shl Doc 545 Filed 01/09/12 Entered 01/09/12 10:32:03 Main Document Pg 1 of 18

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1 Pg 1 of 18 Thomas R. Slome Jil Mazer-Marino Jessica G. Berman MEYER, SUOZZI, ENGLISH & KLEIN, P.C. 990 Stewart Avenue, Suite 300 P.O. Box 9194 Garden City, New York Telephone: (516) Facsimile: (516) and Russell R. Johnson III John M. Craig LA W FIRM OF RUSSELL R. JOHNSON 2258 Wheatlands Drive Manakin-Sabot, Virginia Telephone: (804) Facsimile: (804) III, PLC Co-Counsel for American Electric Power UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: AMR CORPORATION, ~) et af., Debtors. ) ) Chapter 11 ) ) Case No (SHL) ) ) (Jointly Administered) ) DECLARATION OF GREGORY T. HOLLAND IN SUPPORT OF OBJECTION OF CERTAIN UTILITY COMPANIES TO THE MOTION OF DEBTORS FOR ENTRY OF ORDER PURSUANT TO 11 U.S.c. 105(a) AND 366 (I) APPROVING DEBTORS' PROPOSED FORM OF ADEQUATE ASSURANCE OF PAYMENT TO UTILITIES, (II) ESTABLISHING PROCEDURES FOR RESOLVING OBJECTIONS BY UTILITY COMPANIES, AND (III) PROHIBITING UTILITIES FROM... ALTERING. REFUSING. OR DISCONTINUING SERVICE I, Gregory T. Holland, declare as follows:

2 Pg 2 of I am the Manager of Credit and Collections for all eleven operating companies doing business as "American Electric Power," which operate in eleven different states. The operating companies and the states in which they operate are listed below: a. Appalachian Power Company - Virginia and West Virginia b. Ohio Power Company - Ohio c. Columbus Southern Power Company - Ohio d. Southwestern Electric Power Company - Arkansas, Louisiana and Texas e. Indiana/Michigan Power Company - Indiana and Michigan f. Public Service Company of Oklahoma - Oklahoma g. Kingsport Power Company - Tennessee h. Kentucky Power Company - Kentucky 1. Wheeling Power Company - West Virginia 2. It is part of my job responsibility to deal with credit and bankruptcy issues concerning customers' accounts and to review credit and payment histories of customers for all eleven operating companies doing business as "American Electric Power." Additionally, my job responsibilities also include ensuring that the eleven American Electric Power operating companies are in compliance with the applicable Public Utility Commission Rules and Regulations governing electric utility companies in eleven different states. 3. Except as otherwise stated, all facts contained within this Declaration are based upon personal knowledge, my review of AEP's business documents, correspondence and relevant docurpents, or my opinion base9 upon my experience coi1cerning the operations of.aep. If called upon to testify, I would testify to the facts set forth in this Declaration. 2

3 Pg 3 of On behalf of AEP, I submit this Declaration in support of the Objection o.fcertain Utility Companies to the Motion of Debtors For EntlY of Order Pursuant to 11 Us.e. 105(a) and 366 (I) Approving Debtors' Proposed Form of Adequate Assurance of Payment to Utilities; (II) Establishing Procedures For Resolving Objections By Utility Companies, and (III) Prohibiting Utilities From Altering, Refi/sing, or Discontinuing Service (the "Objection"). 5. In making this Declaration, I am familiar with the contents of the Objection and the Motion of Debtors For EntlY of Order Pursuant to 11 Us.e. 105 (a) and 366 (I) Approving Debtors' Proposed Form of Adequate Assurance of Payment to Utilities; (II) Establishing Procedures For Resolving Objections By Utility Companies, and (III) Prohibiting Utilities From Altering, Refi/sing, or Discontinuing Service (the "Utility Motion"). Accordingly, I am aware of the Debtors' proposed adequate assurance of payment in the form of two-week deposits. As AEP issues bills on a monthly basis, a two-week deposit amount is insufficient as discussed herein. 6. It is part of my job responsibility with AEP to: (A) review customer's accounts with AEP; (B) address credit issues with AEP's customers; and (C) address issues concerning customers that file for bankruptcy protection, including requests for adequate assurance of payment. 7. The Debtors propose that any two-week deposit provided to a utility must be returned to the Debtors at the earlier of (i) the entry of an order of the Court authorizing the return of the two-week deposit, or (ii) the effective date of a chapter II plan for the Debtors. Utility Motio!) at ~ 11. AEP does not Qbject to returning a post-p.etition deposit to the Deb,tors once all post-petition charges are paid, but not sooner as proposed by the Debtors. Once AEP is " -'

