AEP serves customers in 7 states. The following is from their latest 10Q statement (11-16-98). Can anybody decipher it?

COMPUTER ISSUE - YEAR 2000 On or about midnight on December 31, 1999, digital computing systems may begin to produce erroneous results or fail, unless these systems were modified or replaced, because such systems may be programmed incorrectly and interpret the date of January 1, 2000 as being January 1st of the year 1900 or another incorrect date. In addition, certain systems may fail to detect that the year 2000 is a leap year. Problems can also arise earlier than January 1, 2000, as dates in the next millennium are entered into non-Year 2000 ready programs.

Readiness Program - Internally, the Company is modifying or replacing its computer hardware and software programs to minimize Year 2000-related failures and repair such failures if they occur. This includes both information technology systems (IT), which are mainframe and client server applications, and embedded logic systems (non-IT), such as process controls for energy production and delivery. Externally, the problem is being addressed with entities that interact with the Company, including suppliers, customers, creditors, financial service organizations and other parties essential to the Company's operations. In the course of the external evaluation, the Company has sought written assurances from third parties regarding their state of Year 2000 readiness.

Another issue we are addressing is the impact of electric power grid problems that may occur outside of our transmission system. AEP, along with other electric utilities in North America, regularly submits information to the North American Electric Reliability Council (NERC) as part of NERC's Year 2000 readiness program. NERC then publicly reports summary information to the U.S. Department of Energy regarding the Year 2000 readiness of electric utilities. In 1999 AEP plans to participate in two NERC-sponsored coordinated electric industry Year 2000 readiness drills. The first NERC report, dated September 17, 1998 and titled Preparing the Electric Power Systems of North America for Transition to the Year 2000-A Status Report and Work Plan, states that: "Mission critical systems and components are to be made Y2K Ready by June 30, 1999." In addition, the report indicates that: "While many organizations are on track to meet these targets, many others need to accelerate project plans and resources." In response to the report, the Company has accelerated its Year 2000 readiness date for mission critical and high priority systems and components from September 30, 1999 to June 30, 1999.

Through the Electric Power Research Institute, an electric industry-wide effort has been established to deal with Year 2000 problems affecting embedded systems. Under this effort, participating utilities are working together to assess specific vendors' system problems and test plans.

Various state regulatory commissions are also reviewing the Year 2000 readiness of electric utilities subject to their jurisdiction.

Company's State of Readiness - Work has been prioritized in accordance with business risk. The highest priority has been assigned to activities that potentially affect safety, communications, and the physical generation and delivery of energy; followed by back office activities such as customer service/billing, regulatory reporting, internal reporting and

administrative activities (e.g. payroll, procurement, accounts payable); and finally, those activities that would cause inconvenience or productivity loss in normal business operations.

The following chart shows our progress toward becoming ready for the Year 2000 as of September 30, 1998:

IT SYSTEMS NON-IT SYSTEMS COMPLETION COMPLETION DATE/ESTIMATED PERCENT DATE/ESTIMATED PERCENT YEAR 2000 PROJECT PHASES COMPLETION DATE COMPLETE COMPLETION DATE COMPLETE

Launch: Initiation of 2/24/1998 100% 5/31/1998 100% the Year 2000 activities within the organization. Establishment of organizational structure, personnel assignments and budget for the workgroup. Continuous management update and awareness program.

Inventory and Assessment: Identifying all Company 7/31/1998 100% 11/30/1998 86% computer systems that could be affected by the millennium change. Prioritize repair efforts based upon criticality to maintaining ongoing operations.

Remediation/Testing: The process of modifying, 6/30/1999 Mainframe 6/30/1999 2% replacing or retiring 60% those mission critical and high priority digital-based systems with problems Client processing dates past the Server: Year 2000. Testing these 1% systems to ensure that after modifications have been implemented correct date processing occurs and full functionality has been maintained.

Costs to Address the Company's Year 2000 Issues - Through September 30, 1998, the Company has spent $15 million on the Year 2000 project and, estimates spending an additional $41 million to $53 million to achieve Year 2000 readiness. Most Year 2000 costs are software, IT consultant and salary-related and are expensed; however, in certain cases the Company has acquired hardware that was capitalized. The Company intends to fund these expenditures through internal sources. Although significant, the cost of becoming Year 2000 ready is not expected to have a material impact on the Company's results of operations, cash flows or financial condition.

Risks of the Company's Year 2000 Issues - The applications posing the greatest business risk to the Company's operations should they experience Year 2000 problems are: * Automated power generation, transmission and distribution systems

* Telecommunications systems * Energy trading systems * Time-in-use, demand and remote metering systems for commercial and industrial customers * Work management and billing systems.

The potential problems related to erroneous processing by, or failure of, these systems are: * Power service interruptions to customers * Interrupted revenue data gathering and collection * Poor customer relations resulting from delayed billing and settlement.

