UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 10-K
 
(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to_________

Commission	 	Registrants;			 	I.R.S. Employer	
File Number	 	Address and Telephone Number		 States of Incorporation	 	Identification Nos.	
 	 	 							 	 	
1-3525	 	AMERICAN ELECTRIC POWER CO INC.		New York	 	13-4922640	
333-221643		AEP TEXAS INC.		Delaware		51-0007707	
333-217143	 	AEP TRANSMISSION COMPANY, LLC		Delaware	 	46-1125168	
1-3457	 	APPALACHIAN POWER COMPANY		Virginia	 	54-0124790	
1-3570	 	INDIANA MICHIGAN POWER COMPANY		Indiana	 	35-0410455	
1-6543	 	OHIO POWER COMPANY		Ohio	 	31-4271000	
0-343	 	PUBLIC SERVICE COMPANY OF OKLAHOMA		Oklahoma	 	73-0410895	
1-3146	 	SOUTHWESTERN ELECTRIC POWER COMPANY		Delaware	 	72-0323455	
 	 	1 Riverside Plaza,	Columbus,	Ohio	43215-2373			 	 	
 	 	Telephone	(614)	716-1000					 	 	

Securities registered pursuant to Section 12(b) of the Act:

Registrant	 	Title of each class	 	Trading Symbol		Name of Each Exchange on Which Registered	
American Electric Power Company Inc.		Common Stock, $6.50 par value		AEP		The NASDAQ Stock Market LLC	
American Electric Power Company Inc.		6.125% Corporate Units		AEPPZ		The NASDAQ Stock Market LLC	

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant American Electric Power Company, Inc., AEP Texas Inc., AEP Transmission Company, LLC, Appalachian Power Company, Ohio Power Company and Southwestern Electric Power Company, are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.	Yes	x	No	¨	
					
Indicate by check mark if the registrants Indiana Michigan Power Company and Public Service Company of Oklahoma, are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.	Yes	¨	No	x	
					
Indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.	Yes	¨	No	x	
					
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.	Yes	x	No	¨	
					
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).	Yes	x	No	¨	

Indicate by check mark whether American Electric Power Company, Inc. is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.	
 		
Large Accelerated filer	x	Accelerated filer	☐	Non-accelerated filer	☐			
 		 	 	 	 	 		
Smaller reporting company	☐	Emerging growth company	☐					

Indicate by check mark whether AEP Texas Inc., AEP Transmission Company, LLC, Appalachian Power Company, Indiana Michigan Power Company, Ohio Power Company, Public Service Company of Oklahoma and Southwestern Electric Power Company are large accelerated filers, accelerated filers, non-accelerated filers, smaller reporting companies, or emerging growth companies.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.	
 			
Large Accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	x			
 	 	 	 	 	 			
Smaller reporting company	☐	Emerging growth company	☐	 				

If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.	
		☐				

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.	
		☒				
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.	
	
		¨				
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).	
		¨				

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).		Yes	☐		No	x	

AEP Texas Inc., AEP Transmission Company, LLC, Appalachian Power Company, Indiana Michigan Power Company, Ohio Power Company, Public Service Company of Oklahoma and Southwestern Electric Power Company meet the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and are therefore filing this Form 10-K with the reduced disclosure format specified in General Instruction I(2) to such Form 10-K.

															
 		Aggregate Market Value of Voting and Non-Voting Common Equity Held by Nonaffiliates of the Registrants as of June 30, 2022 the Last Trading Date of the Registrants' Most Recently Completed Second Fiscal Quarter		Number of Shares of Common Stock Outstanding of the Registrants as of December 31, 2022	
American Electric Power Company, Inc.		$49,300,311,811		513,866,081 		
 		 		($6.50 par value)	
AEP Texas Inc.		None		100 		
				($0.01 par value)	
AEP Transmission Company, LLC (a)		None		NA	
					
Appalachian Power Company		None		13,499,500 		
 		 		(no par value)	
Indiana Michigan Power Company		None		1,400,000 		
 		 		(no par value)	
Ohio Power Company		None		27,952,473 		
 		 		(no par value)	
Public Service Company of Oklahoma		None		9,013,000 		
 		 		($15 par value)	
Southwestern Electric Power Company		None		3,680 		
 		 		($18 par value)	
(a)100% interest is held by AEP Transmission Holdco.
NA    Not applicable.

Note on Market Value of Common Equity Held by Nonaffiliates

American Electric Power Company, Inc. owns all of the common stock of AEP Texas Inc., Appalachian Power Company, Indiana Michigan Power Company, Ohio Power Company, Public Service Company of Oklahoma and Southwestern Electric Power Company and, indirectly, all of the LLC membership interest in AEP Transmission Company, LLC (see Item 12 herein).

Documents Incorporated By Reference

Description	 	Part of Form 10-K into which Document is Incorporated	
 	 	 	
Portions of Proxy Statement of American Electric Power Company, Inc. for 2023 Annual Meeting of Shareholders.	 	Part III	

This combined Form 10-K is separately filed by American Electric Power Company, Inc., AEP Texas Inc., AEP Transmission Company, LLC, Appalachian Power Company, Indiana Michigan Power Company, Ohio Power Company, Public Service Company of Oklahoma and Southwestern Electric Power Company.  Information contained herein relating to any individual registrant is filed by such registrant on its own behalf.  Except for American Electric Power Company, Inc., each registrant makes no representation as to information relating to the other registrants.

You can access financial and other information at AEP’s website, including AEP’s Principles of Business Conduct, certain committee charters and Principles of Corporate Governance.  The address is www.AEP.com.  Investors can obtain copies of our SEC filings from this site free of charge, as well as from the SEC website at www.sec.gov.

TABLE OF CONTENTS

Item
Number	 	Page
Number	
 	Glossary of Terms	i	
 	Forward-Looking Information	vii	
			
PART I	
1	Business	 	
 	General	1	
 	Business Segments	15	
 	Vertically Integrated Utilities	15	
 	Transmission and Distribution Utilities	22	
 	AEP Transmission Holdco	24	
 	Generation & Marketing	27	
 	Executive Officers of AEP	30	
1A	Risk Factors	32	
1B	Unresolved Staff Comments	45	
2	Properties	45	
 	Generation Facilities	45	
 	Transmission and Distribution Facilities	51	
 	Title to Property	51	
 	System Transmission Lines and Facility Siting	52	
 	Construction Program	52	
 	Potential Uninsured Losses	52	
3	Legal Proceedings	52	
4	Mine Safety Disclosure	52	
			
PART II	
5	Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	54	
6	Reserved	55	
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	55	
7A	Quantitative and Qualitative Disclosures about Market Risk	55	
8	Financial Statements and Supplementary Data	55	
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	428	
9A	Controls and Procedures	428	
9B	Other Information	428	
9C	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	428	
			
	PART III		
10	Directors, Executive Officers and Corporate Governance	429	
11	Executive Compensation	429	
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	430	
13	Certain Relationships and Related Transactions and Director Independence	430	
14	Principal Accounting Fees and Services	431	
			
PART IV	
15	Exhibits and Financial Statement Schedules		
 	Financial Statements	432	
16	Form 10-K Summary	433	
 	Signatures	434	
 	Index of Financial Statement Schedules	S-1	
 	Exhibit Index	E-1	

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 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.	
AEPRO		AEP River Operations, LLC, a commercial barge operation sold in November 2015.	
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.	
Appalachian Consumer Rate Relief Funding		Appalachian Consumer Rate Relief Funding LLC, a wholly-owned subsidiary of APCo and 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.	
i

									
Term	 	Meaning	
 	 	 	
APSC		Arkansas Public Service Commission.	
ARAM		Average Rate Assumption Method, an IRS approved method used to calculate the reversal of Excess ADIT for rate-making purposes.	
ARO		Asset Retirement Obligations.	
ASU		Accounting Standards Update.	
ATM		At-the-Market.	
CAA	 	Clean Air Act.	
	
CARES Act		Coronavirus Aid, Relief, and Economic Security Act signed into law in March 2020.	
CCR		Coal Combustion Residual.	
CLECO		Central Louisiana Electric Company, a nonaffiliated utility company.	
CO2	 	Carbon dioxide and other greenhouse gases.	
CO2e		Carbon dioxide equivalent.	
Conesville Plant		A retired, single unit coal-fired generation plant totaling 651 MW located in Conesville, Ohio. The plant was jointly-owned by AGR and a nonaffiliate.	
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.	
CWA		Clean Water Act.	
CWIP		Construction Work in Progress.	
DCC Fuel		DCC Fuel XI, DCC Fuel XII, DCC Fuel XIII, DCC Fuel XIV, DCC Fuel XV, DCC Fuel XVI, DCC Fuel XVII and DCC Fuel XVIII consolidated VIEs formed for the purpose of acquiring, owning and leasing nuclear fuel to I&M.	
Desert Sky		Desert Sky Wind Farm LLC, a 170 MW wind electricity generation facility located on Indian Mesa in Pecos County, Texas in which AEP owns a 100% interest.	
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.	
ii

									
Term	 	Meaning	
 	 	 	
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.	
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).	
IRS		Internal Revenue Service.	
ITC		Investment Tax Credit.	
IURC	 	Indiana Utility Regulatory Commission.	
KGPCo	 	Kingsport Power Company, an AEP electric utility subsidiary.	
KPCo	 	Kentucky Power Company, an AEP electric utility subsidiary.	
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.	
NERC		North American Electric Reliability Corporation.	
Nonutility Money Pool	 	Centralized funding mechanism AEP uses to meet the short-term cash requirements of certain nonutility subsidiaries.	
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.	
	
NOL		Net operating losses.	
NOLC		Net operating loss carryforwards.	
NOx	 	Nitrogen oxide.	
NPDES		National Pollutant Discharge Elimination System.	
NRC	 	Nuclear Regulatory Commission.	
NSR		New Source Review.	
iii

									
Term	 	Meaning	
 	 	 	
OATT	 	Open Access Transmission Tariff.	
OCC	 	Corporation Commission of the State of Oklahoma.	
ODFA		Oklahoma Development Finance Authority.	
	
OHTCo		AEP Ohio Transmission Company, Inc., a wholly-owned AEPTCo transmission subsidiary.	
Oklaunion Power Station		A retired, single unit coal-fired generation plant totaling 650 MW located in Vernon, Texas. The plant was jointly-owned by AEP Texas, PSO and certain nonaffiliated entities.	
OKTCo		AEP Oklahoma Transmission Company, Inc., a wholly-owned AEPTCo transmission subsidiary.	
OPCo	 	Ohio Power Company, an AEP electric utility subsidiary.	
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.	
Parent		American Electric Power Company, Inc., the equity owner of AEP subsidiaries within the AEP consolidation.	
PATH-WV		PATH West Virginia Transmission Company, LLC, a joint venture-owned 50% by FirstEnergy and 50% by AEP.	
PCA		Power Coordination Agreement among APCo, I&M, KPCo and WPCo.	
PFD		Proposal for Decision.	
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.	
PTC		Production Tax Credit.	
PUCO	 	Public Utilities Commission of Ohio.	
PUCT	 	Public Utility Commission of Texas.	
Racine		A generation plant consisting of two hydroelectric generating units totaling 48 MWs located in Racine, Ohio and formerly owned by AGR. Racine was sold to a nonaffiliate in December 2021.	
	
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.	
iv

									
Term	 	Meaning	
 	 	 	
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.	
SIA		System Integration Agreement, effective June 15, 2000, as amended, provides contractual basis for coordinated planning, operation and maintenance of the power supply sources of the combined AEP.	
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.	
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.	
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.	
Trent		Trent Wind Farm LLC, a 156 MW wind electricity generation facility located in west Texas in which AEP owns a 100% interest.	
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.	
v

									
Term	 	Meaning	
 	 	 	
WPCo	 	Wheeling Power Company, an AEP electric utility subsidiary.	
WVPSC	 	Public Service Commission of West Virginia.	
WVTCo		AEP West Virginia Transmission Company, Inc., a wholly-owned AEPTCo transmission subsidiary.	
vi

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 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.	
•	The economic impact of increased global trade tensions including the conflict between Russia and Ukraine, 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; 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 or subsidiaries, 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.	
•	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, and to recover those costs.	
•	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.	
•	The ability to constrain operation and maintenance costs.	
•	Prices and demand for power generated and sold at wholesale.	
vii

						
•	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.	
•	The impact of changing expectations and demands of customers, regulators, investors and stakeholders, including heightened emphasis on environmental, social and governance concerns.	
•	Changes in utility regulation and the allocation of costs within RTOs including ERCOT, PJM and SPP.	
•	Changes in the creditworthiness of the counterparties with contractual arrangements, including participants in the energy trading market.	
•	Actions of rating agencies, including changes in the ratings of debt.	
•	The impact of volatility in the capital markets on the value of the investments held by the pension, OPEB, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements.	
•	Accounting standards periodically issued by accounting standard-setting bodies.	
•	Other risks and unforeseen events, including wars and military conflicts, the effects of terrorism (including increased security costs), embargoes, naturally occurring and human-caused fires, cyber-security threats and other catastrophic events.	
•	The ability to attract and retain the requisite work force and key personnel.	

The forward-looking statements of the Registrants speak only as of the date of this report or as of the date they are made.  The Registrants expressly disclaim any obligation to update any forward-looking information, except as required by law.  For a more detailed discussion of these factors, see “Risk Factors” in Part I of this report.

The Registrants may use AEP’s website as a distribution channel for material company information. Financial and other important information regarding the Registrants is routinely posted on and accessible through AEP’s website at www.aep.com/investors/. In addition, you may automatically receive email alerts and other information about the Registrants when you enroll your email address by visiting the “Email Alerts” section at www.aep.com/investors/.

Company Website and Availability of SEC Filings

Our principal corporate website address is www.aep.com. Information on our website is not incorporated by reference herein and is not part of this Form 10-K. We make available free of charge through our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding AEP.
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PART I

ITEM 1.   BUSINESS

GENERAL

Overview and Description of Major Subsidiaries

AEP was incorporated under the laws of the State of New York in 1906 and reorganized in 1925. It is a public utility holding company that owns, directly or indirectly, all of the outstanding common stock of its public utility subsidiaries and varying percentages of other subsidiaries.

The service areas of AEP’s public utility subsidiaries cover portions of the states of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. Transmission networks are interconnected with extensive distribution facilities in the territories served. The public utility subsidiaries of AEP have traditionally provided electric service, consisting of generation, transmission and distribution, on an integrated basis to their retail customers. Restructuring laws in Michigan, Ohio and the ERCOT area of Texas have caused AEP public utility subsidiaries in those states to unbundle previously integrated regulated rates for their retail customers.

The member companies of the AEP System have contractual, financial and other business relationships with the other member companies, such as participation in the AEP System savings and retirement plans and tax returns, sales of electricity and transportation and handling of fuel. The companies of the AEP System also obtain certain accounting, administrative, information systems, engineering, financial, legal, maintenance and other services at cost from a common provider, AEPSC.

As of December 31, 2022, the subsidiaries of AEP had a total of 16,974 employees. Because it is a holding company rather than an operating company, AEP has no employees. The material subsidiaries of AEP are as follows:

AEP Texas

Organized in Delaware in 1925, AEP Texas is engaged in the transmission and distribution of electric power to approximately 1,094,000 retail customers through REPs in west, central and southern Texas.  As of December 31, 2022, AEP Texas had 1,594 employees.  Among the principal industries served by AEP Texas are petroleum and coal products manufacturing, chemical manufacturing, oil and gas extraction, pipeline transportation and support activities for mining.  The territory served by AEP Texas also includes several military installations. AEP Texas is a member of ERCOT.  AEP Texas is part of AEP’s Transmission and Distribution Utilities segment.

AEPTCo

Organized in Delaware in 2006, AEPTCo is a holding company for the State Transcos. The State Transcos develop and own new transmission assets that are physically connected to the AEP System.  Individual State Transcos (a) have obtained the approvals necessary to operate in Indiana, Kentucky, Michigan, Ohio, Oklahoma and West Virginia, subject to any applicable siting requirements, (b) are authorized to submit projects for commission approval in Virginia and (c) have been granted consent to enter into a joint license agreement that will support investment in Tennessee. Neither AEPTCo nor its subsidiaries have any employees. Instead, AEPSC and certain AEP utility subsidiaries provide services to these entities. AEPTCo is part of the AEP Transmission Holdco segment.

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APCo

Organized in Virginia in 1926, APCo is engaged in the generation, transmission and distribution of electric power to approximately 965,000 retail customers in the southwestern portion of Virginia and southern West Virginia, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities and other market participants. APCo owns 6,681 MWs of generating capacity.  APCo uses its generation to serve its retail and other customers.  As of December 31, 2022, APCo had 1,650 employees. Among the principal industries served by APCo are coal-mining, primary metals, pipeline transportation, chemical manufacturing and paper manufacturing. APCo is a member of PJM.  APCo is part of AEP’s Vertically Integrated Utilities segment.

I&M

Organized in Indiana in 1907, I&M is engaged in the generation, transmission and distribution of electric power to approximately 609,000 retail customers in northern and eastern Indiana and southwestern Michigan, and in supplying and marketing electric power at wholesale to other electric utility companies, rural electric cooperatives, municipalities and other market participants.  I&M owns or leases 3,662 MWs of generating capacity, which it uses to serve its retail and other customers.  In December 2022, the Rockport Plant, Unit 2 lease ended and I&M and AEGCo acquired 100% of the interests in the Rockport Plant.  AEGCo’s 50% ownership share of Rockport Plant, Unit 2 is being billed to I&M under a FERC-approved UPA.  I&M’s purchased power from AEGCo and I&M’s 50% ownership share of Rockport Plant, Unit 2 electricity generated represents a merchant resource for I&M until Rockport Plant, Unit 2 is retired in 2028. As of December 31, 2022, I&M had 2,016 employees. Among the principal industries served are primary metals, transportation equipment, chemical manufacturing, plastics and rubber products and fabricated metal product manufacturing.  I&M is a member of PJM.  I&M is part of AEP’s Vertically Integrated Utilities segment.

KPCo

Organized in Kentucky in 1919, KPCo is engaged in the generation, transmission and distribution of electric power to approximately 163,000 retail customers in eastern Kentucky, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities and other market participants.  KPCo owns 1,075 MWs of generating capacity.  KPCo uses its generation to serve its retail and other customers.  As of December 31, 2022, KPCo had 285 employees. Among the principal industries served are petroleum and coal products manufacturing, chemical manufacturing, coal-mining, oil and gas extraction and pipeline transportation.  KPCo is a member of PJM.  KPCo is part of AEP’s Vertically Integrated Utilities segment. In October 2021, AEP entered into a Stock Purchase Agreement to sell KPCo to Liberty Utilities Co. The closing of the sale is subject to receipt of FERC authorization under Section 203 of the Federal Power Act and clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

KGPCo

Organized in Virginia in 1917, KGPCo provides electric service to approximately 49,000 retail customers in Kingsport and eight neighboring communities in northeastern Tennessee. KGPCo does not own any generating facilities and is a member of PJM. It purchases electric power from APCo for distribution to its customers. As of December 31, 2022, KGPCo had 53 employees. KGPCo is part of AEP’s Vertically Integrated Utilities segment.

OPCo

Organized in Ohio in 1907 and re-incorporated in 1924, OPCo is engaged in the transmission and distribution of electric power to approximately 1,521,000 retail customers in Ohio.  OPCo purchases energy and capacity at auction to serve generation service customers who have not switched to a competitive generation supplier.  As of December 31, 2022, OPCo had 1,713 employees.  Among the principal industries served by OPCo are primary metals, petroleum and coal products manufacturing, plastics and rubber products, chemical manufacturing, pipeline transportation and data centers. OPCo is a member of PJM.  OPCo is part of AEP’s Transmission and Distribution Utilities segment.

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PSO

Organized in Oklahoma in 1913, PSO is engaged in the generation, transmission and distribution of electric power to approximately 575,000 retail customers in eastern and southwestern Oklahoma, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities, rural electric cooperatives and other market participants.  PSO owns 4,380 MWs of generating capacity, which it uses to serve its retail and other customers.  As of December 31, 2022, PSO had 1,030 employees. Among the principal industries served by PSO are paper manufacturing, oil and gas extraction, petroleum and coal products manufacturing, plastics and rubber products and pipeline transportation. PSO is a member of SPP.  PSO is part of AEP’s Vertically Integrated Utilities segment.

SWEPCo

Organized in Delaware in 1912, SWEPCo is engaged in the generation, transmission and distribution of electric power to approximately 551,000 retail customers in northeastern and panhandle of Texas, northwestern Louisiana and western Arkansas, and in supplying and marketing electric power at wholesale to other electric utility companies, municipalities, rural electric cooperatives and other market participants. SWEPCo owns 5,585 MWs of generating capacity, which it uses to serve its retail and other customers.  As of December 31, 2022, SWEPCo had 1,372 employees. Among the principal industries served by SWEPCo are petroleum and coal products manufacturing, food manufacturing, paper manufacturing, oil and gas extraction and chemical manufacturing. The territory served by SWEPCo includes several military installations, colleges and universities. SWEPCo also owns and operates a lignite coal-mining operation. SWEPCo is a member of SPP.  SWEPCo is part of AEP’s Vertically Integrated Utilities segment.

WPCo

Organized in West Virginia in 1883 and re-incorporated in 1911, WPCo provides electric service to approximately 41,000 retail customers in northern West Virginia and in supplying and marketing electric power at wholesale to other market participants. WPCo owns 780 MWs of generating capacity which it uses to serve its retail and other customers. As of December 31, 2022, WPCo had 220 employees. Among the principal industries served by WPCo are coal-mining, primary metals, pipeline transportation, chemical manufacturing and paper manufacturing. WPCo is a member of PJM.  WPCo is part of AEP’s Vertically Integrated Utilities segment.

Service Company Subsidiary

AEPSC is a service company subsidiary that provides accounting, administrative, information systems, engineering, financial, legal, maintenance and other services at cost to AEP subsidiaries. The executive officers of AEP and certain of the executive officers of its public utility subsidiaries are employees of AEPSC. As of December 31, 2022, AEPSC had 6,572 employees.

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Public Utility Subsidiaries by Jurisdiction

The following table illustrates certain regulatory information with respect to the jurisdictions in which the public utility subsidiaries of AEP operate:

Principal Jurisdiction		AEP Utility Subsidiaries Operating in that Jurisdiction		Authorized Return on Equity (a)	
FERC		AEPTCo - PJM		10.35 	%	(b)	
		AEPTCo - SPP		10.50 	%		
						
Ohio		OPCo		9.70 	%		
						
West Virginia		APCo		9.75 	%		
 		WPCo		9.75 	%		
						
Virginia		APCo		9.20 	%		
						
Indiana		I&M		9.70 	%		
						
Michigan		I&M		9.86 	%		
						
Texas		AEP Texas		9.40 	%		
 		SWEPCo		9.25 	%	(c)	
						
Tennessee		KGPCo		9.50 	%		
						
Kentucky		KPCo		9.30 	%		
						
Louisiana		SWEPCo		9.50 	%		
						
Arkansas		SWEPCo		9.50 	%		
						
Oklahoma		PSO		9.40 	%		

(a)Identifies the predominant current authorized ROE, and may not include other, less significant, permitted recovery.  Actual ROE varies from authorized ROE.
(b)In December 2022, the FERC issued an order removing the 50 basis point RTO incentive from OHTCo transmission formula rates effective February 2022, reducing OHTCo’s authorized ROE to 9.85%.
(c)In February 2022, SWEPCo filed a motion for rehearing with the PUCT challenging several errors in the final order, which included a challenge of the approved ROE. In April 2022, the PUCT denied the motion for rehearing. In May 2022, SWEPCo filed a petition for review with the Texas District Court seeking a judicial review of the several errors challenged in the PUCT’s final order.

(a)Pretax income does not include intercompany eliminations.
(b)Excludes $363 million loss on expected sale of the Kentucky Operations.
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CLASSES OF SERVICE

AEP and subsidiaries recognize revenues from customers for retail and wholesale electricity sales and electricity transmission and distribution delivery services. AEP’s subsidiaries within the Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco and Generation & Marketing segments derive revenue from the following sources: Retail Revenues, Wholesale and Competitive Retail Revenues, Other Revenues from Contracts with Customers and Alternative Revenues. For further information relating to the sources of revenue for the Registrants, see Note 19 - Revenues from Contracts with Customers for additional information.

FINANCING

General

Companies within the AEP System generally use short-term debt to finance working capital needs.  Short-term debt may also be used to finance acquisitions, construction and redemption or repurchase of outstanding securities until such needs can be financed with long-term debt.  In recent history, short-term funding needs have been provided for by cash on hand, term loan issuances and AEP’s commercial paper program.  Funds are made available to subsidiaries under the AEP corporate borrowing program.  Certain public utility subsidiaries of AEP also sell accounts receivable to provide liquidity.  See “Financial Condition” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report for additional information.

AEP’s revolving credit agreement (which backstops the commercial paper program) includes covenants and events of default typical for this type of facility, including a maximum debt/capital test.  In addition, the acceleration of AEP’s payment obligations, or the obligations of certain of its major subsidiaries, prior to maturity under any other agreement or instrument relating to debt outstanding in excess of $50 million, would cause an event of default under the credit agreement. As of December 31, 2022, AEP was in compliance with its debt covenants.  With the exception of a voluntary bankruptcy or insolvency, any event of default has either or both a cure period or notice requirement before termination of the agreement.  A voluntary bankruptcy or insolvency of AEP or one of its significant subsidiaries would be considered an immediate termination event.  See “Financial Condition” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report for additional information.

AEP’s subsidiaries have also utilized, and expect to continue to utilize, additional financing arrangements, such as securitization financings and leasing arrangements, including the leasing of coal transportation equipment and facilities.

ENVIRONMENTAL AND OTHER MATTERS

General

AEP subsidiaries are currently subject to regulation by federal, state and local authorities with regard to air and water-quality control and other environmental matters, and are subject to zoning and other regulation by local authorities.  The environmental issues that management believes are potentially material to the AEP System are outlined below.

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Clean Water Act Requirements

Operations for AEP subsidiaries are subject to the CWA, which prohibits the discharge of pollutants into waters of the United States except pursuant to appropriate permits and regulates systems that withdraw surface water for use in power plants.  In 2014, the Federal EPA issued a final rule setting forth standards for water withdrawals at existing power plants that is intended to reduce mortality of aquatic organisms pinned against a plant’s cooling water intake screen (impingement) or entrained in the cooling water.  The standards affect all plants withdrawing more than two million gallons of cooling water per day.  A schedule for compliance with the standard is established by the permit agency and incorporated in NPDES permits.

In November 2015, the Federal EPA issued a final rule revising ELG for electricity generating facilities. The rule established limits on FGD wastewater, fly ash and bottom ash transport water and flue gas mercury control wastewater to be imposed in NPDES permits as soon as possible after November 2018 and no later than December 2023.  The Federal EPA further revised the rule in August 2020 for FGD wastewater and bottom ash transport water extending the compliance date to December 2025 and establishing additional options.

In January 2020, the Federal EPA issued a final rule revising the scope of the “waters of the United States” subject to CWA regulation. In August 2021, this rule was vacated by a federal court and shortly thereafter, in December 2021, the Federal EPA proposed a rule that would roll back the definition of “waters of the United States” to the pre-2015 definition. That rule was finalized in January 2023 and becomes effective in March 2023. See “Environmental Issues - Clean Water Act Regulations” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report for additional information.

Coal Ash Regulation

AEP’s operations produce a number of different coal combustion by-products, including fly ash, bottom ash, gypsum and other materials.  A rule by the Federal EPA regulates the disposal and beneficial re-use of coal combustion residuals, including fly ash and bottom ash generated at coal-fired electric generating units.  The rule requires certain standards for location, groundwater monitoring and dam stability to be met at landfills and certain surface impoundments at operating facilities. If existing disposal facilities cannot meet these standards, they will be required to close. In August 2020, the Federal EPA revised the CCR rule to include a requirement that unlined CCR storage ponds cease operations and initiate closure by April 11, 2021. The revised rule provides two options for seeking an extension of that date. AEP filed extension requests for seven facilities, to date, the Federal EPA has not finalized any of those requests. In July 2022, the Federal EPA proposed a conditional approval of the extension request for AEP’s Mountaineer facility, but that request has since been withdrawn. See “Environmental Issues - Coal Combustion Residual (CCR) Rule” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report for additional information.

Clean Air Act Requirements

The CAA establishes a comprehensive program to protect and improve the nation’s air quality and control mobile and stationary sources of air emissions.  The major CAA programs affecting AEP’s power plants are described below.  The states implement and administer many of these programs and could impose additional or more stringent requirements.

The Acid Rain Program

The CAA includes a cap-and-trade emission reduction program for SO2 emissions from power plants and requirements for power plants to reduce NOx emissions through the use of available combustion controls, collectively called the Acid Rain Program. AEP continues to meet its obligations under the Acid Rain Program through the installation of controls, use of alternate fuels and participation in the emissions allowance markets. 

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National Ambient Air Quality Standards

The CAA requires the Federal EPA to review the available scientific data for criteria pollutants periodically and establish a concentration level in the ambient air for those substances that is adequate to protect the public health and welfare with an extra safety margin.  The Federal EPA also can list additional pollutants and develop concentration levels for them.  These concentration levels are known as NAAQS.

Each state identifies the areas within its boundaries that meet the NAAQS (attainment areas) and those that do not (non-attainment areas).  Each state must develop a SIP to bring non-attainment areas into compliance with the NAAQS and maintain good air quality in attainment areas.  All SIPs are submitted to the Federal EPA for approval.  If a state fails to develop adequate plans, the Federal EPA develops and implements a plan.  As the Federal EPA reviews the NAAQS and establishes new concentration levels, the attainment status of areas can change and states may be required to develop new SIPs.  See “Environmental Issues - Clean Air Act Requirements” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report for additional information.

Hazardous Air Pollutants (HAP)

The CAA also requires the Federal EPA to investigate HAP emissions from the electric utility sector and submit a report to Congress to determine whether those emissions should be regulated. In 2011, the Federal EPA issued a rule setting Maximum Achievable Control Technology standards for new and existing coal and oil-fired utility units and New Source Performance Standards for emissions from new and modified power plants.  In 2014, the U.S. Supreme Court determined that the Federal EPA acted unreasonably in refusing to consider costs in determining if it was appropriate and necessary to regulate HAP emissions from electric generating units. The Federal EPA has engaged in additional rulemaking activity but the 2011 rule remains in effect.

Regional Haze

The CAA establishes visibility goals for certain federally designated areas, including national parks, and requires states to submit SIPs that will demonstrate reasonable progress toward preventing impairment of visibility in these protected areas.  In 2005, the Federal EPA issued its Clean Air Visibility Rule, detailing how the CAA’s best available retrofit technology requirements will be applied to facilities built between 1962 and 1977 that emit more than 250 tons per year of certain pollutants in specific industrial categories, including power plants.

Cross State Air Pollution

CSAPR is a regional trading program designed to address interstate transport of emissions that contribute significantly to non-attainment and maintenance of the ozone and PM NAAQS in downwind states. CSAPR relies on SO2 and NOX allowances and individual state budgets to compel further emission reductions from electric utility generating units. Interstate trading of allowances is allowed on a restricted basis. In January 2021, the Federal EPA finalized a revised CSAPR rule, which substantially reduces the ozone season NOX budgets in 2021-2024. Several utilities and other entities potentially subject to the Federal EPA’s NOX regulations have challenged that final rule in the U.S. Court of Appeals for the District of Columbia Circuit and oral arguments were held in September 2022. Management cannot predict the outcome of that litigation, but believes it can meet the requirements of the rule in the near term, and is evaluating its compliance options for later years, when the budgets are further reduced. In addition, in February 2023, the EPA Administrator finalized the denial of 2015 Ozone NAAQS SIPs for 19 states. A FIP that further revises the ozone season NOX budgets under the existing CSAPR program in those states is expected to be finalized in the spring of 2023 and will likely take effect for the 2023 ozone season. Management is evaluating the impacts of the rule changes.

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Climate Change

In October 2022, AEP announced new intermediate and long-term CO2 emission reduction goals, based on the output of AEP’s integrated resource plans. See “Corporate Governance” section for additional information.

To date, the Federal EPA has twice taken action to regulate CO2 emissions from new and existing fossil fueled electric generating units under the existing provisions of the CAA and both attempts have been struck down by the courts.  The Federal EPA has announced it expects to propose a new rule in 2023. Management expects emissions to continue to decline over time as AEP diversifies generating sources and operates fewer coal units. The projected decline in coal-fired generation is due to a number of factors, including the ongoing cost of operating older units, the relative cost of coal and natural gas as fuel sources, increasing environmental regulations requiring significant capital investments and changing commodity market fundamentals.

Transforming AEP’s Generation Fleet

The electric utility industry is in the midst of an historic transformation, driven by changing customer needs, evolving public policies, stakeholder demands, demographics, competitive offerings, technologies and commodity prices. AEP is also transforming to be more agile and customer-focused as a valued provider of energy solutions. AEP’s long-term commitment to reduce CO2 emissions reflects the current direction of the company’s resource plans to meet those needs. As of December 31, 2022, the AEP System owned generating capacity of approximately 25,000 MWs. In 2022, coal represented 41% of AEP’s generating capacity compared with 70% in 2005. Transforming AEP’s generation portfolio to include, where there is regulatory support, more renewable energy and focusing on the efficient use of energy, demand response, distributed resources and technology solutions to more efficiently manage the grid over time is part of this strategy.

The graph below summarizes AEP’s generation capacity by resource type for the years 1999, 2005 and 2022:

(a)    Energy Efficiency/Demand Response represents avoided capacity rather than physical assets.
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Renewable Sources of Energy

The states AEP serves, other than Kentucky, Oklahoma, West Virginia and Tennessee, have established mandatory or voluntary programs to increase the use of energy efficiency, alternative energy or renewable energy sources. Management actively monitors AEP’s compliance position and is on pace to meet the relevant requirements or benchmarks in each applicable jurisdiction.

As of December 31, 2022, AEP’s regulated utilities had long-term contracts for 2,750 MWs of wind, 80 MWs of hydro and 65 MWs of solar power. Additionally, AEP’s regulated utilities own and operate 1,484 MWs of wind, 805 MWs of hydro and 36 MWs of solar power delivering renewable energy to the companies’ customers.

I&M owns four solar projects that make up I&M’s 15 MW Clean Energy Solar Pilot Project and its 20 MW St. Joseph solar facility went into operation in 2021. In 2020, PSO received approval from the OCC and SWEPCo received approval from the APSC and LPSC to acquire the NCWF, comprised of three Oklahoma wind facilities totaling 1,484 MWs, on a fixed cost turn-key basis at completion. Both the APSC and LPSC approved the flex-up option, agreeing to acquire the Texas portion, which the PUCT denied. PSO owns 45.5% and SWEPCo owns 54.5% of the project, which cost approximately $2 billion. The 199 MW Sundance wind facility was acquired and placed in service in April 2021 and the 287 MW Maverick wind facility was acquired and placed in service in September 2021. The 998 MW Traverse wind facility was acquired and placed in service in March 2022.

AEP’s regulated utilities have significant plans to add new renewable generation. SWEPCo is seeking approval from state regulators to acquire three renewable energy projects totaling 999 MWs. PSO is seeking approval from its state regulator to acquire 996 MW of new renewable projects. Additionally, AEP’s regulated utilities issued RFPs in 2022 seeking additional owned renewable energy projects totaling 4,800 MWs.

The growth of AEP’s renewable generation portfolio reflects the company’s strategy to diversify generation resources to provide clean energy options to customers that meet both their energy and capacity needs.  In addition to gradually reducing AEP’s reliance on coal-fueled generating units, the growth of renewables and natural gas helps AEP to maintain a diversity of generation resources.

The integrated resource plans submitted to state regulatory commissions by AEP’s regulated utility subsidiaries reflect AEP’s strategy to balance reliability and cost with customers’ desire for clean energy in a carbon-constrained world.  AEP has committed significant capital investments to modernize the electric grid and integrate these new resources.  Transmission assets of the AEP System interconnect approximately 22,600 MWs of renewable generation. 

AEP Energy Supply, LLC is a holding company with several divisions, including AEP Renewables and AEP OnSite Partners.

AEP Renewables develops, owns and operates utility scale renewable projects backed with long-term contracts with creditworthy counterparties throughout the United States.  In February 2022, AEP management announced the beginning of a process to sell all or a portion of AEP Renewables’ competitive contracted renewables portfolio. During November 2022, the 235 MW Flat Ridge 2 wind facility was sold. For more information on the pending sale of the competitive contracted renewables portfolio, see the “Contracted Renewable Generation Facilities” section of Management’s Discussion and Analysis. As of December 31, 2022, AEP Renewables owned projects operating in 11 states, including approximately 1,200 MWs of installed wind capacity and 165 MWs of installed solar capacity.

AEP OnSite Partners works directly with wholesale and large retail customers to provide tailored solutions to reduce their energy costs based upon market knowledge, innovative applications of technology and deal structuring capabilities.  AEP OnSite Partners targets opportunities in distributed solar, combined heat and power, energy storage, waste heat recovery, energy efficiency, peaking generation and other energy solutions that create value for customers.  AEP OnSite Partners pursues and develops behind the meter projects with creditworthy customers.  As of December 31, 2022, AEP OnSite Partners owned projects located in 22 states, including approximately 168 MWs of installed solar capacity, and approximately 26 MWs of solar projects under construction.
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End Use Energy Efficiency

Beginning in 2008, AEP ramped up efforts to reduce energy consumption and peak demand through the introduction of additional energy efficiency and demand response programs. These programs, commonly and collectively referred to as demand side management, were implemented in jurisdictions where appropriate cost recovery was available. Since that time, AEP operating company programs have reduced annual consumption by over 10 million MWhs and peak demand by approximately 3,313 MWs. Management estimates that its operating companies spent approximately $1.6 billion since 2008 to achieve these levels.

Energy efficiency and demand reduction programs have received regulatory support in most of the states AEP serves, and appropriate cost recovery will be essential for AEP operating companies to continue and expand these consumer offerings. Appropriate recovery of program costs, lost revenues, and an opportunity to earn a reasonable return ensures that energy efficiency programs are considered equally with supply side investments. As AEP continues to transition to a cleaner, more efficient energy future, energy efficiency and demand response programs will continue to play an important role in how the company serves its customers.

Management believes its experience providing robust energy efficiency programs in several states positions AEP to be a cost-effective provider of these programs as states develop their implementation plans.

Corporate Governance

In response to environmental issues and in connection with its assessment of AEP’s strategic plan, the Board of Directors continually reviews the risks posed by new environmental rules and requirements that could alter the retirement date of coal-fired generation assets. The Board of Directors is informed of new environmental regulations and proposed environmental regulations or legislation that would significantly affect AEP.  In addition, the Board holds extended meetings twice a year to provide extra time for a more robust review of the Company’s strategy, including discussions about carbon and carbon risk. The Board’s Committee on Directors and Corporate Governance oversees AEP’s annual Corporate Sustainability Report, which includes information about AEP’s environmental, social, governance and financial performance.

AEP originally set CO2 emission reduction goals in 2018 after considering input from its annual corporate governance outreach effort with shareholders.

In October 2022, AEP announced new intermediate and long-term CO2 emission reduction goals, based on the output of the AEP’s integrated resource plans, which take into account economics, customer demand, grid reliability and resiliency, regulations and the company’s current business strategy. AEP adjusted its near-term CO2 emission reduction target from a 2000 baseline to a 2005 baseline, upgraded its 80% reduction by 2030 target to include full Scope 1 emissions and accelerated its net-zero goal by five years to 2045. AEP’s total Scope 1 GHG estimated emissions in 2022 were approximately 52.5 million metric tons, a 65% reduction from AEP’s 2005 Scope 1 GHG emissions (inclusive of emission reductions that result from plants that have been sold). AEP has made significant progress in reducing CO2 emissions from its power generation fleet and expects its emissions to continue to decline. Technological advances, including advanced energy storage, advanced nuclear reactors, hydrogen production and public policies are among the factors that will determine how quickly AEP can achieve net-zero emissions while continuing to provide reliable, affordable power for customers.

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Other Environmental Issues and Matters

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 imposes costs for environmental remediation upon owners and previous owners of sites, as well as transporters and generators of hazardous material disposed of at such sites.  See “The Comprehensive Environmental Response Compensation and Liability Act (Superfund) and State Remediation” section of Note 6 included in the 2022 Annual Report for additional information.

Environmental Investments

Investments related to improving AEP System plants’ environmental performance and compliance with environmental quality standards during 2020, 2021 and 2022 and the current estimate for 2023 are shown below. Estimated construction expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, environmental regulations, business opportunities, market volatility, economic trends and the ability to access capital.  In addition to the amounts set forth below, AEP expects to make investments in future years in connection with the modification and addition at generation plants’ facilities for environmental quality controls.  Such future investments are needed in order to comply with environmental standards that have been adopted and have deadlines for compliance after 2022 or have been proposed and may be adopted.  Future investments could be significantly greater if emissions reduction requirements are accelerated or otherwise become more stringent or in response to rules governing the beneficial use and disposal of coal combustion by-products. The cost of complying with applicable environmental laws, regulations and rules is expected to be significant to the AEP System. AEP typically recovers costs of complying with environmental standards from customers through rates in regulated jurisdictions.  Failure to recover these costs could reduce future net income and cash flows and possibly harm AEP’s financial condition.  See “Environmental Issues” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 6 - Commitments, Guarantees and Contingencies included in the 2022 Annual Report for additional information.

Historical and Projected Environmental Performance and Compliance Investments	
									
 		2020		2021		2022		2023	
 		Actual		Actual		Actual		Estimate (a)	
 		(in millions)	
AEP (b)		$	102.2 			$	94.3 			$	225.9 			$	150.7 		
APCo		21.3 			60.0 			129.0 			65.9 		
I&M		31.8 			7.2 			5.0 			— 		
PSO		— 			— 			— 			0.2 		
SWEPCo		(3.6)			3.9 			18.2 			4.8 		

(a)Estimated amounts are exclusive of debt AFUDC.
(b)Includes expenditures of the subsidiaries shown and other subsidiaries not shown. The figures reflect construction expenditures, not investments in subsidiary companies.

Management currently estimates investments related to improving AEP System plants’ environmental performance and compliance with environmental quality standards will be less than $100 million annually for the years 2024 through 2026. These cost estimates could change based on: (a) potential state rules that impose more stringent standards, (b) additional rulemaking activities in response to court decisions, (c) actual performance of the pollution control technologies installed, (d) changes in costs for new pollution controls, (e) new generating technology developments, (f) total MWs of capacity retired and replaced, including the type and amount of such replacement capacity, (g) compliance with the Federal EPA’s revised coal combustion residual rules and (h) timing of implementation.

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HUMAN CAPITAL MANAGEMENT

Attracting, developing and retaining high-performing employees with the skills and experience needed to serve our customers efficiently and effectively is crucial to AEP’s growth and competitiveness and is central to our long-term strategy. AEP invests in employees and continues to build a high performance and inclusive culture that inspires leadership, encourages innovative thinking and welcomes everyone.

The following table shows AEP’s number of employees by subsidiary as of December 31, 2022:

Subsidiary		Number of Employees	
AEPSC		6,572 		
AEP Texas		1,594 		
APCo		1,650 		
I&M		2,016 		
OPCo		1,713 		
PSO		1,030 		
SWEPCo		1,372 		
Other		1,027 		
Total AEP		16,974 		

Of AEP’s 16,974 employees, less than 0.1% are Traditionalists (born before 1946), approximately 20% are Baby Boomers (born 1946-1964), approximately 37% are Generation X (born 1965-1980), approximately 38% are Millennials (born 1981-1996) and approximately 5% are Generation Z (born after 1996).

Safety

Achieving Zero Harm means every employee returns home at the end of their shift in the same condition as when they came to work. Zero Harm is what we value most and commit to wholeheartedly. It is hard work, as it requires full focus every moment of every day. We hold ourselves accountable and we are always striving to be better. AEP has put tools, training and processes in place to strengthen our safety-first culture and mindset. AEP’s focus is on learning from events and has proactive programs to prevent harm. One common industry safety metric utilized by AEP to track incidents is the Days Away/Restricted or Transferred (DART) rate. A DART event is an event that results in one or more lost days, one or more restricted days or results in an employee transferring to a different job within the company. The DART rate is a mathematical calculation (number of DART events multiplied by 200,000 work hours and divided by total YTD hours worked) that describes the number of recordable injuries per 100 full-time employees. In 2022, AEP’s employee DART Rate performance improved to 0.424 as compared to 0.430 in 2021.

Diversity, Equity and Inclusion (DEI)

AEP is committed to cultivating a diverse and inclusive environment that supports the development and advancement of all. We foster an inclusive workplace that encourages diversity of thought, culture and background and actively work to eliminate unconscious biases. DEI is a strategic priority for AEP and our efforts are guided by four principles:

•Establishing leadership accountability around DEI outcomes.
•Building and maintaining a workforce that reflects the communities we serve.
•Promoting an inclusive culture where all employees can thrive.
•Supporting the communities we serve so they will prosper.

We believe our workforce should generally reﬂect the diversity of our customers and the communities we serve so that we may better understand how to tailor our services to meet their expectations. As of December 31, 2022, women comprised approximately 20% of AEP’s workforce and 20% was represented by racially or ethnically diverse employees.
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Our DEI progress is tied to enterprise, business unit and operating company annual incentive compensation objectives, which is measured through our annual employee culture survey. In addition, the Human Resources Committee of the Board of Directors provides oversight of our compensation and human resources policies and practices, including an annual review of our diversity, equity and inclusion strategy, results of our culture survey and compliance with equal opportunity laws.

AEP has taken actions to denounce all forms of racism in the wake of the racial and social unrest across the country in recent years. To accelerate our diversity and inclusion strategy, AEP facilitates “Community Conversations” for employees to discuss how race and equity issues impact the individual and the workplace and provide tools to take action; provides "Mitigating Bias in Candidate Selection" training for all supervisors with a direct report and employees involved in the interview process; created dedicated faith or meditation rooms; developed affirmative action plans for all AEP sites with more than 50 employees; and, conducts pay equity studies to identify and address pay variances for female and minority employees. We are also signatories of the CEO Action for Diversity and Inclusion pledge, Paradigm for Parity and several other local and industry DEI initiatives to demonstrate our commitment to advancing diversity and inclusion within the workplace.

In addition, we’re committed to working with the communities we serve to advance equity for our employees, customers and neighbors of color. The American Electric Power Foundation created the Delivering on the Dream grant program to help dismantle systemic racism and prejudice while prioritizing diversity, equity and inclusion. This five-year, $5 million initial investment funds organizations with programs dedicated to advancing social justice in the communities we serve.

Culture

AEP believes in doing the right thing every time for our customers, each other and our future. AEP leaders at all levels are responsible for fostering an environment that supports a positive culture and for acting in a manner that positively models it. A high-performance culture forms the foundation for long-term success. An engaged, collaborative and empowered workforce is more likely to embrace a change mindset, drive continuous improvement, accept accountability, meet expectations, take ownership, and value personal growth. AEP is committed to driving our culture forward. Employees are given an opportunity to share their perspectives by participating in the Employee Culture Survey, administered by Gallup, Inc., that measures the progress we are making in improving our culture. In addition to engagement, the survey measures well-being and inclusiveness. In 2022, 86% of our organization participated in the survey and we continued to improve our grand mean score to remain in the top decile compared to Gallup’s overall company database. Additionally, in 2022, AEP received the Gallup Exceptional Workplace Award for the third consecutive year. The award recognizes organizations with engaged workplace cultures. Company executives also have candid meetings with employees to discuss our challenges, opportunities, what is going well and what can be even better.

Employee Resource Groups

One of the best ways for AEP to demonstrate our commitment to a trusting and inclusive work environment is to empower employees to form and participate in Employee Resource Groups (ERG). The ERGs at AEP include Abled and Differently-Abled Partnering Together, the Black ERG, the Asian-American Employee Partnership ERG, the Hispanic Origin Latin American ERG, the Military Veteran ERG, the Native American Tribes Interacting, Observing and Networking ERG, the Pride Partnership and the Women at Work ERG. Our ERGs reflect the diverse makeup of our workforce and enable us to gain valuable insight into the diverse communities we serve. They also help increase engagement across AEP by providing employees with a safe space to discuss work-related issues and to develop innovative solutions. ERGs play an active role in AEP’s diversity and inclusion efforts, including recruitment of new employees.

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Training and Professional Development

At AEP, we are preparing our workforce for the future by providing opportunities to learn new skills and engaging higher education institutions to better prepare the next generation with the skills that we will need. AEP has training alliances with several community colleges, universities and vocational and technical schools across our service territory. We work with these institutions to develop academic programs that will prepare employees for upward mobility opportunities and to attract external job seekers interested in careers in our industry. AEP also provides a broad range of training and assistance that supports lifelong learning and transition development. This is especially important as we move closer toward a digital future that requires a more flexible, innovative and diverse workforce. AEP has robust processes to achieve this, including ongoing performance coaching, operational skills training, resources to support our commitment to environment, safety and health, job progression training, tuition assistance, and other forms of training that help employees improve their skills and become better leaders.

In 2022, AEP employees completed more than 950,000 hours of training in programs for which we track participation. In addition, AEP invested more than $3 million in employee education, supporting approximately 1,000 employees through our tuition reimbursement program.

Compensation and Benefits

AEP cares about the wellbeing of our employees and we recognize their importance to our success. We provide market competitive compensation and benefits, including health, wellness and assistance programs to our employees and their families to help them thrive at home and work. We ensure the pay we offer is competitive in the marketplace by market pricing many of our positions using robust compensation survey information. Nearly all AEP employees participate in an annual incentive program that rewards individual performance and achievement of business goals, which fosters a high-performance culture. AEP also offers employees physical and mental health programs, including medical, dental and life insurance, along with a health and well-being program to help employees and their families stay healthy and feeling their best. Additionally, AEP’s retirement programs position our employees for financial stability in retirement.

Labor Relations

Nearly one fourth of AEP’s workforce is represented by labor unions. We value the relationships we have with our union represented employees and believe in a trusting, collaborative and respectful partnership. We continuously work to strengthen these relationships to ensure we have a culture that attracts and supports employees who can adapt to the rapid changes occurring in our company and industry. Our partnership with labor unions is critical to meeting the growing expectations of our customers and adapting to the challenges of rapidly changing technologies.

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BUSINESS SEGMENTS

AEP’s Reportable Segments

AEP’s primary business is the generation, transmission and distribution of electricity.  Within its Vertically Integrated Utilities segment, AEP centrally dispatches generation assets and manages its overall utility operations on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight.  Intersegment sales and transfers are generally based on underlying contractual arrangements and agreements. AEP’s reportable segments are as follows:

•Vertically Integrated Utilities
•Transmission and Distribution Utilities
•AEP Transmission Holdco
•Generation & Marketing

The remainder of AEP’s activities is presented as Corporate and Other, which is not considered a reportable segment. See Note 9 - Business Segments included in the 2022 Annual Report for additional information on AEP’s segments.

VERTICALLY INTEGRATED UTILITIES

GENERAL

AEP’s vertically integrated utility operations are engaged in the generation, transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEGCo, APCo, I&M, KGPCo, KPCo, PSO, SWEPCo and WPCo.  AEPSC, as agent for AEP’s public utility subsidiaries, performs marketing, generation dispatch, fuel procurement and power-related risk management and trading activities on behalf of each of these subsidiaries.

ELECTRIC GENERATION

Facilities

As of December 31, 2022, AEP’s vertically integrated public utility subsidiaries owned approximately 23,500 MWs of domestic generation.  See Item 2 – Properties for more information regarding the generation capacity of vertically integrated public utility subsidiaries.

Fuel Supply

The following table shows the owned and leased generation sources by type (including wind purchase agreements), on an actual net generation (MWhs) basis, used by the Vertically Integrated Utilities:

 	2022		2021		2020	
Coal and Lignite	43%		50%		45%	
Nuclear	21%		22%		24%	
Natural Gas	19%		16%		18%	
Renewables	17%		12%		13%	

An increase/decrease in one or more generation types relative to previous years reflects the addition of renewable resources, retirement of traditional fossil fuel units and price changes in one or more fuel commodity sources relative to the pricing of other fuel commodity sources. AEP’s overall 2022 fossil fuel costs for the Vertically Integrated Utilities increased 1.1% on a dollar per MMBtu basis from 2021.

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Coal and Lignite

AEP’s Vertically Integrated Utilities procure coal and lignite under a combination of purchasing arrangements including long-term contracts, affiliate operations and spot agreements with various producers, marketers and coal trading firms.  Coal and lignite consumption decreased 11% in 2022 from 2021 due to a combination of the retirement of Dolet Hills Power Plant, lower amounts of lignite inventory available due to the planned retirement of the Pirkey Power Plant in March 2023 and lower generation at the coal fired power plants.

Management projects that the Vertically Integrated Utilities will be able to secure and transport coal and lignite of adequate quality and quantities to operate their coal and lignite-fired units; however, with current global dynamics and demand, supplies could be a challenge. As of December 31, 2022, through subsidiaries, AEP owns, leases or controls 3,000 railcars, 319 barges, 4 towboats and a coal handling terminal with approximately 18 million tons of annual capacity to move and store coal for use in AEP generating facilities. AEP will procure additional railcar and barge/towboat capacity as needed based on demand.

Spot coal prices strengthened significantly in the back half of 2021 and continued to increase throughout 2022 for all coal basins to all-time highs, with the exception of Powder River Basin coal which somewhat stabilized in 2022 to more historical levels. These price increases were primarily due to increases in global and domestic demand for coal. AEP’s strategy for purchasing coal includes layering in supplies over time. The price impact of this process is reflected in subsequent periods and with the current elevated prices will drive delivered coal prices up over the next few years for purchases made in 2021 and 2022. The price paid for coal and lignite delivered in 2022 increased approximately 10.6% from 2021 primarily due to the increase in coal prices from all coal basins.

The following table shows the amount of coal and lignite delivered to the Vertically Integrated Utilities’ plants during the past three years and the average delivered price of coal and lignite purchased by the Vertically Integrated Utilities:

 	2022		2021		2020	
Total coal and lignite delivered to the plants (in millions of tons)	20.4		18.2		19.4 		
Average cost per ton of coal and lignite delivered	$	56.16 			$	50.76 			$	53.95 		

The coal supplies at the Vertically Integrated Utilities plants vary from time to time depending on various factors, including, but not limited to, demand for electric power, unit outages, transportation infrastructure limitations, space limitations, plant coal consumption rates, availability of acceptable coals, labor issues and weather conditions, which may interrupt production or deliveries. As of December 31, 2022, the Vertically Integrated Utilities’ coal inventory was approximately 35 days of full load burn. While inventory targets vary by plant and are changed as necessary, the current coal inventory target for the Vertically Integrated Utilities is approximately 27 days of full load burn.

Natural Gas

The Vertically Integrated Utilities consumed approximately 126 billion cubic feet of natural gas during 2022 for generating power. This represents an increase of 16.5% from 2021. Several of AEP’s natural gas-fired power plants are connected to at least two pipelines which allow greater access to competitive supplies and improve delivery reliability. A portfolio of term, seasonal, monthly and daily natural gas supply agreements and term natural gas transportation agreements provide natural gas requirements for each plant, as appropriate. AEP’s natural gas supply transactions are based on market prices.

The following table shows the amount of natural gas delivered to the Vertically Integrated Utilities’ plants during the past three years and the average delivered price of natural gas purchased by the Vertically Integrated Utilities.

 	2022		2021		2020	
Total natural gas delivered to the plants (in billions cubic feet)	126.0 			108.0 			113.1 		
Average delivered price per MMBtu of purchased natural gas	$	6.94 			$	8.92 			$	2.14 		
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Nuclear

I&M has made commitments to meet the current nuclear fuel requirements of the Cook Plant.  I&M has made and will make purchases of uranium in various forms in the spot, short-term and mid-term markets.  

For purposes of the storage of high-level radioactive waste in the form of SNF, I&M completed modifications to its SNF storage pool in the early 1990’s.  I&M entered into an agreement to provide for onsite dry cask storage of SNF to permit normal operations to continue.  I&M is scheduled to conduct further dry cask loading and storage projects on an ongoing periodic basis.  The year of expiration of each NRC Operating License is 2034 for Unit 1 and 2037 for Unit 2. Management is currently evaluating applying for license extensions for both units.

Nuclear Waste and Decommissioning

As the owner of the Cook Plant, I&M has a significant future financial commitment to dispose of SNF and decommission and decontaminate the plant safely.  The cost to decommission a nuclear plant is affected by NRC regulations and the SNF disposal program.  The most recent decommissioning cost study was completed in 2021.  The estimated cost of decommissioning and disposal of low-level radioactive waste for the Cook Plant was $2.2 billion in 2021 non-discounted dollars, with additional ongoing estimated costs of $7 million per year for post decommissioning storage of SNF and an eventual estimated cost of $33 million for the subsequent decommissioning of the spent fuel storage facility, also in 2021 non-discounted dollars. As of December 31, 2022 and 2021, the total decommissioning trust fund balance for the Cook Plant was approximately $3 billion and $3.5 billion, respectively. The balance of funds available to eventually decommission Cook Plant will differ based on contributions and investment returns.  The ultimate cost of retiring the Cook Plant may be materially different from estimates and funding targets as a result of the:

•Escalation of various cost elements (including, but not limited to, general inflation and the cost of energy).
•Further development of regulatory requirements governing decommissioning.
•Technology available at the time of decommissioning differing significantly from that assumed in studies.
•Availability of nuclear waste disposal facilities.
•Availability of a United States Department of Energy facility for permanent storage of SNF.

Accordingly, management is unable to provide assurance that the ultimate cost of decommissioning the Cook Plant will not be significantly different than current projections.  AEP will seek recovery from customers through regulated rates if actual decommissioning costs exceed projections.  See the “Nuclear Contingencies” section of Note 6 - Commitments, Guarantees and Contingencies included in the 2022 Annual Report for additional information with respect to nuclear waste and decommissioning.

Low-Level Radioactive Waste

The Low-Level Waste Policy Act of 1980 mandates that the responsibility for the disposal of low-level radioactive waste rests with the individual states.  Low-level radioactive waste consists largely of ordinary refuse and other items that have come in contact with radioactive materials.  Michigan does not currently have a disposal site for such waste available.  I&M cannot predict when such a site may be available. However, the states of Utah and Texas have licensed low-level radioactive waste disposal sites which currently accept low-level radioactive waste from Michigan waste generators.  There is currently no set date limiting I&M’s access to either of these facilities.  The Cook Plant has a facility onsite designed specifically for the storage of low-level radioactive waste.  In the event that low-level radioactive waste disposal facility access becomes unavailable, it can be stored onsite at this facility.

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Counterparty Risk Management

The Vertically Integrated Utilities segment also sells power and enters into related energy transactions with wholesale customers and other market participants. As a result, counterparties and exchanges may require cash or cash related instruments to be deposited on transactions as margin against open positions.  As of December 31, 2022, counterparties posted approximately $14 million in cash, cash equivalents or letters of credit with AEPSC for the benefit of AEP’s public utility subsidiaries (while, as of that date, AEP’s public utility subsidiaries posted approximately $207 million with counterparties and exchanges).  Since open trading contracts are valued based on market prices of various commodities, exposures change daily.  See the “Quantitative and Qualitative Disclosures About Market Risk” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report for additional information.

Certain Power Agreements

I&M

The UPA between AEGCo and I&M, dated March 31, 1982 (the I&M Power Agreement), provides for the sale by AEGCo to I&M of all the capacity (and the energy associated therewith) available to AEGCo at the Rockport Plant.  Whether or not power is available from AEGCo, I&M is obligated to pay a demand charge for the right to receive such power (and an energy charge for any associated energy taken by I&M).  The I&M Power Agreement will continue in effect until the debt obligations of AEGCo secured by the Rockport Plant have been satisfied and discharged (currently expected to be December 2028).

In April 2021, AEGCo and I&M executed an agreement to purchase 100% of the interests in Rockport Plant, Unit 2 effective at the end of the lease term on December 7, 2022. Beginning December 8, 2022, AEGCo and I&M applied the joint plant accounting model to their respective 50% undivided interests in the jointly owned Rockport Plant, Unit 2 as well as any future investments made prior to the current estimated retirement date of December 2028.

Prior to the termination of the lease, I&M assigned 30% of the power to KPCo.  See the “UPA between AEGCo and KPCo” section of Note 16 - Related Party Transactions for additional information. Beginning December 8, 2022, AEGCo billed 100% of its share of the Rockport Plant to I&M and ceased billing to KPCo. KPCo reached an agreement with I&M, from the end of the lease through May 2024, to buy capacity from Rockport Plant, Unit 2 through the PCA at a rate equal to PJM’s RPM clearing price.

OVEC

AEP and several nonaffiliated utility companies jointly own OVEC.  The aggregate equity participation of AEP in OVEC is 43.47%.  Parent owns 39.17% and OPCo owns 4.3%.  Under the Inter-Company Power Agreement (ICPA), which defines the rights of the owners and sets the power participation ratio of each, the sponsoring companies are entitled to receive and are obligated to pay for all OVEC capacity (approximately 2,400 MWs) in proportion to their respective power participation ratios.  The aggregate power participation ratio of APCo, I&M and OPCo is 43.47%.  The ICPA terminates in June 2040.  The proceeds from charges by OVEC to sponsoring companies under the ICPA based on their power participation ratios are designed to be sufficient for OVEC to meet its operating expenses and fixed costs.  OVEC’s Board of Directors, as elected by AEP and nonaffiliated owners, has authorized environmental investments related to their ownership interests, with resulting expenses (including for related debt and interest thereon) included in charges under the ICPA. OVEC financed capital expenditures in excess of $1 billion in connection with flue gas desulfurization projects and the associated scrubber waste disposal landfills at its two generation plants through debt issuances, including tax-advantaged debt issuances.  Both OVEC generation plants are operating with the new environmental controls in-service.  See Note 17 - Variable Interest Entities and Equity Method Investments for additional information.

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ELECTRIC DELIVERY

General

Other than AEGCo, AEP’s vertically integrated public utility subsidiaries own and operate transmission and distribution lines and other facilities to deliver electric power.  See Item 2 – Properties for more information regarding the transmission and distribution lines.  Most of the transmission and distribution services are sold to retail customers of AEP’s vertically integrated public utility subsidiaries in their service territories.  These sales are made at rates approved by the state utility commissions of the states in which they operate, and in some instances, approved by the FERC.  See Item 1. Business – Vertically Integrated Utilities – Regulation – Rates.  The FERC regulates and approves the rates for both wholesale transmission transactions and wholesale generation contracts.  The use and the recovery of costs associated with the transmission assets of the AEP vertically integrated public utility subsidiaries are subject to the rules, principles, protocols and agreements in place with PJM and SPP, and as approved by the FERC. See Item 1. Business – Vertically Integrated Utilities – Regulation – FERC.  As discussed below, some transmission services also are separately sold to nonaffiliated companies.

Other than AEGCo, AEP’s vertically integrated public utility subsidiaries hold franchises or other rights to provide electric service in various municipalities and regions in their service areas.  In some cases, these franchises provide the utility with the exclusive right to provide electric service within a specific territory.  These franchises have varying provisions and expiration dates.  In general, the operating companies consider their franchises to be adequate for the conduct of their business.  For a discussion of competition in the sale of power, see Item 1. Business – Vertically Integrated Utilities – Competition.

Transmission Agreement

APCo, I&M, KGPCo, KPCo and WPCo own and operate transmission facilities that are used to provide transmission service under the PJM OATT and are parties to the TA.  OPCo, which is a subsidiary in AEP’s Transmission and Distribution Utilities segment that provides transmission service under the PJM OATT, is also a party to the TA.  The TA defines how the parties to the agreement share the revenues associated with their transmission facilities and the costs of transmission service provided by PJM.  The TA has been approved by the FERC.

Transmission Coordination Agreement and Open Access Transmission Tariff

PSO, SWEPCo and AEPSC are parties to the TCA.  Under the TCA, a coordinating committee is charged with the responsibility of: (a) overseeing the coordinated planning of the transmission facilities of the parties to the agreement, including the performance of transmission planning studies, (b) the interaction of such subsidiaries with independent system operators and other regional bodies interested in transmission planning and (c) compliance with the terms of the OATT filed with the FERC and the rules of the FERC relating to such tariff.  Pursuant to the TCA, AEPSC has responsibility for monitoring the reliability of their transmission systems and administering the OATT on behalf of the other parties to the agreement.  The TCA also provides for the allocation among the parties of revenues collected for transmission and ancillary services provided under the OATT.  These allocations have been determined by the FERC-approved OATT for the SPP.

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Regional Transmission Organizations

AEGCo, APCo, I&M, KGPCo, KPCo and WPCo are members of PJM, and PSO and SWEPCo are members of SPP (both FERC-approved RTOs).  RTOs operate, plan and control utility transmission assets in a manner designed to provide open access to such assets in a way that prevents discrimination between participants owning transmission assets and those that do not.

REGULATION

General

AEP’s vertically integrated public utility subsidiaries’ retail rates and certain other matters are subject to traditional cost-based regulation by the state utility commissions.  AEP’s vertically integrated public utility subsidiaries are also subject to regulation by the FERC under the Federal Power Act with respect to wholesale power and transmission service transactions.  I&M is subject to regulation by the NRC under the Atomic Energy Act of 1954, as amended, with respect to the operation of the Cook Plant.  AEP and its vertically integrated public utility subsidiaries are also subject to the regulatory provisions of, much of the Energy Policy Act of 2005, which is administered by the FERC.

Rates

Historically, state utility commissions have established electric service rates on a cost-of-service basis, which is designed to allow a utility an opportunity to recover its cost of providing service and to earn a reasonable return on its investment used in providing that service.  A utility’s cost-of-service generally reflects its operating expenses, including operation and maintenance expense, depreciation expense and taxes.  State utility commissions periodically adjust rates pursuant to a review of: (a) a utility’s adjusted revenues and expenses during a defined test period and (b) such utility’s level of investment.  Absent a legal limitation, such as a law limiting the frequency of rate changes or capping rates for a period of time, a state utility commission can review and change rates on its own initiative.  Some states may initiate reviews at the request of a utility, customer, governmental or other representative of a group of customers.  Such parties may, however, agree with one another not to request reviews of or changes to rates for a specified period of time.

Public utilities have traditionally financed capital investments until the new asset is placed in-service.  Provided the asset was found to be a prudent investment, it was then added to rate base and entitled to a return through rate recovery.  Given long lead times in construction, the high costs of plant and equipment and volatile capital markets, management actively pursues strategies to accelerate rate recognition of investments and cash flow.  AEP representatives continue to engage state commissioners and legislators on alternative rate-making options to reduce regulatory lag and enhance certainty in the process.  These options include pre-approvals, a return on construction work in progress, rider/trackers, formula rates and the inclusion of future test-year projections into rates.

The rates of AEP’s vertically integrated public utility subsidiaries are generally based on the cost of providing traditional bundled electric service (i.e., generation, transmission and distribution service).  Historically, the state regulatory frameworks in the service area of the AEP vertically integrated public utility subsidiaries reflected specified fuel costs as part of bundled (or, more recently, unbundled) rates or incorporated fuel adjustment clauses in a utility’s rates and tariffs.  Fuel adjustment clauses permit periodic adjustments to fuel cost recovery from customers and therefore provide protection against exposure to fuel cost changes.

The following state-by-state analysis summarizes the regulatory environment of certain major jurisdictions in which AEP’s vertically integrated public utility subsidiaries operate.  Several public utility subsidiaries operate in more than one jurisdiction.  See Note 4 - Rate Matters included in the 2022 Annual Report for more information regarding pending rate matters.

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Indiana

I&M provides retail electric service in Indiana at bundled rates approved by the IURC, with rates set on a forecasted cost-of-service basis.  Indiana provides for timely fuel and purchased power cost recovery through a fuel cost recovery mechanism.

Oklahoma

PSO provides retail electric service in Oklahoma at bundled rates approved by the OCC.  PSO’s rates are set on a cost-of-service basis.  Fuel and purchased energy costs are recovered or refunded through a fuel adjustment clause.

Virginia

APCo currently provides retail electric service in Virginia at unbundled generation and distribution rates approved by the Virginia SCC.  Virginia generally allows for timely recovery of fuel costs through a fuel cost recovery mechanism.  In addition to base rates and fuel cost recovery, APCo is permitted to recover a variety of costs through rate adjustment clauses including transmission services provided at OATT rates based on rates established by the FERC.

West Virginia

APCo and WPCo provide retail electric service at bundled rates approved by the WVPSC, with rates set on a combined cost-of-service basis.  West Virginia generally allows for timely recovery of fuel costs through the ENEC which trues-up to actual expenses. In addition to base rates and fuel cost recovery, APCo and WPCo are permitted to recover a variety of costs through surcharges.

FERC

The FERC regulates rates for interstate power sales at wholesale, transmission of electric power, accounting and other matters, including construction and operation of hydroelectric projects.  The FERC regulations require AEP’s vertically integrated public utility subsidiaries to provide open access transmission service at FERC-approved rates, and AEP has approved cost-based formula transmission rates on file at the FERC.  The FERC also regulates unbundled transmission service to retail customers.  In addition, the FERC regulates the sale of power for resale in interstate commerce by: (a) approving contracts for wholesale sales to municipal and cooperative utilities at cost-based rates and (b) granting authority to public utilities to sell power at wholesale at market-based rates upon a showing that the seller lacks the ability to improperly influence market prices.  AEP’s vertically integrated public utility subsidiaries have market-based rate authority from the FERC, under which much of their wholesale marketing activity takes place.  The FERC requires each public utility that owns or controls interstate transmission facilities, directly or through an RTO, to file an open access network and point-to-point transmission tariff that offers services comparable to the utility’s own uses of its transmission system.  The FERC also requires all transmitting utilities, directly or through an RTO, to establish an Open Access Same-time Information System, which electronically posts transmission information such as available capacity and prices, and requires utilities to comply with Standards of Conduct that prohibit utilities’ transmission employees from providing non-public transmission information to the utility’s marketing employees. Additionally, the vertically integrated public utility subsidiaries are subject to reliability standards promulgated by the NERC, with the approval of the FERC.

The FERC oversees RTOs, entities created to operate, plan and control utility transmission assets.  AEGCo, APCo, I&M, KGPCo, KPCo and WPCo are members of PJM.  PSO and SWEPCo are members of SPP.

The FERC has jurisdiction over certain issuances of securities of most of AEP’s public utility subsidiaries, the acquisition of securities of utilities, the acquisition or sale of certain utility assets and mergers with another electric utility or holding company.  In addition, both the FERC and state regulators are permitted to review the books and records of any company within a holding company system.
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COMPETITION

AEP’s vertically integrated public utility subsidiaries primarily generate, transmit and distribute electricity to retail customers of AEP’s vertically integrated public utility subsidiaries in their service territories.  These sales are made at rates approved by the state utility commissions of the states in which they operate, and in some instances, approved by the FERC, and are not subject to competition from other vertically integrated public utilities.  Other than AEGCo, AEP’s vertically integrated public utility subsidiaries hold franchises or other rights that effectively grant the exclusive ability to provide electric service in various municipalities and regions in their service areas.  

AEP’s vertically integrated public utility subsidiaries compete with self-generation and with distributors of other energy sources, such as natural gas, fuel oil, renewables and coal, within their service areas.  The primary factors in such competition are price, reliability of service and the capability of customers to utilize alternative sources of energy other than electric power. With respect to competing generators and self-generation, the public utility subsidiaries of AEP believe that they currently maintain a competitive position. 

Changes in regulatory policies and advances in newer technologies for batteries or energy storage, fuel cells, microturbines, wind turbines and photovoltaic solar cells are reducing costs of new technology to levels that are making them competitive with some central station electricity production.  The costs of photovoltaic solar cells in particular have continued to become increasingly competitive. The ability to maintain relatively low cost, efficient and reliable operations and to provide cost-effective programs and services to customers are significant determinants of AEP’s competitiveness.

SEASONALITY

The consumption of electric power is generally seasonal.  In many parts of the country, demand for power peaks during the hot summer months, with market prices also peaking at that time.  In other areas, power demand peaks during the winter.  The pattern of this fluctuation may change due to the nature and location of AEP’s facilities and the terms of power sale contracts into which AEP enters.  In addition, AEP has historically sold less power, and consequently earned less income, when weather conditions are milder. Unusually mild weather in the future could diminish AEP’s results of operations. Conversely, unusually extreme weather conditions could increase AEP’s results of operations.

TRANSMISSION AND DISTRIBUTION UTILITIES

GENERAL

This segment consists of the transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEP Texas and OPCo. OPCo is engaged in the transmission and distribution of electric power to approximately 1,521,000 retail customers in Ohio.  OPCo purchases energy and capacity to serve standard service offer customers and provides transmission and distribution services for all connected load. AEP Texas is engaged in the transmission and distribution of electric power to approximately 1,094,000 retail customers through REPs in west, central and southern Texas.

AEP’s transmission and distribution utility subsidiaries own and operate transmission and distribution lines and other facilities to deliver electric power.  See Item 2 – Properties, for more information regarding the transmission and distribution lines.  Transmission and distribution services are sold to retail customers of AEP’s transmission and distribution utility subsidiaries in their service territories.  These sales are made at rates approved by the PUCT for AEP Texas and by the PUCO and the FERC for OPCo.  The FERC regulates and approves the rates for wholesale transmission transactions.  As discussed below, some transmission services also are separately sold to nonaffiliated companies.

AEP’s transmission and distribution utility subsidiaries hold franchises or other rights to provide electric service in various municipalities and regions in their service areas.  In some cases, these franchises provide the utility with the exclusive right to provide electric service.  These franchises have varying provisions and expiration dates.  In general, the operating companies consider their franchises to be adequate for the conduct of their business.
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The use and the recovery of costs associated with the transmission assets of the AEP transmission and distribution utility subsidiaries are subject to the rules, protocols and agreements in place with PJM and ERCOT, and as approved by the FERC.  In addition to providing transmission services in connection with power sales in their service areas, AEP’s transmission and distribution utility subsidiaries also provide transmission services for nonaffiliated companies through RTOs.

Transmission Agreement

OPCo owns and operates transmission facilities that are used to provide transmission service under the PJM OATT; OPCo is a party to the TA with other utility subsidiary affiliates. The TA defines how the parties to the agreement share the revenues associated with their transmission facilities and the costs of transmission service provided by PJM. The TA has been approved by the FERC.

Regional Transmission Organizations

OPCo is a member of PJM, a FERC-approved RTO.  RTOs operate, plan and control utility transmission assets to provide open access to such assets in a way that prevents discrimination between participants owning transmission assets and those that do not.  AEP Texas is a member of ERCOT.

REGULATION

OPCo provides distribution and transmission services to retail customers within its service territory at cost-based rates approved by the PUCO or by the FERC.  AEP Texas sets its rates through a combination of base rate cases and interim Transmission Cost of Services (TCOS) and Distribution Cost Recovery Factor (DCRF) filings.  AEP Texas may file interim TCOS filings semi-annually and DCRF filings annually to update its rates to reflect changes in its net invested capital. Transmission and distribution rates are established on a cost-of-service basis, which is designed to allow a utility an opportunity to recover its cost of providing service and to earn a reasonable return on its investment used in providing that service.  The cost-of-service generally reflects operating expenses, including operation and maintenance expense, depreciation expense and taxes.  Utility commissions periodically adjust rates pursuant to a review of: (a) a utility’s adjusted revenues and expenses during a defined test period and (b) such utility’s level of investment.

