On May 15, 2009, Appalachian Power filed the fourth and final tranche of E&R surcharge filings with the SCC, requesting a $41.6MM increase for environmental and reliability costs incurred during the period January 1, 2008 through December 31, 2008, with a proposed one year recovery period commencing January 1, 2010. APCo has requested an ROE of 12.5%. The current E&R surcharge expires December 31, 2009.

On July 15, 2009 APCo filed a base rate case under the re-regulation law in Virginia. The law requires the Commission to initiate proceedings to review the rates, terms, and conditions of all investor-owed incumbent electric utilities during the first six months of 2009, after which electric utilities will be required to file base case proceedings on a biennial basis.

Due to a decision by the VSCC on July 14, 2009 with regard to rate case PUE-2009-00019 defining the required capital structure to be the actual end-of-test-year period, on August 14, 2009 APCo filed supplemental schedules to reflect an end-of-test-year period. This reduced the original requested revenue increase by approximately $15MM.

As provided by Section A4 of the law, APCo is filing a Transmission RAC (T-RAC) in conjunction with its base case filing. The T-RAC filing will provide recovery of costs charged to the Company by PJM Interconnection LLC, the Regional Transmission Entity of which APCo is a member. Therefore, transmission costs have been excluded from the base case filing, and rates determined by the base case will be for Distribution and Generation service only.