Appendix A to the
Proxy Statement
American Electric Power
2023 Annual Report
Audited Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of Operations
AMERICAN ELECTRIC POWER | |
1 Riverside Plaza | |
CONTENTS | Columbus, Ohio 43215-2373 |
Glossary of Terms | 3 |
Forward-Looking Information | 8 |
AEP Common Stock Information | 10 |
Management's Discussion and Analysis of Financial Condition and Results of Operations | 11 |
Report of Independent Registered Public Accounting Firm | 53 |
Management's Report on Internal Control Over Financial Reporting | 56 |
Consolidated Statements of Income | 57 |
Consolidated Statements of Comprehensive Income (Loss) | 58 |
Consolidated Statements of Changes in Equity | 59 |
Consolidated Balance Sheets | 60 |
Consolidated Statements of Cash Flows | 62 |
Index of Notes to Financial Statements of Registrants | 63 |
Corporate and Shareholder Information | 205 |
Executive Leadership Team | 206 |
GLOSSARY OF TERMS
When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.
Term | Meaning | |
AEGCo | AEP Generating Company, an AEP electric utility subsidiary. | |
AEP | American Electric Power Company, Inc., an investor-owned electric public utility holding | |
company which includes American Electric Power Company, Inc. (Parent) and | ||
majority-owned consolidated subsidiaries and consolidated affiliates. | ||
AEP Credit | AEP Credit, Inc., a consolidated VIE of AEP which securitizes accounts receivable and | |
accrued utility revenues for affiliated electric utility companies. | ||
AEP East Companies | APCo, I&M, KGPCo, KPCo, OPCo and WPCo. | |
AEP Energy | AEP Energy, Inc., a wholly-owned retail electric supplier for customers in Ohio, Illinois and | |
other deregulated electricity markets throughout the United States. | ||
AEP Energy Supply, LLC | A nonregulated holding company for AEP's competitive generation, wholesale and retail | |
businesses, and a wholly-owned subsidiary of AEP. | ||
AEP OnSite Partners | A division of AEP Energy Supply, LLC that builds, owns, operates and maintains customer | |
solutions utilizing existing and emerging distributed technologies. | ||
AEP Renewables | A division of AEP Energy Supply, LLC that develops and/or acquires large scale renewable | |
projects that are backed with long-term contracts with creditworthy counter parties. | ||
AEP System | American Electric Power System, an electric system, owned and operated by AEP | |
subsidiaries. | ||
AEP Texas | AEP Texas Inc., an AEP electric utility subsidiary. AEP Texas engages in the transmission | |
and distribution of electric power to retail customers in west, central and southern Texas. | ||
AEP Transmission Holdco | AEP Transmission Holding Company, LLC, a wholly-owned subsidiary of AEP. | |
AEP Wind Holdings, LLC | Acquired in April 2019 as Sempra Renewables LLC, develops, owns and operates, or holds | |
interests in, wind generation facilities in the United States. | ||
AEPEP | AEP Energy Partners, Inc., a subsidiary of AEP dedicated to wholesale marketing and | |
trading, hedging activities, asset management and commercial and industrial sales in | ||
deregulated markets. | ||
AEPSC | American Electric Power Service Corporation, an AEP service subsidiary providing | |
management and professional services to AEP and its subsidiaries. | ||
AEPTCo | AEP Transmission Company, LLC, a wholly-owned subsidiary of AEP Transmission | |
Holdco, is an intermediate holding company that owns the State Transcos. | ||
AEPTCo Parent | AEP Transmission Company, LLC, the holding company of the State Transcos within the | |
AEPTCo consolidation. | ||
AEPTHCo | AEP Transmission Holding Company, LLC, a subsidiary of AEP, an intermediate holding | |
company that owns transmission operations joint ventures and AEPTCo. | ||
AFUDC | Allowance for Equity Funds Used During Construction. | |
AGR | AEP Generation Resources Inc., a competitive AEP subsidiary in the Generation & | |
Marketing segment. | ||
ALJ | Administrative Law Judge. | |
AOCI | Accumulated Other Comprehensive Income. | |
APCo | Appalachian Power Company, an AEP electric utility subsidiary. APCo engages in the | |
generation, transmission and distribution of electric power to retail customers in the | ||
