AEP to sell small portion of Texas distribution facilities to Pedernales Electric Cooperative

COLUMBUS, Ohio, Jan. 21, 2003 – American Electric Power (AEP) has reached an agreement with Pedernales Electric Cooperative Inc., a private, consumer-owned electric cooperative based in Johnson City, Texas, to sell a small portion of AEP’s electric distribution facilities in Central Texas to Pedernales for $9.5 million.

Facilities being sold are in areas that currently border or are surrounded by Pedernales facilities. By consolidating service areas through the sale, AEP can better focus its resources to ensure quality customer service.

According to AEP’s Texas President Julio Reyes, the sale makes sense because it more clearly delineates AEP’s service area in the region and should bring about greater operational efficiency. “Currently, the service area is divided in a very piecemeal fashion,” Reyes said. “This move is consistent with AEP’s business strategy of finding ways to improve efficiencies in a manner that benefits both customers and company shareholders,” said Reyes.

The facilities being sold serve some 3,800 AEP customers primarily in parts of Menard, Sutton, Kimble and Edwards counties. These customers will become PEC member-owners but continue to have the opportunity to participate in retail electric choice. Their existing “price to beat” rates will not change. Prior to electric deregulation last year, these customers were served by AEP West Texas Utilities and AEP Central Power and Light.

Assets involved in the sale include:

“- Distribution assets in the cities of Rocksprings, Junction and Menard totaling 207 miles of distribution line
“- Nine substations and associated equipment
“- A 14-mile radial transmission line originating at Rocksprings Station

While both AEP and Pedernales Electric have agreed to the terms of this sale, approvals are needed from the Public Utility Commission of Texas, the Securities and Exchange Commission and the Federal Energy Regulatory Commission before the transaction can be completed. It is anticipated that this process will take several months, and AEP will continue to maintain facilities until all approvals are met.

American Electric Power, an energy company with a balanced portfolio of energy assets, owns and operates more than 42,000 megawatts of generating capacity in the United States and select international markets and is the largest electricity generator in the U.S. AEP is a wholesale marketer of energy commodities, utilizing its energy expertise and risk management skills to make optimal use of its generation, natural gas pipeline systems, natural gas storage, coal mines and inland barge fleet. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s 11-state electricity transmission and distribution grid. The company is based in Columbus, Ohio.

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