4 Pg 4 of 18 notified to close an account, either by request by the Debtors, Court Order or upon receiving notice of an effective date of a plan, it will close the applicable post-petition account or accounts and issue a final invoice that provides the Debtors with 20 days to pay the invoice. Accordingly, if AEP was required to return a post-petition deposit as proposed by the Debtors, it would still have unpaid invoices outstanding. Therefore, AEP objects to any provision that would require AEP to return a post-petition deposit prior to the Debtors satisfying all post-petition charges owed to AEP. 8. Public Service Company of Oklahoma d/b/a American Electric Power (referred to herein as "AEP") is a state-regulated public utility that provides electric service to various residential and business customers pursuant to applicable state-mandated tariffs in Oklahoma. The provision of electric utility service to customers in Oklahoma is governed by the Oklahoma Corporation Commission ("OCC") pursuant to (i) the applicable tariffs governing AEP's provision of utility service to the Debtors in Oklahoma can be found at / RatesTariffsO K.aspx, and (ii) Electric Utility Rules of the OCC which can be obtained at searchable.pdf (collectively, the "Tariffs"). 9. The Tariffs establish the billing and payment terms for all of AEP's approximately 525,000 customers in Oklahoma. Specifically, under the billing cycle established by the Tariffs, AEP issues bills to its customers on a monthly basis. Accordingly, the Debtors, like AEP's other customers, receive between 25 and 35 days of utility service before AEP issues a bill for suc!) service. Once a bill is is,sued, the customer has 20, days to pay the applicabl~ bill (If the due date falls on a holiday or weekend, the customer is given more than 20 days to pay the 4

5 Pg 5 of 18 bill). If the customer fails to timely pay the bill, a past due notice is issued and a late fee is subsequently imposed on the account. If the customer fails to pay the bill after the issuance of the past due notice, AEP provides at least ten days' written notice informing the customer that it must cure the arrearage within a certain period of time or its service will be disconnected. Accordingly, under AEP's billing cycles, the Debtors could receive approximately two months of unpaid service before their service could be terminated for a post-petition payment default. 10. Based on the foregoing billing cycle mandated by the Tariffs, AEP is seeking a two-month deposit in the amount of $1,813,396 from the Debtors as adequate assurance of future payment, which is based on two times the average monthly bill for the prior twelve-month period. The two-month deposit is also the deposit amount authorized by the Tariffs (Schedule: Deposit Plan, Sheet No , effective 1131/11, which can be found at ities/l ib/docs/ratesandtariffs/oklahomalriders _ Misc _ Sc hedules_ pdf), a copy of which is attached to this Declaration as Exhibit A. 11. AEP provided the Debtors with utility goods and services prior to the November 29,2011 petition date. Although the Debtors generally paid their prepetition invoices on time, the chart attached as Exhibit B demonstrates that even with the timely payment of invoices, the amount of exposure AEP faces with each invoice on each of its three largest accounts is over 40 days. Accordingly, as a result of the foregoing exposure and after application of a $94, prepetition deposit, AEP incurred a prepetition loss on all of its accounts with the Debtors in the amount of$732, AEP continues to provide post-petition utility gopds and services to the D~btors at the Debtors' accounts that are listed on the chart attached to this Declaration as Exhibit C. 5

6 Pg 6 of 18 I declare under penalty of perjury pursuant to 28 U.S.C that the foregoing is true and correct to the best of my knowledge, information, and belief. Executed thi/-{-~ day of January 2012, at Roanoke, Virgl ~J 'L6 6