FERC

The FERC regulates rates for transmission of electric power, accounting and other matters.  The FERC regulations require AEP to provide open access transmission service at FERC-approved rates, and it has approved cost-based formula transmission rates on file at the FERC.  The FERC also regulates unbundled transmission service to retail customers.  The FERC requires each public utility that owns or controls interstate transmission facilities to, directly or through an RTO, file an open access network and point-to-point transmission tariff that offers services comparable to the utility’s own uses of its transmission system.  The FERC also requires all transmitting utilities, directly or through an RTO, to establish an Open Access Same-time Information System, which electronically posts transmission information such as available capacity and prices, and requires utilities to comply with Standards of Conduct that prohibit utilities’ transmission employees from providing non-public transmission information to the utility’s marketing employees. In addition, both the FERC and state regulators are permitted to review the books and records of any company within a holding company system. Additionally, the transmission and distribution utility subsidiaries are subject to reliability standards as set forth by the NERC, with the approval of the FERC.

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SEASONALITY

The delivery of electric power is generally seasonal.  In many parts of the country, demand for power peaks during the hot summer months.  In other areas, power demand peaks during the winter months.  The pattern of this fluctuation may change due to the nature and location of AEP’s transmission and distribution facilities.  In addition, AEP transmission and distribution has historically delivered less power, and consequently earned less income, when weather conditions are milder.  In Texas, where there is residential decoupling, unusually mild weather in the future could diminish AEP’s results of operations.  Conversely, unusually extreme weather conditions could increase AEP’s results of operations.

AEP TRANSMISSION HOLDCO

GENERAL

AEPTHCo is a holding company for (a) AEPTCo, which is the direct holding company for the State Transcos and (b) AEP’s Transmission Joint Ventures.

AEPTCo

AEPTCo wholly owns the State Transcos which are independent of, but respectively overlay, the following AEP electric utility operating companies: APCo, I&M, KPCo, OPCo, PSO, SWEPCo and WPCo. The State Transcos develop, own, operate and maintain their respective transmission assets. Assets of the State Transcos interconnect to transmission facilities owned by the aforementioned operating companies and nonaffiliated transmission owners within the footprints of PJM, MISO and SPP. APTCo, IMTCo, KTCo, OHTCo and WVTCo are located within PJM. IMTCo also owns portions of the Greentown station assets located in MISO. OKTCo and SWTCo are located within SPP.

IMTCo, KTCo, OHTCo, OKTCo and WVTCo own and operate transmission assets in their respective jurisdictions.  The Virginia SCC and WVPSC granted consent for APCo and APTCo to enter into a joint license agreement that will support APTCo investment in the state of Tennessee. SWTCo does not currently own or operate transmission assets.

The State Transcos are regulated for rate-making purposes exclusively by the FERC and earn revenues through tariff rates charged for the use of their electric transmission systems.  The State Transcos establish transmission rates each year through formula rate filings with the FERC.  The rate filings calculate the revenue requirement needed to cover the costs of operation and debt service and to earn an allowed ROE.  These rates are then included in an OATT for PJM, MISO and SPP.

The State Transcos own, operate, maintain and invest in transmission infrastructure in order to maintain and enhance system integrity and grid reliability, grid security, safety, reduce transmission constraints and facilitate interconnections of new generating resources and new wholesale customers, as well as enhance competitive wholesale electricity markets. A key part of AEP’s business is replacing and upgrading transmission facilities, assets and components of the existing AEP System as needed to maintain reliability.

The State Transcos provide the capability to build, replace and upgrade existing facilities. As of December 31, 2022, the State Transcos had $12.8 billion of transmission and other assets in-service with plans to construct approximately $3.3 billion of additional transmission assets, excluding CWIP, through 2025. Additional investment in transmission infrastructure is needed within PJM and SPP to maintain the required level of grid reliability, resiliency, security and efficiency and to address an aging transmission infrastructure. Additional transmission facilities will be needed based on changes in generating resources, such as wind or solar projects, generation additions or retirements and additional new customer interconnections.  The State Transcos will continue their investment to enhance physical and cyber security of assets, and are also investing in improving the telecommunication network that supports the operation and control of the grid.

In October 2021, AEP entered into a Stock Purchase Agreement to sell KTCo to Liberty Utilities. The closing of the sale is subject to receipt of FERC authorization under Section 203 of the Federal Power Act and clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
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AEPTHCO JOINT VENTURE INITIATIVES

AEP has established joint ventures with other electric utility companies for the purpose of developing, building and owning transmission assets that seek to improve reliability and market efficiency and provide transmission access to remote generation sources in North America (Transmission Joint Ventures). The Transmission Joint Ventures currently include:

Joint Venture Name		Location		Projected or Actual Completion Date		Owners
 (Ownership %)		Total Estimated/Actual Project Costs at Completion			Approved Return on Equity		
 								(in millions)					
ETT		Texas		(a)		Berkshire Hathaway		$	4,100.0 		(a)		9.6 	%		
 		(ERCOT) 		 		Energy (50%) 		 	 		 		
 		 		 		AEP (50%) 		 	 		 		
													
Prairie Wind		Kansas		2014		Evergy, Inc. (50%) 		158.0 				12.8 	%		
						Berkshire Hathaway							
						Energy (25%)							
 		 		 		AEP (25%)  		 	 		 	 	
													
Pioneer		Indiana		2018		Duke Energy (50%) 		191.0 				10.52 	%	(b)	
 		 		 	 	AEP (50%) 		 	 		 	 	
													
Transource		Missouri		2016		Evergy, Inc. 		310.5 				11.1 	%	(c)	
Missouri		 		 	 	(13.5%) (d)		 	 		 	 	
 		 		 	 	AEP (86.5%) (d) 		 	 		 	 	
													
Transource		West		2019		Evergy, Inc.		86.0 				10.5 	%		
West Virginia		Virginia				(13.5%) (d) 							
						AEP (86.5%) (d) 							
													
Transource		Maryland		2023		Evergy, Inc.		27.6 		(e)		10.4 	%		
Maryland						(13.5%) (d)							
						AEP (86.5%) (d)							
													
Transource		Pennsylvania		2023		Evergy, Inc.		243.6 		(e)		10.4 	%		
Pennsylvania						(13.5%) (d)							
						AEP (86.5%) (d)							
													
Transource		Oklahoma		2026		Evergy, Inc.		111.0	(f)		10.0 	%		
Oklahoma						 (13.5%)(d)							
						 AEP (86.5%) (d)							
													
Transource		Pennsylvania		2029		Evergy, Inc.		76.3 		(g)		10.4 	%		
Energy						(13.5%) (d)							
						AEP (86.5%) (d)							

(a)ETT is undertaking multiple projects and the completion dates will vary for those projects. ETT’s investment in completed and active projects in ERCOT is expected to be $4.1 billion.  Future projects will be evaluated on a case-by-case basis.
(b)In May 2020, Pioneer received FERC approval authorizing an ROE of 10.02% (10.52% inclusive of the RTO incentive adder of 0.5%).
(c)The ROE represents the weighted-average approved ROE based on the costs of two projects developed by Transource Missouri; the $64 million Iatan-Nashua project (10.3%) and the $247 million Sibley-Nebraska City project (11.3%).
(d)AEP owns 86.5% of Transource Missouri, Transource West Virginia, Transource Maryland, Transource Pennsylvania and Transource Oklahoma through its ownership interest in Transource Energy, LLC (Transource).  Transource is a joint venture with AEPTHCo and Evergy, Inc. formed to pursue competitive transmission projects.  AEPTHCo and Evergy, Inc. own 86.5% and 13.5% of Transource, respectively.
(e)See “Independence Energy Connection Project” section of Note 4 for additional information.
(f)In 2016, Transource Kansas received approval from the FERC authorizing an ROE of 9.8% (10.3% inclusive of the RTO incentive adder of 0.5%) for future competitive transmission projects in SPP. In October 2020, Transource was awarded the Sooner-Wekiwa project by SPP and the project was assigned to Transource Kansas. In November 2020, Transource Kansas was renamed Transource Oklahoma. The project is expected to go in-service in 2026.
(g)In October 2022, Transource Energy’s North Delta A proposal was awarded by the New Jersey Board of Public Utilities. The project is expected to go in-service in 2029. The project consists of a new transmission substation with two transformers and nine breakers and will connect to existing transmission lines.

Transource Missouri, Transource West Virginia, Transource Maryland, Transource Pennsylvania and Transource Oklahoma are consolidated joint ventures by AEP.  All other joint ventures in the table above are not consolidated by AEP. AEP’s joint ventures do not have employees.  Business services for the joint ventures are provided by AEPSC and other AEP subsidiaries and the joint venture partners. In 2022, approximately 461 AEPSC employees and 294 operating company employees provided service to one or more joint ventures.
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REGULATION

The State Transcos and the Transmission Joint Ventures located outside of ERCOT establish transmission rates annually through forward-looking formula rate filings with the FERC pursuant to FERC-approved implementation protocols.  The protocols include a transparent, formal review process to ensure the updated transmission rates are prudently-incurred and reasonably calculated. The IMTCo-owned Greentown station assets acquired from Duke Energy Indiana, LLC in December 2018 are located in MISO. IMTCo utilizes a historic cost recovery model to recover MISO assets.

The State Transcos’ and the Transmission Joint Ventures’ (where applicable) rates are included in the respective OATT for PJM and SPP.  An OATT is the FERC rate schedule that provides the terms and conditions for transmission and related services on a transmission provider’s transmission system.  The FERC requires transmission providers such as PJM and SPP to offer transmission service to all eligible customers (for example, load-serving entities, power marketers, generators and customers) on a non-discriminatory basis.

The FERC-approved formula rates establish the annual transmission revenue requirement (ATRR) and transmission service rates for transmission owners in annual rate base filings with the FERC.  The formula rates establish rates for a one-year period based on the current projects in-service and proposed projects for a defined timeframe.  The formula rates also include a true-up calculation for the previous year’s billings, allowing for over/under-recovery of the transmission owner’s ATRR.  PJM and SPP pay the transmission owners their ATRR for use of their facilities and bill transmission customers taking service under the PJM and SPP OATTs, based on the terms and conditions in the respective OATT for the service taken. Additionally, the State Transcos are subject to reliability standards promulgated by the NERC, with the approval of the FERC.

Management continues to monitor the FERC’s 2019 Notice of Inquiry regarding base ROE policy, the FERC’s 2020 and 2021 supplemental Notice of Proposed Rulemaking (NOPR) regarding transmission incentives policy, and various other matters pending before the FERC with the potential to affect the transmission ROE methodology.

In April 2021, the FERC issued a supplemental NOPR proposing to modify its incentive for transmission owners that join RTOs (RTO Incentive). Under the supplemental NOPR, the RTO Incentive would be modified such that a utility would only be eligible for the RTO Incentive for the first three years after the utility joins a FERC-approved Transmission Organization. This is a significant departure from a previous NOPR issued in 2020 seeking to increase the RTO Incentive from 50 basis points to 100 basis points. The supplemental NOPR also required utilities that have received the RTO Incentive for three or more years to submit, within 30 days of the effective date of a final rule, a compliance filing to eliminate the incentive from its tariff prospectively. The supplemental NOPR was subject to a 60-day comment period followed by a 30-day period for reply comments. In July 2021, AEP submitted reply comments. AEP is awaiting a final rule from the FERC.

In the annual rate base filings described above, the State Transcos in aggregate filed rate base totals of $9.9 billion, $8.4 billion and $7 billion for 2022, 2021 and 2020, respectively.  The total filed transmission revenue requirements, including prior year over/under-recovery of revenue and associated carrying charges were $1.7 billion, $1.4 billion and $1.2 billion for 2022, 2021 and 2020, respectively.

The rates of ETT, which is located in ERCOT, are determined by the PUCT.  ETT sets its rates through a combination of base rate cases and interim Transmission Cost of Services (TCOS) filings.  ETT may file interim TCOS filings semi-annually to update its rates to reflect changes in its net invested capital.

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GENERATION & MARKETING

GENERAL

The AEP Generation & Marketing segment subsidiaries consist of a wholesale energy trading and marketing business, a retail supply and energy management business and competitive generating assets.  

AEP Energy Supply, LLC is a holding company with several divisions, including AEP Renewables and AEP OnSite Partners.

AEP Renewables develops, owns and operates utility scale renewable projects backed with long-term contracts with creditworthy counterparties throughout the United States.  AEP Renewables works directly with stakeholders to ensure that customers have clean, sustainable renewable energy to meet their environmental goals.  As of December 31, 2022, AEP Renewables owned projects operating in 11 states, including approximately 1,200 MWs of installed wind capacity and 165 MWs of installed solar capacity.  In October 2019, AEP Renewables entered into an agreement to construct Flat Ridge 3, a wind farm in Kansas.  The 128 MW facility was placed into service in December 2021. In November 2020, AEP Renewables signed a Purchase and Sale Agreement to acquire 75% of the Dry Lake Solar Project, a 100 MW solar facility in southern Nevada. This facility was placed into service in May 2021. In February 2022, AEP management announced the beginning of a process to sell all or a portion of AEP Renewables’ competitive contracted renewables portfolio. For more information on the pending sale of the competitive contracted renewables portfolio, see the “Contracted Renewable Generation Facilities” section of Management’s Discussion and Analysis.

AEP OnSite Partners works directly with wholesale and large retail customers to provide tailored solutions to reduce their energy costs based upon market knowledge, innovative applications of technology and deal structuring capabilities.  AEP OnSite Partners targets opportunities in distributed solar, combined heat and power, energy storage, waste heat recovery, energy efficiency, peaking generation and other energy solutions that create value for customers.  AEP OnSite Partners pursues and develops behind the meter projects with creditworthy customers.  As of December 31, 2022, AEP OnSite Partners owned projects located in 22 states, including approximately 168 MWs of installed solar capacity, and approximately 26 MWs of solar projects under construction.

With respect to the wholesale energy trading and marketing business, AEP Generation & Marketing segment subsidiaries enter into short-term and long-term transactions to buy or sell capacity, energy and ancillary services in ERCOT, SPP, MISO and PJM.  These subsidiaries sell power into the market and engage in power, natural gas and emissions allowances risk management and trading activities.  These activities primarily involve the purchase-and-sale of electricity (and to a lesser extent, natural gas and emissions allowances) under forward contracts at fixed and variable prices.  These contracts include physical transactions, exchange-traded futures, and to a lesser extent, OTC swaps and options.  The majority of forward contracts are typically settled by entering into offsetting contracts.  These transactions are executed with numerous counterparties or on exchanges.

With respect to the retail supply and energy management business, AEP Energy is a retail energy supplier that supplies electricity and/or natural gas to residential, commercial, and industrial customers.  AEP Energy provides various energy solutions in Illinois, Pennsylvania, Delaware, Maryland, New Jersey, Ohio and Washington, D.C.  AEP Energy had approximately 736,000 customer accounts as of December 31, 2022. AEP has initiated a strategic evaluation of its ownership in AEP Energy. Potential alternatives may include, but are not limited to, continued ownership or a sale of all or a part of AEP Energy. Management has not made a decision regarding the potential alternatives, but expects to complete the strategic evaluation in the first half of 2023.

The primary fossil generation subsidiary in the Generation & Marketing segment has historically been AGR. However, in the third quarter 2022, AGR sold the 595 MW Cardinal Plant, its last remaining fossil generation. Other subsidiaries in this segment own or have the right to receive power from additional generation assets. See Item 2 – Properties for more information regarding the generation assets of the Generation & Marketing segment.

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REGULATION

AGR is a public utility under the Federal Power Act, and is subject to the FERC’s exclusive rate-making jurisdiction over wholesale sales of electricity and the transmission of electricity in interstate commerce. Under the Federal Power Act, the FERC has the authority to grant or deny market-based rates for sales of energy, capacity and ancillary services to ensure that such sales are just and reasonable.  The FERC granted AGR market-based rate authority in December 2013.  The FERC’s jurisdiction over rate-making also includes the authority to suspend the market-based rates of AGR and set cost-based rates if the FERC subsequently determines that it can exercise market power, create barriers to entry or engage in abusive affiliate transactions.  Periodically, AGR is required to file a market power update to show that it continues to meet the FERC’s standards with respect to generation market power and other criteria used to evaluate whether it continues to qualify for market-based rates.  Other matters subject to the FERC jurisdiction include, but are not limited to, review of mergers, and dispositions of jurisdictional facilities and acquisitions of securities of another public utility or an existing operational generating facility.

Specific operations of AGR are also subject to the jurisdiction of various other federal, state, regional and local agencies, including federal and state environmental protection agencies.  AGR is also regulated by the PUCT for transactions inside ERCOT.  Additionally, AGR is subject to mandatory reliability standards promulgated by the NERC, with the approval of the FERC.

COMPETITION

The AEP Generation & Marketing segment subsidiaries face competition for the sale of available power, capacity and ancillary services.  The principal factors of impact are electricity and fuel prices, new market entrants, construction or retirement of generating assets by others and technological advances in power generation. Other factors impacting competitiveness include environmental regulation, transmission congestion or transportation constraints at or near generation facilities, inoperability or inefficiencies, outages and deactivations and retirements at generation facilities.

Technology advancements, increased demand for clean energy, changing consumer behaviors, low-priced and abundant natural gas, and regulatory and public policy reforms are among the catalysts for transformation within the industry that impact competition for AEP’s Generation & Marketing segment. AGR also competes with self-generation and with distributors of other energy sources, such as natural gas, fuel oil, renewables and coal, within their service areas.  The primary factors in such competition are price, unit availability and the capability of customers to utilize sources of energy other than electric power.

Changes in regulatory policies and advances in newer technologies for batteries or energy storage, fuel cells, microturbines, wind turbines and photovoltaic solar cells are reducing costs of new technology to levels that are making them competitive with some central station electricity production.  The ability to maintain relatively low cost, efficient and reliable operations and to provide cost-effective programs and services to customers are significant determinants of AGR’s competitiveness. The costs of photovoltaic solar cells in particular have continued to become increasingly competitive.

This segment’s retail operations provide competitive electricity and natural gas in deregulated retail energy markets in six states and Washington, D.C. Each such retail choice jurisdiction establishes its own laws and regulations governing its competitive market, and public utility commission communications and utility default service pricing can affect customer participation in retail competition. Sustained low natural gas and power prices, low market volatility and maturing competitive environments can adversely affect this business.

This segment also engages in procuring and selling output from renewable generation sources under long-term contracts to creditworthy counterparties.  New sources are not acquired without first securing a long-term placement of such power.  Existing sources do not face competitive exposure.  Competitive nonaffiliated suppliers of renewable or other generation could limit opportunities for future transactions for new sources and related output contracts.
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SEASONALITY

The consumption of electric power is generally seasonal.  In many parts of the country, demand for power peaks during the hot summer months, with market prices also peaking at that time.  In other areas, power demand peaks during the winter months.  The pattern of this fluctuation may change.

Fuel Supply

The following table shows the generation sources by type, on an actual net generation (MWhs) basis, used by the Generation & Marketing segment:

	2022		2021		2020	
Coal	41%		38%		46%	
	
Renewables	59%		62%		54%	

Counterparty Risk Management

Counterparties and exchanges may require cash or cash related instruments to be deposited on these transactions as margin against open positions.  As of December 31, 2022, counterparties posted approximately $498 million in cash, cash equivalents or letters of credit with AEP for the benefit of AEP’s Generation & Marketing segment subsidiaries (while, as of that date, AEP’s Generation & Marketing segment subsidiaries posted approximately $115 million with counterparties and exchanges).  Since open trading contracts are valued based on market prices of various commodities, exposures change daily.  See the “Quantitative and Qualitative Disclosures About Market Risk” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report for additional information.

Certain Power Agreements

As of December 31, 2022, the assets utilized in this segment included approximately 1,200 MWs of company-owned domestic wind power facilities and 177 MWs of domestic wind power from long-term purchase power agreements. Additional long term purchased power agreements have been entered into for 77 MWs of wind that are operating and an additional 640 MWs of wind and 1,659 MWs of solar capacity which are all seeking permits or under construction. These agreements are all contingent on completion of construction which is expected by the end of 2025.

In March 2022, AGR entered into an Asset Purchase agreement with a nonaffiliated electric cooperative to sell Cardinal Plant, Unit 1, a competitive generation asset totaling 595 MWs. The FERC approved the sale in May 2022 and the sale closed in the third quarter of 2022. The proceeds from the sale were not material. Concurrent with the closing of the sale, AGR executed a PPA with the nonaffiliated electric cooperative for rights to Unit 1’s power and capacity through 2028. AGR also retained certain obligations related to environmental remediation.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following persons are executive officers of AEP.  Their ages are given as of February 23, 2023.  The officers are appointed annually for a one-year term by the board of directors of AEP.

Julia A. Sloat
President and Chief Executive Officer
Age 53
President since August 2022 and Chief Executive Officer since January 2023. Executive Vice President from January 2021 to August 2022, Chief Financial Officer from January 2021 to November 2022. Senior Vice President, Treasury & Risk and Treasurer from January 2019 to December 2020. President and Chief Operating Officer of OPCo from May 2016 to December 2018.

Nicholas K. Akins
Executive Chair of the Board of Directors
Age 62
Chairman of the Board from January 2014 to December 2022, President from January 2011 to August 2022 and Chief Executive Officer from November 2011 to December 2022.

Christian T. Beam
Executive Vice President - Energy Services
Age 54
Executive Vice President - Energy Services since September 2022. President and Chief Operating Officer of APCo from January 2017 to September 2022. Vice President, Projects Controls & Construction from January 2013 to December 2016.

David M. Feinberg
Executive Vice President, General Counsel and Secretary
Age 53
Executive Vice President since January 2013. General Counsel and Secretary since January 2012.

Greg B. Hall
Executive Vice President and Chief Commercial Officer
Age 50
Executive Vice President and Chief Commercial Officer since September 2022. Executive Vice President - Energy Supply from July 2021 to September 2022. President and Chief Operating Officer of AEP Energy Supply LLC since July 2021. President of AEP Energy, Inc. since May 2017. President of AEP Energy Partners, Inc. since June 2007.

Ann P. Kelly
Executive Vice President and Chief Financial Officer
Age 52
Executive Vice President and Chief Financial Officer since November 2022. Vice President - Finance and Chief Financial Officer of AmeriGas Propane, Inc., a subsidiary of UGI Corporation since February 2019. Corporate Controller and Chief Accounting Officer of UGI Corporation from March 2018 to February 2019. Assistant Treasurer of UGI Corporation from May 2016 to March 2018.

Therace M. Risch
Executive Vice President and Chief Information & Technology Officer
Age 49
Executive Vice President since July 2021. Chief Information & Technology Officer since May 2020. Senior Vice President from April 2020 to July 2021.

Peggy I. Simmons
Executive Vice President - Utilities
Age 45
Executive Vice President - Utilities since September 2022. President and Chief Operating Officer of PSO from September 2018 to September 2022.

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Raja Sundararajan
Executive Vice President - External Affairs
Age 48
Executive Vice President - External Affairs since July 2022. Senior Vice President - Regulatory and Customer Solutions from July 2021 to July 2022. President and Chief Operating Officer of AEP Ohio from January 2019 to July 2021. Vice President-Regulatory Services September 2016 to December 2018.

Phillip R. Ulrich
Executive Vice President and Chief Human Resources Officer
Age 52
Executive Vice President since January 2023. Chief Human Resources Officer since August 2021. Senior Vice President from August 2021 to December 2022. Chief Human Resources Officer of Flex, LTD from May 2019 to July 2021. Senior Vice President, Human Resources, Electrical Sector of Eaton from August 2016 to May 2019.

Charles E. Zebula
Executive Vice President - Portfolio Optimization
Age 62
Executive Vice President - Portfolio Optimization since July 2021. Executive Vice President - Energy Supply from January 2013 to July 2021.
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ITEM 1A.   RISK FACTORS

GENERAL RISKS OF REGULATED OPERATIONS

AEP may not be able to recover the costs of substantial planned investment in capital improvements and additions. (Applies to all Registrants)

AEP’s business plan calls for extensive investment in capital improvements and additions, including the construction of additional transmission and renewable generation facilities, modernizing existing infrastructure, installation of environmental upgrades and retrofits as well as other initiatives.  AEP’s public utility subsidiaries currently provide service at rates approved by one or more regulatory commissions.  If these regulatory commissions do not approve adjustments to the rates charged, affected AEP subsidiaries would not be able to recover the costs associated with their investments.  This would cause financial results to be diminished.

Regulated electric revenues and earnings are dependent on federal and state regulation that may limit AEP’s ability to recover costs and other amounts. (Applies to all Registrants)

The rates customers pay to AEP regulated utility businesses are subject to approval by the FERC and the respective state utility commissions of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. In certain instances, AEP’s applicable regulated utility businesses may agree to negotiated settlements related to various rate matters that are subject to regulatory approval. AEP cannot predict the ultimate outcomes of any settlements or the actions by the FERC or the respective state commissions in establishing rates.

If regulated utility earnings exceed the returns established by the relevant commissions, retail electric rates may be subject to review and possible reduction by the commissions, which may decrease future earnings. Additionally, if regulatory bodies do not allow recovery of costs incurred in providing service on a timely basis, it could reduce future net income and cash flows and negatively impact financial condition. Similarly, if recovery or other rate relief authorized in the past is overturned or reversed on appeal, future earnings could be negatively impacted. Any regulatory action or litigation outcome that triggers a reversal of a regulatory asset or deferred cost generally results in an impairment to the balance sheet and a charge to the income statement of the company involved. See Note 4 – Rate Matters included in the 2022 Annual Report for additional information.

AEP’s transmission investment strategy and execution are dependent on federal and state regulatory policy. (Applies to all Registrants)

A significant portion of AEP’s earnings is derived from transmission investments and activities.  FERC policy currently favors the expansion and updating of the transmission infrastructure within its jurisdiction.  If the FERC were to adopt a different policy, if states were to limit or restrict such policies, or if transmission needs do not continue or develop as projected, AEP’s strategy of investing in transmission could be impacted.  Management believes AEP’s experience with transmission facilities construction and operation gives AEP an advantage over other competitors in securing authorization to install, construct and operate new transmission lines and facilities.  However, there can be no assurance that PJM, SPP, ERCOT or other RTOs will authorize new transmission projects or will award such projects to AEP.  

Certain elements of AEP’s transmission formula rates have been challenged, which could result in lowered rates and/or refunds of amounts previously collected and thus have an adverse effect on AEP’s business, financial condition, results of operations and cash flows. (Applies to all Registrants other than AEP Texas)

AEP provides transmission service under rates regulated by the FERC. The FERC has approved the cost-based formula rate templates used by AEP to calculate its respective annual revenue requirements, but it has not expressly approved the amount of actual capital and operating expenditures to be used in the formula rates. All aspects of AEP’s rates accepted or approved by the FERC, including the formula rate templates, the rates of return on the
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actual equity portion of its respective capital structures and the approved targeted capital structures, are subject to challenge by interested parties at the FERC, or by the FERC on its own initiative. In addition, interested parties may challenge the annual implementation and calculation by AEP of its projected rates and formula rate true-up pursuant to its approved formula rate templates under AEP’s formula rate implementation protocols. If a challenger can establish that any of these aspects are unjust, unreasonable, unduly discriminatory or preferential, then the FERC can make appropriate prospective adjustments to them and/or disallow any of AEP’s inclusion of those aspects in the rate setting formula.

Inquiries related to rates of return, as well as challenges to the formula rates of other utilities, are ongoing in other proceedings at the FERC.  The results of these proceedings could potentially negatively impact AEP in any future challenges to AEP’s formula rates.  If the FERC orders revenue reductions, including refunds, in any future cases related to its formula rates, it could reduce future net income and cash flows and impact financial condition.

End-use consumers and entities supplying electricity to end-use consumers may also attempt to influence government and/or regulators to change the rate setting methodologies that apply to AEP, particularly if rates for delivered electricity increase substantially.

AEP faces risks related to project siting, financing, construction, permitting, governmental approvals and the negotiation of project development agreements that may impede their development and operating activities. (Applies to all Registrants)

AEP owns, develops, constructs, manages and operates electric generation, transmission and distribution facilities. A key component of AEP's growth is its ability to construct and operate these facilities. As part of these operations AEP must periodically apply for licenses and permits from various local, state, federal and other regulatory authorities and abide by their respective conditions. Should AEP be unsuccessful in obtaining necessary licenses or permits on acceptable terms or resolving third-party challenges to such licenses or permits, should there be a delay in obtaining or renewing necessary licenses or permits or should regulatory authorities initiate any associated investigations or enforcement actions or impose related penalties or disallowances, it could reduce future net income and cash flows and impact financial condition. Any failure to negotiate successful project development agreements for new facilities with third-parties could have similar results.

Changes in technology and regulatory policies may lower the value of electric utility facilities and franchises. (Applies to all Registrants)

AEP primarily generates electricity at large central facilities and delivers that electricity to customers over its transmission and distribution facilities to customers usually situated within an exclusive franchise. This method results in economies of scale and generally lower costs than newer technologies such as fuel cells and microturbines, and distributed generation using either new or existing technology.  Other technologies, such as light emitting diodes (LEDs), increase the efficiency of electricity and, as a result, lower the demand for it.   Changes in regulatory policies and advances in batteries or energy storage, wind turbines and photovoltaic solar cells are reducing costs of new technology to levels that are making them competitive with some central station electricity production and delivery.  These developments can challenge AEP’s competitive ability to maintain relatively low cost, efficient and reliable operations, to establish fair regulatory mechanisms and to provide cost-effective programs and services to customers.  Further, in the event that alternative generation resources are mandated, subsidized or encouraged through legislation or regulation or otherwise are economically competitive and added to the available generation supply, such resources could displace a higher marginal cost generating units, which could reduce the price at which market participants sell their electricity.

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AEP may not recover costs incurred to begin construction on projects that are canceled. (Applies to all Registrants)

AEP’s business plan for the construction of new projects involves a number of risks, including construction delays, non-performance by equipment and other third-party suppliers and increases in equipment and labor costs.  To limit the risks of these construction projects, AEP’s subsidiaries enter into equipment purchase orders and construction contracts and incur engineering and design service costs in advance of receiving necessary regulatory approvals and/or siting or environmental permits.  If any of these projects are canceled for any reason, including failure to receive necessary regulatory approvals and/or siting or environmental permits, significant cancellation penalties under the equipment purchase orders and construction contracts could occur.  In addition, if any construction work or investments have been recorded as an asset, an impairment may need to be recorded in the event the project is canceled.

AEP is exposed to nuclear generation risk. (Applies to AEP and I&M)

I&M owns the Cook Plant, which consists of two nuclear generating units for a rated capacity of 2,296 MWs, or about a tenth of the regulated generating capacity in the AEP System.  AEP and I&M are, therefore, subject to the risks of nuclear generation, which include the following:

•The potential harmful effects on the environment and human health due to an adverse incident/event resulting from the operation of nuclear facilities and the storage, handling and disposal of radioactive materials such as SNF.
•Limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with nuclear operations.
•Uncertainties with respect to contingencies and assessment amounts triggered by a loss event (federal law requires owners of nuclear units to purchase the maximum available amount of nuclear liability insurance and potentially contribute to the coverage for losses of others).
•Uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of their licensed lives.

There can be no assurance that I&M’s preparations or risk mitigation measures will be adequate if these risks are triggered.

The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generation facilities.  In the event of non-compliance, the NRC has the authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved.  Revised safety requirements promulgated by the NRC could necessitate substantial capital expenditures at nuclear plants.  In addition, although management has no reason to anticipate a serious nuclear incident at the Cook Plant, if an incident did occur, it could harm results of operations or financial condition.  A major incident at a nuclear facility anywhere in the world could cause the NRC to limit or prohibit the operation or licensing of any domestic nuclear unit.  Moreover, a major incident at any nuclear facility in the U.S. could require AEP or I&M to make material contributory payments.

Costs associated with the operation (including fuel), maintenance and retirement of nuclear plants continue to be more significant and less predictable than costs associated with other sources of generation, in large part due to changing regulatory requirements and safety standards, availability of nuclear waste disposal facilities and experience gained in the operation of nuclear facilities.  Costs also may include replacement power, any unamortized investment at the end of the useful life of the Cook Plant (whether scheduled or premature), the carrying costs of that investment and retirement costs.  The ability to obtain adequate and timely recovery of costs associated with the Cook Plant is not assured.

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AEP subsidiaries are exposed to risks through participation in the market and transmission structures in various regional power markets that are beyond their control. (Applies to all Registrants)

Results are likely to be affected by differences in the market and transmission structures in various regional power markets.  The rules governing the various RTOs, including SPP and PJM, may also change from time to time which could affect costs or revenues.  Existing, new or changed rules of these RTOs could result in significant additional fees and increased costs to participate in those structures, including the cost of transmission facilities built by others due to changes in transmission rate design. In addition, these RTOs may assess costs resulting from improved transmission reliability, reduced transmission congestion and firm transmission rights. As members of these RTOs, AEP’s subsidiaries are subject to certain additional risks, including the allocation among existing members, of losses caused by unreimbursed defaults of other participants in these markets and resolution of complaint cases that may seek refunds of revenues previously earned by members of these markets.

AEP could be subject to higher costs and/or penalties related to mandatory reliability standards. (Applies to all Registrants)

Owners and operators of the bulk power transmission system are subject to mandatory reliability standards promulgated by the NERC and enforced by the FERC.  The standards are based on the functions that need to be performed to ensure the bulk power system operates reliably and are guided by reliability and market interface principles.  Compliance with new reliability standards may subject AEP to higher operating costs and/or increased capital expenditures.  While management expects to recover costs and expenditures from customers through regulated rates, there can be no assurance that the applicable commissions will approve full recovery in a timely manner.  If AEP were found not to be in compliance with the mandatory reliability standards, AEP could be subject to sanctions, including substantial monetary penalties, which likely would not be recoverable from customers through regulated rates.

A substantial portion of the receivables of AEP Texas is concentrated in a small number of REPs, and any delay or default in payment could adversely affect its cash flows, financial condition and results of operations. (Applies to AEP and AEP Texas)

AEP Texas collects receivables from the distribution of electricity from REPs that supply the electricity it distributes to its customers. As of December 31, 2022, AEP Texas did business with approximately 127 REPs. Adverse economic conditions, structural problems in the market served by ERCOT or financial difficulties of one or more REPs could impair the ability of these REPs to pay for these services or could cause them to delay such payments. AEP Texas depends on these REPs to remit payments on a timely basis. Applicable regulatory provisions require that customers be shifted to another REP or a provider of last resort if a REP cannot make timely payments. Applicable PUCT regulations significantly limit the extent to which AEP Texas can apply normal commercial terms or otherwise seek credit protection from firms desiring to provide retail electric service in its service territory, and AEP Texas thus remains at risk for payments related to services provided prior to the shift to another REP or the provider of last resort. In 2022, AEP Texas’ two largest REPs accounted for 45% of its operating revenue. Any delay or default in payment by REPs could adversely affect cash flows, financial condition and results of operations. If a REP were unable to meet its obligations, it could consider, among various options, restructuring under the bankruptcy laws, in which event such REP might seek to avoid honoring its obligations, and claims might be made by creditors involving payments AEP Texas had received from such REP.

Ohio House Bill 6 (HB 6), which provides for beneficial cost recovery for OPCo and for plants owned by OVEC, has come under public scrutiny. (Applies to AEP and OPCo)

In 2019, Ohio adopted and implemented HB 6 which benefits OPCo by authorizing rate recovery for certain costs including renewable energy contracts, OVEC’s coal-fired generating units and energy efficiency measures. AEP and OPCo engaged in lobbying efforts and provided testimony during the legislative process in connection with HB 6. In July 2020, an investigation led by the U.S. Attorney’s Office resulted in a federal grand jury indictment of an Ohio legislator and associates in connection with an alleged racketeering conspiracy involving the adoption of HB
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6. The outcome of the U.S. Attorney’s Office investigation and its impact on HB 6 is not known. If certain provisions of HB 6 were to be eliminated, it is unclear whether new legislation addressing similar issues would be adopted. To the extent that OPCo is unable to recover the costs currently authorized by HB 6, it could reduce future net income and cash flows and impact financial condition. In addition, the impact of continued public scrutiny of HB 6 is not known, and may have an adverse impact on AEP and OPCo, including their relationship with regulatory and legislative authorities, customers and other stakeholders. AEP is a defendant in current litigation relating to HB 6 and AEP or OPCo may be involved in future litigation.

RISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

AEP’s financial performance may be adversely affected if AEP is unable to successfully operate facilities or perform certain corporate functions. (Applies to all Registrants)

Performance is highly dependent on the successful operation of generation, transmission and/or distribution facilities.  Operating these facilities involves many risks, including:

•Operator error and breakdown or failure of equipment or processes.
•Operating limitations that may be imposed by environmental or other regulatory requirements.
•Labor disputes.
•Compliance with mandatory reliability standards, including mandatory cyber security standards.
•Information technology failure that impairs AEP’s information technology infrastructure or disrupts normal business operations.
•Information technology failure that affects AEP’s ability to access customer information or causes loss of confidential or proprietary data that materially and adversely affects AEP’s reputation or exposes AEP to legal claims.
•Supply chain disruptions and inflation.
•Fuel or water supply interruptions caused by transportation constraints, adverse weather such as drought, non-performance by suppliers and other factors.
•Catastrophic events such as fires, earthquakes, explosions, hurricanes, tornados, ice storms, terrorism (including cyber-terrorism), floods or other similar occurrences.
•Fuel costs and related requirements triggered by financial stress in the coal industry.

Physical attacks or hostile cyber intrusions could severely impair operations, lead to the disclosure of confidential information and damage AEP’s reputation. (Applies to all Registrants)

AEP and its regulated utility businesses face physical security and cybersecurity risks as the owner-operators of generation, transmission and/or distribution facilities and as participants in commodities trading. AEP and its regulated utility businesses own assets deemed as critical infrastructure, the operation of which is dependent on information technology systems. Further, the computer systems that run these facilities are not completely isolated from external networks. Parties that wish to disrupt the U.S. bulk power system or AEP operations could view these computer systems, software or networks as targets for cyber-attack.  The Federal government has notified the owners and operators of critical infrastructure, such as AEP, that the conflict between Russia and Ukraine has increased the likelihood of a cyber-attack on such systems. In addition, the electric utility business requires the collection of sensitive customer data, as well as confidential employee and shareholder information, which is subject to electronic theft or loss.

A security breach of AEP or its regulated utility businesses’ physical assets or information systems, interconnected entities in RTOs, or regulators could impact the operation of the generation fleet and/or reliability of the transmission and distribution system. AEP and its regulated utility businesses could be subject to financial harm associated with ransomware theft or inappropriate release of certain types of information, including sensitive customer, vendor, employee, trading or other confidential data. A successful cyber-attack on the systems that control generation, transmission, distribution or other assets could severely disrupt business operations, preventing service to customers or collection of revenues. The breach of certain business systems could affect the ability to
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correctly record, process and report financial information. A major cyber incident could result in significant expenses to investigate and repair security breaches or system damage and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to AEP’s reputation. In addition, the misappropriation, corruption or loss of personally identifiable information and other confidential data could lead to significant breach notification expenses and mitigation expenses such as credit monitoring.  AEP and its third-party vendors have been subject, and will likely continue to be subject, to attempts to gain unauthorized access to their technology systems and confidential data or to attempts to disrupt utility and related business operations. While there have been immaterial incidents of phishing, unauthorized access to technology systems, financial fraud, and disruption of remote access across the AEP System, there has been no material impact on business or operations from these attacks. However, AEP cannot guarantee that security efforts will detect or prevent breaches, operational incidents, or other breakdowns of technology systems and network infrastructure and cannot provide any assurance that such incidents will not have a material adverse effect in the future.

The amount of taxes imposed on AEP could change. (Applies to all Registrants)

AEP is subject to income taxation at the federal level and by certain states and municipalities. In determining AEP’s income tax liability for these jurisdictions, management monitors changes to the applicable tax laws and related regulations, including tax incentives and credits designed to support the sale of energy from utility scale renewable energy facilities. While management believes AEP complies with current prevailing laws, one or more taxing jurisdictions could seek to impose incremental or new taxes on the company. In addition, any adverse developments in tax laws, incentives, credits or regulations, including legislative changes, judicial holdings or administrative interpretations, could have a material and adverse effect on financial condition and results of operations.

If AEP is unable to access capital markets or insurance markets on reasonable terms, it could reduce future net income and cash flows and negatively impact financial condition. (Applies to all Registrants)

AEP relies on access to capital markets as a significant source of liquidity for capital requirements not satisfied by operating cash flows or proceeds from the strategic sale of assets and investments, including subsidiaries such as the planned sale of KPCo and KTCo and AEP Renewables’ competitive contracted renewable portfolio, and insurance markets to assist in managing its risk and liability profile. Volatility, increased interest rates and reduced liquidity in the financial markets could affect AEP’s ability to raise capital on reasonable terms to fund capital needs, including construction costs and refinancing maturing indebtedness. Certain sources of insurance and debt and equity capital have expressed increasing unwillingness to procure insurance for or to invest in companies, such as AEP, that rely on fossil fuels. The public holds diverse and often conflicting views on the use of fossil fuels. AEP has multiple stakeholders, including our shareholders, customers, associates, federal and state regulatory authorities, and the communities in which AEP operates, and these stakeholders will often have differing priorities and expectations regarding issues related to the use of fossil fuels. Any adverse publicity in connection with AEP’s use of fossil fuels could curtail availability from certain sources of capital. If sources of capital for AEP are reduced and/or expected sale proceeds do not become available, capital costs could increase materially. Restricted access to capital or insurance markets and/or increased borrowing costs or insurance premiums could reduce future net income and cash flows and negatively impact financial condition.

Our financial position may be adversely impacted if announced dispositions do not occur as planned or if assets under strategic evaluation lose value. (Applies to AEP)

In October 2021, AEP entered into an agreement to sell KPCo and KTCo for approximately a $2.85 billion enterprise value. In September 2022, the agreement was amended to reduce the purchase price to approximately $2.646 billion, among other terms. The sale remains subject to regulatory approval and if it is not approved on terms acceptable to AEP or if the sale does not occur for any reason, it could reduce future net income and cash flow and impact financial condition. In February 2023, AEP signed an agreement to sell the AEP Renewables’ competitive contracted renewables portfolio to a nonaffiliated party for $1.5 billion including the assumption of project debt. The sale is subject to regulatory approval. Any announced sale of assets and investments, including subsidiaries, may not occur for any number of reasons beyond our control, including regulatory approval on terms that are acceptable.

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AEP has initiated a strategic evaluation for its ownership in AEP Energy, a wholly-owned retail energy supplier that supplies electricity and/or natural gas to residential, commercial and industrial customers. AEP has not made a decision regarding the potential alternatives and expects to complete the evaluation in the first half of 2023. Certain of these alternatives could result in a loss which could reduce future net income and cash flow and impact financial condition.

Shareholder activism could cause AEP to incur significant expense, hinder execution of AEP’s business strategy and impact AEP’s stock price. (Applies to all Registrants)

Shareholder activism, which can take many forms and arise in a variety of situations, could result in substantial costs and divert management’s and AEP’s board’s attention and resources from AEP’s business. Additionally, such shareholder activism could give rise to perceived uncertainties as to AEP’s future, adversely affect AEP’s relationships with its employees, customers or service providers and make it more difficult to attract and retain qualified personnel. Also, AEP may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors. AEP’s stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism.

Downgrades in AEP’s credit ratings could negatively affect its ability to access capital. (Applies to all Registrants)

The credit ratings agencies periodically review AEP’s capital structure and the quality and stability of earnings and cash flows.  Any negative ratings actions could constrain the capital available to AEP and could limit access to funding for operations.  AEP’s business is capital intensive, and AEP is dependent upon the ability to access capital at rates and on terms management determines to be attractive.  If AEP’s ability to access capital becomes significantly constrained, AEP’s interest costs will likely increase and could reduce future net income and cash flows and negatively impact financial condition.

AEP and AEPTCo have no income or cash flow apart from dividends paid or other payments due from their subsidiaries. (Applies to AEP and AEPTCo)

AEP and AEPTCo are holding companies and have no operations of their own.  Their ability to meet their financial obligations associated with their indebtedness and to pay dividends is primarily dependent on the earnings and cash flows of their operating subsidiaries, primarily their regulated utilities, and the ability of their subsidiaries to pay dividends to, or repay loans from them.  Their subsidiaries are separate and distinct legal entities that have no obligation (apart from loans from AEP or AEPTCo) to provide them with funds for their payment obligations, whether by dividends, distributions or other payments.  Payments to AEP or AEPTCo by their subsidiaries are also contingent upon their earnings and business considerations.  AEP and AEPTCo indebtedness and dividends are structurally subordinated to all subsidiary indebtedness.

AEP’s operating results may fluctuate on a seasonal or quarterly basis and with general economic and weather conditions. (Applies to all Registrants)

Electric power consumption is generally seasonal.  In many parts of the country, demand for power peaks during the hot summer months, with market prices also peaking at that time.  In other areas, power demand peaks during the winter.  As a result, overall operating results in the future may fluctuate substantially on a seasonal basis.  In addition, AEP has historically sold less power, and consequently earned less income, when weather conditions are milder.  Unusually mild weather in the future could reduce future net income and cash flows and negatively impact financial condition.  In addition, unusually extreme weather conditions could impact AEP’s results of operations in a manner that would not likely be sustainable.

Further, deteriorating economic conditions triggered by any cause, including international tariffs, generally result in reduced consumption by customers, particularly industrial customers who may curtail operations or cease production entirely, while an expanding economic environment generally results in increased revenues.  As a result, prevailing economic conditions may reduce future net income and cash flows and negatively impact financial condition.
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Volatility in the securities markets, interest rates, and other factors could substantially increase defined benefit pension and other postretirement plan costs and the costs of nuclear decommissioning. (Applies to all Registrants and to AEP and I&M with respect to the costs of nuclear decommissioning)

The costs of providing pension and other postretirement benefit plans are dependent on a number of factors, such as the rates of return on plan assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plan, changes in actuarial assumptions, future government regulation, changes in life expectancy and the frequency and amount of AEP’s required or voluntary contributions made to the plans. Changes in actuarial assumptions and differences between the assumptions and actual values, as well as a significant decline in the value of investments that fund the pension and other postretirement plans, if not offset or mitigated by a decline in plan liabilities, could increase pension and other postretirement expense, and AEP could be required from time to time to fund the pension plan with significant amounts of cash. Such cash funding obligations could have a material impact on liquidity by reducing cash flows and could negatively affect results of operations.

Additionally, I&M holds a significant amount of assets in its nuclear decommissioning trusts to satisfy obligations to decommission its nuclear plant. The rate of return on assets held in those trusts can significantly impact both the costs of decommissioning and the funding requirements for the trusts.

Supply chain disruptions and inflation could negatively impact our operations and corporate strategy. (Applies to all Registrants)

AEP’s operations and business plans depend on the global supply chain to procure the equipment, materials and other resources necessary to build and provide services in a safe and reliable manner. The delivery of components, materials, equipment and other resources that are critical to AEP’s business operations and corporate strategy has been restricted by domestic and global supply chain upheaval. This has resulted in the shortage of critical items. International tensions, including the ramifications of regional conflict, could further exacerbate the global supply chain upheaval. These disruptions and shortages could adversely impact business operations and corporate strategy. The constraints in the supply chain could restrict the availability and delay the construction, maintenance or repair of items that are needed to support normal operations or are required to execute on AEP’s corporate strategy for continued capital investment in utility equipment. These disruptions and constraints could reduce future net income and cash flows and possibly harm AEP’s financial condition.

Supply chain disruptions have contributed to higher prices of components, materials, equipment and other needed commodities and these inflationary increases may continue in the future. The economy in the United States has encountered a material level of inflation compared to the recent past and that has contributed to increased uncertainty in the outlook of near-term economic activity, including the level of future inflation and the possibility of a recession. AEP typically recovers increases in capital expenses from customers through rates in regulated jurisdictions. Failure to recover increased capital costs could reduce future net income and cash flows and possibly harm AEP’s financial condition. Increases in inflation raises our costs for labor, materials and services, and failure to secure these on reasonable terms may adversely impact our financial condition.

AEP’s results of operations and cash flows may be negatively affected by a lack of growth or slower growth in the number of customers, a decline in customer demand or a recession. (Applies to all Registrants)

Growth in customer accounts and growth of customer usage each directly influence demand for electricity and the need for additional power generation and delivery facilities.  Customer growth and customer usage are affected by a number of factors outside the control of AEP, such as mandated energy efficiency measures, demand-side management goals, distributed generation resources and economic and demographic conditions, such as population changes, job and income growth, housing starts, new business formation and the overall level of economic activity, including changes due to public health considerations.

Certain regulatory and legislative bodies have introduced or are considering requirements and/or incentives to further reduce energy consumption.  Additionally, technological advances or other improvements in or applications of technology could lead to declines in per capita energy consumption.  Some or all of these factors, could impact the demand for electricity.
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Failure to attract and retain an appropriately qualified workforce could harm results of operations. (Applies to all Registrants)

Certain events, such as an aging workforce without appropriate replacements, mismatch of skillset or complement to future needs, or unavailability of contract resources may lead to operating challenges and increased costs. The challenges include potential higher rates of existing employee departures, lack of resources, loss of knowledge and a lengthy time period associated with skill development. In this case, costs, including costs for contractors to replace employees, productivity costs and safety costs, may rise. Failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and expertise to the new employees, or the future availability and cost of contract labor may adversely affect the ability to manage and operate the business. If AEP is unable to successfully attract and retain an appropriately qualified workforce, future net income and cash flows may be reduced.

Changes in the price of purchased power and commodities, the cost of procuring fuel, emission allowances for criteria pollutants and the costs of transport may increase AEP’s cost of purchasing and producing power, impacting financial performance. (Applies to all Registrants except AEP Texas, AEPTCo and OPCo)

AEP is exposed to changes in the price and availability of purchased power and fuel (including the cost to procure coal and gas) and the price and availability to transport fuel.  AEP has existing contracts of varying durations for the supply of fuel, but as these contracts end or if they are not honored, AEP may not be able to purchase fuel on terms as favorable as the current contracts. AEP typically recovers increases in fuel expenses and purchased power from customers in regulated jurisdictions. Failure to recover these costs could reduce future net income and cash flows and possibly harm AEP’s financial condition. The inability to procure fuel at costs that are economical could cause AEP to retire generating capacity prior to the end of its useful life, and while AEP typically recovers expenditures for undepreciated plant balances, there can be no assurance in the future that AEP will recover such costs. Similarly, AEP is exposed to changes in the price and availability of emission allowances.  AEP uses emission allowances based on the amount of fuel used and reductions achieved through emission controls and other measures.  Based on current environmental programs remaining in effect, AEP has sufficient emission allowances available through either EPA original issuance or market purchases to cover projected needs for the next two years and beyond. Additional costs may be incurred either to acquire additional allowances or to achieve further reductions in emissions.  If AEP needs to obtain allowances, those purchases may not be on as favorable terms as those under the current environmental programs.  AEP’s risks relative to the price and availability to transport coal include the volatility of the price of diesel which is the primary fuel used in transporting coal by barge.

Prices for coal, natural gas and emission allowances have shown material swings in the past.  Changes in the cost of purchased power, fuel or emission allowances and changes in the relationship between such costs and the market prices of power could reduce future net income and cash flows and negatively impact financial condition.

In addition, actual power prices and fuel costs will differ from those assumed in financial projections used to value trading and marketing transactions, and those differences may be material.  As a result, as those transactions are marked-to-market, they may impact future results of operations and cash flows and impact financial condition.

AEP is subject to physical and financial risks associated with climate change. (Applies to all Registrants)

Climate change creates physical and financial risk.  Physical risks from climate change may include an increase in sea level and changes in weather conditions, such as changes in precipitation and extreme weather events, such as fires.  Customers’ energy needs vary with weather conditions, primarily temperature and humidity.  For residential customers, heating and cooling represent their largest energy use.  To the extent weather conditions are affected by climate change, customers’ energy use could increase or decrease depending on the duration and magnitude of the changes.

Increased energy use due to weather changes may require AEP to invest in additional generating assets, transmission and other infrastructure to serve increased load.  Decreased energy use due to weather changes may affect financial condition through decreased revenues.  Extreme weather conditions in general require more system
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backup, adding to costs, and can contribute to increased system stress, including service interruptions.  Weather conditions outside of the AEP service territory could also have an impact on revenues.  AEP buys and sells electricity depending upon system needs and market opportunities.  Extreme weather conditions creating high energy demand on AEP’s own and/or other systems may raise electricity prices as AEP buys short-term energy to serve AEP’s own system, which would increase the cost of energy AEP provides to customers.

Severe weather and weather-related events impact AEP’s service territories, primarily when thunderstorms, tornadoes, hurricanes, fires, floods and snow or ice storms occur.  To the extent the frequency and intensity of extreme weather events and storms increase, AEP’s cost of providing service will increase, including the costs and the availability of procuring insurance related to such impacts, and these costs may not be recoverable.  Changes in precipitation resulting in droughts, water shortages or floods could adversely affect operations, principally the fossil fuel generating units.  A negative impact to water supplies due to long-term drought conditions or severe flooding could adversely impact AEP’s ability to provide electricity to customers, as well as increase the price they pay for energy.  AEP may not recover all costs related to mitigating these physical and financial risks.

To the extent climate change impacts a region’s economic health, it may also impact revenues.  AEP’s financial performance is tied to the health of the regional economies AEP serves.  The price of energy, as a factor in a region’s cost of living as well as an important input into the cost of goods and services, has an impact on the economic health of the communities within the AEP System.

Management cannot predict the outcome of the legal proceedings relating to AEP’s business activities. (Applies to all Registrants)

AEP is involved in legal proceedings, claims and litigation arising out of its business operations, the most significant of which are summarized in Note 6 - Commitments, Guarantees and Contingencies included in the 2022 Annual Report.  Adverse outcomes in these proceedings could require significant expenditures that could reduce future net income and cash flows and negatively impact financial condition.

Disruptions at power generation facilities owned by third-parties could interrupt the sales of transmission and distribution services. (Applies to AEP and AEP Texas)

AEP Texas transmits and distributes electric power that the REPs obtain from power generation facilities owned by third-parties. If power generation is disrupted or if power generation capacity is inadequate, sales of transmission and distribution services may be diminished or interrupted, and results of operations, financial condition and cash flows could be adversely affected.

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Management is unable to predict the course, results or impact, if any, of current or future litigation or investigations relating to the extreme winter weather in Texas in February 2021. (Applies to AEP and AEP Texas)

As a result of the February 2021 severe winter weather in Texas which caused a shortage of electric generation, ERCOT instructed AEP Texas and other Texas electric utilities to initiate power outages to avoid a sustained large-scale outage and prevent long-term damage to the electric system. At its peak, approximately 468,000 (44%) AEP Texas customers were without power.

AEP Texas and other AEP entities are named in approximately 100 lawsuits generally alleging the failure to exercise reasonable care in maintaining and updating their generation, transmission and distribution facilities in order to prevent cold weather failures and other related negligence. The complaints seek monetary damages among other forms of relief. In February 2021, AEP Texas received a Civil Investigative Demand from the Office of the Attorney General of Texas requesting, among other data, information about its communications to and from ERCOT, PUCT, retail electric providers, utilities, or power generation companies, concerning power outages related to the February 2021 winter storm. The company responded to the Civil Investigative Demand in March 2021. Management is unable to predict the course or outcome of these or any future litigation or investigations or their impact, if any, on future results of operations, financial condition and cash flows.

Hazards associated with high-voltage electricity transmission may result in suspension of AEP’s operations or the imposition of civil or criminal penalties. (Applies to all Registrants)

AEP operations are subject to the usual hazards associated with high-voltage electricity transmission, including explosions, fires, inclement weather, natural disasters, mechanical failure, unscheduled downtime, equipment interruptions, remediation, chemical spills, discharges or releases of toxic or hazardous substances or gases and other environmental risks. The hazards can cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties. AEP maintains property and casualty insurance, but AEP is not fully insured against all potential hazards incident to AEP’s business, such as damage to poles, towers and lines or losses caused by outages.

AEPTCo depends on its affiliates in the AEP System for a substantial portion of its revenues. (Applies to AEPTCo)

AEPTCo’s principal transmission service customers are its affiliates in the AEP System. Management expects that these affiliates will continue to be AEPTCo’s principal transmission service customers for the foreseeable future. For the year ended December 31, 2022, its affiliates were responsible for approximately 79% of the consolidated transmission revenues of AEPTCo.

Most of the real property rights on which the assets of AEPTCo are situated result from affiliate license agreements and are dependent on the terms of the underlying easements and other rights of its affiliates. (Applies to AEPTCo)

AEPTCo does not hold title to the majority of real property on which its electric transmission assets are located. Instead, under the provisions of certain affiliate contracts, it is permitted to occupy and maintain its facilities upon real property held by the respective AEP System utility affiliate that overlay its operations. The ability of AEPTCo to continue to occupy such real property is dependent upon the terms of such affiliate contracts and upon the underlying real property rights of these utility affiliates, which may be encumbered by easements, mineral rights and other similar encumbrances that may affect the use of such real property. AEP can give no assurance that (a) the relevant AEP System utility affiliates will continue to be affiliates of AEPTCo, (b) suitable replacement arrangements can be obtained in the event that the relevant AEP System utility affiliates are not its affiliates and (c) the underlying easements and other rights are sufficient to permit AEPTCo to operate its assets in a manner free from interruption.
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Compliance with legislative and regulatory requirements may lead to increased costs and result in penalties. (Applies to all Registrants)

Business activities of electric utilities and related companies are heavily regulated, primarily through national and state laws and regulations of general applicability, including laws and regulations related to working conditions, health and safety, equal employment opportunity, employee benefit and other labor and employment matters, laws and regulations related to competition and antitrust matters. Many agencies employ mandatory civil penalty structures for regulatory violations. Registrants are subject to the jurisdiction of many federal and state agencies, including the FERC, NERC, Commodities Futures Trading Commission, Federal EPA, NRC, Occupational Safety and Health Administration, the SEC and the United States Department of Justice which may impose significant civil and criminal penalties to enforce compliance requirements relative to AEP’s business, which could have a material adverse effect on financial operating results including earnings, cash flow and liquidity.

The impact of new laws, regulations and policies and the related interpretations, as well as changes in enforcement practices or regulatory scrutiny generally cannot be predicted, and changes in applicable laws, regulations and policies and the related interpretations and enforcement practices may require extensive system and operational changes, be difficult to implement, increase AEP’s operating costs, require significant capital expenditures, or adversely impact the cost or attractiveness of the products or services AEP offers, or result in adverse publicity and harm AEP’s reputation.

RISKS RELATED TO OWNING AND OPERATING GENERATION ASSETS AND SELLING POWER

Costs of compliance with existing and evolving environmental laws are significant. (Applies to all Registrants except AEPTCo)

Operations are subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, waste management, natural resources and health and safety.  A majority of the electricity generated by the AEP System is produced by the combustion of fossil fuels.  Emissions of nitrogen and sulfur oxides, mercury and particulates and the discharge and disposal of solid waste (including coal-combustion residuals or CCR) resulting from fossil fueled generation plants are subject to increased regulations, controls and mitigation expenses.  Compliance with these legal requirements (including any new and more stringent application of existing CCR regulations) requires AEP to commit significant capital toward environmental monitoring, installation of pollution control equipment, emission fees, disposal, remediation and permits at AEP facilities and could cause AEP to retire generating capacity prior to the end of its estimated useful life.  Costs of compliance with environmental statutes and regulations could reduce future net income and negatively impact financial condition, especially if emission limits, CCR waste discharge and/or discharge disposal obligations are tightened, more extensive operating and/or permitting requirements are imposed or additional substances or facilities become regulated.  Although AEP typically recovers expenditures for pollution control technologies, replacement generation, undepreciated plant balances and associated operating costs from customers, there can be no assurance in the future that AEP will recover the remaining costs associated with such plants.  Failure to recover these costs could reduce future net income and cash flows and possibly harm financial condition. 

Regulation of greenhouse gas emissions could materially increase costs to AEP and its customers or cause some electric generating units to be uneconomical to operate or maintain. (Applies to all Registrants except AEP Texas, AEPTCo and OPCo)

Federal or state laws or regulations may be adopted that would impose new or additional limits on the emissions of greenhouse gases, including, but not limited to, carbon dioxide and methane, from electric generation units using fossil fuels like coal. The potential effects of greenhouse gas emission limits on AEP's electric generation units are subject to significant uncertainties based on, among other things, the timing of the implementation of any new requirements, the required levels of emission reductions, the nature of any market-based or tax-based mechanisms adopted to facilitate reductions, the relative availability of greenhouse gas emission reduction offsets, the development of cost-effective, commercial-scale carbon capture and storage technology and supporting regulations and liability mitigation measures, and the range of available compliance alternatives.

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AEP’s results of operations could be materially adversely affected to the extent that new federal or state laws or regulations impose any new greenhouse gas emission limits. Any future limits on greenhouse gas emissions could create substantial additional costs in the form of taxes or emissions allowances, require significant capital investment in carbon capture and storage technology, fuel switching, or the replacement of high-emitting generation facilities with lower-emitting generation facilities and/or could cause AEP to retire generating capacity prior to the end of its estimated useful life. Although AEP typically recovers environmental expenditures, there can be no assurance in the future that AEP can recover such costs which could reduce future net income and cash flows and possibly harm financial condition.

Courts adjudicating nuisance and other similar claims in the future may order AEP to pay damages or to limit or reduce emissions. (Applies to all Registrants except AEP Texas and AEPTCo)

In the past, there have been several cases seeking damages based on allegations of federal and state common law nuisance in which AEP, among others, were defendants.  In general, the actions allege that emissions from the defendants’ power plants constitute a public nuisance.  The plaintiffs in these actions generally seek recovery of damages and other relief.  If future actions are resolved against AEP, substantial modifications or retirement of AEP’s existing coal-fired power plants could be required, and AEP might be required to purchase power from third-parties to fulfill AEP’s commitments to supply power to AEP customers.  This could have a material impact on revenues.  In addition, AEP could be required to invest significantly in additional emission control equipment, accelerate the timing of capital expenditures, pay damages or penalties and/or halt operations.  Unless recovered, those costs could reduce future net income and cash flows and harm financial condition.  Moreover, results of operations and financial position could be reduced due to the timing of recovery of these investments and the expense of ongoing litigation.

Commodity trading and marketing activities are subject to inherent risks which can be reduced and controlled but not eliminated. (Applies to all Registrants except AEP Texas, AEPTCo and OPCo)

AEP routinely has open trading positions in the market, within guidelines set by AEP, resulting from the management of AEP’s trading portfolio.  To the extent open trading positions exist, fluctuating commodity prices can improve or diminish financial results and financial position.

AEP’s power trading activities also expose AEP to risks of commodity price movements.  To the extent that AEP’s power trading does not hedge the price risk associated with the generation it owns, or controls, AEP would be exposed to the risk of rising and falling spot market prices.

In connection with these trading activities, AEP routinely enters into financial contracts, including futures and options, OTC options, financially-settled swaps and other derivative contracts.  These activities expose AEP to risks from price movements.  If the values of the financial contracts change in a manner AEP does not anticipate, it could harm financial position or reduce the financial contribution of trading operations.

Parties with whom AEP has contracts may fail to perform their obligations, which could harm AEP’s results of operations. (Applies to all Registrants)

AEP sells power from its generation facilities into the spot market and other competitive power markets on a contractual basis. AEP also enters into contracts to purchase and sell electricity, natural gas, emission allowances, renewable energy credits and coal as part of its power marketing and energy trading operations. AEP is exposed to the risk that counterparties that owe AEP money or the delivery of a commodity, including power, could breach their obligations.  Should the counterparties to these arrangements fail to perform, AEP may be forced to enter into alternative hedging arrangements or honor underlying commitments at then-current market prices that may exceed AEP’s contractual prices, which would cause financial results to be diminished and AEP might incur losses.  Although estimates take into account the expected probability of default by a counterparty, actual exposure to a default by a counterparty may be greater than the estimates predict.

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AEP relies on electric transmission facilities that AEP does not own or control.  If these facilities do not provide AEP with adequate transmission capacity, AEP may not be able to deliver wholesale electric power to the purchasers of AEP’s power. (Applies to all Registrants)

AEP depends on transmission facilities owned and operated by other nonaffiliated power companies to deliver the power AEP sells at wholesale.  This dependence exposes AEP to a variety of risks.  If transmission is disrupted, or transmission capacity is inadequate, AEP may not be able to sell and deliver AEP wholesale power.  If a region’s power transmission infrastructure is inadequate, AEP’s recovery of wholesale costs and profits may be limited.  If restrictive transmission price regulation is imposed, the transmission companies may not have sufficient incentive to invest in expansion of transmission infrastructure.

The FERC has issued electric transmission initiatives that require electric transmission services to be offered unbundled from commodity sales.  Although these initiatives are designed to encourage wholesale market transactions, access to transmission systems may not be available if transmission capacity is insufficient because of physical constraints or because it is contractually unavailable.  Management also cannot predict whether transmission facilities will be expanded in specific markets to accommodate competitive access to those markets.

OVEC may require additional liquidity and other capital support.  (Applies to AEP, APCo, I&M and OPCo)

AEP and several nonaffiliated utility companies own OVEC. The Inter-Company Power Agreement (ICPA) defines the rights and obligations and sets the power participation ratio of the parties to it. Under the ICPA, parties are entitled to receive and are obligated to pay for all OVEC capacity (approximately 2,400 MWs) in proportion to their respective power participation ratios. The aggregate power participation ratio of APCo, I&M and OPCo is 43.47%. If a party fails to make payments owed by it under the ICPA, OVEC may not have sufficient funds to honor its payment obligations, including its ongoing operating expenses as well as its indebtedness. As of December 31, 2022, OVEC has outstanding indebtedness of approximately $1.1 billion, of which APCo, I&M, and OPCo are collectively responsible for $478 million through the ICPA. Although they are not an obligor or guarantor, APCo, I&M, and OPCo are responsible for their respective ratio of OVEC’s outstanding debt through the ICPA and if OVEC’s indebtedness is accelerated for any reason, there is risk that APCo, I&M and/or OPCo may be required to pay some or all of such accelerated indebtedness in amounts equal to their aggregate power participation ratio of 43.47%.

New climate disclosure rules proposed by the U.S. Securities and Exchange Commission may increase our costs of compliance and adversely impact our business. (Applies to all Registrants)

On March 21, 2022, the SEC proposed new rules relating to the disclosure of a range of climate-related risks. AEP is currently assessing the proposed rule, but at this time AEP cannot predict the costs of implementation or any potential adverse impacts resulting from the rule. To the extent this rule is finalized as proposed, AEP could incur increased costs relating to the assessment and disclosure of climate-related risks. AEP may also face increased litigation risks related to disclosures made pursuant to the rule if finalized as proposed. In addition, enhanced climate disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon-intensive sectors.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

GENERATION FACILITIES

As of December 31, 2022, the AEP System owned (or leased where indicated) generation plants, with locations and net maximum power capabilities (winter rating), are shown in the following tables:
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Vertically Integrated Utilities Segment

AEGCo		 		 		 		 		 	
Plant Name		Units		State		Fuel Type		Net Maximum
 Capacity (MWs)		Year Plant
 or First Unit Commissioned	
Rockport, Units 1 and 2 – 50% of each (a)		2		IN		Steam - Coal		1,310 			1984	

(a)Rockport Plant, Unit 2 was subject to a finance lease with a nonaffiliated company. In December 2022, the lease expired at which point I&M and AEGCo acquired 100% of the interests in Unit 2. See the “Rockport Plant Litigation” section of Note 6 included in the 2022 Annual Report for additional information.

APCo		 		 		 		 		 	
Plant Name		Units		State		Fuel Type		Net Maximum
 Capacity (MWs)		Year Plant
 or First Unit Commissioned	
Buck		3		VA		Hydro		11 			1912	
Byllesby		4		VA		Hydro		19 			1912	
Claytor		4		VA		Hydro		76 			1939	
Leesville		2		VA		Hydro		50 			1964	
London		3		WV		Hydro		14 			1935	
Marmet		3		WV		Hydro		14 			1935	
Niagara		2		VA		Hydro		1 			1906	
Winfield		3		WV		Hydro		15 			1938	
Ceredo		6		WV		Natural Gas		516 			2001	
Dresden		3		OH		Natural Gas		665 			2012	
Smith Mountain		5		VA		Pumped Storage		585 			1965	
Amos		3		WV		Steam - Coal		2,930 			1971	
Mountaineer		1		WV		Steam - Coal		1,320 			1980	
Clinch River		2		VA		Steam - Natural Gas		465 			1958	
Total MWs		 		 		 		6,681 			 	

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I&M		 		 		 		 		 	
Plant Name		Units		State		Fuel Type		Net Maximum
Capacity (MWs)		Year Plant
 or First Unit Commissioned	
Berrien Springs		12		MI		Hydro		7 			1908	
Buchanan		10		MI		Hydro		3 			1919	
Constantine		4		MI		Hydro		1 			1921	
Elkhart		3		IN		Hydro		3 			1913	
Mottville		4		MI		Hydro		2 			1923	
Twin Branch Hydro		8		IN		Hydro		4 			1904	
Deer Creek Solar Farm		NA		IN		Solar		3 			2016	
Olive Solar Farm		NA		IN		Solar		5 			2016	
St. Joseph		NA		IN		Solar		20 			2021	
Twin Branch Solar Farm		NA		IN		Solar		3 			2016	
Watervliet		NA		MI		Solar		5 			2016	
Rockport (Units 1 and 2, 50% of each) (a)		2		IN		Steam - Coal		1,310 			1984	
Cook		2		MI		Steam - Nuclear		2,296 			1975	
Total MWs		 		 		 		3,662 			 	

(a)Rockport Plant, Unit 2 was subject to a finance lease with a nonaffiliated company. In December 2022, the lease expired at which point I&M and AEGCo acquired 100% of the interests in Unit 2. See the “Rockport Plant Litigation” section of Note 6 included in the 2022 Annual Report for additional information.
NA    Not applicable.

The following table provides operating information related to the Cook Plant:

 	Cook Plant	
 	Unit 1		Unit 2	
Year Placed in Operation	1975		1978	
Year of Expiration of NRC License	2034		2037	
Nominal Net Electrical Rating in MWs	1,084		1,212	
Annual Capacity Utilization	 		 	
2022	79.4 	%		86.6 	%	
2021	96.0 	%		84.2 	%	
2020	87.2 	%		94.2 	%	

KPCo		 		 		 		 		 	
Plant Name		Units		State		Fuel Type		Net Maximum
Capacity (MWs)		Year Plant
 or First Unit Commissioned	
Mitchell (a)(b)		2		WV		Steam - Coal		780 			1971	
Big Sandy		1		KY		Steam - Natural Gas		295 			1963	
Total MWs		 		 		 		1,075 			 	

(a)KPCo owns a 50% interest in the Mitchell Plant units.  WPCo owns the remaining 50%. Figures presented reflect only the portion owned by KPCo.
(b)In September 2022, pursuant to resolutions under the existing Mitchell Plant agreement, WPCo replaced KPCo as the operator of Mitchell Plant. See the “Disposition of KPCo and KTCo” section of Note 7 included in the 2022 Annual Report for additional information.

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PSO		 		 		 		 		 	
Plant Name		Units		State		Fuel Type		Net Maximum
Capacity (MWs)		Year Plant
 or First Unit Commissioned	
Comanche		3		OK		Natural Gas		248 			1973	
Northeastern, Unit 1		1		OK		Natural Gas		470 			1961	
Riverside, Units 3 and 4		2		OK		Natural Gas		160 			2008	
Southwestern, Units 4 and 5		2		OK		Natural Gas		168 			2008	
Weleetka		2		OK		Natural Gas		100 			1975	
Northeastern, Unit 3		1		OK		Steam - Coal		465 			1979	
Northeastern, Unit 2		1		OK		Steam - Natural Gas		434 			1961	
Riverside, Units 1 and 2		2		OK		Steam - Natural Gas		896 			1974	
Southwestern, Units 1, 2 and 3		3		OK		Steam - Natural Gas		446 			1952	
Tulsa		2		OK		Steam - Natural Gas		318 			1956	
Maverick (a)		NA		OK		Wind		131 			2021	
Sundance (a)		NA		OK		Wind		90 			2021	
Traverse (a)		NA		OK		Wind		454 			2022	
Total MWs		 		 		 		4,380 			 	

(a)SWEPCo owns a 54.5% interest and PSO owns the remaining 45.5% interest in Sundance, Maverick and Traverse.  
NA Not applicable.
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SWEPCo		 		 		 		 		 	
Plant Name		Units		State		Fuel Type		Net Maximum
Capacity (MWs)		Year Plant
 or First Unit Commissioned	
Mattison		4		AR		Natural Gas		314 			2007	
Stall		3		LA		Natural Gas		534 			2010	
Flint Creek (a)		1		AR		Steam - Coal		258 			1978	
Turk (a)		1		AR		Steam - Coal		477 			2012	
Welsh (b)		2		TX		Steam - Coal		1,053 			1977	
Pirkey (a)(c)		1		TX		Steam - Lignite		580 			1985	
Arsenal Hill		1		LA		Steam - Natural Gas		110 			1960	
Knox Lee		1		TX		Steam - Natural Gas		344 			1950	
Lieberman		3		LA		Steam - Natural Gas		217 			1947	
Wilkes		3		TX		Steam - Natural Gas		889 			1964	
Maverick (d)		NA		OK		Wind		156 			2021	
Sundance (d)		NA		OK		Wind		109 			2021	
Traverse (d)		NA		OK		Wind		544 			2022	
Total MWs		 		 		 		5,585 			 	

(a)Jointly-owned with nonaffiliated entities.  Figures presented reflect only the portion owned by SWEPCo. The Arkansas jurisdictional portion of SWEPCo’s interest in Turk Plant is not in rate base.
(b)In November 2020, management announced it will cease using coal at the Welsh Plant in 2028.
(c)In November 2020, management announced plans to retire the plant in 2023.
(d)SWEPCo owns a 54.5% interest and PSO owns the remaining 45.5% interest in Sundance, Maverick and Traverse.
NA Not applicable.

WPCo		 		 		 		 		 	
Plant Name		Units		State		Fuel Type		Net Maximum
Capacity (MWs)		Year Plant
 or First Unit Commissioned	
Mitchell (a)(b)		2		WV		Steam - Coal		780 			1971	

(a)WPCo owns 50% in the Mitchell Plant units. KPCo owns the remaining 50%. Figures presented reflect only the portion owned by WPCo.
(b)In September 2022, pursuant to resolutions under the existing Mitchell Plant agreement, WPCo replaced KPCo as the operator of Mitchell Plant. See the “Disposition of KPCo and KTCo” section of Note 7 included in the 2022 Annual Report for additional information.

