1. American Electric Power Integrated Disability Management NCSI – Naples, FL June 2008 Loyd Hudson, IDM Manager

2. Who is AEP? One of the Largest Investor-Owned Utilities Largest Generator of Electricity in the United States Serves Customers in 11 States 23,000 Employees in 400+ Locations One of the Largest Inland River Transportation System in US with over 60 boats in operation. Headquarters in Columbus, Ohio

3. AEP Environment Self-Insured for Sick Pay, Long Term Disability & Workers’ Compensation Unionized (UMWA, IEBW, USWA) Rich Benefits Long Term Employees Aging Workforce Employees are Exempt or Highly Paid Skilled Laborers

4. What is IDM? Integrated Disability Management is a holistic approach and philosophy to how an organization uses the processes, tools, and benefits associated with occupational and non-occupational programs to minimize Disabilities from occurring Cost Impact on productivity.

5. What Is AEP’s IDM? Culture Change Managing the disability not the payment stream Focusing on claims management, not risk management Early intervention, early connection Continuity of care Promoting RTW and quality care Control Costs Employee Advocate

6. Why Implement Integrated Disability?

8. Why Implement Integrated Disability Costs Containment  Direct  Indirect Increased Service Increased Efficiencies Increased Morale Increases Communication Benefits Already Offered

9. What’s In It For Senior Management? Reduced Cost of Services RTW and Productivity Improvement Improved Management of Non-Productive Time Increased Employee Morale and Job Satisfaction Through a System Designed to Value an Employee’s Contribution to Organizational Success Sentinel Effect that an Employee is Needed and Missed

10. What’s In It For The Supervisor? Help in Managing the Workforce and Time-Off Costs Increasing Productivity and Decrease Costs Information to Help Manage Short-Term Disability and Absence Control Additional Expertise

11. What’s In It For The Employee? Support from Internal Sources with Advocate Medical Advice, Guidance and a Source of Information Quick Response with Appropriate Treatment Recovery Plan Options that Enhance Ability to RTW RTW Plans Based on Realistic Goals / Expectations with Supervisory Support Joint Participation in Decision Making

12. What Does AEP IDM Program Look Like? It’s a changing and evolving process

13. Recovery Center Vision Statement Recovery Center Mission: “ Manage Absence Recovery ” Recovery Center Vision: “ Maintain Excellence and National Leadership in Integrated Disability Management ” Recovery Center Purpose: “ Provide a Customer-Focused, Flexible Human Resource Team Dedicated to Providing High Quality, Timely and Consistent Service While Striving For Continuous Improvement ” 3

14. AEP’s Integrated Disability Components Absence Management Employee Advocacy Consulting Services Subject Matter Resources Cost Containment / Liability Management Compliance Management Development of Policy/ Legislation Managing Department Relationships Vendor Management

15. What Has AEP Done Right! Total Integration Absence Management Use of Technology to Improve Efficiencies Third Party Administrators (TPA) Oversight Consulting Measurements/Benchmarks

16. Measure and Benchmark Costs as a Percentage of Payroll Historical Business Unit Comparisons Productive Employees (FTE) Employee Satisfaction Business Unit Satisfaction Expenses as a Percentage of Claim Costs Claim Specialist Matrix

17. Management Reports

18. Recovery Center Utilization The Recovery Center managed absences for 3,006 employees consisting of 3,733 individually reported claims Processed 844 employee workers compensation claims Contacted over 1,084 supervisors, of whom 69 supervisors had 10 employee absences or more 6 More than 20% of AEP’s total population is involved with the Recovery Center on a yearly basis

19. Workers’ Compensation Self-Insured Workers’ Compensation is an assumption of risk that is impacted by severity and frequency of accidents. Self-insured losses are capped by excess insurance for most states based upon the date of the accident. The self-insured retention for 2007 was $500,000 per claim and The Jones Act per claim was $150,000. Workers’ Compensation Costs as a percentage of payroll are: Actual 2007 costs are $7.8 million dollars lower than 1997 costs. Costs average $2.7 million dollars per year lower since the inception of the Recovery Center – a total reduction of $27.3 million dollars. Benchmark 2007 costs are $8.0 million dollars lower than the national average Costs are an average of $6.0 million dollars per year lower than the national average since the inception of the Recovery Center resulting in an accumulative total of $60.2 million dollars below the national average. Workers’ Comp costs are significantly lower than the national average and lower than our 1997 benchmark year and continue to decline 13 The Recovery Center’s oversight of workers’ compensation has helped lead to a decrease in associated costs.

