Bette Jo Rozsa – Managing Director-Investor Relations Nicholas K. Akins – Chairman, President and Chief Executive Officer Brian X. Tierney – Executive Vice President and Chief Financial Officer.

Dan L. Eggers – Credit Suisse Securities LLC Brian Chin – Bank of America Merrill Lynch International Ltd. Stephen C. Byrd – Morgan Stanley & Co. LLC Julien Dumoulin-Smith – UBS Securities LLC Greg Gordon – International Strategy & Investment Group LLC Paul Patterson – Glenrock Associates LLC Jonathan P. Arnold – Deutsche Bank Securities, Inc. Paul T.

Ridzon – KeyBanc Capital Markets, Inc. Steve I. Fleishman – Wolfe Research LLC.

Ladies and gentlemen, thank you for standing by, and welcome to the American Electric Power First Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session; instructions will be given at that time.

(Operator Instructions) As a reminder, today’s call is being recorded. Your hosting speaker Bette Jo Rozsa. Please go ahead..

Thank you, Kevin. Good morning, everyone, and welcome to the first quarter 2014 earnings webcast of American Electric Power. Our earnings release, presentation slides and related financial information are available on our website at aep.com. Today, we will be making forward-looking statements during the call.

There are many factors that may cause future results to differ materially from these statements. Please refer to our SEC filings for a discussion of these factors. Joining me this morning for opening remarks are Nick Akins, our Chairman, President and Chief Executive Officer; and Brian Tierney, our Chief Financial Officer.

We will take your questions following their remarks. I will now turn the call over to Nick..

Nicholas K. Akins:.

And second I would maintain that the cause of the initiatives previously implemented by the company, regarding improved capital allocation to transmission in the operating companies focused on process improvement activity, such as lean in our power plants and wires business and the development of our unregulated generation business.

We would not have been successful in capturing the value of the off-system sales benefits from the extreme weather and market conditions as a result of the polar vortex.

I can give you several instances that it was impaired that the cultural initiatives that have – and still the teamwork and ingenuity paid off to ensure our generation was available to the benefit of our shareholders and our customer.

Before Brian and I get into the details of the quarter, let me go over the headlines for the quarter and for the reminder of the year. AEP earnings for the first quarter both GAAP and operating came in at a $1.15 per share compared with $0.75 GAAP and $0.80 per share operating for first quarter 2013.

Because of the strong results, and after review of cash flow and earnings metrics for the reminder of the year, we are increasing our 2014 guidance for 320 to 340 per share to 335 to 355 per share. We are reaffirming guidance for 2015 and 2016 in the 4% to 6% earnings growth rate based upon the original guidance given in 2013.

We will continue to monitor the fundamentals in particular, load and energy markets along with the progress of our previously announced initiatives to announce any further guidance detailed during the EEI financial conference in the fall.

Additionally, as we mentioned to you in our last earnings call, if we were to get ahead from a cash and earnings perspective we would reinvest from cash flows and retained earnings and more transmission and move projects from 2015 and 2016 into 2014 to elevate pressures that exists in those later years.

Because of the excellent operations of our plants and continued focus for our employees regarding continuous improvement we are able to do just that.

Consequently, AEP will invest $200 million more in the transmission projects that was identified in the green area of my second most favored graph, a transmission graph that you’ve all seen previously and we will also move $60 million to $70 million of 2015, 2016 spending end of this year.

There is still a lot more work to be done because we are not counting on increased load or capacity market revenues that’s not the way we are running our business.

I’ve said before our business is now an optimization business and one in which we continually adjust the changing conditions to ensure discipline and execution, that drives consistency for our share holders and value for our customers. Even though we now have the wins that are back somewhat because of first quarter results, our focus will not change.

We will continue our capital allocation approach defined earlier, thoughtful prioritization and control of O&M expenses, continued development of our unregulated business and the continuous improvement and cultural initiatives.

The implementation of lean activities and other continuous improvement initiatives continue to produce expected results and we are pleased with the progress our employees continue to make in this regard.

This effort will not slowdown because this now engrained in our decision making and how we do business and this progress will not be jeopardized because we all know that one quarter does not make a year and it certainly doesn’t make three years.

On the regulatory front we have filed the PSO rate requesting $45 million of additional revenue focused on infrastructure and AMR meter investments as well as SPP related transmission charges. Interveners have filed testimony asking for varying levels of reductions and hearings are set for June and we expect an order by the end of the year.

We have filed in West Virginia and FERC to allow the transfer of half of Mitchell Plant to Wheeling power to provide needed capacity and energy to serve Wheeling customer load. Hearings are set in August in West Virginia and the FERC case commoning period ends in May. So everything is on track with the remaining Mitchell transfer.

We have also filed in Virginia for the biannual rate review, while we are not asking for a rate increase because our ROEs within the statutory bandwidth, we are seeking some rate adjustments within customer classes and a requested ROE of 10.52%. Hearings for this case have been set for September.

I would also like to point out the progress that has been made with the capacity construct within PJM. The FERC has agreed with PJM on many of the capacity auction adjustments that AEP support as well to enable the recognition of the value of steel in the ground generating assets within PJMs footprint.

These changes were not completely adequate, our moves in the right directions and not only enable a more balanced portfolio of resources, but also maintain the integrity and reliability of the grid particularly at times of extreme stress being such as with the polar vortex.

Just as in this side I had previously reported 89% of coal units slated for retirement in mid 2015 ran during the polar vortex that is also true for the quarter. But another interesting titbit is that these units ran at substantial 46% capacity factor during the quarter.

