In 2002, we served more than one million customers. Our marketplace is the key link between our business and the communities we serve.

Our impact on society in the marketplace is made up of the impact of what we produce and how we buy and sell. How much value or harm do our core products and services produce? Is our approach to marketing, advertising and procurement fair and honest, as well as effective?

In the US, the market environment for electricity companies varies from state to state, depending on the level of deregulation enacted in each jurisdiction.

The electric power industry remains highly regulated at the retail level in much of the US, including Kentucky, although in some parts of the country, including Virginia, it is becoming more competitive as a result of price and supply deregulation and other regulatory changes.

Our primary electric service territories are located in Kentucky, which accounted for 60% of our total revenues in 2002. There is also a small customer base in Virginia and Tennessee.

In contrast to the relatively stable market environment in which our utility businesses operate, our non-utility businesses are largely exposed to changes in wholesale prices for electricity, which have decreased significantly in recent periods, as well as being exposed to increases in fuel costs.

Seasonal variations in US demand for electricity reflect the summer cooling period as the time of peak load requirements, with a lesser peak during the winter heating period, the latter primarily in regions which do not have extensive gas distribution networks. The peak period of retail gas demand is the winter heating period.

We are one of a large number of transmission-owning members of the Midwest Independent Systems Operations (MISO), one of the major regional grid operators in the US. MISO commenced commercial operations on 1 February 2002.