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Generation & Marketing Segment

Renewable Power							
									
Size of Energy Resource		AEP Energy Supply, LLC Division		Renewable
Energy Resource		Location		In-Service or
Under Construction	
1,200 MW		AEP Renewables		Wind		Eight states (a)		In-service	
20 MW		AEP Renewables		Solar		California		In-service	
20 MW		AEP Renewables		Solar		Utah		In-service	
125 MW		AEP Renewables		Solar		Nevada		In-service	
168 MW		AEP OnSite Partners		Solar		Seventeen states (b)		In-service	
26 MW		AEP OnSite Partners		Solar		Two states (c)		Under Construction	

(a)    Colorado, Hawaii, Indiana, Kansas, Michigan, Minnesota, Pennsylvania and Texas.
(b)    California, Colorado, Florida, Hawaii, Illinois, Iowa, Minnesota, Nebraska, New Hampshire, New Jersey, New Mexico, New York, Ohio, Rhode Island, Texas, Vermont and Wisconsin.
(c)    Ohio and New Mexico.

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TRANSMISSION AND DISTRIBUTION FACILITIES

The following tables set forth the total overhead circuit miles of transmission and distribution lines of the AEP System and its operating companies.

Vertically Integrated Utilities Segment

		Total Overhead Circuit Miles of Transmission and Distribution Lines	
APCo		51,620 		
I&M		20,852 		
KGPCo		1,406 		
KPCo		11,182 		
PSO		18,177 		
SWEPCo		26,174 		
WPCo		1,736 		
Total Circuit Miles		131,147 		

Transmission and Distribution Utilities Segment

		Total Overhead Circuit Miles of Transmission and Distribution Lines	
OPCo		44,576 		
AEP Texas		46,492 		
Total Circuit Miles		91,068 		

AEP Transmission Holdco Segment

The following table sets forth the total overhead circuit miles of transmission lines of certain wholly-owned and joint venture-owned entities:

		Total Overhead Circuit Miles of Transmission Lines	
ETT		1,884 		
IMTCo		1,115 		
OHTCo		1,215 		
OKTCo		1,061 		
WVTCo		344 		
Pioneer		43 		
Prairie Wind Transmission		216 		
Transource Missouri		167 		
Transource West Virginia		27 		
Total Circuit Miles		6,072 		

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TITLE TO PROPERTY

The AEP System’s generating facilities are generally located on lands owned in fee simple.  The greater portion of the transmission and distribution lines of the AEP System has been constructed over lands of private owners pursuant to easements or along public highways and streets pursuant to appropriate statutory authority.  The rights of AEP’s public utility subsidiaries in the realty on which their facilities are located are considered adequate for use in the conduct of their business.  Minor defects and irregularities customarily found in title to properties of like size and character may exist, but such defects and irregularities do not materially impair the use of the properties.  AEP’s public utility subsidiaries generally have the right of eminent domain which permits them, if necessary, to acquire, perfect or secure titles to or easements on privately held lands used or to be used in their utility operations.  

SYSTEM TRANSMISSION LINES AND FACILITY SITING

Laws in the states of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Tennessee, Texas, Virginia and West Virginia require prior approval of sites of generating facilities and/or routes of high-voltage transmission lines.  AEP has experienced delays and additional costs in constructing facilities as a result of proceedings conducted pursuant to such statutes and in proceedings in which AEP’s operating companies have sought to acquire rights-of-way through condemnation.  These proceedings may result in additional delays and costs in future years.

CONSTRUCTION PROGRAM

With input from its state utility commissions, the AEP System continuously assesses the adequacy of its transmission, distribution, generation and other facilities to plan and provide for the reliable supply of electric power and energy to its customers.  In this assessment process, assumptions are continually being reviewed as new information becomes available and assessments and plans are modified, as appropriate.  AEP forecasts approximately $6.8 billion of construction expenditures for 2023. Estimated construction expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, environmental regulations, business opportunities, market volatility, economic trends, supply chain issues, weather, legal reviews and the ability to access capital.  See the “Budgeted Capital Expenditures” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report for additional information.

POTENTIAL UNINSURED LOSSES

Some potential losses or liabilities may not be insurable or the amount of insurance carried may not be sufficient to meet potential losses and liabilities, including liabilities relating to damage to AEP’s generation plants and costs of replacement power.  Unless allowed to be recovered through rates, future losses or liabilities which are not completely insured could reduce net income and impact the financial conditions of AEP and other AEP System companies.  For risks related to owning a nuclear generating unit, see the “Nuclear Contingencies” section of Note 6 - Commitments, Guarantees and Contingencies included in the 2022 Annual Report for additional information.

ITEM 3.   LEGAL PROCEEDINGS

For a discussion of material legal proceedings, see Note 6 - Commitments, Guarantees and Contingencies included in the 2022 Annual Report for additional information.

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ITEM 4.   MINE SAFETY DISCLOSURE

The Federal Mine Safety and Health Act of 1977 (Mine Act) imposes stringent health and safety standards on various mining operations. The Mine Act and its related regulations affect numerous aspects of mining operations, including training of mine personnel, mining procedures, equipment used in mine emergency procedures, mine plans and other matters. SWEPCo, through its ownership of DHLC, a wholly-owned lignite mining subsidiary of SWEPCo, is subject to the provisions of the Mine Act.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires companies that operate mines to include in their periodic reports filed with the SEC, certain mine safety information covered by the Mine Act.  Exhibit 95 “Mine Safety Disclosure Exhibit” contains the notices of violation and proposed assessments received by DHLC under the Mine Act for the quarter ended December 31, 2022.

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PART II

ITEM 5.   MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

AEP

In addition to the AEP Common Stock Information section below, the remaining information required by this item is incorporated herein by reference to the material under the “Dividend Policy and Restrictions” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report.

During the quarter ended December 31, 2022, neither AEP nor its publicly-traded subsidiaries purchased equity securities that are registered by AEP or its publicly-traded subsidiaries pursuant to Section 12 of the Exchange Act.

AEP Texas, APCo, I&M, OPCo, PSO and SWEPCo

The common stock of these companies is held solely by AEP.  For more information see the “Dividend Restrictions” section of Note 14 - Financing Activities included in the 2022 Annual Report.

AEPTCo

AEP owns the entire interest in AEPTCo through its wholly-owned subsidiary AEP Transmission Holdco.

AEP COMMON STOCK INFORMATION

AEP common stock is principally traded using the trading symbol “AEP” on the NASDAQ Stock Market.  As of December 31, 2022, AEP had 51,279 registered shareholders. The performance graph below compares the cumulative total return among AEP, the S&P 500 Index and the S&P Electric Utilities (SP833) Index over a five year period. The performance graph assumes an initial investment of $100 on December 31, 2017 and that all dividends were reinvested.

Source: S&P Dow Jones Indices LLC. Data as of December 31, 2022. Past performance is no guarantee of future results. Chart provided for illustrative purposes.

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ITEM 6.         RESERVED

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

AEP

The information required by this item is incorporated herein by reference to the material under Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2022 Annual Report. Year-to-year comparisons between 2021 and 2020 have been omitted from this Form 10-K but may be found in "Management's Discussion and Analysis of Financial Condition" in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2021, which specific discussion is incorporated herein by reference.

AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo

Omitted pursuant to Instruction I(2)(a).  Management’s narrative analysis of the results of operations and other information required by Instruction I(2)(a) is incorporated herein by reference to the material under Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2022 Annual Report.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo

The information required by this item is incorporated herein by reference to the material under the “Quantitative and Qualitative Disclosures About Market Risk” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2022 Annual Report.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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2022 Annual Reports

American Electric Power Company, Inc. and Subsidiary Companies
AEP Texas Inc. and Subsidiaries
AEP Transmission Company, LLC and Subsidiaries
Appalachian Power Company and Subsidiaries
Indiana Michigan Power Company and Subsidiaries
Ohio Power Company and Subsidiaries
Public Service Company of Oklahoma
Southwestern Electric Power Company Consolidated

Audited Financial Statements and
Management’s Discussion and Analysis of Financial Condition and Results of Operations

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AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
INDEX OF ANNUAL REPORTS

		Page
Number	
American Electric Power Company, Inc. and Subsidiary Companies:			
	
	Management’s Discussion and Analysis of Financial Condition and Results of Operations		58	
	Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		127	
	Management’s Report on Internal Control Over Financial Reporting		131	
	Consolidated Financial Statements		132	
				
AEP Texas Inc. and Subsidiaries:			
	Management’s Narrative Discussion and Analysis of Results of Operations		139	
	Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		142	
	Management’s Report on Internal Control Over Financial Reporting		144	
	Consolidated Financial Statements		145	
				
AEP Transmission Company, LLC and Subsidiaries:			
	Management’s Narrative Discussion and Analysis of Results of Operations		152	
	Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		154	
	Management’s Report on Internal Control Over Financial Reporting		157	
	Consolidated Financial Statements		158	
				
Appalachian Power Company and Subsidiaries:			
	Management’s Narrative Discussion and Analysis of Results of Operations		164	
	Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		167	
	Management’s Report on Internal Control Over Financial Reporting		169	
	Consolidated Financial Statements		170	
				
Indiana Michigan Power Company and Subsidiaries:			
	Management’s Narrative Discussion and Analysis of Results of Operations		177	
	Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		180	
	Management’s Report on Internal Control Over Financial Reporting		182	
	Consolidated Financial Statements		183	
				
Ohio Power Company and Subsidiaries:			
	Management’s Narrative Discussion and Analysis of Results of Operations		190	
	Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		193	
	Management’s Report on Internal Control Over Financial Reporting		196	
	Consolidated Financial Statements		197	
				
Public Service Company of Oklahoma:			
	Management’s Narrative Discussion and Analysis of Results of Operations		203	
	Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		206	
	Management’s Report on Internal Control Over Financial Reporting		208	
	Financial Statements		209	
				
Southwestern Electric Power Company Consolidated:			
	Management’s Narrative Discussion and Analysis of Results of Operations		216	
	Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		219	
	Management’s Report on Internal Control Over Financial Reporting		221	
	Consolidated Financial Statements		222	
				
Index of Notes to Financial Statements of Registrants		228	

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AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

EXECUTIVE OVERVIEW

Company Overview

AEP is one of the largest investor-owned electric public utility holding companies in the United States.  AEP’s electric utility operating companies provide generation, transmission and distribution services to more than five million retail customers in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia.

AEP’s subsidiaries operate an extensive portfolio of assets including:

•Approximately 225,000 circuit miles of distribution lines that deliver electricity to 5.6 million customers.
•Approximately 40,000 circuit miles of transmission lines, including approximately 2,200 circuit miles of 765 kV lines, the backbone of the electric interconnection grid in the eastern United States.
•Approximately 23,500 MWs of regulated owned generating capacity as of December 31, 2022, one of the largest complements of generation in the United States.

Customer Demand

AEP’s weather-normalized retail sales volumes for the year ended December 31, 2022 increased by 2.8% from the year ended December 31, 2021. Weather-normalized residential sales increased 0.1% for the year ended December 31, 2022 compared to the year ended December 31, 2021. Weather-normalized commercial sales increased by 4.2% in 2022 compared to 2021. The increase in commercial sales was spread across many sectors. AEP’s 2022 industrial sales volumes increased 4.5% compared to 2021. The growth in industrial sales was spread across many industries.

In 2023, AEP anticipates weather-normalized retail sales volumes will increase by 0.7%. Weather-normalized residential sales volumes are projected to decrease by 0.5% in 2023, while weather-normalized commercial sales volumes are projected to increase by 0.6%. Finally, AEP projects the industrial class to increase by 2.1% in 2023.

(a)Percentage change for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
(b)Forecasted percentage change for the year ended December 31, 2023 compared to the year ended December 31, 2022.
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Supply Chain Disruption and Inflation

The Registrants have experienced certain supply chain disruptions driven by several factors including staffing and travel issues caused by the COVID-19 pandemic, international tensions including the ramifications of regional conflict, increased demand due to the economic recovery from the pandemic, inflation, labor shortages in certain trades and shortages in the availability of certain raw materials. These supply chain disruptions have not had a material impact on the Registrants net income, cash flows and financial condition, but have extended lead times for certain goods and services and have contributed to higher prices for fuel, materials, labor, equipment and other needed commodities. Management has implemented risk mitigation strategies in an attempt to mitigate the impacts of these supply chain disruptions.

The United States economy has experienced a significant level of inflation that has contributed to increased uncertainty in the outlook of near-term economic activity, including whether inflation will continue and at what rate. A prolonged continuation or a further increase in the severity of supply chain and inflationary disruptions could result in additional increases in the cost of certain goods, services and cost of capital and further extend lead times which could reduce future net income and cash flows and impact financial condition.

Strategic Evaluation of AEP Energy

AEP has initiated a strategic evaluation for its ownership in AEP Energy, a wholly-owned retail energy supplier that supplies electricity and/or natural gas to residential, commercial and industrial customers. AEP Energy provides various energy solutions in Illinois, Pennsylvania, Delaware, Maryland, New Jersey, Ohio and Washington, D.C. AEP Energy had approximately 736,000 customer accounts as of December 31, 2022. Potential alternatives may include, but are not limited to, continued ownership or a sale of all or a part of AEP Energy. Management has not made a decision regarding the potential alternatives, but expects to complete the strategic evaluation in the first half of 2023.

Regulatory Matters

AEP’s public utility subsidiaries are involved in rate and regulatory proceedings at the FERC and their state commissions.  Depending on the outcomes, these rate and regulatory proceedings can have a material impact on results of operations, cash flows and possibly financial condition. AEP is currently involved in the following key proceedings. See Note 4 - Rate Matters for additional information.

•2017-2019 Virginia Triennial Review - In November 2020, the Virginia SCC issued an order on APCo’s 2017-2019 Triennial Review filing concluding that APCo earned above its authorized ROE but within its ROE band for the 2017-2019 period, resulting in no refund to customers and no change to APCo base rates on a prospective basis. The Virginia SCC approved a prospective 9.2% ROE for APCo's 2020-2022 triennial review period with the continuation of a statutory 140 basis point band (8.5% bottom, 9.2% midpoint, 9.9% top). APCo appealed this order and a similar order on reconsideration to the Virginia Supreme Court in March 2021, alleging the Virginia SCC erred in finding that costs associated with asset impairments related to APCo early retirement determinations for certain generation facilities should not be attributed to the 2017-2019 test periods under review and deemed fully recovered in the period recorded. In August 2022, the Virginia Supreme Court agreed with this portion of APCo’s appeal and remanded this issue regarding the retired coal-fired plants back to the Virginia SCC for further proceedings. In September 2022, as a result of the Virginia Supreme Court ruling, APCo expensed the remaining $25 million closed coal plant regulatory asset that was previously ordered by the Virginia SCC and recorded a $37 million regulatory asset for previously incurred costs that APCo is expecting to recover as a result of earning below its 2017-2019 authorized ROE band.

In response to the Virginia Supreme Court’s August 2022 opinion, the Virginia SCC initiated remand proceedings and, in December 2022, issued an order that: (a) approved APCo’s requested $37 million regulatory asset related to previously incurred costs as a result of APCo earning below its 2017-2019 authorized ROE band, (b) authorized a $28 million annual increase in APCo Virginia base rates effective
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October 2022 and (c) approved a rider to recover approximately $48 million related to this APCo Virginia base rate increase for the period January 2021 through September 2022. APCo’s 2022 financial statements reflect the impact of the Virginia SCC’s December 2022 order.

•2020-2022 Virginia Triennial Review - In March 2023, APCo will submit its required Virginia earnings test calculation to the Virginia SCC for the 2020-2022 Triennial Review period. For Triennial Review periods in which a Virginia utility earns below its authorized ROE band, the utility may file to recover expenses incurred, up to the bottom of the authorized ROE band, related to major storms, the early retirement of fossil fuel generating assets and certain projects necessary to comply with state and federal environmental legislation. As of December 2022, APCo has deferred approximately $38 million related to previously incurred costs as a result of the current estimate that APCo will earn below the bottom of its authorized ROE band during the 2020-2022 Triennial Review period.

APCo is also required to submit a depreciation study as part of its 2020-2022 Triennial Review filing based on plant in service balances as of December 31, 2022. APCo is required to implement the impacts of this depreciation study effective January 1, 2023 without a corresponding adjustment in customer rates until the first quarter of 2024. While subject to review as part of APCo’s 2020-2022 Virginia Triennial Review, a significant change in depreciation rates (either an increase or a decrease) without a corresponding adjustment in Virginia retail rates would impact future net income and cash flows and impact financial condition.

•2012 Texas Base Rate Case - In 2012, SWEPCo filed a request with the PUCT to increase annual base rates primarily due to the completion of the Turk Plant. In 2013, the PUCT issued an order affirming the prudence of the Turk Plant but determined that the Turk Plant’s Texas jurisdictional capital cost cap established in a previous Certificate of Convenience and Necessity case also limited SWEPCo’s recovery of AFUDC in addition to limits on its recovery of cash construction costs. Upon rehearing in 2014, the PUCT reversed its initial ruling and determined that AFUDC was excluded from the Turk Plant’s Texas jurisdictional capital cost cap. In 2017, the Texas District Court upheld the PUCT’s 2014 order and intervenors filed appeals with the Texas Third Court of Appeals. In July 2018, the Texas Third Court of Appeals reversed the PUCT’s judgment affirming the prudence of the Turk Plant and remanded the issue back to the PUCT. In January 2019, SWEPCo and the PUCT filed petitions for review with the Texas Supreme Court.

In March 2021, the Texas Supreme Court issued an opinion reversing the July 2018 judgment of the Texas Third Court of Appeals and agreeing with the PUCT’s judgment affirming the prudence of the Turk Plant. In addition, the Texas Supreme Court remanded the AFUDC dispute back to the Texas Third Court of Appeals. No parties filed a motion for rehearing with the Texas Supreme Court. In August 2021, the Texas Third Court of Appeals reversed the Texas District Court judgment affirming the PUCT’s order on AFUDC, concluding that the language of the PUCT’s original 2008 order intended to include AFUDC in the Texas jurisdictional capital cost cap, and remanded the case to the PUCT for future proceedings. SWEPCo disagrees with the Court of Appeals decision. SWEPCo and the PUCT submitted Petitions for Review with the Texas Supreme Court in November 2021. In October 2022, the Texas Supreme Court denied the Petitions for Review submitted by SWEPCo and the PUCT. In December 2022, SWEPCo and the PUCT filed requests for rehearing with the Texas Supreme Court. The Texas Supreme Court requested comments on rehearing by March 1, 2023. If SWEPCo’s request for rehearing is denied, the case will be remanded to the PUCT for future proceedings.

Management does not believe a disallowance of capitalized Turk Plant costs or a revenue refund is probable as of December 31, 2022. However, if SWEPCo is ultimately unable to recover AFUDC in excess of the Texas jurisdictional capital cost cap, it would be expected to result in a pretax net disallowance ranging from $80 million to $90 million. In addition, if AFUDC is ultimately determined to be included in the Texas jurisdictional capital cost cap, SWEPCo estimates it may be required to make customer refunds ranging from $0 to $185 million related to revenues collected from February 2013 through December 2022 and such determination may reduce SWEPCo’s future revenues by approximately $15 million on an annual basis.
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•In July 2019, Ohio House Bill 6 (HB 6), which offered incentives for power-generating facilities with zero or reduced carbon emissions, was signed into law by the Ohio Governor. HB 6 terminated energy efficiency programs as of December 31, 2020, including OPCo’s shared savings revenues of $26 million annually and phased out renewable mandates after 2026. HB 6 also provided for continued recovery of existing renewable energy contracts on a bypassable basis through 2032 and included a provision for continued recovery of OVEC costs through 2030 which is allocated to all electric distribution utility customers in Ohio on a non-bypassable basis. OPCo’s Inter-Company Power Agreement for OVEC terminates in June 2040. In July 2020, an investigation led by the U.S. Attorney’s Office resulted in a federal grand jury indictment of the Speaker of the Ohio House of Representatives, Larry Householder, four other individuals, and Generation Now, an entity registered as a 501(c)(4) social welfare organization, in connection with an alleged racketeering conspiracy involving the adoption of HB 6. Certain defendants in that case have since pleaded guilty and a criminal trial is proceeding against the other. In 2021, four AEP shareholders filed derivative actions purporting to assert claims on behalf of AEP against certain AEP officers and directors. See “Litigation Related to Ohio House Bill 6” section of Litigation below for additional information.

In March 2021, the Governor of Ohio signed legislation that, among other things, repealed the payments to the nonaffiliated owner of Ohio’s nuclear power plants that were previously authorized under HB 6. The new legislation, House Bill 128, went into effect in May 2021 and leaves unchanged other provisions of HB 6 regarding energy efficiency programs, recovery of renewable energy costs and recovery of OVEC costs. To the extent that the law changes or OPCo is unable to recover the costs of renewable energy contracts on a bypassable basis by the end of 2032, recover costs of OVEC after 2030 or incurs significant costs associated with the derivative actions, it could reduce future net income and cash flows and impact financial condition.

•In April 2021, the FERC issued a supplemental Notice of Proposed Rulemaking (NOPR) proposing to modify its incentive for transmission owners that join RTOs (RTO Incentive). Under the supplemental NOPR, the RTO Incentive would be modified such that a utility would only be eligible for the RTO Incentive for the first three years after the utility joins a FERC-approved Transmission Organization. This is a significant departure from a previous NOPR issued in 2020 seeking to increase the RTO Incentive from 50 basis points to 100 basis points. The supplemental NOPR also required utilities that have received the RTO Incentive for three or more years to submit, within 30 days of the effective date of a final rule, a compliance filing to eliminate the incentive from its tariff prospectively. The supplemental NOPR was subject to a 60-day comment period followed by a 30-day period for reply comments. In July 2021, AEP submitted reply comments. AEP is awaiting a final rule from the FERC.

In 2019, the FERC approved settlement agreements establishing base ROEs of 9.85% (10.35% inclusive of RTO Incentive adder of 0.5%) and 10% (10.5% inclusive of RTO Incentive adder of 0.5%) for AEP’s PJM and SPP transmission-owning subsidiaries, respectively. In 2020, the FERC determined the base ROE for MISO’s transmission owning subsidiaries should be 10.02% (10.52% inclusive of RTO Incentive adder of 0.5%).

If the FERC modifies its RTO Incentive policy, it would be applied, as applicable, to AEP’s PJM, SPP and MISO transmission owning subsidiaries on a prospective basis, and could affect future net income and cash flows and impact financial condition. Based on management’s preliminary estimates, if a final rule is adopted consistent with the April 2021 supplemental NOPR, it could reduce AEP’s pretax income by approximately $35 million to $50 million on an annual basis.
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•FERC RTO Incentive Complaint - In February 2022, the Office of the Ohio Consumers’ Counsel (OCC) filed a complaint against AEPSC, American Transmission Systems, Inc. and Duke Energy Ohio, alleging the 50-basis point RTO incentive included in Ohio Transmission Owners’ respective transmission formula rates is not just and reasonable and therefore should be eliminated on the basis that RTO participation is not voluntary, but rather is required by Ohio law. In March 2022, AEPSC filed a motion to dismiss the OCC’s February 2022 complaint with the FERC on the basis of certain deficiencies, including that the complaint fails to request relief that can be granted under FERC regulations because AEPSC is not a public utility nor does it have a transmission rate on file with the FERC. In December 2022, the FERC issued an order removing the 0.5 basis point RTO incentive from OPCo and OHTCo transmission formula rates effective the date of the February 2022 complaint filing and directed OPCo and OHTCo to provide refunds, with interest, within sixty days of the date of its order. In January 2023, both AEPSC and the OCC filed requests for rehearing with the FERC. A FERC order on rehearing is expected in 2023. Based on management’s preliminary estimates, the December 2022 FERC order is expected to reduce AEP’s pretax income by approximately $20 million on an annual basis.

In July 2021, the FERC issued an order denying Dayton Power and Light’s request for a 50 basis point RTO incentive on the basis that its RTO participation was not voluntary, but rather is required by Ohio law. This precedent could have an adverse impact on AEP’s Ohio transmission owning subsidiaries. In its February 2022 order on rehearing, the FERC affirmed the decision in its July 2021 order. The case is currently pending appeal at the U.S. Court of Appeals for the Sixth Circuit. In May 2022, the U.S. Court of Appeals for the Sixth Circuit issued an order to hold the appeal in abeyance pending resolution of FERC proceedings on the Office of the Ohio Consumers’ Counsels’ February 2022 RTO Incentive Complaint.

•2021 Louisiana Storm Cost Filing - In 2020, Hurricanes Laura and Delta caused power outages and extensive damage to the SWEPCo service territories, primarily impacting the Louisiana jurisdiction. Following both hurricanes, the LPSC issued orders allowing Louisiana utilities, including SWEPCo, to establish regulatory assets to track and defer expenses associated with these storms. In February 2021, severe winter weather impacted the Louisiana jurisdiction and in March 2021, the LPSC approved the deferral of incremental storm restoration expenses related to the winter storm. In October 2021, SWEPCo filed a request with the LPSC for recovery of $145 million in deferred storm costs associated with the three storms. As part of the filing, SWEPCo requested recovery of the carrying charges on the deferred regulatory asset at a weighted average cost of capital through a rider beginning in January 2022. In May 2022, LPSC staff testimony was submitted to the LPSC. In July 2022, SWEPCo filed rebuttal testimony which agreed to make a request for securitization as the LPSC staff had recommended in their testimony. An order is expected in the first quarter of 2023. If any of the storm costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

•In February 2021, severe winter weather had a significant impact in SPP, resulting in the declaration of Energy Emergency Alert Levels 2 and 3 for the first time in SPP’s history. The winter storm increased the demand for natural gas and restricted the available natural gas supply resulting in significantly increased market prices for natural gas power plants to meet reliability needs for the SPP electric system. As a result of the severe winter weather, PSO and SWEPCo incurred approximately $1.1 billion of extraordinary fuel costs and purchases of electricity, which were deferred as regulatory assets.

In April 2021, the OCC approved a waiver for PSO allowing the deferral of the extraordinary fuel and purchases of electricity as regulatory assets, including a carrying charge at an interim rate of 0.75%, over a longer time period than what the FAC traditionally allows. Also in April 2021, legislation was enacted in Oklahoma permitting securitized financing of qualified costs from extreme weather events. This legislation provides certain authority to the OCC to approve amounts to be recovered from the issuance of ratepayer-backed securitized bonds issued by the ODFA, an Oklahoma governmental agency. In January 2022, PSO, OCC staff and certain intervenors filed a joint stipulation and settlement agreement with the OCC to approve the securitization of PSO’s extraordinary fuel costs and purchases of electricity. In February 2022, the OCC approved the joint stipulation and settlement agreement which included a determination that all of PSO’s extraordinary fuel costs and purchases of electricity were prudent and reasonable and also provided a 0.75% carrying charge related to those costs, subject to true-up based on actual financing costs.
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In September 2022, PSO received proceeds of $687 million from the ODFA which issued ratepayer-backed securitization bonds for the purpose of reimbursing PSO for extraordinary fuel costs and purchases of electricity incurred during the February 2021 severe winter weather event, which were previously recorded as Regulatory Assets on PSO’s balance sheet. The securitization bonds are the obligation of the ODFA and there is no recourse against PSO in the event of a bond default, and therefore are not recorded as Long-term Debt on PSO’s balance sheet. PSO will serve as the servicing agent of the bonds and is responsible for the routine billing and collection of the securitization charges and remitting those collections back to the ODFA. The securitization charges billed to and collected from customers are not included as revenue on PSO’s statement of income. The collections from customers will occur over 20 years.

In March 2021, the APSC issued an order authorizing recovery of the Arkansas jurisdictional share of the retail customer fuel costs over five years, with the appropriate carrying charge to be determined at a later date. Subsequently, SWEPCo began recovery of these fuel costs. In April 2021, SWEPCo filed testimony supporting a five-year recovery with a carrying charge of 6.05%. In June 2022, the APSC ordered SWEPCo to recover the Arkansas jurisdictional share of the fuel costs over six years with a carrying charge equal to its weighted average cost of capital, subject to a prudency review and true-up.

In March 2021, the LPSC approved a special order granting a temporary modification to the FAC and shortly after SWEPCo began recovery of its Louisiana jurisdictional share of these fuel costs based on a five-year recovery period inclusive of an interim carrying charge of 3.25%. SWEPCo will work with the LPSC to finalize the actual recovery period and determine the appropriate carrying charge in future proceedings.

In August 2021, SWEPCo filed an application with the PUCT to implement a net interim fuel surcharge for the Texas jurisdictional share of these retail fuel costs. The application requested a five-year recovery with a carrying charge of 7.18%. In March 2022, the PUCT ordered SWEPCo to recover the Texas jurisdictional share of the fuel costs over five years with a carrying charge of 1.65% and ordered SWEPCo to file a fuel reconciliation addressing fuel costs from January 1, 2020 through December 31, 2021.

If SWEPCo is unable to recover any of the costs relating to the extraordinary fuel and purchases of electricity, or obtain authorization of a reasonable carrying charge on these costs, it could reduce future net income and cash flows and impact financial condition.

•AEP transitioned to stand-alone treatment of NOLC in its PJM and SPP transmission formula rates beginning with 2022 projected transmission revenue requirements and 2021 true-up to actual transmission revenue requirements, and provided notice of this change in informational filings made with the FERC. Stand-alone treatment of the NOLCs for transmission formula rates increased the 2021 and 2022 annual revenue requirements by $78 million and $60 million, respectively. Through year-end 2022, the Registrants’ financial statements reflect a provision for refund for certain NOLC revenues billed by PJM and SPP. Also, a certain portion of the impact of inclusion of the NOLC in the 2021 annual formula rate true-up not yet billed by PJM and SPP is not reflected in the Registrants’ revenues and expenses as the Registrants have not met the requirements of alternative revenue recognition in accordance with the accounting guidance for “Regulated Operations”.

AEP is also transitioning to stand-alone treatment of NOLC in retail jurisdiction base rate case filings.  As a result of retail jurisdiction base rate cases in Arkansas, Indiana, Oklahoma and Texas, inclusion of NOLCs in rates in those jurisdictions is contingent upon a supportive private letter ruling from the IRS. If the Registrant Subsidiaries are successful in transitioning to stand-alone treatment of NOLC, it could have a material, favorable impact on future net income.

•SPP Capacity Planning Reserve Margin - In July 2022, SPP approved a plan to increase its capacity planning reserve margin from 12% to 15% starting in the summer of 2023. Compliance filings were made with SPP in February 2023 and any deficiencies are required to be remedied by May 2023. SPP’s annual
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non-compliance charge as a result of not meeting capacity requirements could range from approximately $86 thousand per MW to approximately $171 thousand per MW under the current SPP tariff. Non-compliance could also result in a failure to meet NERC criteria. As of December 31, 2022, the increase in the capacity planning reserve margin for PSO and SWEPCo to comply with this new SPP requirement was approximately 265 MWs.

Management has been taking actions and expects to comply with SPP’s 2023 capacity planning reserve margin requirement. If PSO or SWEPCo incur charges or are unable to recover, or experience delays in recovering, the costs of complying with SPP’s rule, it could reduce future net income and cash flows and impact financial condition.

Utility Rates and Rate Proceedings

The Registrants file rate cases with their regulatory commissions in order to establish fair and appropriate electric service rates to recover their costs and earn a fair return on their investments. The outcomes of these regulatory proceedings impact the Registrants’ current and future results of operations, cash flows and financial position.

The following tables show the Registrants’ completed and pending base rate case proceedings in 2022. See Note 4 - Rate Matters for additional information.

Completed Base Rate Case Proceedings

				Approved Revenue			Approved		New Rates	
Company		Jurisdiction		Requirement Increase			ROE		Effective	
				(in millions)						
SWEPCo		Texas		$	39.4 				9.25%		March 2021	
I&M		Indiana		61.4 		(a)		9.7%		February 2022	
SWEPCo		Arkansas		48.7 				9.5%		July 2022	
KGPCo		Tennessee		5.8 				9.5%		August 2022	
SWEPCo		Louisiana		21.0 				9.5%		February 2023	

(a)See “2021 Indiana Base Rate Case” section of Note 4 - Rate Matters in the 2021 Annual Report for additional information.

Pending Base Rate Case Proceedings

						Requested Revenue				Commission Staff/	
				Filing		Requirement		Requested		Intervenor Range of	
Company		Jurisdiction		Date		Increase		ROE		Recommended ROE	
						(in millions)					
PSO		Oklahoma		November 2022		$	173.0 			10.4%		(a)	

(a)Intervenor testimony is expected to be filed in the first quarter of 2023.
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Deferred Fuel Costs

Increased fuel and purchased power prices in excess of amounts included in fuel-related revenues has led to an increase in the under collection of fuel costs from customers in most jurisdictions. The table below illustrates the increase (decrease) in the deferred fuel regulatory assets by company and jurisdiction, excluding the impacts of the February 2021 severe winter weather event. See the “February 2021 Severe Winter Weather Impacts in SPP” sections in Note 4 for additional information.

				Traditional FAC		As of		As of		Increase/	
Company		Jurisdiction		Recovery Reset		December 31, 2022		December 31, 2021		(Decrease)	
APCo		Virginia (a)		Annually		$	407.9 			$	128.6 			$	279.3 		
APCo		West Virginia		Annually		288.5 			72.7 			215.8 		
I&M		Indiana		Bi-Annually		38.1 			— 			38.1 		
I&M		Michigan		Annually		9.0 			6.4 			2.6 		
PSO		Oklahoma (b)		Annually		431.5 			194.6 			236.9 		
SWEPCo		Arkansas		Annually		65.8 			23.1 			42.7 		
SWEPCo		Louisiana		Monthly		— 			11.1 			(11.1)		
SWEPCo		Texas		Tri-Annually		191.4 			47.0 			144.4 		
KPCo		Kentucky		Monthly		23.2 			8.2 			15.0 		
WPCo		West Virginia		Annually		231.1 			101.6 			129.5 		
				Total (c)		$	1,686.5 			$	593.3 			$	1,093.2 		

(a)Includes $223 million of noncurrent deferred fuel classified as a Regulatory Asset on APCo’s balance sheets as of December 31, 2022.
(b)Includes $253 million of noncurrent deferred fuel classified as a Regulatory Asset on PSO’s balance sheets as of December 31, 2022.
(c)Includes $23 million and $8 million as of December 31, 2022 and December 31, 2021, respectively, of deferred fuel classified as Assets Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

The AEP utility subsidiaries are working with various state commissions on the timing of recovering deferred fuel balances and have made the following recent filings:

In April 2022, APCo and WPCo submitted their 2022 annual ENEC filing with the WVPSC requesting a $297 million annual increase in ENEC revenues, effective September 1, 2022. In February 2023, the WVPSC issued an order stating that the commission will not grant additional rate increases for fuel costs until the WVPSC staff completes its prudency review. See “2021 and 2022 ENEC Filings” section of Note 4 for additional information.

In August 2022, PSO requested an interim update to its annual Fuel Cost Adjustment (FCA) rates in accordance with the terms of the established tariff which allows PSO or the OCC staff to request an interim FCA adjustment in the event that the annual FCA over/under-recovered balance is $50 million or more on a cumulative basis. In September 2022, the Director of the Public Utility Division of the OCC approved a FCA rate designed to collect a $402 million deferred fuel balance over a 27-month period, effective with the first billing cycle of October 2022. PSO’s fuel and purchased power expenses are subject to an annual prudency review by the OCC.

In September 2022, APCo submitted a request to the Virginia SCC to increase its annual fuel factor by approximately $279 million. APCo implemented interim FAC rates effective November 2022 subject to Virginia SCC review. To help mitigate the impact of rising fuel costs on customer bills, APCo proposed to recover its deferred fuel balance as of October 31, 2022 over two years. An order from the Virginia SCC is expected in the first quarter of 2023.
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In September 2022, SWEPCo filed a request with the APSC for an interim increase to its current Energy Cost Rate (ECR) to recover $44 million of additional fuel costs incurred from April 2022 through August 2022, subsequent to the last annual ECR rate change. The interim rate was effective with the first billing cycle of October 2022 and will be in effect for six months until the ECR is reset in April 2023.

In October 2022, SWEPCo filed a request with the PUCT for an interim fuel surcharge to recover $83 million of additional fuel costs incurred through August 2022. An interim rate is effective February 2023, subject to final approval by the PUCT.

Dolet Hills Power Station and Related Fuel Operations

In 2020, management of SWEPCo and CLECO determined DHLC would not develop additional Oxbow Lignite Company (Oxbow) mining areas for future lignite extraction and ceased extraction of lignite at the mine in May 2020. In April 2020, SWEPCo and CLECO jointly filed a notification letter to the LPSC providing notice of the cessation of lignite mining. In December 2021, the Dolet Hills Power Station was retired. While in operation, DHLC provided 100% of the fuel supply to Dolet Hills Power Station.

The remaining book value of Dolet Hills Power Station non-fuel related assets are recoverable by SWEPCo through rate riders. As of December 31, 2022, SWEPCo’s share of the net investment in the Dolet Hills Power Station is $112 million, including materials and supplies, net of cost of removal collected in rates.

Fuel costs incurred by the Dolet Hills Power Station are recoverable by SWEPCo through active fuel clauses and are subject to prudency determinations by the various commissions. After closure of the DHLC mining operations and the Dolet Hills Power Station, additional reclamation and other land-related costs incurred by DHLC and Oxbow will continue to be billed to SWEPCo and included in existing fuel clauses. As of December 31, 2022, SWEPCo had a net under-recovered fuel balance of $257 million, inclusive of costs related to Dolet Hills Power Station billed by DHLC, but excluding impacts of the February 2021 severe winter weather event.

In March 2021, the LPSC issued an order allowing SWEPCo to recover up to $20 million of fuel costs in 2021 and defer approximately $32 million of additional costs with a recovery period to be determined at a later date. In August 2022, the LPSC staff filed testimony recommending fuel disallowances of $72 million, including denial of recovery of the $32 million deferral, with refunds to customers over five years. In September 2022, SWEPCo filed rebuttal testimony addressing the LPSC staff recommendations.

In March 2021, the APSC approved fuel rates that provide recovery of $20 million for the Arkansas share of the 2021 Dolet Hills Power Station fuel costs over five years through the existing fuel clause.

In August 2022, SWEPCo filed a fuel reconciliation with the PUCT covering the fuel period of January 1, 2020 through December 31, 2021. Intervenor testimony is due in the first quarter of 2023 and a decision from the PUCT is expected in the third quarter of 2023.

If any of these costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

Pirkey Plant and Related Fuel Operations

In 2020, management announced plans to retire the Pirkey Plant in 2023. The Pirkey Plant non-fuel costs are recoverable by SWEPCo through base rates and rate riders. As part of the 2020 Louisiana Base Rate Case, the LPSC authorized recovery of SWEPCo’s Louisiana share of the Pirkey Plant through a separate rider. Fuel costs are recovered through active fuel clauses and are subject to prudency determinations by the various commissions. As of December 31, 2022, SWEPCo’s share of the net investment in the Pirkey Plant is $215 million, including CWIP, before cost of removal. Sabine is a mining operator providing mining services to the Pirkey Plant. Under the provisions of the mining agreement, SWEPCo is required to pay, as part of the cost of lignite delivered, an
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amount equal to mining costs plus a management fee. SWEPCo expects fuel deliveries, including billings of all fixed and operating costs, from Sabine to cease during the first quarter of 2023. Under the fuel agreements, SWEPCo’s fuel inventory and unbilled fuel costs from mining related activities were $43 million as of December 31, 2022. As of December 31, 2022, SWEPCo had a net under-recovered fuel balance of $257 million, inclusive of costs related to Pirkey Plant billed by Sabine, but excluding impacts of the February 2021 severe winter weather event. Upon cessation of lignite deliveries by Sabine to the Pirkey Plant, additional operational, reclamation and other land-related costs incurred by Sabine will be billed to SWEPCo and included in existing fuel clauses. If any of these costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

Renewable Generation

The growth of AEP’s renewable generation portfolio reflects the company’s strategy to diversify generation resources to provide clean energy options to customers that meet both their energy and capacity needs.

Contracted Renewable Generation Facilities

In recent years, AEP has developed its renewable portfolio within the Generation & Marketing segment. Activities have included working directly with wholesale and large retail customers to provide tailored solutions based upon market knowledge, technology innovations and deal structuring which may include distributed solar, wind, combined heat and power, energy storage, waste heat recovery, energy efficiency, peaking generation and other forms of cost reducing energy technologies. The Generation & Marketing segment also developed and/or acquired large scale renewable generation projects that are backed with long-term contracts with creditworthy counterparties.

In February 2022, AEP management announced the initiation of a process to sell all or a portion of AEP Renewables’ competitive contracted renewables portfolio within the Generation & Marketing segment. Subsequently, AEP’s investment in Flat Ridge 2 Wind LLC was removed from the competitive contracted renewables sale portfolio. In June 2022, as a result of deteriorating financial performance, sale negotiations and AEP’s ongoing evaluation and ultimate decision to exit the investment in the near term, AEP determined a decline in the fair value of AEP’s investment in Flat Ridge 2 was other than temporary and recorded a pretax other than temporary impairment charge of $186 million in Equity Earnings (Losses) of Unconsolidated Subsidiaries on AEP’s statements of income. In the third quarter of 2022, in accordance with the accounting guidance for “Investments - Equity Method and Joint Ventures”, AEP recorded an additional $2 million pretax other than temporary impairment charge in Equity Earnings (Losses) of Unconsolidated Subsidiaries on AEP’s statements of income. AEP has recorded a $188 million other than temporary impairment in its investment in Flat Ridge 2 for the year ended December 31, 2022 in Equity Earnings (Losses) of Unconsolidated Subsidiaries on AEP’s statements of income. AEP’s determination of fair value utilized the accounting guidance for Fair Value Measurement market approach to valuation and was based on negotiations to sell the investment to a nonaffiliate. In September 2022, AEP signed a Purchase and Sale Agreement with a nonaffiliate for AEP’s interest in Flat Ridge 2. The transaction closed in the fourth quarter of 2022 and had an immaterial impact on the financial statements at closing.

As of December 31, 2022, the competitive contracted renewable portfolio assets totaled 1.4 gigawatts of generation resources representing consolidated solar and wind assets, with a net book value of $1.2 billion, and a 50% interest in four joint venture wind farms, totaling $247 million, accounted for as equity method investments.

In late January 2023, AEP received final bids from interested parties. In February 2023, AEP’s Board of Directors approved management’s plan to sell the competitive contracted renewables portfolio and AEP signed an agreement to sell the competitive contracted renewables portfolio to a nonaffiliated party for $1.5 billion including the assumption of project debt. As part of the sale agreement, AEP provided the acquirer an indemnification related to certain losses, not to exceed $70 million, which could result from one of the joint venture wind farm’s inability to meet certain minimum performance requirements.

The sale is subject to FERC approval, clearance from the Committee on Foreign Investment in the United States and approval under applicable competition laws. AEP expects to close on the sale in the second quarter of 2023 and
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receive cash proceeds, net of taxes, transaction fees and other customary closing adjustments, of approximately $1.2 billion.

Management concluded the consolidated assets within the competitive contracted renewables portfolio met the accounting requirements to be presented as Held for Sale in the first quarter of 2023 based on the receipt of final bids, Board of Director approval to consummate a sale transaction and the signing of the sale agreement. AEP anticipates recording an estimated pretax loss ranging from $175 million to $225 million ($100 million to $150 million after-tax), in the first quarter of 2023 as a result of reaching Held for Sale status. Management concluded the impact of any other than temporary decline in the fair value of the four joint venture wind farms was not material to AEP’s December 31, 2022 financial statements. Any changes to the book value or carrying value of these assets, or the anticipated sale price, could further reduce future net income and impact financial condition.

Regulated Renewable Generation Facilities

North Central Wind Facilities

In 2020, PSO and SWEPCo received regulatory approvals to acquire the NCWF, comprised of three Oklahoma wind facilities totaling 1,484 MWs. PSO and SWEPCo own undivided interests of 45.5% and 54.5% of the NCWF, respectively. Output from the NCWF serves retail load in PSO’s Oklahoma service territory and both retail and FERC wholesale load in SWEPCo’s service territories in Arkansas and Louisiana. The Oklahoma and Louisiana portions of the NCWF revenue requirement, net of PTC benefit, are recoverable through authorized riders beginning at commercial operation and until such time as amounts are reflected in base rates. The Arkansas portion of the NCWF revenue requirement was approved for recovery through base rates in the 2021 Arkansas base rate case. The table below provides a summary of the facilities as of December 31, 2022:

																											
Project		In-Service Date		Net Book Value		Federal PTC Qualification % (a)		Generating Capacity	
				(in millions)				(in MWs)	
Sundance		April 2021		$	282.3 			100 	%		199	
Maverick		September 2021		398.3		80 	%		287	
Traverse		March 2022		1,255.0		100 	%	(b)	998	

(a)PTC benefits are available for a ten year period following the in-service date.
(b)The PTC for Traverse was increased to 100% in the third quarter of 2022 as a result of the IRA legislation.

See “North Central Wind Energy Facilities” section of Note 7 for additional information.

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Recent Renewable Generation Filings

In December 2021 and January 2022, APCo filed petitions with the Virginia SCC and WVPSC, respectively, for prudency and cost recovery of several renewable projects. In July 2022, the Virginia SCC approved APCo’s December 2021 petition for prudency and cost recovery. In January 2023, the WVPSC issued an order approving the remaining projects included in the petition. The table below provides a list of all remaining projects from the APCo petitions.
																					
Generation Type		Expected Commercial Operation		Owned/PPA		Generating Capacity	
						(in MWs)	
Solar		Second Quarter 2023		Owned		5	
Solar		Fourth Quarter 2025		PPA		20	
Solar		In Operation		PPA		15	
Wind		Third Quarter 2025		Owned		204	
Total Renewable Projects				244	

In May 2022, SWEPCo submitted filings before the APSC, LPSC and PUCT requesting approval to acquire three renewable energy projects totaling 999 MWs. In October 2022, SWEPCo also submitted the necessary filings with the FERC. The projects are comprised of two wind facilities, totaling 799 MWs, and one solar facility, totaling 200 MWs. One of the wind facilities, totaling approximately 201 MWs, is expected to reach commercial operation in December 2024 with the remaining facilities expected to reach commercial operation in December 2025. In January 2023, a hearing was held at the PUCT. Additionally in January 2023, SWEPCo filed an unopposed joint settlement agreement with the APSC that supported approval of the projects. An order from the APSC is expected in the second quarter of 2023. In December, 2022, an intervenor filed suit seeking injunctive relief to effectively halt SWEPCo’s regulatory proceedings, among other relief; however, the magistrate judge for the United States District Court for the Eastern District of Texas has recommended denial of intervenor’s request for injunctive relief.

In November 2022, PSO submitted filings with the OCC requesting approval of its fuel-free power plan to purchase three new wind farms, totaling approximately 553 MWs, and three new solar facilities, totaling approximately 443 MWs. These projects are expected to reach commercial operation in 2025. This proposed plan will help meet projected power needs while protecting customers from volatility in energy costs driven by high natural gas and power prices. In addition, PSO has recently executed an agreement to purchase the 154 MW Rock Falls Wind Facility, and has requested cost recovery in the 2022 Oklahoma Base Rate Case. In February 2023, the FERC approved PSO’s acquisition of the Rock Falls Wind Facility under Section 203 of the Federal Power Act. See “2022 Oklahoma Base Rate Case” section of Note 4 for additional information.

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Significant Renewable Generation Requests for Proposal (RFP)

As part of AEP’s transition to diversify the company’s generation resources and build its renewable generation portfolio, the Registrants file RFPs in an effort to identify potential wind and solar projects. The table below includes RFPs recently issued for owned generation. These projects would be subject to regulatory approval.

Company		Issuance Date		Generation Type		Generating Capacity	
						(in MWs)	
APCo		January 2022		Wind		1,000 		
APCo		January 2022		Solar (a)		100 		
I&M		March 2022		Wind (a)(b)		800 		
I&M		March 2022		Solar (a)(b)		500 		
SWEPCo		September 2022		Wind (a)		1,900 		
SWEPCo		September 2022		Solar (a)		500 		
Total Significant RFPs				4,800 		

(a)Includes an option for battery storage.
(b)Includes solicitation of bids for both owned projects and PPAs.

Disposition of KPCo and KTCo

In October 2021, AEP entered into a Stock Purchase Agreement (SPA) to sell KPCo and KTCo to Liberty Utilities Co., a subsidiary of Algonquin Power & Utilities Corp. (Liberty), for approximately a $2.85 billion enterprise value. In May 2022, the KPSC approved the transfer of KPCo to Liberty subject to certain conditions contingent upon the closing of the sale. AEP has received clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) and the Committee on Foreign Investment in the United States during 2022. Clearance under the HSR expired in January 2023. AEP and Liberty refiled a joint application seeking HSR clearance in February 2023. The sale is also contingent upon FERC approval under Section 203 of the Federal Power Act. The parties to the SPA have certain termination rights if the closing of the sale does not occur by April 26, 2023.

Transfer of Ownership

FERC Proceedings

In December 2021, Liberty, KPCo and KTCo (the applicants) requested FERC approval of the sale under Section 203 of the Federal Power Act. In February 2022, several intervenors in the case filed protests related to whether the sale will negatively impact the wholesale transmission rates of applicants. In April 2022, the FERC issued a deficiency letter stating that the Section 203 application is deficient and that additional information is required to process it. In May 2022, Liberty, KPCo and KTCo supplemented the application. In December 2022, the FERC issued an order denying, without prejudice, authorization of the proposed sale stating the applicants failed to demonstrate the proposed transaction will not have an adverse effect on rates.

In January 2023, AEP, AEPTCo, and Liberty entered into an amendment to the SPA that specified the applicants will submit a new filing for approval under Section 203 of the Federal Power Act. The new filing was submitted to the FERC on February 14, 2023. The applicants requested expedited treatment of the new filing, including an accelerated comment period. In response, the FERC granted a shortened 45 day comment period. The applicants believe the new Section 203 application addresses the concerns raised in the FERC’s December 2022 order. The application contains several additional commitments by Liberty to mitigate potential adverse impacts on FERC jurisdictional rates over the next five years, including: a) maintaining the current return on equity; b) maintaining the current cost cap on equity; c) financing future investments at the current credit rating; and d) capping certain operating and administrative costs. The sale remains subject to FERC approval. The statute requires an order from the FERC within 180 days of the February 14, 2023 filing date in accordance with Section 203 of the Federal Power Act.
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KPSC Proceedings

In May 2022, the KPSC approved the transfer of KPCo to Liberty subject to conditions contingent upon the closing of the sale, including establishment of regulatory liabilities to subsidize retail customer transmission and distribution expenses, a fuel adjustment clause bill credit, and a three-year Big Sandy decommissioning rider rate holiday during which KPCo’s carrying charge is reduced by 50%.

Mitchell Plant Operations and Maintenance Agreement and Ownership Agreement

KPCo and WPCo each own a 50% undivided interest in the 1,560 MW coal-fired Mitchell Plant. As of December 31, 2022 and 2021, the net book value of KPCo’s share of the Mitchell Plant, before cost of removal including CWIP and inventory, was $577 million and $586 million, respectively. The SPA includes a condition precedent to closing requiring the issuance of regulatory orders approving new Mitchell Plant agreements.

The KPSC and WVPSC issued orders proposing materially different modifications to the Mitchell Plant agreements filed by AEP such that the new agreements could not be executed by the parties. In lieu of new agreements, in July 2022, KPCo and WPCo confirmed with the KPSC and WVPSC, respectively, that they will continue operating under the existing Mitchell Agreement, utilizing the Mitchell Agreement Operating Committee’s authority under that agreement to issue appropriate resolutions so the parties can operate in accordance with each state commission’s directives related to CCR and ELG investment. In September 2022, pursuant to resolutions under the existing Mitchell Plant agreement, WPCo replaced KPCo as the Operator of Mitchell Plant.

Summary

As a result of the conditions imposed by the KPSC’s May 2022 order, in the second quarter of 2022, AEP recorded a $69 million loss on the expected sale of the Kentucky Operations in accordance with accounting guidance for Fair Value Measurement.

In September 2022, AEP, AEPTCo and Liberty entered into an amendment to the SPA which reduced the purchase price to approximately $2.646 billion and Liberty agreed to waive, upon FERC approval of the sale, the SPA condition precedent to closing requiring the issuance of regulatory orders approving new proposed Mitchell Plant agreements. Further, as a result of the reduced purchase price from the September Amendment and the change to the anticipated timing of the completion of the transaction, AEP recorded an additional $194 million pretax loss ($149 million net of tax) on the expected sale of the Kentucky Operations in the third quarter of 2022 in accordance with the accounting guidance for Fair Value Measurement.

As a result of the December 2022 FERC order and resulting delay in the anticipated timing of the closing of the transaction, AEP recorded an additional $100 million pretax loss ($79 million net of tax) on the expected sale of the Kentucky Operations in December 2022 in accordance with the accounting guidance for Fair Value Measurement. In total, AEP recorded a $363 million pretax loss of ($297 million net of tax) on the expected sale of the Kentucky Operations for the twelve months ended December 31, 2022.

Management believes it is probable that FERC authorization under Section 203 of the Federal Power Act will be received and closing will occur after receipt of the order. Therefore, the assets and liabilities of KPCo and KTCo were classified as Held for Sale in the December 31, 2022 balance sheets of AEP and AEPTCo. Upon closing, Liberty will acquire the assets and assume the liabilities of KPCo and KTCo, excluding pension and other post-retirement benefit plan assets and liabilities. AEP expects to provide customary transition services to Liberty for a period of time after closing of the transaction. AEP expects cash proceeds, net of taxes and transaction fees, from the sale of approximately $1.2 billion. AEP plans to use the proceeds from the sale to fund its continued investment in regulated businesses, including transmission and regulated renewables projects. If additional reductions in the fair value of the Kentucky Operations occur, it would reduce future net income and cash flows.

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Merchant Portion of Turk Plant

SWEPCo constructed the Turk Plant, a base load 600 MW (650 MW net maximum capacity) pulverized coal ultra-supercritical generating unit in Arkansas, which was placed in-service in December 2012 and is included in the Vertically Integrated Utilities segment. SWEPCo owns 73% (440 MWs/477 MWs) of the Turk Plant and operates the facility.

Approximately 20% of the Turk Plant output is currently not subject to cost-based rate recovery in Arkansas. This portion of the plant’s output is being sold into the wholesale market. Approximately 80% of the Turk Plant investment is recovered under retail cost-based rate recovery in Texas, Louisiana and through SWEPCo’s wholesale customers under FERC-approved rates. In November 2022, SWEPCo filed a Certificate of Public Convenience and Necessity with the APSC for approval to operate the Turk plant to serve Arkansas customers and recover the associated costs through a cost recovery rider. Cost-based recovery of the Turk Plant would aid SWEPCo’s near-term capacity needs and support compliance with SPP’s 2023 increased capacity planning reserve margin requirements. As of December 31, 2022, the net book value of the Turk Plant was $1.4 billion, before cost of removal including CWIP and inventory. If SWEPCo cannot ultimately recover its investment and expenses related to the Arkansas retail portion of the Turk Plant, it could reduce future net income and cash flows and impact financial condition.

Winter Storm Elliott

In December 2022, severe winter weather and extreme cold temperatures resulted in an unusually high demand for electricity and the declaration of an Energy Emergency Alert (EEA) in the PJM region. The EEA was in effect from December 23, 2022 through December 25, 2022. During this time, all electric generating units located within the PJM region were directed to operate up to their maximum generation output levels. The issuance of the EEA also triggered PJM Performance Assessment Intervals (PAI) for each committed generation capacity resource. During a PAI event, PJM evaluates the performance of each committed capacity resource against PJM performance standards. Generating units that underperform during a PAI event are subject to non-performance charges while generating units that perform above expectations are awarded performance bonuses. PJM awards and allocates the bonus performance payments from the pool of non-performance charges collected during the PAI event. PJM provided preliminary performance standards for each generating resource in January 2023 and additional preliminary generating unit performance data was released by PJM in February 2023. PJM currently expects to invoice non-performance charges and bonus payments in the month-end bill for March 2023 issued in early April 2023. As of December 31, 2022, based on preliminary PJM performance standards and internal generation estimates, OPCo and APCo recorded $7 million and $2 million, respectively, of non-performance charges from the December PAI event in Electricity, Transmission and Distribution revenues and Purchased Electricity, Fuel and Other Consumables Used for Electric Generation, respectively, on the statements of income. The Registrants did not record estimated bonus performance payments as of December 31, 2022 as those amounts were not reasonably estimable.
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LITIGATION

In the ordinary course of business, AEP is involved in employment, commercial, environmental and regulatory litigation. Since it is difficult to predict the outcome of these proceedings, management cannot predict the eventual resolution, timing or amount of any loss, fine or penalty. Management assesses the probability of loss for each contingency and accrues a liability for cases that have a probable likelihood of loss if the loss can be estimated.  Adverse results in these proceedings have the potential to reduce future net income and cash flows and impact financial condition. See Note 4 – Rate Matters and Note 6 – Commitments, Guarantees and Contingencies for additional information.

Rockport Plant Litigation

In 2013, the Wilmington Trust Company filed suit in the U.S. District Court for the Southern District of New York against AEGCo and I&M alleging that it would be unlawfully burdened by the terms of the modified NSR consent decree after the Rockport Plant, Unit 2 lease expiration in December 2022.  The terms of the consent decree allow the installation of environmental emission control equipment, repowering, refueling or retirement of the unit.  The plaintiffs sought a judgment declaring that the defendants breached the lease, must satisfy obligations related to installation of emission control equipment and indemnify the plaintiffs.  See “Obligations under the New Source Review Litigation Consent Decree” section below for additional information.

After the litigation proceeded at the district court and appellate court, in April 2021, I&M and AEGCo reached an agreement to acquire 100% of the interests in Rockport Plant, Unit 2 for $116 million from certain financial institutions that own the unit through trusts established by Wilmington Trust, the nonaffiliated owner trustee of the ownership interests in the unit. The transaction closed at the expiration of the Rockport Plant, Unit 2 lease in December 2022 and also resulted in a final settlement of, and release of claims in, the lease litigation.

Subsequent to the end of the Rockport Plant, Unit 2 lease in December 2022, AEGCo’s 50% ownership share of Rockport Plant, Unit 2 is being billed to I&M under a FERC-approved UPA. I&M’s purchased power from AEGCo and I&M’s 50% ownership share of Rockport Plant, Unit 2 electricity generated represent a merchant resource for I&M until Rockport Plant, Unit 2 is retired in 2028. A 2021 IURC order approved a settlement agreement addressing the future use of Rockport Plant, Unit 2 as a short-term capacity resource through the June 2023 - May 2024 PJM planning year. The MPSC issued an order in February 2023 approving the settlement agreement on I&M’s 2022 Integrated Resource Plan (IRP) filing, which included certain cost recovery for the remaining net book value of leasehold improvements made during the term of the Rockport Plant, Unit 2 lease and future use of Rockport Plant, Unit 2 as a capacity resource. If I&M cannot recover its future investment and expenses related to the merchant share of Rockport Plant Unit 2, it could reduce future net income and cash flows and impact financial condition.

Claims Challenging Transition of American Electric Power System Retirement Plan to Cash Balance Formula

Four participants in The American Electric Power System Retirement Plan (the Plan) filed a class action complaint in December 2021 in the U.S. District Court for the Southern District of Ohio against AEPSC and the Plan. When the Plan’s benefit formula was changed in the year 2000, AEP provided a special provision for employees hired before January 1, 2001, allowing them to continue benefit accruals under the then benefit formula for a full 10 years alongside of the new cash balance benefit formula then being implemented.  Employees who were hired on or after January 1, 2001 accrued benefits only under the new cash balance benefit formula.  The plaintiffs assert a number of claims on behalf of themselves and the purported class, including that: (a) the Plan violates the requirements under the Employee Retirement Income Security Act (ERISA) intended to preclude back-loading the accrual of benefits to the end of a participant’s career, (b) the Plan violates the age discrimination prohibitions of ERISA and the Age Discrimination in Employment Act and (c) AEP failed to provide required notice regarding the changes to the Plan. Among other relief, the Complaint seeks reformation of the Plan to provide additional benefits and the recovery of plan benefits for former employees under such reformed plan. The plaintiffs previously had submitted claims for additional plan benefits to AEP, which were denied. On February 15, 2022, AEPSC and the Plan filed a motion to
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dismiss the complaint for failure to state a claim. On August 16, 2022, the district court granted the motion to dismiss the complaint without prejudice. The plaintiffs filed a motion for leave to file an amended complaint, which the Court denied on December 1, 2022. The plaintiffs did not file an appeal by the deadline of January 3, 2023.

Litigation Related to Ohio House Bill 6 (HB 6)

In 2019, Ohio adopted and implemented HB 6 which benefits OPCo by authorizing rate recovery for certain costs including renewable energy contracts and OVEC’s coal-fired generating units. OPCo engaged in lobbying efforts and provided testimony during the legislative process in connection with HB 6. In July 2020, an investigation led by the U.S. Attorney’s Office resulted in a federal grand jury indictment of an Ohio legislator and associates in connection with an alleged racketeering conspiracy involving the adoption of HB 6. After AEP learned of the criminal allegations against the Ohio legislator and others relating to HB 6, AEP, with assistance from outside advisors, conducted a review of the circumstances surrounding the passage of the bill. Management does not believe that AEP was involved in any wrongful conduct in connection with the passage of HB 6.

In August 2020, an AEP shareholder filed a putative class action lawsuit in the U.S. District Court for the Southern District of Ohio against AEP and certain of its officers for alleged violations of securities laws. The amended complaint alleged misrepresentations or omissions by AEP regarding: (a) its alleged participation in or connection to public corruption with respect to the passage of HB 6 and (b) its regulatory, legislative, political contribution, 501(c)(4) organization contribution and lobbying activities in Ohio. The complaint sought monetary damages, among other forms of relief. In December 2021, the district court issued an opinion and order dismissing the securities litigation complaint with prejudice, determining that the complaint failed to plead any actionable misrepresentations or omissions. The plaintiffs did not appeal the ruling.

In January 2021, an AEP shareholder filed a derivative action in the U.S. District Court for the Southern District of Ohio purporting to assert claims on behalf of AEP against certain AEP officers and directors. In February 2021, a second AEP shareholder filed a similar derivative action in the Court of Common Pleas of Franklin County, Ohio. In April 2021, a third AEP shareholder filed a similar derivative action in the U.S. District Court for the Southern District of Ohio and a fourth AEP shareholder filed a similar derivative action in the Supreme Court for the State of New York, Nassau County. These derivative complaints allege the officers and directors made misrepresentations and omissions similar to those alleged in the putative securities class action lawsuit filed against AEP. The derivative complaints together assert claims for: (a) breach of fiduciary duty, (b) waste of corporate assets, (c) unjust enrichment, (d) breach of duty for insider trading and (e) contribution for violations of sections 10(b) and 21D of the Securities Exchange Act of 1934; and seek monetary damages and changes to AEP’s corporate governance and internal policies among other forms of relief. The court entered a scheduling order in the New York state court derivative action staying the case other than with respect to briefing the motion to dismiss. AEP filed substantive and forum-based motions to dismiss on April 29, 2022. On September 13, 2022, the New York state court granted the forum-based motion to dismiss with prejudice and the plaintiffs subsequently filed a notice of appeal with the New York appellate court. On January 20, 2023, the New York plaintiff filed a motion to intervene in the pending Ohio federal court action and withdrew his appeal in New York on January 24, 2023. AEP filed a brief in opposition to intervention on February 3, 2023. The two derivative actions pending in federal district court in Ohio have been consolidated and the plaintiffs in the consolidated action filed an amended complaint. AEP filed a motion to dismiss the amended complaint on May 3, 2022 and briefing on the motion to dismiss has been completed. Discovery remains stayed pending the district court’s ruling on the motion to dismiss. The plaintiff in the Ohio state court case advised that they no longer agreed to stay the proceedings, therefore, AEP filed a motion to continue the stays of proceedings on May 20, 2022 and the plaintiff filed an amended complaint on June 2, 2022. On June 15, 2022, the Ohio state court entered an order continuing the stays of that case until the resolution of the consolidated derivative actions pending in Ohio federal district court. The defendants will continue to defend against the claims. Management is unable to determine a range of potential losses that is reasonably possible of occurring.

In March 2021, AEP received a litigation demand letter from counsel representing a purported AEP shareholder. The litigation demand letter is directed to the Board of Directors of AEP and contains factual allegations involving HB 6 that are generally consistent with those in the derivative litigation filed in state and federal court. The letter demands, among other things, that the AEP Board undertake an independent investigation into alleged legal violations by directors and officers, and that, following such investigation, AEP commence a civil action for breaches of fiduciary duty and related claims and take appropriate disciplinary action against those individuals who
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allegedly harmed the company. The shareholder that sent the letter has since withdrawn the litigation demand, which is now terminated and of no further effect.

In May 2021, AEP received a subpoena from the SEC’s Division of Enforcement seeking various documents, including documents relating to the passage of HB 6 and documents relating to AEP’s policies and financial processes and controls. In August 2022, AEP received a second subpoena from the SEC seeking various additional documents relating to its ongoing investigation. AEP is cooperating fully with the SEC’s investigation, which has included taking testimony from certain individuals. Although the outcome of the SEC’s investigation cannot be predicted, management does not believe the results of this investigation will have a material impact on financial condition, results of operations or cash flows.

Claims for Indemnification Related to Damages Resulting from the Federal EPA’s Denial of Alternative Closure Deadline for Gavin Plant and Associated Findings of Compliance

In November 2022, the Federal EPA issued a final decision denying Gavin Power LLC’s requested extension to allow a CCR surface impoundment at the Gavin Power Station to continue to receive CCR and non-CCR waste streams after April 11, 2021 until May 4, 2023 (the Gavin Denial). As part of the Gavin Denial, the Federal EPA made several determinations related to the CCR Rule (see “Coal Combustion Residual (CCR) Rule” section below for additional information), including a determination that the closure of the 300 acre unlined fly ash reservoir (FAR) is noncompliant with the CCR Rule in multiple respects. The Gavin Power Station was formerly owned and operated by AEP and was sold to Gavin Power LLC and Lightstone Generation LLC in 2017. Pursuant to the PSA, AEP maintained responsibility to complete closure of the FAR in accordance with the closure plan approved by the Ohio EPA which was completed in July 2021. The PSA contains indemnification provisions, pursuant to which the owners of the Gavin Power Station have notified AEP they believe they are entitled to indemnification for any damages that may result from the Gavin Denial, as well as any future enforcement or litigation resulting from the Federal EPA’s determinations of noncompliance with various aspects of the CCR Rule as part of the Gavin Denial. Management does not believe that the owners of the Gavin Power Station have any valid claim for indemnity or otherwise against AEP under the PSA. In addition, Gavin Power LLC, several AEP subsidiaries, and other parties have filed Petitions for Review of the Gavin Denial with the U.S. Court of Appeals for the District of Columbia Circuit. Management is unable to determine a range of potential losses that is reasonably possible of occurring.

ENVIRONMENTAL ISSUES

AEP has a substantial capital investment program and incurs additional operational costs to comply with environmental control requirements.  Additional investments and operational changes will be made in response to existing and anticipated requirements to reduce emissions from fossil generation and in response to rules governing the beneficial use and disposal of coal combustion by-products, clean water and renewal permits for certain water discharges.

AEP is engaged in litigation about environmental issues, was notified of potential responsibility for the clean-up of contaminated sites and incurred costs for disposal of SNF and future decommissioning of the nuclear units.  Management is engaged in the development of possible future requirements including the items discussed below. 

AEP will seek recovery of expenditures for pollution control technologies and associated costs from customers through rates in regulated jurisdictions.  Environmental rules could result in accelerated depreciation, impairment of assets or regulatory disallowances.  If AEP cannot recover the costs of environmental compliance, it would reduce future net income and cash flows and impact financial condition.

Environmental Controls Impact on the Generating Fleet

The rules and proposed environmental controls discussed below will have a material impact on AEP System generating units.  Management continues to evaluate the impact of these rules, project scope and technology available to achieve compliance.  As of December 31, 2022, the AEP System owned generating capacity of approximately 25,000 MWs, of which approximately 11,300 MWs were coal-fired.  Management continues to
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refine the cost estimates of complying with these rules and other impacts of the environmental proposals on fossil generation. Based upon management estimates, AEP’s future investment to meet these existing and proposed requirements ranges from approximately $125 million to $200 million through 2026.

The cost estimates will change depending on the timing of implementation and whether the Federal EPA provides flexibility in finalizing proposed rules or revising certain existing requirements.  The cost estimates will also change based on: (a) potential state rules that impose more stringent standards, (b) additional rulemaking activities in response to court decisions, (c) actual performance of the pollution control technologies installed, (d) changes in costs for new pollution controls, (e) new generating technology developments, (f) total MWs of capacity retired and replaced, including the type and amount of such replacement capacity, (g) compliance with the Federal EPA’s revised coal combustion residual rules and (h) other factors.  In addition, management continues to evaluate the economic feasibility of environmental investments on regulated and competitive plants.

Obligations under the New Source Review Litigation Consent Decree

In 2007, the U.S. District Court for the Southern District of Ohio approved a consent decree between AEP subsidiaries in the eastern area of the AEP System and the Department of Justice, the Federal EPA, eight northeastern states and other interested parties to settle claims that the AEP subsidiaries violated the NSR provisions of the CAA when they undertook various equipment repair and replacement projects over a period of nearly 20 years.  The consent decree’s terms include installation of environmental control equipment on certain generating units, a declining cap on SO2 and NOX emissions from the AEP System and various mitigation projects. The consent decree has been modified seven times, for various reasons, most recently in 2022. All of the environmental control equipment required by the consent decree has been installed.

Clean Air Act Requirements

The CAA establishes a comprehensive program to protect and improve the nation’s air quality and control sources of air emissions. The states implement and administer many of these programs and could impose additional or more stringent requirements. The primary regulatory programs that continue to drive investments in AEP’s existing generating units include: (a) periodic revisions to NAAQS and the development of SIPs to achieve more stringent standards, (b) implementation of the regional haze program by the states and the Federal EPA, (c) regulation of hazardous air pollutant emissions under MATS, (d) implementation and review of CSAPR and (e) the Federal EPA’s regulation of greenhouse gas emissions from fossil generation under Section 111 of the CAA. Notable developments in significant CAA regulatory requirements affecting AEP’s operations are discussed in the following sections.

National Ambient Air Quality Standards

The Federal EPA periodically reviews and revises the NAAQS for criteria pollutants under the CAA. Revisions tend to increase the stringency of the standards, which in turn may require AEP to make investments in pollution control equipment at existing generating units, or, since most units are already well controlled, to make changes in how units are dispatched and operated. In January 2023, the Federal EPA announced its proposed decision to strengthen the primary (health-based) annual PM2.5 standard. The Biden administration has previously indicated that it is likely to revisit the NAAQS for ozone, which were left unchanged by the prior administration following its review. Management cannot currently predict if any changes to either standard are likely to be finalized or what such changes may be, but will continue to monitor this issue and any future rulemakings.

Regional Haze

The Federal EPA issued a Clean Air Visibility Rule (CAVR) in 2005, which could require power plants and other facilities to install best available retrofit technology to address regional haze in federal parks and other protected areas. CAVR is implemented by the states, through SIPs, or by the Federal EPA, through FIPs. In 2017, the Federal EPA revised the rules governing submission of SIPs to implement the visibility programs, including a provision that postponed the due date for the next comprehensive SIP revisions until 2021. Petitions for review of the final rule revisions have been filed in the U.S. Court of Appeals for the District of Columbia Circuit.

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Arkansas has an approved regional haze SIP and all of SWEPCo's affected units are in compliance with the relevant requirements.

In Texas, the Federal EPA disapproved portions of the Texas regional haze SIP and finalized a FIP that allows participation in the CSAPR ozone season program to satisfy the NOX regional haze obligations for electric generating units in Texas. Additionally, the Federal EPA finalized an intrastate SO2 emissions trading program based on CSAPR allowance allocations. Legal challenges to these various rulemakings are pending in both the U.S. Court of Appeals for the Fifth Circuit and the U.S. Court of Appeals for the District of Columbia Circuit. Management cannot predict the outcome of that litigation, although management supports the intrastate trading program as a compliance alternative to source-specific controls and has intervened in the litigation in support of the Federal EPA.

Cross-State Air Pollution Rule

CSAPR is a regional trading program designed to address interstate transport of emissions that contribute significantly to non-attainment and maintenance of the 1997 ozone and PM NAAQS in downwind states.  CSAPR relies on SO2 and NOX allowances and individual state budgets to compel further emission reductions from electric utility generating units.  Interstate trading of allowances is allowed on a restricted basis.

In January 2021, the Federal EPA finalized a revised CSAPR rule, which substantially reduces the ozone season NOX budgets in 2021-2024. Several utilities and other entities potentially subject to the Federal EPA’s NOX regulations have challenged that final rule in the U.S. Court of Appeals for the District of Columbia Circuit and oral arguments were held in September 2022. Management cannot predict the outcome of that litigation, but believes it can meet the requirements of the rule in the near term, and is evaluating its compliance options for later years, when the budgets are further reduced. In addition, in February 2023, the EPA Administrator finalized the denial of 2015 Ozone NAAQS SIPs for 19 states. A FIP that further revises the ozone season NOX budgets under the existing CSAPR program in those states is expected to be finalized in the spring of 2023 and will likely take effect for the 2023 ozone season. Management is evaluating the impacts of the rule changes.

Climate Change, CO2 Regulation and Energy Policy

In 2019, the Affordable Clean Energy (ACE) rule established a framework for states to adopt standards of performance for utility boilers based on heat rate improvements for such boilers. However, in January 2021, the U.S. Court of Appeals for the District of Columbia Circuit vacated the ACE rule and remanded it to the Federal EPA. In October 2021, the United States Supreme Court granted certiorari and combined four separate petitions seeking review of the District of Columbia Circuit Court decisions. Oral arguments were held in February 2022 and on June 30, 2022, the United States Supreme Court reversed the District of Columbia Circuit Court’s decision and remanded for further proceedings. The Federal EPA must take some action before anything is required of the utilities as a result of this decision. At a minimum, if the Federal EPA intends to implement the ACE rule, it must conduct additional rulemaking to update its applicable deadlines, which have all passed. Alternatively, the Federal EPA may abandon the ACE rule and proceed to regulate greenhouse gases through a new rule, the scope of which is unknown. The Federal EPA has announced it expects to propose a new rule in 2023. Management is unable to predict how the Federal EPA will respond to the Court’s remand.

In 2018, the Federal EPA filed a proposed rule revising the standards for new sources and determined that partial carbon capture and storage is not the best system of emission reduction because it is not available throughout the U.S. and is not cost-effective. That rule has not been finalized. The Federal EPA has indicated that it intends to conduct a comprehensive review of the existing standards and, if appropriate, amend the emission standards for new fossil fuel-fired generating units. A proposed rule is expected in 2023. Management continues to actively monitor these rulemaking activities.