southwestern portion of Virginia and southern West Virginia. | ||
Appalachian Consumer Rate | Appalachian Consumer Rate Relief Funding LLC, a wholly-owned subsidiary of APCo and | |
Relief Funding | a consolidated VIE formed for the purpose of issuing and servicing securitization bonds | |
related to the under-recovered ENEC deferral balance. | ||
APTCo | AEP Appalachian Transmission Company, Inc., a wholly-owned AEPTCo transmission | |
subsidiary. | ||
APSC | Arkansas Public Service Commission. | |
ARO | Asset Retirement Obligations. | |
ASU | Accounting Standards Update. | |
ATM | At-the-Market. |
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Term | Meaning |
BHE | Berkshire Hathaway Energy. |
CAA | Clean Air Act. |
CCR | Coal Combustion Residual. |
CLECO | Central Louisiana Electric Company, a nonaffiliated utility company. |
CO2 | Carbon dioxide and other greenhouse gases. |
Cook Plant | Donald C. Cook Nuclear Plant, a two-unit, 2,296 MW nuclear plant owned by I&M. |
COVID-19 | Coronavirus 2019, a highly infectious respiratory disease. In March 2020, the World Health |
Organization declared COVID-19 a worldwide pandemic. | |
CRES provider | Competitive Retail Electric Service providers under Ohio law that target retail customers by |
offering alternative generation service. | |
CSAPR | Cross-State Air Pollution Rule. |
CSPCo | Columbus Southern Power Company, a former AEP electric utility subsidiary that was |
merged into OPCo effective December 31, 2011. | |
CWIP | Construction Work in Progress. |
DCC Fuel | DCC Fuel XIII, DCC Fuel XIV, DCC Fuel XV, DCC Fuel XVI, DCC Fuel XVII, DCC Fuel |
XVIII and DCC Fuel XIX consolidated VIEs formed for the purpose of acquiring, | |
owning and leasing nuclear fuel to I&M. | |
DHLC | Dolet Hills Lignite Company, LLC, a wholly-owned lignite mining subsidiary of SWEPCo. |
DIR | Distribution Investment Rider. |
DOE | U. S. Department of Energy. |
EIS | Energy Insurance Services, Inc., a nonaffiliated captive insurance company and consolidated |
VIE of AEP. | |
ELG | Effluent Limitation Guidelines. |
ENEC | Expanded Net Energy Cost. |
Equity Units | AEP's Equity Units issued in August 2020 and March 2019. |
ERCOT | Electric Reliability Council of Texas regional transmission organization. |
ESP | Electric Security Plans, a PUCO requirement for electric utilities to adjust their rates by |
filing with the PUCO. | |
ETT | Electric Transmission Texas, LLC, an equity interest joint venture between AEP |
Transmission Holdco and Berkshire Hathaway Energy Company formed to own and | |
operate electric transmission facilities in ERCOT. | |
Excess ADIT | Excess accumulated deferred income taxes. |
FAC | Fuel Adjustment Clause. |
FASB | Financial Accounting Standards Board. |
Federal EPA | United States Environmental Protection Agency. |
FERC | Federal Energy Regulatory Commission. |
FGD | Flue Gas Desulfurization or scrubbers. |
FIP | Federal Implementation Plan. |
FTR | Financial Transmission Right, a financial instrument that entitles the holder to receive |
compensation for certain congestion-related transmission charges that arise when the | |
power grid is congested resulting in differences in locational prices. | |
GAAP | Accounting Principles Generally Accepted in the United States of America. |
GHG | Greenhouse gas. |
I&M | Indiana Michigan Power Company, an AEP electric utility subsidiary. I&M engages in the |
generation, transmission and distribution of electric power to retail customers in | |
northern and eastern Indiana and southwestern Michigan. | |
IMTCo | AEP Indiana Michigan Transmission Company, Inc., a wholly-owned AEPTCo transmission |
subsidiary. | |
IRA | On August 16, 2022 President Biden signed into law legislation commonly referred to as the |
"Inflation Reduction Act" (IRA). | |
IRP | Integrated Resource Plan. |
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Term | Meaning |
IRS | Internal Revenue Service. | |
ITC | Investment Tax Credit. | |
IURC | Indiana Utility Regulatory Commission. | |
KGPCo | Kingsport Power Company, an AEP electric utility subsidiary. | KGPCo provides electric |
service to retail customers in Kingsport, Tennessee and eight neighboring communities | ||