7 Pg 7 of 18 EXHIBIT A

8 Pg 8 of 18 PUBLIC SERVICE COMPANY OF OKLAHOMA P.O. BOX 201 TULSA, OKLAHOMA PHONE: KIND OF SERVICE: ELECTRIC SCHEDULE: DEPOSIT PLAN SHEET NO. REPLACES SHEET NO. EFFECTIVE DATE /31/11 AVAILABILITY The following is Public Service Company of Oklahoma's Deposit Plan for all classification of Customers. Where a difference in the deposit criteria exists between Residential and non-residential Customers, it shall be specifically stated in the plan. PURPOSE OF SECURITY DEPOSIT Customer deposits are security for the payment of any unpaid amounts the customer may owe at the time of service termination. This amount includes, but is not limited to: Monthly bills Service charges Meter diversion charges Temporary service DEPOSIT RECORDS Accurate records are maintained on customer deposits for two years after service termination or deposit is refunded or applied. These records shall include: Account number Customer's name Current address Deposit receipt number Date of deposit Amount of deposit Date interest paid to Amount of interest paid to date Date deposit refunded or applied Rates Authorized by the Oklahoma Corporation Commission Effective January 31, 2011 January 29, 2009 Order Number Cause I Docket Number PUD PUD

9 Pg 9 of 18 PUBLIC SERVICE COMPANY OF OKLAHOMA P.O. BOX 201 TULSA, OKLAHOMA PHONE: KIND OF SERVICE: ELECTRIC SCHEDULE: DEPOSIT PLAN SHEET NO. REPLACES SHEET NO. EFFECTIVE DATE I /3 1/11 ESTABLISIllNG DEPOSIT AMOUNT Public Service Company shall not require a deposit of more than 1/6 of the average annual bill based on previous billing history on the account. No deposit will be required from a residential customer who has received the same or similar type and classification of service for twelve (12) consecutive months and service was not terminated for non-payment nor was payment late more than twice nor was a check for payment dishonored. The twelve (12) month service period shall have been within eighteen (18) months prior to the application for new service. If the billing history is insufficient or not available, PSG may estimate the average based on one or more of the following: 1. Square footage 2. Appliance usage 3. Conservation measures 4. Same type of service at another location 5. Load (which includes connected horsepower, lighting, incidental load and hours of operation) 6. Type of heating and cooling 7. Minimum deposit amount Deposit amounts may be reduced when. one or more of the following conditions exist: 1. Reduction in installed appliances or equipment 2. Reduced usage 3. Installation of higher efficiency heating/cooling equipment 4. Added conservation measures 5. Rate changes 6. Sufficient on-peak and off-peak billing history ISSUING DEPOSIT RECEIPTS Customers paying deposits at an authorized PSG paystation will be given a non-assignable receipt for their deposit at that time. Receipts for billed deposits shall be mailed to the customer within 10 days after the billed deposit amount is paid. Rates Authorized by the Oklahoma Corporation Commission Effective January 31, 2011 January 29, 2009 Order Number Cause / Docket Number PUD PUD

10 Pg 10 of 18 PUBLIC SERVICE COMPANY OF OKLAHOMA P.O. BOX 201 TULSA, OKLAHOMA PHONE: KIND OF SERVICE: ELECTRIC SCHEDULE: DEPOSIT PLAN SHEET NO. REPLACES SHEET NO. EFFECTIVE DATE ~ /31/11 INTEREST ON ACTIVE DEPOSITS Accrued interest on active deposits held at least 30 days or longer, shall be credited to the customer's billing at least once annually. If deposit was refunded or applied within one year, interest will be based on one year u.s. Treasury Securities interest rate, otherwise if deposit retained, interest will be based on ten year U. S. Treasury Securities interest rate. These rates will be established by the Oklahoma Corporation Commission (OCe). REFUNDING DEPOSIT AND INTEREST ON FINAL BILLS Deposit and accrued interest shall be applied to the fmal billing up to and including the service termination date. When the deposit and interest exceed the final billing, the credit balance shall be refunded by refund draft within 30 days. The customer shall not be required to return the deposit receipt at the time of service termination or time of refund. DISPUTED BILLS PSO may withhold refund or return of a customer's deposit until a dispute of any charges covered by the deposit is resolved. RESIDENTIAL ACCOUNTS WITII INADEQUATE DEPOSITS PSO shall communicate with the customer, by letter, to obtain a cash deposit or one of the appropriate deposit options on accounts with inadequate deposit amounts which have become past due two or more times in the last 12 months, has had service discontinued for non-payment, or had a check for payment dishonored more than once in a year. TRANSFER/SALES With the sale or transfer of service territory to any other utility, PSG shall file with the application of transfer, a verified listing of all active customer deposit records affected by this sale or transfer. Rates Authorized by the Oklahoma Corporation Commission Effective January 31, 2011 January 29, 2009 Order Number Cause / Docket Number PUD PUD