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While no federal regulatory requirements to reduce CO2 emissions are in place, AEP has taken action to reduce and offset CO2 emissions from its generating fleet. AEP expects CO2 emissions from its operations to continue to decline due to the retirement of some of its coal-fired generation units, and actions taken to diversify the generation fleet and increase energy efficiency where there is regulatory support for such activities. The majority of the states where AEP has generating facilities passed legislation establishing renewable energy, alternative energy and/or energy efficiency requirements that can assist in reducing carbon emissions.  In April 2020, Virginia enacted clean energy legislation to allow the state to participate in the Regional Greenhouse Gas Initiative (RGGI), require the retirement of all fossil-fueled generation by 2045 and require 100% renewable energy to be provided to Virginia customers by 2050. Management is taking steps to comply with these requirements, including increasing wind and solar installations, purchasing renewable power and broadening AEP System’s portfolio of energy efficiency programs. In early 2022, Virginia’s governor issued an executive order directing his administration to end Virginia’s participation in RGGI. In December 2022, the Virginia Air Pollution Control Board voted in support of the proposed regulations to withdraw Virginia from RGGI. These regulations have not been finalized. Management will continue to monitor these rulemaking activities.

In October 2022, AEP announced new intermediate and long-term CO2 emission reduction goals, based on the output of the company’s integrated resource plans, which take into account economics, customer demand, grid reliability and resiliency, regulations and the company’s current business strategy. AEP adjusted its near-term carbon dioxide emission reduction target from a 2000 baseline to a 2005 baseline, upgraded its 80% reduction by 2030 target to include full Scope 1 emissions and accelerated its net-zero goal by five years to 2045. AEP’s total Scope 1 GHG emissions in 2022 were approximately 52.5 million metric tons CO2e, approximately a 65% reduction from AEP’s 2005 Scope 1 GHG emissions (inclusive of emission reductions that result from plants that have been sold). AEP has made significant progress in reducing CO2 emissions from its power generation fleet and expects its emissions to continue to decline. Technological advances, including energy storage, will determine how quickly AEP can achieve zero emissions while continuing to provide reliable, affordable power for customers.

Excessive costs to comply with future legislation or regulations have led to the announcement of early plant closures and could force AEP to close additional coal-fired generation facilities earlier than their estimated useful life. If AEP is unable to recover the costs of its investments, it would reduce future net income and cash flows and impact financial condition.

Coal Combustion Residual (CCR) Rule

The Federal EPA’s CCR rule regulates the disposal and beneficial re-use of CCR, including fly ash and bottom ash created from coal-fired generating units and FGD gypsum generated at some coal-fired plants.  The rule applies to active and inactive CCR landfills and surface impoundments at facilities of active electric utility or independent power producers.

In 2020, the Federal EPA revised the CCR rule to include a requirement that unlined CCR storage ponds cease operations and initiate closure by April 11, 2021. The revised rule provides two options that allow facilities to extend the date by which they must cease receipt of coal ash and close the ponds.

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The first option provides an extension to cease receipt of CCR no later than October 15, 2023 for most units, and October 15, 2024 for a narrow subset of units; however, the Federal EPA’s grant of such an extension will be based upon a satisfactory demonstration of the need for additional time to develop alternative ash disposal capacity and will be limited to the soonest timeframe technically feasible to cease receipt of CCR. Additionally, each request must undergo formal review, including public comments, and be approved by the Federal EPA. AEP filed applications for additional time to develop alternative disposal capacity at the following plants:

Company		Plant Name		Generating
Capacity		Net Book Value (a)		Projected
 Retirement Date	
				(in MWs)		(in millions)			
AEGCo		Rockport Plant, Unit 1		655		$	226.0 			2028	
APCo		Amos		2,930		2,140.2 			2040	
APCo		Mountaineer		1,320		980.8 			2040	
I&M		Rockport Plant, Unit 1		655		449.2 		(b)	2028	
KPCo		Mitchell Plant		780		576.7 			2040	
SWEPCo		Flint Creek Plant		258		265.4 			2038	
WPCo		Mitchell Plant		780		638.3 			2040	

(a)Net book value as of December 31, 2022, before cost of removal including CWIP and inventory.
(b)Amount includes a $147 million regulatory asset related to the retired Tanners Creek Plant. The IURC and MPSC authorized recovery of the Tanners Creek Plant regulatory asset over the useful life of Rockport Plant, Unit 1 in 2015 and 2014, respectively.

In January 2022, the Federal EPA proposed to deny several extension requests filed by the other utilities based on allegations that those utilities are not in compliance with the CCR Rule (the January Actions). In November 2022, the Federal EPA finalized one of these denials. The Federal EPA’s allegations of noncompliance rely on new interpretations of the CCR Rule requirements. The January Actions of the Federal EPA have been challenged in the U.S. Court of Appeals for the District of Columbia Circuit as unlawful rulemaking that revises the existing CCR Rule requirements without proper notice and without opportunity for comment. Management is unable to predict the outcome of that litigation.

In July 2022, the Federal EPA proposed conditional approval of the pending extension request for the Mountaineer Plant. The Federal EPA alleged that the Mountaineer Plant was not fully compliant with the CCR Rule. In December 2022, AEP withdrew the pending extension request for the Mountaineer Plant as work to construct new CCR disposal facilities was completed and the extension was no longer needed. The Federal EPA has not yet proposed any action on the other pending extension requests submitted by AEP. However, statements made by the Federal EPA in the context of the proposed and final decisions on extension requests issued to date indicate that there is a risk that the Federal EPA may conclude that AEP is not eligible for an extension of time to cease use of those CCR impoundments for which extension requests are pending and/or that one or more of AEP’s facilities is not in compliance with the CCR Rule. If that occurs, AEP may incur material additional costs to change its plans for complying with the CCR Rule, including the potential to have to temporarily cease operation of one or more facilities until an acceptable compliance alternative can be implemented. Such temporary cessation of operation could materially impact the cost of serving customers of the affected utility. Further, actions by the Federal EPA could require AEP to remove coal ash from CCR units that have already been closed in accordance with state law programs or could require AEP to incur costs related to CCR units at various active and legacy facilities.

Closure and post-closure costs have been included in ARO in accordance with the requirements in the Federal EPA’s final CCR rule. Additional ARO revisions will occur on a site-by-site basis if groundwater monitoring activities conclude that corrective actions are required to mitigate groundwater impacts. AEP may incur significant additional costs complying with the Federal EPA’s CCR Rule, including costs to upgrade or close and replace surface impoundments and landfills used to manage CCR and to conduct any required remedial actions including removal of coal ash. If additional costs are incurred and AEP is unable to obtain cost recovery, it would reduce future net income and cash flows and impact financial condition. Management will continue to participate in rulemaking activities and make adjustments based on new federal and state requirements affecting its ash disposal units.

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The second option to obtain an extension of the April 11, 2021 deadline to cease operation of unlined impoundments allows a generating facility to continue operating its existing impoundments without developing alternative CCR disposal, provided the facility commits to cease combustion of coal by a date certain. Under this option, a generating facility would have until October 17, 2023 to cease coal-fired operations and to close CCR storage ponds 40 acres or less in size, or through October 17, 2028 for facilities with CCR storage ponds greater than 40 acres in size. Pursuant to this option, AEP informed the Federal EPA of its intent to retire the Pirkey Plant and cease using coal at the Welsh Plant. The table below summarizes the net book value of the Pirkey Plant and Welsh Plant, Units 1 and 3 as of December 31, 2022.
																																				
Company		Plant Name and Unit		Generating
Capacity		Net Investment (a)		Accelerated Depreciation Regulatory Asset		Projected
 Retirement Date	
				(in MWs)		(in millions)				
SWEPCo		Pirkey Plant		580		$	35.1 			$	179.5 			2023	(b)	
SWEPCo		Welsh Plant, Units 1 & 3		1,053		416.8 			85.6 			2028	(c)(d)	

(a)Net book value as of December 31, 2022, including CWIP and excluding cost of removal and materials and supplies.
(b)In January 2023, the LPSC authorized the recovery of SWEPCo’s Louisiana share of the Pirkey Plant through a separate rider through 2032. See Note 4 - Rate Matters for additional information. The Pirkey Plant is currently being recovered through 2045 in the Arkansas and Texas jurisdictions.
(c)In November 2020, management announced it will cease using coal at the Welsh Plant in 2028.
(d)Unit 1 is currently being recovered through 2027 in the Louisiana jurisdiction and through 2037 in the Arkansas and Texas jurisdictions. Unit 3 is currently being recovered through 2032 in the Louisiana jurisdiction and through 2042 in the Arkansas and Texas jurisdictions.

To date, the Federal EPA has not taken any action on these pending extension requests. Under the second option above, AEP may need to recover remaining depreciation and estimated closure costs associated with these plants over a shorter period. If AEP cannot ultimately recover the costs of environmental compliance and/or the remaining depreciation and estimated closure costs associated with these plants in a timely manner, it would reduce future net income and cash flows and impact financial condition.

Clean Water Act Regulations

The Federal EPA’s ELG rule for generating facilities establishes limits for FGD wastewater, fly ash and bottom ash transport water and flue gas mercury control wastewater, which are to be implemented through each facility’s wastewater discharge permit. A revision to the ELG rule, published in October 2020, establishes additional options for reusing and discharging small volumes of bottom ash transport water, provides an exception for retiring units and extends the compliance deadline to a date as soon as possible beginning one year after the rule was published but no later than December 2025. Management has assessed technology additions and retrofits to comply with the rule and the impacts of the Federal EPA’s recent actions on facilities’ wastewater discharge permitting for FGD wastewater and bottom ash transport water. For affected facilities that must install additional technologies to meet the ELG rule limits, permit modifications were filed in January 2021 that reflect the outcome of that assessment. AEP continues to work with state agencies to finalize permit terms and conditions. Other facilities opted to file Notices of Planned Participation (NOPP), pursuant to which the facilities are not required to install additional controls to meet ELG limits provided they make commitments to cease coal combustion by a date certain. The Federal EPA has announced its intention to reconsider the 2020 rule and to further revise limits applicable to discharges of landfill and impoundment leachate. A proposed rule is expected in 2023. Management cannot predict whether the Federal EPA will actually finalize further revisions or what such revisions might be, but will continue to monitor this issue and will participate in further rulemaking activities as they arise.

In January 2023, the Federal EPA finalized a new rule revising the definition of “waters of the United States,” which will become effective in March 2023. The new rule expands the scope of the definition, which means that permits may be necessary where none were previously required and issued permits may need to be reopened to impose additional obligations. Management is evaluating what impacts the revised rule will have on operations.

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In October 2022, the United States Supreme Court heard an appeal related to the scope of “waters of the United States,” specifically which wetlands can be regulated as waters of the United States. Management cannot predict the outcome of that litigation.

Impact of Environmental Regulation on Coal-Fired Generation

Compliance with extensive environmental regulations requires significant capital investment in environmental monitoring, installation of pollution control equipment, emission fees, disposal, remediation and permits. Management continuously evaluates cost estimates of complying with these regulations which may result in a decision to retire coal-fired generating facilities earlier than their currently estimated useful lives.

Previously, management retired or announced early closure plans for Welsh Plant, Unit 2, Dolet Hills Power Station and Northeastern Plant, Unit 3.

The table below summarizes the net book value, as of December 31, 2022, of generating facilities retired or planned for early retirement in advance of the retirement date currently authorized for ratemaking purposes:

Company		Plant		Net
Investment (a)		Accelerated Depreciation Regulatory Asset		Actual/Projected
Retirement
Date		Current Authorized
Recovery
Period		Annual Depreciation (b)	
				(in millions)						(in millions)	
PSO		Northeastern Plant, Unit 3		$	136.3 			$	145.8 			2026			(c)		$	14.9 		
	
SWEPCo		Dolet Hills Power Station		— 			54.8 			2021			(d)		— 		
SWEPCo		Pirkey Plant		35.1 			179.5 			2023			(e)		11.7 		
SWEPCo		Welsh Plant, Units 1 and 3		416.8 			85.6 			2028	(f)		(g)		37.9 		
SWEPCo		Welsh Plant, Unit 2		— 			35.2 			2016			(h)		— 		

(a)Net book value including CWIP excluding cost of removal and materials and supplies.
(b)These amounts represent the amount of annual depreciation that has been collected from customers over the prior 12-month period.
(c)Northeastern Plant, Unit 3 is currently being recovered through 2040.
(d)In January 2023, the LPSC authorized the recovery of SWEPCo’s Louisiana share of the Dolet Hills Power Station through a separate rider through 2032. In May 2022, the APSC authorized recovery of SWEPCo’s Arkansas jurisdictional share of the Dolet Hills Power Station through 2027, but denied SWEPCo the ability to earn a return on this investment resulting in a disallowance of $2 million. In December 2021, the PUCT authorized the recovery of SWEPCo’s Texas jurisdictional share of the Dolet Hills Power Station through 2046 without providing a return on the investment which resulted in a disallowance of $12 million. See Note 4 - Rate Matters for additional information.
(e)In January 2023, the LPSC authorized the recovery of SWEPCo’s Louisiana share of the Pirkey Plant through a separate rider through 2032. See Note 4 - Rate Matters for additional information. The Pirkey Plant is currently being recovered through 2045 in the Arkansas and Texas jurisdictions.
(f)In November 2020, management announced it will cease using coal at the Welsh Plant in 2028.
(g)Welsh Plant, Unit 1 is being recovered through 2027 in the Louisiana jurisdiction and through 2037 in the Arkansas and Texas jurisdictions. Welsh Plant, Unit 3 is being recovered through 2032 in the Louisiana jurisdiction and through 2042 in the Arkansas and Texas jurisdictions.
(h)In January 2023, the LPSC approved a settlement agreement which provided recovery of Welsh Plant, Unit 2 over the blended useful life of Welsh Plant, Units 1 and 3.

Management is seeking or will seek regulatory recovery, as necessary, for any net book value remaining when the plants are retired. To the extent the net book value of these generation assets is not deemed recoverable, it could materially reduce future net income, cash flows and impact financial condition.
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RESULTS OF OPERATIONS

SEGMENTS

AEP’s primary business is the generation, transmission and distribution of electricity.  Within its Vertically Integrated Utilities segment, AEP centrally dispatches generation assets and manages its overall utility operations on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight.  Intersegment sales and transfers are generally based on underlying contractual arrangements and agreements.

AEP’s reportable segments and their related business activities are outlined below:

Vertically Integrated Utilities

•Generation, transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEGCo, APCo, I&M, KGPCo, KPCo, PSO, SWEPCo and WPCo.

Transmission and Distribution Utilities

•Transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEP Texas and OPCo.
•OPCo purchases energy and capacity at auction to serve standard service offer customers and provides transmission and distribution services for all connected load.

AEP Transmission Holdco

•Development, construction and operation of transmission facilities through investments in AEPTCo. These investments have FERC-approved ROE.
•Development, construction and operation of transmission facilities through investments in AEP’s transmission-only joint ventures. These investments have PUCT-approved or FERC-approved ROE.

Generation & Marketing

•Contracted renewable energy investments and management services.
•Marketing, risk management and retail activities in ERCOT, MISO, PJM and SPP.
•Competitive generation in PJM.

The remainder of AEP’s activities are presented as Corporate and Other. While not considered a reportable segment, Corporate and Other primarily includes the purchasing of receivables from certain AEP utility subsidiaries, Parent’s guarantee revenue received from affiliates, investment income, interest income and interest expense and other nonallocated costs.

The following discussion of AEP’s results of operations by operating segment includes an analysis of Gross Margin, which is a non-GAAP financial measure. Gross Margin includes Total Revenues less the costs of Fuel and Other Consumables Used for Electric Generation, as well as Purchased Electricity for Resale, as presented in the Registrants’ statements of income as applicable. Under the various state utility rate making processes, these expenses are generally reimbursable directly from and billed to customers. As a result, they do not typically impact Operating Income or Earnings Attributable to AEP Common Shareholders. Management believes that Gross Margin provides a useful measure for investors and other financial statement users to analyze AEP’s financial performance in that it excludes the effect on Total Revenues caused by volatility in these expenses. Operating Income, which is presented in accordance with GAAP in AEP’s statements of income, is the most directly comparable GAAP financial measure to the presentation of Gross Margin. AEP’s definition of Gross Margin may not be directly comparable to similarly titled financial measures used by other companies.

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A detailed discussion of AEP’s 2021 results of operations by operating segment can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operation section included in the 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022.

The following table presents Earnings (Loss) Attributable to AEP Common Shareholders by segment:

		Years Ended December 31,	
		2022		2021		2020	
		(in millions)	
Vertically Integrated Utilities		$	1,292.0 			$	1,113.6 			$	1,061.6 		
Transmission and Distribution Utilities		595.7 			543.4 			496.4 		
AEP Transmission Holdco		673.5 			677.8 			504.8 		
Generation & Marketing		283.6 			217.5 			226.9 		
Corporate and Other		(537.6)			(64.2)			(89.6)		
Earnings Attributable to AEP Common Shareholders		$	2,307.2 			$	2,488.1 			$	2,200.1 		

Note: 2022 Earnings Attributable to AEP Common Shareholders by Segment excludes Corporate and Other which is not considered a reportable segment.

AEP CONSOLIDATED

2022 Compared to 2021

Earnings Attributable to AEP Common Shareholders decreased from $2.5 billion in 2021 to $2.3 billion in 2022.

AEP’s Earnings Attributable to AEP Common Shareholders in 2022 were positively impacted by favorable rate proceedings in various jurisdictions, higher earnings driven by continued transmission investment and increased sales volumes driven by favorable weather and load. In June 2022, AEP also recognized a gain on the sale of mineral rights which contributed to AEP’s Earnings Attributable to AEP Common Shareholders.

The favorable items discussed above were more than offset by a loss on the expected sale of the Kentucky Operations, an impairment of AEP’s equity investment in Flat Ridge 2, increases in interest expense due to higher interest rates and debt balances and a charitable contribution to the AEP Foundation.

AEP’s results of operations by reportable segment are discussed below.
83

VERTICALLY INTEGRATED UTILITIES

(a)Other AEP Segments excludes Corporate and Other which is not considered a reportable segment.

		Years Ended December 31,	
Vertically Integrated Utilities		2022		2021		2020	
		(in millions)	
Revenues		$	11,477.5 			$	9,998.5 			$	8,879.4 		
Fuel and Purchased Electricity		4,007.9 			3,144.2 			2,544.9 		
Gross Margin		7,469.6 			6,854.3 			6,334.5 		
Other Operation and Maintenance		3,287.2 			3,043.1 			2,754.3 		
Asset Impairments and Other Related Charges		24.9 			11.6 			— 		
Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset		(37.0)			— 			— 		
Depreciation and Amortization		2,007.2 			1,747.6 			1,600.5 		
Taxes Other Than Income Taxes		504.9 			497.3 			472.6 		
Operating Income		1,682.4 			1,554.7 			1,507.1 		

Other Income		30.2 			13.5 			2.4 		
Allowance for Equity Funds Used During Construction		29.5 			40.2 			42.2 		
Non-Service Cost Components of Net Periodic Benefit Cost		109.8 			67.9 			67.9 		
Interest Expense		(650.9)			(574.2)			(565.0)		
Income Before Income Tax Benefit and Equity Earnings		1,201.0 			1,102.1 			1,054.6 		
Income Tax Benefit		(93.8)			(11.2)			(7.0)		
Equity Earnings of Unconsolidated Subsidiary		1.4 			3.4 			2.9 		
Net Income		1,296.2 			1,116.7 			1,064.5 		
Net Income Attributable to Noncontrolling Interests		4.2 			3.1 			2.9 		
Earnings Attributable to AEP Common Shareholders		$	1,292.0 			$	1,113.6 			$	1,061.6 		
84

																								
Summary of KWh Energy Sales for Vertically Integrated Utilities		
								
		Years Ended December 31,		
		2022		2021		2020		
		(in millions of KWhs)		
Retail:								
Residential		32,835 			32,149 			31,526 			
Commercial		23,770 			22,833 			22,225 			
Industrial		34,532 			33,181 			32,860 			
Miscellaneous		2,316 			2,214 			2,185 			
Total Retail		93,453 			90,377 			88,796 			
								
Wholesale (a)		16,099 			19,025 			16,987 			
								
Total KWhs		109,552 			109,402 			105,783 			

(a)Includes Off-system Sales, municipalities and cooperatives, unit power and other wholesale customers.

85

Heating degree days and cooling degree days are metrics commonly used in the utility industry as a measure of the impact of weather on revenues.  In general, degree day changes in the eastern region have a larger effect on revenues than changes in the western region due to the relative size of the two regions and the number of customers within each region.

Summary of Heating and Cooling Degree Days for Vertically Integrated Utilities	
							
		Years Ended December 31,	
		2022		2021		2020	
		(in degree days)	
Eastern Region							
Actual – Heating (a)		2,709 			2,438 			2,295 		
Normal – Heating (b)		2,717 			2,720 			2,727 		
							
Actual – Cooling (c)		1,187 			1,268 			1,222 		
Normal – Cooling (b)		1,106 			1,110 			1,104 		
							
Western Region							
Actual – Heating (a)		1,523 			1,241 			1,160 		
Normal – Heating (b)		1,455 			1,461 			1,464 		
							
Actual – Cooling (c)		2,695 			2,370 			2,117 		
Normal – Cooling (b)		2,247 			2,246 			2,253 		

(a)Heating degree days are calculated on a 55 degree temperature base.
(b)Normal Heating/Cooling represents the thirty-year average of degree days.
(c)Cooling degree days are calculated on a 65 degree temperature base.

86

2022 Compared to 2021

Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Earnings Attributable to AEP Common Shareholders from Vertically Integrated Utilities
(in millions)

Year Ended December 31, 2021		$	1,113.6 		
			
Changes in Gross Margin:			
Retail Margins		492.6 		
Margins from Off-system Sales		9.6 		
Transmission Revenues		81.9 		
Other Revenues		31.2 		
Total Change in Gross Margin		615.3 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(244.1)		
Asset Impairments and Other Related Charges		(13.3)		
Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset		37.0 		
Depreciation and Amortization		(259.6)		
Taxes Other Than Income Taxes		(7.6)		

Other Income		16.7 		
Allowance for Equity Funds Used During Construction		(10.7)		
Non-Service Cost Components of Net Periodic Pension Cost		41.9 		
Interest Expense		(76.7)		
Total Change in Expenses and Other		(516.4)		
			
Income Tax Benefit		82.6 		
Equity Earnings of Unconsolidated Subsidiary		(2.0)		
Net Income Attributable to Noncontrolling Interests		(1.1)		
			
Year Ended December 31, 2022		$	1,292.0 		

The major components of the increase in Gross Margin, defined as revenues less the related direct cost of fuel, including consumption of chemicals and emissions allowances, and purchased electricity were as follows:

•Retail Margins increased $493 million primarily due to the following:
•A $127 million increase at APCo and WPCo due to an increase in rider revenues in Virginia and West Virginia. This increase was partially offset in other expense items below.
•A $110 million increase at PSO due to a $61 million increase in base rate revenues and a $49 million increase in rider revenues. These increases were partially offset in other expense items below.
•A $102 million increase at SWEPCo primarily due to base rate revenue increases in Texas and Arkansas and rider increases in all retail jurisdictions. These increases were partially offset in other expense items below.
•An $87 million increase in rider revenues at I&M partially offset by lower wholesale true-ups. This increase was partially offset in other expense items below.
•A $69 million increase in weather-related usage primarily in the residential class.
•A $30 million increase in weather-normalized retail margins primarily in the commercial class.
•A $17 million increase at APCo due to a base rate increase in Virginia implemented in October 2022 following the Virginia Supreme Court remand. This increase was partially offset in Other Operation and Maintenance expense below.

87

These increases were partially offset by:
•A $73 million decrease at PSO and SWEPCo due to the NCWF PTC benefits provided to customers through fuel clause mechanisms. This decrease was partially offset in Income Tax Benefit below.
•A $6 million decrease in municipal and cooperative revenues at SWEPCo primarily due to the February 2021 severe winter weather event.
•Margins from Off-system Sales increased $10 million primarily due to the following:
•A $32 million increase at I&M primarily due to Rockport Plant, Unit 2 Merchant sales beginning in December 2022 in addition to higher market prices driven by winter storm Elliott.
These increases were partially offset by:
•An $11 million decrease at SWEPCo due to a decrease in Turk Plant merchant sales primarily driven by the February 2021 severe winter weather event.
•A $9 million decrease at KPCo due to a change in the OSS sharing arrangement.
•A $4 million decrease at APCo due to decreased generation.
•Transmission Revenues increased $82 million primarily due to the following:
•A $61 million increase due to continued investment in transmission assets and increased load.
•A $16 million increase in formula rate true-up activity.
•Other Revenues increased $31 million primarily due to the following:
•A $12 million increase due to pole attachment revenue primarily at APCo. This increase was partially offset in Other Operation and Maintenance Expense below.
•A $10 million increase due to business development revenue primarily at APCo. This increase was partially offset in Other Operation and Maintenance Expense below.
•A $4 million increase due to a gain on sale of allowances primarily at I&M. The gain on sale of allowances was partially offset in Retail Margins above.
•A $4 million increase at I&M due to an increase in barging revenues by River Transportation Division (RTD). The increase in barging revenues was partially offset in Other Operation and Maintenance expenses below.

Expenses and Other and Income Tax Benefit changed between years as follows:

•Other Operation and Maintenance expenses increased $244 million primarily due to the following:
•A $131 million increase in PJM transmission services. This increase was partially offset in Retail Margins above.
•A $69 million increase in generation expenses primarily due to outages and maintenance at APCo, I&M and PSO.
•A $40 million increase due to a charitable contribution to the AEP Foundation.
•A $29 million increase in storm restoration expenses.
•A $25 million increase in distribution expenses primarily related to vegetation management, pole inspections and distribution overhead costs.
•A $22 million increase in SPP transmission services. This increase was partially offset in Retail Margins above.
•A $17 million increase in Energy Efficiency/Demand Response expenses. This increase was offset in Retail Margins above.
•A $14 million increase in accounts receivable factoring expenses as a result of increased interest rates.
These increases were partially offset by:
•A $132 million decrease due to the modification of the Rockport Plant, Unit 2 lease which resulted in a change in lease classification from an operating lease to a finance lease in December 2021 at AEGCo and I&M. This decrease was offset in Depreciation and Amortization expense below.
•Asset Impairments and Other Related Charges increased $13 million primarily due to:
•A $25 million increase at APCo due to the write-off of a regulatory asset in accordance with the August 2022 Virginia Supreme Court opinion related to the 2017-2019 Virginia Triennial review.
This increase was partially offset by:
•A $12 million decrease due to a partial regulatory disallowance of SWEPCo’s investment in the Dolet Hills Power Station as a result of an order received in the 2020 Texas Base Rate Case.
88

•Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset increased $37 million at APCo due to the establishment of a regulatory asset in accordance with the August 2022 Virginia Supreme Court opinion and resulting from under-earning during the 2017-2019 Triennial Review.
•Depreciation and Amortization expenses increased $260 million primarily due to the following:
•A $132 million increase due to the modification of the Rockport Plant, Unit 2 lease which resulted in a change in lease classification from an operating lease to a finance lease in December 2021 at AEGCo and I&M. This increase was partially offset in Other Operation and Maintenance expenses above.
•A $128 million increase due to a higher depreciable base primarily at APCo, I&M, PSO and SWEPCo, the implementation of new rates and the timing of refunds to customers under rate rider mechanisms at PSO and in Arkansas and Texas for SWEPCo. The increase due to implementation of new rates and the timing of refunds to customers under rate rider mechanisms at PSO was partially offset in Retail Margins above.
•Taxes Other Than Income Taxes increased $8 million primarily due to the following:
•A $17 million increase at PSO and SWEPCo primarily due to increased property taxes and a new infrastructure fee at PSO implemented by the City of Tulsa in March 2022. This increase was partially offset in Retail Margins above.
•A $4 million increase at APCo primarily due to an increase in property taxes driven by additional investments in transmission and distribution assets and higher tax rates.
These increases were partially offset by:
•A $14 million decrease at I&M primarily due to the repeal of the Indiana Utility Receipts Tax in July 2022. This decrease was partially offset in Retail Margins above.
•Other Income increased $17 million primarily due to carrying charges on regulatory assets resulting from the February 2021 severe winter weather event at PSO and SWEPCo.
•Allowance for Equity Funds Used During Construction decreased $11 million primarily due to a lower AFUDC base at APCo and SWEPCo and a decrease in AFUDC equity rates primarily at APCo and I&M.
•Non-Service Cost Components of Net Periodic Benefit Cost decreased $42 million primarily due to an increase in discount rates, an increase in the expected return on plan assets and favorable plan returns in 2021.
•Interest Expense increased $77 million primarily due to higher long-term debt balances at APCo, PSO and SWEPCo, higher interest rates at APCo and increased Advances from Affiliates at PSO and SWEPCo.
•Income Tax Benefit increased $83 million primarily due to the following:
•A $92 million increase in PTCs related to enacted legislation under the IRA and additional capital investment in tax-credit eligible property. This increase was partially offset in Retail Margins above.
•A $16 million increase due to favorable tax return to provision adjustments recorded in the current year.
•A $15 million increase due to a decrease in flow through depreciation expense.
•A $7 million increase due to an unfavorable out of period adjustment recorded in the prior year related to deferred income taxes.
These increases were partially offset by:
•A $21 million decrease due to an increase in pretax book income.
•A $19 million decrease due to a decrease in amortization of Excess ADIT. The decrease in amortization of Excess ADIT was partially offset in Gross Margin above.

89

TRANSMISSION AND DISTRIBUTION UTILITIES

(a)Other AEP Segments excludes Corporate and Other which is not considered a reportable segment.

																					
		Years Ended December 31,	
Transmission and Distribution Utilities		2022		2021		2020	
		(in millions)	
Revenues		$	5,512.0 			$	4,492.9 			$	4,345.9 		
Purchased Electricity		1,287.3 			729.9 			682.7 		

Gross Margin		4,224.7 			3,763.0 			3,663.2 		
Other Operation and Maintenance		1,864.2 			1,573.9 			1,575.4 		
	
Depreciation and Amortization		746.7 			690.3 			751.1 		
Taxes Other Than Income Taxes		659.9 			640.9 			586.7 		
Operating Income		953.9 			857.9 			750.0 		

	
Other Income		4.9 			2.6 			4.0 		
Allowance for Equity Funds Used During Construction		33.6 			32.3 			31.9 		
Non-Service Cost Components of Net Periodic Benefit Cost		47.6 			29.0 			29.4 		
Interest Expense		(328.0)			(300.9)			(289.2)		
Income Before Income Tax Expense and Equity Earnings		712.0 			620.9 			526.1 		
Income Tax Expense		116.9 			77.5 			29.7 		
Equity Earnings of Unconsolidated Subsidiary		0.6 			— 			— 		
Net Income		595.7 			543.4 			496.4 		
Net Income Attributable to Noncontrolling Interests		— 			— 			— 		
Earnings Attributable to AEP Common Shareholders		$	595.7 			$	543.4 			$	496.4 		
90

																								
Summary of KWh Energy Sales for Transmission and Distribution Utilities		
								
		Years Ended December 31,		
		2022		2021		2020		
		(in millions of KWhs)		
Retail:								
Residential		27,479 			26,830 			26,518 			
Commercial		27,448 			25,514 			23,998 			
Industrial		25,435 			23,919 			22,432 			
Miscellaneous		753 			737 			749 			
Total Retail (a)		81,115 			77,000 			73,697 			
								
Wholesale (b)		2,198 			2,018 			1,859 			
								
Total KWhs		83,313 			79,018 			75,556 			

(a)Represents energy delivered to distribution customers.
(b)Primarily Ohio’s contractually obligated purchases of OVEC power sold into PJM.

91

Heating degree days and cooling degree days are metrics commonly used in the utility industry as a measure of the impact of weather on revenues.  In general, degree day changes in the eastern region have a larger effect on revenues than changes in the western region due to the relative size of the two regions and the number of customers within each region.

Summary of Heating and Cooling Degree Days for Transmission and Distribution Utilities	
							
		Years Ended December 31,	
		2022		2021		2020	
		(in degree days)	
Eastern Region							
Actual – Heating (a)		3,116 			2,815 			2,743 		
Normal – Heating (b)		3,185 			3,190 			3,202 		
							
Actual – Cooling (c)		1,121 			1,222 			1,140 		
Normal – Cooling (b)		1,011 			1,016 			1,006 		
							
Western Region							
Actual – Heating (a)		450 			341 			189 		
Normal – Heating (b)		312 			310 			313 		
							
Actual – Cooling (d)		2,984 			2,653 			2,846 		
Normal – Cooling (b)		2,714 			2,712 			2,711 		

(a)Heating degree days are calculated on a 55 degree temperature base.
(b)Normal Heating/Cooling represents the thirty-year average of degree days.
(c)Eastern Region cooling degree days are calculated on a 65 degree temperature base.
(d)Western Region cooling degree days are calculated on a 70 degree temperature base.

92

2022 Compared to 2021
 
Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Earnings Attributable to AEP Common Shareholders from Transmission and Distribution Utilities
(in millions)

Year Ended December 31, 2021		$	543.4 		
			
Changes in Gross Margin:			
Retail Margins		362.3 		
Margins from Off-system Sales		61.9 		
Transmission Revenues		72.6 		
Other Revenues		(35.1)		
Total Change in Gross Margin		461.7 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(290.3)		
	
Depreciation and Amortization		(56.4)		
Taxes Other Than Income Taxes		(19.0)		

Other Income		2.3 		
Allowance for Equity Funds Used During Construction		1.3 		
Non-Service Cost Components of Net Periodic Benefit Cost		18.6 		
Interest Expense		(27.1)		
Total Change in Expenses and Other		(370.6)		
			
Income Tax Expense		(39.4)		
Equity Earnings of Unconsolidated Subsidiaries		0.6 		
			
Year Ended December 31, 2022		$	595.7 		

The major components of the increase in Gross Margin, defined as revenues less the related direct cost of purchased electricity were as follows:

•Retail Margins increased $362 million primarily due to the following:
•A $111 million increase in Basic Transmission Cost Rider revenues and recoverable PJM expenses in Ohio. This increase was partially offset in Other Operation and Maintenance expenses below.
•A $105 million increase due to interim rate increases driven by increased distribution and transmission investment in Texas.
•A $42 million increase due to various rider revenues in Ohio. This increase was partially offset in Margins from Off-system Sales, Other Revenues and other expense items below.
•A $30 million increase due to prior year refunds of Excess ADIT to customers in Texas. This increase was partially offset in Income Tax Expense below.
•A $23 million increase in weather-related usage in Texas primarily due to a 12% increase in cooling degree days and a 32% increase in heating degree days.
•A $19 million increase in revenue from rate riders in Texas. This increase was partially offset in other expense items below.
•An $18 million increase in weather-normalized margins primarily in the commercial and industrial classes, partially offset by the residential class.
•A $10 million increase in weather-related usage in Ohio primarily due to the end of decoupling.
93

•Margins from Off-system Sales increased $62 million primarily due to the following:
•A $52 million increase in off-system sales at OVEC due to higher market prices and volume, partially offset by an increase in PJM expenses driven by winter storm Elliott. This increase was offset in Retail Margins above and Other Revenues below.
•A $10 million increase in deferrals of OVEC costs. This increase was offset in Retail Margins above and Other Revenues below.
•Transmission Revenues increased $73 million primarily due to the following:
•A $65 million increase due to interim rate increases driven by increased transmission investment.
•A $7 million increase due to prior year refunds to customers in Texas associated with the last base rate case. This increase was offset in Other Revenues below.
•Other Revenues decreased $35 million primarily due to the following:
•A $38 million decrease in Ohio primarily due to third-party Legacy Generation Resource Rider revenue related to the recovery of OVEC costs. This decrease was offset in Retail Margins and Margins from Off-system Sales above.
•A $12 million decrease in Texas due to the prior year amortization of a provision for refund recorded associated with the last base rate case. This decrease was offset in Retail Margins and Transmission Revenues above.
•A $7 million decrease in energy efficiency revenues in Texas.
These decreases were partially offset by:
•A $26 million increase in securitization revenues primarily due to the AEP Texas Central Transition Funding II LLC bonds that matured in July 2020 and final refunds that were completed in 2021. This increase was offset in Depreciation and Amortization expenses and Interest Expense below.

Expenses and Other and Income Tax Expense changed between years as follows:

•Other Operation and Maintenance expenses increased $290 million primarily due to the following:
•An $87 million increase in transmission expenses in Ohio primarily due to the following:
•An $88 million increase in recoverable PJM expenses. This increase was offset in Retail Margins above.
•A $3 million increase in transmission vegetation management expenses.
These increases were partially offset by:
•A $6 million decrease in transmission formula rate true-up activity.
•A $76 million increase in ERCOT transmission expenses. This increase was partially offset in Retail Margins and Transmission Revenues above.
•A $21 million increase in bad debt related expenses in Ohio, including $8 million in 2022 related to Bad Debt Rider over-recovery. This increase was offset in Retail Margins above.
•A $19 million increase in remitted Universal Service Fund surcharge payments to the Ohio Department of Development to fund an energy assistance program for qualified Ohio customers. This increase was offset in Retail Margins above.
•An $18 million increase due to a charitable contribution to the AEP Foundation.
•A $17 million increase in recoverable distribution expenses in Ohio primarily related to vegetation management. This increase was offset in Retail Margins above.
•A $17 million increase in employee-related expenses.
•An $11 million increase in distribution-related expenses in Texas.
•Depreciation and Amortization expenses increased $56 million primarily due to the following:
•A $29 million increase due to a higher depreciable base in Texas.
•A $27 million increase in securitization amortizations in Texas primarily related to the AEP Texas Central Transition Funding II LLC bonds that matured in July 2020 and final refunds that were completed in 2021. This increase was offset in Other Revenues above.
•A $7 million increase in recoverable advanced metering system depreciable expenses in Texas.
These increases were partially offset by:
•A $9 million decrease in recoverable smart grid and Distribution Investment Rider depreciable expenses in Ohio. This decrease was offset in Retail Margins above.
94

•Taxes Other Than Income Taxes increased $19 million primarily due to an increase in Ohio in property taxes driven by additional investments in transmission and distribution assets and higher tax rates.
•Non-Service Cost Components of Net Period Benefit Cost decreased $19 million primarily due to an increase in discount rates, an increase in the expected return on plan assets and favorable plan returns in 2021.
•Interest Expense increased $27 million primarily due to the following:
•A $32 million increase in Texas primarily due to higher long-term debt balances and higher interest rates.
This increase was partially offset by:
•A $5 million decrease in Ohio primarily due to the retirement of a higher rate bond, partially offset by the issuance of a lower rate bond in 2021.
•Income Tax Expense increased $39 million primarily due to the following:
•A $21 million decrease in amortization of Excess ADIT. This decrease was partially offset in Gross Margin above.
•A $19 million increase due to an increase in pretax book income.
•A $4 million increase due to a current year change in the accounting policy for the parent company loss benefit.
These increases were partially offset by:
•A $9 million decrease due to an unfavorable out of period adjustment recorded in the prior year related to deferred income taxes.
95

AEP TRANSMISSION HOLDCO

(a)Other AEP Segments excludes Corporate and Other which is not considered a reportable segment.

		Years Ended December 31,	
AEP Transmission Holdco		2022		2021		2020	
		(in millions)	
Transmission Revenues		$	1,677.0 			$	1,526.2 			$	1,198.8 		
Other Operation and Maintenance		165.7 			132.3 			119.0 		
Depreciation and Amortization		355.0 			306.0 			257.6 		
Taxes Other Than Income Taxes		277.6 			245.0 			211.0 		
Operating Income		878.7 			842.9 			611.2 		

Interest and Investment Income		2.0 			0.7 			2.9 		
Allowance for Equity Funds Used During Construction		70.6 			67.2 			74.0 		
Non-Service Cost Components of Net Periodic Benefit Cost		5.0 			2.1 			2.0 		
Interest Expense		(169.3)			(146.3)			(133.2)		
Income Before Income Tax Expense and Equity Earnings		787.0 			766.6 			556.9 		
Income Tax Expense		193.6 			159.6 			130.8 		
Equity Earnings of Unconsolidated Subsidiary		83.4 			75.0 			82.4 		
Net Income		676.8 			682.0 			508.5 		
Net Income Attributable to Noncontrolling Interests		3.3 			4.2 			3.7 		
Earnings Attributable to AEP Common Shareholders		$	673.5 			$	677.8 			$	504.8 		
96

Summary of Investment in Transmission Assets for AEP Transmission Holdco

		December 31,	
		2022		2021		2020	
		(in millions)	
Plant in Service		$	13,040.2 			$	11,718.0 			$	10,327.5 		
Construction Work in Progress		1,659.9 			1,495.0 			1,499.7 		
Accumulated Depreciation and Amortization		1,047.6 			801.8 			595.7 		
Total Transmission Property, Net		$	13,652.5 			$	12,411.2 			$	11,231.5 		

97

2022 Compared to 2021
 
Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Earnings Attributable to AEP Common Shareholders from AEP Transmission Holdco
(in millions)

Year Ended December 31, 2021		$	677.8 		
			
Changes in Transmission Revenues:			
Transmission Revenues		150.8 		
Total Change in Transmission Revenues		150.8 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(33.4)		
Depreciation and Amortization		(49.0)		
Taxes Other Than Income Taxes		(32.6)		

Interest and Investment Income		1.3 		
Allowance for Equity Funds Used During Construction		3.4 		
Non-Service Cost Components of Net Periodic Pension Cost		2.9 		
Interest Expense		(23.0)		
Total Change in Expenses and Other		(130.4)		
			
Income Tax Expense		(34.0)		
Equity Earnings of Unconsolidated Subsidiary		8.4 		
Net Income Attributable to Noncontrolling Interests		0.9 		
			
Year Ended December 31, 2022		$	673.5 		

The major components of the increase in transmission revenues, which consists of wholesale sales to affiliates and nonaffiliates were as follows:

•Transmission Revenues increased $151 million primarily due to the following:
•A $180 million increase due to continued investment in transmission assets.
This increase was partially offset by:
•A $14 million decrease due to affiliated transmission formula rate true-up activity. This decrease was offset in Other Operation and Maintenance expense across the other Registrant Subsidiaries.
•A $5 million decrease due to nonaffiliated transmission formula rate true-up activity.

Expenses and Other, Income Tax Expense and Equity Earnings of Unconsolidated Subsidiary changed between years as follows:

•Other Operation and Maintenance expenses increased $33 million primarily due to the following:
•A $12 million increase in employee-related expenses.
•An $11 million increase due to a charitable contribution to the AEP Foundation.
•A $5 million increase due to cancelled capital projects.
•Depreciation and Amortization expenses increased $49 million primarily due to a higher depreciable base.
•Taxes Other Than Income Taxes increased $33 million primarily due to higher property taxes as a result of increased transmission investment.
•Allowance for Equity Funds Used During Construction increased $3 million primarily due to higher CWIP.
•Interest Expense increased $23 million primarily due to higher long-term debt balances.
•Income Tax Expense increased $34 million primarily due to the following:
•A $21 million increase due to a current year change in the accounting policy for the parent company loss benefit.
•A $7 million increase due to an increase in pretax book income.
•Equity Earnings of Unconsolidated Subsidiary increased $8 million primarily due to higher pretax equity earnings for ETT and PATH-WV, partially offset by lower pretax equity earnings for Pioneer.
98

GENERATION & MARKETING

(a)Other AEP Segments excludes Corporate and Other which is not considered a reportable segment.

		Years Ended December 31,	
Generation & Marketing		2022		2021		2020	
		(in millions)	
Revenues		$	2,466.9 			$	2,163.7 			$	1,725.6 		
Fuel, Purchased Electricity and Other		1,984.3 			1,806.8 			1,403.6 		
Gross Margin		482.6 			356.9 			322.0 		
Other Operation and Maintenance		118.7 			97.5 			124.9 		
	
Gain on Sale of Mineral Rights		(116.3)			— 			— 		
Depreciation and Amortization		93.0 			80.9 			72.8 		
Taxes Other Than Income Taxes		11.1 			10.5 			13.2 		
Operating Income		376.1 			168.0 			111.1 		
Interest and Investment Income		38.9 			4.2 			3.2 		
	
Non-Service Cost Components of Net Periodic Benefit Cost		20.6 			15.4 			15.4 		
Interest Expense		(51.8)			(15.6)			(24.0)		
Income Before Income Tax Benefit and Equity Earnings (Loss)		383.8 			172.0 			105.7 		
Income Tax Benefit		(83.1)			(48.8)			(108.0)		
Equity Earnings (Loss) of Unconsolidated Subsidiaries		(192.4)			(10.6)			3.2 		
Net Income		274.5 			210.2 			216.9 		
Net Loss Attributable to Noncontrolling Interests		(9.1)			(7.3)			(10.0)		
Earnings Attributable to AEP Common Shareholders		$	283.6 			$	217.5 			$	226.9 		

99

																		
Summary of MWhs Generated for Generation & Marketing	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in millions of MWhs)	
Fuel Type:						
Coal	4 			3 			4 		
	
Renewables	4 			4 			3 		
Total MWhs	8 			7 			7 		

100

2022 Compared to 2021
 
Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Earnings Attributable to AEP Common Shareholders from Generation & Marketing
(in millions)

Year Ended December 31, 2021		$	217.5 		
			
Changes in Gross Margin:			
Merchant Generation		31.6 		
Renewable Generation		38.7 		
Retail, Trading and Marketing		55.4 		
Total Change in Gross Margin		125.7 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(21.2)		
	
Gain on Sale of Mineral Rights		116.3 		
Depreciation and Amortization		(12.1)		
Taxes Other Than Income Taxes		(0.6)		
Interest and Investment Income		34.7 		
	
Non-Service Cost Components of Net Periodic Benefit Cost		5.2 		
Interest Expense		(36.2)		
Total Change in Expenses and Other		86.1 		
			
Income Tax Benefit		34.3 		
Equity Earnings of Unconsolidated Subsidiaries		(181.8)		
Net Loss Attributable to Noncontrolling Interests		1.8 		
			
Year Ended December 31, 2022		$	283.6 		

The major components of the increase in Gross Margin, defined as revenues less the related direct cost of fuel, including consumption of chemicals and emissions allowances, purchased electricity and certain cost-of-service for retail operations were as follows:

•Merchant Generation increased $32 million primarily due to higher market prices.
•Renewable Generation increased $39 million primarily due to higher market prices at Texas wind facilities and new solar projects placed in service.
•Retail, Trading and Marketing increased $55 million primarily due to higher retail power and gas margins.

Expenses and Other, Income Tax Benefit and Equity Earnings of Unconsolidated Subsidiaries changed between years as follows:

•Other Operation and Maintenance expenses increased $21 million primarily due to the following:
•A $39 million increase due to the sale of Racine Hydro in 2021.
•A $14 million increase due to newly placed in service renewable projects in 2022.
These increases were partially offset by:
•A $33 million decrease due to higher land sales and sale of renewable development projects in 2022.
•Gain on Sale of Mineral Rights increased $116 million due to the current year sale of mineral rights.
•Depreciation and Amortization expenses increased $12 million primarily due to a higher depreciable base from increased investments in renewable energy assets.
•Interest and Investment Income increased $35 million primarily due to an increase in advances to affiliates and higher interest rates in 2022.
•Non-Service Cost Components of Net Periodic Benefit Cost decreased $5 million primarily due to an increase in discount rates, an increase in the expected return on plan assets and favorable plan returns in 2021.
101

•Interest Expense increased $36 million primarily due to higher interest rates in 2022.
•Income Tax Benefit increased $34 million primarily due to the following:
•A $22 million increase due to a change in state apportionment impacting deferred state taxes.
•A $14 million increase due to an unfavorable out of period adjustment recorded in the prior year related to deferred income taxes.
•A $10 million increase due to a decrease in state taxes.
•A $7 million increase due to an increase in PTCs related to enacted legislation under the IRA and additional capital investment in tax-credit eligible property.
These increases were partially offset by:
•A $10 million decrease due to a current year change in the accounting policy for the parent company loss benefit.
•An $8 million decrease due to an increase in pretax book income.
•Equity Earnings of Unconsolidated Subsidiaries decreased $182 million primarily due to the impairment of AEP’s investment in Flat Ridge 2 Wind LLC.

102

CORPORATE AND OTHER

2022 Compared to 2021

Earnings Attributable to AEP Common Shareholders from Corporate and Other decreased from a loss of $64 million in 2021 to a loss of $538 million in 2022 primarily due to:

•A $363 million pretax loss related to the anticipated sale of Kentucky operations.
•A $128 million increase in interest expense due to higher interest rates on short-term debt, an increase in advances from affiliates and an increase in long-term debt outstanding.
•A $42 million decrease at EIS, primarily due to lower returns on investments and an increase in reserves.
•A $26 million decrease in equity earnings.
•A $24 million decrease due to asset impairments and other related charges.
•An $18 million decrease due to unfavorable changes in gains and losses from AEP’s investment in ChargePoint. As of August 2022, AEP no longer has a direct investment in ChargePoint.

These items were partially offset by:

•A $60 million increase in interest income, primarily due to higher interest income from affiliates.
•A $67 million decrease in Income Tax Expense primarily due to the following:
•A $66 million decrease due to a loss on the anticipated sale of Kentucky operations.
•A $40 million decrease due to a current year change in the accounting policy for the parent company loss benefit.
•A $38 million decrease due to a change in pretax book income.
These items were partially offset by:
•A $79 million increase due to an out of period adjustment related to deferred taxes in 2021.

AEP SYSTEM INCOME TAXES

2022 Compared to 2021

•Income Tax Expense decreased $110 million primarily due to the following:
•An $88 million increase in tax credits primarily due to an increase in PTCs related to enacted legislation under the IRA and additional capital investment in tax-credit eligible property.
•A $61 million decrease due to a decrease in pretax book income.
•A $42 million decrease due to a change in state apportionment and statutory rates related to deferred taxes.
•A $17 million decrease in state income taxes primarily due to state return to provision adjustments.
These decreases were partially offset by:
•A $55 million increase due to an out of period adjustment recorded in 2021 related to deferred taxes.
•A $41 million decrease in the amortization of Excess ADIT.

103

FINANCIAL CONDITION

AEP measures financial condition by the strength of its balance sheet and the liquidity provided by its cash flows.

SIGNIFICANT CASH REQUIREMENTS

AEP’s contractual cash obligations include amounts reported on the balance sheets and other obligations disclosed in the footnotes. It is anticipated that these obligations will be satisfied through a combination of cash flows from operations, long-term debt issuances, short-term debt through AEP’s Commercial Paper Program or bank term loans, proceeds from the Kentucky operations sale, proceeds from the sale of competitive contracted renewables and the use of the ATM Program or other equity issuances.

Capital Expenditures

Continued capital investments reflect AEP’s commitment to enhance service and deliver reliable, clean energy and advanced technologies that exceed customer expectations. See “Budgeted Capital Expenditures” herein, for additional information.

Long-term Debt

Long-term debt maturities, including interest, represent a significant cash requirement for AEP and the Registrant Subsidiaries. See Note 14 - Financing Activities for additional information relating to the Registrant Subsidiaries’ long-term debt outstanding as of December 31, 2022, the weighted-average interest rate applicable to each debt category and a schedule of debt maturities over the next five years.

Other Significant Cash Requirements

Operating and finance leases represent a significant component of funding requirements for AEP and the Registrant Subsidiaries. See Note 13 - Leases for additional information.

The AEP System has substantial commitments for fuel, energy and capacity contracts as part of the normal course of business. See Note 6 - Commitments, Guarantees and Contingencies for additional information.

As of December 31, 2022, AEP expected to make contributions to the pension plans totaling $6 million in 2023. Based upon the projected benefit obligation and fair value of assets available to pay pension benefits, the pension plans were 101% funded as of December 31, 2022. See “Estimated Future Benefit Payments and Contributions” section of Note 8 for additional information.

Standby letters of credit are entered into with third-parties. These letters of credit are issued in the ordinary course of business and cover items such as natural gas and electricity risk management contracts, construction contracts, insurance programs, security deposits and debt security reserves. There is no collateral held in relation to any guarantees in excess of the ownership percentages. In the event any letters of credit are drawn, there is no recourse to third-parties. See “Letters of Credit” section of Note 6 for additional information.

104

LIQUIDITY AND CAPITAL RESOURCES

Debt and Equity Capitalization

		December 31,	
		2022		2021	
		(dollars in millions)	
Long-term Debt, including amounts due within one year (a)		$	35,622.6 			55.8 	%		$	33,454.5 			57.0 	%	
Short-term Debt		4,112.2 			6.4 			2,614.0 			4.4 		
Total Debt		39,734.8 			62.2 			36,068.5 			61.4 		
AEP Common Equity		23,893.4 			37.4 			22,433.2 			38.2 		
Noncontrolling Interests		229.0 			0.4 			247.0 			0.4 		
Total Debt and Equity Capitalization		$	63,857.2 			100.0 	%		$	58,748.7 			100.0 	%	
(a)    Amount excludes $1.2 billion and $1.1 billion of Total Long-term Debt Outstanding classified as Liabilities Held for Sale on the balance sheet as of December 31, 2022 and 2021, respectively. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

AEP’s ratio of debt-to-total capital increased from 61.4% to 62.2% as of December 31, 2021 and 2022, respectively, primarily due to an increase in debt to support distribution, transmission and renewable investment growth in addition to working capital needs due to an increase in deferred fuel costs.

Liquidity

Liquidity, or access to cash, is an important factor in determining AEP’s financial stability.  Management believes AEP has adequate liquidity under its existing credit facilities. As of December 31, 2022, AEP had $5 billion in revolving credit facilities to support its commercial paper program. Additional liquidity is available from cash from operations and a receivables securitization agreement.  Management is committed to maintaining adequate liquidity.  AEP generally uses short-term borrowings to fund working capital needs, property acquisitions and construction until long-term funding is arranged. Sources of long-term funding include issuance of long-term debt, leasing agreements, hybrid securities or common stock. AEP and its utilities finance its operations with commercial paper and other variable rate instruments that are subject to fluctuations in interest rates. To the extent that the Federal Reserve continues to raise short-term interest rates, it could reduce future net income and cash flows and impact financial condition. In February 2021, severe winter weather impacted certain AEP service territories resulting in disruptions to SPP market conditions. See Note 4 - Rate Matters for additional information. In March 2021, AEP entered into a $500 million 364-day Term Loan and borrowed the full amount to help address the cash flow implications resulting from the February 2021 severe winter weather event. In August 2022, AEP paid off the $500 million Term Loan. In 2022, increased fuel and purchased power prices continue to lead to an increase in under collection of fuel costs. As a result, in July 2022, APCo and KPCo entered into term loans of $100 million and $75 million, respectively, to help address the cash flow implications of the increased fuel and purchased power costs. See “Deferred Fuel Costs” section of Executive Overview for additional information on how the registrants are addressing the increase in deferred fuel regulatory assets. In September 2022, the ODFA issued ratepayer-backed securitization bonds for the purpose of reimbursing PSO for $687 million of extraordinary fuel costs and purchases of electricity incurred during the February 2021 severe winter weather event. See Note 4 - Rate Matters for additional information. In December 2022, AEP entered into four individual Term Loans, including three 364-day Term Loans, totaling $500 million to further address the cash flow implications of increased fuel and purchased power prices. In February 2023, AEP entered into a $500 million term loan to address short-term liquidity needs, made a capital contribution to SWEPCo, totaling $25 million, for general corporate business purposes and made a capital contribution to AEPTCo, totaling $25 million, to manage short-term borrowing capacity under the Money Pool.

105

Net Available Liquidity

AEP manages liquidity by maintaining adequate external financing commitments.  As of December 31, 2022, available liquidity was approximately $2.6 billion as illustrated in the table below:

		Amount		Maturity		
		(in millions)				
Commercial Paper Backup:						
Revolving Credit Facility		$	4,000.0 			March 2027	(a)	
Revolving Credit Facility		1,000.0 			March 2024	(a)	

Cash and Cash Equivalents		509.4 					
Total Liquidity Sources		5,509.4 					
Less: AEP Commercial Paper Outstanding		2,862.2 					
Net Available Liquidity		$	2,647.2 					
(a)In April 2022, AEP extended the maturity dates of the Revolving Credit Facilities from March 2026 to March 2027 and from March 2023 to March 2024, respectively.

AEP uses its commercial paper program to meet the short-term borrowing needs of its subsidiaries.  The program funds a Utility Money Pool, which funds AEP’s utility subsidiaries; a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries; and the short-term debt requirements of subsidiaries that are not participating in either money pool for regulatory or operational reasons, as direct borrowers.  The maximum amount of commercial paper outstanding during 2022 was $2.9 billion.  The weighted-average interest rate for AEP’s commercial paper during 2022 was 2.74%.

Other Credit Facilities

An uncommitted facility gives the issuer of the facility the right to accept or decline each request made under the facility. AEP issues letters of credit on behalf of subsidiaries under five uncommitted facilities totaling, as of December 31, 2022, $400 million.  The Registrants’ maximum future payments for letters of credit issued under the uncommitted facilities, as of December 31, 2022, was $287 million with maturities ranging from January 2023 to December 2023.

Financing Plan

As of December 31, 2022, AEP had $2 billion of long-term debt due within one year, excluding $490 million classified as Liabilities Held for Sale on the balance sheet. This also included $250 million of Pollution Control Bonds with mandatory tender dates and credit support for variable interest rates that requires the debt be classified as current and $210 million of securitization bonds and DCC Fuel notes.  Management plans to refinance the majority of the maturities due within one year on a long-term basis.

Securitized Accounts Receivables

AEP Credit’s receivables securitization agreement provides a commitment of $750 million from bank conduits to purchase receivables and was amended in September 2021 to include a $125 million and a $625 million facility. The $125 million facility was renewed in September 2022 and amended to extend the expiration date to September 2024. The $625 million facility also expires in September 2024. As of December 31, 2022, the affiliated utility subsidiaries, with the exception of SWEPCo, were in compliance with all requirements under the agreement. SWEPCo temporarily eased credit policies from August 2022 through October 2022 to assist customers with higher than normal bills driven by increased fuel costs and, in turn, experienced higher than normal aged receivables. In response, in January 2023, AEP Credit amended its receivables securitization agreement to increase the eligibility criteria related to their aged receivables requirements to bring SWEPCo back into compliance.

106

Debt Covenants and Borrowing Limitations

AEP’s credit agreements contain certain covenants and require it to maintain a percentage of debt-to-total capitalization at a level that does not exceed 67.5%.  The method for calculating outstanding debt and capitalization is contractually-defined in AEP’s credit agreements.  Debt as defined in the revolving credit agreement excludes securitization bonds and debt of AEP Credit. As of December 31, 2022, this contractually-defined percentage was 59.1%. Non-performance under these covenants could result in an event of default under these credit agreements.  In addition, the acceleration of AEP’s payment obligations, or the obligations of certain of AEP’s major subsidiaries, prior to maturity under any other agreement or instrument relating to debt outstanding in excess of $50 million, would cause an event of default under these credit agreements.  This condition also applies in a majority of AEP’s non-exchange-traded commodity contracts and would similarly allow lenders and counterparties to declare the outstanding amounts payable.  However, a default under AEP’s non-exchange-traded commodity contracts would not cause an event of default under its credit agreements.

The revolving credit facility does not permit the lenders to refuse a draw on any facility if a material adverse change occurs.

Utility Money Pool borrowings and external borrowings may not exceed amounts authorized by regulatory orders and AEP manages its borrowings to stay within those authorized limits.

ATM Program

AEP participates in an ATM offering program that allows AEP to issue, from time to time, up to an aggregate of $1 billion of its common stock, including shares of common stock that may be sold pursuant to an equity forward sales agreement. There were no issuances under the ATM program for the year ended December 31, 2022. As of December 31, 2022, approximately $511 million of equity is available for issuance under the ATM offering program. See Note 14 - Financing Activities for additional information.

Equity Units

In August 2020, AEP issued 17 million Equity Units initially in the form of corporate units, at a stated amount of $50 per unit, for a total stated amount of $850 million. Net proceeds from the issuance were approximately $833 million. Each corporate unit represents a 1/20 undivided beneficial ownership interest in $1,000 principal amount of AEP’s 1.30% Junior Subordinated Notes due in 2025 and a forward equity purchase contract which settles after three years in August 2023. The proceeds were used to support AEP’s overall capital expenditure plan.

In March 2019, AEP issued 16.1 million Equity Units initially in the form of corporate units, at a stated amount of $50 per unit, for a total stated amount of $805 million. Net proceeds from the issuance were approximately $785 million. Each corporate unit represents a 1/20 undivided beneficial ownership interest in $1,000 principal amount of AEP’s 3.40% Junior Subordinated Notes due in 2024 and a forward equity purchase contract which settled after three years in 2022. The proceeds from this issuance were used to support AEP’s overall capital expenditure plans including the acquisition of Sempra Renewables LLC. In January 2022, AEP successfully remarketed the notes on behalf of holders of the corporate units and did not directly receive any proceeds therefrom. Instead, the holders of the corporate units used the debt remarketing proceeds to settle the forward equity purchase contract with AEP. The interest rate on the notes was reset to 2.031% with the maturity remaining in 2024. In March 2022, AEP issued 8,970,920 shares of AEP common stock and received proceeds totaling $805 million under the settlement of the forward equity purchase contract. AEP common stock held in treasury was used to settle the forward equity purchase contract.

See Note 14 - Financing Activities for additional information.

107

Dividend Policy and Restrictions

The Board of Directors declared a quarterly dividend of $0.83 per share in January 2023.  Future dividends may vary depending upon AEP’s profit levels, operating cash flow levels and capital requirements, as well as financial and other business conditions existing at the time. Parent’s income primarily derives from common stock equity in the earnings of its utility subsidiaries. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the subsidiaries to transfer funds to Parent in the form of dividends. Management does not believe these restrictions will have any significant impact on its ability to access cash to meet the payment of dividends on its common stock. See “Dividend Restrictions” section of Note 14 for additional information.

Credit Ratings

AEP and its utility subsidiaries do not have any credit arrangements that would require material changes in payment schedules or terminations as a result of a credit downgrade, but its access to the commercial paper market may depend on its credit ratings.  In addition, downgrades in AEP’s credit ratings by one of the rating agencies could increase its borrowing costs.  Counterparty concerns about the credit quality of AEP or its utility subsidiaries could subject AEP to additional collateral demands under adequate assurance clauses under its derivative and non-derivative energy contracts.

CASH FLOW

AEP relies primarily on cash flows from operations, debt issuances and its existing cash and cash equivalents to fund its liquidity and investing activities. AEP’s investing and capital requirements are primarily capital expenditures, repaying of long-term debt and paying dividends to shareholders. AEP uses short-term debt, including commercial paper, as a bridge to long-term debt financing. The levels of borrowing may vary significantly due to the timing of long-term debt financings and the impact of fluctuations in cash flows.

		Years Ended December 31,	
		2022		2021		2020	
		(in millions)	
Cash, Cash Equivalents and Restricted Cash at Beginning of Period		$	451.4 			$	438.3 			$	432.6 		
Net Cash Flows from Operating Activities		5,288.0 			3,839.9 			3,832.9 		
Net Cash Flows Used for Investing Activities		(7,751.8)			(6,433.9)			(6,233.9)		
Net Cash Flows from Financing Activities		2,568.9 			2,607.1 			2,406.7 		
	
Net Increase in Cash, Cash Equivalents and Restricted Cash		105.1 			13.1 			5.7 		
Cash, Cash Equivalents and Restricted Cash at End of Period		$	556.5 			$	451.4 			$	438.3 		

108

Operating Activities

		Years Ended December 31,	
		2022		2021		2020	
		(in millions)	
Net Income		$	2,305.6 			$	2,488.1 			$	2,196.7 		
Non-Cash Adjustments to Net Income (a)		3,461.6 			3,025.9 			2,954.8 		
Mark-to-Market of Risk Management Contracts		15.5 			112.3 			66.5 		
Pension Contributions to Qualified Plan Trust		— 			— 			(110.3)		
Property Taxes		(41.2)			(68.0)			(43.3)		
Deferred Fuel Over/Under Recovery, Net		(319.2)			(1,647.9)			(31.8)		
Change in Regulatory Assets		(46.7)			(238.9)			(337.9)		

Change in Other Noncurrent Assets		(187.7)			(126.6)			(151.0)		
Change in Other Noncurrent Liabilities		337.8 			206.4 			(54.5)		
Change in Certain Components of Working Capital		(237.7)			88.6 			(656.3)		
Net Cash Flows from Operating Activities		$	5,288.0 			$	3,839.9 			$	3,832.9 		

(a)Non-Cash Adjustments to Net Income includes Depreciation and Amortization, Rockport Plant, Unit 2 Lease Amortization, Deferred Income Taxes, Loss on the Expected Sale of the Kentucky Operations, Asset Impairments and Other Related Charges, Impairment of Equity Method Investment, Allowance for Equity Funds Used During Construction, Amortization of Nuclear Fuel, Gain on Sale of Mineral Rights and Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset.

2022 Compared to 2021

Net Cash Flows from Operating Activities increased by $1.4 billion primarily due to the following:
•A $1.3 billion increase in cash primarily due to the timing of fuel and purchased power revenues and expenses. PSO and SWEPCo were impacted by the February 2021 severe winter weather event in SPP which led to significantly higher fuel and purchased power expenses which were deferred as regulatory assets in 2021. In September 2022, the ODFA issued ratepayer-backed securitization bonds and provided PSO proceeds of $687 million as reimbursement of the extraordinary fuel costs and purchased electricity incurred during the severe winter weather event. See Note 4 - Rate Matters for additional information. In 2022, increased fuel and purchased power prices in excess of amounts included in fuel-related revenues has resulted in an increase in the under collection of fuel costs in most jurisdictions, offsetting the proceeds received by PSO in September 2022. See the “Deferred Fuel Costs” section of Executive Overview for additional information.
•A $253 million increase in cash from Net Income, after non-cash adjustments. See Results of Operations for further detail.
•A $192 million increase in cash from Changes in Regulatory Assets primarily due to incremental other operation and maintenance storm restoration expenses incurred in 2021 by APCo, SWEPCo and KPCo as a result of the February 2021 severe winter weather event. The increase due to the February 2021 severe winter weather event was partially offset by the deferral of incremental other operation and maintenance storm restoration expenses incurred in June 2022 by APCo, KPCo, OPCo and WPCo. See Note 4 - Rate Matters for additional information.
•A $131 million increase in cash from Changes in Other Noncurrent Liabilities. The increase is primarily due to changes in provisions for refunds and regulatory liabilities driven by timing differences between collections from and refunds to customers under rate rider mechanisms. See Note 5 - Effects of Regulation for additional information.
•A $97 million increase primarily due to collateral held against risk management contracts due to pricing movement in the commodities market.

109

These increases in cash were offset by:
•A $326 million decrease in cash from the Change in Certain Components of Working Capital. The decrease is primarily due to fuel, material and supplies driven by current year increases in coal inventory and material and supplies in addition to prior year decreases in coal and lignite inventory on hand, an increase in estimated federal income taxes paid and the timing of accounts receivables. These decreases were partially offset by the timing of accounts payable and a return of margin deposits from PJM originally paid in 2021.

Investing Activities

		Years Ended December 31,	
		2022		2021		2020	
		(in millions)	
Construction Expenditures		$	(6,671.7)			$	(5,659.6)			$	(6,246.3)		
Acquisitions of Nuclear Fuel		(100.7)			(104.5)			(69.7)		
	
Acquisition of the Dry Lake Solar Project		— 			(114.4)			— 		
Acquisition of the North Central Wind Energy Facilities		(1,207.3)			(652.8)			— 		
Proceeds on Sale of Assets		218.0 			118.9 			71.1 		
Other		9.9 			(21.5)			11.0 		
Net Cash Flows Used for Investing Activities		$	(7,751.8)			$	(6,433.9)			$	(6,233.9)		

2022 Compared to 2021

Net Cash Flows Used for Investing Activities increased by $1.3 billion primarily due to the following:
•A $1 billion increase in construction expenditures, primarily due to increases in Vertically Integrated and Transmission and Distribution segments of $647 million and $411 million, respectively.
•A $440 million increase due to the 2022 acquisition of Traverse, partially offset by the 2021 acquisitions of the Dry Lake Solar Project, Sundance and Maverick. See Note 7 - Acquisitions, Assets and Liabilities Held for Sale, Dispositions and Impairments for additional information.
These increases in cash used were partially offset by:
•A $99 million increase in Proceeds from Sale of Assets, primarily due to the 2022 sale of certain mineral rights. See Note 7 - Acquisitions, Assets and Liabilities Held for Sale, Dispositions and Impairments for additional information.

Financing Activities

		Years Ended December 31,	
		2022		2021		2020	
		(in millions)	
Issuance of Common Stock		$	826.5 			$	600.5 			$	155.0 		
Issuance/Retirement of Debt, Net		3,802.5 			3,631.7 			3,927.3 		
	
Dividends Paid on Common Stock		(1,645.2)			(1,519.5)			(1,424.9)		
Principal Payments for Finance Lease Obligations		(309.5)			(64.0)			(61.7)		
Redemption of Noncontrolling Interests		— 			— 			(100.2)		
Other		(105.4)			(41.6)			(88.8)		
Net Cash Flows from Financing Activities		$	2,568.9 			$	2,607.1 			$	2,406.7 		

2022 Compared to 2021

Net Cash Flows from Financing Activities decreased by $38 million primarily due to the following:
•A $1.8 billion decrease in issuances of long-term debt. See Note 14 - Financing Activities for additional information.
•A $246 million decrease due to an increase in Principal Payments for Finance Lease Obligations primarily driven by Rockport Plant, Unit 2 final lease payments.
•A $126 million decrease due to an increase in dividends paid on common stock.
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These decreases in cash were partially offset by:
•A $1.4 billion increase in short-term debt primarily due to increased draws under the commercial paper program. See Note 14 - Financing Activities for additional information.
•A $644 million increase due to decreased retirements of long-term debt. See Note 14 - Financing Activities for additional information.
•A $226 million increase in issuances of common stock primarily due to the settlement of the 2019 equity units. See “Equity Units” section of Note 14 for additional information.

The following financing activities occurred during 2022:

AEP Common Stock:

•During 2022, AEP issued 683 thousand shares of common stock under the incentive compensation, employee saving and dividend reinvestment plans. Additionally in 2022, AEP reissued 9 million shares of treasury stock to fulfill share commitments related to AEP’s Equity Units. See “Common Stock” and “Equity Units” section of Note 14 for additional information. AEP received net proceeds of $827 million related to these issuances.

Debt:

•During 2022, AEP issued approximately $4.7 billion of long-term debt, including $3.1 billion of senior unsecured notes at interest rates ranging from 4.5% to 5.95%, $1.3 billion of other debt at various interest rates and $214 million of pollution control bonds at interest rates ranging from 3% to 3.75%.  The proceeds from these issuances were primarily used to fund long-term debt maturities, construction programs and to help address working capital needs.
•During 2022, AEP entered into interest rate derivatives with notional amounts totaling $700 million that were designated as cash flow hedges.  During 2022, settlements of AEP’s interest rate derivatives resulted in net cash paid of $7 million for derivatives designated as fair hedges.  As of December 31, 2022, AEP had a total notional amount of $950 million of outstanding interest rate derivatives designated as fair value hedges and $700 million designated as cash flow hedges.

See “Long-term Debt Subsequent Events” section of Note 14 for Long-term debt and other securities issued, retired and principal payments made after December 31, 2022 through February 23, 2023, the date that the 10-K was issued.

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BUDGETED CAPITAL EXPENDITURES

Management forecasts approximately $6.8 billion of capital expenditures in 2023.  For the four year period, 2024 through 2027, management forecasts capital expenditures of $32.9 billion. The expenditures are generally for transmission, generation, distribution, regulated renewables and required environmental investment to comply with the Federal EPA rules.  Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, environmental regulations, business opportunities, market volatility, economic trends, supply chain issues, weather, legal reviews and the ability to access capital.  Management expects to fund these capital expenditures through cash flows from operations, proceeds from the sale of Kentucky operations, proceeds from the sale of competitive contracted renewables and financing activities.  Generally, the Registrant Subsidiaries use cash or short-term borrowings under the money pool to fund these expenditures until long-term funding is arranged. The 2023 estimated capital expenditures include generation, transmission and distribution related investments, as well as expenditures for compliance with environmental regulations as follows:

		2023 Budgeted Capital Expenditures		
Segment		Environmental		Generation		Renewables		Transmission		Distribution		Other (a)		Total		
		(in millions)		
Vertically Integrated Utilities		$	150.7 			$	345.5 			$	106.1 			$	817.3 			$	1,310.7 			$	426.3 			$	3,156.6 		(b)	
Transmission and Distribution Utilities		— 			— 			— 			999.0 			993.1 			287.5 			2,279.6 			
AEP Transmission Holdco		— 			— 			— 			1,290.6 			— 			19.1 			1,309.7 		(b)	
Generation & Marketing		— 			43.9 			4.7 			— 			— 			21.5 			70.1 			
Corporate and Other		— 			— 			— 			— 			— 			30.6 			30.6 			
Total		$	150.7 			$	389.4 			$	110.8 			$	3,106.9 			$	2,303.8 			$	785.0 			$	6,846.6 			

(a)Amount primarily consists of facilities, software and telecommunications.
(b)2023 budgeted capital expenditures do not include any amounts for KPCo or KTCo.

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The table below represents estimated capital investments by business segment for the years 2024 to 2027:

																											
Segment		2024		2025		2026		2027	
			
Vertically Integrated Utilities (a)		$	5,103.6 			$	6,417.2 			$	3,824.9 			$	3,306.3 		
Transmission and Distribution Utilities		2,509.8 			2,280.0 			2,289.3 			2,226.5 		
AEP Transmission Holdco (a)		1,225.5 			964.5 			1,107.1 			1,246.4 		
Generation & Marketing		76.6 			72.4 			76.4 			103.6 		
Corporate and Other		27.4 			14.0 			15.4 			2.1 		
Total		$	8,942.9 			$	9,748.1 			$	7,313.1 			$	6,884.9 		

(a) 2024-2027 estimated capital investments do not include any amounts for KPCo or KTCo.

The 2023 estimated capital expenditures by Registrant Subsidiary include distribution, transmission and generation-related investments, as well as expenditures for compliance with environmental regulations as follows:

		2023 Budgeted Capital Expenditures	
Company		Environmental		Generation		Renewables		Transmission		Distribution		Other (a)		Total	
		(in millions)	
AEP Texas		$	— 			$	— 			$	— 			$	683.3 			$	509.1 			$	125.6 			$	1,318.0 		
AEPTCo		— 			— 			— 			1,290.6 			— 			19.1 			1,309.7 		
APCo		65.9 			122.8 			25.3 			324.9 			432.8 			146.7 			1,118.4 		
I&M		— 			100.8 			2.0 			74.6 			297.1 			105.5 			580.0 		
OPCo		— 			— 			— 			315.7 			484.0 			161.9 			961.6 		
PSO		0.2 			27.4 			57.7 			119.2 			305.7 			54.1 			564.3 		
SWEPCo		4.8 			48.1 			21.2 			290.0 			221.3 			110.4 			695.8 		

(a) Amount primarily consists of facilities, software and telecommunications.

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CYBER SECURITY

The electric utility industry is an identified critical infrastructure function with mandatory cyber security requirements under the authority of FERC. The NERC, which FERC certified as the nation’s Electric Reliability Organization, developed mandatory critical infrastructure protection cyber security reliability standards. AEP’s service territory covers multiple NERC regions and is audited at least annually by one or more of the regions. AEP has participated in the NERC grid security and emergency response exercises, GridEx, for the past ten years and continues to participate in the bi-yearly exercises. These NERC-led efforts test and further develop the coordination, threat sharing and interaction between utilities and various government agencies relative to potential cyber and physical threats against the nation’s electric grid. AEP also conducts internal exercises to test and further develop AEP’s cyber response plans. These internal scenarios are chosen based on real world events and often include coordination with and communication to AEP’s Chief Executive Officer and executive team.

