About this report
We seek to maintain our leadership as one of the largest generation and transmission companies in the United States and as the largest electric distribution business throughout the regions we serve, and to be a leader in technical innovation of power systems, environmental technology, transmission systems and customer service.

Our vision for sustainability
American Electric Power enters its second century committed to operating responsibly, efficiently and profitably for customers, shareholders, employees and communities. We will safely provide reliable, reasonably priced electric power while working to protect people and the environment. We will engage stakeholders and continue our role in making people's lives better today and for generations to come.

Materiality
Like last year's report, this report covers seven material issues identified by man agement and our Board of Directors that (1) have a significant impact on the finances or operation of the company; (2) have significant impact on the environment or society now or in the future; or (3) substantially influence the assessments and decisions of stakeholders.

The seven material issues we have identified are:

• Leadership, Management & Strategy: Our sustainability requires a strong and visionary leadership team willing to take prudent risks to maintain AEP's role as an industry leader, meet the needs of our customers and deliver value to our shareholders.
• Environmental Performance: Although environmental laws and regulations are complex and change frequently, we must comply at all times, and we have made significant investments in order to do so. Our challenge is to continually achieve compliance and to reduce risks to the environment and the health of our communities.
• Work Force Issues: Protecting our employees' safety and health and ensuring that we have a skilled, diverse work force to build, operate and maintain new generation, transmission and distribution technologies are imperative if we are to remain an industry leader.
• Public Policy: We must actively engage policymakers, employees, community leaders and other stakeholders to ensure that public policy, laws and regulations allow us to continue to serve our customers, reward our shareholders and pursue our vision for sustainability.
• Climate Change: We are one of the largest greenhouse gas emitters in the Western Hemisphere. Our sustainability and financial stability, and the economic well-being of our service territory, are at risk if we are not able to prosper with the proposed passage of a U.S. climate policy. Our success will be based on our ability to work with technology providers to bring new technologies to commercial scale.
• Energy Security, Reliability & Growth: Our electric delivery system must be modern, reliable and keep pace with customer demand with a diverse fuel supply. This requires us to collaborate with regulators, legislators and other stakeholders not only to create and maintain such a system, but to ensure timely regulatory cost recovery.
• Stakeholder Engagement: We need to work closely with our numerous stakeholders, such as investors, customers, employees, regulators and policymakers. If we are to be sustainable, we must be transparent and listen to all points of view while measuring and holding ourselves accountable for our impacts.

Stakeholder Review Of This Report
American Electric Power conducted eight stakeholder meetings in the process of preparing this report, enabling us to engage many more stakeholders than in the past. Our operating companies and power plants, as well as senior management, participated in this process.

We worked with SustainAbility, a highly regarded sustainability firm, to facilitate most of our stakeholder meetings. We spoke with state and federal regulators, power plant neighbors, environmental and conservation groups, customers, employees, academia and community leaders. We worked again with Ceres, a network of investors, environmentalists and other public interest groups that works with companies and investors to address sustainability challenges. Ceres brought together 17 organizations for this process. A group of investors also met with AEP to talk specifically about sustainability issues. Our discussions are reflected throughout this report.

Our primary stakeholders are:

• Shareholders and prospective investors
• Customers – large and small
• AEP employees and retirees
• Labor unions
• Local communities
• Federal and state legislators and regulators
• Prospective employees
• Suppliers and others doing business with the company
• Non-governmental organizations (NGOs)
• Professionals from industry, government, labor and academia

Reporting period & development
This report is based on performance and information for calendar year 2007, but also provides available data for 2005 and 2006 to establish trends against which current performance can be compared. Financial performance is covered in AEP's 2007 Annual Report to Shareholders. This report contains forward-looking information about our goals and progress.

AEP's Steering Committee for Sustainable Development, co-chaired by the chief financial officer and the executive vice president of environment, safety & health and facilities, guides the company's sustainable development and participated in creating this report. This executive-level steering committee represents every business function at AEP and met periodically throughout the year. The Committee on Directors and Corporate Governance of AEP's Board of Directors reviewed the report and its content. The full Board of Directors also reviewed the report and voted to approve it.

AEP joined SustainAbility's Engaging Stakeholders Program, which conducted a benchmark of last year's report. The benchmark study offered several suggestions for improvement, such as to make a clearer business case for climate change action and to show how sustainability is being integrated within the company. The study also found the report to be comprehensive, candid and transparent.

Last year's report was reviewed by Ethical Corporation magazine, which said: [our] "approach to corporate responsibility reporting is proportionate in size yet without verbosity or hype." The review offered thoughtful suggestions for improvement that we considered in developing this report.

Changes in reporting
This report includes metrics for each material issue within each section of the report relating to that issue, eliminating the need for an overview section (formerly entitled "Challenges, Goals, Progress"). Many of our stakeholders asked for a shorter summary report and we will publish one starting this year.

AEP is participating in the Global Reporting Initiative (GRI) Electric Utility Sector Supplement Pilot designed to identify relevant performance indicators for the electric utility industry globally. This report incorporates more of the Supplement's indicators than did last year's report.

Completeness, reliability & accuracy of reporting
Through AEP's Enterprise Risk and Insurance Department and oversight by the Risk Executive Committee, AEP established a formal information collection and reporting process for GRI indicators that allows us to track our progress against our commitments. Reports to the Risk Executive Committee are made twice a year and are reported to the Board of Directors. Each business unit collects and verifies data for which it is responsible. Some of the data presented are required to be filed with other entities (e.g., Chicago Climate Exchange, U.S. EPA) and are verified accordingly. We continue to develop a more complete information management system as part of our sustainable development initiative.

Reporting principles & guidance
We continue to follow GRI's G3 Reporting Principles in an effort to provide a balanced and reasonable representation of AEP's sustainability performance. These principles are materiality, stakeholder inclusiveness, sustainability context, completeness, comparability, accuracy, timeliness, clarity, reliability and boundary setting.

Contact for questions about this report
For additional information about this report, the GRI information on AEP's web site or the company's sustainability initiative, please contact Sandy Nessing at smnessing@aep.com.