11 Pg 11 of 18 PUBLIC SERVICE COMPANY OF OKLAHOMA P.O. BOX 201 TULSA, OKLAHOMA PHONE: KIND OF SERVICE: ELECTRIC SCHEDULE: DEPOSIT PLAN SHEET NO. REPLACES SHEET NO.. EFFECTIVE DATE /31/11 OPTIONS TO CASH DEPOSITS FOR RESIDENTIAL CUSTOMERS Based on infonnation provided by the customer, PSG shall consider one of the following options to a cash deposit that will satisfy both the customer and company needs: LETTER OF GUARANTEE PSG customers with 12 months good pay history may sign a Residential Letter of Guarantee for any residential customer. The Guarantor will be liable for the tenns specified in the Residential Letter of Guarantee. The fonn, which includes Third Party Notification, is available, upon request from PSG. LETTER OF REFERENCE A letter of referral from another utility company that indicates satisfactory payment record. DEFERRED DEPOSIT AMOUNT The deposit amount is recorded on the customer's account, but is not charged unless the customer has a past due bill (greater than $10.00) and the account becomes past due at any monthly bill date. BILLED DEPOSITS Rather than pay the deposit amount when applying for electric service, the customer may pay the billed deposit with their first electric service bill. INSTALLMENTS ON BILLED DEPOSIT It is possible to arrange to make the billed deposit payments in installments, with partial payment allowed initially and installments not to exceed three consecutive months. Rates Authorized by the Oklahoma Corporation Commission Effective January 31, 2011 January 29, 2009 Order Number Cause I Docket Number PUD PUD

12 Pg 12 of 18 PUBLIC SERVICE COMPANY OF OKLAHOMA P.O. BOX 201 TULSA, OKLAHOMA PHONE: KIND OF SERVICE: ELECTRIC SCHEDULE: DEPOSIT PLAN SHEET NO. REPLACES SHEET NO. EFFECTIVE DATE /31/11 PREVIOUS PAY IllSTORY A deferred deposit may be required of a residential customer whose last 12 consecutive months of service was with satisfactory pay history, provided service was terminated within the last 18 months. REFUNDING DEPOSITS ON ACTIVE RESIDENTIAL ACCOUNTS Customers' payinent history shall be reviewed monthly. Customers with 1D out of 12 months satisfactory pay history (as defmed in the next section) will be refunded their deposit with accrued interest by either a credit against billing or by refund draft. SATISFACTORYPAYMENTIDSTORY - RESIDENTIAL PSO considers a satisfactory pay customer as a customer who meets all of the following criteria: No past due or returned check balance in current month No more than two 3D-day balances in last 12 months No more than one returned check in the last 12 months No history of diversion on the account Service has not been disconnected within last 12 months OPTIONS TO CASH DEPOSITS FOR NON-RESIDENTIAL CUSTOMERS Based on information provided by the customer, PSO shall consider one of the following options to a cash deposit that will satisfy both the customer and company needs: IRREVOCABLE LETTER OF CREDIT Customer may obtain an Irrevocable Letter of Credit ITom banks or other financial institutions. The bank guarantees to pay a specific amount if the customer does not pay the final bill. Rates Authorized by the Oklahoma Corporation Commission Effective January 31, 2011 January 29,2009 Order Number Cause / Docket Number PUD PUD