The operations of AEP’s electric utility subsidiaries are subject to extensive and rigorous mandatory cyber and physical security requirements that are developed and enforced by NERC to protect grid security and reliability. AEP’s enterprise-wide security program includes cyber and physical security and incorporates many of the guidelines set forth in the National Institute of Standards and Technology Cybersecurity Framework. AEP’s Chief Security Officer (CSO) is also its NERC Critical Infrastructure Protection Senior Manager, ensuring alignment of compliance with the enterprise-wide security program.

Critical cyber assets, such as data centers, power plants, transmission operations centers and business networks are protected using multiple layers of cyber security controls and authentication. Cyber hackers and other malicious actors have caused material disruption by successfully breaching a number of very secure facilities, including federal agencies and financial institutions. As understanding of these events develop, AEP has adopted a defense in depth approach to cyber security and continually assesses its cyber security tools and processes to determine where to strengthen its defenses. These strategies include monitoring, alerting and emergency response, forensic analysis, disaster recovery, threat sharing and criminal activity reporting. This approach has allowed AEP to deal with cyber and related threats, intrusions and attempted breaches in real-time and to limit their impact to levels that would be expected in the ordinary course of business in the absence of such malicious activity.

AEP has undertaken a variety of actions to monitor and address cyber-related risks. Cyber security and the effectiveness of AEP’s cyber security processes are reviewed annually with the Board of Directors and at several meetings throughout the year with the Technology Committee of the Board, the principal committee that exercises oversight with respect to these matters. AEP’s Chief Executive Officer and executive team participate in interactive threat briefings from AEP’s CSO and the security leadership team on a regular basis. AEP’s strategy and procedure for managing cyber-related risks is integrated within its enterprise risk management processes. These procedures are designed to ensure that any material information regarding potentially relevant cyber incidents is elevated in a timely manner both to the appropriate leadership and, where applicable, to our external financial reporting and disclosure team. AEP’s enterprise-wide security program continually adjusts staff and resources in response to the evolving threat landscape. The costs for such investments are material and have remained constant over time, a pattern that is expected to continue. In addition, AEP maintains cyber liability insurance to cover certain damages caused by cyber incidents.

AEP’s CSO leads the cyber security and physical security teams and is responsible for the design, implementation and execution of AEP’s security risk management strategy, which includes cyber security. AEP’s cyber security team operates a 24/7 Cyber Security Intelligence and Response Center responsible for monitoring the AEP System for cyber risks and threats. The cyber security team constantly scans the AEP System for risks and threats. In addition, under the direction of the CSO, the cyber security team actively monitors best practices, performs penetration testing, leads response exercises and internal awareness campaigns and provides training and communication across the organization. AEP’s security awareness training is mandatory for all employees and includes regular phish email testing to train employees to identify malicious emails that could put AEP at risk.

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AEP also continually reviews its business continuity plan to develop an effective recovery strategy that seeks to decrease response times, limit financial impacts and maintain customer confidence during any business interruption. The cyber security team administers a third-party risk governance program that identifies potential risks introduced through third-party relationships, such as vendors, software and hardware manufacturers or professional service providers. As warranted, AEP obtains certain contractual security guarantees and assurances with these third-party relationships to help ensure the security and safety of its information. The cyber security team works closely with a broad range of departments, including legal, regulatory, corporate communications, audit services, information technology and operational technology functions critical to the power grid.

The cyber security team collaborates with partners from both industry and government, and routinely participates in industry-wide programs that exchange knowledge of threats with utility peers, industry and federal agencies. AEP is an active member of a number of industry-specific threat and information sharing communities including the Department of Homeland Security’s Joint Cyber Defense Collaborative, the Electricity Information Sharing and Analysis Center and the National Defense Information Sharing and Analysis Center. AEP continues to work with nonaffiliated entities to do penetration testing and to design and implement appropriate remediation strategies. There can be no assurance, however, that these efforts will be effective to prevent material interruption of services or other damages to AEP's business or operations in connection with any cyber-related incident.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES AND ACCOUNTING STANDARDS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures, including amounts related to legal matters and contingencies.  Management considers an accounting estimate to be critical if:

•It requires assumptions to be made that were uncertain at the time the estimate was made; and
•Changes in the estimate or different estimates that could have been selected could have a material effect on net income or financial condition.

Management discusses the development and selection of critical accounting estimates as presented below with the Audit Committee of AEP’s Board of Directors and the Audit Committee reviews the disclosures relating to them.

Management believes that the current assumptions and other considerations used to estimate amounts reflected in the financial statements are appropriate.  However, actual results can differ significantly from those estimates.

The sections that follow present information about critical accounting estimates, as well as the effects of hypothetical changes in the material assumptions used to develop each estimate.

Regulatory Accounting

Nature of Estimates Required

The Registrants’ financial statements reflect the actions of regulators that can result in the recognition of revenues and expenses in different time periods than enterprises that are not rate-regulated.

The Registrants recognize regulatory assets (deferred expenses to be recovered in the future) and regulatory liabilities (deferred future revenue reductions or refunds) for the economic effects of regulation.  Specifically, the timing of expense and income recognition is matched with regulated revenues.  Liabilities are also recorded for refunds, or probable refunds, to customers that have not been made.

Assumptions and Approach Used

When incurred costs are probable of recovery through regulated rates, regulatory assets are recorded on the balance sheets.  Management reviews the probability of recovery at each balance sheet date and whenever new events occur.  Similarly, regulatory liabilities are recorded when a determination is made that a refund is probable or when ordered by a commission.  Examples of new events that affect probability include changes in the regulatory environment, issuance of a regulatory commission order or passage of new legislation.  The assumptions and judgments used by regulatory authorities continue to have an impact on the recovery of costs as well as the return of revenues, rate of return earned on invested capital and timing and amount of assets to be recovered through regulated rates.  If recovery of a regulatory asset is no longer probable, that regulatory asset is written-off as a charge against earnings.  A write-off of regulatory assets or establishment of a regulatory liability may also reduce future cash flows since there will be no recovery through regulated rates.

Effect if Different Assumptions Used

A change in the above assumptions may result in a material impact on net income.  See Note 5 - Effects of Regulation for additional information related to regulatory assets and regulatory liabilities.
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Revenue Recognition – Unbilled Revenues

Nature of Estimates Required

AEP recognizes revenues from customers as the performance obligations of delivering energy to customers are satisfied.  The determination of sales to individual customers is based on the reading of their meters, which is performed on a systematic basis throughout the month.  At the end of each month, amounts of energy delivered to customers since the date of the last meter reading are estimated and the corresponding unbilled revenue accrual is recorded.  This estimate is reversed in the following month and actual revenue is recorded based on meter readings.  PSO and SWEPCo do not include the fuel portion in unbilled revenue in accordance with the applicable state commission regulatory treatment in Arkansas, Louisiana, Oklahoma and Texas.

Accrued unbilled revenues for the Vertically Integrated Utilities segment were $354 million and $246 million as of December 31, 2022 and 2021, respectively. The changes in unbilled electric utility revenues for AEP’s Vertically Integrated Utilities segment were $108 million, $(42) million and $40 million for the years ended December 31, 2022, 2021 and 2020, respectively.  The changes in unbilled electric revenues are primarily due to changes in weather and rates.  

Accrued unbilled revenues for the Transmission and Distribution Utilities segment were $221 million and $172 million as of December 31, 2022 and 2021, respectively. The changes in unbilled electric utility revenues for AEP’s Transmission and Distribution Utilities segment were $49 million, $1 million and $5 million for the years ended December 31, 2022, 2021 and 2020, respectively.  The changes in unbilled electric revenues are primarily due to changes in weather and rates.  

Accrued unbilled revenues for the Generation & Marketing segment were $109 million and $110 million as of December 31, 2022 and 2021, respectively. The changes in unbilled electric utility revenues for AEP’s Generation & Marketing segment were $(1) million, $24 million and $11 million for the years ended December 31, 2022, 2021 and 2020, respectively.  

Assumptions and Approach Used

For each Registrant except AEPTCo, the monthly estimate for unbilled revenues is based upon a primary computation of net generation (generation plus purchases less sales) less the current month’s billed KWhs and estimated line losses, plus the prior month’s unbilled KWhs. However, due to the potential for meter reading issues, meter drift and other anomalies, a secondary computation is made, based upon an allocation of billed KWhs to the current month and previous month, on a billing cycle-by-cycle basis, and by dividing the current month aggregated result by the billed KWhs. The two methodologies are evaluated to confirm that they are not statistically different.

For AEP’s Generation & Marketing segment, management calculates unbilled revenues based on a primary computation of load as provided by PJM less the current month’s billed KWhs and estimated line losses, plus the prior month’s unbilled KWhs. However, due to the potential for meter reading issues, meter drift and other anomalies, a secondary computation is made, based upon using the most recent historic daily activity on a per contract basis. The two methodologies are evaluated to confirm that they are not statistically different.

Effect if Different Assumptions Used

If the two methodologies used to estimate unbilled revenue are statistically different, a limiter adjustment is made to bring the primary computation within one standard deviation of the secondary computation. Additionally, significant fluctuations in energy demand for the unbilled period, weather, line losses or changes in the composition of customer classes could impact the estimate of unbilled revenue.  

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Accounting for Derivative Instruments

Nature of Estimates Required

Management considers fair value techniques, valuation adjustments related to credit and liquidity and judgments related to the probability of forecasted transactions occurring within the specified time period to be critical accounting estimates.  These estimates are considered significant because they are highly susceptible to change from period to period and are dependent on many subjective factors.

Assumptions and Approach Used

The Registrants measure the fair values of derivative instruments and hedge instruments accounted for using MTM accounting based primarily on exchange prices and broker quotes.  If a quoted market price is not available, the fair value is estimated based on the best market information available including valuation models that estimate future energy prices based on existing market and broker quotes and other assumptions.  Fair value estimates, based upon the best market information available, involve uncertainties and matters of significant judgment.  These uncertainties include forward market price assumptions.

The Registrants reduce fair values by estimated valuation adjustments for items such as discounting, liquidity and credit quality.  Liquidity adjustments are calculated by utilizing bid/ask spreads to estimate the potential fair value impact of liquidating open positions over a reasonable period of time.  Credit adjustments on risk management contracts are calculated using estimated default probabilities and recovery rates relative to the counterparties or counterparties with similar credit profiles and contractual netting agreements.

With respect to hedge accounting, management assesses hedge effectiveness and evaluates a forecasted transaction’s probability of occurrence within the specified time period as provided in the original hedge documentation.

Effect if Different Assumptions Used

There is inherent risk in valuation modeling given the complexity and volatility of energy markets.  Therefore, it is possible that results in future periods may be materially different as contracts settle.

The probability that hedged forecasted transactions will not occur by the end of the specified time period could change operating results by requiring amounts currently classified in Accumulated Other Comprehensive Income (Loss) to be classified into Operating Income.

For additional information see Note 10 - Derivatives and Hedging and Note 11 - Fair Value Measurements.  See “Fair Value Measurements of Assets and Liabilities” section of Note 1 for AEP’s fair value calculation policy.

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Long-Lived Assets

Nature of Estimates Required

In accordance with the requirements of “Property, Plant and Equipment” accounting guidance and “Regulated Operations” accounting guidance, the Registrants evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of any such assets may not be recoverable. Such events or changes in circumstance include planned abandonments, probable disallowances for rate-making purposes of assets determined to be recently completed plant and assets that meet the held-for-sale criteria.  The Registrants utilize a group composite method of depreciation to estimate the useful lives of long-lived assets.  

An impairment evaluation of a long-lived, held and used asset may result from an abandonment, significant decreases in the market price of an asset, a significant adverse change in the extent or manner in which an asset is being used or in its physical condition, a significant adverse change in legal factors or in the business climate that could affect the value of an asset, as well as other economic or operations analyses.  If the book value of the asset is not recoverable through estimated, future undiscounted cash flows, the Registrants record an impairment to the extent that the fair value of the asset is less than its book value.  Performing an impairment evaluation involves a significant degree of estimation and judgment in areas such as identifying circumstances that indicate an impairment may exist, identifying and grouping affected assets and developing the non-discounted and discounted future cash flows (used to estimate fair value in the absence of market-based value, in some instances) associated with the asset.  Assets held for sale must be measured at the lower of the book value or fair value less cost to sell. An impairment is recognized if an asset’s fair value less costs to sell is less than its book value. Any impairment charge is recorded as a reduction to earnings.

Assumptions and Approach Used

The fair value of an asset is the amount at which that asset could be bought or sold in a current transaction between willing parties other than in a forced or liquidation sale.  Quoted market prices in active markets are the best evidence of fair value and are used as the basis for the measurement, if available.  In the absence of quoted prices for identical or similar assets in active markets, the Registrants estimate fair value using various internal and external valuation methods including cash flow projections or other market indicators of fair value such as bids received, comparable sales or independent appraisals.  Cash flow estimates are based on relevant information available at the time the estimates are made.  Estimates of future cash flows are, by nature, highly uncertain and may vary significantly from actual results.  Also, when measuring fair value, management evaluates the characteristics of the asset or liability to determine if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.  Such characteristics include, for example, the condition and location of the asset or restrictions on the use of the asset.  The Registrants perform depreciation studies that include a review of any external factors that may affect the useful life to determine composite depreciation rates and related lives which are subject to periodic review by state regulatory commissions for regulated assets.  The fair value of the asset could be different using different estimates and assumptions in these valuation techniques.

Effect if Different Assumptions Used

In connection with the evaluation of long-lived assets in accordance with the requirements of “Property, Plant and Equipment” accounting guidance, the fair value of the asset can vary if different estimates and assumptions are used in the applied valuation techniques.  Estimates for depreciation rates contemplate the history of interim capital replacements and the amount of salvage expected.  In cases of impairment, the best estimate of fair value was made using valuation methods based on the most current information at that time.  Differences in realized sales proceeds versus the estimated fair value of the asset are generally due to a variety of factors including, but not limited to, differences in subsequent market conditions, the level of bidder interest, the timing and terms of the transactions and management’s analysis of the benefits of the transaction.

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Pension and OPEB

AEP maintains a qualified, defined benefit pension plan (Qualified Plan), which covers substantially all nonunion and certain union employees, and unfunded, non-qualified supplemental plans (Nonqualified Plans) to provide benefits in excess of amounts permitted under the provisions of the tax law for participants in the Qualified Plan (collectively the Pension Plans).  AEP also sponsors OPEB plans to provide health and life insurance benefits for retired employees.  The Pension Plans and OPEB plans are collectively referred to as the Plans.

For a discussion of investment strategy, investment limitations, target asset allocations and the classification of investments within the fair value hierarchy, see “Investments Held in Trust for Future Liabilities” and “Fair Value Measurements of Assets and Liabilities” sections of Note 1.  See Note 8 - Benefit Plans for information regarding costs and assumptions for the Plans.

The following table shows the net periodic cost (credit) of the Plans:

		Years Ended December 31,	
Net Periodic Cost (Credit)		2022		2021		2020	
		(in millions)	
Pension Plans		$	80.9 			$	138.2 			$	108.6 		
OPEB		(144.8)			(122.0)			(109.7)		

The net periodic benefit cost is calculated based upon a number of actuarial assumptions, including expected long-term rates of return on the Plans’ assets.  In developing the expected long-term rate of return assumption for 2023, management evaluated input from actuaries and investment consultants, including their reviews of asset class return expectations as well as long-term inflation assumptions.  Management also considered historical returns of the investment markets and tax rates which affect a portion of the OPEB plans’ assets.  Management anticipates that the investment managers employed for the Plans will invest the assets to generate future returns averaging 7.5% for the Qualified Plan and 7.25% for the OPEB plans.

The expected long-term rate of return on the Plans’ assets is based on management’s targeted asset allocation and expected investment returns for each investment category.  Assumptions for the Plans are summarized in the following table:

	Pension Plans		OPEB	
			Assumed/				Assumed/	
	2023		Expected		2023		Expected	
	Target		Long-Term		Target		Long-Term	
	Asset		Rate of		Asset		Rate of	
	Allocation		Return		Allocation		Return	
Equity	30 	%		9.28 	%		59 	%		8.30 	%	
Fixed Income	54 			5.92 			40 			5.71 		
Other Investments	15 			9.06 			— 			— 		
Cash and Cash Equivalents	1 			2.67 			1 			2.67 		
Total	100 	%				100 	%			

Management regularly reviews the actual asset allocation and periodically rebalances the investments to the targeted allocation.  Management believes that 7.5% for the Qualified Plan and 7.25% for the OPEB plans are reasonable estimates of the long-term rate of return on the Plans’ assets.  The Pension Plans’ assets had an actual loss of 16.88% and a gain of 5.41% for the years ended December 31, 2022 and 2021, respectively.  The OPEB plans’ assets had an actual loss of 19.53% and a gain of 8.67% for the years ended December 31, 2022 and 2021, respectively.  Management will continue to evaluate the actuarial assumptions, including the expected rate of return, at least annually, and will adjust the assumptions as necessary.
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AEP bases the determination of pension expense or income on a market-related valuation of assets, which reduces year-to-year volatility.  This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur.  Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets.  Since the market-related value of assets recognizes gains or losses over a five-year period, the future value of assets will be impacted as previously deferred gains or losses are recorded.  As of December 31, 2022, AEP had cumulative gains of approximately $523 million for the Qualified Plan that remain to be recognized in the calculation of the market-related value of assets.  These unrecognized market-related net actuarial gains may result in decreases in the future pension costs depending on several factors, including whether such gains at each measurement date exceed the corridor in accordance with “Compensation – Retirement Benefits” accounting guidance.

The method used to determine the discount rate that AEP utilizes for determining future obligations is a duration-based method in which a hypothetical portfolio of high quality corporate bonds is constructed with cash flows matching the benefit plan liability.  The composite yield on the hypothetical bond portfolio is used as the discount rate for the plan.  The discount rate as of December 31, 2022 under this method was 5.5% for the Qualified Plan, 5.6% for the Nonqualified Plans and 5.5% for the OPEB plans.  Due to the effect of the unrecognized net actuarial losses and based on an expected rate of return on the Pension Plans’ assets of 7.5%, discount rates of 5.5% and 5.6% and various other assumptions, management estimates credits for the Pension Plans will approximate $24 million and $20 million in 2023 and 2024, respectively. Management estimates that the pension costs for the Pension Plans will approximate $8 million in 2025.  Based on an expected rate of return on the OPEB plans’ assets of 7.25%, a discount rate of 5.5% and various other assumptions, management estimates OPEB plan credits will approximate $107 million, $65 million and $62 million in 2023, 2024 and 2025, respectively. Future actual costs will depend on future investment performance, changes in future discount rates and various other factors related to the populations participating in the Plans.  The actuarial assumptions used may differ materially from actual results.  The effects of a 50 basis point change to selective actuarial assumptions are included in the “Effect if Different Assumptions Used” section below.

The value of AEP’s Pension Plans’ assets decreased to $4.1 billion as of December 31, 2022 from $5.4 billion as of December 31, 2021 primarily due to negative investment returns.  During 2022, the Qualified Plan paid $395 million and the Nonqualified Plans paid $7 million in benefits to plan participants.  The value of AEP’s OPEB plans’ assets decreased to $1.5 billion as of December 31, 2022 from $2.0 billion as of December 31, 2021 primarily due to negative investment returns.  During 2022, the OPEB plans paid $140 million in benefits to plan participants.

Nature of Estimates Required

AEP sponsors pension and OPEB plans in various forms covering all employees who meet eligibility requirements.  These benefits are accounted for under “Compensation” and “Plan Accounting” accounting guidance.  The measurement of pension and OPEB obligations, costs and liabilities is dependent on a variety of assumptions.

Assumptions and Approach Used

The critical assumptions used in developing the required estimates include the following key factors:

•Discount rate
•Compensation increase rate
•Cash balance crediting rate
•Health care cost trend rate
•Expected return on plan assets

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Other assumptions, such as retirement, mortality and turnover, are evaluated periodically and updated to reflect actual experience.

Effect if Different Assumptions Used

The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, longer or shorter life spans of participants or higher or lower lump sum versus annuity payout elections by plan participants.  These differences may result in a significant impact to the amount of pension and OPEB expense recorded.  If a 50 basis point change were to occur for the following assumptions, the approximate effect on the financial statements would be as follows:

		Pension Plans		OPEB	
		+0.5%		-0.5%		+0.5%		-0.5%	
		(in millions)	
Effect on December 31, 2022 Benefit Obligations									
Discount Rate		$	(170.2)			$	184.9 			$	(37.1)			$	40.3 		
Compensation Increase Rate		19.7 			(18.3)			NA		NA	
Cash Balance Crediting Rate		57.2 			(54.2)			NA		NA	
Health Care Cost Trend Rate		NA		NA		6.1 			(5.4)		
									
Effect on 2022 Periodic Cost									
Discount Rate		$	(12.7)			$	14.0 			$	3.0 			$	(2.9)		
Compensation Increase Rate		7.4 			(6.8)			NA		NA	
Cash Balance Crediting Rate		14.3 			(13.4)			NA		NA	
Health Care Cost Trend Rate		NA		NA		0.6 			(0.2)		
Expected Return on Plan Assets		(24.1)			24.1 			(10.1)			10.1 		

NA    Not applicable.

SIGNIFICANT TAX LEGISLATION

In August 2022, President Biden signed H.R. 5376 into law, commonly known as the Inflation Reduction Act of 2022 or IRA. Most notably this budget reconciliation legislation creates a 15% minimum tax on adjusted financial statement income (Corporate Alternative Minimum Tax or CAMT), extends and increases the value of PTCs and ITCs, adds a nuclear and clean hydrogen PTC, an energy storage ITC and allows the sale or transfer of tax credits to third parties for cash. The IRS has since released interim guidance in the form of Notices addressing the Prevailing Wage and Apprenticeship Requirements tied to full value PTCs and ITCs for projects that begin construction on or after January 29, 2023, and time-sensitive issues related to the CAMT. As further significant guidance from Treasury and the IRS is expected on the tax provisions in the IRA, AEP will continue to monitor any issued guidance and evaluate the impact on future net income, cash flows and financial condition.

The enactment of the IRA will have future cash flow and income tax reporting considerations. AEP and subsidiaries expect to be applicable CAMT corporations beginning in 2023 and AEP expects to have CAMT cash tax payments beginning in 2024. CAMT cash taxes are expected to be offset by regulatory recovery, the utilization of tax credits and additionally, the cash inflow generated by the sale of tax credits. The sale of tax credits will be presented in the operating section of the cash flow statement consistent with the presentation of cash taxes paid. AEP will present the gain or loss on sale of tax credits through income tax expense on the statement of income. Management believes this presentation provides consistency in financial statement reporting as it matches the originating income tax benefit of the tax credit.

ACCOUNTING STANDARDS

See Note 2 - New Accounting Standards for information related to accounting standards. There are no new standards expected to have a material impact to the Registrants’ financial statements.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks

The Vertically Integrated Utilities segment is exposed to certain market risks as a major power producer and through transactions in power, coal, natural gas and marketing contracts. These risks include commodity price risks which may be subject to capacity risk, credit risk as well as interest rate risk. These risks represent the risk of loss that may impact this segment due to changes in the underlying market prices or rates.

The Transmission and Distribution Utilities segment is exposed to energy procurement risk and interest rate risk.

The Generation & Marketing segment conducts marketing, risk management and retail activities in ERCOT, PJM, SPP and MISO. This segment is exposed to certain market risks as a marketer of wholesale and retail electricity. These risks include commodity price risks which may be subject to capacity risk, credit risk as well as interest rate risk. These risks represent the risk of loss that may impact this segment due to changes in the underlying market prices or rates. In addition, the Generation & Marketing segment is also exposed to certain market risks as a power producer and through transactions in wholesale electricity, natural gas and marketing contracts.

Management employs risk management contracts including physical forward and financial forward purchase-and-sale contracts.  Management engages in risk management of power, capacity, coal, natural gas and, to a lesser extent, heating oil, gasoline and other commodity contracts to manage the risk associated with the energy business.  As a result, AEP is subject to price risk.  The amount of risk taken is determined by the Commercial Operations, Energy Supply and Finance groups in accordance with established risk management policies as approved by the Finance Committee of the Board of Directors.  AEPSC’s market risk oversight staff independently monitors risk policies, procedures and risk levels and provides members of the Regulated Risk Committee and the Energy Supply Risk Committee (Competitive Risk Committee) various reports regarding compliance with policies, limits and procedures.  The Regulated Risk Committee consists of AEPSC’s Chief Financial Officer, Chief Commercial Officer, Executive Vice President Utilities, Senior Vice President of Regulated Commercial Operations, Senior Vice President of Grid Solutions, Senior Vice President of Treasury and Risk and Chief Risk Officer.  The Competitive Risk Committee consists of AEPSC’s Chief Financial Officer, Chief Commercial Officer, Senior Vice President of Treasury and Risk, Senior Vice President of Competitive Commercial Operations and Chief Risk Officer.  When commercial activities exceed predetermined limits, positions are modified to reduce the risk to be within the limits unless specifically approved by the respective committee.

Due to multiple defaults of market participants, ERCOT had a large outstanding unpaid balance associated with the February 2021 winter storm. A certain portion of this balance has been securitized and disbursed to impacted market participants. A recovery plan has been reached by ERCOT for the remaining portion of the outstanding balance. In both cases, financial costs are allocated to certain market participants and in the role AEPEP is exposed, but not materially. If the market rules were to change on how socialized losses are allocated this could affect AEPEP’s exposure. Regardless of the approach of how socialized losses are allocated there are potential downstream impacts that could push counterparties into financial distress and or bankruptcy, affecting AEPEP, AEP Texas and ETT.

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The following table summarizes the reasons for changes in total MTM value as compared to December 31, 2021:

MTM Risk Management Contract Net Assets (Liabilities)	
Year Ended December 31, 2022	
								
	Vertically
Integrated
Utilities		Transmission
and
Distribution
Utilities		Generation
&
Marketing		Total	
	(in millions)	
Total MTM Risk Management Contract Net Assets (Liabilities) as of December 31, 2021	$	59.8 			$	(91.4)			$	275.9 			$	244.3 		
(Gain)/Loss from Contracts Realized/Settled During the Period and Entered in a Prior Period	(75.5)			5.7 			(66.0)			(135.8)		
Fair Value of New Contracts at Inception When Entered During the Period (a)	— 			— 			0.9 			0.9 		
Changes in Fair Value Due to Market Fluctuations During the Period (b)	10.7 			— 			149.7 			160.4 		
Changes in Fair Value Allocated to Regulated Jurisdictions (c)	133.7 			45.7 			— 			179.4 		
MTM Risk Management Contract Net Assets Held for Sale Related to KPCo (d)	(2.5)			— 			— 			(2.5)		
Total MTM Risk Management Contract Net Assets (Liabilities) as of December 31, 2022	$	126.2 			$	(40.0)			$	360.5 			446.7 		
Commodity Cash Flow Hedge Contracts							283.3 		
Interest Rate Cash Flow Hedge Contracts							11.0 		
Fair Value Hedge Contracts							(127.4)		
Collateral Deposits							(479.6)		
	
Total MTM Derivative Contract Net Assets as of December 31, 2022							$	134.0 		

(a)Reflects fair value on primarily long-term structured contracts which are typically with customers that seek fixed pricing to limit their risk against fluctuating energy prices.  The contract prices are valued against market curves associated with the delivery location and delivery term.  A significant portion of the total volumetric position has been economically hedged.
(b)Market fluctuations are attributable to various factors such as supply/demand, weather, etc.
(c)Relates to the net gains (losses) of those contracts that are not reflected on the statements of income.  These net gains (losses) are recorded as regulatory liabilities/assets or accounts payable on the balance sheet.
(d)MTM risk management contract net assets relating to KPCo are classified as Assets Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

See Note 10 – Derivatives and Hedging and Note 11 – Fair Value Measurements for additional information related to risk management contracts.  The following tables and discussion provide information on credit risk and market volatility risk.

Credit Risk

Credit risk is mitigated in wholesale marketing and trading activities by assessing the creditworthiness of potential counterparties before entering into transactions with them and continuing to evaluate their creditworthiness on an ongoing basis.  Management uses credit agency ratings and current market-based qualitative and quantitative data as well as financial statements to assess the financial health of counterparties on an ongoing basis.

AEP has risk management contracts (includes non-derivative contracts) with numerous counterparties.  Since open risk management contracts are valued based on changes in market prices of the related commodities, exposures change daily.  As of December 31, 2022, credit exposure net of collateral to sub investment grade counterparties was approximately 0.6%, expressed in terms of net MTM assets, net receivables and the net open positions for contracts not subject to MTM (representing economic risk even though there may not be risk of accounting loss). 
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As of December 31, 2022, the following table approximates AEP’s counterparty credit quality and exposure based on netting across commodities, instruments and legal entities where applicable:

Counterparty Credit Quality		Exposure
Before
Credit
Collateral		Credit
Collateral		Net
Exposure		Number of
Counterparties
>10% of
Net Exposure		Net Exposure
of
Counterparties
>10%	
		(in millions, except number of counterparties)	
Investment Grade		$	691.0 			$	236.7 			$	454.3 			2 			$	131.2 		

Split Rating		9.0 			— 			9.0 			1 			9.0 		
Noninvestment Grade		2.3 			2.2 			0.1 			1 			0.1 		
No External Ratings:											
Internal Investment Grade		41.2 			— 			41.2 			2 			24.8 		
Internal Noninvestment Grade		5.2 			2.5 			2.7 			3 			2.5 		
Total as of December 31, 2022		$	748.7 			$	241.4 			$	507.3 						

All exposure in the table above relates to AEPSC and AEPEP as AEPSC is agent for and transacts on behalf of certain AEP subsidiaries, including the Registrant Subsidiaries and AEPEP is agent for and transacts on behalf of other AEP subsidiaries.

In addition, AEP is exposed to credit risk related to participation in RTOs.  For each of the RTOs in which AEP participates, this risk is generally determined based on the proportionate share of member gross activity over a specified period of time.

Value at Risk (VaR) Associated with Risk Management Contracts

Management uses a risk measurement model, which calculates VaR, to measure AEP’s commodity price risk in the risk management portfolio.  The VaR is based on the variance-covariance method using historical prices to estimate volatilities and correlations and assumes a 95% confidence level and a one-day holding period.  Based on this VaR analysis, as of December 31, 2022, a near term typical change in commodity prices is not expected to materially impact net income, cash flows or financial condition.

Management calculates the VaR for both a trading and non-trading portfolio. The trading portfolio consists primarily of contracts related to energy trading and marketing activities. The non-trading portfolio consists primarily of economic hedges of generation and retail supply activities.
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The following tables show the end, high, average and low market risk as measured by VaR for the periods indicated:

VaR Model
Trading Portfolio

Twelve Months Ended		Twelve Months Ended	
December 31, 2022		December 31, 2021	
End		High		Average		Low		End		High		Average		Low	
(in millions)		(in millions)	
$	0.5 			$	4.5 			$	0.7 			$	0.1 			$	0.4 			$	3.6 			$	0.4 			$	0.1 		

VaR Model
Non-Trading Portfolio

Twelve Months Ended		Twelve Months Ended	
December 31, 2022		December 31, 2021	
End		High		Average		Low		End		High		Average		Low	
(in millions)		(in millions)	
$	17.7 			$	76.9 			$	24.7 			$	6.7 			$	8.3 			$	14.9 			$	3.7 			$	0.7 		

Management back-tests VaR results against performance due to actual price movements.  Based on the assumed 95% confidence interval, the performance due to actual price movements would be expected to exceed the VaR at least once every 20 trading days.

As the VaR calculation captures recent price movements, management also performs regular stress testing of the trading portfolio to understand AEP’s exposure to extreme price movements.  A historical-based method is employed whereby the current trading portfolio is subjected to actual, observed price movements from the last several years in order to ascertain which historical price movements translated into the largest potential MTM loss.  Management then researches the underlying positions, price movements and market events that created the most significant exposure and reports the findings to the Risk Executive Committee, Regulated Risk Committee or Competitive Risk Committee as appropriate.

Interest Rate Risk

AEP is exposed to interest rate market fluctuations in the normal course of business operations. Prior to 2022, interest rates remained at low levels and the Federal Reserve maintained the federal funds target range at 0.0% to 0.25% for much of 2021. However, during 2022, the Federal Reserve approved rate increases totaling 4.25%. The Federal Reserve has indicated that, in light of continued signs of inflation, it foresees further increases in interest rates in 2023. AEP has outstanding short and long-term debt which is subject to variable rates. AEP manages interest rate risk by limiting variable-rate exposures to a percentage of total debt, by entering into interest rate derivative instruments and by monitoring the effects of market changes in interest rates. For the twelve months ended December 31, 2022, 2021 and 2020, a 100 basis point change in the benchmark rate on AEP’s variable rate debt would impact pretax interest expense annually by $47 million, $33 million and $32 million, respectively.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
American Electric Power Company, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of American Electric Power Company, Inc. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021 and the related consolidated statements of income, of comprehensive income (loss), of changes in equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedules listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for the Effects of Cost-Based Regulation

As described in Notes 1 and 5 to the consolidated financial statements, the Company's consolidated financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated. As of December 31, 2022, there were $5.6 billion of deferred costs included in regulatory assets, $0.8 billion of which were pending final regulatory approval, and $8.0 billion of regulatory liabilities awaiting potential refund or future rate reduction, $0.2 billion of which were pending final regulatory determination. Regulatory assets (deferred expenses) and regulatory liabilities (deferred future revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and matching income with its passage to customers in cost-based regulated rates. Management reviews the probability of recovery of regulatory assets and refund of regulatory liabilities at each balance sheet date and whenever new events occur, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of cost-based regulation is a critical audit matter are the significant judgment by management in the ongoing evaluation of the recovery of regulatory assets and refund of regulatory liabilities, and in applying guidance contained in rate orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of new events, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation, including the probability of recovery of regulatory
128

assets and refund of regulatory liabilities. These procedures also included, among others, evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities. Testing of regulatory assets and liabilities, involved evaluating the provisions and formulas outlined in rate orders, other regulatory correspondence, application of relevant regulatory precedents, and other relevant evidence.

Valuation of Level 3 Risk Management Commodity Contracts

As described in Notes 1, 10 and 11 to the consolidated financial statements, the Company employs risk management commodity contracts including physical and financial forward purchase and sale contracts and, to a lesser extent, over-the-counter swaps and options to accomplish its risk management strategies. Certain over-the-counter and bilaterally executed derivative instruments are executed in less active markets with a lower availability of pricing information. As disclosed by management, the fair value of these risk management commodity contracts is estimated based on the best market information available, including valuation models that estimate future energy prices based on existing market and broker quotes, and other assumptions. Fair value estimates, based upon the best market information available, involve uncertainties and matters of significant judgment including forward market price assumptions. The main driver of contracts being classified as Level 3 is the inability to substantiate energy price curves in the market. Management utilized such unobservable pricing inputs to value its Level 3 risk management commodity contract assets and liabilities, which totaled $332.5 million and $180.6 million, as of December 31, 2022, respectively.

The principal considerations for our determination that performing procedures relating to the valuation of Level 3 risk management commodity contracts is a critical audit matter are the significant judgment by management when developing the fair value of the commodity contracts; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the forward market price assumptions used in management's valuation models. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's valuation of the risk management commodity contracts, including controls over the assumptions used to value the Level 3 risk management commodity contracts. These procedures also included, among others, testing management's process for developing the fair value of the Level 3 risk management commodity contracts, evaluating the appropriateness of the valuation models, evaluating the reasonableness of the forward market price assumptions, and testing the data used by management in the valuation models. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the forward market price assumptions.

Classification of the Assets and Liabilities of KPCo and KTCo as Held for Sale

As described in Note 7 to the consolidated financial statements, in October 2021 the Company entered into a Stock Purchase Agreement (SPA) to sell Kentucky Power Company (KPCo) and Kentucky Transmission Company (KTCo) to Liberty Utilities Co. (Liberty) for $2.85 billion. In September 2022, the Company and Liberty entered into an amendment to the SPA which reduced the purchase price to approximately $2.646 billion. The sale is subject to several regulatory approvals, including approval from the Kentucky Public Service Commission (KPSC) and from the Federal Energy Regulatory Commission (FERC). In May 2022, the KPSC approved the transfer of KPCo to Liberty subject to conditions contingent upon the closing of the sale. In December 2022, the FERC issued an order denying, without prejudice, authorization of the proposed sale stating the applicants failed to demonstrate the proposed transaction will not have adverse effect on rates. In January 2023, the Company and Liberty entered into an amendment to the SPA that specified the applicants will submit a new filing for approval under Section 203 of the Federal Power Act. The new filing was submitted to the FERC on February 14, 2023. Management believes it is probable that FERC authorization under Section 203 of the Federal Power Act will be received and closing will
129

occur in 2023. Therefore, the assets and liabilities of KPCO and KTCo will continue to be classified as held for sale as of December 31, 2022.

The principal considerations for our determination that performing procedures relating to the classification of the assets and liabilities of KPCo and KTCo is a critical audit matter are the significant judgment by management in determining the classification of the assets and liabilities as held for sale, and in assessing the impact of regulatory orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability that a sale of the assets and liabilities of KPCO and KTCo will occur resulting in held for sale classification as of December 31, 2022.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's determination of the classification of the assets and liabilities of KPCo and KTCo as held for sale. These procedures also included, among others, evaluating management’s determination of the classification of KPCo and KTCo as held for sale which involved i) evaluating the reasonableness of management's assessment of probability of the sale to occur resulting in held for sale classification as of the balance sheet date ii) evaluating the commitment of both parties to the sale as supported by public statements and other representations, iii) evaluating guidance in applicable regulatory orders and other regulatory correspondence, iv) consideration of relevant regulatory and legal precedents, and v) reviewing written agreements in place between the parties related to the sale.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

We have served as the Company’s auditor since 2017.
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of American Electric Power Company, Inc. and Subsidiary Companies (AEP) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  AEP’s internal control is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of AEP’s internal control over financial reporting as of December 31, 2022.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).  Based on management’s assessment, management concluded AEP’s internal control over financial reporting was effective as of December 31, 2022.

PricewaterhouseCoopers LLP, AEP’s independent registered public accounting firm has issued an audit report on the effectiveness of AEP’s internal control over financial reporting as of December 31, 2022.  The Report of Independent Registered Public Accounting Firm appears on the previous page.
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AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2022, 2021 and 2020
 (in millions, except per-share and share amounts)

		Years Ended December 31,	
		2022		2021		2020	
REVENUES							
Vertically Integrated Utilities		$	11,292.8 			$	9,852.2 			$	8,753.2 		
Transmission and Distribution Utilities		5,489.6 			4,464.1 			4,238.7 		
Generation & Marketing		2,448.9 			2,108.3 			1,621.0 		
Other Revenues		408.2 			367.4 			305.6 		
TOTAL REVENUES		19,639.5 			16,792.0 			14,918.5 		
EXPENSES							
Purchased Electricity, Fuel and Other Consumables Used for Electric Generation		7,097.9 			5,466.3 			4,369.7 		
	
Other Operation		2,878.1 			2,547.7 			2,572.4 		
Maintenance		1,249.4 			1,121.8 			1,010.4 		
Loss on the Expected Sale of the Kentucky Operations		363.3 			— 			— 		
Asset Impairments and Other Related Charges		48.8 			11.6 			— 		
Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset		(37.0)			— 			— 		
Gain on Sale of Mineral Rights		(116.3)			— 			— 		
Depreciation and Amortization		3,202.8 			2,825.7 			2,682.8 		
Taxes Other Than Income Taxes		1,469.8 			1,407.6 			1,295.5 		
TOTAL EXPENSES		16,156.8 			13,380.7 			11,930.8 		
							
OPERATING INCOME		3,482.7 			3,411.3 			2,987.7 		
							
Other Income (Expense):							

Other Income		11.6 			41.4 			57.0 		
Allowance for Equity Funds Used During Construction		133.7 			139.7 			148.1 		
Non-Service Cost Components of Net Periodic Benefit Cost		188.5 			118.6 			119.0 		
	
Interest Expense		(1,396.1)			(1,199.1)			(1,165.7)		
							
INCOME BEFORE INCOME TAX EXPENSE AND EQUITY EARNINGS (LOSS)		2,420.4 			2,511.9 			2,146.1 		
							
Income Tax Expense		5.4 			115.5 			40.5 		
Equity Earnings (Loss) of Unconsolidated Subsidiaries		(109.4)			91.7 			91.1 		

	

NET INCOME		2,305.6 			2,488.1 			2,196.7 		
							
Net Income (Loss) Attributable to Noncontrolling Interests		(1.6)			— 			(3.4)		
							
EARNINGS ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS		$	2,307.2 			$	2,488.1 			$	2,200.1 		
							
WEIGHTED AVERAGE NUMBER OF BASIC AEP COMMON SHARES OUTSTANDING		511,841,946 			500,522,177 			495,718,223 		

	
TOTAL BASIC EARNINGS PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS		$	4.51 			$	4.97 			$	4.44 		
							
WEIGHTED AVERAGE NUMBER OF DILUTED AEP COMMON SHARES OUTSTANDING		513,484,609 			501,784,032 			497,226,867 		

	
TOTAL DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS		$	4.49 			$	4.96 			$	4.42 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
132

AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
Net Income		$	2,305.6 			$	2,488.1 			$	2,196.7 		
							
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES							
Cash Flow Hedges, Net of Tax of $21.6, $66.6 and $1.8 in 2022, 2021 and 2020, Respectively		81.4 			250.5 			6.9 		
	
Amortization of Pension and OPEB Deferred Costs, Net of Tax of $(2.8), $(2.2) and $(1.9) in 2022, 2021 and 2020, Respectively		(10.4)			(8.1)			(7.0)		
Pension and OPEB Funded Status, Net of Tax of $(41.3), $7.3 and $16.7 in 2022, 2021 and 2020, Respectively		(155.4)			27.5 			62.7 		
Reclassifications of KPCo Pension and OPEB Regulatory Assets, Net of Tax of $(4.4), $0 and $0 in 2022, 2021 and 2020, Respectively		(16.7)			— 			— 		
							
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		(101.1)			269.9 			62.6 		
							
TOTAL COMPREHENSIVE INCOME		2,204.5 			2,758.0 			2,259.3 		
							
Total Comprehensive Loss Attributable To Noncontrolling Interests		(1.6)			— 			(3.4)		
							
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS		$	2,206.1 			$	2,758.0 			$	2,262.7 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
133

AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

	AEP Common Shareholders					
	Common Stock						Accumulated
Other
Comprehensive
Income (Loss)					
	Shares		Amount		Paid-in
Capital		Retained
Earnings				Noncontrolling
Interests		Total	
TOTAL EQUITY – DECEMBER 31, 2019	514.4 			$	3,343.4 			$	6,535.6 			$	9,900.9 			$	(147.7)			$	281.0 			$	19,913.2 		
														
Issuance of Common Stock	2.4 			15.9 			139.1 									155.0 		
Common Stock Dividends							(1,415.0)		(a)			(9.9)			(1,424.9)		
Other Changes in Equity					(85.8)		(b)					(0.4)			(86.2)		
ASU 2016-13 Adoption							1.8 							1.8 		
Acquisition of Incremental Interest in Santa Rita East											(43.7)			(43.7)		
Net Income (Loss)							2,200.1 					(3.4)			2,196.7 		
Other Comprehensive Income									62.6 					62.6 		
TOTAL EQUITY – DECEMBER 31, 2020	516.8 			3,359.3 			6,588.9 			10,687.8 			(85.1)			223.6 			20,774.5 		
														
Issuance of Common Stock	7.6 			49.4 			551.1 									600.5 		
Common Stock Dividends							(1,507.7)		(a)			(11.8)			(1,519.5)		
Other Changes in Equity					32.6 			(1.1)					16.3 			47.8 		
	
Acquisition of Dry Lake Solar Project											18.9 			18.9 		
Net Income							2,488.1 					— 			2,488.1 		
Other Comprehensive Income									269.9 					269.9 		
TOTAL EQUITY – DECEMBER 31, 2021	524.4 			3,408.7 			7,172.6 			11,667.1 			184.8 			247.0 			22,680.2 		
														
Issuance of Common Stock	0.7 			4.4 			822.1 									826.5 		
Common Stock Dividends							(1,628.7)		(a)			(16.5)			(1,645.2)		
Other Changes in Equity					56.3 							0.1 			56.4 		

Net Income (Loss)							2,307.2 					(1.6)			2,305.6 		
Other Comprehensive Loss									(101.1)					(101.1)		
TOTAL EQUITY – DECEMBER 31, 2022	525.1 			$	3,413.1 			$	8,051.0 			$	12,345.6 			$	83.7 			$	229.0 			$	24,122.4 		

(a)    Cash dividends declared per AEP common share were $3.17, $3.00 and $2.84 for the years ended December 31, 2022, 2021 and 2020, respectively.
(b)    Includes $(121) million related to a forward equity purchase contract associated with the issuance of Equity Units. See “Equity Units” section of Note 14 for additional information.
			
See Notes to Financial Statements of Registrants beginning on page 228.	

134

AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

		December 31,	
		2022		2021	
CURRENT ASSETS					
Cash and Cash Equivalents		$	509.4 			$	403.4 		
Restricted Cash
(December 31, 2022 and 2021 Amounts Include $47.1 and $48, Respectively, Related to Transition Funding, Restoration Funding, Appalachian Consumer Rate Relief Funding and Santa Rita East)		47.1 			48.0 		
Other Temporary Investments
(December 31, 2022 and 2021 Amounts Include $182.9 and $214.8, Respectively, Related to EIS and Transource Energy)		187.5 			220.4 		
Accounts Receivable:					
Customers		1,081.5 			720.9 		
Accrued Unbilled Revenues		287.9 			204.4 		
Pledged Accounts Receivable – AEP Credit		1,207.4 			1,038.0 		
Miscellaneous		49.6 			33.9 		
Allowance for Uncollectible Accounts		(56.1)			(55.6)		
Total Accounts Receivable		2,570.3 			1,941.6 		
Fuel		413.2 			307.9 		
Materials and Supplies		888.9 			681.3 		
Risk Management Assets		340.4 			194.4 		
Accrued Tax Benefits		99.4 			121.5 		
Regulatory Asset for Under-Recovered Fuel Costs		1,286.8 			647.8 		
Margin Deposits		81.9 			193.4 		
Assets Held for Sale		2,823.5 			2,919.7 		
Prepayments and Other Current Assets		170.3 			129.8 		
TOTAL CURRENT ASSETS		9,418.7 			7,809.2 		
					
PROPERTY, PLANT AND EQUIPMENT					
Electric:					
Generation		24,597.7 			23,088.1 		
Transmission		32,312.9 			29,911.1 		
Distribution		26,077.2 			24,440.0 		
Other Property, Plant and Equipment (Including Coal Mining and Nuclear Fuel)		6,142.1 			5,682.9 		
Construction Work in Progress		4,664.1 			3,684.3 		
Total Property, Plant and Equipment		93,794.0 			86,806.4 		
Accumulated Depreciation and Amortization		22,511.1 			20,805.1 		
TOTAL PROPERTY, PLANT AND EQUIPMENT – NET		71,282.9 			66,001.3 		
					
OTHER NONCURRENT ASSETS					
Regulatory Assets		4,281.2 			4,142.3 		
Securitized Assets		446.0 			552.8 		
Spent Nuclear Fuel and Decommissioning Trusts		3,341.2 			3,867.0 		
Goodwill		52.5 			52.5 		
Long-term Risk Management Assets		284.1 			267.0 		
Operating Lease Assets		645.0 			578.3 		
Deferred Charges and Other Noncurrent Assets		3,717.8 			4,398.3 		
TOTAL OTHER NONCURRENT ASSETS		12,767.8 			13,858.2 		
					
TOTAL ASSETS		$	93,469.4 			$	87,668.7 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	
135

AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
December 31, 2022 and 2021
(dollars in millions)

							December 31,	
							2022		2021	
CURRENT LIABILITIES					
Accounts Payable							$	2,613.0 			$	2,054.6 		
Short-term Debt:										
Securitized Debt for Receivables – AEP Credit							750.0 			750.0 		
Other Short-term Debt							3,362.2 			1,864.0 		
Total Short-term Debt							4,112.2 			2,614.0 		
Long-term Debt Due Within One Year
(December 31, 2022 and 2021 Amounts Include $218.2 and $190.5, Respectively, Related to Sabine, DCC Fuel, Transition Funding, Restoration Funding, Appalachian Consumer Rate Relief Funding and Transource Energy)			1,996.4 			2,153.8 		
Risk Management Liabilities							145.2 			75.4 		
Customer Deposits							370.0 			321.6 		
Accrued Taxes							1,672.8 			1,586.4 		
Accrued Interest							327.6 			273.2 		
Obligations Under Operating Leases							113.4 			97.6 		
	
Liabilities Held for Sale							1,955.7 			1,880.9 		
Other Current Liabilities							1,261.1 			1,369.2 		
TOTAL CURRENT LIABILITIES							14,567.4 			12,426.7 		
										
NONCURRENT LIABILITIES					
Long-term Debt
(December 31, 2022 and 2021 Amounts Include $755.3 and $840.5, Respectively, Related to Sabine, DCC Fuel, Transition Funding, Restoration Funding, Appalachian Consumer Rate Relief Funding and Transource Energy)			33,626.2 			31,300.7 		
Long-term Risk Management Liabilities							345.3 			230.3 		
Deferred Income Taxes							8,493.3 			8,202.5 		
Regulatory Liabilities and Deferred Investment Tax Credits					7,999.6 			8,686.3 		
Asset Retirement Obligations							2,860.8 			2,676.2 		
Employee Benefits and Pension Obligations							257.3 			328.4 		
Obligations Under Operating Leases							552.1 			492.8 		
Deferred Credits and Other Noncurrent Liabilities							599.1 			601.3 		
TOTAL NONCURRENT LIABILITIES							54,733.7 			52,518.5 		
										
TOTAL LIABILITIES							69,301.1 			64,945.2 		
										
Rate Matters (Note 4)										
Commitments and Contingencies (Note 6)										
										
MEZZANINE EQUITY					
	
Contingently Redeemable Performance Share Awards							45.9 			43.3 		
TOTAL MEZZANINE EQUITY							45.9 			43.3 		
										
EQUITY					
Common Stock – Par Value – $6.50 Per Share:										
		2022		2021						
Shares Authorized		600,000,000		600,000,000						
Shares Issued		525,099,321		524,416,175						
(11,233,240 and 20,204,160 Shares were Held in Treasury as of December 31, 2022 and 2021, Respectively)			3,413.1 			3,408.7 		
Paid-in Capital							8,051.0 			7,172.6 		
Retained Earnings							12,345.6 			11,667.1 		
Accumulated Other Comprehensive Income (Loss)							83.7 			184.8 		
TOTAL AEP COMMON SHAREHOLDERS’ EQUITY			23,893.4 			22,433.2 		
										
Noncontrolling Interests							229.0 			247.0 		
										
TOTAL EQUITY							24,122.4 			22,680.2 		
										
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY		$	93,469.4 			$	87,668.7 		
										
See Notes to Financial Statements of Registrants beginning on page 228.	

136

AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
OPERATING ACTIVITIES							
Net Income		$	2,305.6 			$	2,488.1 			$	2,196.7 		

Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:							
Depreciation and Amortization		3,202.8 			2,825.7 			2,682.8 		
Rockport Plant, Unit 2 Lease Amortization		— 			135.4 			136.5 		
Deferred Income Taxes		(137.2)			107.6 			196.1 		
	
Loss on the Expected Sale of the Kentucky Operations		363.3 			— 			— 		
Asset Impairments and Other Related Charges		48.8 			11.6 			— 		
	
Impairment of Equity Method Investment		188.0 			— 			— 		
Allowance for Equity Funds Used During Construction		(133.7)			(139.7)			(148.1)		
Mark-to-Market of Risk Management Contracts		15.5 			112.3 			66.5 		
Amortization of Nuclear Fuel		82.9 			85.3 			87.5 		
	
Pension Contributions to Qualified Plan Trust		— 			— 			(110.3)		
Property Taxes		(41.2)			(68.0)			(43.3)		
Deferred Fuel Over/Under-Recovery, Net		(319.2)			(1,647.9)			(31.8)		

	
	
Gain on Sale of Mineral Rights		(116.3)			— 			— 		
Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset		(37.0)			— 			— 		
Change in Regulatory Assets		(46.7)			(238.9)			(337.9)		
Change in Other Noncurrent Assets		(187.7)			(126.6)			(151.0)		
Change in Other Noncurrent Liabilities		337.8 			206.4 			(54.5)		
Changes in Certain Components of Working Capital:							
Accounts Receivable, Net		(681.7)			(119.7)			(129.3)		
Fuel, Materials and Supplies		(313.9)			300.2 			(142.9)		
Accounts Payable		489.2 			200.6 			(35.3)		
Accrued Taxes, Net		105.4 			218.7 			20.1 		
Rockport Plant, Unit 2 Operating Lease Payments		— 			(147.7)			(147.7)		
Other Current Assets		109.0 			(151.3)			34.3 		
Other Current Liabilities		54.3 			(212.2)			(255.5)		
Net Cash Flows from Operating Activities		5,288.0 			3,839.9 			3,832.9 		
							
INVESTING ACTIVITIES							
Construction Expenditures		(6,671.7)			(5,659.6)			(6,246.3)		
	
Purchases of Investment Securities		(2,784.2)			(1,955.1)			(1,678.8)		
Sales of Investment Securities		2,743.8 			1,901.4 			1,644.3 		
Acquisitions of Nuclear Fuel		(100.7)			(104.5)			(69.7)		
	
Acquisition of the Dry Lake Solar Project		— 			(114.4)			— 		
Acquisition of the North Central Wind Energy Facilities		(1,207.3)			(652.8)			— 		
Proceeds from Sales of Assets		218.0 			118.9 			71.1 		
Other Investing Activities		50.3 			32.2 			45.5 		
Net Cash Flows Used for Investing Activities		(7,751.8)			(6,433.9)			(6,233.9)		
							
FINANCING ACTIVITIES							
Issuance of Common Stock, Net		826.5 			600.5 			155.0 		
Issuance of Long-term Debt		4,649.7 			6,486.3 			5,626.1 		
Issuance of Short-term Debt with Original Maturities greater than 90 Days		833.9 			1,393.3 			1,396.5 		
Change in Short-term Debt with Original Maturities less than 90 Day, Net		1,650.4 			(487.3)			(448.4)		
Retirement of Long-term Debt		(2,345.4)			(2,989.3)			(1,339.8)		
Redemption of Short-term Debt with Original Maturities greater than 90 Days		(986.1)			(771.3)			(1,307.1)		

Principal Payments for Finance Lease Obligations		(309.5)			(64.0)			(61.7)		
Dividends Paid on Common Stock		(1,645.2)			(1,519.5)			(1,424.9)		
Redemption of Noncontrolling Interests		— 			— 			(100.2)		
Other Financing Activities		(105.4)			(41.6)			(88.8)		
Net Cash Flows from Financing Activities		2,568.9 			2,607.1 			2,406.7 		

	

Net Increase in Cash, Cash Equivalents and Restricted Cash		105.1 			13.1 			5.7 		
Cash, Cash Equivalents and Restricted Cash at Beginning of Period		451.4 			438.3 			432.6 		
Cash, Cash Equivalents and Restricted Cash at End of Period		$	556.5 			$	451.4 			$	438.3 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
137

AEP TEXAS INC.
AND SUBSIDIARIES

138

AEP TEXAS INC. AND SUBSIDIARIES
MANAGEMENT’S NARRATIVE DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

KWh Sales/Degree Days

Summary of KWh Energy Sales	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in millions of KWhs)	
Retail:						
Residential	13,049 			12,284 			12,163 		
Commercial	11,435 			10,477 			10,065 		
Industrial	11,347 			9,598 			9,085 		
Miscellaneous	643 			625 			636 		
Total Retail	36,474 			32,984 			31,949 		

Heating degree days and cooling degree days are metrics commonly used in the utility industry as a measure of the impact of weather on revenues.

Summary of Heating and Cooling Degree Days	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in degree days)	
Actual – Heating (a)	450 			341 			189 		
Normal – Heating (b)	312 			310 			313 		
						
Actual – Cooling (c)	2,984 			2,653 			2,846 		
Normal – Cooling (b)	2,714 			2,712 			2,711 		

(a)Heating degree days are calculated on a 55 degree temperature base.
(b)Normal Heating/Cooling represents the thirty-year average of degree days.
(c)Cooling degree days are calculated on a 70 degree temperature base.

139

2022 Compared to 2021

AEP Texas Inc. and Subsidiaries
Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Net Income
(in millions)

Year Ended December 31, 2021		$	289.8 		
			
Changes in Revenues:			
Retail Revenues		184.3 		
	
Transmission Revenues		66.3 		
Other Revenues		2.4 		
Total Change in Revenues		253.0 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(112.0)		
	
Depreciation and Amortization		(65.4)		
Taxes Other Than Income Taxes		(2.4)		
Interest Income		2.8 		
Allowance for Equity Funds Used During Construction		(1.8)		
Non-Service Cost Components of Net Periodic Benefit Cost		5.6 		
Interest Expense		(32.2)		
Total Change in Expenses and Other		(205.4)		
			
Income Tax Expense		(29.5)		

Year Ended December 31, 2022		$	307.9 		

The major components of the increase in revenues were as follows:

•Retail Revenues increased $184 million primarily due to the following:
•A $72 million increase due to interim rate increases driven by increased transmission investment.
•A $33 million increase in interim rate due to increased distribution investment.
•A $30 million increase due to prior year refunds of Excess ADIT to customers. This increase was partially offset in Income Tax Expense below.
•A $23 million increase in weather-related usage primarily due to a 12% increase in cooling degree days and a 32% increase in heating degree days.
•A $19 million increase in revenue from rate riders. This increase was partially offset in other expense items below.
•An $8 million increase in weather-normalized revenues in all retail classes.
•Transmission Revenues increased $66 million primarily due to the following:
•A $59 million increase due to interim rate increases driven by increased transmission investment.
•A $7 million increase due to prior year refunds to customers associated with the last base rate case. This impact was offset in Other Revenues below.

140

•Other Revenues increased $2 million primarily due to the following:
•A $26 million increase primarily due to securitization revenues driven by the AEP Texas Central Transition Funding II LLC bonds that matured in July 2020 and final refunds that were completed in 2021. This increase was offset in Depreciation and Amortization expenses and Interest Expense below.
This increase was partially offset by:
•A $12 million decrease due to the prior year amortization of a provision for refund recorded associated with the last base rate case. This decrease was offset in Retail Revenues and Transmission Revenues above.
•A $7 million decrease in energy efficiency revenues.
•A $4 million decrease in pole attachment revenue primarily due to provision for refund.

Expenses and Other and Income Tax Expense changed between years as follows:

•Other Operation and Maintenance expenses increased $112 million primarily due to the following:
•A $76 million increase in ERCOT transmission expenses. This increase was partially offset in Retail Revenues and Transmission Revenues above.
•An $11 million increase in distribution-related expenses.
•A $10 million increase due to a charitable contribution to the AEP Foundation.
•A $7 million increase in employee-related expenses.
•A $5 million increase in vegetation management expenses.
•Depreciation and Amortization expenses increased $65 million primarily due to the following:
•A $29 million increase due to a higher depreciable base.
•A $27 million increase in securitization amortizations primarily due to prior year AEP Texas Central Transition Funding II LLC bonds that matured in July 2020 and final refunds that were completed in 2021. This increase was offset in Other Revenues above.
•A $7 million increase in recoverable advanced metering system depreciable expenses.
•Non-Service Cost Components of Net Periodic Benefit Cost decreased $6 million primarily due to an increase in discount rates, an increase in the expected return on plan assets and favorable plan returns in 2021.
•Interest Expense increased $32 million primarily due to higher long-term debt balances and higher interest rates.
•Income Tax Expense increased $30 million primarily due to a decrease in amortization of Excess ADIT and an increase in pretax book income. The decrease in amortization of Excess ADIT was partially offset in Retail Revenues above.
141

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
AEP Texas Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of AEP Texas Inc and its subsidiaries (the “Company”) as of December 31, 2022 and 2021 and the related consolidated statements of income, of comprehensive income (loss), of changes in common shareholder’s equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

142

Accounting for the Effects of Cost-Based Regulation

As described in Notes 1 and 5 to the consolidated financial statements, the Company's consolidated financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated. As of December 31, 2022, there were $298 million of deferred costs included in regulatory assets, $67 million of which were pending final regulatory approval, and $1,260 million of regulatory liabilities awaiting potential refund or future rate reduction, $15 million of which were pending final regulatory determination. Regulatory assets (deferred expenses) and regulatory liabilities (deferred future revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and matching income with its passage to customers in cost-based regulated rates. Management reviews the probability of recovery of regulatory assets and refund of regulatory liabilities at each balance sheet date and whenever new events occur, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of cost-based regulation is a critical audit matter are the significant judgment by management in the ongoing evaluation of the recovery of regulatory assets and refund of regulatory liabilities, and in applying guidance contained in rate orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of new events, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation, including the probability of recovery of regulatory assets and refund of regulatory liabilities. These procedures also included, among others, evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities. Testing of regulatory assets and liabilities, involved evaluating the provisions and formulas outlined in rate orders, other regulatory correspondence, application of relevant regulatory precedents, and other relevant evidence.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

We have served as the Company's auditor since 2017.
143

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of AEP Texas Inc. and Subsidiaries (AEP Texas) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  AEP Texas’ internal control is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of AEP Texas’ internal control over financial reporting as of December 31, 2022.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).  Based on management’s assessment, management concluded AEP Texas’ internal control over financial reporting was effective as of December 31, 2022.

This annual report does not include an audit report from PricewaterhouseCoopers LLP, AEP Texas’ registered public accounting firm regarding internal control over financial reporting pursuant to the Securities and Exchange Commission rules that permit AEP Texas to provide only management’s report in this annual report.
144

AEP TEXAS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
 		2022		2021		2020	
REVENUES		 		 			
Electric Transmission and Distribution		$	1,839.7 			$	1,586.4 			$	1,524.9 		
Sales to AEP Affiliates		3.5 			3.9 			90.8 		
Other Revenues		3.6 			3.5 			3.2 		
TOTAL REVENUES		1,846.8 			1,593.8 			1,618.9 		
 							
EXPENSES		 		 		 	
Fuel and Other Consumables Used for Electric Generation		— 			— 			13.7 		
Other Operation		594.2 			489.5 			488.9 		
Maintenance		93.5 			86.2 			80.5 		
	
Depreciation and Amortization		452.4 			387.0 			529.8 		
Taxes Other Than Income Taxes		157.5 			155.1 			136.4 		
TOTAL EXPENSES		1,297.6 			1,117.8 			1,249.3 		
 							
OPERATING INCOME		549.2 			476.0 			369.6 		
 							
Other Income (Expense):		 		 		 	
Interest Income		3.6 			0.8 			1.4 		
	
Allowance for Equity Funds Used During Construction		19.7 			21.5 			19.4 		
	
Non-Service Cost Components of Net Periodic Benefit Cost		16.7 			11.1 			11.2 		
Interest Expense		(208.7)			(176.5)			(171.8)		
 							
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		380.5 			332.9 			229.8 		
 							
Income Tax Expense (Benefit)		72.6 			43.1 			(11.2)		
							
NET INCOME		$	307.9 			$	289.8 			$	241.0 		
							
The common stock of AEP Texas is wholly-owned by Parent.	
							
See Notes to Financial Statements of Registrants beginning on page 228.	

145

AEP TEXAS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

 	 	Years Ended December 31,	
		2022		2021		2020	
Net Income		$	307.9 			$	289.8 			$	241.0 		
 							
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES		 		 		 	
Cash Flow Hedges, Net of Tax of $0.3, $0.3 and $0.3 in 2022, 2021 and 2020, Respectively		1.0 			1.0 			1.1 		
Amortization of Pension and OPEB Deferred Costs, Net of Tax of $0, $0 and $0 in 2022, 2021 and 2020, Respectively		0.1 			0.2 			0.2 		
Pension and OPEB Funded Status, Net of Tax of $(0.9), $0.3 and $0.7 in 2022, 2021 and 2020, Respectively		(3.2)			1.2 			2.6 		
							
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		(2.1)			2.4 			3.9 		
 							
TOTAL COMPREHENSIVE INCOME		$	305.8 			$	292.2 			$	244.9 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	

146

AEP TEXAS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S EQUITY
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total	
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2019		$	1,457.9 			$	1,516.0 			$	(12.8)			$	2,961.1 		

	
	
Net Income				241.0 					241.0 		
Other Comprehensive Income						3.9 			3.9 		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2020		1,457.9 			1,757.0 			(8.9)			3,206.0 		
		 		 		 		 	
Capital Contribution from Parent		96.0 							96.0 		

Net Income				289.8 					289.8 		
Other Comprehensive Income						2.4 			2.4 		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2021		1,553.9 			2,046.8 			(6.5)			3,594.2 		
									
Capital Contribution from Parent		4.3 							4.3 		
	
Net Income				307.9 					307.9 		
Other Comprehensive Loss						(2.1)			(2.1)		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2022		$	1,558.2 			$	2,354.7 			$	(8.6)			$	3,904.3 		
									
See Notes to Financial Statements of Registrants beginning on page 228.	

147

AEP TEXAS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

		December 31,	
 		2022		2021	
CURRENT ASSETS		 		 	
Cash and Cash Equivalents		$	0.1 			$	0.1 		
Restricted Cash
(December 31, 2022 and 2021 Amounts Include $32.7 and $30.4, Respectively, Related to Transition Funding and Restoration Funding)		32.7 			30.4 		
Advances to Affiliates		6.9 			6.9 		
Accounts Receivable:		 		 	
Customers		150.9 			123.4 		
Affiliated Companies		11.9 			7.9 		
Accrued Unbilled Revenues		91.4 			77.9 		
Miscellaneous		0.2 			— 		
Allowance for Uncollectible Accounts		(4.2)			(4.0)		
Total Accounts Receivable		250.2 			205.2 		
	
Materials and Supplies		138.8 			73.9 		
	
Accrued Tax Benefits		12.2 			24.8 		
Prepayments and Other Current Assets		6.0 			5.9 		
TOTAL CURRENT ASSETS		446.9 			347.2 		
 					
PROPERTY, PLANT AND EQUIPMENT		 		 	
Electric:		 		 	
	
Transmission		6,301.5 			5,849.9 		
Distribution		5,312.8 			4,917.2 		
Other Property, Plant and Equipment		1,022.8 			961.1 		
Construction Work in Progress		805.2 			551.3 		
Total Property, Plant and Equipment		13,442.3 			12,279.5 		
Accumulated Depreciation and Amortization		1,760.7 			1,644.1 		
TOTAL PROPERTY, PLANT AND EQUIPMENT – NET		11,681.6 			10,635.4 		
 					
OTHER NONCURRENT ASSETS		 		 	
Regulatory Assets		298.3 			275.2 		
Securitized Assets
(December 31, 2022 and 2021 Amounts Include $286.4 and $367.6, Respectively, Related to Transition Funding and Restoration Funding)		286.4 			367.6 		
	
Deferred Charges and Other Noncurrent Assets		179.0 			211.3 		
TOTAL OTHER NONCURRENT ASSETS		763.7 			854.1 		
					
TOTAL ASSETS		$	12,892.2 			$	11,836.7 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	

148

AEP TEXAS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND COMMON SHAREHOLDER’S EQUITY
December 31, 2022 and 2021
(in millions)

		December 31,	
 	 	2022	 	2021	
CURRENT LIABILITIES		 		 	
Advances from Affiliates		$	96.5 			$	26.9 		
Accounts Payable:					
General		331.0 			306.3 		
Affiliated Companies		34.7 			32.5 		
Long-term Debt Due Within One Year – Nonaffiliated
(December 31, 2022 and 2021 Amounts Include $93.5 and $91, Respectively, Related to Transition Funding and Restoration Funding)		278.5 			716.0 		

Accrued Taxes		95.5 			93.3 		
Accrued Interest
(December 31, 2022 and 2021 Amounts Include $2.2 and $2.3, Respectively, Related to Transition Funding and Restoration Funding)		48.3 			44.7 		
	
Obligations Under Operating Leases		28.6 			14.0 		
	
Other Current Liabilities		130.7 			78.0 		
TOTAL CURRENT LIABILITIES		1,043.8 			1,311.7 		
					
NONCURRENT LIABILITIES		 			
Long-term Debt – Nonaffiliated
(December 31, 2022 and 2021 Amounts Include $221 and $313.7, Respectively, Related to Transition Funding and Restoration Funding)		5,379.3 			4,464.8 		
	
Deferred Income Taxes		1,144.2 			1,088.9 		
Regulatory Liabilities and Deferred Investment Tax Credits		1,259.6 			1,242.0 		
	
Obligations Under Operating Leases		67.8 			61.3 		
Deferred Credits and Other Noncurrent Liabilities		93.2 			73.8 		
TOTAL NONCURRENT LIABILITIES		7,944.1 			6,930.8 		
					
TOTAL LIABILITIES		8,987.9 			8,242.5 		
					
Rate Matters (Note 4)					
Commitments and Contingencies (Note 6)	 				
 	 				
COMMON SHAREHOLDER’S EQUITY	 	 		 	

	
Paid-in Capital	 	1,558.2 			1,553.9 		
Retained Earnings	 	2,354.7 			2,046.8 		
Accumulated Other Comprehensive Income (Loss)		(8.6)			(6.5)		
TOTAL COMMON SHAREHOLDER’S EQUITY	 	3,904.3 			3,594.2 		
 	 				
TOTAL LIABILITIES AND COMMON SHAREHOLDER'S EQUITY	 	$	12,892.2 			$	11,836.7 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	

149

AEP TEXAS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

 		Years Ended December 31,	
 	 	2022		2021		2020	
OPERATING ACTIVITIES	 	 		 			
Net Income	 	$	307.9 			$	289.8 			$	241.0 		
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:	 						
Depreciation and Amortization	 	452.4 			387.0 			529.8 		
Deferred Income Taxes	 	42.2 			43.0 			(15.2)		
	
Allowance for Equity Funds Used During Construction		(19.7)			(21.5)			(19.4)		
	
Pension Contributions to Qualified Plan Trust		— 			— 			(11.3)		

Change in Other Noncurrent Assets	 	(36.2)			(78.2)			(74.0)		
Change in Other Noncurrent Liabilities	 	57.6 			26.4 			(24.7)		
Changes in Certain Components of Working Capital:	 						
Accounts Receivable, Net	 	(45.0)			(21.6)			9.8 		
Fuel, Materials and Supplies	 	(64.9)			(3.9)			(7.4)		
Accounts Payable	 	25.0 			8.9 			30.2 		
	
Accrued Taxes, Net		14.8 			7.0 			42.7 		
	
Other Current Assets	 	2.2 			(0.9)			0.8 		
Other Current Liabilities	 	(4.4)			(39.4)			(88.1)		
Net Cash Flows from Operating Activities	 	731.9 			596.6 			614.2 		
	 						
INVESTING ACTIVITIES	 						
Construction Expenditures		(1,305.0)			(1,033.3)			(1,295.0)		
Change in Advances to Affiliates, Net	 	— 			0.2 			200.1 		
	
Other Investing Activities		35.1 			32.3 			29.5 		
Net Cash Flows Used for Investing Activities	 	(1,269.9)			(1,000.8)			(1,065.4)		
	 						
FINANCING ACTIVITIES	 						
Capital Contribution from Parent		4.3 			96.0 			— 		
Issuance of Long-term Debt – Nonaffiliated		1,188.6 			444.2 			652.7 		
Change in Advances from Affiliates, Net	 	69.6 			(40.2)			67.1 		
Retirement of Long-term Debt – Nonaffiliated	 	(716.0)			(88.7)			(392.1)		
Principal Payments for Finance Lease Obligations	 	(6.8)			(6.7)			(6.3)		
	
Other Financing Activities		0.6 			1.3 			0.8 		
Net Cash Flows from Financing Activities	 	540.3 			405.9 			322.2 		
							
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash		2.3 			1.7 			(129.0)		
Cash, Cash Equivalents and Restricted Cash at Beginning of Period		30.5 			28.8 			157.8 		
Cash, Cash Equivalents and Restricted Cash at End of Period		$	32.8 			$	30.5 			$	28.8 		
	 						
SUPPLEMENTARY INFORMATION	 						
Cash Paid for Interest, Net of Capitalized Amounts	 	$	198.9 			$	168.9 			$	153.2 		
Net Cash Paid (Received) for Income Taxes	 	11.0 			5.7 			(42.9)		
Noncash Acquisitions Under Finance Leases	 	6.1 			4.4 			5.6 		
Construction Expenditures Included in Current Liabilities as of December 31,	 	235.4 			230.0 			177.8 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
150

AEP TRANSMISSION COMPANY, LLC
AND SUBSIDIARIES
151

AEP TRANSMISSION COMPANY, LLC AND SUBSIDIARIES
MANAGEMENT’S NARRATIVE DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Summary of Investment in Transmission Assets for AEPTCo

		As of December 31,	
		2022		2021		2020	
		(in millions)	
Plant In Service		$	12,635.1 			$	11,313.7 			$	9,923.0 		
CWIP		1,547.1 			1,394.8 			1,422.6 		
Accumulated Depreciation		1,012.1 			772.8 			572.8 		
Total Transmission Property, Net		$	13,170.1 			$	11,935.7 			$	10,772.8 		

2022 Compared to 2021

AEP Transmission Company, LLC and Subsidiaries
Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Net Income
(in millions)

Year Ended December 31, 2021		$	591.7 		
			
Changes in Transmission Revenues:			
Transmission Revenues		155.2 		
Total Change in Transmission Revenues		155.2 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(29.6)		
Depreciation and Amortization		(48.9)		
Taxes Other Than Income Taxes		(32.3)		
Interest Income - Affiliated		1.1 		
Allowance for Equity Funds Used During Construction		3.5 		
Interest Expense		(21.5)		
Total Change in Expenses and Other		(127.7)		
			
Income Tax Expense		(25.0)		

Year Ended December 31, 2022		$	594.2 		

The major components of the increase in transmission revenues, which consists of wholesale sales to affiliates and nonaffiliates were as follows:

•Transmission Revenues increased $155 million primarily due to the following:
•A $185 million increase due to continued investment in transmission assets.
This increase was partially offset by:
•A $14 million decrease due to affiliated transmission formula rate true-up activity. This decrease was offset in Other Operation and Maintenance expense across the other Registrant Subsidiaries.
•A $5 million decrease due to non-affiliated transmission formula rate true-up activity.

