Star Symposium 2013 The Changing Reality of Energy Development

1. Star Symposium 2013 The Changing Reality of Energy Development Jeffery LaFleur, Vice President Generation Assets APCO/KYPCO October 22, 2013

2. Environmental Rules Development CSAPR (SO2 & NOx) 2012 & 2014 Compliance Phases Rule Vacated pending Supreme Court Appeal MATS (mercury & air toxics) Potential for One Year Compliance Extension Coal Combustion Residuals Proposedand/or Finalized Rules Effluent Limit Guidelines (water discharge limits) Compliance Timeline Contingent on Permit Renewal Cycle 316(b) Rule (water intake structures) Compliance Timeline Will Vary New Source CO2 NSPS Compliance Required from Rule Proposal Date Re-Proposal of Rule Expected AnticipatedRules Existing Source CO2 NSPS Compliance Timeline Contingent on State Implementation Plans 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Time From Rule Finalization to Compliance

3. 2.0 0.8 1.6 0.6 1.2 SO2 (millions of U.S. tons) NOx (millions of U.S. tons) 0.4 SO2 Emissions 0.8 NOx Emissions 0.2 0.4 0.0 0.0 1980 1985 1990 1995 2000 2005 2010 Historic AEP Emission Reductions Since 1980, AEP’s TOTAL generating fleet has reduced: SO2 emissions by more than 77 percent NOx emissions by about 80 percent

4. Global CO2 Emissions

5. Global CO2 Emissions • 2012 global CO2 emissions totaled 32.2 billion metric tons. • Of that, China accounted for 28 percent. • The U.S. accounted for 17 percent. • Global emissions have increased 15 percent since 2005. • 80 percent of the increase is because of growth in China. • By 2040, emissions from developing countries will rise by more than 70 percent.

6. U.S. Greenhouse Emissions

7. U.S. Greenhouse Emissions • In 2011, EGU CO2 emissions were 10 percent below 2005 levels. • Preliminary 2012 EIA data indicates EGU emissions were 15 percent below 2005 levels.

8. Proposed CO2 Regs • 1,100 lbs. per MWh for new coal plants. • CCS would be required to meet goal. • 1,000 lbs. per MWh for new natural gas plants. • New Turk plant is 1,800 lbs. per MWh.

9. Cost to Build Installation Cost Per kW

10. Coal vs. Natural Gas MMBTU

11. IGCC Status • Duke Edwardsport IGCC • Began commercial operation June 2013. • 618 MW facility without CO2 capture. • Estimated Cost: $3.4 billion or $5,500/kW. • Southern Company Kemper IGCC • Under construction (expected COD mid-2014). • 582 MW facility with 65 percent CO2 capture (3.5 million tonnes per year). • Estimated Cost: $4.7 billion to date or $8,000/kW (original estimate about $2.4 billion). • By comparison, the Turk plant is a 620 MW ultra-supercritical and was completed at a cost of about $1.8 billion, or $2,900/kW.

12. A Customer’s Bill 25% Distribution 7% Transmission

13. Recent Rate Activity

14. The Appalachian Power ExperienceThe Effect on Customers • Low per capita income • West Virginia - $23,697. • Virginia - $21,636 (our service area). • Unemployment remains high • West Virginia – 6.3 percent. • Virginia – 5.8 percent (our service area). • 54 percent of customers have electric heat. • 25 percent of customers are behind on their bills. • 400 percent increase in uncollectibles.

15. Customer Data