of the four elements supporting the granting of a preliminary injunction, a standard far stricter than the Blackwelder balancing approach, requiring only that the plaintiff demonstrate a grave or serious question for litigation.”  Real Truth, 575 F.3d at 346-47.

Any uncertainty in West Virginia law regarding preliminary injunctive relief is due to the fact that the federal standard has become stricter since the West Virginia Supreme Court’s ruling in Jefferson County. “A federal case interpreting a federal counterpart to a West Virginia rule or procedure may be persuasive, but it is not binding or controlling.” Brooks v. Isinghood, 584 S.E.3d 531, 538 (W. Va. 2003). Therefore, the standard for determining whether to grant injunctive relief in West Virginia state courts remains that set forth in Jefferson County/Blackwelder until the West Virginia Supreme Court alters it.

 

1 The Blackwelder Court held that the balancing of the harms is the most important part of the test and directly affects the required showing on the likelihood of success on the merits. 550 F.2d at 193-96.

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While Real Truth has tightened the Jefferson County/Blackwelder standard, it is unclear whether the West Virginia Supreme Court will adopt the Real Truth test.  Several other courts of appeals have not construed the Winter case (relied upon in Real Truth) as eliminating the sliding scale/balancing test in the context of preliminary injunctions.  See, e.g., Wild Rockies II, 632 F.3d 1127, 1131-2 (9th Cir. 2011)(“[T]he ‘serious’ question approach survives Winter when applied as part of the four-element Winter test.”).

The function of preliminary injunctive relief is to preserve the status quo of the litigants during the pendency of litigation.  In State v. Baker, the West Virginia Supreme Court held that“[t]he function of a preliminary injunction, whether it be prohibitory or mandatory, is to preserve the status quo, until upon final hearing the court may grant full relief.”164 S.E. 154, 155 (W. Va. 1932).  Whether Bondholders would be entitled to a preliminary injunction during a challenge to the constitutionality of an Impairment Action will depend on the strength of their constitutional argument on the merits and on their arguments as to the other Jefferson County /Blackwelder factors.  While consideration of whether to grant a preliminary injunction is fact intensive, assuming Bondholders can satisfy the traditional requirements for granting injunctive relief, we conclude that a West Virginia Court would grant Bondholders a preliminary injunction against an Impairment Action.

2)      Permanent Injunctive Relief.

The mere finding that the Impairment Action is unconstitutional, would not necessarily require a West Virginia Court to grant Bondholders permanent injunctive relief.  In Perdue v. Ferguson, the West Virginia Supreme Court held that “an injunction does not lie to restrain the enforcement of an invalid [law] merely because the [law] is unconstitutional, arbitrary or otherwise invalid; other circumstances, such as irreparable injury, inadequacy of remedies at law, etc., bringing the case within one or more of the grounds for equity jurisdiction must also be alleged and shown.” 350 S.E.2d 555, 559 (W. Va. 1986). Similarly, in Coal & Coke Ry. Co. v. Conley, 67 W. Va. 129, 130, 67 S.E. 613 (1910), the West Virginia Supreme Court held that “[u]nconstitutionality of the act is not alone sufficient to confer jurisdiction of such a suit or proceeding in equity. To this there must be added, for such purpose, some right or injury, respecting the person or property, not adequately remediable by any proceeding at law.” Id at 617.  Once a West Virginia Court has declared an Impairment Action invalid, the decision whether to grant Bondholders a permanent injunction preventing state officials from enforcing the invalid Impairment Action will depend on Bondholders showing some right or injury not adequately remediable at law.  We believe that if such showing can be made, then a West Virginia Court would grant Bondholders a permanent injunction.

*     *     *     *

QUALIFICATIONS AND LIMITATIONS

We note that judicial analysis of West Virginia constitutional issues has typically proceeded on a case-by-case basis and that the determinations of the West Virginia Courts, in most instances, are usually strongly influenced by facts and circumstances of the particular case.  We further note that there are no reported controlling West Virginia judicial precedents of which