20. Workers’ Compensation Non- Productive Full Time Employees Workers’ Compensation days continue to decline resulting in 45 non-productive full time equivalent employees being made available for productive employment since 2001. 14 The Recovery Center’s oversight has led to more available productive employees – (45 FTEs)

21. Long Term Disability Long Term Disability costs as a percentage of payroll are: Actual 2007 costs are $3.7 million dollars lower than 1997 costs. Costs are an average of $3.2 million dollars per year lower since the inception of the Recovery Center – a total reduction of $32.7 million dollars. Benchmark 2007 costs are $1.6 million dollars higher than the national average. Costs are an average of $1.0 million dollars higher than the national average since the inception of the Recovery Center resulting in an accumulative total of $10.0 million dollars above the national average. Long Term Disability (LTD) costs are above the national average but have been steadily decreasing since the inception of the Recovery Center 15 The Recovery Center’s involvement has led to decreased Long Term Disability costs.

22. Long Term Disability Employee Count Long Term Disability employee count continues to decline resulting in 167 more full time equivalent employees since 2001. 16 The Recovery Center’s oversight has led to more productive employees – (167 FTEs)

23. Sick Leave Plan 1999 – Eliminated the 3 day wait ($4.1 million dollars) 2001 – Eliminated the banks to give 6 months of benefits ($5.3 million dollars) AEP Sick Pay Costs as a percentage of payroll are : Actual While Plan changes averaged $7.7 million dollars since the inception of the Recovery Center, costs have increased an average of $5.6 million dollars – a net savings to the company of $2.1 million dollars per year. Total net benefit increases have been $69.1 million dollars while costs have only increased by $45.0 million dollars – a net total savings of $24.1 million dollars since the inception of the Recovery Center. Benchmark 2007 costs are $2.0 million dollars higher than the national average. Accumulative cost averages since the inception of the Recovery Center have been $21.9 million dollars lower than the national average resulting in a yearly average of $2.2 million dollars below the national average. 17 Increased benefits have resulted in higher Sick Pay cost which has been mitigated by Integrated Disability Sick pay costs are at the national average

24. Sick Hours Used Sick hours continue to decline resulting in 61 more full time equivalent employees since 2001. 18 The Recovery Center’s oversight of sick leave has helped lead to a decrease in associated costs – (61 FTEs)

25. AEP Total Disability Costs AEP’s Total Disability Costs as a percentage of payroll are: Actual 2007 costs are $9.5 million dollars lower than 1997 costs even with a $7.7 million dollar benefit increase. Costs average $5.6 million dollars per year lower since the inception of the Recovery Center – a total reduction of $55.8 million dollars. Benchmark 2007 costs are $11.4 million dollars lower than the nation average. Costs average $6.1 million dollars per year lower than the national average since the inception of the Recovery Center resulting in an accumulative total of $60.9 million dollars below the national average 1999 – Eliminated the 3 day wait 2001 – Eliminated the banks gave 6 months of benefits Disability costs are lower than the 1997 benchmark and well below the national average while providing additional benefits to our employees 19 With Recovery Center involvement disability costs continue to decline while employee benefit costs have increased.

26. Absent Non-Productive Full Time Employees (FTE) 20 334 non- productive full time employees have been made available for productive employment The Recovery Center’s Integrated Disability Program has led to more available productive employees – (334 FTEs)

27. Additional Productive FTE Available for Work Compared to 2001 we have 334 additional productive employees

28. Recovery Center Survey 2007 Employees who have utilized the Recovery Center rate our performance a 4.24 out of 5.00 7 The Recovery Center has proven its ability to manage the programs with high employee satisfaction

29. Management Expenses As a Percentage of Disability Costs AEP Management Expenses are 5.13% -- well below the 10% target. 22 HR Function Through improved process efficiency, the Recovery Center has continued to decrease operational expenses as a percentage of claim costs.

30. Measurements of IDM

31. AEP – National Leader in Integrated Disability Management Mercer/Marsh -- Columbus, Ohio, Cleveland, Ohio, Chicago, Illinois Consol Energy -- Pittsburgh, Pennsylvania ArvinMeritor Corporation -- Detroit, Michigan Kaiser Permanente – CA The Ohio State University -- Columbus, Ohio Longaberger Basket Company -- Dresden, Ohio Dow Chemical Corporation -- Charleston, West Virginia Honda of American -- Marysville, Ohio Southern Company -- Atlanta, Georgia Alabama Power Company – Birmingham, Alabama First Energy -- Akron, Ohio Goodwill Industries -- Columbus, Ohio Holiday Retirement Corporation -- Portland, Oregon PCC Structurals -- Portland, Oregon Ohio Health -- Columbus, Ohio Chevron Texaco Corporation -- California Owens Corning Corporation -- Toledo, Ohio and Newark, Ohio Portland General Electric – Portland, Oregon Eugene Electric and Water – Eugene, Oregon Allegheny Energy – Greensburg, Pennsylvania Southern California Edison -- California Companies that we have benchmarked at our center since 1998 23 The AEP Human Resources Recovery Center is a nationally recognized leader in Integrated Disability Management.

32. Questions & Comments Thank you

33. WC Claim Cost By State Claim Costs are totals paid out and do not reflect recoveries made through subrogation and excess insurance. 32

34. AEP Workers’ Compensation Assessments 33