Expenses and Other and Income Tax Expense changed between years as follows:

•Other Operation and Maintenance expenses increased $30 million primarily due to:
•An $11 million increase due to a charitable contribution to the AEP Foundation.
•A $9 million increase in employee-related expenses.
•A $5 million increase due to cancelled capital projects.
152

•Depreciation and Amortization expenses increased $49 million primarily due to a higher depreciable base.
•Taxes Other Than Income Taxes increased $32 million primarily due to higher property taxes as a result of increased transmission investment.
•Allowance for Equity Funds Used During Construction increased $4 million primarily due to higher CWIP.
•Interest Expense increased $22 million primarily due to higher long-term debt balances.
•Income Tax Expense increased $25 million primarily due to the following:
•An $18 million increase due to a current year change in the accounting policy for the parent company loss benefit.
•A $6 million increase due to an increase in pretax book income.
153

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Member of
AEP Transmission Company, LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of AEP Transmission Company, LLC and its subsidiaries (the “Company”) as of December 31, 2022 and 2021 and the related consolidated statements of income, of changes in member's equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

154

Accounting for the Effects of Cost-Based Regulation

As described in Notes 1 and 5 to the consolidated financial statements, the Company's consolidated financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated. As of December 31, 2022, there were $6.8 million of deferred costs included in regulatory assets and $715 million of regulatory liabilities awaiting potential refund or future rate reduction, $8.7 million of which were pending final regulatory determination. Regulatory assets (deferred expenses) and regulatory liabilities (deferred future revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and matching income with its passage to customers in cost-based regulated rates. Management reviews the probability of recovery of regulatory assets and refund of regulatory liabilities at each balance sheet date and whenever new events occur, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of cost-based regulation is a critical audit matter are the significant judgment by management in the ongoing evaluation of the recovery of regulatory assets and refund of regulatory liabilities, and in applying guidance contained in rate orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of new events, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation, including the probability of recovery of regulatory assets and refund of regulatory liabilities. These procedures also included, among others, evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities. Testing of regulatory assets and liabilities, involved evaluating the provisions and formulas outlined in rate orders, other regulatory correspondence, application of relevant regulatory precedents, and other relevant evidence.

Classification of the Assets and Liabilities of KTCo as Held For Sale

As described in Note 7 to the consolidated financial statements, in October 2021 the Company entered into a Stock Purchase Agreement (SPA) to sell Kentucky Power Company (KPCo) and Kentucky Transmission Company (KTCo) to Liberty Utilities Co. (Liberty) for $2.85 billion. In September 2022, the Company and Liberty entered into an amendment to the SPA which reduced the purchase price to approximately $2.646 billion. The sale is subject to several regulatory approvals, including approval from the Kentucky Public Service Commission (KPSC) and from the Federal Energy Regulatory Commission (FERC). In May 2022, the KPSC approved the transfer of KPCo to Liberty subject to conditions contingent upon the closing of the sale. In December 2022, the FERC issued an order denying, without prejudice, authorization of the proposed sale stating the applicants failed to demonstrate the proposed transaction will not have adverse effect on rates. In January 2023, the Company and Liberty entered into an amendment to the SPA that specified the applicants will submit a new filing for approval under Section 203 of the Federal Power Act. The new filing was submitted to the FERC on February 14, 2023. Management believes it is probable that FERC authorization under Section 203 of the Federal Power Act will be received and closing will occur in 2023. Therefore, the assets and liabilities of KTCo will continue to be classified as held for sale as of December 31, 2022.

The principal considerations for our determination that performing procedures relating to the classification of the assets and liabilities of KTCo is a critical audit matter are the significant judgment by management in determining the classification of the assets and liabilities as held for sale, and in assessing the impact of regulatory orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing
155

procedures and evaluating audit evidence related to the probability that a sale of the assets and liabilities of KTCo will occur resulting in held for sale classification as of December 31, 2022.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's determination of the classification of the assets and liabilities of KTCo as held for sale. These procedures also included, among others, evaluating management’s determination of the classification of KTCo as held for sale which involved i) evaluating the reasonableness of management's assessment of probability of the sale to occur resulting in held for sale classification as of the balance sheet date ii) evaluating the commitment of both parties to the sale as supported by public statements and other representations, iii) evaluating guidance in applicable regulatory orders and other regulatory correspondence, iv) consideration of relevant regulatory and legal precedents, and v) reviewing written agreements in place between the parties related to the sale.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

We have served as the Company’s auditor since 2017.
156

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of AEP Transmission Company, LLC and Subsidiaries (AEPTCo) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  AEPTCo’s internal control is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of AEPTCo’s internal control over financial reporting as of December 31, 2022.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).  Based on management’s assessment, management concluded AEPTCo’s internal control over financial reporting was effective as of December 31, 2022.

This annual report does not include an audit report from PricewaterhouseCoopers LLP, AEPTCo’s registered public accounting firm regarding internal control over financial reporting pursuant to the Securities and Exchange Commission rules that permit AEPTCo to provide only management’s report in this annual report.
157

AEP TRANSMISSION COMPANY, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
REVENUES							
Transmission Revenues		$	354.9 			$	317.8 			$	265.4 		
Sales to AEP Affiliates		1,354.5 			1,171.5 			954.6 		
Provision for Refund – Affiliated		(70.7)			(17.6)			(58.3)		
Provision for Refund – Nonaffiliated		(14.2)			(2.4)			(16.0)		
	
TOTAL REVENUES		1,624.5 			1,469.3 			1,145.7 		
							
EXPENSES							
Other Operation		136.3 			105.5 			99.8 		
Maintenance		17.2 			18.4 			10.2 		
Depreciation and Amortization		346.2 			297.3 			249.0 		
Taxes Other Than Income Taxes		271.1 			238.8 			205.2 		
TOTAL EXPENSES		770.8 			660.0 			564.2 		
							
OPERATING INCOME		853.7 			809.3 			581.5 		
							
Other Income (Expense):							
Interest Income - Affiliated		1.6 			0.5 			2.4 		
Allowance for Equity Funds Used During Construction		70.7 			67.2 			74.0 		
Interest Expense		(162.7)			(141.2)			(127.8)		
							
INCOME BEFORE INCOME TAX EXPENSE		763.3 			735.8 			530.1 		
							
Income Tax Expense		169.1 			144.1 			106.7 		
							
NET INCOME		$	594.2 			$	591.7 			$	423.4 		
							
AEPTCo is wholly-owned by AEP Transmission Holdco.							
							
See Notes to Financial Statements of Registrants beginning on page 228.	

158

AEP TRANSMISSION COMPANY, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER’S EQUITY
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Paid-in
Capital		Retained
Earnings		Total Member’s Equity	
TOTAL MEMBER'S EQUITY - DECEMBER 31, 2019		$	2,480.6 			$	1,528.9 			$	4,009.5 		
							
Capital Contribution from Member		335.0 					335.0 		
Capital Distribution of Radial Assets to Member		(50.0)					(50.0)		
Dividends Paid to Member				(5.0)			(5.0)		
Net Income				423.4 			423.4 		
TOTAL MEMBER'S EQUITY - DECEMBER 31, 2020		2,765.6 			1,947.3 			4,712.9 		
							
Capital Contribution from Member		184.0 					184.0 		
	
Dividends Paid to Member				(112.5)			(112.5)		
Net Income				591.7 			591.7 		
TOTAL MEMBER'S EQUITY - DECEMBER 31, 2021		2,949.6 			2,426.5 			5,376.1 		
							
Capital Contribution from Member		72.7 					72.7 		
	
Dividends Paid to Member				(170.0)			(170.0)		
Net Income				594.2 			594.2 		
TOTAL MEMBER'S EQUITY - DECEMBER 31, 2022		$	3,022.3 			$	2,850.7 			$	5,873.0 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
159

AEP TRANSMISSION COMPANY, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

		December 31,	
		2022		2021	
CURRENT ASSETS					
Advances to Affiliates		$	— 			$	27.2 		
Accounts Receivable:					
Customers		46.7 			22.5 		
Affiliated Companies		117.9 			96.1 		
	
Total Accounts Receivable		164.6 			118.6 		
Materials and Supplies		10.7 			9.3 		
Accrued Tax Benefits		4.2 			5.6 		
Assets Held for Sale		178.0 			167.9 		
Prepayments and Other Current Assets		3.0 			2.7 		
TOTAL CURRENT ASSETS		360.5 			331.3 		
					
TRANSMISSION PROPERTY					
Transmission Property		12,183.2 			10,886.3 		
Other Property, Plant and Equipment		451.9 			427.4 		
Construction Work in Progress		1,547.1 			1,394.8 		
Total Transmission Property		14,182.2 			12,708.5 		
Accumulated Depreciation and Amortization		1,012.1 			772.8 		
TOTAL TRANSMISSION PROPERTY – NET		13,170.1 			11,935.7 		
					
OTHER NONCURRENT ASSETS					
	
Regulatory Assets		6.8 			8.5 		
Deferred Property Taxes		266.6 			245.7 		
Deferred Charges and Other Noncurrent Assets		10.2 			3.2 		
TOTAL OTHER NONCURRENT ASSETS		283.6 			257.4 		
					
TOTAL ASSETS		$	13,814.2 			$	12,524.4 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	
160

AEP TRANSMISSION COMPANY, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND MEMBER’S EQUITY
December 31, 2022 and 2021

		December 31,	
		2022		2021	
		(in millions)	
CURRENT LIABILITIES					
Advances from Affiliates		$	229.3 			$	124.0 		
Accounts Payable:					
General		427.0 			460.1 		
Affiliated Companies		81.9 			69.9 		
Long-term Debt Due Within One Year – Nonaffiliated		60.0 			104.0 		
Accrued Taxes		528.3 			479.0 		
Accrued Interest		28.4 			28.4 		
Obligations Under Operating Leases		1.3 			0.9 		
Liabilities Held for Sale		28.6 			27.6 		
Other Current Liabilities		8.4 			3.0 		
TOTAL CURRENT LIABILITIES		1,393.2 			1,296.9 		
					
NONCURRENT LIABILITIES					
Long-term Debt – Nonaffiliated		4,722.8 			4,239.9 		
Deferred Income Taxes		1,040.4 			962.9 		
Regulatory Liabilities		715.0 			644.1 		
Obligations Under Operating Leases		1.5 			1.3 		
Deferred Credits and Other Noncurrent Liabilities		68.3 			3.2 		
TOTAL NONCURRENT LIABILITIES		6,548.0 			5,851.4 		
					
TOTAL LIABILITIES		7,941.2 			7,148.3 		
					
Rate Matters (Note 4)					
Commitments and Contingencies (Note 6)					
					
MEMBER’S EQUITY					
Paid-in Capital		3,022.3 			2,949.6 		
Retained Earnings		2,850.7 			2,426.5 		
TOTAL MEMBER’S EQUITY		5,873.0 			5,376.1 		
					
TOTAL LIABILITIES AND MEMBER’S EQUITY		$	13,814.2 			$	12,524.4 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	
161

AEP TRANSMISSION COMPANY, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
OPERATING ACTIVITIES							
Net Income		$	594.2 			$	591.7 			$	423.4 		
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:							
Depreciation and Amortization		346.2 			297.3 			249.0 		
Deferred Income Taxes		62.3 			68.5 			81.6 		
Allowance for Equity Funds Used During Construction		(70.7)			(67.2)			(74.0)		
Property Taxes		(20.9)			(25.6)			(26.6)		
	
Change in Other Noncurrent Assets		(7.4)			7.5 			(8.2)		
Change in Other Noncurrent Liabilities		68.7 			3.7 			8.3 		
Changes in Certain Components of Working Capital:							
Accounts Receivable, Net		(46.3)			(16.0)			(19.0)		
Materials and Supplies		(1.4)			(0.8)			5.3 		
Accounts Payable		18.5 			(2.2)			77.8 		
Accrued Taxes, Net		50.2 			67.2 			62.7 		
	
Other Current Assets		(1.1)			6.0 			5.4 		
Other Current Liabilities		3.0 			(4.4)			(14.5)		
Net Cash Flows from Operating Activities		995.3 			925.7 			771.2 		
							
INVESTING ACTIVITIES							
Construction Expenditures		(1,458.5)			(1,424.8)			(1,615.9)		
Change in Advances to Affiliates, Net		22.8 			81.9 			(23.7)		
Acquisitions of Assets		(9.8)			(17.9)			(6.0)		
	
Other Investing Activities		6.3 			1.8 			5.2 		
Net Cash Flows Used for Investing Activities		(1,439.2)			(1,359.0)			(1,640.4)		
							
FINANCING ACTIVITIES							
Capital Contribution from Member		72.7 			184.0 			335.0 		
Issuance of Long-term Debt – Nonaffiliated		540.8 			443.7 			519.5 		
Change in Advances from Affiliates, Net		104.4 			(31.9)			19.7 		
Retirement of Long-term Debt – Nonaffiliated		(104.0)			(50.0)			— 		
Dividends Paid to Member		(170.0)			(112.5)			(5.0)		
	
Net Cash Flows from Financing Activities		443.9 			433.3 			869.2 		
							
Net Change in Cash and Cash Equivalents		— 			— 			— 		
Cash and Cash Equivalents at Beginning of Period		— 			— 			— 		
Cash and Cash Equivalents at End of Period		$	— 			$	— 			$	— 		
							
SUPPLEMENTARY INFORMATION							
Cash Paid for Interest, Net of Capitalized Amounts		$	158.8 			$	132.9 			$	119.7 		
Net Cash Paid for Income Taxes		95.5 			65.7 			22.9 		
	
Construction Expenditures Included in Current Liabilities as of December 31,		320.7 			358.7 			311.9 		
Noncash Distribution of Radial Assets to Member		— 			— 			(50.0)		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
162

APPALACHIAN POWER COMPANY
AND SUBSIDIARIES

163

APPALACHIAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT’S NARRATIVE DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

KWh Sales/Degree Days

Summary of KWh Energy Sales	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in millions of KWhs)	
Retail:						
Residential	11,159 			11,207 			10,916 		
Commercial	6,066 			5,949 			5,887 		
Industrial	8,849 			8,879 			8,873 		
Miscellaneous	843 			810 			794 		
Total Retail	26,917 			26,845 			26,470 		
						
Wholesale	1,585 			4,285 			3,281 		
						
Total KWhs	28,502 			31,130 			29,751 		

Heating degree days and cooling degree days are metrics commonly used in the utility industry as a measure of the impact of weather on revenues.

Summary of Heating and Cooling Degree Days	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in degree days)	
Actual – Heating (a)	2,182 			1,969 			1,764 		
Normal – Heating (b)	2,209 			2,210 			2,216 		
						
Actual – Cooling (c)	1,314 			1,389 			1,379 		
Normal – Cooling (b)	1,238 			1,242 			1,236 		

(a)Heating degree days are calculated on a 55 degree temperature base.
(b)Normal Heating/Cooling represents the thirty-year average of degree days.
(c)Cooling degree days are calculated on a 65 degree temperature base.

164

2022 Compared to 2021

Appalachian Power Company and Subsidiaries
Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Net Income
(in millions)

Year Ended December 31, 2021		$	348.9 		
			
Changes in Gross Margin:			
Retail Margins		183.3 		
Margins from Off-system Sales		(4.4)		
Transmission Revenues		26.2 		
Other Revenues		15.6 		
Total Change in Gross Margin		220.7 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(146.4)		
Asset Impairments and Other Related Charges - Coal Fired Generation		(24.9)		
Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset		37.0 		
	
Depreciation and Amortization		(29.7)		
Taxes Other Than Income Taxes		(4.0)		
Interest Income		2.5 		
	
Allowance for Equity Funds Used During Construction		(3.9)		
Non-Service Cost Components of Net Periodic Benefit Cost		10.0 		
Interest Expense		(19.9)		
Total Change in Expenses and Other		(179.3)		
			
Income Tax Expense		3.9 		
			
Year Ended December 31, 2022		$	394.2 		

The major components of the increase in Gross Margin, defined as revenues less the related direct cost of fuel, including consumption of chemicals and emissions allowances, and purchased electricity were as follows:

•Retail Margins increased $183 million primarily due to the following:
•A $121 million increase due to rider revenues in Virginia and West Virginia. This increase was partially offset in other expense items below.
•A $29 million increase in weather-normalized margins primarily driven by increases in the residential and commercial classes.
•An $18 million increase due to lower customer refunds related to Tax Reform. This increase was offset in Income Tax Expense below.
•A $17 million increase due to a base rate increase in Virginia implemented in October 2022 following the Virginia Supreme Court remand. This increase was partially offset in Other Operation and Maintenance expense below.
•A $9 million increase in weather-related usage primarily driven by a 11% increase in heating degree days partially offset by a 5% decrease in cooling degree days.
•Margins from Off-system Sales decreased $4 million due to decreased generation.
•Transmission Revenues increased $26 million primarily due to the following:
•A $17 million increase due to continued investment in transmission assets.
•A $9 million increase due to transmission formula rate true-up activity.
•Other Revenues increased $16 million primarily due to the following:
•An $8 million increase due to pole attachment revenue. This increase was partially offset in Other Operation and Maintenance Expense below.
•A $7 million increase due to business development revenue. This increase was partially offset in Other Operation and Maintenance Expense below.
165

Expenses and Other and Income Tax Expense changed between years as follows:
 
•Other Operation and Maintenance expenses increased $146 million primarily due to the following:
•A $75 million increase in transmission expenses primarily due to:
•A $95 million increase in recoverable PJM expenses. This increase was offset in Retail Margins above.
This increase was partially offset by:
•A $12 million decrease in vegetation management expenses.
•A $9 million decrease in transmission formula rate true-up activity. This decrease was partially offset in Retail Margins above.
•A $33 million increase in distribution expenses primarily related to storm restoration costs.
•A $20 million increase in maintenance expenses at various generation plants.
•A $12 million increase due to a charitable contribution to the AEP Foundation.
•A $9 million increase in employee-related expenses.
•A $7 million increase due to the amortization of the regulatory asset established in the current year in accordance with the August 2022 Virginia Supreme Court opinion related to under-earnings during the 2017-2019 Triennial Review. This increase was offset in Retail Margins above.
These increases were partially offset by:
•A $14 million decrease due to gains from the sale of land in 2022.
•Asset Impairments and Other Related Charges - Coal Fired Generation increased $25 million due to a write-off of a regulatory asset in accordance with the August 2022 Virginia Supreme Court opinion related to the 2017-2019 Virginia Triennial Review.
•Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset increased $37 million due to the establishment of a regulatory asset in accordance with the August 2022 Virginia Supreme Court opinion related to under-earning during the 2017-2019 Triennial Review.
•Depreciation and Amortization expenses increased $30 million primarily due to a higher depreciable base.
•Taxes Other Than Income Taxes increased $4 million primarily due to the following:
•A $4 million increase in Virginia state minimum taxes primarily due to prior year refunds and increased projected minimum tax liability.
•A $4 million increase in property taxes driven by additional investments in transmission and distribution assets and higher tax rates.
These increases were partially offset by:
•A $5 million decrease due to regulatory fees that are now required to be recorded to Other Operation and Maintenance Expense.
•Allowance for Equity Funds Used During Construction decreased $4 million primarily due to a lower AFUDC base and a decrease in AFUDC equity rates.
•Non-Service Cost Components of Net Periodic Benefit Cost decreased $10 million primarily due to an increase in discount rates, an increase in the expected return on plan assets and favorable plan returns in 2021.
•Interest Expense increased $20 million primarily due to higher long-term debt balances and higher interest rates.
•Income Tax Expense decreased $4 million primarily due to the following:
•A $10 million decrease in flow through depreciation expense.
•An $8 million decrease in state taxes.
•A $5 million decrease due to an unfavorable out of period adjustment recorded in the prior year related to deferred income taxes.
These decreases were partially offset by:
•A $10 million decrease in amortization of Excess ADIT. This decrease was partially offset by a decrease in Retail Margins.
•A $9 million increase due to an increase in pretax book income.

166

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
Appalachian Power Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Appalachian Power Company and its subsidiaries (the “Company”) as of December 31, 2022 and 2021 and the related consolidated statements of income, of comprehensive income (loss), of changes in common shareholder’s equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

167

Accounting for the Effects of Cost-Based Regulation

As described in Notes 1 and 5 to the consolidated financial statements, the Company's consolidated financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated. As of December 31, 2022, there were $1,532 million of deferred costs included in regulatory assets, $145 million of which were pending final regulatory approval, and $1,144 million of regulatory liabilities awaiting potential refund or future rate reduction, $31 million of which were pending final regulatory determination. Regulatory assets (deferred expenses) and regulatory liabilities (deferred future revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and matching income with its passage to customers in cost-based regulated rates. Management reviews the probability of recovery of regulatory assets and refund of regulatory liabilities at each balance sheet date and whenever new events occur, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of cost-based regulation is a critical audit matter are the significant judgment by management in the ongoing evaluation of the recovery of regulatory assets and refund of regulatory liabilities, and in applying guidance contained in rate orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of new events, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation, including the probability of recovery of regulatory assets and refund of regulatory liabilities. These procedures also included, among others, evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities. Testing of regulatory assets and liabilities, involved evaluating the provisions and formulas outlined in rate orders, other regulatory correspondence, application of relevant regulatory precedents, and other relevant evidence.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

We have served as the Company's auditor since 2017.
168

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Appalachian Power Company and Subsidiaries (APCo) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  APCo’s internal control is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of APCo’s internal control over financial reporting as of December 31, 2022.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).  Based on management’s assessment, management concluded APCo’s internal control over financial reporting was effective as of December 31, 2022.

This annual report does not include an audit report from PricewaterhouseCoopers LLP, APCo’s registered public accounting firm regarding internal control over financial reporting pursuant to the Securities and Exchange Commission rules that permit APCo to provide only management’s report in this annual report.
169

APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
REVENUES							
Electric Generation, Transmission and Distribution		$	3,245.5 			$	2,895.5 			$	2,610.9 		
Sales to AEP Affiliates		256.1 			197.9 			174.7 		
Other Revenues		18.3 			11.8 			10.6 		
TOTAL REVENUES		3,519.9 			3,105.2 			2,796.2 		
							
EXPENSES							
Purchased Electricity, Fuel and Other Consumables Used for Electric Generation		1,173.9 			979.9 			873.6 		

Other Operation		724.1 			610.0 			530.5 		
Maintenance		297.8 			265.5 			226.8 		
Asset Impairments and Other Related Charges - Coal Fired Generation		24.9 			— 			— 		
Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset		(37.0)			— 			— 		
Re-Establishment of Regulatory Asset - Coal Fired Generation		— 			— 			(49.0)		
Depreciation and Amortization		575.9 			546.2 			507.5 		
Taxes Other Than Income Taxes		158.2 			154.2 			150.2 		
TOTAL EXPENSES		2,917.8 			2,555.8 			2,239.6 		
							
OPERATING INCOME		602.1 			549.4 			556.6 		
							
Other Income (Expense):							
Interest Income		3.5 			1.0 			1.6 		
	
Allowance for Equity Funds Used During Construction		11.7 			15.6 			14.6 		
Non-Service Cost Components of Net Periodic Benefit Cost		29.0 			19.0 			18.8 		
Interest Expense		(233.9)			(214.0)			(217.6)		
							
INCOME BEFORE INCOME TAX EXPENSE		412.4 			371.0 			374.0 		
							
Income Tax Expense		18.2 			22.1 			4.3 		
							
NET INCOME		$	394.2 			$	348.9 			$	369.7 		
							
The common stock of APCo is wholly-owned by Parent.	
							
See Notes to Financial Statements of Registrants beginning on page 228.	
170

APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2022, 2021 and 2020
 (in millions)

		Years Ended December 31,	
		2022		2021		2020	
Net Income		$	394.2 			$	348.9 			$	369.7 		
							
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES							
Cash Flow Hedges, Net of Tax of $(0.2), $2.2 and $(0.5) in 2022, 2021 and 2020, Respectively		(0.8)			8.3 			(1.7)		
Amortization of Pension and OPEB Deferred Costs, Net of Tax of $(1.1), $(1.1) and $(1.0) in 2022, 2021 and 2020, Respectively		(4.3)			(4.2)			(3.8)		
Pension and OPEB Funded Status, Net of Tax of $(6.4), $3.5 and $2.0 in 2022, 2021 and 2020, Respectively		(24.1)			13.1 			7.7 		
							
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		(29.2)			17.2 			2.2 		
							
TOTAL COMPREHENSIVE INCOME		$	365.0 			$	366.1 			$	371.9 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
171

APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S EQUITY
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

	Common
Stock		Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total	
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2019	$	260.4 			$	1,828.7 			$	2,078.3 			$	5.0 			$	4,172.4 		
										
Common Stock Dividends					(200.0)					(200.0)		
	
Net Income					369.7 					369.7 		
Other Comprehensive Income							2.2 			2.2 		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2020	260.4 			1,828.7 			2,248.0 			7.2 			4,344.3 		
										
Common Stock Dividends					(62.5)					(62.5)		
Net Income					348.9 					348.9 		
Other Comprehensive Income							17.2 			17.2 		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2021	260.4 			1,828.7 			2,534.4 			24.4 			4,647.9 		
										
Common Stock Dividends					(37.5)					(37.5)		
Net Income					394.2 					394.2 		
Other Comprehensive Loss							(29.2)			(29.2)		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2022	$	260.4 			$	1,828.7 			$	2,891.1 			$	(4.8)			$	4,975.4 		
										
See Notes to Financial Statements of Registrants beginning on page 228.	
172

APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

		December 31,	
		2022		2021	
CURRENT ASSETS					
Cash and Cash Equivalents		$	7.5 			$	2.5 		
Restricted Cash for Securitized Funding		14.4 			17.6 		
Advances to Affiliates		19.8 			20.8 		
Accounts Receivable:					
Customers		168.9 			158.5 		
Affiliated Companies		94.0 			129.9 		
Accrued Unbilled Revenues		91.3 			54.0 		
Miscellaneous		0.3 			0.2 		
Allowance for Uncollectible Accounts		(1.7)			(1.6)		
Total Accounts Receivable		352.8 			341.0 		
Fuel		158.9 			67.1 		
Materials and Supplies		130.6 			109.8 		
Risk Management Assets		69.1 			42.0 		
	
Regulatory Asset for Under-Recovered Fuel Costs		473.1 			201.3 		
Margin Deposits		7.4 			71.8 		
Prepayments and Other Current Assets		26.0 			51.4 		
TOTAL CURRENT ASSETS		1,259.6 			925.3 		
					
PROPERTY, PLANT AND EQUIPMENT					
Electric:					
Generation		6,776.8 			6,683.9 		
Transmission		4,482.8 			4,322.4 		
Distribution		4,933.0 			4,683.3 		
Other Property, Plant and Equipment		883.3 			696.6 		
Construction Work in Progress		705.3 			469.9 		
Total Property, Plant and Equipment		17,781.2 			16,856.1 		
Accumulated Depreciation and Amortization		5,402.0 			5,051.8 		
TOTAL PROPERTY, PLANT AND EQUIPMENT – NET		12,379.2 			11,804.3 		
					
OTHER NONCURRENT ASSETS					
Regulatory Assets		1,058.6 			757.6 		
Securitized Assets		159.6 			185.1 		
	
Employee Benefits and Pension Assets		152.9 			220.5 		
Operating Lease Assets		73.6 			66.9 		
Deferred Charges and Other Noncurrent Assets		138.7 			129.2 		
TOTAL OTHER NONCURRENT ASSETS		1,583.4 			1,359.3 		
					
TOTAL ASSETS		$	15,222.2 			$	14,088.9 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	
173

APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND COMMON SHAREHOLDER’S EQUITY
December 31, 2022 and 2021

		December 31,	
		2022		2021	
		(in millions)	
CURRENT LIABILITIES					
Advances from Affiliates		$	182.2 			$	199.3 		
Accounts Payable:					
General		451.2 			262.2 		
Affiliated Companies		142.7 			118.6 		
Long-term Debt Due Within One Year - Nonaffiliated		251.8 			480.7 		

Customer Deposits		75.1 			73.9 		
	
Accrued Taxes		101.0 			119.7 		
	
Obligations Under Operating Leases		15.0 			15.1 		
	
Other Current Liabilities		171.2 			146.4 		
TOTAL CURRENT LIABILITIES		1,390.2 			1,415.9 		
					
NONCURRENT LIABILITIES					
Long-term Debt – Nonaffiliated		5,158.7 			4,458.2 		

Deferred Income Taxes		1,992.2 			1,804.7 		
Regulatory Liabilities and Deferred Investment Tax Credits		1,143.6 			1,238.8 		
Asset Retirement Obligations		419.2 			394.9 		
Employee Benefits and Pension Obligations		34.2 			41.5 		
Obligations Under Operating Leases		59.1 			52.4 		
Deferred Credits and Other Noncurrent Liabilities		49.6 			34.6 		
TOTAL NONCURRENT LIABILITIES		8,856.6 			8,025.1 		
					
TOTAL LIABILITIES		10,246.8 			9,441.0 		
					
Rate Matters (Note 4)					
Commitments and Contingencies (Note 6)					
					
COMMON SHAREHOLDER’S EQUITY					
Common Stock – No Par Value:					
Authorized – 30,000,000 Shares					
Outstanding – 13,499,500 Shares		260.4 			260.4 		
Paid-in Capital		1,828.7 			1,828.7 		
Retained Earnings		2,891.1 			2,534.4 		
Accumulated Other Comprehensive Income (Loss)		(4.8)			24.4 		
TOTAL COMMON SHAREHOLDER’S EQUITY		4,975.4 			4,647.9 		
					
TOTAL LIABILITIES AND COMMON SHAREHOLDER’S EQUITY		$	15,222.2 			$	14,088.9 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	

174

APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
OPERATING ACTIVITIES							
Net Income		$	394.2 			$	348.9 			$	369.7 		
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:							
Depreciation and Amortization		575.9 			546.2 			507.5 		
Deferred Income Taxes		79.6 			15.0 			(26.2)		
Asset Impairments and Other Related Charges - Coal Fired Generation		24.9 			— 			— 		

Allowance for Equity Funds Used During Construction		(11.7)			(15.6)			(14.6)		
Mark-to-Market of Risk Management Contracts		(24.4)			(22.3)			18.8 		
Pension Contributions to Qualified Plan Trust		— 			— 			(7.0)		
Deferred Fuel Over/Under-Recovery, Net		(501.8)			(196.0)			37.2 		
	
Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset		(37.0)			— 			— 		
Re-Establishment of Regulatory Asset - Coal Fired Generation		— 			— 			(49.0)		
Change in Other Noncurrent Assets		(75.2)			(68.8)			(40.4)		
Change in Other Noncurrent Liabilities		31.4 			35.6 			11.2 		
Changes in Certain Components of Working Capital:							
Accounts Receivable, Net		(8.5)			(53.3)			(30.2)		
	
Fuel, Materials and Supplies		(113.5)			116.1 			(38.2)		
Margin Deposits		64.4 			(70.0)			2.8 		
Accounts Payable		190.1 			36.8 			(48.1)		
Accrued Taxes, Net		6.7 			(16.2)			31.3 		
Other Current Assets		0.2 			(2.4)			15.5 		
Other Current Liabilities		5.9 			(42.3)			(28.3)		
Net Cash Flows from Operating Activities		601.2 			611.7 			712.0 		
							
INVESTING ACTIVITIES							
Construction Expenditures		(1,048.6)			(841.6)			(767.4)		
Change in Advances to Affiliates, Net		1.0 			0.6 			0.7 		
	
Other Investing Activities		42.4 			14.5 			8.8 		
Net Cash Flows Used for Investing Activities		(1,005.2)			(826.5)			(757.9)		
							
FINANCING ACTIVITIES							
	
Issuance of Long-term Debt – Nonaffiliated		698.0 			494.0 			606.9 		
Change in Advances from Affiliates, Net		(17.1)			180.7 			(218.1)		
Retirement of Long-term Debt – Nonaffiliated		(230.4)			(393.0)			(140.3)		

Principal Payments for Finance Lease Obligations		(7.9)			(7.7)			(7.4)		
Dividends Paid on Common Stock		(37.5)			(62.5)			(200.0)		
Other Financing Activities		0.7 			0.7 			0.7 		
Net Cash Flows from Financing Activities		405.8 			212.2 			41.8 		
							
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash for Securitized Funding		1.8 			(2.6)			(4.1)		
Cash, Cash Equivalents and Restricted Cash for Securitized Funding at Beginning of Period		20.1 			22.7 			26.8 		
Cash, Cash Equivalents and Restricted Cash for Securitized Funding at End of Period		$	21.9 			$	20.1 			$	22.7 		
							
SUPPLEMENTARY INFORMATION							
Cash Paid for Interest, Net of Capitalized Amounts		$	215.1 			$	207.5 			$	207.1 		
Net Cash Paid (Received) for Income Taxes		(88.6)			32.8 			— 		
Noncash Acquisitions Under Finance Leases		1.6 			1.7 			7.2 		
	
Construction Expenditures Included in Current Liabilities as of December 31,		164.6 			139.1 			105.6 		

							
See Notes to Financial Statements of Registrants beginning on page 228.	
175

INDIANA MICHIGAN POWER COMPANY
AND SUBSIDIARIES

176

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT’S NARRATIVE DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

KWh Sales/Degree Days

Summary of KWh Energy Sales	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in millions of KWhs)	
Retail:						
Residential	5,507 			5,463 			5,464 		
Commercial	4,740 			4,600 			4,475 		
Industrial	7,492 			7,373 			7,225 		
Miscellaneous	56 			58 			67 		
Total Retail	17,795 			17,494 			17,231 		
						
Wholesale	6,772 			6,618 			7,135 		
						
Total KWhs	24,567 			24,112 			24,366 		

Heating degree days and cooling degree days are metrics commonly used in the utility industry as a measure of the impact of weather on revenues.

Summary of Heating and Cooling Degree Days	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in degree days)	
Actual – Heating (a)	3,804 			3,396 			3,352 		
Normal – Heating (b)	3,725 			3,730 			3,742 		
						
Actual – Cooling (c)	935 			1,055 			928 		
Normal – Cooling (b)	857 			861 			854 		

(a)Heating degree days are calculated on a 55 degree temperature base.
(b)Normal Heating/Cooling represents the thirty-year average of degree days.
(c)Cooling degree days are calculated on a 65 degree temperature base.

177

2022 Compared to 2021

Indiana Michigan Power Company and Subsidiaries
Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Net Income
(in millions)

Year Ended December 31, 2021		$	279.8 		
			
Changes in Gross Margin:			
Retail Margins		65.2 		
	
Margins from Off-system Sales		32.2 		
Transmission Revenues		17.1 		
Other Revenues		7.9 		
Total Change in Gross Margin		122.4 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		7.0 		
	
Depreciation and Amortization		(81.2)		
Taxes Other Than Income Taxes		13.8 		
Other Income		(2.4)		

Non-Service Cost Components of Net Periodic Benefit Cost		8.5 		
Interest Expense		(8.4)		
Total Change in Expenses and Other		(62.7)		
			
Income Tax Expense		(14.8)		
			
Year Ended December 31, 2022		$	324.7 		

The major components of the increase in Gross Margin, defined as revenues less the related direct cost of fuel, including consumption of chemicals and emissions allowances, and purchased electricity were as follows:

•Retail Margins increased $65 million primarily due to the following:
•An $87 million increase in rider revenues partially offset by lower wholesale true-ups. This increase was partially offset in other expense items below.
•An $8 million decrease in costs for power acquired under the Unit Power Agreement between AEGCo and I&M, primarily due to the expiration of the Rockport Plant, Unit 2 lease in December 2022.
These increases were partially offset by:
•A $29 million decrease in weather-normalized retail margins in all retail classes.
•Margins from Off-system Sales increased $32 million primarily due to Rockport Plant, Unit 2 Merchant sales beginning in December 2022 in addition to higher market prices driven by winter storm Elliott.
•Transmission Revenues increased $17 million primarily due to the following:
•A $10 million increase due to transmission formula rate true-up activity.
•A $7 million increase due to continued investment in transmission assets.
• Other Revenues increased $8 million primarily due to the following:
•A $4 million increase due to a gain on sale of allowances. The gain on sale of allowances was partially offset in Retail Margins above.
•A $4 million increase in barging revenues by River Transportation Division (RTD). The increase in barging revenues was partially offset in Other Operation and Maintenance expenses below.
178

Expenses and Other and Income Tax Expense changed between years as follows:

•Other Operation and Maintenance expenses decreased $7 million primarily due to the following:
•A $66 million decrease in steam generation expenses primarily due to the modification of the Rockport Plant, Unit 2 lease, which resulted in a change in lease classification from an operating lease to a finance lease in December 2021. This decrease was partially offset in Depreciation and Amortization expenses below.
•A $4 million decrease due to an increased Nuclear Electric Insurance Limited distribution in 2022.
These decreases were partially offset by:
•A $25 million increase in transmission expenses primarily due to the following:
•A $42 million increase in recoverable PJM expenses. These expenses were offset in Retail Margins above.
This increase was partially offset by:
•A $7 million decrease in transmission vegetation management expenses.
•A $7 million decrease in transmission formula rate true-up activity.
•A $22 million increase in nuclear expenses at Cook Plant primarily due to refueling outage expenses.
•An $11 million increase due to a charitable contribution to the AEP Foundation.
•A $6 million increase in vegetation management expenses.
•Depreciation and Amortization expenses increased $81 million primarily due to the modification of the Rockport Plant, Unit 2 lease, which resulted in a change in lease classification from an operating lease to a finance lease in December 2021, and a higher depreciable base. The increase resulting from the lease modification was partially offset in Other Operation and Maintenance expenses above.
•Taxes Other Than Income Taxes decreased $14 million primarily due to the repeal of the Indiana Utility Receipts Tax in July 2022. This decrease was partially offset in Retail Margins above.
•Non-Service Cost Components of Net Periodic Benefit Cost decreased $9 million primarily due to an increase in discount rates, an increase in the expected return on plan assets and favorable plan returns in 2021.
•Interest Expense increased $8 million primarily due to a debt issuance in April 2021.
•Income Tax Expense increased $15 million primarily due to the following:
•A $13 million increase due to an increase in pretax book income.
•An $11 million increase in state taxes.
These increases were partially offset by:
•An $8 million increase in amortization of Excess ADIT.
179

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
Indiana Michigan Power Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Indiana Michigan Power Company and its subsidiaries (the “Company”) as of December 31, 2022 and 2021 and the related consolidated statements of income, of comprehensive income (loss), of changes in common shareholder’s equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

180

Accounting for the Effects of Cost-Based Regulation

As described in Notes 1 and 5 to the consolidated financial statements, the Company's consolidated financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated. As of December 31, 2022, there were $507 million of deferred costs included in regulatory assets, $111 million of which were pending final regulatory approval, and $1,702 million of net regulatory liabilities awaiting potential refund or future rate reduction. Regulatory assets (deferred expenses) and regulatory liabilities (deferred future revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and matching income with its passage to customers in cost-based regulated rates. Management reviews the probability of recovery of regulatory assets and refund of regulatory liabilities at each balance sheet date and whenever new events occur, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of cost-based regulation is a critical audit matter are the significant judgment by management in the ongoing evaluation of the recovery of regulatory assets and refund of regulatory liabilities, and in applying guidance contained in rate orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of new events, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation, including the probability of recovery of regulatory assets and refund of regulatory liabilities. These procedures also included, among others, evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities. Testing of regulatory assets and liabilities, involved evaluating the provisions and formulas outlined in rate orders, other regulatory correspondence, application of relevant regulatory precedents, and other relevant evidence.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

We have served as the Company's auditor since 2017.
181

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Indiana Michigan Power Company and Subsidiaries (I&M) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  I&M’s internal control is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of I&M’s internal control over financial reporting as of December 31, 2022.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).  Based on management’s assessment, management concluded I&M’s internal control over financial reporting was effective as of December 31, 2022.

This annual report does not include an audit report from PricewaterhouseCoopers LLP, I&M’s registered public accounting firm regarding internal control over financial reporting pursuant to the Securities and Exchange Commission rules that permit I&M to provide only management’s report in this annual report.
182

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
REVENUES							
Electric Generation, Transmission and Distribution		$	2,588.3 			$	2,261.2 			$	2,165.3 		
Sales to AEP Affiliates		15.3 			3.8 			10.5 		
Other Revenues – Affiliated		54.3 			54.0 			60.8 		
Other Revenues – Nonaffiliated		11.7 			7.7 			5.2 		
TOTAL REVENUES		2,669.6 			2,326.7 			2,241.8 		
							
EXPENSES							
Purchased Electricity, Fuel and Other Consumables Used for Electric Generation		535.5 			338.9 			344.2 		
	
Purchased Electricity from AEP Affiliates		241.8 			217.9 			172.8 		
Other Operation		621.0 			645.2 			650.0 		
Maintenance		227.2 			210.0 			193.2 		
	
Depreciation and Amortization		527.2 			446.0 			411.6 		
Taxes Other Than Income Taxes		97.0 			110.8 			107.1 		
TOTAL EXPENSES		2,249.7 			1,968.8 			1,878.9 		
							
OPERATING INCOME		419.9 			357.9 			362.9 		
							
Other Income (Expense):							
Other Income		9.3 			11.7 			10.0 		

	
Non-Service Cost Components of Net Periodic Benefit Cost		24.9 			16.4 			16.7 		
Interest Expense		(125.2)			(116.8)			(112.3)		
							
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		328.9 			269.2 			277.3 		
							
Income Tax Expense (Benefit)		4.2 			(10.6)			(7.5)		
							
NET INCOME		$	324.7 			$	279.8 			$	284.8 		
							
The common stock of I&M is wholly-owned by Parent.	
							
See Notes to Financial Statements of Registrants beginning on page 228.	
183

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2022, 2021 and 2020
 (in millions)

		Years Ended December 31,	
		2022		2021		2020	
Net Income		$	324.7 			$	279.8 			$	284.8 		
							
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES							
Cash Flow Hedges, Net of Tax of $0.4, $0.4 and $0.4 in 2022, 2021 and 2020, Respectively		1.6 			1.6 			1.6 		
Amortization of Pension and OPEB Deferred Costs, Net of Tax of $(0.1), $0 and $0 in 2022, 2021 and 2020, Respectively		(0.3)			(0.1)			(0.1)		
Pension and OPEB Funded Status, Net of Tax of $(0.1), $1.1 and $0.8 in 2022, 2021 and 2020, Respectively		(0.3)			4.2 			3.1 		
							
TOTAL OTHER COMPREHENSIVE INCOME		1.0 			5.7 			4.6 		
							
TOTAL COMPREHENSIVE INCOME		$	325.7 			$	285.5 			$	289.4 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
184

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S EQUITY
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

	Common
Stock		Paid-in
Capital		Retained Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total	
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2019	$	56.6 			$	980.9 			$	1,518.5 			$	(11.6)			$	2,544.4 		
										
Common Stock Dividends					(85.0)					(85.0)		
ASU 2016-13 Adoption					0.4 					0.4 		
Net Income					284.8 					284.8 		
Other Comprehensive Income							4.6 			4.6 		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2020	56.6 			980.9 			1,718.7 			(7.0)			2,749.2 		
										
Common Stock Dividends					(250.0)					(250.0)		
	
Net Income					279.8 					279.8 		
Other Comprehensive Income							5.7 			5.7 		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2021	56.6 			980.9 			1,748.5 			(1.3)			2,784.7 		
										
Capital Contribution from Parent			7.9 							7.9 		
Common Stock Dividends					(110.0)					(110.0)		
	
Net Income					324.7 					324.7 		
Other Comprehensive Income							1.0 			1.0 		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2022	$	56.6 			$	988.8 			$	1,963.2 			$	(0.3)			$	3,008.3 		
										
See Notes to Financial Statements of Registrants beginning on page 228.	

185

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

		December 31,	
		2022		2021	
CURRENT ASSETS					
Cash and Cash Equivalents		$	4.2 			$	1.3 		
Advances to Affiliates		23.0 			21.5 		
Accounts Receivable:					
Customers		96.6 			40.6 		
Affiliated Companies		104.0 			78.2 		
Accrued Unbilled Revenues		0.6 			— 		
Miscellaneous		4.7 			2.5 		
Allowance for Uncollectible Accounts		(0.1)			(0.1)		
Total Accounts Receivable		205.8 			121.2 		
Fuel		46.5 			56.8 		
Materials and Supplies		188.1 			175.2 		
Risk Management Assets		15.2 			3.3 		

Regulatory Asset for Under-Recovered Fuel Costs		47.1 			6.4 		
	
Prepayments and Other Current Assets		41.9 			53.7 		
TOTAL CURRENT ASSETS		571.8 			439.4 		
					
PROPERTY, PLANT AND EQUIPMENT					
Electric:					
Generation		5,585.1 			5,531.8 		
Transmission		1,842.2 			1,783.1 		
Distribution		3,024.7 			2,800.1 		
Other Property, Plant and Equipment (Including Coal Mining and Nuclear Fuel)		839.3 			792.9 		
Construction Work in Progress		253.0 			302.8 		
Total Property, Plant and Equipment		11,544.3 			11,210.7 		
Accumulated Depreciation, Depletion and Amortization		4,132.8 			3,899.8 		
TOTAL PROPERTY, PLANT AND EQUIPMENT – NET		7,411.5 			7,310.9 		
					
OTHER NONCURRENT ASSETS					
Regulatory Assets		459.6 			410.9 		
Spent Nuclear Fuel and Decommissioning Trusts		3,341.2 			3,867.0 		
	
Operating Lease Assets		64.3 			63.5 		
Deferred Charges and Other Noncurrent Assets		270.5 			316.5 		
TOTAL OTHER NONCURRENT ASSETS		4,135.6 			4,657.9 		
					
TOTAL ASSETS		$	12,118.9 			$	12,408.2 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	

186

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND COMMON SHAREHOLDER’S EQUITY
December 31, 2022 and 2021
(dollars in millions)

		December 31,	
		2022		2021	
CURRENT LIABILITIES					
Advances from Affiliates		$	249.9 			$	93.3 		
Accounts Payable:					
General		173.4 			174.4 		
Affiliated Companies		121.5 			94.9 		
Long-term Debt Due Within One Year – Nonaffiliated
(December 31, 2022 and 2021 Amounts Include $89.6 and $65 Respectively, Related to DCC Fuel)		341.8 			67.0 		
Risk Management Liabilities		— 			5.0 		
Customer Deposits		48.6 			45.2 		
Accrued Taxes		103.2 			106.5 		
Accrued Interest		36.9 			37.0 		
Obligations Under Finance Leases		6.9 			130.5 		
Obligations Under Operating Leases		16.0 			15.5 		
Regulatory Liability for Over-Recovered Fuel Costs		— 			1.5 		
Other Current Liabilities		98.9 			123.2 		
TOTAL CURRENT LIABILITIES		1,197.1 			894.0 		
					
NONCURRENT LIABILITIES					
Long-term Debt – Nonaffiliated		2,919.0 			3,128.0 		
	
Deferred Income Taxes		1,157.0 			1,100.2 		
Regulatory Liabilities and Deferred Investment Tax Credits		1,702.2 			2,447.9 		
Asset Retirement Obligations		2,027.6 			1,946.2 		
Obligations Under Operating Leases		48.9 			48.9 		
Deferred Credits and Other Noncurrent Liabilities		58.8 			58.3 		
TOTAL NONCURRENT LIABILITIES		7,913.5 			8,729.5 		
					
TOTAL LIABILITIES		9,110.6 			9,623.5 		
					
Rate Matters (Note 4)					
Commitments and Contingencies (Note 6)					
					
COMMON SHAREHOLDER’S EQUITY					
Common Stock – No Par Value:					
Authorized – 2,500,000 Shares					
Outstanding  – 1,400,000 Shares		56.6 			56.6 		
Paid-in Capital		988.8 			980.9 		
Retained Earnings		1,963.2 			1,748.5 		
Accumulated Other Comprehensive Income (Loss)		(0.3)			(1.3)		
TOTAL COMMON SHAREHOLDER’S EQUITY		3,008.3 			2,784.7 		
					
TOTAL LIABILITIES AND COMMON SHAREHOLDER'S EQUITY		$	12,118.9 			$	12,408.2 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	
187

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
OPERATING ACTIVITIES			
Net Income		$	324.7 			$	279.8 			$	284.8 		
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:							
Depreciation and Amortization		527.2 			446.0 			411.6 		
Rockport Plant, Unit 2 Operating Lease Amortization		— 			62.4 			69.2 		
Deferred Income Taxes		(45.1)			(38.0)			(16.2)		
Amortization (Deferral) of Incremental Nuclear Refueling Outage Expenses, Net		(49.2)			7.5 			24.4 		

Allowance for Equity Funds Used During Construction		(9.8)			(12.8)			(11.5)		
Mark-to-Market of Risk Management Contracts		(16.9)			5.2 			5.9 		
Amortization of Nuclear Fuel		82.9 			85.3 			87.5 		
Pension Contributions to Qualified Plan Trust		— 			— 			(6.4)		
Deferred Fuel Over/Under-Recovery, Net		(42.2)			(20.2)			12.4 		
	
Change in Other Noncurrent Assets		(47.3)			(54.1)			6.1 		
Change in Other Noncurrent Liabilities		62.4 			7.5 			45.0 		
Changes in Certain Components of Working Capital:							
Accounts Receivable, Net		(82.7)			(22.3)			14.5 		
Fuel, Materials and Supplies		(2.6)			30.1 			(34.7)		
Accounts Payable		37.3 			42.3 			(10.8)		
	
Accrued Taxes, Net		9.4 			1.6 			(20.2)		
	
Rockport Plant, Unit 2 Operating Lease Payments		— 			(73.9)			(73.9)		
Other Current Assets		19.5 			(15.2)			14.3 		
Other Current Liabilities		(46.9)			2.5 			(25.7)		
Net Cash Flows from Operating Activities		720.7 			733.7 			776.3 		
							
INVESTING ACTIVITIES							
Construction Expenditures		(557.8)			(500.9)			(544.7)		
Change in Advances to Affiliates, Net		(1.5)			(8.2)			(0.1)		
Purchases of Investment Securities		(2,765.4)			(1,928.2)			(1,637.2)		
Sales of Investment Securities		2,713.6 			1,886.4 			1,593.4 		
Acquisitions of Nuclear Fuel		(100.7)			(104.5)			(69.7)		
	
Other Investing Activities		10.3 			22.3 			9.4 		
Net Cash Flows Used for Investing Activities		(701.5)			(633.1)			(648.9)		
							
FINANCING ACTIVITIES							
Capital Contribution from Parent		7.9 			— 			— 		
Issuance of Long-term Debt - Nonaffiliated		142.7 			546.7 			69.5 		
Change in Advances from Affiliates, Net		156.6 			(9.7)			(11.4)		
Retirement of Long-term Debt - Nonaffiliated		(83.4)			(383.5)			(93.2)		
	
Principal Payments for Finance Lease Obligations		(130.7)			(6.8)			(6.5)		
Dividends Paid on Common Stock		(110.0)			(250.0)			(85.0)		
Other Financing Activities		0.6 			0.7 			0.5 		
Net Cash Flows Used for Financing Activities		(16.3)			(102.6)			(126.1)		
							
Net Increase (Decrease) in Cash and Cash Equivalents		2.9 			(2.0)			1.3 		
Cash and Cash Equivalents at Beginning of Period		1.3 			3.3 			2.0 		
Cash and Cash Equivalents at End of Period		$	4.2 			$	1.3 			$	3.3 		
							
SUPPLEMENTARY INFORMATION							
Cash Paid for Interest, Net of Capitalized Amounts		$	120.9 			$	110.9 			$	107.6 		
Net Cash Paid for Income Taxes		10.1 			29.3 			42.1 		
Noncash Acquisitions Under Finance Leases		2.2 			132.3 			3.0 		
Construction Expenditures Included in Current Liabilities as of December 31,		71.9 			87.8 			62.8 		
Acquisition of Nuclear Fuel Included in Current Liabilities as of December 31,		— 			— 			33.4 		

See Notes to Financial Statements of Registrants beginning on page 228.	
188

OHIO POWER COMPANY AND SUBSIDIARIES

189

OHIO POWER COMPANY AND SUBSIDIARIES
MANAGEMENT’S NARRATIVE DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

KWh Sales/Degree Days

Summary of KWh Energy Sales		
							
	Years Ended December 31,	
	2022		2021		2020		
	(in millions of KWhs)		
Retail:							
Residential	14,430 			14,547 			14,355 			
Commercial	16,013 			15,036 			13,933 			
Industrial	14,088 			14,321 			13,347 			
Miscellaneous	110 			112 			113 			
Total Retail (a)	44,641 			44,016 			41,748 			
							
Wholesale (b)	2,198 			2,018 			1,859 			
							
Total KWhs	46,839 			46,034 			43,607 			

(a)Represents energy delivered to distribution customers.
(b)Primarily Ohio’s contractually obligated purchases of OVEC power sold into PJM.

Heating degree days and cooling degree days are metrics commonly used in the utility industry as a measure of the impact of weather on revenues.

Summary of Heating and Cooling Degree Days	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in degree days)	
Actual – Heating (a)	3,116 			2,815 			2,743 		
Normal – Heating (b)	3,185 			3,190 			3,202 		
						
Actual – Cooling (c)	1,121 			1,222 			1,140 		
Normal – Cooling (b)	1,011 			1,016 			1,006 		

(a)Heating degree days are calculated on a 55 degree temperature base.
(b)Normal Heating/Cooling represents the thirty-year average of degree days.
(c)Cooling degree days are calculated on a 65 degree temperature base.

190

2022 Compared to 2021

Ohio Power Company and Subsidiaries
Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Net Income
(in millions)

Year Ended December 31, 2021		$	253.6 		
			
Changes in Gross Margin:			
Retail Margins		177.9 		
Margins from Off-system Sales		61.9 		
Transmission Revenues		6.4 		
Other Revenues		(37.5)		
Total Change in Gross Margin		208.7 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(172.5)		
Depreciation and Amortization		9.0 		
Taxes Other Than Income Taxes		(16.7)		
Interest Income		0.3 		
	
Allowance for Equity Funds Used During Construction		3.1 		
Non-Service Cost Components of Net Periodic Benefit Cost		7.5 		
Other Income		(0.8)		
Interest Expense		4.8 		
Total Change in Expenses and Other		(165.3)		
			
Income Tax Expense		(9.8)		
Equity Earnings of Unconsolidated Subsidiaries		0.6 		
			
Year Ended December 31, 2022		$	287.8 		

The major components of the increase in Gross Margin, defined as revenues less the related direct cost of purchased electricity were as follows:

•Retail Margins increased $178 million primarily due to the following:
•A $111 million net increase in Basic Transmission Cost Rider revenues and recoverable PJM expenses. This increase was partially offset in Other Operation and Maintenance expenses below.
•A $42 million increase due to various rider revenues. This increase was partially offset in Margins from Off-system Sales, Other Revenues and other expense items below.
•A $10 million increase in weather-normalized margins primarily from the industrial and commercial classes, partially offset by the residential class.
•A $10 million increase in weather-related usage primarily due to the end of decoupling.
•Margins from Off-system Sales increased $62 million primarily due to the following:
•A $52 million increase in off-system sales at OVEC due to higher market prices and volume, partially offset by an increase in PJM expenses driven by winter storm Elliott. This increase was offset in Retail Margins above and Other Revenues below.
•A $10 million increase in deferrals of OVEC costs. This increase was offset in Retail Margins above and Other Revenues below.
•Transmission Revenues increased $6 million primarily due to continued investment in transmission assets.
•Other Revenues decreased $38 million primarily due to third-party Legacy Generation Resource Rider revenue related to the recovery of OVEC costs. This decrease was offset in Retail Margins and Margins from Off-system Sales above.

191

Expenses and Other and Income Tax Expense changed between years as follows:

•Other Operation and Maintenance expenses increased $173 million primarily due to the following:
•An $87 million increase in transmission expenses, primarily due to an $88 million increase in recoverable PJM expenses and a $3 million increase in vegetation management, partially offset by a $6 million decrease in transmission formula rate true-up activity. The recoverable PJM expenses are offset in Retail Margins above.
•A $21 million increase in bad debt related expenses including $8 million in 2022 related to Bad Debt Rider over-recovery. This increase was offset in Retail Margins above.
•A $19 million increase in remitted Universal Service Fund surcharge payments to the Ohio Department of Development to fund an energy assistance program for qualified Ohio customers. This increase was offset in Retail Margins above.
•A $17 million increase in recoverable distribution expenses primarily related to vegetation management. This increase was offset in Retail Margins above.
•A $10 million increase in employee-related expenses.
•An $8 million increase due to a charitable contribution to the AEP Foundation.
•Depreciation and Amortization expenses decreased $9 million primarily due to a decrease in recoverable smart grid and Distribution Investment Rider depreciable expenses. This decrease was offset in Retail Margins above.
•Taxes Other Than Income Taxes increased $17 million primarily due to an increase in property taxes driven by additional investments in transmission and distribution assets and higher tax rates.
•Allowance for Equity Funds Used During Construction increased $3 million primarily due to an increase in AFUDC base.
•Non-Service Cost Components of Net Periodic Benefit Cost decreased $8 million primarily due to an increase in discount rates, an increase in the expected return on plan assets and favorable plan returns in 2021.
•Interest Expense decreased $5 million primarily due to the retirement of a higher rate bond partially offset by the issuance of a lower rate bond in 2021.
•Income Tax Expense increased $10 million primarily due to the following:
•A $9 million increase due to an increase in pretax book income.
•A $5 million decrease in amortization of Excess ADIT.
•A $5 million increase due to 2021 return to provision adjustments.
These increases were partially offset by:
•A $9 million decrease due to an unfavorable out of period adjustment recorded in the prior year related to deferred income taxes.

192

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
Ohio Power Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ohio Power Company and its subsidiaries (the “Company”) as of December 31, 2022 and 2021 and the related consolidated statements of income, of changes in common shareholder’s equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

193

Accounting for the Effects of Cost-Based Regulation

As described in Notes 1 and 5 to the consolidated financial statements, the Company's consolidated financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated. As of December 31, 2022, there were $331 million of deferred costs included in regulatory assets, $34 million of which were pending final regulatory approval, and $1,044 million of regulatory liabilities awaiting potential refund or future rate reduction. Regulatory assets (deferred expenses) and regulatory liabilities (deferred future revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and matching income with its passage to customers in cost-based regulated rates. Management reviews the probability of recovery of regulatory assets and refund of regulatory liabilities at each balance sheet date and whenever new events occur, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of cost-based regulation is a critical audit matter are the significant judgment by management in the ongoing evaluation of the recovery of regulatory assets and refund of regulatory liabilities, and in applying guidance contained in rate orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of new events, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation, including the probability of recovery of regulatory assets and refund of regulatory liabilities. These procedures also included, among others, evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities. Testing of regulatory assets and liabilities, involved evaluating the provisions and formulas outlined in rate orders, other regulatory correspondence, application of relevant regulatory precedents, and other relevant evidence.

Valuation of Level 3 Risk Management Commodity Contracts

As described in Notes 1, 10 and 11 to the consolidated financial statements, the Company employs risk management commodity contracts including physical and financial forward purchase and sale contracts and, to a lesser extent, over-the-counter swaps and options to accomplish its risk management strategies. Certain over-the-counter and bilaterally executed derivative instruments are executed in less active markets with a lower availability of pricing information. As disclosed by management, the fair value of these risk management commodity contracts is estimated based on the best market information available, including valuation models that estimate future energy prices based on existing market and broker quotes, and other assumptions. Fair value estimates, based upon the best market information available, involve uncertainties and matters of significant judgment including forward market price assumptions. The main driver of contracts being classified as Level 3 is the inability to substantiate energy price curves in the market. Management utilized such unobservable pricing inputs to value its Level 3 risk management commodity contract liabilities, which totaled $40 million, as of December 31, 2022.

The principal considerations for our determination that performing procedures relating to the valuation of Level 3 risk management commodity contracts is a critical audit matter are the significant judgment by management when developing the fair value of the commodity contracts; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the forward market price assumptions used in management’s valuation models. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

194

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s valuation of the risk management commodity contracts, including controls over the assumptions used to value the Level 3 risk management commodity contracts. These procedures also included, among others, testing management’s process for developing the fair value of the Level 3 risk management commodity contracts, evaluating the appropriateness of the valuation models, evaluating the reasonableness of the forward market price assumptions, and testing the data used by management in the valuation models. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the forward market price assumptions.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

We have served as the Company's auditor since 2017.
195

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Ohio Power Company and Subsidiaries (OPCo) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  OPCo’s internal control is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of OPCo’s internal control over financial reporting as of December 31, 2022.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).  Based on management’s assessment, management concluded OPCo’s internal control over financial reporting was effective as of December 31, 2022.

This annual report does not include an audit report from PricewaterhouseCoopers LLP, OPCo’s registered public accounting firm regarding internal control over financial reporting pursuant to the Securities and Exchange Commission rules that permit OPCo to provide only management’s report in this annual report.
196

OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
REVENUES							
Electricity, Transmission and Distribution		$	3,635.3 			$	2,863.7 			$	2,698.6 		
Sales to AEP Affiliates		18.8 			24.8 			41.5 		
Other Revenues		11.0 			10.6 			9.0 		
TOTAL REVENUES		3,665.1 			2,899.1 			2,749.1 		
							
EXPENSES							
Purchased Electricity for Resale		1,277.4 			678.0 			549.2 		
Purchased Electricity from AEP Affiliates		9.8 			51.9 			119.7 		

Other Operation		982.0 			836.8 			822.6 		
Maintenance		185.5 			158.2 			127.1 		
Depreciation and Amortization		294.3 			303.3 			276.6 		
Taxes Other Than Income Taxes		502.4 			485.7 			450.2 		
TOTAL EXPENSES		3,251.4 			2,513.9 			2,345.4 		
							
OPERATING INCOME		413.7 			385.2 			403.7 		
							
Other Income (Expense):							
Interest Income		0.9 			0.6 			1.0 		
	
Allowance for Equity Funds Used During Construction		13.9 			10.8 			12.5 		
Non-Service Cost Components of Net Periodic Benefit Cost		22.1 			14.6 			15.0 		
	
Interest Expense		(119.6)			(124.4)			(117.2)		
Other Income		0.4 			1.2 			1.6 		
INCOME BEFORE INCOME TAX EXPENSE		331.4 			288.0 			316.6 		
							
Income Tax Expense		44.2 			34.4 			45.2 		
Equity Earnings of Unconsolidated Subsidiaries		0.6 			— 			— 		
							
NET INCOME		$	287.8 			$	253.6 			$	271.4 		
							
The common stock of OPCo is wholly-owned by Parent.	
							
See Notes to Financial Statements of Registrants beginning on page 228.	
197

OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S EQUITY
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

	Common
Stock		Paid-in
Capital		Retained Earnings		Total	
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2019	$	321.2 			$	838.8 			$	1,348.5 			$	2,508.5 		
								
Common Stock Dividends					(87.5)			(87.5)		
ASU 2016-13 Adoption					0.3 			0.3 		
Net Income					271.4 			271.4 		
	
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2020	321.2 			838.8 			1,532.7 			2,692.7 		
								
Common Stock Dividends					(100.0)			(100.0)		
	
Net Income					253.6 			253.6 		
	
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2021	321.2 			838.8 			1,686.3 			2,846.3 		
								
Capital Contribution from Parent			1.0 					1.0 		
Return of Capital to Parent			(2.0)					(2.0)		
Common Stock Dividends					(45.0)			(45.0)		
Net Income					287.8 			287.8 		
	
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2022	$	321.2 			$	837.8 			$	1,929.1 			$	3,088.1 		
								
See Notes to Financial Statements of Registrants beginning on page 228.	
198

OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

		December 31,	
		2022		2021	
CURRENT ASSETS					
Cash and Cash Equivalents		$	9.6 			$	3.0 		
	
Advances to Affiliates		— 			42.0 		
Accounts Receivable:					
Customers		119.9 			71.6 		
Affiliated Companies		100.9 			71.8 		
Accrued Unbilled Revenues		17.8 			1.3 		
Miscellaneous		0.1 			5.9 		
Allowance for Uncollectible Accounts		(0.1)			(0.6)		
Total Accounts Receivable		238.6 			150.0 		
Materials and Supplies		109.5 			74.1 		
Renewable Energy Credits		35.0 			30.5 		

Prepayments and Other Current Assets		21.7 			27.9 		
TOTAL CURRENT ASSETS		414.4 			327.5 		
					
PROPERTY, PLANT AND EQUIPMENT					
Electric:					
Transmission		3,198.6 			2,992.8 		
Distribution		6,450.3 			6,070.6 		
Other Property, Plant and Equipment		1,051.4 			992.9 		
Construction Work in Progress		474.3 			365.0 		
Total Property, Plant and Equipment		11,174.6 			10,421.3 		
Accumulated Depreciation and Amortization		2,565.3 			2,458.3 		
TOTAL PROPERTY, PLANT AND EQUIPMENT – NET		8,609.3 			7,963.0 		
					
OTHER NONCURRENT ASSETS					
Regulatory Assets		327.3 			293.0 		

Operating Lease Assets		73.8 			81.2 		
Deferred Charges and Other Noncurrent Assets		578.3 			601.1 		
TOTAL OTHER NONCURRENT ASSETS		979.4 			975.3 		
					
TOTAL ASSETS		$	10,003.1 			$	9,265.8 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	
199

OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND COMMON SHAREHOLDER’S EQUITY
December 31, 2022 and 2021
(dollars in millions)

		December 31,	
		2022		2021	
CURRENT LIABILITIES					
Advances from Affiliates		$	172.9 			$	— 		
Accounts Payable:					
General		337.3 			213.5 		
Affiliated Companies		126.1 			125.4 		
Long-term Debt Due Within One Year – Nonaffiliated		0.1 			0.1 		
Risk Management Liabilities		1.8 			6.7 		
Customer Deposits		96.5 			66.4 		
Accrued Taxes		733.1 			702.4 		
	
Obligations Under Operating Leases		13.5 			13.1 		
Other Current Liabilities		154.2 			118.1 		
TOTAL CURRENT LIABILITIES		1,635.5 			1,245.7 		
					
NONCURRENT LIABILITIES					
Long-term Debt – Nonaffiliated		2,970.2 			2,968.4 		
Long-term Risk Management Liabilities		37.9 			85.8 		
Deferred Income Taxes		1,101.1 			1,000.9 		
Regulatory Liabilities and Deferred Investment Tax Credits		1,044.0 			1,020.9 		
	
Obligations Under Operating Leases		60.3 			68.6 		
Deferred Credits and Other Noncurrent Liabilities		66.0 			29.2 		
TOTAL NONCURRENT LIABILITIES		5,279.5 			5,173.8 		
					
TOTAL LIABILITIES		6,915.0 			6,419.5 		
					
Rate Matters (Note 4)					
Commitments and Contingencies (Note 6)					
					
COMMON SHAREHOLDER'S EQUITY					
Common Stock – No Par Value:					
Authorized – 40,000,000 Shares					
Outstanding  – 27,952,473 Shares		321.2 			321.2 		
Paid-in Capital		837.8 			838.8 		
Retained Earnings		1,929.1 			1,686.3 		
	
TOTAL COMMON SHAREHOLDER’S EQUITY		3,088.1 			2,846.3 		
					
TOTAL LIABILITIES AND COMMON SHAREHOLDER'S EQUITY		$	10,003.1 			$	9,265.8 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	
200

OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
OPERATING ACTIVITIES							
Net Income		$	287.8 			$	253.6 			$	271.4 		
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:							
Depreciation and Amortization		294.3 			303.3 			276.6 		

Deferred Income Taxes		71.5 			30.7 			77.2 		
	
Allowance for Equity Funds Used During Construction		(13.9)			(10.8)			(12.5)		
Mark-to-Market of Risk Management Contracts		(52.8)			(17.8)			6.7 		
	
Property Taxes		(20.0)			(35.3)			(16.6)		

	
Change in Regulatory Assets		30.4 			38.3 			(69.4)		
Change in Other Noncurrent Assets		(87.1)			(40.7)			(49.4)		
Change in Other Noncurrent Liabilities		91.1 			6.9 			(66.4)		
Changes in Certain Components of Working Capital:							
Accounts Receivable, Net		(83.7)			(11.8)			4.2 		
Materials and Supplies		(23.4)			(2.5)			(23.9)		
Accounts Payable		112.7 			19.1 			10.3 		
Accrued Taxes, Net		27.8 			78.2 			43.3 		
Other Current Assets		11.2 			(15.7)			1.9 		
Other Current Liabilities		40.2 			(19.9)			(42.5)		
Net Cash Flows from Operating Activities		686.1 			575.6 			410.9 		
							
INVESTING ACTIVITIES							
Construction Expenditures		(872.4)			(732.8)			(813.2)		
Change in Advances to Affiliates, Net		42.0 			(42.0)			— 		
Other Investing Activities		27.9 			21.5 			22.2 		
Net Cash Flows Used for Investing Activities		(802.5)			(753.3)			(791.0)		
							
FINANCING ACTIVITIES							
Capital Contribution from Parent		1.0 			— 			— 		
Return of Capital to Parent		(2.0)			— 			— 		
Issuance of Long-term Debt – Nonaffiliated		— 			1,037.1 			347.0 		
Change in Advances from Affiliates, Net		172.9 			(259.2)			128.2 		
Retirement of Long-term Debt – Nonaffiliated		(0.1)			(500.1)			(0.1)		
	
Principal Payments for Finance Lease Obligations		(4.9)			(4.9)			(4.7)		
Dividends Paid on Common Stock		(45.0)			(100.0)			(87.5)		
Other Financing Activities		1.1 			0.4 			0.9 		
Net Cash Flows from Financing Activities		123.0 			173.3 			383.8 		
							
Net Increase (Decrease) in Cash and Cash Equivalents		6.6 			(4.4)			3.7 		
Cash and Cash Equivalents at Beginning of Period		3.0 			7.4 			3.7 		
Cash and Cash Equivalents at End of Period		$	9.6 			$	3.0 			$	7.4 		
							
SUPPLEMENTARY INFORMATION							
Cash Paid for Interest, Net of Capitalized Amounts		$	113.4 			$	119.5 			$	111.2 		
Net Cash Paid (Received) for Income Taxes		(19.7)			(7.9)			(26.9)		
Noncash Acquisitions Under Finance Leases		3.0 			2.5 			6.1 		
Construction Expenditures Included in Current Liabilities as of December 31,		109.7 			97.1 			76.7 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
201

PUBLIC SERVICE COMPANY OF OKLAHOMA

202

PUBLIC SERVICE COMPANY OF OKLAHOMA
MANAGEMENT’S NARRATIVE DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

KWh Sales/Degree Days

Summary of KWh Energy Sales	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in millions of KWhs)	
Retail:						
Residential	6,618 			6,243 			6,117 		
Commercial	5,153 			4,911 			4,673 		
Industrial	6,073 			5,830 			5,713 		
Miscellaneous	1,297 			1,222 			1,199 		
Total Retail	19,141 			18,206 			17,702 		
						
Wholesale	734 			669 			345 		
						
Total KWhs	19,875 			18,875 			18,047 		

Heating degree days and cooling degree days are metrics commonly used in the utility industry as a measure of the impact of weather on revenues.

Summary of Heating and Cooling Degree Days	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in degree days)	
Actual – Heating (a)	1,893 			1,499 			1,454 		
Normal – Heating (b)	1,736 			1,742 			1,744 		
						
Actual – Cooling (c)	2,559 			2,198 			2,069 		
Normal – Cooling (b)	2,161 			2,165 			2,174 		

(a)Heating degree days are calculated on a 55 degree temperature base.
(b)Normal Heating/Cooling represents the thirty-year average of degree days.
(c)Cooling degree days are calculated on a 65 degree temperature base.
203

2022 Compared to 2021

Public Service Company of Oklahoma
Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Net Income
(in millions)

Year Ended December 31, 2021		$	141.1 		
			
Changes in Gross Margin:			
Retail Margins (a)		91.6 		
	
Transmission Revenues		(0.1)		
Other Revenues		1.6 		
Total Change in Gross Margin		93.1 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(63.8)		
Depreciation and Amortization		(33.5)		
Taxes Other Than Income Taxes		(7.9)		
Interest Income		3.1 		
Allowance for Funds Used During Construction		(0.9)		
Non-Service Cost Components of Net Periodic Benefit Cost		4.0 		
Interest Expense		(20.9)		
Total Change in Expenses and Other		(119.9)		
			
Income Tax Expense		53.3 		
			
Year Ended December 31, 2022		$	167.6 		

(a)Includes firm wholesale sales to municipals and cooperatives.

The major components of the increase in Gross Margin, defined as revenues less the related direct cost of fuel, including consumption of chemicals and emissions allowances, and purchased electricity were as follows:

•Retail Margins increased $92 million primarily due to the following:
•A $110 million increase due to a $61 million increase in base rate revenues and a $49 million increase in rider revenues. These increases were partially offset in other expense items below.
•A $26 million increase in weather-related usage due to a 16% increase in cooling degree days and a 26% increase in heating degree days.
•A $9 million increase in weather-normalized margins primarily in the commercial class.
These increases were partially offset by:
•A $54 million decrease due to the NCWF PTC benefits provided to customers through fuel clause mechanisms. This decrease was partially offset in Income Tax Expense below.

Expenses and Other and Income Tax Expense changed between years as follows:

•Other Operation and Maintenance expenses increased $64 million primarily due to the following:
•An $18 million increase in generating expenses primarily due to an increase in maintenance expenses at the NCWF and Northeastern.
•A $12 million increase in transmission expenses primarily due to the following:
•A $103 million increase due to a change in rider recovery, increased transmission investment and load.
This increase was partially offset by:
•An $82 million decrease in recoverable SPP transmission expenses. This decrease was offset in Retail Margins above.
•A $7 million decrease in transmission formula rate true-up activity. This decrease was partially offset in Retail Margins above.
204

•A $14 million increase in distribution expenses primarily due to an increase in overhead line maintenance.
•A $6 million increase due to a charitable contribution to the AEP Foundation.
•A $4 million increase due to pre-construction costs associated with various renewable projects.
•Depreciation and Amortization expenses increased $34 million primarily due to a higher depreciable base, implementation of new rates and the timing of refunds to customers under rate rider mechanisms.
•Taxes Other Than Income Taxes increased $8 million primarily due to a new infrastructure fee implemented by the City of Tulsa in March 2022 and increased property taxes. This increase was partially offset in Retail Margins above.
•Non-Service Cost Components of Net Periodic Benefit Cost decreased $4 million primarily due to an increase in discount rates, an increase in the expected return on plan assets and favorable plan returns in 2021.
•Interest Expense increased $21 million primarily due to an increase in long-term debt balances and Advances from Affiliates.
•Income Tax Expense decreased $53 million primarily due to a $42 million increase in PTCs related to enacted legislation under the IRA and additional capital investment in tax-credit eligible property and a $6 million decrease due to a decrease in pretax book income. The increase in PTCs was partially offset in Retail Margins above.

205

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
Public Service Company of Oklahoma

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Public Service Company of Oklahoma (the “Company”) as of December 31, 2022 and 2021 and the related statements of income, of comprehensive income (loss), of changes in common shareholder’s equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

206

Accounting for the Effects of Cost-Based Regulation

As described in Notes 1 and 5 to the financial statements, the Company's financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated. As of December 31, 2022, there were $832 million of deferred costs included in regulatory assets, $26 million of which were pending final regulatory approval, and $809 million of regulatory liabilities awaiting potential refund or future rate reduction, $51 million of which were pending final regulatory determination. Regulatory assets (deferred expenses) and regulatory liabilities (deferred future revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and matching income with its passage to customers in cost-based regulated rates. Management reviews the probability of recovery of regulatory assets and refund of regulatory liabilities at each balance sheet date and whenever new events occur, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of cost-based regulation is a critical audit matter are the significant judgment by management in the ongoing evaluation of the recovery of regulatory assets and refund of regulatory liabilities, and in applying guidance contained in rate orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of new events, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation, including the probability of recovery of regulatory assets and refund of regulatory liabilities. These procedures also included, among others, evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities. Testing of regulatory assets and liabilities, involved evaluating the provisions and formulas outlined in rate orders, other regulatory correspondence, application of relevant regulatory precedents, and other relevant evidence.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

We have served as the Company's auditor since 2017.
207

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Public Service Company of Oklahoma (PSO) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  PSO’s internal control is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of PSO’s internal control over financial reporting as of December 31, 2022.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).  Based on management’s assessment, management concluded PSO’s internal control over financial reporting was effective as of December 31, 2022.