in northeastern Tennessee. | ||
KPCo | Kentucky Power Company, an AEP electric utility subsidiary. | KPCo engages in the |
generation, transmission and distribution of electric power to retail customers in eastern | ||
Kentucky. | ||
KPSC | Kentucky Public Service Commission. | |
KTCo | AEP Kentucky Transmission Company, Inc., a wholly-owned AEPTCo transmission | |
subsidiary. | ||
kV | Kilovolt. | |
KWh | Kilowatt-hour. | |
Liberty | Liberty Utilities Co., a subsidiary of Algonquin Power & Utilities Corporation. | |
LPSC | Louisiana Public Service Commission. | |
MATS | Mercury and Air Toxic Standards. | |
Maverick | Maverick, part of the North Central Wind Energy Facilities, consists of 287 MWs of wind | |
generation in Oklahoma. | ||
MISO | Midcontinent Independent System Operator. | |
Mitchell Plant | A two unit, 1,560 MW coal-fired power plant located in Moundsville, West Virginia. The | |
plant is jointly owned by KPCo and WPCo. | ||
MMBtu | Million British Thermal Units. | |
MPSC | Michigan Public Service Commission. | |
MTM | Mark-to-Market. | |
MW | Megawatt. | |
MWh | Megawatt-hour. | |
NAAQS | National Ambient Air Quality Standards. | |
NCWF | North Central Wind Energy Facilities, a joint PSO and SWEPCo project, which includes | |
three Oklahoma wind facilities totaling approximately 1,484 MWs of wind generation. | ||
NERC | North American Electric Reliability Corporation. | |
NMRD | New Mexico Renewable Development, LLC. | |
Nonutility Money Pool | Centralized funding mechanism AEP uses to meet the short-term cash requirements of | |
certain nonutility subsidiaries. | ||
NOL | Net operating losses. | |
NOLC | Net operating loss carryforwards. | |
NOx | Nitrogen oxide. | |
NRC | Nuclear Regulatory Commission. | |
OATT | Open Access Transmission Tariff. | |
OCC | Corporation Commission of the State of Oklahoma. | |
OHTCo | AEP Ohio Transmission Company, Inc., a wholly-owned AEPTCo transmission subsidiary. | |
OKTCo | AEP Oklahoma Transmission Company, Inc., a wholly-owned AEPTCo transmission | |
subsidiary. | ||
OPCo | Ohio Power Company, an AEP electric utility subsidiary. OPCo engages in the transmission | |
and distribution of electric power to retail customers in Ohio. | ||
OPEB | Other Postretirement Benefits. | |
Operating Agreement | Agreement, dated January 1, 1997, as amended, by and among PSO and SWEPCo governing | |
generating capacity allocation, energy pricing, and revenues and costs of third-party | ||
sales. AEPSC acts as the agent. | ||
OTC | Over-the-counter. | |
OVEC | Ohio Valley Electric Corporation, which is 43.47% owned by AEP. |
5
Term | Meaning |
Parent | American Electric Power Company, Inc., the equity owner of AEP subsidiaries within the |
AEP consolidation. | |
PCA | Power Coordination Agreement among APCo, I&M, KPCo and WPCo. |
PJM | Pennsylvania - New Jersey - Maryland regional transmission organization. |
PM | Particulate Matter. |
PPA | Purchase Power and Sale Agreement. |
PSA | Purchase and Sale Agreement. |
PSO | Public Service Company of Oklahoma, an AEP electric utility subsidiary. PSO engages in |
the generation, transmission and distribution of electric power to retail customers in | |
eastern and southwestern Oklahoma. | |
PTC | Production Tax Credit. |
PUCO | Public Utilities Commission of Ohio. |
PUCT | Public Utility Commission of Texas. |
Registrant Subsidiaries | AEP subsidiaries which are SEC registrants: AEP Texas, AEPTCo, APCo, I&M, OPCo, |
PSO and SWEPCo. | |
Registrants | SEC registrants: AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo. |
REP | Texas Retail Electric Provider. |
Restoration Funding | AEP Texas Restoration Funding LLC, a wholly-owned subsidiary of AEP Texas and a |
consolidated VIE formed for the purpose of issuing and servicing securitization bonds | |
related to storm restoration in Texas primarily caused by Hurricane Harvey. | |
Risk Management Contracts | Trading and non-trading derivatives, including those derivatives designated as cash flow and |
fair value hedges. | |
Rockport Plant | A generation plant, jointly-owned by AEGCo and I&M, consisting of two 1,310 MW coal- |
fired generating units near Rockport, Indiana. | |
ROE | Return on Equity. |