13 Pg 13 of 18 PUBLIC SERVICE COMPANY OF OKLAHOMA P.O. BOX 201 TULSA, OKLAHOMA PHONE: KIND OF SERVICE: ELECTRIC SCHEDULE: DEPOSIT PLAN SHEET NO. REPLACES SHEET NO. EFFECTIVE DATE /31/11 SURETY BOND A surety bond may be purchased by the customer from an Oklahoma based Insurance Company. They are normally for the amount of the deposit. Surety Bonds must have an expiration date of not less than 12 months. BILLED DEPOSITS Rather than pay the deposit amount when applying for electric service, the customer may pay the billed deposit with their first electric service bill. INSTALLMENTS ON BILLED DEPOSIT It is possible to arrange to make the billed deposit payments in installments, with partial payment allowed initially and installments not to exceed three consecutive months. DEFERRED DEPOSITS The deposit amount is recorded on the customer's account, but is not charged unless the customer has a past due bill (greater than $10.00) and the account becomes past due at any monthly bill date. REFUNDING DEPOSITS ON ACTIVE NON-RESIDENTIAL ACCOUNTS Non-residential customer service deposits of less than $20,000, with accrued interest, will be automatically refunded after twenty-four (24) months' satisfactory payment of undisputed charges and where payment was not late more than twice; provided, however, that service has not been disconnected within the twenty-four (24) month period. Non-residential customers, who meet the above criteria, must have a minimum of five (5) years continuous service at the service location with PSO before a deposit will be refunded. Rates Authorized by the Oklahoma Corporation Commission Effective January 31, 2011 January 29, 2009 Order Number Cause 1Docket Number PUD PUD

14 Pg 14 of 18 PUBLIC SERVICE COMPANY OF OKLAHOMA P.O. BOX 201 TULSA, OKLAHOMA PHO!\'E: KIND OF SERVICE: ELECTRIC SCHEDULE: DEPOSIT PLA~ SHEET NO. REPLACES SHEET NO. EFFECTIVE DATE /11 -NON-RESIDENTIAL ACCOUNTS WITII JNADEQUATE DEPOSITS A non-residential customer may be required to post a supplemental deposit amount if PSO determines an inadequate amount exists due to any of the following events: 1) Ifundisputed charges have become delinquent, with delinquent meaning a payment not received on or before the due date as posted on the bill in two (2) out of the last twenty-four billing periods, or 2) if the customer has had service disconnected during the last twenty-four (24) months, or 3) has presented a check subsequently dishonored. This plan shall be administered in accordance with the Oklahoma Corporation Commission's established Rules and Regulations. Rates Authorized by the Oklahoma Corporation Commission Effective January 31, 2011 January 29, 2009 Order Number Cause I Docket Number PUD PUD

15 Pg 15 of 18 EXHIBIT B

16 Pg 16 of , $ $ 4, , , , , , , , , , $ $ 6/13/ $ 774, , , , , , , , , , , , /12/ , /9/ , /12/ , /15/ , /15/ , /14/ , /30/ , /14/ , /24/ , /17/ , /11/ , /12/ , /12/ , /10/ , /14/ , , , , , , , , , , , , , , , , , , , , , /22/ /16/ /10/2011 2/14/2011 3/22/2011 4/26/2011 6/28/2011 7/19/2011 8/17/2011 9/19/2011 1/24/2011 5/26/ /14/ /24/ /11/ /12/ /13/ /14/ /12/ /13/ /3/ Monthlv Davs Service Payment of Exposure Bill Period Amount Date Amount Not Not Not Paid Paid Exhibit B American Airlines Billing Information 10/1-10/31/10 10/1-10/31/10

17 Pg 17 of 18 EXHIBIT C

18 Pg 18 of 18 K AMR CORPORATION SERVICE H xxx-xxx xxx-xxx POST-PETITION xxx-xxx xxx-xxx xxx-xxx xxx-xxx xxx-xxx xxx-xxx xxx-xxx xxx-xxx DEPOSIT NAME AMERICAN E PINE ADDRESS APACHE QUOTE $ $ ST AIRLINES ACCT ST # H AMERICAN $1,628, NE $13, E $17,46800 $81, $58, ST 77TH MINGO 85TH $6, $4, $1, $1,16000 APACHE PINE READING $ $ AIRLINES EAST RDN STPL AVE NEMEMORIAL APACHE STDR $1,813, AMERICAN AEP ACCTS AIRLINES PRE-PETITION ACCT #