PSO files to increase fuel factor, provides notice for rate case

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TULSA, Okla., May 15, 2008 – Public Service Company of Oklahoma (PSO), a subsidiary of American Electric Power (NYSE: AEP), today made two separate filings at the Oklahoma Corporation Commission (OCC); the first addressing the company’s need to increase customer charges for fuel costs and purchased power, and the second giving notice of PSO’s plans to file a base rate case.

In the first filing, PSO applied to increase its fuel cost adjustment (FCA) for all customers, reflecting significant increases in the cost of fuels – primarily natural gas – used to generate electricity, as well as increases in the cost of power purchased from third parties. Natural gas prices have increased approximately 40 percent since PSO’s fuel costs were last set.

PSO is required to change its FCA annually to reflect the cost of fuel. Any change to the FCA will go into effect beginning with PSO’s first billing cycle in June.

If the proposed change in the FCA is approved, a residential customer who uses 1,000 kilowatt-hours (kWh) a month would expect to see an overall bill increase of approximately $17.50. Actual impact on the electric bill will vary with individual usage.

Under Oklahoma law, PSO recovers only the actual cost of fuel used to generate electricity for its customers, and makes no profit from the purchase of natural gas or other fuels used at PSO’s power plants, or from purchased power.

“Prices for natural gas are at levels approaching historic highs,” said Stuart Solomon, PSO president and chief operating officer. “Since the majority of our fuel costs are based on natural gas, these significantly higher natural gas prices are substantially increasing our costs for producing electricity.”

Solomon notes that prices for natural gas are the highest they’ve been since late- 2005 in the aftermath of Hurricane Katrina

“We understand the challenge that increased electric prices have on our customers who are already struggling with significantly higher prices for gasoline, groceries and other necessities. We’re doing everything we can to hold costs down, and we urge our customers to conserve their use of electricity to help manage these cost increases. That’s especially important as we go into the summer season where usage and bills are typically higher. To help customers, we have many energy-saving tips on our website at PSOklahoma.com.”

In addition to the fuel filing, PSO also gave notice to the OCC of plans to seek a general change in the company’s base, or non-fuel, rates. OCC rules require utilities to issue a Notice of Intent to file a rate case at least 45 days before the actual application is filed.

Although the amount of PSO’s rate request is still being determined, Solomon says the proposed increases are being driven by significant new investments PSO has made in generation, transmission, distribution and other facilities to serve customers, and substantially increased costs of those investments and operations.

“To provide reliable service for our customers, PSO must continue to make investments in our system,” said Solomon. “Recovery of these investments and the increased costs of our operations are necessary for PSO to continue to provide safe, reliable, and electrical service adequate to meet our customers’ needs and support the growth and development of the communities we serve.”

Solomon says he expects PSO to file a rate case application at the end of June or in early July.

PSO, a unit of AEP, is an electric utility company serving approximately 525,000 customers in eastern and southwestern Oklahoma. Based in Tulsa, PSO has 4,400 megawatts of generating capacity, and is the largest provider of wind energy in the state.

News releases and other information about PSO can be found on the World Wide Web at PSOklahoma.com.

American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP’s headquarters are in Columbus, Ohio.




This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the registrants believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of generating capacity and the performance of AEP’s generating plants; AEP’s ability to recover regulatory assets and stranded costs in connection with deregulation; AEP’s ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP’s ability to build or acquire generating capacity (including the company’s ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs through applicable rate cases or competitive rates; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance); resolution of litigation (including disputes arising from the bankruptcy of Enron Corp. and related matters); AEP’s ability to constrain operation and maintenance costs; the economic climate and growth in AEP’s service territory and changes in market demand and demographic patterns; inflationary and interest rate trends; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing AEP’s ability to refinance existing debt at attractive rates; AEP’s ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas, coal, nuclear fuel and other energy-related commodities; changes in utility regulation, including the potential for new legislation in Ohio and the allocation of costs within regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value of the investments held by AEP’s pension, other postretirement benefit plans and nuclear decommissioning trust; prices for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.

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