So the need for this coal capacity was not just an abrasion, but an integral part of the maintaining comfort for our customers during the extreme cold weather.

The capacity market changes are important because this capacity construct also defines the revenues and price signals for investment as well as the bandwidth around the volatility of energy prices. Wind energy prices move as high as $1,800 megawatt an hour, this should be an indication that capacity markets are not operating properly.

This is bad for investment resources, ultimately bad for the reliability of the grid and certainly bad for the customers in the end.

We are also pleased that Congress in now getting involved with hearings in the house and senate to shed some light on the confluence of pending an existing EPA rules, electricity and natural gas coordination, physical and cyber security issues related to the grid, and capacity market issues.

All of which impact the resiliency of our country’s electric supply to fuel the needs of our customers and the economy. Now, after my favorite graph, which I typically call the equalizer graph on page – this is page four of the presentation. We will go through and set through some of the stage that they were looking at here.

As far as overall looks like were 9.9% and that’s close to the 10%, we expect that to improve. We’ve got from an Ohio power perspective, I know it's showing 13.1%, but that includes some non-recurring items particularly in seed adjustments and transmission through related cost.

That will bring that down to that – below that 12% allowed to return threshold with the seed test, so that’s going to come down. APCo continues to improve, we – and certainly two jurisdictions there from the Virginia standpoint were in good shape, I talked about that earlier.

For West Virginia we will plan to file a rate case this year because of the returns there in that jurisdiction. We have current ROE range of 10% to 10.9% in West Virginia, but we’re certainly underperforming there from an ROE perspective. So we will file a rate case there..

PSO is in the midst of a rate case as I mentioned earlier, so we expect that outcome by the end of the year. So that will be an opportunity for us as well.

SWEPCo continues to have the issue of the part of the capacity of Turk that was slated for Arkansas and they continue to work on ways which to deal with that situation and other areas like transmission cost and other measures to improve the ROE there. So we expect that to come up.

AEP Texas includes a securitization, so it always showing high that the 13.7%, but also has considerable customer growth, so it just staying there pretty steady.

And then AEP Transco , Holdco we continue to invest heavily in that area, so you will see the return there show up lower than what actually is the authorized and actual returns there in that part of the business. So and we intentionally will drive more investment in that area is evidenced by the $200 million I talked about earlier.

So but that’s a good story and we will continue to do that. So it really shows that the benefits of been able to properly allocate capital and work on the operating company side of things to ensure that we are improving from an ROE perspective.

So we feel pretty good about where we said from a regulated results perspective, they are all strong and that provides the foundation for our business. So after an excellent quarter as we look at the reminder of 2014 and into 2015 and 2016 we’ll be looking for following sensitivity is in our modeling in earnings to expectation.

First, the continued weather adjusted effects on load forecast in each customer category which Brian will talk about little bit later, energy prices with the peer would be increasing but not clear given the lack of long-term liquidity in the market shale gas related growth in the service territory which Brian will cover in detail, continued progress on process improvement initiatives which continue to move forward in the company in a very positive way.

Additional transmission capital allocation opportunities that may exist, rate related activities as we mentioned earlier and certainly the unregulated business from the cost side and the revenue side.

I'm reminded of an old adage that says that is better to be lucky than good, we at AEP believe there is much more desirable to be good and lucky I know you Pittsburgh Penguin fans checks blue being one of the them may not like this. But I recently attended the most recent Columbus Blue Jackets Pittsburgh Penguin playoff hockey game.

Columbus initially had trouble controlling the puck and quickly fell behind in the first period by 3 score and look like it was going to be a long night. But was focused on the fundamentals with discipline and execution scored a goal in each period we won the game in over time.

In the old adage good speaks of the fundamentals and lucky speaks of a free option that cannot occur if the fundamentals were not present AEP is focusing on the fundamentals and the rest will take care of itself that’s the story of the first quarter of 2014. Over to you Brian..

Thank you, Nick. And good morning everyone, on Slide 5 you’ll see our comparison of 2014 results to 2013 bisegment for the quarter. As we announced last fall at the EEI Conference we have adjusted our earnings presentation to align with our big business segments following our corporate structuring.

The segment reporting detail for the first quarter of 2014 and pro forma for 2013 can be found in the supplemental information package posted on our website and in the 10-Q that we plan to file later today, the recently completed corporate separation provided the occasion for us to define segments with make our reporting simpler and more transparent.

For the company overall operating earnings for the first quarter were $560 million or $1.15 per share up $0.35 per share compared to the $387 million or $0.80 per share recorded last year.

Generally the year-over-year improvement was realized across all segments and was driven by new rates that reflected our increased customer focus investment strong generation performance that captured high prices for wholesale power and high weather related retail sales.

With that as an overview let me step you through the major earnings drivers bisegment on Slide 6.

Earnings for the vertically integrated segment were $0.57 per share up $0.16 per share compared to the first quarter of 2013 significant drivers include customer focus investment and our utilities that resulted in rate changes across many of our jurisdictions adding $0.08 per share for the quarter.

In addition the effect of extreme weather winter temperatures improved earnings by $0.07 per share heating degree days were 25% higher in the East and 30% higher in the West when compared to last year.

Higher wholesale power prices and strong performance by our generation group bolstered off-system sales which benefited shareholders and customers the higher off-system sales improved earnings for this segment by a $0.11 per share while customers across several of our jurisdictions were realized $74 million through margin sharing mechanisms the year-over-year increase in retail and wholesale margins were partially offset by higher O&M, depreciation and other items.