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we are aware directly on point.  Our analysis is necessarily a reasoned application of judicial decisions involving similar or analogous circumstances (none of which addresses the facts presented here), and on our understanding of the State of West Virginia constitutional principles on which a challenge to the constitutionality of a statute could conceivably be based.  Moreover, the application of equitable principles (including the availability of injunctive relief or the issuance of a stay pending appeal) is subject to the discretion of the court asked to apply them.  We cannot predict the facts and circumstances that will be present in the future and may be relevant to the exercise of such discretion.  It is our and your understanding that none of the foregoing opinions is intended to be a guaranty as to what a particular court would actually hold; rather each such opinion is only an expression as to the decision a court should reach if the issue were properly prepared and presented to it and the court followed what we believe to be the applicable legal principles under existing judicial precedent.  Moreover, there can be no assurance that a repeal or amendment to the Securitization Law will not be proposed or enacted or that any action by the State of West Virginia or the Public Service Commission of West Virginia that constitutes a violation of the State Pledge will not occur.  Furthermore, given the lack of West Virginia judicial precedent directly on point, and the nature of the security for the Bondholders, there can be no assurance that a West Virginia Court will reach the conclusions which we believe current judicial precedent supports.  In the event of any State of West Virginia legislation that adversely impacts the rights of Bondholders, costly and time-consuming litigation might ensue, adversely affecting, at least temporarily, the price and liquidity of the Consumer Rate Relief Bonds.

The foregoing opinions are expressly subject to there being no material change in the law, and there being no additional facts that would materially affect the assumptions set forth herein.  We do not undertake to supplement this opinion with respect to factual matters or changes in the law (whether constitutional, statutory or judicial) that may hereafter occur.

This letter is being furnished to you solely for your benefit in connection with the issuance of the Consumer Rate Relief Bonds and is not to be used, circulated, quoted, relied upon or otherwise referred to for any other purpose or by any other person without prior express written permission.  We consent to the filing of this opinion as an Exhibit to the Registration Statement and to the references to this firm under the heading “The Recovery Act – APCo and Other Utilities May Securitize Consumer Rate Relief Costs” in the Registration Statement.  In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.  We further consent to the reliance by Sidley Austin LLP on this opinion in rendering their opinion under Section 9(m) of the Underwriting Agreement.

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Very truly yours,
JACKSON KELLY PLLC
By:
	Member

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[DRAFT: SUBJECT TO JK OPINION COMMITTEE APPROVAL]

Each Person Listed on

  the Attached Schedule I

[________________, 2013]

Page

Schedule I

Standard & Poor’s Ratings Group

55 Water Street

New York, New York 10041

Moody’s Investors Services, Inc.

99 Church Street

New York, New York 10007

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

RBS Securities Inc.

600 Washington Boulevard

Stamford, Connecticut 06901

CORRESP

Appalachian Power Company

1 Riverside Plaza, 28th Floor

Columbus, Ohio 43215

Appalachian Consumer Rate Relief Funding LLC

1 Riverside Plaza, 28th Floor

Columbus, Ohio 43215

October 24, 2013

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Attn:  Arthur C. Sandel and Lulu Cheng, Esq.

Re: Appalachian Power Company

Appalachian Consumer Rate Relief Funding LLC

Registration Statement on Form S-3

File Nos. 333-191392 and 333-191392-01

Ladies and Gentlemen:

Appalachian Power Company and Appalachian Consumer Rate Relief Funding LLC (collectively, the “Registrants”) jointly thank you for your letter of comments dated October 18, 2013 (the “Letter”) that relate to the Form S-3 registration statement referenced above (the “Registration Statement”).

We have revised the Registration Statement in response to the Letter, and have also made other related revisions and updating changes where appropriate to the base prospectus and prospectus supplement, and we have, concurrently with the delivery of this letter, filed an Amendment No. 1 to the Registration Statement, including  all outstanding exhibits.  For your convenience, we have attached to this letter marked pages from the Registration Statement showing the relevant changes.

Registration Statement on Form S-3

COMMENT:

General

1. We note your disclosure on page 40 of the prospectus regarding your other affiliated issuing entities. Please confirm that the depositor or any issuing entity previously established, directly or indirectly, by the depositor or any affiliate of the depositor has been current and timely with Exchange Act reporting during the last twelve months with respect to asset-backed securities involving the same asset class. Please refer to General Instruction I.A.4 to Form S-3.  Also, please provide us with

Arthur C. Sandel

Lulu Cheng.

October 24, 2013

Page 2

the CIK codes for any affiliate of the depositor that has offered a class of asset-backed securities involving the same asset class as this offering.

