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.

3

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.

4

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.

8

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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.