The increase in O&M adversely affected the quarterly comparison by $0.03 per share due to a favorable insurance settlement recorded in 2013 and higher employee related costs, somewhat offset by lower storm expenses. The higher depreciation expense resulted from increased investment in plant reducing earnings by $0.02 per share.

Finally, other items in total were off by $0.05 per share, primarily due to higher cost from PJM that we’re not covered through regulatory tracking mechanisms. The transmission and distribution utility segment results were also higher than last year by $0.02 per share driven by positive rate changes and extreme weather in Texas.

The Transmission Holdco segment continues to grow adding $0.02 per share for the quarter, reflecting our continued significant investment in this area. From March of last year to March of this year, this segments net plant grew by nearly $1 billion an increase of 99%.

The Generation and Marketing segment had a strong quarter adding $0.15 per share to our quarterly comparison. This segment benefited from the strong performance of its generation fleet and commercial organization as well as higher wholesale power prices. I will discuss this in more detail in the next slide.

AEP river operations continue to rebound from the recent drought conditions adding $0.01 per share. Finally, corporate and other results were half a penny per share due to lower interest income at the parent.

In summary, our earnings performance was strong, largely due to the affects of positive rate adjustments strong generation and commercial performance during periods of high prices and weather related improvements in retail sales. Turning to Slide 7, let’s take look at AEP generation resources.

This competitive generation business was a driver behind the positive quarterly results for the Generation and Marketing segment.

The extreme temperatures and energy consumption during the quarter, significantly impacted energy pricing, for the quarter, AEP GEN HUB, Day-Ahead prices for around the clock power settled to 100% higher than they did year-ago. Henry Hub natural gas prices were 45% higher.

In the phase of these extremes, our competitive generation team and the commercial organization we have built around it performed exceptionally well. Volumes for this fleet were up 22% and capacity factors were up 10%. The competitive generation fleet has about 2,500 megawatts of capacity that will retire by next summer.

Approximately 1,800 megawatts of that capacity operated during the first quarter, those units experienced a capacity factor up 52%. On the right of the slide, you will see the percentage of sales by channel.

The data shows that about 69% of generation resources sales had a hedge in the first quarter and about 31% were exposed to short-term or spot pricing. This allowed the commercial and generation teams to capture higher margins, as their output was needed to meet demand during high price periods.

We view our competitive retail business has a positive margin hedge for our competitive generation, this business performed well during the first quarter. Now, turn to Slide 8, we will see our usual detail on normalized load.

We are repeating the format we introduced last quarter that shows the industrial and total retail sales trends adjusted to reflect the loss of the Ormets load. On the bottom right quadrant, you can see that for the quarter weather normalized total load was up 1.5% compared to last year. Excluding Ormet, our normalized total retail sales were up 3.2%.

On the bottom left of the slide, you can see that while a reported industrial sales growth was down 2.9% for the quarter, we continue to see steady improvement despite the loss of Ormet.

Excluding Ormet from the comparison, our industrial sales were 2.2% higher for the quarter, in fact eight of our top ten industrial sectors showed positive growth compared to last year.

The two sectors with declining industrial sales for the quarter were Primary Metals which was influenced by the shutdown of Ormet and mining expect for oil and gas with the shale gas revolution and increasing environmental regulations adversely impacted demand for coal. Residential sales shown in the upper left quadrant were up 4.4% for the quarter.

We did see some improvement in our residential customer accounts, but most of the increase in residential sales was due to higher average usage. Finally, in the upper right quadrant, you can see the commercial sales increased 2.9% for the quarter.

We saw customer growth in the commercial class of eight tenth of a percent and higher growth in average usage. Commercial sales growth was the strongest in the western footprint, where we also saw the strongest growth in employment. While we are happy to see increased volumes in our residential and commercial classes.

We have concerns that our traditional weather normalization models do not fully capture the change in consumers’ behavior during extreme weather events as was the case this winter. Now, I’d like to take a few minutes to describe the most recent economic activity within AEP service territory.

On Slide nine, you will see that we are introducing a few new charts to give you some perspective on how the economy within AEP service territory compares to what you may have read about within U.S. First looking at GDP for the quarter, you can see that estimated growth for AEP continues to outpace that of the U.S. at 3% and 2.7% respectively.

The chart on the upper right shows that GDP in our western service area continues to outperform the U.S. and our eastern service territory. The bottom left chart displays employment growth within AEPs footprint compared to the U.S. For the quarter employment growth for AEP service area was up 1.4% compared to 1.7% for the U.S.

Growth in employment trends tend to lead growth in retail sales and that has proven true for AEP this quarter. Finally, turning to the chart on the bottom right it is clear that the job market in our western footprint is consistently stronger than the U.S. than our eastern footprint. Even though U.S.

employment growth moderated somewhat in Q1 compared to Q4 of last year, we saw continued improvement in employment growth in both the eastern and western parts of our service territory over the past two quarters. The last thing I want to discuss about load growth for the quarter is on Slide 10.

As I had mentioned on previous calls, we are seeing quite a bit of growth related to shale gas activity. AEP is fortunate to have a number of major shale regions located within our service territory. The top chart illustrates the distinction that we are seeing in industrial sales growth between major shale regions as compared to non-shale regions.