RESPONSE:

We confirm that the depositor and each issuing entity previously established by the depositor and its affiliates have been current and timely with the applicable Exchange Act reporting for the last 12 months with respect to asset-backed securities.  The only affiliates of the depositor that have previously issued asset-backed securities involving the same asset class (i.e., ratepayer relief property or similar property under other state laws) are (i) AEP Texas Central Transition Funding LLC, or “TCC Funding I,” whose CIK code is 0001099204; (ii) AEP Texas Central Funding II LLC, or “TCC Funding II,” whose CIK code is 0001366928; (iii) AEP Texas Central Funding III LLC, or “TCC Funding III,” whose CIK code is 0001539816; and (iv) Ohio Phase-In-Recovery Funding, LLC, whose CIK code is 0001577459.   TCC Funding I, which filed a Form 15 on January 22, 2003, is not currently subject to reporting obligations under the Exchange Act.

COMMENT:

2. Please confirm that the offered securities will be investment grade securities as defined in General Instruction I.B.2 to Form S-3. See General Instruction I.B.5.(a)(i) to Form S-3.

RESPONSE:

We confirm that the offered securities will be investment grade securities.

COMMENT:

3. We note that, in addition to the CRR property, various types of collateral will also secure the bonds. Please confirm whether any of the underlying collateral will consist of securities for purposes of Rule 190 under the Securities Act.

RESPONSE:

We confirm that none of the underlying collateral will consist of securities for purposes of Rule 190 under the Securities Act.  The only types of collateral other than the consumer rate relief property consist of contract rights under the various documents, the Capital Subaccount established to hold the initial capital contribution to the equity account, and the other accounts held with the Indenture Trustee into which collections of the property are held pending distributions of the same to bondholders.  The funds in such accounts may be invested in Permitted Investments as described in the Registration Statement.

Arthur C. Sandel

Lulu Cheng.

October 24, 2013

Page 3

COMMENT:

4. We note that you have indicated here and on page II-8 that Exhibit 3.1 (Certification of Formation of Appalachian Consumer Rate Relief Funding LLC), Exhibit 24.1 (Power of Attorney and Resolutions of Appalachian Power Company) and Exhibit 24.2 (Power of Attorney and Resolutions of Appalachian Consumer Rate Relief Funding LLC) have been filed as exhibits to the registration statement; however, these exhibits have not actually been filed. We further note that multiple signatories have signed the registration statement in reliance upon valid powers of attorney.   Please file these exhibits with your next amendment.

RESPONSE:

We confirm that all of the above-described exhibits were filed concurrently with the filing of the Amendment No. 1 to the Registration Statement.

COMMENT:

5.  Additionally, please file your other exhibits with the next amendment and remove the reference to Item 601(b)(1) of Regulation S-K in your footnote here and on page II-8. Please confirm that all finalized agreements, including any exhibits to these agreements, will be filed simultaneously with or prior to the final prospectus, including unqualified legal and tax opinions. Refer to Item 1100(f) of Regulation AB and Instruction 1 to Item 601 of Regulation S-K.

RESPONSE:

The references to Item 601(b)(1) of Regulation S-K have been deleted per your request.  Drafts of the exhibits that had not been filed with the initial filing of the Registration Statement were filed concurrently with the Amendment No. 1 to the Registration Statement, including legal and tax opinions.  We believe the filed exhibits are in substantially final form and confirm that all finalized agreements, including exhibits, will be filed simultaneously with or prior to the final prospectus and that unqualified legal and tax opinions will be filed prior to the takedown of the bonds.  We further confirm that conformed copies of all executed agreements and unqualified legal and tax opinions will be filed as exhibits to a Current Report on Form 8-K within four business days of the closing date as required under applicable Commission rules.

***

The Registrants acknowledge that: (i) they are responsible for the adequacy and accuracy of the disclosure in the filing; (ii) staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) the Registrants may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Arthur C. Sandel

Lulu Cheng.

October 24, 2013

Page 4

Please contact our counsel, Kevin J. Hochberg at Sidley Austin LLP, at 312-853-2085, or by e-mail at khochberg@sidley.com,  if you have any questions or further comments.

Very truly yours,
APPALACHIAN POWER COMPANY
By:	/s/ Julia A. Sloat
	Name: Julia A. Sloat
	Title:   Treasurer

APPALACHIAN CONSUMER RATE RELIEF FUNDING LLC
By:	/s/ Julia A. Sloat
	Name: Julia A. Sloat
	Title:   Treasurer