TRANSMISSIONCOORDINATION AGREEMENT Between PublicService Company of Oklahoma, SouthwesternElectric Power Company, WestTexas Utilities Company, and AmericanElectric Power Service Corporation TABLEOF CONTENTS

This TRANSMISSION COORDINATION AGREEMENT, hereinafter called “Agreement,” is made and entered into as of the _____ day of _________, 2002, by and among West Texas Utilities Company (“WTU”), Public Service Company of Oklahoma (“PSO”) and Southwestern Electric Power Company (“SWEPCO”), hereinafter separately referred to as “Company” and jointly as “Companies,” and American Electric Power Service Corporation (“AEPSC”).

WHEREAS, Companies are the owners and operators of interconnected generation, transmission and distribution facilities with which they are engaged in the business of transmitting and selling electric power to the general public, to other entities and to other electric utilities; and

This Agreement shall become effective as of the date American Electric Power Company, Inc. restructures its operating companies pursuant to Orders issued by the Federal Energy Regulatory Commission ("FERC" or "Commission") in Docket Nos. EC01-130-000 and ER01-2668-000, or such later date as is established by the FERC. This Agreement shall continue in force and effect for a term of one year from the effective date and continue from year to year thereafter until terminated by written notice given by any Company to the other Companies and to AEPSC. Such written notice shall become effective within 30 days of receipt.

This Agreement will be reviewed periodically by the Coordinating Committee, as defined herein, to determine whether revisions are necessary to meet changing conditions. In the event that revisions are made by the Companies pursuant to Section 8.5, and after requisite approval or acceptance for filing by the appropriate regulatory authorities, the Coordinating Committee may thereafter, for the purpose of ready reference to a single document, prepare for distribution to the Companies an amended document reflecting all changes in and additions to this Agreement with notations thereon of the date amended.

2.2           Ancillary Services shall mean those services that are necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the Companies’ transmission facilities in accordance with Good Utility Practice, as that term is defined in the Open Access Transmission Tariff.

2.3           Company Demand shall mean the demand in megawatts of all retail and wholesale power customers in the SPP on whose behalf the Company, by statute, franchise, regulatory requirement, or contract, has undertaken an obligation to construct and operate its transmission system to meet the reliable electric needs of such customers, integrated over a period of one hour, plus the losses incidental to that service.

2.5           Control Area shall mean an electric power system or combination of electric power systems to which a common automatic generation control scheme is applied for the purposes specified in the Open Access Transmission Tariff.

2.7           Designated Agent shall mean any entity that performs actions or functions on behalf of the Companies, an Eligible Customer (as that term is defined in the Open Access Transmission Tariff), or the Transmission Customer required under the Open Access Transmission Tariff.

2.8           Direct Assignment Facilities shall mean facilities or portions of facilities located in the SPP that are constructed by the Companies for the sole use or benefit of a particular Transmission Customer requesting service under the Open Access Transmission Tariff.

2.9           Generating Unit shall mean an electric generator, together with its prime mover and all auxiliary and appurtenant devices and equipment designed to be operated as a unit for the production of electric capacity and energy.

2.13           Open Access Transmission Tariff shall mean the Open Access Transmission Tariff or Tariffs filed on behalf of the Companies with the Federal Energy Regulatory Commission by AEPSC or a regional transmission entity, as such may be amended from time to time.

2.14           Point-to-Point Transmission Service shall mean the reservation and transmission of capacity and energy on either a firm or non-firm basis from the points of receipt to the points of delivery in the SPP under Part II of the Open Access Transmission Tariff.

2.16           Scheduling, System Control and Dispatch Service shall mean the service required to schedule the movement of power through, out of, within, or into a Control Area, as specified in Schedule 1 of the Open Access Transmission Tariff.

2.18           Transmission Customer shall mean any Eligible Customer as defined in the Open Access Transmission Tariff (or its Designated Agent) that (i) executes a Service Agreement, or (ii) requests in writing that the Companies, or their agent, file with the Federal Energy Regulatory Commission a proposed unexecuted Service Agreement to receive service under the Open Access Transmission Tariff. This term is used in the Part I Common Service Provisions of the Open Access Transmission Tariff to include customers receiving service under Part II and Part III of the Open Access Transmission Tariff.

The purposes of this Agreement are (a) to provide the contractual basis for the coordinated planning and operation of the Companies’ transmission facilities in the SPP to achieve optimal economies, consistent with reliable electric service and regulatory and environmental requirements and (b) to provide the means by which the Companies will allocate among themselves the revenue that they receive for Part II and Part III and Ancillary Services provided in the SPP under the Open Access Transmission Tariff. Any revenue received by a Company(ies) from the provision of service under any other Part of the Open Access Transmission Tariff or any agreement, tariff or rate schedule other than the Open Access Transmission Tariff, will be kept by the Company(ies) that is (are) the party(ies) to such Part, agreement, tariff or rate schedule.