While we are seeing improving trends in both areas, the contrast in significant. For our shale counties excluding Ormet, industrial sales were up almost 30% in the first quarter, while industrial sales in non-shale counties were down four tenth of a percent.

This is significant for AEP because 17% of our industrial sales are located in shale rich geographies. The bottom chart shows the industrial growth by major shale region. As you can see the most significant growth over the past two quarters has occurred in the Utica area in Ohio and the Permian Basin in Texas.

We have already seen significant industrial sales growth around the Eagle Ford area in Texas, and the Marcellus Shale in West Virginia dating back to 2012. We are projecting additional new loads to be added in all five of the listed shale regions over the next several years. Turning to Slide 11, let’s review the financial health of the company.

Our total debt to total capitalization is now 54.2%. Our credit metrics, FFO interest coverage, and FFO to debt are solidly in the BBB and Baa1 range at 4.9 times and 19.9% respectively.

Our qualified pension funding stands at 99% and our other post-employment benefit obligations are more than fully funded at a 122% our liquidity stands at about $3 million and it’s supported by two revolving credit facilities with tenders that extend into the summers of 2016 and 2017.

On January 31 Moody’s upgraded AEP Inc’s senior unsecured rating and the ratings of six of our operating companies. In its release announcing the upgrades Moody’s cited it’s more favorable view of the credit supportiveness of the U.S. regulatory environment.

Moody’s also noted AEP’s diversity of utility subsidiaries cash flows the company successfully executed corporate restructuring and its growing rate base.

We have worked hard over the last several years to achieve the credit metrics and balance sheet demonstrated and balance sheet strength demonstrated here and is because of the strength that we’re confident in funding the incremental transmission investment for this year that Nick mentioned earlier.

Finally, let me summarize the quarter and where we go from here the first quarter was very strong from an earnings standpoint operationally and by what we’re able to accomplish for our customers in spite of extremely cold temperatures our generation team was able to keep our units running and our transmission and distribution employees were able to deliver energy to our customers to keep people warm and to keep businesses running.

We insulated our retail customers from much higher wholesale electricity prices due to the transition plan in Ohio we were able to deliver our Ohio standard service offer to customers savings of a $132 million relatively to PJM Day-ahead market pricing for the quarter.

In addition to our Ohio customers regulated customers of our integrated utility businesses benefited from the off-system sales margins to the tune of $74 million, an increase of $57 million over the last year’s first quarter.

At the EEI Conference in November and on the last earnings call we talked about how we’d fill the revenue GAAP’s in 2015 and 2016 as our transition in Ohio comes to an end.

At that time we identified three efforts, one continuos improvement including lean initiatives, two cost shifting out of 2015 and 2016 and three, funding our transmission investments above base allocations.

In regards to the continuos improvement efforts employees have now completed lean initiatives at six of our generating plants with plants to complete an additional seven during 2014.

On the distribution side of our business we have a total of 32 work districts, two of these districts have completed lean initiatives, five were on process now with an additional six more to be completed this year.

In places were employees have engaged in lean practices we have identified cost savings to more efficient work practices and better utilization of the contractor workforce our transmission supply chain, procurement and corporate center organizations are engaged in similar programs demonstrating the continuos improvement and employee engagement are part of our culture.

In regards to cost shifting we have identified between $60 million and $70 million in work that we’ll accelerate into 2014 from 2015 and 2016 the financial results of the first quarter give us confidence at accelerating this work will benefit our customers this year and our shareholders in future years.

In our Transmission Holdco segment we had identified a base level of capital investment that was part of our budget forecast as well as a high case for incremental capital investment, the strong first quarter results give us confidence that we can fund an incremental $140 million in Transmission Holdco business and an additional $60 million in operating company transmission spend, we intend to fund this investment from operating cash flows and retain earnings and do not plan to issue incremental debt to do so.

This accelerated investment means that our transmission customers, will realize enhanced reliability sooner and our shareholders will realize higher returns. Finally, in addition to the activities mentioned about as Nick mentioned earlier, we are able to raise our earnings guidance for 2014 to a range of $3.35 per share to $3.55 per share.

At this time, we are reaffirming our guidance for 2015 and 2016. As is our custom, we will likely present detailed guidance for future years, at the fall EEI Conference. With that said, the strong first quarter of this year has enabled us to execute against our plans with confidence and to deliver on our commitments to our customers and shareholders.

I will now turn the call over to the operator, for your questions..

Thank you (Operator Instructions). First question from the line of Dan Eggers, Credit Suisse. Please go ahead..

Hi, good morning guys..

Good morning, Dan..

A couple of your neighbors in Ohio have made announcements that they’re looking next to their generation assets to a sales process.

Can you just give an update on what your thought process is for your fleet and what bearing the first quarter may or may not have had on making that decision?.

Yes, I think our process is unchanged, we’ve said earlier that, we are going to be focusing on producing value out of that piece of the business to position that business the best we can. To try to take some of the volatility out of business and certainly to do what we can from a cost stand point within that business.

And Chuck and in his team are definitely working on all of those activity. So I’d – the first quarter doesn’t change our opinion of our look at that business one way or another.

And I think that, as we go through the process we still have yet to see those per cursors that we talked about earlier, what happens to the capacity markets? Certainly what happens to the energy markets? What we can do with the cost structure of that business? And then how do we take the volatility of the business with not only the capacity markets, but the hedging activities that are occurring in the background relative to regulated generation.

So we’re still, that we’re still on the same time schedule having the same discussions with our board as we go through this process and we will continue that and make decisions later on in this year and the next year..