In addition, although as discussed the Company is monitoring its relationships with third parties, such as suppliers, customers and other electric utilities, these third parties nonetheless represent a risk that cannot be assessed with precision or controlled with certainty. Due to the complexity of the problem and the interdependent nature of computer systems, if our corrective actions, and/or the actions of others not affiliated with AEP, fail for critical applications, Year 2000-related issues may materially adversely affect AEP.

Company's Contingency Plans - The Company intends to establish contingency plans on a case-by-case basis to address alternatives if Year 2000 failures of automatic systems and equipment occur as part of its Year 2000 readiness program. The contingency plans will be based upon a risk analysis process and will be developed by the fourth quarter of 1999. These plans will build upon disaster recovery, system restoration, and contingency planning that we now have in place. We have begun the contingency planning process, including the review of NERC's Contingency Planning Guide. The Company plans to submit a draft of its contingency plans to NERC as part of NERC's review of drafts of regional and individual electric utility contingency plans in 1999.

Forward-Looking Statements - This description of Year 2000 problems, the consequences of Year 2000 failures and the estimated costs of, and timetable for, becoming Year 2000 ready constitute "forward looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on management's beliefs as well as assumptions made by, and information currently available to, management. Investors are cautioned that such statements and estimates could differ materially from actual results because of factors referred to specifically in connection with such forward-looking statements and, in addition, the following other factors, among others: * Continuing availability of experienced consultants and IT personnel and related resources * Ability of third parties to complete their Year 2000 remediations on a timely basis and accuracy of representations made by such third parties concerning their Year 2000 readiness * Ability of the Company to identify and implement contingency plans.

-- Anonymous, November 29, 1998

Answers

M.J., here's my summary of the most pertinent data:

They are 100% complete with the "Launch" phase (awareness) for both IT and Non-IT (embedded) systems. This corporation is one of the few I've read which has included an awareness phase in percentages as part of their charts. I suppose those initial 100 percents make it look good, but having awareness at this date should be a given. The dates for the start of this "Launch" phase are not reassuring: 2/24/1998 for IT and 5/31/1998 for Non-IT systems. Basically that tells us that by the end of the third quarter 1998 (September) which this filing is for, American Electric had been working on the year 2000 problem for only 7 months for IT systems and only 4 months for Non-IT systems. (Are your warning bells going off yet? Mine are.)

Their Inventory and Assessment phase for IT systems is estimated to be 100% complete. Inventory and assessment for Non-IT systems is ongoing and estimated to be 86% complete.

The Remediation/Testing phase for their mainframe is estimated to be 60% complete, and their Non-IT systems remediation/testing is estimated to be only 2% complete.

That's where they are now. They say that they have "accelerated its Year 2000 readiness date for mission critical and high priority systems and components from September 30, 1999 to June 30, 1999," in order to comply with NERC's readiness program. (They don't say whether this "acceleration" is just on paper estimates, or if the work has been somehow? accelerated.)

Their present projections for completion of all assessment of Non-IT systems is 11/30/1998. They project their IT systems to be complete in 6/30/1999, and their Non-IT systems to be complete in 6/30/1999 also. Since remediation and testing is considered to be the vast bulk of any project, time-wise, how they expect to finish assessing and get all the fixes and testing done in just a few months is something which requires a real stretch of the imagination. Of course a company can ESTIMATE anything it wants. That doesn't have much to do with when the actual work will be finished.

Money spent so far on the remediation is $15 million. They estimate they will spend an additional $41 million to $53 million.

I was fascinated by these statements: "Company's Contingency Plans - The Company intends to establish contingency plans on a case-by-case basis to address alternatives if Year 2000 failures of automatic systems and equipment occur as part of its Year 2000 readiness program. The contingency plans will be based upon a risk analysis process and will be developed by the fourth quarter of 1999."

My personal translation of the above is, "We're winging it as we go along. If anything crashes or can't be fixed in time we'll deal with alternatives then."

By now my alarm bells are ringing loud and clear, and I hope yours are too. The refrain accompanying those bells is, "not enough time left, not enough time left, not enough time.." That's how I decipher American's 10Q. Perhaps someone else sees it differently. You'll have to decide for yourself whether you want to bet you'll have electricity come Jan.1, 2000. In my mind, the only safe outcome to that bet, either way it goes, is to make personal preparations for an electrical outage.

-- Anonymous, November 29, 1998

I would think the phrase "disaster recovery" as stated in their contingency plan would be telling enough...

-- Anonymous, November 30, 1998

I live in Columbus OH where AEP runs the grid and from what I have heard, they are only ready in 40% and 'been working on it for a looong time. I am rather pessimistic... peter
2000andYou!-visit this site

-- Anonymous, November 30, 1998