The Coordinating Committee is the organization established to oversee planning, construction, operation, and maintenance of the Transmission System. The Coordinating Committee members shall include at least one member representing each of the parties hereto who is not a member of the Operating Committee established under the Restated and Amended AEP-West Operating Agreement. The chairperson, who shall be appointed by the chief executive officer of the holder of the majority of the common stock of the Companies, shall appoint the member representative(s) of the Companies. Other than the chairperson, there shall be the same number of members representing each Company. The majority of the members on the Coordinating Committee shall be representatives of the Companies. Coordinating Committee decisions shall be by a majority vote of those present. However, any member not present may vote by proxy. The chairperson shall vote only in case of a tie. No employee of the Companies engaged in marketing, sales or brokering of electricity or an employee of any affiliate engaged or involved in the transmission, sale, or marketing of electricity or natural gas shall be appointed to, or serve on, the Coordinating Committee.

(a) the Companies in the coordinated planning of their transmission facilities in the SPP, including studies for transmission planning purposes and their interaction with independent system operators and other regional bodies that are interested in transmission planning; and

 

The Companies hereby delegate to the Coordinating Committee, and the Coordinating Committee hereby accepts, responsibility and authority for the duties listed in this Article and elsewhere in this Agreement.

               The Coordinating Committee shall provide periodic summary reports of its activities under this Agreement to the transmission and reliability function employees of the Companies and shall keep such employees of the Companies informed of situations or problems that may materially affect the reliability of the Transmission System. Furthermore, the Coordinating Committee agrees to report to the transmission and reliability function employees of the Companies in such additional detail as is requested regarding specific issues or projects under its oversight.

                               The Companies agree that their respective transmission facilities in the SPP shall be planned and developed on the basis that their combined individual systems constitute a coordinated transmission system and that the objective of their planning shall be to maximize the economy, efficiency and reliability of the Transmission System as a whole. In this connection, the Coordinating Committee will from time to time, as it deems appropriate, direct studies for transmission planning purposes.

               The Companies shall delegate to the Transmission System Operator the responsibility and authority to act on behalf of the Companies for all of the requirements and purposes of the Open Access Transmission Tariff.

Each Company shall make Direct Assignment Facilities available to the Transmission System Operator as may be required to provide service to a particular

Transmission Customer requesting service under the Open Access Transmission Tariff.

(a) The Companies shall share transmission service revenues obtained from the use of the transmission facilities that comprise the Transmission System in accordance with Schedule A to this Agreement. Transmission service revenues are those revenues received for service provided under the Open Access Transmission Tariff. The Companies’ annual transmission revenue requirements are shown on Schedule B to this Agreement and shall be revised whenever there is a change to the annual transmission revenue requirements in Attachment H to the Open Access Transmission Tariff or a change to the annual transmission revenue requirements underlying the rates set forth in Schedules 7 and 8 to the Open Access Transmission Tariff. Future revisions to the transmission revenue requirements ratios set forth in Schedule B will be made by the Companies’ making an appropriate filing with the Commission, if required by law. Such changes shall become effective as of the date accepted or approved by the Commission, subject to refund if the Commission so orders.

                                (b) Revenues received for Ancillary Services shall be allocated among the Companies in accordance with the revenue ratios set forth in Schedule C. Future revisions to the revenue ratios set forth in Schedule C will be made by the Companies’ making an appropriate filing with the Commission, if required by la w. Such changes shall become effective as of the date accepted or approved by the Commission, subject to refund if the Commission so orders.

(d) The distribution to the Companies of revenues received for stranded costs received from third-party customers under the Open Access Transmission Tariff shall be determined on a case-by-case basis and shall be filed with the Commission, if required by law.

            (f) Revenues received for Transmission System studies performed for the benefit of a Transmission Customer under Part II or Part III of the Open Access Transmission Tariff shall be allocated to each Company as applicable, in proportion to the ratio of each Company’s number of transmission pole miles of the Transmission System, as such number of transmission pole miles is reported in each Company’s Form 1 annual report, over the total number of transmission pole miles of the Transmission System.

The Transmission System Operator shall bill each of the Companies for the amount due to the Transmission System Operator in each Month for their use of Network Integration Transmission Service and Ancillary Services under the Open Access Transmission Tariff on the basis set forth in the Open Access Transmission Tariff.

This Agreement shall inure to and be binding upon the successors and assigns of the respective Companies, but shall not be assignable by any of the Companies without the written consent of the other Companies, except upon foreclosure of a mortgage or deed of trust.  Nothing expressed or mentioned or to which reference is made in this Agreement is intended or shall be construed to give any person or corporation other than the Companies any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained, expressly or by reference, or any schedule hereto, this Agreement, any such schedule and any and all conditions and provisions hereof and thereof being intended to be and being for the sole exclusive benefit of the Companies, and for the benefit of no other person or corporation.