And I guess Nick one of the ideas if you find people who would sign longer-term contracts and be interested in staying in those assets.

With the first quarter volatility kind of timing market conditions, Are you having a change in tone in those conversations at this juncture?.

Yes, sort of interesting there is discussion about long-term purchase power arrangements that could occur relative to this generation I think the polar vortex the sense that there is – certainly there is no when you look at the long-term markets is illiquid there is not much out there going on and sort of tends to keep those process low in the future, but we know that is the closure we get to this generation retiring, that’s likely to change.

And I firmly believe there is renewed interest and what that generation looks like and how it can preserve from a long-term PPA perspective customers expectations around taking out that volatility and having some consistency.

So, yes we are getting some interest in that, yet to determine what that means but it we see sustained energy process that are a bit higher than anticipated in the capacity markets we were I’m sure the degree of interest will intensify as well.

So again our position is not changed relative to that, we can make it look cause our regulated then it’s a business that’s worth taking a look at..

Great, thanks. And just one last question, can you give us an update on where coal inventories are at this point in time and under the strategy around the country you have full availability for this one..

Yes, so we’re fine on coal deliveries, we’re at about 25 days on average on the system, we were 35 days going into the winner. So and keep in mind our suppliers are taken to the Mississippi and then – and then we have the Barge business to bring that coal to the plant.

So we are in good shape there and most of our delivers are over the Union Pacific Railroad and their performance has been recently well rolled down as well. I think as we move into summer, that’s when inventory levels start to improve, but anticipation of warmer weather over the summer, but we are in great shape..

Dan, we’ve heard of some people doing things like burning more gas to build up their coal inventories, we went into the winter fairly healthy and we haven’t had to change or dispatch our commitment at all in response to our coal levels..

Great. Thank you guys..

Sure..

Our next question is from the line of Brian Chin, Bank of America Merrill Lynch. Please go ahead..

Good morning, Brian..

Hi, good morning.

On the $60 million to $70 million in cost shifting, is it fair to think about that, is that a cumulative amount of cost shifting from 2015 and 2016 into 2014?.

What do you mean by cumulative?.

So, $60 million to $70 million in bringing forecast from 2015 and 2016 together, so in other words the expense levels in 2015 and 2016 prior to this announcement we should bought about is being $60 million to $70 million higher over the two years?.

Yes, it was forecasted to be spent for us in 2015 and 2016 and we’ve now taken those costs and activities out of 2015 and 2016 and are now reflecting in 2014..

And is that more of our front-end loaded as in more 2015 level of cost shifting or it’s more backend loaded as in more 2016 and then also could you give a little bit more of a business segment breakdown of that cost shifting?.

Yes, so it’s evenly spread across both years and it’s across all of our business segments, so this significant component of it coming from generation and moving outages out of those years into 2014..

Excellent. Thank you very much..

Thank you, Brian..

Our next question is from the line of Stephen Byrd, Morgan Stanley. Please go ahead..

Good morning..

Hi, Stephen.

How you doing?.

Great, thank you.

I wanted to talk more about your high case growth plans and transmission, you are showing real good progress this year, could you maybe talk at a high level as to – as you think about what needs to happened to be able to achieve that growth over the next couple of years in terms of whether that be approvals or planning efforts resource, whatever it might be just how we should sort of think about the risk of execution, or what approvals, what milestones you need to hit to be able to achieve that growth..

Yes, so we’ve been very clear for probably two or three years now that and I don’t know if you can recall the slide that had the base transmission and then had a green piece above that was incremental transmission that were real projects that were ready to be done, but we had to fund the capital to do it and what you see in this quarter is refocus of $200 million on that incremental green portion.

So as far as risk there is very little risk associated with those projects that are already identified, rate to be done, and you can expect those returns relative to those investments to occur.

So and as we look forward to the business I think we’ve been a proponent order 1000 and very focused on our joint ventures as well in our Transource entity, ETT and others and they move forward pretty well as well. So we continue to look for ways to continue to improve the transmission earnings profile and that’s a very distinct focus for us.

But the only things we’re reporting are real projects and we sort of learned our lesson awhile back about the supposition of what may happen we’ve gotten over that..

Steven the beauty of the chart that shows the incremental transmission spend that we can make going from the base case to the high case, is that we can fund that serially as capital becomes available. So whether it’s cash flows from operations, the bonus depreciation should get approved later this year.

We can serially fund that incremental growth capital on a year-by-year basis and as we talked about earlier, cash flows from operations enabled us to do it this year and we’ll just see how this – the end of this year and future year’s play out.

But since we have that growth opportunity existing within our own business, that’s an awful smart place for us to put incremental capital to work..

That’s great color, thank you. And just follow up on transmission, when you look at the competitive side of the business I’m just curious if you could talk at a high level attitude the competitive dynamics there, how competitive is that, how do you access your capabilities versus others.

How does that business playing out?.

I think we’re absolutely well positioned from a competitive standpoint. Obviously that’s why we’ve proponent of it.

But when we look at the projects that we do, the project flow, the project management structure, the engineering expertise that we have and the fact that we’ve got joint ventures around portions of the country and just with the scope of our transmission system drives the benefits for our investors relative to transmission.

We’re well positioned in terms of the breadth and if you are plowing $1.7 billion a year in transmission projects which that’s what we’re doing over the next three year period each year. That’s a pretty substantial critical mass around the growth of transmission.