This annual report does not include an audit report from PricewaterhouseCoopers LLP, PSO’s registered public accounting firm regarding internal control over financial reporting pursuant to the Securities and Exchange Commission rules that permit PSO to provide only management’s report in this annual report.
208

PUBLIC SERVICE COMPANY OF OKLAHOMA
STATEMENTS OF INCOME
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
REVENUES							
Electric Generation, Transmission and Distribution		$	1,865.6 			$	1,465.3 			$	1,246.1 		
Sales to AEP Affiliates		2.9 			4.2 			5.2 		
Other Revenues		6.2 			4.9 			14.8 		
TOTAL REVENUES		1,874.7 			1,474.4 			1,266.1 		
							
EXPENSES							
Purchased Electricity, Fuel and Other Consumables Used for Electric Generation		891.5 			584.3 			443.5 		

Other Operation		400.4 			353.8 			327.3 		
Maintenance		114.4 			97.2 			98.4 		
Depreciation and Amortization		230.1 			196.6 			173.5 		
Taxes Other Than Income Taxes		57.5 			49.6 			47.5 		
TOTAL EXPENSES		1,693.9 			1,281.5 			1,090.2 		
							
OPERATING INCOME		180.8 			192.9 			175.9 		
							
Other Income (Expense):							
Interest Income		7.4 			4.3 			0.1 		
	
Allowance for Equity Funds Used During Construction		1.5 			2.4 			4.0 		
Non-Service Cost Components of Net Periodic Benefit Cost		12.5 			8.5 			8.5 		
Interest Expense		(83.8)			(62.9)			(60.3)		
							
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		118.4 			145.2 			128.2 		
							
Income Tax Expense (Benefit)		(49.2)			4.1 			5.2 		
							
NET INCOME		$	167.6 			$	141.1 			$	123.0 		
							
The common stock of PSO is wholly-owned by Parent.	
							
See Notes to Financial Statements of Registrants beginning on page 228.	

209

PUBLIC SERVICE COMPANY OF OKLAHOMA
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2022, 2021 and 2020
 (in millions)

		Years Ended December 31,	
		2022		2021		2020	
Net Income		$	167.6 			$	141.1 			$	123.0 		
							
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES							
Cash Flow Hedges, Net of Tax of $0.3, $0 and $(0.3) in 2022, 2021 and 2020, Respectively		1.3 			(0.1)			(1.0)		
							
TOTAL COMPREHENSIVE INCOME		$	168.9 			$	141.0 			$	122.0 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	

210

PUBLIC SERVICE COMPANY OF OKLAHOMA
STATEMENTS OF CHANGES IN COMMON SHAREHOLDER’S EQUITY
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

	Common
Stock		Paid-in
Capital		Retained Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total	
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2019	$	157.2 			$	364.0 			$	851.0 			$	1.1 			$	1,373.3 		
										
Capital Contribution of Radial Assets from Parent			50.0 							50.0 		
ASU 2016-13 Adoption					0.3 					0.3 		
	
Net Income					123.0 					123.0 		
Other Comprehensive Loss							(1.0)			(1.0)		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2020	157.2 			414.0 			974.3 			0.1 			1,545.6 		
										
Capital Contribution from Parent			625.0 							625.0 		
	
Common Stock Dividends					(20.0)					(20.0)		
Net Income					141.1 					141.1 		
Other Comprehensive Loss							(0.1)			(0.1)		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2021	157.2 			1,039.0 			1,095.4 			— 			2,291.6 		
										
Capital Contribution from Parent			3.6 							3.6 		
Common Stock Dividends					(45.0)					(45.0)		
	
Net Income					167.6 					167.6 		
Other Comprehensive Income							1.3 			1.3 		
TOTAL COMMON SHAREHOLDER’S EQUITY – DECEMBER 31, 2022	$	157.2 			$	1,042.6 			$	1,218.0 			$	1.3 			$	2,419.1 		
										
See Notes to Financial Statements of Registrants beginning on page 228.	

211

PUBLIC SERVICE COMPANY OF OKLAHOMA
BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

		December 31,	
		2022		2021	
CURRENT ASSETS					
Cash and Cash Equivalents		$	4.0 			$	1.3 		
	
Accounts Receivable:					
Customers		70.1 			41.5 		
Affiliated Companies		52.2 			35.0 		
Miscellaneous		0.8 			0.6 		
	
Total Accounts Receivable		123.1 			77.1 		
Fuel		11.6 			14.5 		
Materials and Supplies		111.1 			56.2 		
Risk Management Assets		25.3 			12.1 		
Accrued Tax Benefits		16.1 			17.6 		
Regulatory Asset for Under-Recovered Fuel Costs		178.7 			194.6 		
Prepayments and Other Current Assets		21.6 			13.4 		
TOTAL CURRENT ASSETS		491.5 			386.8 		
					
PROPERTY, PLANT AND EQUIPMENT					
Electric:					
Generation		2,394.8 			1,802.4 		
Transmission		1,164.4 			1,107.7 		
Distribution		3,216.4 			3,004.9 		
Other Property, Plant and Equipment		469.3 			437.0 		
Construction Work in Progress		219.3 			156.0 		
Total Property, Plant and Equipment		7,464.2 			6,508.0 		
Accumulated Depreciation and Amortization		1,837.7 			1,705.2 		
TOTAL PROPERTY, PLANT AND EQUIPMENT – NET		5,626.5 			4,802.8 		
					
OTHER NONCURRENT ASSETS					
Regulatory Assets		653.7 			1,037.4 		
	
Employee Benefits and Pension Assets		67.3 			95.2 		
Operating Lease Assets		106.1 			68.9 		
Deferred Charges and Other Noncurrent Assets		20.8 			7.9 		
TOTAL OTHER NONCURRENT ASSETS		847.9 			1,209.4 		
					
TOTAL ASSETS		$	6,965.9 			$	6,399.0 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	

212

PUBLIC SERVICE COMPANY OF OKLAHOMA
BALANCE SHEETS
LIABILITIES AND COMMON SHAREHOLDER’S EQUITY
December 31, 2022 and 2021

		December 31,	
		2022		2021	
		(in millions)	
CURRENT LIABILITIES					
Advances from Affiliates		$	364.2 			$	72.3 		
Accounts Payable:					
General		202.9 			157.4 		
Affiliated Companies		76.7 			51.0 		
Long-term Debt Due Within One Year – Nonaffiliated		0.5 			125.5 		
	
Customer Deposits		59.0 			56.2 		
Accrued Taxes		28.7 			27.0 		
	
Obligations Under Operating Leases		8.9 			6.9 		

Other Current Liabilities		101.8 			66.4 		
TOTAL CURRENT LIABILITIES		842.7 			562.7 		
					
NONCURRENT LIABILITIES					
Long-term Debt – Nonaffiliated		1,912.3 			1,788.0 		
Deferred Income Taxes		788.6 			782.3 		
Regulatory Liabilities and Deferred Investment Tax Credits		809.1 			835.3 		
Asset Retirement Obligations		73.5 			57.5 		
	
Obligations Under Operating Leases		99.3 			62.2 		
Deferred Credits and Other Noncurrent Liabilities		21.3 			19.4 		
TOTAL NONCURRENT LIABILITIES		3,704.1 			3,544.7 		
					
TOTAL LIABILITIES		4,546.8 			4,107.4 		
					
Rate Matters (Note 4)					
Commitments and Contingencies (Note 6)					
					
COMMON SHAREHOLDER’S EQUITY					
Common Stock – Par Value – $15 Per Share:					
Authorized – 11,000,000 Shares					
Issued – 10,482,000 Shares					
Outstanding – 9,013,000 Shares		157.2 			157.2 		
Paid-in Capital		1,042.6 			1,039.0 		
Retained Earnings		1,218.0 			1,095.4 		
Accumulated Other Comprehensive Income (Loss)		1.3 			— 		
TOTAL COMMON SHAREHOLDER’S EQUITY		2,419.1 			2,291.6 		
					
TOTAL LIABILITIES AND COMMON SHAREHOLDER’S EQUITY		$	6,965.9 			$	6,399.0 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	

213

PUBLIC SERVICE COMPANY OF OKLAHOMA
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
OPERATING ACTIVITIES							
Net Income		$	167.6 			$	141.1 			$	123.0 		
Adjustments to Reconcile Net Income to Net Cash Flows from (Used for) Operating Activities:							
Depreciation and Amortization		230.1 			196.6 			173.5 		
Deferred Income Taxes		(59.4)			113.9 			17.0 		
	
Allowance for Equity Funds Used During Construction		(1.5)			(2.4)			(4.0)		
Mark-to-Market of Risk Management Contracts		(13.7)			1.9 			5.5 		

Deferred Fuel Over/Under-Recovery, Net		442.4 			(843.8)			(94.0)		

Change in Other Noncurrent Assets		(35.4)			(18.3)			(17.9)		
Change in Other Noncurrent Liabilities		29.9 			4.4 			1.6 		
Changes in Certain Components of Working Capital:							
Accounts Receivable, Net		(46.0)			(28.7)			1.4 		
Fuel, Materials and Supplies		(51.1)			1.4 			(14.1)		
Accounts Payable		57.5 			34.2 			(29.5)		
Accrued Taxes, Net		3.2 			(6.5)			3.6 		
Other Current Assets		(6.3)			(6.3)			4.6 		
Other Current Liabilities		30.4 			(20.8)			(13.7)		
Net Cash Flows from (Used for) Operating Activities		747.7 			(433.3)			157.0 		
							
INVESTING ACTIVITIES							
Construction Expenditures		(447.0)			(332.1)			(337.9)		
Change in Advances to Affiliates, Net		— 			— 			38.8 		
Acquisition of the North Central Wind Energy Facilities		(549.3)			(297.0)			— 		
Other Investing Activities		4.3 			2.4 			4.0 		
Net Cash Flows Used for Investing Activities		(992.0)			(626.7)			(295.1)		
							
FINANCING ACTIVITIES							
Capital Contribution from Parent		3.6 			625.0 			— 		
Issuance of Long-term Debt – Nonaffiliated		499.7 			1,290.0 			— 		
Change in Advances from Affiliates, Net		291.9 			(83.1)			155.4 		
Retirement of Long-term Debt – Nonaffiliated		(500.5)			(750.5)			(13.2)		
	
Principal Payments for Finance Lease Obligations		(3.2)			(3.2)			(3.5)		
Dividends Paid on Common Stock		(45.0)			(20.0)			— 		
Other Financing Activities		0.5 			0.5 			0.5 		
Net Cash Flows from Financing Activities		247.0 			1,058.7 			139.2 		
							
Net Increase (Decrease) in Cash and Cash Equivalents		2.7 			(1.3)			1.1 		
Cash and Cash Equivalents at Beginning of Period		1.3 			2.6 			1.5 		
Cash and Cash Equivalents at End of Period		$	4.0 			$	1.3 			$	2.6 		
							
SUPPLEMENTARY INFORMATION							
Cash Paid for Interest, Net of Capitalized Amounts		$	79.7 			$	57.0 			$	59.1 		
Net Cash Paid (Received) for Income Taxes		(12.5)			(102.9)			(11.8)		
Noncash Acquisitions Under Finance Leases		2.8 			3.6 			3.2 		
Construction Expenditures Included in Current Liabilities as of December 31,		69.8 			56.8 			35.5 		
Noncash Contribution of Radial Assets from Parent		— 			— 			50.0 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	

214

SOUTHWESTERN ELECTRIC POWER COMPANY CONSOLIDATED

215

SOUTHWESTERN ELECTRIC POWER COMPANY CONSOLIDATED
MANAGEMENT’S NARRATIVE DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

KWh Sales/Degree Days

Summary of KWh Energy Sales	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in millions of KWhs)	
Retail:						
Residential	6,538 			6,205 			5,988 		
Commercial	5,732 			5,489 			5,296 		
Industrial	5,174 			4,682 			4,891 		
Miscellaneous	75 			77 			79 		
Total Retail	17,519 			16,453 			16,254 		
						
Wholesale	6,714 			6,704 			5,838 		
						
Total KWhs	24,233 			23,157 			22,092 		

Heating degree days and cooling degree days are metrics commonly used in the utility industry as a measure of the impact of weather on revenues.

Summary of Heating and Cooling Degree Days	
						
	Years Ended December 31,	
	2022		2021		2020	
	(in degree days)	
Actual – Heating (a)	1,149 			981 			862 		
Normal – Heating (b)	1,170 			1,177 			1,181 		
						
Actual – Cooling (c)	2,833 			2,543 			2,165 		
Normal – Cooling (b)	2,333 			2,328 			2,333 		

(a)Heating degree days are calculated on a 55 degree temperature base.
(b)Normal Heating/Cooling represents the thirty-year average of degree days.
(c)Cooling degree days are calculated on a 65 degree temperature base.

216

2022 Compared to 2021

Reconciliation of Year Ended December 31, 2021 to Year Ended December 31, 2022
Earnings Attributable to SWEPCo Common Shareholder
(in millions)

Year Ended December 31, 2021		$	239.0 		
			
Changes in Gross Margin:			
Retail Margins (a)		122.5 		
Margins from Off-system Sales		(10.5)		
Transmission Revenues		21.6 		
Other Revenues		0.5 		
Total Change in Gross Margin		134.1 		
			
Changes in Expenses and Other:			
Other Operation and Maintenance		(76.3)		
Asset Impairments and Other Related Charges		11.6 		
Depreciation and Amortization		(29.8)		
Taxes Other Than Income Taxes		(9.1)		
Interest Income		8.5 		
Allowance for Equity Funds Used During Construction		(2.1)		
Non-Service Cost Components of Net Periodic Benefit Cost		4.2 		
Interest Expense		(11.5)		
Total Change in Expenses and Other		(104.5)		
			
Income Tax Benefit		24.6 		
Equity Earnings of Unconsolidated Subsidiary		(2.0)		
Net Income Attributable to Noncontrolling Interest		(1.1)		
			
Year Ended December 31, 2022		$	290.1 		

(a)Includes firm wholesale sales to municipals and cooperatives.

The major components of the increase in Gross Margin, defined as revenues less the related direct cost of fuel, including consumption of chemicals and emissions allowances, and purchased electricity were as follows:

•Retail Margins increased $123 million primarily due to the following:
•A $102 million increase primarily due to base rate revenue increases in Texas and Arkansas and rider increases in all retail jurisdictions. These increases were partially offset in other expense items below.
•A $31 million increase in weather-related usage primarily due to an 11% increase in cooling degree days and a 17% increase in heating degree days.
•A $15 million increase in weather-normalized margins primarily in the residential and commercial classes, partially offset by the industrial class.
These increases were partially offset by:
•A $19 million decrease due to the NCWF PTC benefits provided to customers through fuel clause mechanisms. This decrease was partially offset in Income Tax Benefit below.
•A $6 million decrease in municipal and cooperative revenues primarily due to the February 2021 severe winter weather event.
•Margins from Off-system Sales decreased $11 million due to a decrease in Turk Plant merchant sales primarily driven by the February 2021 severe winter weather event.
•Transmission Revenues increased $22 million primarily due to continued investment in transmission assets and increased load.

217

Expenses and Other and Income Tax Benefit changed between years as follows:

•Other Operation and Maintenance expenses increased $76 million primarily due to the following:
•A $12 million increase in transmission expenses primarily due to the following:
•A $13 million increase due to increased transmission investment and load.
•A $9 million increase in recoverable SPP transmission expenses. This increase was offset in Retail Margins above.
•A $3 million increase in employee-related expenses.
These increases were partially offset by:
•An $8 million decrease due to the implementation of a rider mechanism in Arkansas.
•A $5 million decrease in transmission formula rate true-up activity.
•A $12 million increase in generation expenses primarily driven by the NCWF.
•A $10 million increase in distribution expenses primarily due to vegetation management and storm restoration expenses.
•A $9 million increase due to a charitable contribution to the AEP Foundation.
•An $8 million increase in administrative and general expenses primarily due to regulatory fees and employee-related expenses.
•A $7 million increase due to pre-construction costs associated with various renewable projects.
•A $6 million increase due to energy efficiency programs. This increase was offset in Retail Margins above.
•Asset Impairments and Other Related Charges decreased $12 million due to the prior year partial regulatory disallowance of SWEPCo’s investment in the Dolet Hills Power Station as a result of an order received in the 2020 Texas Base Rate Case.
•Depreciation and Amortization expenses increased $30 million primarily due to the implementation of new rates in Arkansas and Texas and a higher depreciable base. This increase was partially offset in Retail Margins above.
•Taxes Other Than Income Taxes increased $9 million primarily due to increased property taxes driven by the investment in the NCWF.
•Interest Income increased $9 million primarily related to carrying charges on regulatory assets resulting from the February 2021 severe winter weather event.
•Non-Service Cost Components of Net Periodic Benefit Cost decreased $4 million primarily due to an increase in discount rates, an increase in the expected return on plan assets and favorable plan returns in 2021.
•Interest Expense increased $12 million primarily due to an increase in long-term debt balances and Advances from Affiliates.
•Income Tax Benefit increased $25 million primarily due to the following:
•A $50 million increase in PTCs related to enacted legislation under the IRA and additional capital investment in tax-credit eligible property. This increase was partially offset in Retail Margins above.
These increases were partially offset by:
•A $16 million decrease in amortization of Excess ADIT.
•A $6 million decrease due to an increase in pretax book income.

218

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
Southwestern Electric Power Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Southwestern Electric Power Company and its subsidiaries (the “Company”) as of December 31, 2022 and 2021 and the related consolidated statements of income, of comprehensive income (loss), of changes in equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

219

Accounting for the Effects of Cost-Based Regulation

As described in Notes 1 and 5 to the consolidated financial statements, the Company's consolidated financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated. As of December 31, 2022, there were $1,395 million of deferred costs included in regulatory assets, $510 million of which were pending final regulatory approval, and $827 million of regulatory liabilities awaiting potential refund or future rate reduction, $7 million of which were pending final regulatory determination. Regulatory assets (deferred expenses) and regulatory liabilities (deferred future revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and matching income with its passage to customers in cost-based regulated rates. Management reviews the probability of recovery of regulatory assets and refund of regulatory liabilities at each balance sheet date and whenever new events occur, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of cost-based regulation is a critical audit matter are the significant judgment by management in the ongoing evaluation of the recovery of regulatory assets and refund of regulatory liabilities, and in applying guidance contained in rate orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of new events, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation, including the probability of recovery of regulatory assets and refund of regulatory liabilities. These procedures also included, among others, evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities. Testing of regulatory assets and liabilities, involved evaluating the provisions and formulas outlined in rate orders, other regulatory correspondence, application of relevant regulatory precedents, and other relevant evidence.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

We have served as the Company's auditor since 2017.
220

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Southwestern Electric Power Company Consolidated (SWEPCo) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  SWEPCo’s internal control is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of SWEPCo’s internal control over financial reporting as of December 31, 2022.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).  Based on management’s assessment, management concluded SWEPCo’s internal control over financial reporting was effective as of December 31, 2022.

This annual report does not include an audit report from PricewaterhouseCoopers LLP, SWEPCo’s registered public accounting firm regarding internal control over financial reporting pursuant to the Securities and Exchange Commission rules that permit SWEPCo to provide only management’s report in this annual report.
221

SOUTHWESTERN ELECTRIC POWER COMPANY CONSOLIDATED
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
REVENUES							
Electric Generation, Transmission and Distribution		$	2,228.6 			$	2,088.9 			$	1,696.6 		
Sales to AEP Affiliates		59.5 			41.4 			41.0 		
Provision for Refund - Affiliated		(5.6)			(0.4)			(2.0)		
Other Revenues		1.9 			1.9 			2.9 		
TOTAL REVENUES		2,284.4 			2,131.8 			1,738.5 		
							
EXPENSES							
Purchased Electricity, Fuel and Other Consumables Used for Electric Generation		889.5 			871.0 			604.5 		

Other Operation		424.7 			360.3 			338.3 		
Maintenance		148.6 			136.7 			129.7 		
Asset Impairments and Other Related Charges		— 			11.6 			— 		
Depreciation and Amortization		324.8 			295.0 			272.7 		
Taxes Other Than Income Taxes		126.8 			117.7 			102.8 		
TOTAL EXPENSES		1,914.4 			1,792.3 			1,448.0 		
							
OPERATING INCOME		370.0 			339.5 			290.5 		
							
Other Income (Expense):							
Interest Income		17.7 			9.2 			2.1 		
Allowance for Equity Funds Used During Construction		4.9 			7.0 			7.7 		
Non-Service Cost Components of Net Periodic Benefit Cost		12.5 			8.3 			8.4 		
Interest Expense		(137.4)			(125.9)			(118.5)		
							
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY EARNINGS		267.7 			238.1 			190.2 		
							
Income Tax Expense (Benefit)		(25.2)			(0.6)			9.4 		
Equity Earnings of Unconsolidated Subsidiary		1.4 			3.4 			2.9 		
							
NET INCOME		294.3 			242.1 			183.7 		
							
Net Income Attributable to Noncontrolling Interest		4.2 			3.1 			2.9 		

	

EARNINGS ATTRIBUTABLE TO SWEPCo COMMON SHAREHOLDER		$	290.1 			$	239.0 			$	180.8 		
							
The common stock of SWEPCo is wholly-owned by Parent.	
							
See Notes to Financial Statements of Registrants beginning on page 228.	
222

SOUTHWESTERN ELECTRIC POWER COMPANY CONSOLIDATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2022, 2021 and 2020
 (in millions)

		Years Ended December 31,	
		2022		2021		2020	
Net Income		$	294.3 			$	242.1 			$	183.7 		
							
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES							
Cash Flow Hedges, Net of Tax of $0, $0.4 and $0.4 in 2022, 2021 and 2020, Respectively		(0.1)			1.5 			1.5 		
Amortization of Pension and OPEB Deferred Costs, Net of Tax of $(0.4), $(0.4) and $(0.4) in 2022, 2021 and 2020, Respectively		(1.6)			(1.6)			(1.5)		
Pension and OPEB Funded Status, Net of Tax of $(2.5), $1.3 and $0.9 in 2022, 2021 and 2020, Respectively		(9.2)			4.9 			3.2 		
							
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		(10.9)			4.8 			3.2 		
							
TOTAL COMPREHENSIVE INCOME		283.4 			246.9 			186.9 		
							
Total Comprehensive Income Attributable to Noncontrolling Interest		4.2 			3.1 			2.9 		
							
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO SWEPCo COMMON SHAREHOLDER		$	279.2 			$	243.8 			$	184.0 		
							
See Notes to Financial Statements of Registrants beginning on page 228.	
223

SOUTHWESTERN ELECTRIC POWER COMPANY CONSOLIDATED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

	SWEPCo Common Shareholder					
	Common
Stock		Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Noncontrolling
Interest		Total	
TOTAL EQUITY – DECEMBER 31, 2019	$	135.7 			$	676.6 			$	1,629.5 			$	(1.3)			$	0.6 			$	2,441.1 		
												
Reverse Common Stock Split (a)	(135.6)			135.6 									— 		
	
Common Stock Dividends – Nonaffiliated									(1.9)			(1.9)		
ASU 2016-03 Adoption					1.6 							1.6 		
	
Net Income					180.8 					2.9 			183.7 		
Other Comprehensive Income							3.2 					3.2 		
	
TOTAL EQUITY – DECEMBER 31, 2020	0.1 			812.2 			1,811.9 			1.9 			1.6 			2,627.7 		

Capital Contribution from Parent			280.0 									280.0 		
	
Common Stock Dividends – Nonaffiliated									(4.8)			(4.8)		
	
Net Income					239.0 					3.1 			242.1 		
Other Comprehensive Income							4.8 					4.8 		
TOTAL EQUITY – DECEMBER 31, 2021	0.1 			1,092.2 			2,050.9 			6.7 			(0.1)			3,149.8 		

Capital Contribution from Parent			350.0 									350.0 		
Common Stock Dividends					(105.0)							(105.0)		
Common Stock Dividends – Nonaffiliated									(3.4)			(3.4)		
	
Net Income					290.1 					4.2 			294.3 		
Other Comprehensive Loss							(10.9)					(10.9)		
TOTAL EQUITY – DECEMBER 31, 2022	$	0.1 			$	1,442.2 			$	2,236.0 			$	(4.2)			$	0.7 			$	3,674.8 		
												
(a) In August 2020, SWEPCo executed a reverse stock split with each 2,048 shares of common stock issued and outstanding being combined into one share of common stock. The common stock of SWEPCo is wholly-owned by Parent.	
												
See Notes to Financial Statements of Registrants beginning on page 228.	
224

SOUTHWESTERN ELECTRIC POWER COMPANY CONSOLIDATED
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

		December 31,	
		2022		2021	
CURRENT ASSETS					
Cash and Cash Equivalents
(December 31, 2022 and 2021 Amounts Include $84.2 and $49.9, Respectively, Related to Sabine)		$	88.4 			$	51.2 		
Advances to Affiliates		2.1 			155.9 		
Accounts Receivable:					
Customers		38.8 			35.8 		
Affiliated Companies		65.4 			38.3 		
Miscellaneous		10.4 			12.3 		
	
Total Accounts Receivable		114.6 			86.4 		
Fuel
(December 31, 2022 and 2021 Amounts Include $14.2 and $13.1, Respectively, Related to Sabine)		81.3 			82.2 		
Materials and Supplies
(December 31, 2022 and 2021 Amounts Include $4.2 and $12, Respectively, Related to Sabine)		92.1 			81.9 		
Risk Management Assets		16.4 			9.8 		
	
Accrued Tax Benefits		16.5 			17.8 		
Regulatory Asset for Under-Recovered Fuel Costs		353.0 			143.9 		
Prepayments and Other Current Assets		47.8 			39.4 		
TOTAL CURRENT ASSETS		812.2 			668.5 		
					
PROPERTY, PLANT AND EQUIPMENT					
Electric:					
Generation		5,476.2 			4,734.5 		
Transmission		2,479.8 			2,316.9 		
Distribution		2,659.6 			2,514.3 		
Other Property, Plant and Equipment
(December 31, 2022 and 2021 Amounts Include $219.8 and $219.9, Respectively, Related to Sabine)		804.4 			764.0 		
Construction Work in Progress		369.5 			240.7 		
Total Property, Plant and Equipment		11,789.5 			10,570.4 		
Accumulated Depreciation and Amortization
(December 31, 2022 and 2021 Amounts Include $212.5 and $168.1, Respectively, Related to Sabine)		3,527.3 			3,170.3 		
TOTAL PROPERTY, PLANT AND EQUIPMENT – NET		8,262.2 			7,400.1 		
					
OTHER NONCURRENT ASSETS					
Regulatory Assets		1,042.4 			1,005.3 		
Deferred Charges and Other Noncurrent Assets		262.0 			251.8 		
TOTAL OTHER NONCURRENT ASSETS		1,304.4 			1,257.1 		
					
TOTAL ASSETS		$	10,378.8 			$	9,325.7 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	
225

SOUTHWESTERN ELECTRIC POWER COMPANY CONSOLIDATED
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
December 31, 2022 and 2021

		December 31,	
		2022		2021	
		(in millions)	
CURRENT LIABILITIES					
Advances from Affiliates		$	310.7 			$	— 		
Accounts Payable:					
General		213.1 			163.6 		
Affiliated Companies		81.7 			61.4 		
	
Long-term Debt Due Within One Year – Nonaffiliated		6.2 			6.2 		
Risk Management Liabilities		1.4 			2.1 		
Customer Deposits		65.4 			62.4 		
Accrued Taxes		52.8 			44.3 		
Accrued Interest		36.0 			36.0 		
	
Obligations Under Operating Leases		8.4 			8.1 		
	
Other Current Liabilities		172.0 			154.6 		
TOTAL CURRENT LIABILITIES		947.7 			538.7 		
					
NONCURRENT LIABILITIES					
Long-term Debt – Nonaffiliated		3,385.4 			3,389.0 		
	
Deferred Income Taxes		1,089.7 			1,087.6 		
Regulatory Liabilities and Deferred Investment Tax Credits		825.7 			806.9 		
Asset Retirement Obligations		237.2 			192.7 		
Employee Benefits and Pension Obligations		29.7 			20.3 		
	
Obligations Under Operating Leases		120.2 			77.7 		
Deferred Credits and Other Noncurrent Liabilities		68.4 			63.0 		
TOTAL NONCURRENT LIABILITIES		5,756.3 			5,637.2 		
					
TOTAL LIABILITIES		6,704.0 			6,175.9 		
					
Rate Matters (Notes 4)					
Commitments and Contingencies (Note 6)					
					
EQUITY					
Common Stock – Par Value – $18 Per Share:					
Authorized – 3,680 Shares					
Outstanding – 3,680 Shares		0.1 			0.1 		
Paid-in Capital		1,442.2 			1,092.2 		
Retained Earnings		2,236.0 			2,050.9 		
Accumulated Other Comprehensive Income (Loss)		(4.2)			6.7 		
TOTAL COMMON SHAREHOLDER’S EQUITY		3,674.1 			3,149.9 		
					
Noncontrolling Interest		0.7 			(0.1)		
					
TOTAL EQUITY		3,674.8 			3,149.8 		
					
TOTAL LIABILITIES AND EQUITY		$	10,378.8 			$	9,325.7 		
					
See Notes to Financial Statements of Registrants beginning on page 228.	
226

SOUTHWESTERN ELECTRIC POWER COMPANY CONSOLIDATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

		Years Ended December 31,	
		2022		2021		2020	
OPERATING ACTIVITIES							
Net Income		$	294.3 			$	242.1 			$	183.7 		
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:							
Depreciation and Amortization		324.8 			295.0 			272.7 		
Deferred Income Taxes		9.4 			16.6 			32.4 		
Asset Impairments and Other Related Charges		— 			11.6 			— 		
Allowance for Equity Funds Used During Construction		(4.9)			(7.0)			(7.7)		
Mark-to-Market of Risk Management Contracts		(6.2)			(7.3)			(0.1)		
Pension Contributions to Qualified Plan Trust		— 			— 			(8.9)		
Deferred Fuel Over/Under-Recovery, Net		(86.4)			(546.4)			26.3 		
Change in Regulatory Assets		7.6 			(95.6)			(108.4)		
Change in Other Noncurrent Assets		42.9 			41.9 			16.1 		
Change in Other Noncurrent Liabilities		18.3 			(1.1)			25.2 		
Changes in Certain Components of Working Capital:							
Accounts Receivable, Net		(28.2)			(21.5)			7.3 		
Fuel, Materials and Supplies		(9.3)			126.5 			(46.4)		
Accounts Payable		34.1 			22.0 			11.1 		
Accrued Taxes, Net		9.8 			15.4 			(23.1)		
Other Current Assets		(9.8)			(3.6)			(2.8)		
Other Current Liabilities		(9.8)			8.2 			(21.1)		
Net Cash Flows from Operating Activities		586.6 			96.8 			356.3 		
							
INVESTING ACTIVITIES							
Construction Expenditures		(586.4)			(414.6)			(402.7)		
Change in Advances to Affiliates, Net		153.8 			(153.8)			— 		
Acquisition of the North Central Wind Energy Facilities		(658.0)			(355.8)			— 		

Other Investing Activities		5.5 			3.5 			10.1 		
Net Cash Flows Used for Investing Activities		(1,085.1)			(920.7)			(392.6)		
							
FINANCING ACTIVITIES							
Capital Contribution from Parent		350.0 			280.0 			— 		
Issuance of Long-term Debt – Nonaffiliated		— 			1,137.6 			— 		
Change in Short-term Debt – Nonaffiliated		— 			(35.0)			16.7 		
Change in Advances from Affiliates, Net		310.7 			(124.6)			64.7 		
Retirement of Long-term Debt – Nonaffiliated		(6.2)			(381.2)			(21.2)		

Principal Payments for Finance Lease Obligations		(10.8)			(10.9)			(10.9)		
Dividends Paid on Common Stock		(105.0)			— 			— 		
Dividends Paid on Common Stock – Nonaffiliated		(3.4)			(4.8)			(1.9)		
	
Other Financing Activities		0.4 			0.8 			0.5 		
Net Cash Flows from Financing Activities		535.7 			861.9 			47.9 		
							
Net Increase in Cash and Cash Equivalents		37.2 			38.0 			11.6 		
Cash and Cash Equivalents at Beginning of Period		51.2 			13.2 			1.6 		
Cash and Cash Equivalents at End of Period		$	88.4 			$	51.2 			$	13.2 		
							
SUPPLEMENTARY INFORMATION							
Cash Paid for Interest, Net of Capitalized Amounts		$	131.2 			$	116.5 			$	110.7 		
Net Cash Paid (Received) for Income Taxes		(29.1)			(28.8)			4.3 		
Noncash Acquisitions Under Finance Leases		3.6 			4.8 			8.9 		
Construction Expenditures Included in Current Liabilities as of December 31,		105.6 			69.0 			46.0 		

							
See Notes to Financial Statements of Registrants beginning on page 228.	
227

INDEX OF NOTES TO FINANCIAL STATEMENTS OF REGISTRANTS

The notes to financial statements are a combined presentation for the Registrants. The following list indicates Registrants to which the notes apply. Specific disclosures within each note apply to all Registrants unless indicated otherwise.

Note		Registrant		Page
Number	
					
Organization and Summary of Significant Accounting Policies		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		229	
New Accounting Standards		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		246	
Comprehensive Income		AEP, AEP Texas, APCo, I&M, PSO, SWEPCo		247	
Rate Matters		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		254	
Effects of Regulation		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		265	
Commitments, Guarantees and Contingencies		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		284	
Acquisitions, Assets and Liabilities Held for Sale, Dispositions and Impairments		AEP, AEP Texas, AEPTCo, PSO, SWEPCo		292	
Benefit Plans		AEP, AEP Texas, APCo, I&M, OPCo, PSO, SWEPCo		299	
Business Segments		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		322	
Derivatives and Hedging		AEP, AEP Texas, APCo, I&M, OPCo, PSO, SWEPCo		327	
Fair Value Measurements		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		342	
Income Taxes		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		357	
Leases		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		369	
Financing Activities		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		375	
Stock-based Compensation		AEP		386	
Related Party Transactions		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		391	
Variable Interest Entities and Equity Method Investments		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		399	
Property, Plant and Equipment		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		410	
Revenue from Contracts with Customers		AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO, SWEPCo		417	
Goodwill		AEP		426	
Subsequent Events		AEP		427	

228

1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The disclosures in this note apply to all Registrants unless indicated otherwise.

ORGANIZATION

The Registrants engage in the generation, transmission and distribution of electric power.  The Registrant Subsidiaries that conduct most of these activities are regulated by the FERC under the Federal Power Act and the Energy Policy Act of 2005 and maintain accounts in accordance with the FERC and other regulatory guidelines.  Most of these companies are subject to further regulation with regard to rates and other matters by state regulatory commissions.

AEP provides competitive electric and gas supply for residential, commercial and industrial customers in deregulated electricity markets and also provides energy management solutions throughout the United States, including energy efficiency services through its independent retail electric supplier.

The Registrants also engage in wholesale electricity, natural gas and other commodity marketing and risk management activities in the United States and provide various energy-related services.  In addition, AEP operates competitive wind and solar farms. I&M provides barging services to both affiliated and nonaffiliated companies.  SWEPCo, through Sabine, conducts lignite mining operations to fuel the Pirkey Plant.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Rates and Service Regulation

AEP’s public utility subsidiaries’ rates are regulated by the FERC and state regulatory commissions in the eleven state operating territories in which they operate.  The FERC also regulates the Registrants’ affiliated transactions, including AEPSC intercompany service billings which are generally at cost, under the 2005 Public Utility Holding Company Act and the Federal Power Act.  The FERC also has jurisdiction over certain issuances and acquisitions of securities of the public utility subsidiaries, the acquisition or sale of certain utility assets and mergers with another electric utility or holding company.  The state regulatory commissions also regulate certain intercompany transactions under various orders and affiliate statutes.  Both the FERC and state regulatory commissions are permitted to review and audit the relevant books and records of companies within a public utility holding company system.

The FERC regulates wholesale power markets and wholesale power transactions.  The Registrants’ wholesale power transactions are generally market-based.  Wholesale power transactions are cost-based regulated when a cost-based contract is negotiated and filed with the FERC or the FERC determines that the Registrants have “market power” in the region where the transaction occurs.  Wholesale power supply contracts have been entered into with various municipalities and cooperatives that are FERC-regulated, cost-based contracts.  These contracts are generally formula rate mechanisms, which are trued-up to actual costs annually.  

The state regulatory commissions regulate all of the retail distribution operations and rates of the Registrants’ retail public utility subsidiaries on a cost basis.  The state regulatory commissions also regulate the retail generation/power supply operations and rates except in Ohio and the ERCOT region of Texas.  For generation in Ohio, customers who have not switched to a CRES provider for generation pay market-based auction rates.  In addition, all OPCo distribution customers continue to pay for certain legacy deferred generation-related costs through PUCO approved riders.  In the ERCOT region of Texas, the generation/supply business is under customer choice and market pricing is conducted by REPs. AEP has one active REP in ERCOT. AEP’s nonregulated subsidiaries enter into short and long-term wholesale transactions to buy or sell capacity, energy and ancillary services in the ERCOT market. In addition, these nonregulated subsidiaries control certain wind assets, the power from which is marketed and sold in ERCOT.

229

The FERC also regulates the Registrants’ wholesale transmission operations and rates.  Retail transmission rates are based upon the FERC OATT rate when retail rates are unbundled in connection with restructuring.  Retail transmission rates are based on formula rates included in the PJM OATT that are cost-based and are unbundled in Ohio for OPCo, in Virginia for APCo and in Michigan for I&M. AEP Texas’ retail transmission rates in Texas are unbundled but the retail transmission rates are regulated, on a cost basis, by the PUCT. Bundled retail transmission rates are regulated, on a cost basis, by the state commissions. Transmission rates for AEPTCo’s seven wholly-owned transmission subsidiaries within the AEP Transmission Holdco segment are based on formula rates included in the applicable RTO’s OATT that are cost-based.

In West Virginia, APCo and WPCo provide retail electric service at bundled rates approved by the WVPSC, with rates set on a combined cost-of-service basis.

In addition, the FERC regulates the SIA, Operating Agreement, TA and TCA, all of which allocate shared system costs and revenues among the utility subsidiaries that are parties to each agreement.  The FERC also regulates the PCA. See Note 16 - Related Party Transactions for additional information.

Principles of Consolidation

AEP’s consolidated financial statements include its wholly-owned subsidiaries and VIEs, of which AEP is the primary beneficiary. The consolidated financial statements for AEP Texas include the Registrant Subsidiary, its wholly-owned subsidiaries, Transition Funding (consolidated VIEs) and Restoration Funding (a consolidated VIE). The consolidated financial statements for APCo include the Registrant Subsidiary, its wholly-owned subsidiaries and Appalachian Consumer Rate Relief Funding (a consolidated VIE).  The consolidated financial statements for I&M include the Registrant Subsidiary, its wholly-owned subsidiaries and DCC Fuel (consolidated VIEs).  The consolidated financial statements for SWEPCo include the Registrant Subsidiary, its wholly-owned subsidiary and Sabine (a consolidated VIE).  Intercompany items are eliminated in consolidation.  

The equity method of accounting is used for equity investments where the Registrants exercise significant influence but do not hold a controlling financial interest.  Such investments are initially recorded at cost in Deferred Charges and Other Noncurrent Assets on the balance sheets. The proportionate share of the investee’s equity earnings or losses is included in Equity Earnings of Unconsolidated Subsidiaries on the statements of income.

AEP, I&M, PSO and SWEPCo have undivided ownership interests in generating units that are jointly-owned.  The proportionate share of the operating costs associated with such facilities is included on the income statements and the assets and liabilities are reflected on the balance sheets.  See Note 17 - Variable Interest Entities and Equity Method Investments and Note 18 - Property, Plant and Equipment for additional information. In October 2020, AEP Texas, PSO and a nonaffiliated joint-owner executed an Environmental Liability and Property Transfer and Asset Purchase Agreement with a nonaffiliated third-party related to the Oklaunion Power Station site. See “Oklaunion Power Station” section of Note 7 for additional information.

Accounting for the Effects of Cost-Based Regulation

The Registrants’ financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated.  In accordance with accounting guidance for “Regulated Operations,” regulatory assets (deferred expenses) and regulatory liabilities (deferred revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and by matching income with its passage to customers in cost-based regulated rates.
230

Use of Estimates

The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  These estimates include, but are not limited to, inventory valuation, allowance for doubtful accounts, goodwill, intangible and long-lived asset impairment, unbilled electricity revenue, valuation of long-term energy contracts, the effects of regulation, long-lived asset recovery, storm costs, the effects of contingencies and certain assumptions made in accounting for pension and postretirement benefits.  The estimates and assumptions used are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financial statements.  Actual results could ultimately differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents include temporary cash investments with original maturities of three months or less.

AEP System Tax Allocation

AEP and subsidiaries join in the filing of a consolidated federal income tax return. Historically, the allocation of the AEP System’s current consolidated federal income tax to the AEP System companies allocated the benefit of current tax loss of the parent company (Parent Company Loss Benefit) to the AEP System subsidiaries through a reduction of current tax expense. In the first quarter of 2022, AEP and subsidiaries changed accounting for the Parent Company Loss Benefit from a reduction of current tax expense to an allocation through equity. The impact of this change was immaterial to the Registrant Subsidiaries’ financial statements. The consolidated NOL of the AEP System is allocated to each company in the consolidated group with taxable loss. With the exception of the allocation of the consolidated AEP System NOL, the loss of the Parent and tax credits, the method of allocation reflects a separate return result for each company in the consolidated group.

Restricted Cash (Applies to AEP, AEP Texas and APCo)

Restricted Cash primarily includes funds held by trustees for the payment of securitization bonds.

Reconciliation of Cash, Cash Equivalents and Restricted Cash

The following tables provide a reconciliation of Cash, Cash Equivalents and Restricted Cash reported within the balance sheets that sum to the total of the same amounts shown on the statement of cash flows:

		December 31, 2022	
		AEP		AEP Texas		APCo	
		(in millions)	
Cash and Cash Equivalents		$	509.4 			$	0.1 			$	7.5 		
Restricted Cash		47.1 			32.7 			14.4 		
Total Cash, Cash Equivalents and Restricted Cash		$	556.5 			$	32.8 			$	21.9 		

		December 31, 2021	
		AEP		AEP Texas		APCo	
		(in millions)	
Cash and Cash Equivalents		$	403.4 			$	0.1 			$	2.5 		
Restricted Cash		48.0 			30.4 			17.6 		
Total Cash, Cash Equivalents and Restricted Cash		$	451.4 			$	30.5 			$	20.1 		

231

Other Temporary Investments (Applies to AEP)

Other Temporary Investments primarily include marketable securities and investments by its protected cell of EIS. These securities have readily determinable fair values and are carried at fair value with changes in fair value recognized in net income.  The cost of securities sold is based on the specific identification or weighted-average cost method. See “Fair Value Measurements of Other Temporary Investments” section of Note 11 for additional information.

Inventory

Fossil fuel inventories are carried at average cost with the exception of AGR, which carries these inventories at the lower of average cost or net realizable value.  Materials and supplies inventories are carried at average cost.

Accounts Receivable

Customer accounts receivable primarily include receivables from wholesale and retail energy customers, receivables from energy contract counterparties related to risk management activities and customer receivables primarily related to other revenue-generating activities.

Revenue is recognized over time as the performance obligations of delivering energy to customers are satisfied.  To the extent that deliveries have occurred but a bill has not been issued, the Registrants accrue and recognize, as Accrued Unbilled Revenues on the balance sheets, an estimate of the revenues for energy delivered since the last billing.

AEP Credit factors accounts receivable on a daily basis, excluding receivables from risk management activities, through purchase agreements with I&M, KGPCo, OPCo, PSO, SWEPCo and a portion of APCo.  Since APCo does not have regulatory authority to sell accounts receivable in its West Virginia regulatory jurisdiction, only a portion of APCo’s accounts receivable are sold to AEP Credit.  AEP Credit has a receivables securitization agreement with bank conduits. Under the securitization agreement, AEP Credit receives financing from bank conduits for the interest in the billed and unbilled receivables they acquire from affiliated utility subsidiaries. See “Securitized Accounts Receivable – AEP Credit” section of Note 14 for additional information.

Allowance for Uncollectible Accounts

Generally, AEP Credit records bad debt expense based upon a 12-month rolling average of bad debt write-offs in proportion to gross accounts receivable purchased from participating AEP subsidiaries. The assessment is performed separately by each participating AEP subsidiary, which inherently contemplates any differences in geographical risk characteristics for the allowance. KPCo terminated selling accounts receivable to AEP Credit in the first quarter of 2022, based on the pending sale to Liberty. As a result of the termination, in the first quarter of 2022, KPCo recorded an allowance for uncollectible accounts on its balance sheet for those receivables no longer sold to AEP Credit. For receivables related to KPCo and APCo’s West Virginia operations, the bad debt reserve is calculated based on a rolling two-year average write-off in proportion to gross accounts receivable. For customer accounts receivables relating to risk management activities, accounts receivables are reviewed for bad debt reserves at a specific counterparty level basis. For AEP Texas, bad debt reserves are calculated using the specific identification of receivable balances greater than 120 days delinquent, and for those balances less than 120 days where the collection is doubtful. For miscellaneous accounts receivable, bad debt expense is recorded based upon a 12-month rolling average of bad debt write-offs in proportion to gross accounts receivable, unless specifically identified. In addition to these processes, management contemplates available current information, as well as any reasonable and supportable forecast information, to determine if allowances for uncollectible accounts should be further adjusted in accordance with the accounting guidance for “Credit Losses.” Management’s assessments contemplate expected losses over the life of the accounts receivable.
232

Concentrations of Credit Risk and Significant Customers (Applies to Registrant Subsidiaries)

APCo, I&M, OPCo, PSO and SWEPCo do not have any significant customers that comprise 10% or more of their operating revenues. AEP Texas had significant transactions with REPs which on a combined basis account for the following percentages of Total Revenues for the years ended December 31 and Accounts Receivable – Customers as of December 31:

Significant Customers of AEP Texas:	 	 					
Reliant Energy, Direct Energy and TXU Energy (a)	 	2022	 	2021	 	2020	
Percentage of Total Revenues	 	45 	%	 	43 	%	 	46 	%	
Percentage of Accounts Receivable – Customers	 	42 	%	 	41 	%	 	40 	%	

(a)In January 2021, NRG Energy, parent company of Reliant Energy, completed a deal to purchase Direct Energy from Centrica.

AEPTCo had significant transactions with AEP Subsidiaries which on a combined basis account for the following percentages of Total Revenues for the years ended December 31 and Total Accounts Receivable as of December 31:

Significant Customers of AEPTCo:							
AEP Subsidiaries		2022	 	2021		2020	
Percentage of Total Revenues		79 	%		79 	%		78 	%	
Percentage of Total Accounts Receivable		72 	%		81 	%		78 	%	

The Registrant Subsidiaries monitor credit levels and the financial condition of their customers on a continuous basis to minimize credit risk.  The regulatory commissions allow recovery in rates for a reasonable level of bad debt costs.  Management believes adequate provisions for credit loss have been made in the accompanying Registrant Subsidiary financial statements.

Renewable Energy Credits (Applies to all Registrants except AEP Texas and AEPTCo)

In regulated jurisdictions, the Registrants record renewable energy credits (RECs) at cost.  For AEP’s competitive generation business, management records RECs at the lower of cost or net realizable value.  The Registrants follow the inventory model for these RECs.  RECs expected to be consumed within one year are reported in Materials and Supplies on the balance sheets.  RECs with expected consumption beyond one year are included in Deferred Charges and Other Noncurrent Assets on the balance sheets. The purchases and sales of RECs are reported in the Operating Activities section of the statements of cash flows. RECs that are consumed to meet applicable state renewable portfolio standards are recorded in Fuel and Other Consumables Used for Electric Generation at an average cost on the statements of income.  The net margin on sales of RECs affects the determination of deferred fuel and REC costs.

Property, Plant and Equipment

Regulated

Electric utility property, plant and equipment for rate-regulated operations are stated at original cost. Additions, major replacements and betterments are added to the plant accounts.  Under the group composite method of depreciation, continuous interim routine replacements of items such as boiler tubes, pumps, motors, etc. result in original cost retirements, less salvage, being charged to accumulated depreciation.  The group composite method of depreciation assumes that on average, asset components are retired at the end of their useful lives and thus there is no gain or loss.  The equipment in each primary electric plant account is identified as a separate group.  The depreciation rates that are established take into account the past history of interim capital replacements and the amount of removal cost incurred and salvage received.  These rates and the related lives are subject to periodic review.  Removal costs accrued are typically recorded as regulatory liabilities when the revenue received for
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removal costs accrued exceeds actual removal costs incurred. The asset removal costs liability is relieved as removal costs are incurred. A regulatory asset balance will occur if actual removal costs incurred exceed accumulated removal costs accrued.

The costs of labor, materials and overhead incurred to operate and maintain plant and equipment are included in operating expenses.

Nuclear fuel, including nuclear fuel in the fabrication phase, is included in Other Property, Plant and Equipment on the balance sheets.

Long-lived assets are required to be tested for impairment when it is determined that the carrying value of the assets may no longer be recoverable or when the assets meet the held-for-sale criteria under the accounting guidance for “Impairment or Disposal of Long-Lived Assets.”  When it becomes probable that an asset in-service or an asset under construction will be abandoned and regulatory cost recovery has been disallowed or is not probable, the cost of that asset shall be written down to its then current estimated fair value, with the change charged to expense, and the asset is removed from plant-in-service or CWIP. The fair value of an asset is the amount at which that asset could be bought or sold in a current transaction between willing parties, as opposed to a forced or liquidation sale.  Quoted market prices in active markets are the best evidence of fair value and are used as the basis for the measurement, if available.  In the absence of quoted prices for identical or similar assets in active markets, fair value is estimated using various internal and external valuation methods including cash flow analysis and appraisals.

Nonregulated

Nonregulated operations generally follow the policies of rate-regulated operations listed above but with the following exceptions.  Property, plant and equipment of nonregulated operations are stated at original cost (or as adjusted for any applicable impairments) plus the original cost of property acquired or constructed since the acquisition, less disposals.  Normal and routine retirements from the plant accounts, net of salvage, are charged to accumulated depreciation for most nonregulated operations under the group composite method of depreciation.  A gain or loss would be recorded if the retirement is not considered an interim routine replacement.  Removal costs are charged to expense.

Allowance for Funds Used During Construction and Interest Capitalization

For regulated operations, AFUDC represents the estimated cost of borrowed and equity funds used to finance construction projects that is capitalized and recovered through depreciation over the service life of regulated electric utility plant.  The Registrants record the equity component of AFUDC in Allowance for Equity Funds Used During Construction and the debt component of AFUDC as a reduction to Interest Expense on the statements of income.  For nonregulated operations, including certain generating assets, interest is capitalized during construction in accordance with the accounting guidance for “Capitalization of Interest.”

Asset Retirement Obligations (Applies to all Registrants except AEPTCo)

The Registrants record ARO in accordance with the accounting guidance for “Asset Retirement and Environmental Obligations” for legal obligations for asbestos removal and for the retirement of certain ash disposal facilities, wind farms, solar farms and certain coal-mining facilities. I&M records ARO for the decommissioning of the Cook Plant. AROs are computed as the present value of the estimated costs associated with the future retirement of an asset and are recorded in the period in which the liability is incurred. Estimates of the timing and amounts of future cash outlays are based on projections of when and how the assets will be decommissioned, inflation, and discount rate, which may change significantly over time. The estimated costs are capitalized as part of the related long-lived asset and depreciated over the asset's useful life. The Registrants have identified, but not recognized, ARO liabilities related to electric transmission and distribution assets as a result of certain easements on property on which assets are owned. Generally, such easements are perpetual and require only the retirement and removal of assets upon the cessation of the property’s use. The retirement obligation is not estimable for such easements since
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the Registrants plan to use their facilities indefinitely. The retirement obligation would only be recognized if and when the Registrants abandon or cease the use of specific easements, which is not expected.

Valuation of Nonderivative Financial Instruments

The book values of Cash and Cash Equivalents, Advances to/from Affiliates, Accounts Receivable, Accounts Payable and Short-term Debt approximate fair value because of the short-term maturity of these instruments.

Fair Value Measurements of Assets and Liabilities (Applies to all Registrants except AEPTCo)

The accounting guidance for “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).  Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2.  When quoted market prices are not available, pricing may be completed using comparable securities, dealer values, operating data and general market conditions to determine fair value.  Valuation models utilize various inputs such as commodity, interest rate and, to a lesser degree, volatility and credit that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, market corroborated inputs (i.e. inputs derived principally from, or correlated to, observable market data) and other observable inputs for the asset or liability.

For commercial activities, exchange-traded derivatives, namely futures contracts, are generally fair valued based on unadjusted quoted prices in active markets and are classified as Level 1.  Level 2 inputs primarily consist of OTC broker quotes in moderately active or less active markets, as well as exchange-traded derivatives where there is insufficient market liquidity to warrant inclusion in Level 1.  Management verifies price curves using these broker quotes and classifies these fair values within Level 2 when substantially all of the fair value can be corroborated.  Management typically obtains multiple broker quotes, which are nonbinding in nature but are based on recent trades in the marketplace.  When multiple broker quotes are obtained, the quoted bid and ask prices are averaged.  In certain circumstances, a broker quote may be discarded if it is a clear outlier.  Management uses a historical correlation analysis between the broker quoted location and the illiquid locations.  If the points are highly correlated, these locations are included within Level 2 as well.  Certain OTC and bilaterally executed derivative instruments are executed in less active markets with a lower availability of pricing information.  Illiquid transactions, complex structured transactions, FTRs and counterparty credit risk may require nonmarket-based inputs.  Some of these inputs may be internally developed or extrapolated and utilized to estimate fair value.  When such inputs have a significant impact on the measurement of fair value, the instrument is categorized as Level 3.  The main driver of contracts being classified as Level 3 is the inability to substantiate energy price curves in the market.  A portion of the Level 3 instruments have been economically hedged which limits potential earnings volatility.

AEP utilizes its trustee’s external pricing service to estimate the fair value of the underlying investments held in the benefit plan and nuclear trusts.  AEP’s investment managers review and validate the prices utilized by the trustee to determine fair value.  AEP’s management performs its own valuation testing to verify the fair values of the securities.  AEP receives audit reports of the trustee’s operating controls and valuation processes.  

Assets in the benefits and nuclear trusts, cash and cash equivalents, other temporary investments and restricted cash for securitized funding are classified using the following methods.  Equities are classified as Level 1 holdings if they are actively traded on exchanges.  Items classified as Level 1 are investments in money market funds, fixed income and equity mutual funds and equity securities.  They are valued based on observable inputs, primarily unadjusted quoted prices in active markets for identical assets.  Items classified as Level 2 are primarily investments in individual fixed income securities.  Fixed income securities generally do not trade on exchanges and do not have an official closing price but their valuation inputs are based on observable market data.  Pricing vendors calculate bond valuations using financial models and matrices.  The models use observable inputs including yields on benchmark securities, quotes by securities brokers, rating agency actions, discounts or premiums on securities
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compared to par prices, changes in yields for U.S. Treasury securities, corporate actions by bond issuers, prepayment schedules and histories, economic events and, for certain securities, adjustments to yields to reflect changes in the rate of inflation.  Other securities with model-derived valuation inputs that are observable are also classified as Level 2 investments.  Investments with unobservable valuation inputs are classified as Level 3 investments.  Investments classified as Other are valued using Net Asset Value as a practical expedient. Items classified as Other are primarily cash equivalent funds, common collective trusts, commingled funds, structured products, private equity, real estate, infrastructure and alternative credit investments. These investments do not have a readily determinable fair value or they contain redemption restrictions which may include the right to suspend redemptions under certain circumstances. Redemption restrictions may also prevent certain investments from being redeemed at the reporting date for the underlying value.

Deferred Fuel Costs (Applies to all Registrants except AEP Texas, AEPTCo and OPCo)

The cost of purchased electricity, fuel and related emission allowances and emission control chemicals/consumables is charged to Purchased Electricity, Fuel and Other Consumables Used for Electric Generation expense when the fuel is burned or the allowance or consumable is utilized. The cost of fuel also includes the cost of nuclear fuel burned which is computed primarily using the units-of-production method. In regulated jurisdictions with an active FAC, fuel cost over-recoveries (the excess of fuel-related revenues over applicable fuel costs incurred) are generally deferred as current regulatory liabilities and under-recoveries (the excess of applicable fuel costs incurred over fuel-related revenues) are generally deferred as current regulatory assets. Fuel cost over-recovery and under-recovery balances are classified as noncurrent when there is an expectation that refunds or recoveries will extend beyond a one year period, based on a company’s filing with a commission or a commission directive. These deferrals are incorporated into the development of future fuel rates billed to or refunded to customers. The amount of an over-recovery or under-recovery can also be affected by actions of the state regulatory commissions. On a routine basis, state regulatory commissions review and/or audit the Registrants’ fuel procurement policies and practices, the fuel cost calculations and FAC deferrals. FAC deferrals are adjusted when costs are no longer probable of recovery or when refunds of fuel reserves are probable. The Registrants share the majority of their Off-system Sales margins to customers either through an active FAC or other rate mechanisms. Where the FAC or Off-system Sales sharing mechanism is capped, frozen, non-existent or not applicable to merchant operations, changes in fuel costs or sharing of Off-system Sales impact earnings.

Revenue Recognition

Regulatory Accounting

The Registrants’ financial statements reflect the actions of regulators that can result in the recognition of revenues and expenses in different time periods than enterprises that are not rate-regulated.  Regulatory assets (deferred expenses or alternative revenues recognized in accordance with the guidance for “Regulated Operations”) and regulatory liabilities (deferred revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and by matching revenue with its passage to customers in cost-based regulated rates.

When regulatory assets are probable of recovery through regulated rates, assets are recorded on the balance sheets.  Regulatory assets are reviewed for probability of recovery at each balance sheet date or whenever new events occur.  Examples of new events include the issuance of a regulatory commission order or passage of new legislation.  If it is determined that recovery of a regulatory asset is no longer probable, the regulatory asset is derecognized as a charge against income.

Retail and Wholesale Supply and Delivery of Electricity

The Registrants recognize revenues from customers for retail and wholesale electricity sales and electricity transmission and distribution delivery services.  The Registrants recognize such revenues on the statements of income as the performance obligations of delivering energy to customers are satisfied. Recognized revenues include both billed and unbilled amounts.  In accordance with the applicable state commission’s regulatory
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treatment, PSO and SWEPCo do not include the fuel portion in unbilled revenue, but rather recognize such revenues when billed to customers.

Wholesale transmission revenue is based on FERC-approved formula rate filings made for each calendar year using estimated costs. Revenues initially recognized per the annual rate filing are compared to actual costs, resulting in the subsequent recognition of an over or under-recovered amount, with interest, that is refunded or recovered, respectively, in a future year’s rates. These annual true-ups meet the definition of alternative revenues in accordance with the accounting guidance for “Regulated Operations”. An estimated annual true-up is recorded by the Registrants in the fourth quarter of each calendar year and a final annual true-up is recognized by the Registrants in the second quarter of each calendar year following the filing of annual FERC reports. Any portion of the true-ups applicable to an affiliated company is recorded as Accounts Receivable - Affiliated Companies or Accounts Payable - Affiliated Companies on the balance sheets. Any portion of the true-ups applicable to third-parties is recorded as Regulatory Assets or Regulatory Liabilities on the balance sheets. See Note 19 - Revenue from Contracts with Customers for additional information.

Gross versus Net Presentation of Certain Electricity Supply and Delivery Activities

Most of the power produced at the generation plants is sold to PJM or SPP.  The Registrants also purchase power from PJM and SPP to supply power to customers.  Generally, these power sales and purchases are reported on a net basis as revenues on the statements of income.  However, purchases of power in excess of sales to PJM or SPP, on an hourly net basis, used to serve retail load are recorded gross as Purchased Electricity for Resale on the statements of income. With the exception of certain dedicated load bilateral power supply contracts, the transactions of AEP’s nonregulated subsidiaries are reported as gross purchases or sales.

Physical energy purchases arising from non-derivative contracts are accounted for on a gross basis in Purchased Electricity for Resale on the statements of income.  Energy purchases arising from non-trading derivative contracts are recorded based on the transaction’s facts and circumstances.  Purchases under non-trading derivatives used to serve accrual based obligations are recorded in Purchased Electricity for Resale on the statements of income.  All other non-trading derivative purchases are recorded net in revenues.

In general, the Registrants record expenses when purchased electricity is received and when expenses are incurred, with the exception of certain power purchase contracts that are derivatives and accounted for using MTM accounting where generation/supply rates are not cost-based regulated.  In jurisdictions where the generation/supply business is subject to cost-based regulation, the unrealized MTM amounts are deferred as regulatory assets (for losses) and regulatory liabilities (for gains).

Energy Marketing and Risk Management Activities (Applies to all Registrants except AEPTCo)

The Registrants engage in power, capacity and, to a lesser extent, natural gas marketing as major power producers and participants in electricity and natural gas markets. The Registrants also engage in power, capacity, coal, natural gas and, to a lesser extent, heating oil, gasoline and other commodity risk management activities focused on markets where the AEP System owns assets and on adjacent markets.  These activities include the purchase-and-sale of energy under forward contracts at fixed and variable prices.  These contracts include physical transactions, exchange-traded futures, and to a lesser extent, OTC swaps and options.  Certain energy marketing and risk management transactions are with RTOs.

The Registrants recognize revenues from marketing and risk management transactions that are not derivatives as the performance obligation of delivering the commodity is satisfied. Expenses from marketing and risk management transactions that are not derivatives are also recognized upon delivery of the commodity.

The Registrants use MTM accounting for marketing and risk management transactions that are derivatives unless the derivative is designated in a qualifying cash flow hedge relationship or elected normal under the normal purchase normal sale election. Unrealized MTM gains and losses are included on the balance sheets as Risk
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Management Assets or Liabilities, as appropriate, and on the statements of income in Total Revenues. Realized gains and losses on marketing and risk management transactions are included in revenues or expenses based on the transaction’s facts and circumstances. However, in regulated jurisdictions subject to cost-based regulation, unrealized MTM amounts and some realized gains and losses are deferred as regulatory assets (for losses) and regulatory liabilities (for gains).

Certain qualifying marketing and risk management derivatives transactions are designated as hedges of variability in future cash flows as a result of forecasted transactions (cash flow hedge).  In the event the Registrants designate a cash flow hedge, the cash flow hedge’s gain or loss is initially recorded as a component of AOCI.  When the forecasted transaction is realized and affects net income, the Registrants subsequently reclassify the gain or loss on the hedge from AOCI into revenues or expenses within the same financial statement line item as the forecasted transaction on their statements of income. See “Accounting for Cash Flow Hedging Strategies” section of Note 10 for additional information.

Levelization of Nuclear Refueling Outage Costs (Applies to AEP and I&M)

In accordance with regulatory orders, I&M defers incremental operation and maintenance costs associated with periodic refueling outages at its Cook Plant and amortizes the costs over approximately 18 months, beginning with the month following the start of each unit’s refueling outage and lasting until the end of the month in which the same unit’s next scheduled refueling outage begins.

Maintenance

The Registrants expense maintenance costs as incurred.  If it becomes probable that the Registrants will recover specifically-incurred costs through future rates, a regulatory asset is established to match the expensing of those maintenance costs with their recovery in cost-based regulated revenues.  In certain regulated jurisdictions, the Registrants defer costs above the level included in base rates and amortize those deferrals commensurate with recovery through rate riders.

Income Taxes and Investment and Production Tax Credits

The Registrants use the liability method of accounting for income taxes.  Under the liability method, deferred income taxes are provided for all temporary differences between the book and tax basis of assets and liabilities which will result in a future tax consequence. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled.

When the flow-through method of accounting for temporary differences is required by a regulator to be reflected in regulated revenues (that is, when deferred taxes are not included in the cost-of-service for determining regulated rates for electricity), deferred income taxes are recorded and related regulatory assets and liabilities are established to match the regulated revenues and tax expense.

AEP and subsidiaries apply the deferral methodology for the recognition of ITCs. Deferred ITCs are amortized to income tax expense over the life of the asset that generated the credit. Amortization of deferred ITCs begins when the asset is placed in-service, except where regulatory commissions reflect ITCs in the rate-making process, then amortization begins when the utility is able to utilize the ITC on a stand-alone basis. Alternatively, PTCs reduce income tax expense as they are earned. PTCs are earned when electricity is produced.

The Registrants account for uncertain tax positions in accordance with the accounting guidance for “Income Taxes.”  The Registrants classify interest expense or income related to uncertain tax positions as interest expense or income as appropriate and classify penalties as Other Operation expense on the statements of income.
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Excise Taxes (Applies to all Registrants except AEPTCo)

As agents for some state and local governments, the Registrants collect from customers certain excise taxes levied by those state or local governments on customers.  The Registrants do not record these taxes as revenue or expense.

Debt

Gains and losses from the reacquisition of debt used to finance regulated electric utility plants are deferred and amortized over the remaining term of the reacquired debt in accordance with their rate-making treatment unless the debt is refinanced.  If the reacquired debt associated with the regulated business is refinanced, the reacquisition costs attributable to the portions of the business that are subject to cost-based regulatory accounting are generally deferred and amortized over the term of the replacement debt consistent with its recovery in rates.  Operations not subject to cost-based rate regulation report gains and losses on the reacquisition of debt in Interest Expense on the statements of income upon reacquisition.

Debt discount or premium and debt issuance expenses are deferred and amortized generally utilizing the straight-line method over the term of the related debt.  The straight-line method approximates the effective interest method and is consistent with the treatment in rates for regulated operations.  The net amortization expense is included in Interest Expense on the statements of income.

Goodwill (Applies to AEP)

When the Registrants acquire a business, as defined by the accounting guidance for “Business Combinations,” management recognizes all acquired assets and liabilities at their fair value.  To the extent that consideration exceeds the net fair value of the identified assets and liabilities, goodwill is recognized on the balance sheets.  Goodwill is not amortized.  Management tests acquired goodwill at the reporting unit level for impairment at least annually at its estimated fair value. Fair value is the amount at which an asset or liability could be bought or sold in a current transaction between willing parties other than in a forced or liquidation sale.  Quoted market prices in active markets are the best evidence of fair value and are used as the basis for the measurement, if available.  In the absence of quoted prices for identical or similar assets in active markets, management estimates fair value using various internal and external valuation methods.  

Pension and OPEB Plans (Applies to all Registrants except AEPTCo)

AEP sponsors a qualified pension plan and two unfunded non-qualified pension plans.  Substantially all AEP employees are covered by the qualified plan or both the qualified and a non-qualified pension plan.  AEP also sponsors OPEB plans to provide health and life insurance benefits for retired employees.  The Registrant Subsidiaries account for their participation in the AEP sponsored pension and OPEB plans using multiple-employer accounting.  See Note 8 - Benefit Plans for additional information including significant accounting policies associated with the plans.

Investments Held in Trust for Future Liabilities (Applies to all Registrants except AEPTCo)

AEP has several trust funds with significant investments intended to provide for future payments of pension and OPEB benefits, nuclear decommissioning and SNF disposal.  All of the trust funds’ investments are diversified and managed in compliance with all laws and regulations.  The investment strategy for the trust funds is to use a diversified portfolio of investments to achieve an acceptable rate of return while managing the investment risk of the assets relative to the associated liabilities.  To minimize investment risk, the trust funds are broadly diversified among classes of assets, investment strategies and investment managers.  Management regularly reviews the actual asset allocations and periodically rebalances the investments to targeted allocations when appropriate.  Investment policies and guidelines allow investment managers in approved strategies to use financial derivatives to obtain or manage market exposures and to hedge assets and liabilities.  The investments are reported at fair value under the “Fair Value Measurements and Disclosures” accounting guidance.

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Benefit Plans

All benefit plan assets are invested in accordance with each plan’s investment policy.  The investment policy outlines the investment objectives, strategies and target asset allocations by plan.

The investment philosophies for AEP’s benefit plans support the allocation of assets to minimize risks and optimize net returns.  Strategies used include:

•Maintaining a long-term investment horizon.
•Diversifying assets to help control volatility of returns at acceptable levels.
•Managing fees, transaction costs and tax liabilities to maximize investment earnings.
•Using active management of investments where appropriate risk/return opportunities exist.
•Keeping portfolio structure style-neutral to limit volatility compared to applicable benchmarks.
•Using alternative asset classes such as real estate and private equity to maximize return and provide additional portfolio diversification.

The objective of the investment policy for the pension fund is to maintain the funded status of the plan while providing for growth in the plan assets to offset the growth in the plan liabilities.  The current target asset allocations are as follows:

Pension Plan Assets		Target	
Equity		30 	%	
Fixed Income		54 	%	
Other Investments		15 	%	
Cash and Cash Equivalents		1 	%	
			
OPEB Plans Assets		Target	
Equity		59 	%	
Fixed Income		40 	%	
Cash and Cash Equivalents		1 	%	

The investment policy for each benefit plan contains various investment limitations.  The investment policies establish concentration limits for securities and prohibit the purchase of securities issued by AEP (with the exception of proportionate and immaterial holdings of AEP securities in passive index strategies or certain commingled funds).  However, the investment policies do not preclude the benefit trust funds from receiving contributions in the form of AEP securities, provided that the AEP securities acquired by each plan may not exceed the limitations imposed by law.

For equity investments, the concentration limits are generally as follows:

•No security in excess of 5% of all equities.
•Cash equivalents must be less than 10% of an investment manager’s equity portfolio.
•No individual stock may be more than 10% and 7% for pension and OPEB investments, respectively, of each manager’s equity portfolio.
•No securities may be bought or sold on margin or other use of leverage.

For fixed income investments, each investment manager’s portfolio is compared to investment grade, diversified long and intermediate benchmark indices.

A portion of the pension assets is invested in real estate funds to provide diversification, add return and hedge against inflation.  Real estate properties are illiquid, difficult to value and not actively traded.  The pension plan uses external real estate investment managers to invest in commingled funds that hold real estate properties.  To mitigate investment risk in the real estate portfolio, commingled real estate funds are used to ensure that holdings are
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diversified by region, property type and risk classification.  Real estate holdings include core, value-added and opportunistic classifications.

A portion of the pension assets is invested in private equity.  Private equity investments add return and provide diversification and typically require a long-term time horizon to evaluate investment performance.  Private equity is classified as an alternative investment because it is illiquid, difficult to value and not actively traded.  The pension plan uses limited partnerships to invest across the private equity investment spectrum.   The private equity holdings are with multiple general partners who help monitor the investments and provide investment selection expertise.  The holdings are currently comprised of venture capital, buyout and hybrid debt and equity investments.  

AEP participates in a securities lending program with BNY Mellon to provide incremental income on idle assets and to provide income to offset custody fees and other administrative expenses.  AEP lends securities to borrowers approved by BNY Mellon in exchange for collateral.  All loans are collateralized by at least 102% of the loaned asset’s market value and the collateral is invested.  The difference between the rebate owed to the borrower and the collateral rate of return determines the earnings on the loaned security.  The securities lending program’s objective is to provide modest incremental income with a limited increase in risk. As of December 31, 2022 and 2021, the fair value of securities on loan as part of the program was $83 million and $137 million, respectively. Cash and securities obtained as collateral exceeded the fair value of the securities loaned as of December 31, 2022 and 2021.

Trust owned life insurance (TOLI) underwritten by The Prudential Insurance Company is held in the OPEB plan trusts.  The strategy for holding life insurance contracts in the taxable Voluntary Employees’ Beneficiary Association trust is to minimize taxes paid on the asset growth in the trust.  Earnings on plan assets are tax-deferred within the TOLI contract and can be tax-free if held until claims are paid.  Life insurance proceeds remain in the trust and are used to fund future retiree medical benefit liabilities.  With consideration to other investments held in the trust, the cash value of the TOLI contracts is invested in two diversified funds.  A portion is invested in a commingled fund with underlying investments in stocks that are actively traded on major international equity exchanges.  The other portion of the TOLI cash value is invested in a diversified, commingled fixed income fund with underlying investments in government bonds, corporate bonds and asset-backed securities.

Cash and cash equivalents are held in each trust to provide liquidity and meet short-term cash needs. Cash equivalent funds are used to provide diversification and preserve principal.  The underlying holdings in the cash funds are investment grade money market instruments including commercial paper, certificates of deposit, treasury bills and other types of investment grade short-term debt securities.  The cash funds are valued each business day and provide daily liquidity.

Nuclear Trust Funds (Applies to AEP and I&M)

Nuclear decommissioning and SNF trust funds represent funds that regulatory commissions allow I&M to collect through rates to fund future decommissioning and SNF disposal liabilities.  By rules or orders, the IURC, the MPSC and the FERC established investment limitations and general risk management guidelines.  In general, limitations include:

•Acceptable investments (rated investment grade or above when purchased).
•Maximum percentage invested in a specific type of investment.
•Prohibition of investment in obligations of AEP, I&M or their affiliates.
•Withdrawals permitted only for payment of decommissioning costs and trust expenses.

I&M maintains trust funds for each regulatory jurisdiction.  Regulatory approval is required to withdraw decommissioning funds.  These funds are managed by an external investment manager that must comply with the guidelines and rules of the applicable regulatory authorities. The trust assets are invested to optimize the net of tax earnings of the trust giving consideration to liquidity, risk, diversification and other prudent investment objectives.

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I&M records securities held in these trust funds in Spent Nuclear Fuel and Decommissioning Trusts on its balance sheets.  I&M records these securities at fair value.  I&M classifies debt securities in the trust funds as available-for-sale due to their long-term purpose.

Other-than-temporary impairments for investments in debt securities are considered realized losses as a result of securities being managed by an external investment management firm.  The external investment management firm makes specific investment decisions regarding the debt and equity investments held in these trusts and generally intends to sell debt securities in an unrealized loss position as part of a tax optimization strategy.  Impairments reduce the cost basis of the securities which will affect any future unrealized gain or realized gain or loss due to the adjusted cost of investment.  I&M records unrealized gains, unrealized losses and other-than-temporary impairments from securities in these trust funds as adjustments to the regulatory liability account for the nuclear decommissioning trust funds and to regulatory assets or liabilities for the SNF disposal trust funds in accordance with their treatment in rates.  Consequently, changes in fair value of trust assets do not affect earnings or AOCI.  See the “Nuclear Contingencies” section of Note 6 for additional discussion of nuclear matters.  See “Fair Value Measurements of Trust Assets for Decommissioning and SNF Disposal” section of Note 11 for disclosure of the fair value of assets within the trusts.

