AEP recognizes the challenges and importance of the global climate change issue. We have been working diligently for years to improve the greenhouse gas emission performance of our operations through a host of initiatives ranging from voluntary GHG reduction commitments and new technology investments to pioneering R&D and energy efficiency. In 2005, AEP's commitment and actions to reduce its GHGs was recogized by the U.S. EPA with its Climate Protection Award.

AEP was the first and largest U.S. utility to join the Chicago Climate Exchange (CCX) and make a legally binding commitment to gradually reduce or offset its greenhouse gas emissions during 2003-2010 below the average of its 1998-2001 emission levels. The commitment started with a 1% reduction requirement in 2003 increasing to 6 percent by 2010. Through this commitment, AEP will reduce or offset approximately 46 million metric tons of GHG emissions by the end of the decade.

Today, AEP’s adjusted carbon emissions baseline is 155 million metric tons. The total cumulative CO2 equivalent reduction requirement to meet the CCX commitment is approximately 46 million metric tons by 2010. Through 2006 we have achieved approximately 31 million metric tons in reductions, so we are well on our way to reaching our target.

AEP made a similar GHG reduction commitment through the U.S. Environmental Protection Agency's (EPA) Climate Leaders program. Both programs succeed AEP's participation in the US Department of Energy (DOE) Climate Challenge program, through which the company reported more than 22 million tons of CO2 saved between 1991-2002 under the DOE's 1605(b) program.

AEP is achieving its GHG reductions through a broad portfolio of actions. These include:

• Improvements in the overall efficiency of its fossil fuel fired units (i.e. reducing the rate of CO2 emissions produced per kilowatt-hour generated)
• Increasing its use of nuclear and renewable generation such as wind and biomass co-firing
• Off-system GHG reduction projects, reforestation projects and the direct purchase of emission credits through CCX.

The company is one of the larger generators and distributors of wind energy in the United States, operating 310 megawatts (MW) of wind generation in Texas and purchasing an additional 373 MW of wind generation from facilities in Oklahoma and Texas. AEP also has invested nearly $25 million in terrestrial sequestration projects designed to conserve and reforest sensitive areas and offset more than 20 million metric tons of carbon dioxide (CO2) over the next 40 years. Finally, AEP has substantially reduced the leakage rate of SF6 (a very potent greenhouse gas with over 23,000 times the global warming potential of CO2) from its transformers, and was recognized by the U.S. EPA with an outstanding achievement award in 2004.