So we’re not gold plating anything, we’re not trying to fund projects just to do projects, these are all immediate projects in terms of refurbishment and reoptimization of the grid with retirements and generation and so forth. So a very clear path for the business case relative to transmission as far as AEP is concerned..

That’s great color. Thank you very much..

Yes..

Your next question is from the line of Julien Dumoulin-Smith, UBS. Please go ahead..

Hi, good morning..

Good morning, Julien. .

So quick follow-up there on the generation business.

I’d be curious, is there any tolerability in Ohio as you are thinking about it, perhaps to see some of those longer term contract against the remainder of the generation business in particular?.

Yes, sort of an interesting thing, Ohio certainly needs to take notice in my opinion of what happened during the polar vortex, and I would have to say that there is discussions going on relative to how Ohio would do with that in the future.

Because it’s a clear indication that we really do need to think about the portfolio for Ohio customers that has a long-term component and a short-term component to it and customers are continued to allow the switch. But keep in mind I mean we separated our generation and it is separated.

So if we would do purchase power arrangements and that kind of thing. It would have to be something to provide value to consumers on the long-term, but also value to the company as far as hedging that generation for the long-term. And I think there is a distinct opportunity for those types of discussions.

It’s positive for us, it’s a positive for Ohio and it’s certainly positive for consumers in the long run particularly industrial customers, who are looking at the polar vortex and where energy markets win, there is high degree of concern about that. So, more work to be done there..

Interesting, is it about savings some of the more marginal goal assets, kind of in a more normalized environment, or is this about just again security and supply? I suppose you could kind of cut it both ways?.

I think it’s cut both ways, when you look at jobs, taxes certainly generation within Ohio and the fact that Ohio really depended upon the capacity markets to provide long-term pricing as we knew that’s not going to happen or at least not has happened thus far.

So there is a degree of interest area that needs to occur relative to taking matters in their own hands from an Ohio perspective..

Interesting, and I will be curious following upon all the Utica discussion, are you seeing any nascent development on the gas project front I mean I will be curious just in terms of new gas plant entry and also broadly where gas basis is headed in your neck of the woods up there?.

Well, I think it’s a challenge in Ohio, because certainly from a Utica standpoint, there is a great opportunity to use a resource that’s indigenous within Ohio.

But at the same time you got to have the fundamentals in the market and an improving economy to drive that investment and right now you have at least some glamour of hope on the economic recovery, but at the same time the market signals just aren’t there. So we need to get that solidified before you see natural gas-type development..

Great, thank you..

Thank you. Next question is from the line of Greg Gordon, ISI Group. Please go ahead..

Good morning, Greg..

Thanks, good morning guys. So, I understand you’re taking the opportunity to accelerate some expenses into the year given to the phenomenal opportunities in the first quarter and the earnings result.

But then also looking at the earnings guidance range, what are you assuming as a baseline that your annual sales forecast comes in as originally articulated or you assuming that you see the trend line as you saw in the first quarter?.

Yes, we have unchanged the load forecast at this point in the guidance, even in the adjusted guidance range that we’ve now given, so because we are very clear that one quarter does not make a trend and certainly form a polar vertex perspective there is a continued cold weather, could that have skewed the weather normalization routines that we usually go through to adjust these numbers.

And whenever we get extreme heat or extreme cold for a long period of time, you have to question that. So we’re going – have to see some during this coming quarter and the third quarter a consistency around that before we make those kinds of adjustments and we’re being deliberately conservative there..

Greg we are forecasting, we have factored in the forecast the higher wholesale prices for the balance of the year..

Yes. As far as energy prices, that’s changed..

Okay, so you factored in higher sort of APC wholesale prices, but you haven’t assumed anymore volatility of the nature that we saw?.

No..

And then you are saying that when I look at page 8, that 4.4% 1Q 2014 residential, weather normal number, you are saying you are nerves that it might not be in accurate number in your 41 to see how things trends in the second and third quarter?.

Yes, just saying we don’t no to the degree at this point to really make that adjustment and, but I think it’s pretty clear though that directionally it’s in the right direction. It is increasing, the question is the order of magnitude and before we make that adjustment we want to be very secured in what we are seeing..

Greg, for the first time and some time we saw on both the residential and commercial classes significantly higher average normalized usage and more concern that the normalization models don’t behave as well at describing the weather effects versus the normal effects in extreme weather, and so we’d like to see another quarter before we start thinking about changing the balance of the year load forecast..

Great, thanks. Obviously, great start. Congratulations..

Thank you, Greg..

Next question is from the line of Paul Patterson, Glenrock Associates. Please go ahead..

Good morning..

Good morning..

The sales growth forecast, the 10-year forecast that you guys recently put out, maybe just kind of sort of lower growth over 10 years. I guess negative growth are just flattish or what how you.

And I was wondering if you sort of comment on that and whether or not you think that might change with the legislation that’s being purposed and just sort of how we should think about that I guess this is all Ohio, I’m sorry.

If you could just sort of discuss sort of a little bit about that and what you are thinking is going on there?.

Yes, so sort of a frame of reference that was used in that, if you looked at sort of comparing Apples and Oranges because one includes Ormet obviously the future anticipated it is nice. So if you exclude Ormet the energy is increasing..

Okay, but the load forecast it sounds when I look at it seems like it’s declining or just slightly flat really over the years, it doesn’t look like there is really much change let say from 2016 to 2024?.

Yes, that’s true, we’ve been anticipating for period now that load forecasting will be relatively flat and we haven’t changed that because we haven’t seen the longevity of the fundamentals.