It is contemplated by the Companies that it may be appropriate from time to time to change, amend, modify or supplement this Agreement or the schedules that are attached to this Agreement, to reflect changes in operating practices or costs of operations or for other reasons.  This Agreement or such schedules may be changed, amended, modified or supplemented by an instrument in writing executed by all of the Companies subject to any required approval or acceptance for filing by the appropriate regulatory authorities.

By entering into this Agreement the Companies shall not become partners, and as to each other and to third persons, the Companies shall remain independent contractors in all matters relating to this Agreement.

The liability of the Companies shall be several, not joint or collective. Each Company shall be responsible only for its obligations, and shall be liable only for its

proportionate share of the costs and expenses as provided in this Agreement, and any liability resulting here from. Each Company will defend, indemnify, and save harmless the other Companies hereto from and against any and all liability, loss, costs, damages, and expenses, including reasonable attorney’s fees, caused by or growing out of the gross negligence, willful misconduct, or breach of this Agreement by such indemnifying Company.

The revenue the Transmission System Operator receives pursuant to Section 6.4 of the Agreement for service provided in the SPP by the Companies under Parts II and III of the Open Access Transmission Tariff, other than revenues received pursuant to Sections 26 (Stranded Cost Recovery), 27 (Compensation for New Facilities and Redispatch Costs), and 34.4 (Redispatch Charge) thereof and for System and Facilities Studies made pursuant to Sections 19 (Additional Study Procedures for Firm Point-to-Point Transmission Service Requests) and 32 (Additional Study Procedures for Network Integration Transmission Service Requests), will be allocated among the Companies based on the ratios determined in accordance with Schedule B and Schedule C.

Revenues related to studies of the Transmission System performed for the benefit of Transmission Customers under Part II or Part III of the Open Access Transmission Tariff will be allocated among the Companies as applicable, in proportion to their respective number of transmission pole miles on the Transmission System. Direct Assignment Facilities revenues will be assigned to the Companies in proportion to the related costs that each of them incurred.  Assignment of revenues received from a third party related to stranded cost or new transmission facilities shall be determined on a case-by-case basis.

From time to time the Coordinating Committee will calculate for each of the Companies its Transmission Revenue Requirements Ratios set forth below. A Company’s Transmission Revenue Requirements Ratio for revenue received under Part III of the Open Access Transmission Tariff shall be a fraction, the numerator of which is the Company’s transmission revenue requirement that is used to calculate the Annual Transmission Revenue Requirements amount for the AEP West Zone – SPP set forth on Attachment H to the Open Access Transmission Tariff (herein called the Company Revenue Requirement) and the denominator of which is the sum of the Company Revenue Requirement for all of the Companies. A Company’s Transmission Revenue Requirement Ratio for revenue received under Part II of the Open Access Transmission Tariff shall be a fraction, the numerator of which is the Company’s transmission revenue requirement that is used to calculate the Annual Transmission Revenue Requirements underlying the rates set forth for the AEP West Zone – SPP on Schedules 7 and 8 to the Open Access Transmission Tariff and the denominator of which is the sum of the Company Revenue Requirements for all of the Companies.

The revenues the Transmission System Operator receives pursuant to Schedules 1 through 6 under the Open Access Transmission Tariff shall be allocated among the Companies as set forth below. Future revisions to the revenue ratios set forth in Schedule C will be made by the Companies’ making an appropriate filing with the Commission, if required by law. Such changes shall become effective as of the date accepted or approved by the Commission, subject to refund if the Commission so orders.

(a)           Revenues received from System Scheduling, System Control and Dispatch Service (AEP West Zone – SPP) under Schedule 1 of the Open Access Transmission Tariff will be allocated among PSO, SWEPCO and WTU based on the following ratio:

(b)           Revenues received from System Reactive Supply and Voltage Control from Generation Sources Service (AEP West Zone – SPP) under Schedule 2 of the Open Access Transmission Tariff will be allocated between PSO and SWEPCO based on the following ratio:

                (c)           Revenues received from System Regulation and Frequency Response Service (AEP West Zone – SPP) under Schedule 3 will be allocated between PSO and SWEPCO based on the following ratio:

                (d)           Revenues received for and energy exchanged as part of System Energy Imbalance Service rendered under Schedule 4 will be allocated in the same manner as margin from off system sales and purchases as set forth in Service Schedule B to the Restated and Amended AEP-West Operating Agreement.

                (e)           Revenues received from System Operating Reserve - Spinning Reserve Service (AEP West Zone – SPP) under Schedule 5 and from System Operating Reserve – Supplemental Reserve Service (AEP West Zone – SPP) under Schedule 6 for load served in the PSO/SWEPCO Control Area will be allocated between PSO and SWEPCO based on the following ratio: