PUCO Approves Transfer of Ohio Power Generation Out of Ratebase to AEP Affiliate

The Public Utilities Commission of Ohio yesterday approved Ohio Power's application to transfer its generating assets outside of the ratebase and to new affiliate AEP Generation Resources Inc.

The transfer will occur at net book value.

PUCO conditioned approval of the transfer on, among other things, the following:

• PUCO Staff, or an independent auditor, shall audit the terms and conditions of the transfer of the generating assets to ensure compliance with the electric security plan (ESP) stipulation and shall also audit Ohio Power's compliance with Section 4928.17, Revised Code, and Chapter 4901:1-37, O.A.C, and any successors to the rules in that chapter, to ensure that no subsidiary or affiliate of Ohio Power (OP) that owns competitive generating assets has any competitive advantage due to its affiliation with Ohio Power.

• Following the transfer of the generating assets, OP shall generally not, without prior Commission approval, provide or loan funds to, provide any parental guarantee or other security for any financing for, and/or assume any liability or responsibility for any obligation of subsidiaries or affiliates that own generating assets

• Any subsidiary or affiliate of OP to which generating assets are transferred shall not use or rely upon the ratings from credit rating agencies for OP. If such subsidiary or affiliate currently does not maintain separate ratings from the credit rating agencies, then upon transfer of any of the generating assets, it shall either seek to establish such ratings or shall tie its credit ratings to AEP as soon as practicable but no later than six months following such transfer.

• Generation-related costs associated with implementing corporate separation shall not be recoverable from customers.