I mean we’re seeing initial indication in the fourth quarter of last year, I think we’ve seen a broader indication this first quarter, but I think it will more capital we are going to see in another quarter to and make that determination..

Okay, does any of this have to do with the legislation that’s being, that’s currently in place or might change in Ohio or could that have an impact that we should think about and if so can you give us a feeling for that?.

No, overall the energy efficiency was pretty negligible to begin with in the overall scheme of things but as far as the legislation is concerned it’s not I mean its not a significant impact at all..

Okay, and then just following up on Julien’s question, contracting, it sounded to me that there might be some industrial interest in this. But also I wasn’t clear whether or not there is any governmental interest in this.

There was some comments on the part of the governor in Ohio excuse me about so second thoughts perhaps on deregulation and whether it was the best move.

I was wondering if you just elaborate a little bit if there is, if there is a thought like hey you mentioned field diversity what have you but perhaps the thought that something new should change from a state policy perspective to sort of ensure that there’s still diversity and all the things that nuclear and coal provide..

Yes, and certainly the Governor can speak for himself. But there is certainly is recognition but its apparent by the governor and as well others including industrials that we really have to think about how to address this lack of market consistency particularly as it relates to the PJM capacity market.

But we do have legislation in place, we do have competition that’s there our generation is separated. So you really have to think about that in the context of how you make these adjustments.

And keep in mind we in December AEP filed its ESP case with a PPA arrangement from a portion of our units that was in a partnership or OVEK units that allowed for recovery through a purchase power arrangement.

And you could see some expansion of that PPA to accommodate other generation resources within the state and that would be a way to address at least some portion of the overall requirement of Ohio customers that could be served with a long-term for formal based rate contract that could supply some of those needs.

And that’s something that could be done.

And I think as people become more aware of where we stand relative to retirements of coal-fired generation where we stand in terms of if we do have an economic recovery that’s occurring at the same time Ohio has to really think about not only the investment potential for new generation but also the maintenance of existing generation and that’s what the key component of these discussion within tale..

Do you think there will be any need for change in regulatory or legislation or I mean with that entail any of that or is there something that could be done under current constructors that you see..

No, we see it as something that could be done under the current constructors evidenced by our PPA arrangement that we filed in our ESP filing late last year we believe that would be done and customers could continue to choose although and all likely have the long-term PPA’s would be non-bypassable charge or something like that they would benefit Ohio in total, but and at the same time allow customers to continue to shop and choose suppliers..

Okay. Thanks a lot, really appreciated..

Next question is from the line of Jonathan Arnold, Deutsche Bank. Please go ahead..

Hi, Jonathan..

Good morning guys. And just quick question on the I think in the annual guidance you had laid out I think $175 million for rate relief is the target I just conform, is that 65 that you had in the first quarter is that one on an apples-to-apple basis, sort of 65 to 175 of the bag.

Is that the right way to think about it?.

Well, it’s on an annualize basis the 175, so it’s for the full year of 2014. So, we’re of the 175 that we’ve previously identified we are right on track to get all of that..

So, that I know you are on track to get exceeded that?.

No..

That’s still the number. Okay..

Yes, we are right on it..

Thanks, Brian. And one other thing, I was just curious that you look at the portfolio, and how it performed in the first quarter. You obviously had some of the sales commitments and then the access to sell spot.

If you kind of imagine a world where you hadn’t had the plants that you are going to be shutting, would you still have been that long and would you been kind of more in places showed and how is the portfolio kind of evolving to address that?.

Well, it’s two things. One is that there clearly would have been less volume, right there was a 52% capacity factor on the 1800 megawatts, but for the whole country sake and there would be less volume and likely higher prices. So we don’t know what the net effect of that would be – would we’ve had more hours that $1800 megawatt hour..

And keep in mind that from the generation perspective we no longer have the obligation to serve in Ohio. So it really is about an optimization business is oppose to ever increasing demand and having to serve them.

So that really drives the whole different business model relative to that and then from the overall market context as Brian said certainly there is implications and shortage of capacity and I think people are realizing that..

To answer your question directly Jonathan as well we would still be net long..

Yes, I’m thinking the 1800 megawatts to 52% CapEx, it probably wouldn’t have been the whole of that 31%?.

That’s correct..

Great. Okay, thank you very much..

Yes..

The next question is from the line of Paul Ridzon, KeyBanc. Please go head..

Good morning.

Can you hear me?.

Yes, Paul. We can hear you. .

Just wanted to clarify that this $200 million transmission is not an acceleration, it’s actually incremental that you found because you have this capital head room?.

That’s right, it’s incremental..

And I didn’t see any discussion of Ohio shopping.

Is that a big impact or have we kind of lapped out at this point?.

Yes, we’re in the upper 60% right now in terms of switching; we anticipate that by the end of the year we’d be about 71% switched..

Okay, and then any comments about your expectations about the upcoming auction?.

Are we talking about the PJM capacity auction or….

Yes, yes sorry, sorry PJM..

Yes, our expectation is that the capacity prices will go probably in that $80 to $100 per megawatt day range, but who knows I mean because the way this capacity construct works, where things happen all the time. And as long as we get some of these adjustments from a FERC perspective that certainly will be helpful.

But again it’s one of those things that, and it goes back to the earlier discussion of how we view this business. If you can’t really that market construct and PJM it’s very difficult to really map out what the revenues are going to be from a capacity standpoint.