RPM | Reliability Pricing Model. |
RTO | Regional Transmission Organization, responsible for moving electricity over large interstate |
areas. | |
Sabine | Sabine Mining Company, a lignite mining company that is a consolidated VIE for AEP and |
SWEPCo. | |
Santa Rita East | Santa Rita East Wind Holdings, LLC, a consolidated VIE whose sole purpose is to own and |
operate a 302 MW wind generation facility in west Texas in which AEP owns an 85% | |
interest. | |
SEC | U.S. Securities and Exchange Commission. |
Sempra Renewables LLC | Sempra Renewables LLC, acquired in April 2019 (subsequently renamed as AEP Wind |
Holdings LLC), consists of 724 MWs of wind generation and battery assets in the | |
United States. | |
SIP | State Implementation Plan. |
SNF | Spent Nuclear Fuel. |
SO2 | Sulfur dioxide. |
SPP | Southwest Power Pool regional transmission organization. |
SSO | Standard service offer. |
State Transcos | AEPTCo's seven wholly-owned, FERC regulated, transmission only electric utilities, which |
are geographically aligned with AEP's existing utility operating companies. | |
Sundance | Sundance, acquired in April 2021 as part of the North Central Wind Energy Facilities, |
consists of 199 MWs of wind generation in Oklahoma. | |
SWEPCo | Southwestern Electric Power Company, an AEP electric utility subsidiary. SWEPCo |
engages in the generation, transmission and distribution of electric power to retail | |
customers in northeastern and panhandle of Texas, northwestern Louisiana and western | |
Arkansas. | |
SWTCo | AEP Southwestern Transmission Company, Inc., a wholly-owned AEPTCo transmission |
subsidiary. | |
TA | Transmission Agreement, effective November 2010, among APCo, I&M, KGPCo, KPCo, |
OPCo and WPCo with AEPSC as agent. |
6
Term | Meaning |
Tax Reform | On December 22, 2017, President Trump signed into law legislation referred to as the "Tax |
Cuts and Jobs Act" (the TCJA). The TCJA includes significant changes to the Internal | |
Revenue Code of 1986, including a reduction in the corporate federal income tax rate | |
from 35% to 21% effective January 1, 2018. | |
TCA | Transmission Coordination Agreement dated January 1, 1997, by and among, PSO, |
SWEPCo and AEPSC, in connection with the operation of the transmission assets of the | |
two public utility subsidiaries. | |
Transition Funding | AEP Texas Central Transition Funding III LLC, a wholly-owned subsidiary of AEP Texas |
and consolidated VIE formed for the purpose of issuing and servicing securitization | |
bonds related to restructuring legislation in Texas. | |
Transource Energy | Transource Energy, LLC, a consolidated VIE formed for the purpose of investing in utilities |
which develop, acquire, construct, own and operate transmission facilities in accordance | |
with FERC-approved rates. | |
Traverse | Traverse, part of the North Central Wind Energy Facilities, consists of 998 MWs of wind |
generation in Oklahoma. | |
Turk Plant | John W. Turk, Jr. Plant, a 650 MW coal-fired plant in Arkansas that is 73% owned by |
SWEPCo. | |
UMWA | United Mine Workers of America. |
UPA | Unit Power Agreement. |
Utility Money Pool | Centralized funding mechanism AEP uses to meet the short-term cash requirements of |
certain utility subsidiaries. | |
VIE | Variable Interest Entity. |
Virginia SCC | Virginia State Corporation Commission. |
WPCo | Wheeling Power Company, an AEP electric utility subsidiary. WPCo provides electric |
service to retail customers in northern West Virginia. | |
WVPSC | Public Service Commission of West Virginia. |
WVTCo | AEP West Virginia Transmission Company, Inc., a wholly-owned AEPTCo transmission |
subsidiary. |
7
FORWARD-LOOKING INFORMATION
This report made by the Registrants contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Many forward-looking statements appear in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations," but there are others throughout this document which may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue" and similar expressions, and include statements reflecting future results or guidance and statements of outlook. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Forward-looking statements in this document are presented as of the date of this document. Except to the extent required by applicable law, management undertakes no obligation to update or revise any forward-looking statement. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are:
- Changes in economic conditions, electric market demand and demographic patterns in AEP service territories.
- The economic impact of increased global trade tensions including the conflicts in Ukraine and the Middle East, and the adoption or expansion of economic sanctions or trade restrictions.
- Inflationary or deflationary interest rate trends.
- Volatility and disruptions in financial markets precipitated by any cause, including failure to make progress on federal budget or debt ceiling matters or instability in the banking industry; particularly developments affecting the availability or cost of capital to finance new capital projects and refinance existing debt.
- The availability and cost of funds to finance working capital and capital needs, particularly (i) if expected sources of capital such as proceeds from the sale of assets, subsidiaries and tax credits and anticipated securitizations do not materialize or do not materialize at the level anticipated, and (ii) during periods when the time lag between incurring costs and recovery is long and the costs are material.
- Decreased demand for electricity.
- Weather conditions, including storms and drought conditions, and the ability to recover significant storm restoration costs.
- Limitations or restrictions on the amounts and types of insurance available to cover losses that might arise in connection with natural disasters or operations.
- The cost of fuel and its transportation, the creditworthiness and performance of fuel suppliers and transporters and the cost of storing and disposing of used fuel, including coal ash and SNF.
- The availability of fuel and necessary generation capacity and the performance of generation plants.
- The ability to recover fuel and other energy costs through regulated or competitive electric rates.
- The ability to transition from fossil generation and the ability to build or acquire renewable generation, transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms, including favorable tax treatment, cost caps imposed by regulators and other operational commitments to regulatory commissions and customers for renewable generation projects, and to recover all related costs.
- The impact of pandemics and any associated disruption of AEP's business operations due to impacts on economic or market conditions, costs of compliance with potential government regulations, electricity usage, supply chain issues, customers, service providers, vendors and suppliers.
- New legislation, litigation or government regulation, including changes to tax laws and regulations, oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or PM and other substances that could impact the continued operation, cost recovery and/or profitability of generation plants and related assets.
- The impact of federal tax legislation on results of operations, financial condition, cash flows or credit ratings.
- The risks before, during and after generation of electricity associated with the fuels used or the byproducts and wastes of such fuels, including coal ash and SNF.
- Timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance.
- Resolution of litigation or regulatory proceedings or investigations.
- The ability to efficiently manage operation and maintenance costs.
- Prices and demand for power generated and sold at wholesale.
- Changes in technology, particularly with respect to energy storage and new, developing, alternative or distributed sources of generation.
- The ability to recover through rates any remaining unrecovered investment in generation units that may be retired before the end of their previously projected useful lives.
- Volatility and changes in markets for coal and other energy-related commodities, particularly changes in the price of natural gas.
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AEP - American Electric Power Company Inc. published this content on 01 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 March 2024 20:24:07 UTC.