So hopefully, it will be certainly something that is more adequate, certainly for the continued operations of base load generation like coal and nuclear..

Thank you..

Next question is from the line of Steven Fleishman, Wolfe Research. Please go ahead..

Good morning, Steve..

Hi, first clarification to 25 day coal piles you have now.

What would that be versus like a normal or year-ago?.

Last year I think we were still at the 30, 35 day range, I think it was 35 we move from 45 to 35, but it’s not unusual we’ve had inventory levels in the past as low as 10 day. So it’s not anything that, that we have to do any corrective action around..

Okay.

Second question is on I think you mentioned at these PJM uplift charges was a bit of a drag in the quarter? Did you – were you able to pass those through it all or you have to kind of absorb those?.

So the once that identified that made up, most of that $0.05 per share difference for the vertically integrated we’re in the jurisdictions where we couldn’t pass them through. In some of our jurisdictions we are allowed to pass them through on trackers..

You can pass them through on trackers you have the opportunity to recover them.

In future periods. .

In future periods..

Okay. And did you defer then the cost of those, or you could do that..

We were not able to defer those..

Okay.

And you are going to see coal recovery like first energy as in some of these on your retail contracts can you do that?.

Yes, so these are different items that we are talking about, one was for the vertically integrated utilities. And then there is the issue of passing through to customers on our competitive retail side. We’ve made a corporate decision that we’re not going to pass those through associated with the first quarter of this year.

We have a misstep in some customers started to see those charges pass through, we have gone back and since corrected that and for this quarter we are not passing those incremental charges through to our competitive retail customers..

Okay.

One last question, we are going to get the EPA green house gas rule soon for existing and just made curious what you’re expecting there and how you are thinking about potential implications?.

Yes, if you hear what’s being said, certainly Gena McCarthy has been public about certainly they don’t have any – at least they are not focused on anything relative to reducing the reliability of the grid.

I think that’s clearly within question now and she has reinforced the point that they are not trying to take coal away that there are not – they are concerned about the reliability of the grid and won’t do anything to unpair that.

So there is somewhat of an expectation that they may go outside the fence and focus on energy efficiency on those types of things with the state, and give the states which I said they would give the state a lot of opportunity to be able to come up with their mechanisms to adjust to the new targets.

So it’s going to be I mean in my opinion it’s going to wind up being a state process that we go through, and one that at least dispose to provide a significant amount of flexibility and how we respond and certainly with Hazmat went further then anyone anticipated in terms of retirement generation, and in fact AEP is already 21% lower than 2005 levels and the present targets worth 17% by 2020.

So the industry is already come along way and the particular AEP has, so I think as long as they give that geographic and state flexibility we should have an opportunity to respond in very incredible fashion..

Thank you..

Operator, we have time for one more question..

Okay. Next question is from the line of Michael Lapides, Goldman Sachs. Please go ahead..

Hey, guys congrats on a great quarter and thank you for taking my call..

Thanks, Michael. .

I just want to look at Slide 4 where you show the earned ROEs by jurisdiction. And I want to compare it to the same slide from the first quarter of 2013’s earnings call. Because if I do that, except for Ohio Power in Texas, pretty much everything else is down year-over-year rolling 12 months.

How much of those decreases do you attribute to weather versus other factors?.

Yes, I don’t see much of it in terms of weather.

I think the ones that are down have investments that are occurring like there is – there is a transfers that occurred to APCo and to Kentucky that takes a while to stabilize after you make these certain I mean settlement deals that are done and then you come in for rate cases for recovery for Mitchell and Kentucky and so forth.

And then of course Turk being just built in SWEPCO, so and then the transmission the heavy investment cycle it’s going on there.

So I think it’s really more reflection of the timing of the investments cycle and similarly we worked long and hard on putting writers in place to bring the revenue more concurrent, but on these large capital investments we continue to work due to rate process.

And Indiana has been very positive because certainly the I&M team has been very successful in putting legislation in place that essentially allows that recovery more quickly for things like the nuclear Life Cycle Management. So I would not read that as we have a continued deterioration of ROEs.

I would it as more where we are at in the investment cycle. .

Got it. Okay.

And just when you think about 2014 and 2015, what efforts, so kind of specific, whether it’s specific jurisdiction or specific state, do you anticipate trying to get done that makes a structural change to reduce lag?.

Certainly, Kentucky. I mean getting the Mitchell assets reflected in Kentucky’s base rate is a big component of that. And that’s what a lot of the drag on Kentucky’s ROE is it – it’s equity component is increased so much and to transfer those Mitchell assets over there..

And APCo and West Virginia, and certainly that ROE has been low for a long period of time and its while Virginia has stabilized in a very good place, West Virginia we still need to work that’s why we are making the filing this year. So those initiatives will be in place to do and then as far as SWEPCO is concerned.

We continue to look for home relative to the investment the 88 megawatts of Turk station and Arkansas should be looking at that at some point hopefully, because they see the value of those assets. And then overall load growth and some reductions and some of the capacity that PPA contracts that flow to SWEPCO have ended.

So there is an opportunity for the use of that additional capacity and energy with in the SWEPCO portfolio. So and there is issues in regard to that as well. So you could bet that any of these that appear low at this point there is a whole litany of actions being taken in the background to bring those backup to acceptable levels..

Got it. Okay, thanks guys much appreciated..

Thank you for joining us on today's call. And as always, the IR team will be available to answer any additional questions you may have.

Kevin, can you give replay information please?.

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