Comprehensive Income (Loss) (Applies to all Registrants except AEPTCo and OPCo)

Comprehensive income (loss) is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.  It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.  Comprehensive income (loss) has two components: net income (loss) and other comprehensive income (loss).

Stock-Based Compensation Plans

As of December 31, 2022, AEP had performance shares and restricted stock units outstanding under the American Electric Power System 2015 Long-Term Incentive Plan (2015 LTIP).  Upon vesting, all outstanding performance shares and restricted stock units settle in AEP common stock. All performance units awarded prior to 2017 and restricted stock units granted after January 1, 2013 and prior to January 1, 2017 that vested to executive officers were settled in cash. During 2019, all of the remaining performance units and restricted stock units that settle in cash were settled. The impact of AEP’s stock-based compensation plans are insignificant to the financial statements of the Registrant Subsidiaries.

AEP maintains a variety of tax qualified and non-qualified deferred compensation plans for employees and non-employee directors that include, among other options, an investment in or an investment return equivalent to that of AEP common stock.  This includes AEP career shares maintained under the American Electric Power System Stock Ownership Requirement Plan (SORP), which facilitates executives in meeting minimum stock ownership requirements assigned to them by the Human Resources Committee of the Board of Directors.  AEP career shares are derived from vested performance shares granted to employees under the 2015 LTIP and previous long-term incentive plans. AEP career shares accrue additional dividend shares in an amount equal to dividends paid on AEP common shares at the closing market price on the dividend payments date. All AEP career shares are settled in shares of AEP common stock after the executive’s service with AEP ends.

Performance shares awarded after January 1, 2017 are classified as temporary equity in the Mezzanine Equity section of the balance sheets until the awards vest. Upon vesting, the performance shares are classified as permanent equity. These awards may be settled in cash upon an employee’s qualifying termination due to a change in control. Because such event is not solely within the control of the company, these awards are classified outside of permanent equity until the awards vest.

AEP compensates their non-employee directors, in part, with stock units under the American Electric Power Company, Inc. Stock Unit Accumulation Plan for Non-Employee Directors.  These stock units were payable in cash
242

to directors after their service ends. Effective in June 2022, these stock units became payable in AEP common stock rather than cash.

Management measures and recognizes compensation expense for all share-based payment awards to employees and directors based on estimated fair values. For share-based payment awards with service only vesting conditions, management recognizes compensation expense on a straight-line basis.  Stock-based compensation expense recognized on the statements of income for the years ended December 31, 2022, 2021 and 2020 is based on the number of outstanding awards at the end of each period without a reduction for estimated forfeitures. AEP accounts for forfeitures in the period in which they occur.

For the years ended December 31, 2022, 2021 and 2020, compensation costs are included in Net Income for the performance shares, career shares, restricted stock units and the non-employee director stock units. Compensation costs may also be capitalized. See Note 15 - Stock-based Compensation for additional information.

Equity Method Investments in Unconsolidated Entities (Applies to AEP and SWEPCo)

The equity method of accounting is used for equity investments where either AEP or SWEPCo exercise significant influence but do not hold a controlling financial interest. Such investments are initially recorded at cost in Deferred Charges and Other Noncurrent Assets on the balance sheets. The proportionate share of the investee’s equity earnings or losses is included in Equity Earnings (Loss) of Unconsolidated Subsidiaries on the statements of income. AEP and SWEPCo regularly monitor and evaluate equity method investments to determine whether they are impaired. An impairment is recognized when the investment has experienced a loss in value that is other-than-temporary in nature.

AEP’s significant equity method investments include ETT, DHLC and four joint venture interests which own distinct wind generation facilities. See Note 17 - Variable Interest Entities and Equity Method Investments for additional information.

Earnings Per Share (EPS) (Applies to AEP)

Basic EPS is calculated by dividing net earnings available to common shareholders by the weighted-average number of common shares outstanding during the period.  Diluted EPS is calculated by adjusting the weighted-average outstanding common shares, assuming conversion of all potentially dilutive stock awards.

The following table presents AEP’s basic and diluted EPS calculations included on the statements of income:

		Years Ended December 31,	
		2022		2021		2020	
		(in millions, except per-share data)	
				$/share				$/share				$/share	

Earnings Attributable to AEP Common Shareholders		$	2,307.2 					$	2,488.1 					$	2,200.1 				
													
Weighted-Average Number of Basic AEP Common Shares Outstanding		511.8 			$	4.51 			500.5 			$	4.97 			495.7 			$	4.44 		
Weighted-Average Dilutive Effect of Stock-Based Awards		1.7 			(0.02)			1.3 			(0.01)			1.5 			(0.02)		
Weighted-Average Number of Diluted AEP Common Shares Outstanding		513.5 			$	4.49 			501.8 			$	4.96 			497.2 			$	4.42 		

Equity Units are potentially dilutive securities but were excluded from the calculation of diluted EPS for the years ended December 31, 2022, 2021 and 2020, as the dilutive stock price thresholds were not met. See Note 14 - Financing Activities for additional information related to Equity Units.

243

There were no antidilutive shares outstanding as of December 31, 2022 and 2021. There were 128 thousand antidilutive shares outstanding as of December 31, 2020.

Supplementary Income Statement Information

The following tables provide the components of Depreciation and Amortization for the years ended December 31, 2022, 2021 and 2020:

2022																	
																	
Depreciation and Amortization		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Depreciation and Amortization of Property, Plant and Equipment		$	3,072.8 			$	363.5 			$	346.2 			$	576.1 			$	511.9 			$	293.1 			$	226.2 			$	319.3 		
Amortization of Certain Securitized Assets		93.3 			93.3 			— 			— 			— 			— 			— 			— 		
Amortization of Regulatory Assets and Liabilities		36.7 			(4.4)			— 			(0.2)			15.3 			1.2 			3.9 			5.5 		
Total Depreciation and Amortization		$	3,202.8 			$	452.4 			$	346.2 			$	575.9 			$	527.2 			$	294.3 			$	230.1 			$	324.8 		

2021																	
																	
Depreciation and Amortization		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Depreciation and Amortization of Property, Plant and Equipment		$	2,717.1 			$	327.2 			$	297.3 			$	547.0 			$	424.9 			$	301.1 			$	185.9 			$	292.9 		
Amortization of Certain Securitized Assets		64.2 			64.2 			— 			— 			— 			— 			— 			— 		
Amortization of Regulatory Assets and Liabilities		44.4 			(4.4)			— 			(0.8)			21.1 			2.2 			10.7 			2.1 		
Total Depreciation and Amortization		$	2,825.7 			$	387.0 			$	297.3 			$	546.2 			$	446.0 			$	303.3 			$	196.6 			$	295.0 		

2020																	
																	
Depreciation and Amortization		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Depreciation and Amortization of Property, Plant and Equipment		$	2,487.5 			$	364.2 			$	249.0 			$	507.8 			$	393.3 			$	275.0 			$	171.9 			$	271.2 		
Amortization of Certain Securitized Assets		171.3 			171.3 			— 			— 			— 			— 			— 			— 		
Amortization of Regulatory Assets and Liabilities		24.0 			(5.7)			— 			(0.3)			18.3 			1.6 			1.6 			1.5 		
Total Depreciation and Amortization		$	2,682.8 			$	529.8 			$	249.0 			$	507.5 			$	411.6 			$	276.6 			$	173.5 			$	272.7 		

244

Supplementary Cash Flow Information (Applies to AEP)

		Years Ended December 31,	
Cash Flow Information		2022		2021		2020	
		(in millions)	
Cash Paid (Received) for:							
Interest, Net of Capitalized Amounts		$	1,286.3 			$	1,137.2 			$	1,029.1 		
Income Taxes		116.8 			13.2 			(49.1)		
Noncash Investing and Financing Activities:							
Acquisitions Under Finance Leases		31.8 			287.6 			44.2 		
Construction Expenditures Included in Current Liabilities as of December 31,		1,258.9 			1,180.4 			975.4 		
Construction Expenditures Included in Noncurrent Liabilities as of December 31,		— 			— 			5.5 		
	
Acquisition of Nuclear Fuel Included in Current Liabilities as of December 31,		— 			— 			33.4 		

Noncash Contribution of Assets to Cedar Creek Project		— 			(9.3)			— 		
Noncontrolling Interest Assumed - Dry Lake Solar Project		— 			35.3 			— 		

Forward Equity Purchase Contracts Included in Current and Noncurrent Liabilities as of December 31,		— 			— 			110.6 		
245

2. NEW ACCOUNTING STANDARDS

The disclosures in this note apply to all Registrants unless indicated otherwise.

During the FASB’s standard-setting process and upon issuance of final standards, management reviews the new accounting literature to determine its relevance, if any, to the Registrants’ business. There are no new standards expected to have a material impact on the Registrants’ financial statements.

246

3.  COMPREHENSIVE INCOME

The disclosures in this note apply to all Registrants except AEPTCo and OPCo.

Presentation of Comprehensive Income

The following tables provide the components of changes in AOCI and details of reclassifications from AOCI for the years ended December 31, 2022, 2021 and 2020.  The amortization of pension and OPEB AOCI components are included in the computation of net periodic pension and OPEB costs. See Note 8 - Benefit Plans for additional information.

AEP											
											
		Cash Flow Hedges		Pension and OPEB		 	
For the Year Ended December 31, 2022		Commodity		Interest Rate		Amortization of Deferred Costs		Changes in Funded Status		Total	
 		(in millions)	
Balance in AOCI as of December 31, 2021		$	163.7 			$	(21.3)			$	115.6 			$	(73.2)			$	184.8 		
Change in Fair Value Recognized in AOCI, Net of Tax		477.3 			18.4 		(a)	— 			(155.4)			340.3 		
Amount of (Gain) Loss Reclassified from AOCI											
Generation & Marketing Revenues (b)		0.1 			— 			— 			— 			0.1 		
Purchased Electricity for Resale (b)		(528.6)			— 			— 			— 			(528.6)		
Interest Expense (b)		— 			4.0 			— 			— 			4.0 		
Amortization of Prior Service Cost (Credit)		— 			— 			(21.8)			— 			(21.8)		
Amortization of Actuarial (Gains) Losses		— 			— 			8.6 			— 			8.6 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		(528.5)			4.0 			(13.2)			— 			(537.7)		
Income Tax (Expense) Benefit		(111.0)			0.8 			(2.8)			— 			(113.0)		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		(417.5)			3.2 			(10.4)			— 			(424.7)		
Reclassifications of KPCo Pension and OPEB Regulatory Assets to AOCI		— 			— 			— 			(21.1)			(21.1)		
Income Tax (Expense) Benefit		— 			— 			— 			(4.4)			(4.4)		
Reclassifications of KPCo Pension and OPEB Regulatory Assets to AOCI, Net of Income Tax (Expense) Benefit		— 			— 			— 			(16.7)			(16.7)		
Net Current Period Other Comprehensive Income (Loss)		59.8 			21.6 			(10.4)			(172.1)			(101.1)		
Balance in AOCI as of December 31, 2022		$	223.5 			$	0.3 			$	105.2 			$	(245.3)			$	83.7 		
247

																																	
AEP											
											
 		Cash Flow Hedges		Pension and OPEB		 	
For the Year Ended December 31, 2021		Commodity		Interest Rate		Amortization of Deferred Costs		Changes in Funded Status		Total	
 		(in millions)	
Balance in AOCI as of December 31, 2020		$	(60.6)			$	(47.5)			$	123.7 			$	(100.7)			$	(85.1)		
Change in Fair Value Recognized in AOCI, Net of Tax		488.2 			21.1 		(a)	— 			27.5 			536.8 		
Amount of (Gain) Loss Reclassified from AOCI											
Generation & Marketing Revenues (b)		0.7 			— 			— 			— 			0.7 		
Purchased Electricity for Resale (b)		(334.8)			— 			— 			— 			(334.8)		
Interest Expense (b)		— 			6.5 			— 			— 			6.5 		
Amortization of Prior Service Cost (Credit)		— 			— 			(19.4)			— 			(19.4)		
Amortization of Actuarial (Gains) Losses		— 			— 			9.1 			— 			9.1 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		(334.1)			6.5 			(10.3)			— 			(337.9)		
Income Tax (Expense) Benefit		(70.2)			1.4 			(2.2)			— 			(71.0)		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		(263.9)			5.1 			(8.1)			— 			(266.9)		
Net Current Period Other Comprehensive Income (Loss)		224.3 			26.2 			(8.1)			27.5 			269.9 		

Balance in AOCI as of December 31, 2021		$	163.7 			$	(21.3)			$	115.6 			$	(73.2)			$	184.8 		

 		Cash Flow Hedges		Pension and OPEB		 	
For the Year Ended December 31, 2020		Commodity		Interest Rate		Amortization of Deferred Costs		Changes in Funded Status		Total	
 		(in millions)	
Balance in AOCI as of December 31, 2019		$	(103.5)			$	(11.5)			$	130.7 			$	(163.4)			$	(147.7)		
Change in Fair Value Recognized in AOCI, Net of Tax		(89.2)			(39.9)		(a)	— 			62.7 			(66.4)		
Amount of (Gain) Loss Reclassified from AOCI											
Generation & Marketing Revenues (b)		(0.4)			— 			— 			— 			(0.4)		
Purchased Electricity for Resale (b)		167.6 			— 			— 			— 			167.6 		
Interest Expense (b)		— 			4.9 			— 			— 			4.9 		
Amortization of Prior Service Cost (Credit)		— 			— 			(19.2)			— 			(19.2)		
Amortization of Actuarial (Gains) Losses		— 			— 			10.3 			— 			10.3 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		167.2 			4.9 			(8.9)			— 			163.2 		
Income Tax (Expense) Benefit		35.1 			1.0 			(1.9)			— 			34.2 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		132.1 			3.9 			(7.0)			— 			129.0 		
Net Current Period Other Comprehensive Income (Loss)		42.9 			(36.0)			(7.0)			62.7 			62.6 		

Balance in AOCI as of December 31, 2020		$	(60.6)			$	(47.5)			$	123.7 			$	(100.7)			$	(85.1)		
248

																											
AEP Texas									
									
				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2022		Interest Rate		Costs		Status		Total	
	(in millions)	
Balance in AOCI as of December 31, 2021		$	(1.3)			$	5.3 			$	(10.5)			$	(6.5)		
Change in Fair Value Recognized in AOCI, Net of Tax		— 			— 			(3.2)			(3.2)		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		1.3 			— 			— 			1.3 		
Amortization of Prior Service Cost (Credit)		— 			(0.1)			— 			(0.1)		
Amortization of Actuarial (Gains) Losses		— 			0.2 			— 			0.2 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		1.3 			0.1 			— 			1.4 		
Income Tax (Expense) Benefit		0.3 			— 			— 			0.3 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		1.0 			0.1 			— 			1.1 		
Net Current Period Other Comprehensive Income (Loss)		1.0 			0.1 			(3.2)			(2.1)		
Balance in AOCI as of December 31, 2022		$	(0.3)			$	5.4 			$	(13.7)			$	(8.6)		

				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2021		Interest Rate		Costs		Status		Total	
	(in millions)	
Balance in AOCI as of December 31, 2020		$	(2.3)			$	5.1 			$	(11.7)			$	(8.9)		
Change in Fair Value Recognized in AOCI, Net of Tax		0.1 			— 			1.2 			1.3 		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		1.2 			— 			— 			1.2 		
Amortization of Prior Service Cost (Credit)		— 			(0.1)			— 			(0.1)		
Amortization of Actuarial (Gains) Losses		— 			0.3 			— 			0.3 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		1.2 			0.2 			— 			1.4 		
Income Tax (Expense) Benefit		0.3 			— 			— 			0.3 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		0.9 			0.2 			— 			1.1 		
Net Current Period Other Comprehensive Income (Loss)		1.0 			0.2 			1.2 			2.4 		
	
Balance in AOCI as of December 31, 2021		$	(1.3)			$	5.3 			$	(10.5)			$	(6.5)		

				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2020		Interest Rate		Costs		Status		Total	
	(in millions)	
Balance in AOCI as of December 31, 2019		$	(3.4)			$	4.9 			$	(14.3)			$	(12.8)		
Change in Fair Value Recognized in AOCI, Net of Tax		0.1 			— 			2.6 			2.7 		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		1.3 			— 			— 			1.3 		
Amortization of Prior Service Cost (Credit)		— 			(0.1)			— 			(0.1)		
Amortization of Actuarial (Gains) Losses		— 			0.3 			— 			0.3 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		1.3 			0.2 			— 			1.5 		
Income Tax (Expense) Benefit		0.3 			— 			— 			0.3 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		1.0 			0.2 			— 			1.2 		
Net Current Period Other Comprehensive Income (Loss)		1.1 			0.2 			2.6 			3.9 		
	
Balance in AOCI as of December 31, 2020		$	(2.3)			$	5.1 			$	(11.7)			$	(8.9)		
249

																											
APCo									
									
				Pension and OPEB		 	
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2022		Interest Rate		Costs		Status		Total	
	(in millions)	
Balance in AOCI as of December 31, 2021		$	7.5 			$	1.2 			$	15.7 			$	24.4 		
Change in Fair Value Recognized in AOCI, Net of Tax		— 			— 			(24.1)			(24.1)		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		(1.0)			— 			— 			(1.0)		
Amortization of Prior Service Cost (Credit)		— 			(5.4)			— 			(5.4)		
	
Reclassifications from AOCI, before Income Tax (Expense) Benefit		(1.0)			(5.4)			— 			(6.4)		
Income Tax (Expense) Benefit		(0.2)			(1.1)			— 			(1.3)		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		(0.8)			(4.3)			— 			(5.1)		
Net Current Period Other Comprehensive Income (Loss)		(0.8)			(4.3)			(24.1)			(29.2)		
Balance in AOCI as of December 31, 2022		$	6.7 			$	(3.1)			$	(8.4)			$	(4.8)		

				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedges -		of Deferred		Funded			
For the Year Ended December 31, 2021		Interest Rate		Costs		Status		Total	
		(in millions)	
Balance in AOCI as of December 31, 2020		$	(0.8)			$	5.4 			$	2.6 			$	7.2 		
Change in Fair Value Recognized in AOCI, Net of Tax		9.2 			— 			13.1 			22.3 		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		(1.1)			— 			— 			(1.1)		
Amortization of Prior Service Cost (Credit)		— 			(5.3)			— 			(5.3)		
	
Reclassifications from AOCI, before Income Tax (Expense) Benefit		(1.1)			(5.3)			— 			(6.4)		
Income Tax (Expense) Benefit		(0.2)			(1.1)			— 			(1.3)		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		(0.9)			(4.2)			— 			(5.1)		
Net Current Period Other Comprehensive Income (Loss)		8.3 			(4.2)			13.1 			17.2 		
	
Balance in AOCI as of December 31, 2021		$	7.5 			$	1.2 			$	15.7 			$	24.4 		

				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedges -		of Deferred		Funded			
For the Year Ended December 31, 2020		Interest Rate		Costs		Status		Total	
		(in millions)	
Balance in AOCI as of December 31, 2019		$	0.9 			$	9.2 			$	(5.1)			$	5.0 		
Change in Fair Value Recognized in AOCI, Net of Tax		(0.7)			— 			7.7 			7.0 		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		(1.3)			— 			— 			(1.3)		
Amortization of Prior Service Cost (Credit)		— 			(5.3)			— 			(5.3)		
Amortization of Actuarial (Gains) Losses		— 			0.5 			— 			0.5 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		(1.3)			(4.8)			— 			(6.1)		
Income Tax (Expense) Benefit		(0.3)			(1.0)			— 			(1.3)		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		(1.0)			(3.8)			— 			(4.8)		
Net Current Period Other Comprehensive Income (Loss)		(1.7)			(3.8)			7.7 			2.2 		
	
Balance in AOCI as of December 31, 2020		$	(0.8)			$	5.4 			$	2.6 			$	7.2 		
250

																											
I&M									
									
				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2022		Interest Rate		Costs		Status		Total	
		(in millions)	
Balance in AOCI as of December 31, 2021		$	(6.7)			$	4.7 			$	0.7 			$	(1.3)		
Change in Fair Value Recognized in AOCI, Net of Tax		— 			— 			(0.3)			(0.3)		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		2.0 			— 			— 			2.0 		
Amortization of Prior Service Cost (Credit)		— 			(0.8)			— 			(0.8)		
Amortization of Actuarial (Gains) Losses		— 			0.4 			— 			0.4 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		2.0 			(0.4)			— 			1.6 		
Income Tax (Expense) Benefit		0.4 			(0.1)			— 			0.3 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		1.6 			(0.3)			— 			1.3 		
Net Current Period Other Comprehensive Income (Loss)		1.6 			(0.3)			(0.3)			1.0 		
Balance in AOCI as of December 31, 2022		$	(5.1)			$	4.4 			$	0.4 			$	(0.3)		

				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2021		Interest Rate		Costs		Status		Total	
		(in millions)	
Balance in AOCI as of December 31, 2020		$	(8.3)			$	4.8 			$	(3.5)			$	(7.0)		
Change in Fair Value Recognized in AOCI, Net of Tax		— 			— 			4.2 			4.2 		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		2.0 			— 			— 			2.0 		
Amortization of Prior Service Cost (Credit)		— 			(0.8)			— 			(0.8)		
Amortization of Actuarial (Gains) Losses		— 			0.7 			— 			0.7 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		2.0 			(0.1)			— 			1.9 		
Income Tax (Expense) Benefit		0.4 			— 			— 			0.4 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		1.6 			(0.1)			— 			1.5 		
Net Current Period Other Comprehensive Income (Loss)		1.6 			(0.1)			4.2 			5.7 		
	
Balance in AOCI as of December 31, 2021		$	(6.7)			$	4.7 			$	0.7 			$	(1.3)		

				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2020		Interest Rate		Costs		Status		Total	
		(in millions)	
Balance in AOCI as of December 31, 2019		$	(9.9)			$	4.9 			$	(6.6)			$	(11.6)		
Change in Fair Value Recognized in AOCI, Net of Tax		— 			— 			3.1 			3.1 		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		2.0 			— 			— 			2.0 		
Amortization of Prior Service Cost (Credit)		— 			(0.8)			— 			(0.8)		
Amortization of Actuarial (Gains) Losses		— 			0.7 			— 			0.7 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		2.0 			(0.1)			— 			1.9 		
Income Tax (Expense) Benefit		0.4 			— 			— 			0.4 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		1.6 			(0.1)			— 			1.5 		
Net Current Period Other Comprehensive Income (Loss)		1.6 			(0.1)			3.1 			4.6 		
	
Balance in AOCI as of December 31, 2020		$	(8.3)			$	4.8 			$	(3.5)			$	(7.0)		
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PSO

	
	
		Cash Flow Hedge –	
For the Year Ended December 31, 2022		Interest Rate	
		(in millions)	
Balance in AOCI as of December 31, 2021		$	— 		
Change in Fair Value Recognized in AOCI, Net of Tax		1.3 		
Amount of (Gain) Loss Reclassified from AOCI			

Interest Expense (b)		— 		

Reclassifications from AOCI, before Income Tax (Expense) Benefit		— 		
Income Tax (Expense) Benefit		— 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		— 		
Net Current Period Other Comprehensive Income (Loss)		1.3 		
Balance in AOCI as of December 31, 2022		$	1.3 		

	
	
		Cash Flow Hedge –	
For the Year Ended December 31, 2021		Interest Rate	
		(in millions)	
Balance in AOCI as of December 31, 2020		$	0.1 		
Change in Fair Value Recognized in AOCI, Net of Tax		— 		
Amount of (Gain) Loss Reclassified from AOCI			

Interest Expense (b)		(0.1)		

Reclassifications from AOCI, before Income Tax (Expense) Benefit		(0.1)		
Income Tax (Expense) Benefit		— 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		(0.1)		
Net Current Period Other Comprehensive Income (Loss)		(0.1)		
	
Balance in AOCI as of December 31, 2021		$	— 		

	
	
		Cash Flow Hedge –	
For the Year Ended December 31, 2020		Interest Rate	
		(in millions)	
Balance in AOCI as of December 31, 2019		$	1.1 		
Change in Fair Value Recognized in AOCI, Net of Tax		— 		
Amount of (Gain) Loss Reclassified from AOCI			

Interest Expense (b)		(1.3)		

Reclassifications from AOCI, before Income Tax (Expense) Benefit		(1.3)		
Income Tax (Expense) Benefit		(0.3)		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		(1.0)		
Net Current Period Other Comprehensive Income (Loss)		(1.0)		
	
Balance in AOCI as of December 31, 2020		$	0.1 		
252

																											
SWEPCo									
									
				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2022		Interest Rate		Costs		Status		Total	
		(in millions)	
Balance in AOCI as of December 31, 2021		$	1.2 			$	(4.4)			$	9.9 			$	6.7 		
Change in Fair Value Recognized in AOCI, Net of Tax		— 			— 			(9.2)			(9.2)		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		(0.1)			— 			— 			(0.1)		
Amortization of Prior Service Cost (Credit)		— 			(2.0)			— 			(2.0)		
	
Reclassifications from AOCI, before Income Tax (Expense) Benefit		(0.1)			(2.0)			— 			(2.1)		
Income Tax (Expense) Benefit		— 			(0.4)			— 			(0.4)		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		(0.1)			(1.6)			— 			(1.7)		
Net Current Period Other Comprehensive Income (Loss)		(0.1)			(1.6)			(9.2)			(10.9)		
Balance in AOCI as of December 31, 2022		$	1.1 			$	(6.0)			$	0.7 			$	(4.2)		

				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2021		Interest Rate		Costs		Status		Total	
		(in millions)	
Balance in AOCI as of December 31, 2020		$	(0.3)			$	(2.8)			$	5.0 			$	1.9 		
Change in Fair Value Recognized in AOCI, Net of Tax		— 			— 			4.9 			4.9 		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		1.9 			— 			— 			1.9 		
Amortization of Prior Service Cost (Credit)		— 			(2.0)			— 			(2.0)		
	
Reclassifications from AOCI, before Income Tax (Expense) Benefit		1.9 			(2.0)			— 			(0.1)		
Income Tax (Expense) Benefit		0.4 			(0.4)			— 			— 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		1.5 			(1.6)			— 			(0.1)		
Net Current Period Other Comprehensive Income (Loss)		1.5 			(1.6)			4.9 			4.8 		
	
Balance in AOCI as of December 31, 2021		$	1.2 			$	(4.4)			$	9.9 			$	6.7 		

				Pension and OPEB			
				Amortization		Changes in			
		Cash Flow Hedge –		of Deferred		Funded			
For the Year Ended December 31, 2020		Interest Rate		Costs		Status		Total	
		(in millions)	
Balance in AOCI as of December 31, 2019		$	(1.8)			$	(1.3)			$	1.8 			$	(1.3)		
Change in Fair Value Recognized in AOCI, Net of Tax		— 			— 			3.2 			3.2 		
Amount of (Gain) Loss Reclassified from AOCI									

Interest Expense (b)		1.9 			— 			— 			1.9 		
Amortization of Prior Service Cost (Credit)		— 			(2.0)			— 			(2.0)		
Amortization of Actuarial (Gains) Losses		— 			0.1 			— 			0.1 		
Reclassifications from AOCI, before Income Tax (Expense) Benefit		1.9 			(1.9)			— 			— 		
Income Tax (Expense) Benefit		0.4 			(0.4)			— 			— 		
Reclassifications from AOCI, Net of Income Tax (Expense) Benefit		1.5 			(1.5)			— 			— 		
Net Current Period Other Comprehensive Income (Loss)		1.5 			(1.5)			3.2 			3.2 		
	
Balance in AOCI as of December 31, 2020		$	(0.3)			$	(2.8)			$	5.0 			$	1.9 		

(a)The change in fair value includes $(10) million, $(7) million and $6 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to AEP's investment in joint venture wind farms acquired as part of the purchase of Sempra Renewables LLC.
(b)Amounts reclassified to the referenced line item on the statements of income.
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4.  RATE MATTERS

The disclosures in this note apply to all Registrants unless indicated otherwise.

The Registrants are involved in rate and regulatory proceedings at the FERC and their state commissions.  Rate matters can have a material impact on net income, cash flows and possibly financial condition.  The Registrants’ recent significant rate orders and pending rate filings are addressed in this note.

AEP Texas Rate Matters (Applies to AEP and AEP Texas)

AEP Texas Interim Transmission and Distribution Rates

Through December 31, 2022, AEP Texas’ cumulative revenues from interim base rate increases that are subject to review is approximately $614 million. A base rate review could result in a refund to customers if AEP Texas incurs a disallowance of the transmission or distribution investment on which an interim increase was based. Management is unable to determine a range of potential losses, if any, that are reasonably possible of occurring. A revenue decrease, including a refund of interim transmission and distribution rates, could reduce future net income and cash flows and impact financial condition. AEP Texas is required to file for a comprehensive rate review no later than April 5, 2024.

APCo and WPCo Rate Matters (Applies to AEP and APCo)

2017-2019 Virginia Triennial Review

In November 2020, the Virginia SCC issued an order on APCo’s 2017-2019 Triennial Review filing concluding that APCo earned above its authorized ROE but within its ROE band for the 2017-2019 period, resulting in no refund to customers and no change to APCo base rates on a prospective basis. The Virginia SCC approved a prospective 9.2% ROE for APCo's 2020-2022 triennial review period with the continuation of a statutory 140 basis point band (8.5% bottom, 9.2% midpoint, 9.9% top). APCo appealed this order and a similar order on reconsideration to the Virginia Supreme Court in March 2021, alleging the Virginia SCC erred in finding that costs associated with asset impairments related to APCo early retirement determinations for certain generation facilities should not be attributed to the 2017-2019 test periods under review and deemed fully recovered in the period recorded. In August 2022, the Virginia Supreme Court agreed with this portion of APCo’s appeal and remanded this issue regarding the retired coal-fired plants back to the Virginia SCC for further proceedings. In September 2022, as a result of the Virginia Supreme Court ruling, APCo expensed the remaining $25 million closed coal plant regulatory asset that was previously ordered by the Virginia SCC and recorded a $37 million regulatory asset for previously incurred costs that APCo is expecting to recover as a result of earning below its 2017-2019 authorized ROE band.

In response to the Virginia Supreme Court’s August 2022 opinion, the Virginia SCC initiated remand proceedings and, in December 2022, issued an order that: (a) approved APCo’s requested $37 million regulatory asset related to previously incurred costs as a result of APCo earning below its 2017-2019 authorized ROE band, (b) authorized a $28 million annual increase in APCo Virginia base rates effective October 2022 and (c) approved a rider to recover approximately $48 million related to this APCo Virginia base rate increase for the period January 2021 through September 2022. APCo’s 2022 financial statements reflect the impact of the Virginia SCC’s December 2022 order.

2020-2022 Virginia Triennial Review

In March 2023, APCo will submit its required Virginia earnings test calculation to the Virginia SCC for the 2020-2022 Triennial Review period. For Triennial Review periods in which a Virginia utility earns below its authorized ROE band, the utility may file to recover expenses incurred, up to the bottom of the authorized ROE band, related to major storms, the early retirement of fossil fuel generating assets and certain projects necessary to comply with state and federal environmental legislation. As of December 31, 2022, APCo has deferred approximately $38 million related to previously incurred costs as a result of the current estimate that APCo will earn below the bottom of its authorized ROE band during the 2020-2022 Triennial Review period. If it is determined
254

that APCo has earned above the bottom of its authorized ROE band for the 2020-2022 Triennial Review period it could reduce future net income and cash flows and impact financial condition.

CCR/ELG Compliance Plan Filings

In December 2020, APCo submitted filings with the Virginia SCC and WVPSC requesting approvals necessary to implement CCR/ELG compliance plans at the Amos and Mountaineer Plants. In August 2021, the Virginia SCC issued an order approving recovery of CCR-related operation and maintenance expenses and investments at the Amos and Mountaineer Plants through an active rider. The order also denied APCo’s request to recover the cost of ELG investments and denied recovery of previously incurred ELG costs, but did not preclude APCo from refiling for approval. Also in August 2021, the WVPSC approved the request to construct CCR/ELG investments at the Amos and Mountaineer Plants and approved recovery of the West Virginia jurisdictional share of these costs through an active rider.

In March 2022, APCo refiled for approval to recover the Virginia jurisdictional share of ELG investments at the Amos and Mountaineer Plants. The Virginia SCC issued a November 2022 order approving this request.

2021 and 2022 ENEC (Expanded Net Energy Cost) Filings

In April 2021, APCo and WPCo (the Companies) requested a $73 million annual increase in ENEC rates based on a cumulative combined $55 million ENEC under-recovery as of February 28, 2021 and a combined $18 million increase in projected ENEC costs for the period September 2021 through August 2022. In September 2021, the WVPSC issued an order approving a $7 million overall increase in ENEC rates, including an approval for recovery of the Companies’ cumulative $55 million ENEC under-recovery balance and a $48 million reduction in projected costs for the period September 2021 through August 2022. Subsequently, the Companies submitted a request for reconsideration of this order, identifying flaws in the WVPSC’s calculation of forecasted future year fuel expense and purchased power costs.

In March 2022, the WVPSC issued an order granting the Companies’ request for reconsideration, in part, and approving $31 million in projected costs for the period September 2021 through August 2022. The order also reopened the 2021 ENEC case to require the Companies to explain the significant growth in the reported under-recovery of ENEC costs and to provide various other information including revised projected costs for the period March 2022 through August 2022. Also, in March 2022, the Companies filed testimony providing the information requested in the WVPSC’s order and requested a $155 million annual increase in ENEC rates effective May 1, 2022. In May 2022, the WVPSC issued an order approving a $93 million overall increase to ENEC rates to recover projected annual ENEC costs. However, the WVPSC stated that actual and projected ENEC costs are still subject to a prudency review.

In April 2022, the Companies submitted their 2022 annual ENEC filing with the WVPSC requesting a $297 million annual increase in ENEC revenues, inclusive of the previously requested $155 million increase, effective September 1, 2022.

In September 2022, following an agreed upon delay in the proceedings of the Companies’ 2022 ENEC case, certain intervenors submitted testimony recommending disallowances of at least $83 million to the Companies’ historical period ENEC under-recovery balance along with proposals to either securitize the Companies’ remaining ENEC balance or defer recovery of this balance beyond the traditional one-year period. West Virginia Staff recommended a $13 million increase in ENEC rates pending the outcome of the ENEC prudency review. In February 2023, the WVPSC issued an order stating that the commission will not grant additional rate increases for fuel costs until the WVPSC staff completes its prudency review. As of December 31, 2022, the Companies’ cumulative ENEC under-recovery was $520 million. If any deferred ENEC costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

255

June 2022 West Virginia Storm Costs

In June 2022, the West Virginia service territories of APCo and WPCo (the Companies) were impacted by strong winds from multiple storms resulting in system damages and power outages. As of December 31, 2022, the Companies incurred and deferred an estimated $17 million in incremental distribution operation and maintenance expenses related to service restoration efforts. The Companies will seek recovery of these deferrals in future filings. If any of the storm restoration costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

ETT Rate Matters (Applies to AEP)

ETT Interim Transmission Rates

AEP has a 50% equity ownership interest in ETT. Predominantly all of ETT’s revenues are based on interim rate changes that can be filed twice annually and are subject to review and possible true-up in the next base rate proceeding. Through December 31, 2022, AEP’s share of ETT’s cumulative revenues that are subject to review is approximately $1.5 billion. A base rate review could produce a refund if ETT incurs a disallowance of the transmission investment on which an interim increase was based. A revenue decrease, including a refund of interim transmission rates, could reduce future net income and cash flows and impact financial condition. Management is unable to determine a range of potential losses, if any, that are reasonably possible of occurring.

In December 2022, ETT and various intervenors filed a stipulation and settlement agreement with the PUCT. The agreement maintains ETT’s previously allowed ROE and capital structure and includes: (a) a $14 million decrease to the current annual revenue requirement effective February 1, 2023, (b) a provision that ETT must make an interim transmission cost of service filing by June 1, 2023, (c) a $2 million line item decrease to the revenue requirement determined in each interim transmission cost of service filing until the filing of the next comprehensive base rate review and (d) no determination of prudence on any transmission investment added since ETT’s last comprehensive base rate review, which would leave the $1.5 billion of cumulative revenues above subject to review in the next comprehensive base rate review. In February 2023, the PUCT approved the stipulation and settlement agreement. As part of the approved agreement, new rates will be implemented in February 2023 and ETT is required to file for a comprehensive base rate review no later than February 1, 2025.

I&M Rate Matters (Applies to AEP and I&M)

Michigan Power Supply Cost Recovery (PSCR) Reconciliation

In April 2022, an ALJ issued a PFD for I&M’s PSCR reconciliation for the 12-month period ending December 31, 2020, recommending the MPSC disallow approximately $8 million of purchased power costs that I&M incurred under the Inter-Company Power Agreement with OVEC and the Unit Power Agreement with AEGCo. In February 2023, the MPSC issued an order resulting in a $1 million disallowance of 2020 OVEC costs.

Indiana Earnings Test Filings

I&M is required by Indiana law to submit an earnings test evaluation for the most recent one-year and five-year periods as part of I&M’s semi-annual Indiana FAC filings. These earnings test evaluations require I&M to include a credit in the FAC factor computation for periods in which I&M earned above its authorized return for both the one-year and five-year periods. The credit is determined as 50% of the lower of the one-year or five-year earnings above the authorized level. In August 2022, I&M submitted its FAC filing and earnings test evaluation for the period ended May 2022, which calculated a credit due to customers of $14 million. In October 2022, the IURC approved the FAC filing and earnings test evaluation, with the credit to customers starting in November 2022 through the FAC. As of December 31, 2022, I&M’s financial statements adequately reflect the estimated impact of I&M’s upcoming Indiana earnings test filings. If it is determined that I&M’s over-earnings exceed what has been recorded, it could reduce future net income and cash flows and impact financial condition.
256

2022 Michigan Integrated Resource Plan (IRP) Filing

In February 2022, I&M filed a request with the MPSC for approval of its 2022 IRP. Included in that filing were requests for approval and deferral of costs associated with resources commencing construction within three years of the Commission’s order in the filing. These resources include the new generation resources expected to be in-service by 2028 and demand-side resources, including load management programs and conservation voltage reduction investments. I&M is also requesting MPSC approval of I&M’s Rockport Plant, Unit 2 transition plan consistent with that approved by the IURC, including certain cost recovery related to remaining net book value of leasehold improvements made during the term of the Rockport Unit 2 lease and future use of Rockport Plant, Unit 2 as a capacity resource. In addition, I&M has made requests for approval of a financial incentive on certain power purchase agreements and load management programs. As of December 31, 2022, I&M’s total net book value for these Rockport Plant, Unit 2 leasehold improvements was approximately $17 million on a Michigan jurisdictional basis.

In November 2022, I&M filed a settlement agreement, which included a Rockport Plant, Unit 2 transition plan. Under this plan, I&M Michigan ratepayers will receive a jurisdictional share of post-lease revenues in excess of costs from Rockport Plant, Unit 2’s operations as a merchant facility. In addition, I&M will continue to recover the remaining net book value of Rockport Plant, Unit 2 leasehold improvements through 2028, including a pretax return. In February 2023, the MPSC issued an order approving the settlement agreement without modification.

KPCo Rate Matters (Applies to AEP)

CCR/ELG Compliance Plan Filings

KPCo and WPCo each own a 50% interest in the Mitchell Plant. As of December 31, 2022, the net book value of KPCo’s share of the Mitchell Plant, before cost of removal including CWIP and inventory, was $577 million. In December 2020 and February 2021, WPCo and KPCo filed requests with the WVPSC and KPSC, respectively, to obtain the regulatory approvals necessary to implement CCR and ELG compliance plans and seek recovery of the estimated $132 million investment for the Mitchell Plant that would allow the plant to continue operating beyond 2028. Within those requests, WPCo and KPCo also filed a $25 million alternative to implement only the CCR-related investments with the WVPSC and KPSC, respectively, which would allow the Mitchell Plant to continue operating only through 2028.

In July 2021, the KPSC issued an order approving the CCR only alternative and rejecting the full CCR and ELG compliance plan. In May 2022, the KPSC approved recovery of the Kentucky jurisdictional share of ELG costs incurred at the Mitchell Plant prior to July 15, 2021.

In August 2021, the WVPSC approved the full CCR and ELG compliance plan for the WPCo share of the Mitchell Plant. In September 2021, WPCo submitted a filing with the WVPSC to reopen the CCR/ELG case that was approved by the WVPSC in August 2021. Due to the rejection by the KPSC of the KPCo share of the ELG investments, WPCo requested the WVPSC consider approving the construction and recovery of all ELG costs at the plant. In October 2021, the WVPSC affirmed its August 2021 order approving the construction of CCR/ELG investments and directed WPCo to proceed with CCR/ELG compliance plans that would allow the plant to continue operating beyond 2028. The WVPSC also ordered that WPCo will be given the opportunity to recover, from its customers, the ELG and new capital and operating costs arising solely from the WVPSC's directive to operate the plant beyond 2028 if the WVPSC finds that the costs are reasonably and prudently incurred. The WVPSC’s order further states that unless KPCo pays for its share of costs for ELG improvements and costs necessary to continue operations beyond 2028, the benefit of the capacity and energy made possible by those improvements and operating Mitchell Plant beyond 2028 should benefit only West Virginia jurisdictional customers who have shared in paying for those costs.

257

OPCo Rate Matters (Applies to AEP and OPCo)

OVEC Cost Recovery Audits

In December 2021, as part of OVEC cost recovery audits pending before the PUCO, intervenors filed positions claiming that costs incurred by OPCo during the 2018-2019 audit period were imprudent and should be disallowed. In May 2022, intervenors filed for rehearing on the 2016-2017 OVEC cost recovery audit period claiming the PUCO’s April 2022 order to adopt the findings of the audit report were unjust, unlawful and unreasonable for multiple reasons, including the position that OPCo recovered imprudently incurred costs. In June 2022, the PUCO granted rehearing on the 2016-2017 audit period for purposes of further consideration. Management disagrees with these claims and is unable to predict the impact of these disputes; however, if any costs are disallowed or refunds are ordered it could reduce future net income and cash flows and impact financial condition. See "OVEC" section of Note 17 for additional information on AEP and OPCo’s investment in OVEC.

June 2022 Storm Costs

In June 2022, the service territory of OPCo was impacted by strong winds from multiple storms resulting in power outages and damage to the transmission and distribution infrastructures. As of December 31, 2022, OPCo had incurred approximately $20 million in incremental operation and maintenance costs related to service restoration efforts. The incremental storm restoration costs have been deferred as regulatory assets and OPCo is expected to seek recovery in a future filing. In July 2022, intervenors filed a motion requesting the PUCO open a formal investigation into the power outages that occurred as a result of the June storms and determine if OPCo was negligent and liable to consumers for damages incurred as a result of the power outages. Separately, in July 2022, the PUCO directed its staff to conduct an after-action review to examine the circumstances of the event and OPCo’s response to determine if OPCo adhered to the laws and rules in the state, followed its PUCO-approved emergency plan and responded appropriately to the event in an effort to mitigate the negative effects. In January 2023, the PUCO Staff issued a report which concluded OPCo was required to proactively shut down parts of its distribution system in order to avoid damages to the system and further outages and that OPCo adhered to its emergency plan. The report also directed OPCo to revise its vegetation programs around high voltage transmission lines and recommended that it make improvements to its emergency communications procedures. If any of the storm restoration costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

Ohio ESP Filings

In January 2023, OPCo filed an application with the PUCO to approve an ESP that included proposed rate adjustments, proposed new riders and the continuation and modification of certain existing riders, including the DIR, effective June 2024 through May 2030. The proposal includes a return on common equity of 10.65% on capital costs for certain riders. If OPCo is ultimately not permitted to fully collect its ESP rates it could reduce future net income and cash flows and impact financial condition.

PSO Rate Matters (Applies to AEP and PSO)

2022 Oklahoma Base Rate Case

In November 2022, PSO filed a request with the OCC for a $173 million annual increase in rates based upon a 10.4% ROE with a capital structure of 45.4% debt and 54.6% common equity, net of existing rider revenues and certain incremental renewable facility benefits expected to be provided to customers through riders. The requested annual revenue increase includes a $47 million annual depreciation expense increase related to the accelerated depreciation recovery of the Northeastern Plant, Unit 3 through 2026, and a $16 million annual amortization expense increase to recover intangible plant over a 5-year useful life instead of a 10-year useful life. PSO’s request also includes recovery of the 154 MW Rock Falls Wind Facility through base rates to aid PSO’s near-term capacity needs and support compliance with SPP’s 2023 increased capacity planning reserve margin requirements. In
258

November 2022, PSO entered into an agreement to acquire the Rock Falls Wind Facility. In February 2023, the FERC approved PSO’s acquisition of the Rock Falls Wind Facility under Section 203 of the Federal Power Act. PSO expects to close on the acquisition and place the Rock Falls Wind Facility in-service during the first quarter of 2023. OCC approval is not a condition precedent to closing on the acquisition of the Rock Falls Wind Facility. In addition, PSO requested an annual formula based rate tariff, with an initial one-year pilot term. In the event the requested formula based rate tariff is denied, PSO has requested an expanded rider to recover certain distribution investments and related expenses as well as an expanded transmission cost recovery rider. If any of these costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

February 2021 Severe Winter Weather Impacts in SPP

In February 2021, severe winter weather had a significant impact in SPP, resulting in the declaration of Energy Emergency Alert Levels 2 and 3 for the first time in SPP’s history. The winter storm increased the demand for natural gas and restricted the available natural gas supply resulting in significantly increased market prices for natural gas power plants to meet reliability needs for the SPP electric system.

In April 2021, the OCC approved a waiver for PSO allowing the deferral of the extraordinary fuel and purchases of electricity as regulatory assets, including a carrying charge at an interim rate of 0.75%, over a longer time period than what the FAC traditionally allows. Also in April 2021, legislation was enacted in Oklahoma permitting securitized financing of qualified costs from extreme weather events. This legislation provides certain authority to the OCC to approve amounts to be recovered from the issuance of ratepayer-backed securitized bonds issued by the ODFA, an Oklahoma governmental agency. In January 2022, PSO, OCC staff and certain intervenors filed a joint stipulation and settlement agreement with the OCC to approve the securitization of PSO’s extraordinary fuel costs and purchases of electricity. In February 2022, the OCC approved the joint stipulation and settlement agreement which included a determination that all of PSO’s extraordinary fuel costs and purchases of electricity were prudent and reasonable and also provided a 0.75% carrying charge related to those costs, subject to true-up based on actual financing costs.

In September 2022, PSO received proceeds of $687 million from the ODFA which issued ratepayer-backed securitization bonds for the purpose of reimbursing PSO for extraordinary fuel costs and purchases of electricity incurred during the February 2021 severe winter weather event, which were previously recorded as Regulatory Assets on PSO’s balance sheet. The securitization bonds are the obligation of the ODFA and there is no recourse against PSO in the event of a bond default, and therefore are not recorded as Long-term Debt on PSO’s balance sheet. PSO will serve as the servicing agent of the bonds and is responsible for the routine billing and collection of the securitization charges and remitting those collections back to the ODFA. The securitization charges billed to and collected from customers are not included as revenue on PSO’s statement of income. The collections from customers will occur over 20 years.

SWEPCo Rate Matters (Applies to AEP and SWEPCo)

2012 Texas Base Rate Case

In 2012, SWEPCo filed a request with the PUCT to increase annual base rates primarily due to the completion of the Turk Plant. In 2013, the PUCT issued an order affirming the prudence of the Turk Plant but determined that the Turk Plant’s Texas jurisdictional capital cost cap established in a previous Certificate of Convenience and Necessity case also limited SWEPCo’s recovery of AFUDC in addition to limits on its recovery of cash construction costs.

Upon rehearing in 2014, the PUCT reversed its initial ruling and determined that AFUDC was excluded from the Turk Plant’s Texas jurisdictional capital cost cap. As a result, SWEPCo reversed $114 million of a previously recorded regulatory disallowance in 2013. In 2017, the Texas District Court upheld the PUCT’s 2014 order and intervenors filed appeals with the Texas Third Court of Appeals.

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In July 2018, the Texas Third Court of Appeals reversed the PUCT’s judgment affirming the prudence of the Turk Plant and remanded the issue back to the PUCT. In January 2019, SWEPCo and the PUCT filed petitions for review with the Texas Supreme Court. In March 2021, the Texas Supreme Court issued an opinion reversing the July 2018 judgment of the Texas Third Court of Appeals and agreeing with the PUCT’s judgment affirming the prudence of the Turk Plant. In addition, the Texas Supreme Court remanded the AFUDC dispute back to the Texas Third Court of Appeals. No parties filed a motion for rehearing with the Texas Supreme Court. In August 2021, the Texas Third Court of Appeals reversed the Texas District Court judgment affirming the PUCT’s order on AFUDC, concluding that the language of the PUCT’s original 2008 order intended to include AFUDC in the Texas jurisdictional capital cost cap, and remanded the case to the PUCT for future proceedings. SWEPCo disagrees with the Court of Appeals decision. SWEPCo and the PUCT submitted Petitions for Review with the Texas Supreme Court in November 2021. In October 2022, the Texas Supreme Court denied the Petitions for Review submitted by SWEPCo and the PUCT. In December 2022, SWEPCo and the PUCT filed requests for rehearing with the Texas Supreme Court. The Texas Supreme Court requested comments on rehearing by March 1, 2023. If SWEPCo’s request for rehearing is denied, the case will be remanded to the PUCT for future proceedings.

Management does not believe a disallowance of capitalized Turk Plant costs or a revenue refund is probable as of December 31, 2022. However, if SWEPCo is ultimately unable to recover AFUDC in excess of the Texas jurisdictional capital cost cap, it would be expected to result in a pretax net disallowance ranging from $80 million to $90 million. In addition, if AFUDC is ultimately determined to be included in the Texas jurisdictional capital cost cap, SWEPCo estimates it may be required to make customer refunds ranging from $0 to $185 million related to revenues collected from February 2013 through December 2022 and such determination may reduce SWEPCo’s future revenues by approximately $15 million on an annual basis.

2016 Texas Base Rate Case

In 2016, SWEPCo filed a request with the PUCT for a net increase in Texas annual revenues of $69 million based upon a 10% ROE. In January 2018, the PUCT issued a final order approving a net increase in Texas annual revenues of $50 million based upon a ROE of 9.6%, effective May 2017. The final order also included: (a) approval to recover the Texas jurisdictional share of environmental investments placed in- service, as of June 30, 2016, at various plants, including Welsh Plant, Units 1 and 3, (b) approval of recovery of, but no return on, the Texas jurisdictional share of the net book value of Welsh Plant, Unit 2, (c) approval of $2 million in additional vegetation management expenses and (d) the rejection of SWEPCo’s proposed transmission cost recovery mechanism.

As a result of the final order, in 2017 SWEPCo: (a) recorded an impairment charge of $19 million, which included $7 million associated with the lack of return on Welsh Plant, Unit 2 and $12 million related to other disallowed plant investments, (b) recognized $32 million of additional revenues, for the period of May 2017 through December 2017, that was surcharged to customers in 2018 and (c) recognized an additional $7 million of expenses consisting primarily of depreciation expense and vegetation management expense, offset by the deferral of rate case expense. SWEPCo implemented new rates in February 2018 billings. The $32 million of additional 2017 revenues was collected during 2018. In March 2018, the PUCT clarified and corrected portions of the final order, without changing the overall decision or amounts of the rate change. The order has been appealed by various intervenors related to limiting SWEPCo’s recovery of AFUDC on Turk Plant and recovery of Welsh Plant, Unit 2. The appeal will move forward following the conclusion of the 2012 Texas Base Rate Case. If certain parts of the PUCT order are overturned, it could reduce future net income and cash flows and impact financial condition.

2020 Texas Base Rate Case

In October 2020, SWEPCo filed a request with the PUCT for a $105 million annual increase in Texas base rates based upon a proposed 10.35% ROE. The request would move transmission and distribution interim revenues recovered through riders into base rates. Eliminating these riders would result in a net annual requested base rate increase of $90 million primarily due to increased investments. SWEPCo subsequently filed a request with the PUCT lowering the requested annual increase in Texas base rates to $100 million which would result in an $85 million net annual base rate increase after moving the proposed riders to rate base.
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In January 2022, the PUCT issued a final order approving an annual revenue increase of $39 million based upon a 9.25% ROE. The order also includes: (a) rates implemented retroactively back to March 18, 2021, (b) $5 million of the proposed increase related to vegetation management, (c) $2 million annually to establish a storm catastrophe reserve and (d) the creation of a rider to recover the Dolet Hills Power Station as if it were in rate base until its retirement at the end of 2021 and starting in 2022 the remaining net book value to be recovered as a regulatory asset through 2046. As a result of the final order, SWEPCo recorded a disallowance of $12 million in 2021 associated with the lack of return on the Dolet Hills Power Station. In February 2022, SWEPCo filed a motion for rehearing with the PUCT challenging several errors in the order, which include challenges of the approved ROE, the denial of a reasonable return or carrying costs on the Dolet Hills Power Station and the calculation of the Texas jurisdictional share of the storm catastrophe reserve. In April 2022, the PUCT denied the motion for rehearing. In May 2022, SWEPCo filed a petition for review with the Texas District Court seeking a judicial review of the several errors challenged in the PUCT’s final order.

2020 Louisiana Base Rate Case

In December 2020, SWEPCo filed a request with the LPSC for a $134 million annual increase in Louisiana base rates based upon a proposed 10.35% ROE. SWEPCo’s requested annual increase includes accelerated depreciation related to the Dolet Hills Power Station, Pirkey Power Plant and Welsh Plant, all of which were or are expected to be retired early. SWEPCo also included recovery of Welsh Plant, Unit 2 over the blended useful life of Welsh Plant, Units 1 and 3. SWEPCo subsequently revised the requested annual increase to $95 million to reflect removing hurricane storm restoration costs from the base case filing, to modify the proposed recovery of the Dolet Hills Power Station and revisions to various proposed amortizations. The hurricane costs have been requested in a separate storm filing. See “2021 Louisiana Storm Cost Filing” below for more information.

In January 2023, the LPSC approved a settlement which provides for an annual revenue increase of $27 million based upon a 9.5% ROE and includes: (a) a $21 million increase in base rates effective February 2023, (b) a $14 million rider to recover costs of the Dolet Hills Power Station and Pirkey Plant including a return, (c) an $8 million reduction in fuel rates, (d) an adoption of a 3-year formula rate term subject to an earnings band and (e) the recovery of certain incremental SPP charges net of associated revenue and the LA jurisdictional share of the return on and of projected transmission capital investment outside of the earnings band. The settlement agreement did not rule on the prudency of the early retirement of the Dolet Hills Power Station, which is being addressed in a separate proceeding.

The primary differences between SWEPCo’s requested annual rate increase and the agreed upon settlement increase are primarily due to: (a) a reduction in the requested ROE, (b) recovery of the Dolet Hills Power Station and Pirkey Plant over ten years in a separate rider mechanism as opposed to base rates with accelerated depreciation rates, (c) maintaining existing depreciation rates for Welsh Plant, Units 1 and 3 and (d) the severing of SWEPCo’s proposed adjustment to include a stand-alone NOLC deferred tax asset in rate base. In January 2023, a hearing was held related to the inclusion of a stand-alone NOLC deferred tax asset in rate base and an order from the LPSC is expected in 2023.

2021 Arkansas Base Rate Case

In July 2021, SWEPCo filed a request with the APSC for an $85 million annual increase in Arkansas base rates based upon a proposed 10.35% ROE with a capital structure of 48.7% debt and 51.3% common equity. The proposed annual increase includes: (a) a $41 million revenue requirement for the North Central Wind Facilities, (b) a $14 million annual depreciation increase primarily due to recovery of the Dolet Hills Power Station through 2026 and Pirkey Plant and Welsh Plant, Units 1 and 3 through 2037 and (c) a $6 million increase due to SPP costs. In January 2022, SWEPCo filed testimony revising the requested annual increase in Arkansas base rates to $81 million. SWEPCo requested that rates become effective in June 2022.

In May 2022, the APSC issued a final order approving an annual revenue increase of $49 million based upon a 9.5% ROE. The order also includes: (a) a capital structure of 55% debt and 45% common equity, (b) approval to recover the Dolet Hills Power Station as a regulatory asset over five years without a return on this investment
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resulting in an immaterial disallowance in the second quarter of 2022, (c) the denial of accelerated depreciation for Pirkey Plant and Welsh Plant, Units 1 and 3 and (d) approval of a rider to recover SPP costs and revenues. The final order also denied the inclusion of the stand-alone NOLC in SWEPCo’s deferred tax assets, but included approval of the deferral of the forgone revenue requirement associated with the NOLC and excess NOLC, with recovery of the deferral contingent upon receipt of a supportive private letter ruling from the IRS. Rates were implemented with the first billing cycle of July 2022.

2021 Louisiana Storm Cost Filing

In 2020, Hurricanes Laura and Delta caused power outages and extensive damage to the SWEPCo service territories, primarily impacting the Louisiana jurisdiction. Following both hurricanes, the LPSC issued orders allowing Louisiana utilities, including SWEPCo, to establish regulatory assets to track and defer expenses associated with these storms. In February 2021, severe winter weather impacted the Louisiana jurisdiction and in March 2021, the LPSC approved the deferral of incremental storm restoration expenses related to the winter storm. In October 2021, SWEPCo filed a request with the LPSC for recovery of $145 million in deferred storm costs associated with the three storms. As part of the filing, SWEPCo requested recovery of the carrying charges on the deferred regulatory asset at a weighted average cost of capital through a rider beginning in January 2022. In May 2022, LPSC staff testimony was submitted to the LPSC. In July 2022, SWEPCo filed rebuttal testimony which agreed to make a request for securitization as the LPSC staff had recommended in their testimony. An order is expected in 2023. If any of the storm costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

February 2021 Severe Winter Weather Impacts in SPP

As discussed in the “PSO Rate Matters” section above, severe winter weather had a significant impact in SPP, resulting in significantly increased market prices for natural gas power plants to meet reliability needs for the SPP electric system. For the time period of February 9, 2021, to February 20, 2021, SWEPCo’s natural gas expenses and purchases of electricity still to be recovered from customers are $329 million as of December 31, 2022, of which $75 million, $122 million and $132 million is related to the Arkansas, Louisiana and Texas jurisdictions, respectively.

In March 2021, the APSC issued an order authorizing recovery of the Arkansas jurisdictional share of the retail customer fuel costs over five years, with the appropriate carrying charge to be determined at a later date. Subsequently, SWEPCo began recovery of these fuel costs. In April 2021, SWEPCo filed testimony supporting a five-year recovery with a carrying charge of 6.05%. In June 2022, the APSC ordered SWEPCo to recover the Arkansas jurisdictional share of the fuel costs over six years with a carrying charge equal to its weighted average cost of capital, subject to a prudency review and true-up.

In March 2021, the LPSC approved a special order granting a temporary modification to the FAC and shortly after SWEPCo began recovery of its Louisiana jurisdictional share of these fuel costs based on a five-year recovery period inclusive of an interim carrying charge of 3.25%. SWEPCo will work with the LPSC to finalize the actual recovery period and determine the appropriate carrying charge in future proceedings.

In August 2021, SWEPCo filed an application with the PUCT to implement a net interim fuel surcharge for the Texas jurisdictional share of these retail fuel costs. The application requested a five-year recovery with a carrying charge of 7.18%. In March 2022, the PUCT ordered SWEPCo to recover the Texas jurisdictional share of the fuel costs over five years with a carrying charge of 1.65% and ordered SWEPCo to file a fuel reconciliation addressing fuel costs from January 1, 2020 through December 31, 2021.

If SWEPCo is unable to recover any of the costs relating to the extraordinary fuel and purchases of electricity, or obtain authorization of a reasonable carrying charge on these costs, it could reduce future net income and cash flows and impact financial condition.

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FERC Rate Matters

FERC SPP Transmission Formula Rate Challenge (Applies to AEP, AEPTCo, PSO and SWEPCo)

In May 2021, certain joint customers submitted a formal challenge at the FERC related to the 2020 Annual Update of the 2019 SPP Transmission Formula Rates of the AEP transmission owning subsidiaries within SPP. In March 2022, the FERC issued an order on the formal challenge which ruled in favor of the joint customers on several issues. Management has determined that the result of the order will have an immaterial impact to the financial statements of AEP, AEPTCo, PSO and SWEPCo. In November 2022, certain joint customers appealed the FERC decision to the U.S. Court of Appeals for the District of Columbia Circuit.

Independence Energy Connection Project (Applies to AEP)

In 2016, PJM approved the Independence Energy Connection Project (IEC) and included it in its Regional Transmission Expansion Plan to alleviate congestion. Transource Energy has an ownership interest in the IEC, which is located in Maryland and Pennsylvania. In June 2020, the Maryland Public Service Commission approved a Certificate of Public Convenience and Necessity to construct the portion of the IEC in Maryland. In May 2021, the Pennsylvania Public Utility Commission (PAPUC) denied the IEC certificate for siting and construction of the portion in Pennsylvania. Transource Energy appealed the PAPUC ruling in Pennsylvania state court and challenged the ruling before the United States District Court for the Middle District of Pennsylvania. In May 2022, the Pennsylvania state court issued an order affirming the PAPUC decision. The PAPUC decision remains subject to the jurisdiction and review of the United States District Court for the Middle District of Pennsylvania, which had stayed review of the PAPUC decision until the Pennsylvania state court had ordered. The procedural schedule for this case states that a decision by the United States District Court for the Middle of Pennsylvania will not be reached until 2023.

In September 2021, PJM notified Transource Energy that the IEC was suspended to allow for the regulatory and related appeals process to proceed in an orderly manner without breaching milestone dates in the project agreement. At that time, PJM stated that the IEC has not been cancelled and remains necessary to alleviate congestion. PJM continues to evaluate reliability and market efficiency in the area. As of December 31, 2022, AEP’s share of IEC capital expenditures was approximately $87 million, located in Total Property, Plant and Equipment - Net on AEP’s balance sheets. The FERC has previously granted abandonment benefits for this project, allowing the full recovery of prudently incurred costs if the project is cancelled for reasons outside the control of Transource Energy. If any of the IEC costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

FERC RTO Incentive Complaint (Applies to AEP, AEPTCo and OPCo)

In February 2022, the Office of the Ohio Consumers’ Counsel (OCC) filed a complaint against AEPSC, American Transmission Systems, Inc. and Duke Energy Ohio, alleging the 50 basis point RTO incentive included in Ohio Transmission Owners’ respective transmission formula rates is not just and reasonable and therefore should be eliminated on the basis that RTO participation is not voluntary, but rather is required by Ohio law. In March 2022, AEPSC filed a motion to dismiss the OCC’s February 2022 complaint with the FERC on the basis of certain deficiencies, including that the complaint fails to request relief that can be granted under FERC regulations because AEPSC is not a public utility nor does it have a transmission rate on file with the FERC. In December 2022, the FERC issued an order removing the 50 basis point RTO incentive from OPCo and OHTCo transmission formula rates effective the date of the February 2022 complaint filing and directed OPCo and OHTCo to provide refunds, with interest, within sixty days of the date of its order. In January 2023, both AEPSC and the OCC filed requests for rehearing with the FERC. A FERC order on rehearing is expected in 2023. Based on management’s preliminary estimates, the December 2022 FERC order is expected to reduce AEP’s pretax income by approximately $20 million on an annual basis.

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Request to Update AEGCo Depreciation Rates (Applies to AEP and I&M)

In October 2022, AEP, on behalf of AEGCo, submitted proposed revisions to AEGCo’s depreciation rates for its 50% ownership interest in Rockport Plant, Unit 1 and Unit 2, reflected in AEGCo’s unit power agreement with I&M. The proposed depreciation rates for these assets reflect an estimated 2028 retirement date for the Rockport Plant. AEGCo’s previous FERC-approved depreciation rates for Rockport Plant, Unit 1 were based upon a December 31, 2028 estimated retirement date while AEGCo’s previous FERC-approved depreciation rates for Rockport Plant, Unit 2 leasehold improvements were based upon a December 31, 2022 estimated retirement date in conjunction with the termination of the Rockport Plant, Unit 2 lease.

In December 2022, the FERC issued an order approving the proposed AEGCo Rockport depreciation rates effective January 1, 2023, subject to further review and a potential refund. The FERC established a separate proceeding to review: (a) AEGCo’s acquisition value for the Rockport Plant, Unit 2 base generating asset (original cost and accumulated depreciation), (b) the appropriateness of including future capital additions as stated components in proposed depreciation rates, in light of the UPA’s formula rate mechanism, (c) the appropriateness of applying two different depreciation rates to a single asset common to both units and (d) the accounting and regulatory treatment of Rockport Plant, Unit 2 costs of removal and related AROs. It is expected that the FERC will issue an order on this review in the second half of 2023. This FERC review and subsequent order on these issues could reduce future net income and cash flows and impact financial conditions.
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5.  EFFECTS OF REGULATION

The disclosures in this note apply to all Registrants unless indicated otherwise.

Coal-Fired Generation Plants (Applies to AEP, PSO and SWEPCo)

Compliance with extensive environmental regulations requires significant capital investment in environmental monitoring, installation of pollution control equipment, emission fees, disposal costs and permits. Management continuously evaluates cost estimates of complying with these regulations which has resulted in, and in the future may result in, a decision to retire coal-fired generating facilities earlier than their currently estimated useful lives.

Management is seeking or will seek regulatory recovery, as necessary, for any net book value remaining when the plants are retired. To the extent the net book value of these generation assets is not deemed recoverable, it could materially reduce future net income and cash flows and impact financial condition.

Regulated Generating Units that have been Retired

SWEPCo

In April 2016, Welsh Plant, Unit 2 was retired. As part of the 2016 Texas Base Rate Case, the PUCT authorized recovery of SWEPCo’s Texas jurisdictional share of Welsh Plant, Unit 2, but denied SWEPCo the ability to earn a return on this investment resulting in a disallowance of $7 million in 2017. See “2016 Texas Base Rate Case” section of Note 4 for additional information. As part of the 2019 Arkansas Base Rate Case, SWEPCo received approval from the APSC to recover the Arkansas jurisdictional share of Welsh Plant, Unit 2. In December 2020, SWEPCo filed a request with the LPSC to recover the Louisiana jurisdictional share of Welsh Plant, Unit 2. In January 2023, the LPSC approved a settlement agreement which provided recovery of Welsh Plant, Unit 2 as requested. See “2020 Louisiana Base Rate Case” section of Note 4 for additional information.

In December 2021, the Dolet Hills Power Station was retired. As part of the 2020 Texas Base Rate Case, the PUCT authorized recovery of SWEPCo’s Texas jurisdictional share of the Dolet Hills Power Station through 2046, but denied SWEPCo the ability to earn a return on this investment resulting in a disallowance of $12 million in 2021. As part of the 2021 Arkansas Base Rate Case, the APSC authorized recovery of SWEPCo’s Arkansas jurisdictional share of the Dolet Hills Power Station through 2027, but denied SWEPCo the ability to earn a return on this investment resulting in a disallowance of $2 million in the second quarter of 2022. Also, the APSC did not rule on the prudency of the early retirement of the Dolet Hills Power Station, which will be addressed in a future proceeding. As part of the 2020 Louisiana Base Rate Case, the LPSC authorized the recovery of SWEPCo’s Louisiana share of the Dolet Hills Power Station, through a separate rider, through 2032, but did not rule on the prudency of the early retirement of the plant, which is being addressed in a separate proceeding. See “2020 Texas Base Rate Case”, “2020 Louisiana Base Rate Case” and “2021 Arkansas Base Rate Case” sections of Note 4 for additional information.

Regulated Generating Units to be Retired

PSO

In 2014, PSO received final approval from the Federal EPA to close Northeastern Plant, Unit 3, in 2026. The plant was originally scheduled to close in 2040. As a result of the early retirement date, PSO revised the useful life of Northeastern Plant, Unit 3, to the projected retirement date of 2026 and the incremental depreciation is being deferred as a regulatory asset. As part of the 2021 Oklahoma Base Rate Case, PSO will continue to recover Northeastern Plant, Unit 3 through 2040.
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SWEPCo

In November 2020, management announced plans to retire Pirkey Plant in 2023 and that it will cease using coal at the Welsh Plant in 2028. As a result of the announcement, SWEPCo began recording a regulatory asset for accelerated depreciation.

The table below summarizes the net book value including CWIP, before cost of removal and materials and supplies, as of December 31, 2022, of generating facilities planned for early retirement:

Plant		Net Book Value		Accelerated Depreciation Regulatory Asset		Cost of Removal
Regulatory Liability			Projected
Retirement Date		Current Authorized
Recovery Period		Annual
Depreciation (a)	
		(dollars in millions)	
Northeastern Plant, Unit 3		$	136.3 			$	145.8 			$	20.2 		(b)		2026		(c)		$	14.9 		
Pirkey Plant		35.1 			179.5 			39.8 				2023		(d)		11.7 		
Welsh Plant, Units 1 and 3		416.8 			85.6 			58.3 		(e)		2028		(f)		37.9 		

(a)Represents the amount of annual depreciation that has been collected from customers over the prior 12-month period.
(b)Includes Northeastern Plant, Unit 4, which was retired in 2016. Removal of Northeastern Plant, Unit 4, will be performed with Northeastern Plant, Unit 3, after retirement.
(c)Northeastern Plant, Unit 3 is currently being recovered through 2040.
(d)Pirkey Plant is currently being recovered through 2032 in the Louisiana jurisdiction and through 2045 in the Arkansas and Texas jurisdictions.
(e)Includes Welsh Plant, Unit 2, which was retired in 2016. Removal of Welsh Plant, Unit 2, will be performed with Welsh Plant, Units 1 and 3, after retirement.
(f)Unit 1 is being recovered through 2027 in the Louisiana jurisdiction and through 2037 in the Arkansas and Texas jurisdictions. Unit 3 is being recovered through 2032 in the Louisiana jurisdiction and through 2042 in the Arkansas and Texas jurisdictions.

Dolet Hills Power Station and Related Fuel Operations (Applies to AEP and SWEPCo)

In 2020, management of SWEPCo and CLECO determined DHLC would not develop additional Oxbow Lignite Company (Oxbow) mining areas for future lignite extraction and ceased extraction of lignite at the mine in May 2020. In April 2020, SWEPCo and CLECO jointly filed a notification letter to the LPSC providing notice of the cessation of lignite mining. In December 2021, the Dolet Hills Power Station was retired. While in operation, DHLC provided 100% of the fuel supply to Dolet Hills Power Station.

The remaining book value of Dolet Hills Power Station non-fuel related assets are recoverable by SWEPCo through rate riders. As of December 31, 2022, SWEPCo’s share of the net investment in the Dolet Hills Power Station is $112 million, including materials and supplies, net of cost of removal collected in rates.

Fuel costs incurred by the Dolet Hills Power Station are recoverable by SWEPCo through active fuel clauses and are subject to prudency determinations by the various commissions. After closure of the DHLC mining operations and the Dolet Hills Power Station, additional reclamation and other land-related costs incurred by DHLC and Oxbow will continue to be billed to SWEPCo and included in existing fuel clauses. As of December 31, 2022, SWEPCo had a net under-recovered fuel balance of $257 million, inclusive of costs related to Dolet Hills Power Station billed by DHLC, but excluding impacts of the February 2021 severe winter weather event.

In March 2021, the LPSC issued an order allowing SWEPCo to recover up to $20 million of fuel costs in 2021 and defer approximately $32 million of additional costs with a recovery period to be determined at a later date. In August 2022, the LPSC staff filed testimony recommending fuel disallowances of $72 million, including denial of recovery of the $32 million deferral, with refunds to customers over five years. In September 2022, SWEPCo filed rebuttal testimony addressing the LPSC staff recommendations.

In March 2021, the APSC approved fuel rates that provide recovery of $20 million for the Arkansas share of the 2021 Dolet Hills Power Station fuel costs over five years through the existing fuel clause.

In August 2022, SWEPCo filed a fuel reconciliation with the PUCT covering the fuel period of January 1, 2020 through December 31, 2021. Intervenor testimony is due in the first quarter of 2023 and a decision from the PUCT is expected in the third quarter of 2023.
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If any of these costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

Pirkey Power Plant and Related Fuel Operations (Applies to AEP and SWEPCo)

In 2020, management announced plans to retire the Pirkey Plant in 2023. The Pirkey Plant non-fuel costs are recoverable by SWEPCo through base rates and rate riders. As part of the 2020 Louisiana Base Rate Case, the LPSC authorized recovery of SWEPCo’s Louisiana share of the Pirkey Plant through a separate rider. Fuel costs are recovered through active fuel clauses and are subject to prudency determinations by the various commissions. As of December 31, 2022, SWEPCo’s share of the net investment in the Pirkey Plant is $215 million, including CWIP, before cost of removal. Sabine is a mining operator providing mining services to the Pirkey Plant. Under the provisions of the mining agreement, SWEPCo is required to pay, as part of the cost of lignite delivered, an amount equal to mining costs plus a management fee. SWEPCo expects fuel deliveries, including billings of all fixed and operating costs, from Sabine to cease during the first quarter of 2023. Under the fuel agreements, SWEPCo’s fuel inventory and unbilled fuel costs from mining related activities were $43 million as of December 31, 2022. As of December 31, 2022, SWEPCo had a net under-recovered fuel balance of $257 million, inclusive of costs related to Pirkey Plant billed by Sabine, but excluding impacts of the February 2021 severe winter weather event. Upon cessation of lignite deliveries by Sabine to the Pirkey Plant, additional operational, reclamation and other land-related costs incurred by Sabine will be billed to SWEPCo and included in existing fuel clauses. If any of these costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.

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Regulatory Assets and Liabilities

Regulatory assets and liabilities are comprised of the following items:

		AEP	
		December 31,		Remaining Recovery Period	
		2022		2021			
Current Regulatory Assets		(in millions)			
Under-recovered Fuel Costs - earns a return		$	625.7 			$	409.4 			1 year	
Under-recovered Fuel Costs - does not earn a return		565.3 			175.7 			1 year	
Unrecovered Winter Storm Fuel Costs - earns a return (a)		95.8 			62.7 			1 year	
Total Current Regulatory Assets (b)		$	1,286.8 			$	647.8 				
							
Noncurrent Regulatory Assets							
Regulatory assets pending final regulatory approval:							
							
Regulatory Assets Currently Earning a Return							
	
Pirkey Plant Accelerated Depreciation		$	116.5 			$	87.0 				
Welsh Plant, Units 1 and 3 Accelerated Depreciation		85.6 			45.9 				
Unrecovered Winter Storm Fuel Costs		84.6 			367.5 				
	
Dolet Hills Power Station Fuel Costs - Louisiana		32.0 			30.9 				

	

Dolet Hills Power Station Accelerated Depreciation (c)		9.7 			72.3 				
Plant Retirement Costs - Unrecovered Plant, Louisiana		— 			35.2 				
Other Regulatory Assets Pending Final Regulatory Approval		27.2 			9.2 				
Total Regulatory Assets Currently Earning a Return		355.6 			648.0 				
Regulatory Assets Currently Not Earning a Return							
Storm-Related Costs		332.7 			241.8 				
2020-2022 Virginia Triennial Under-Earnings		37.9 			15.1 				
Plant Retirement Costs - Asset Retirement Obligation Costs		25.9 			25.9 				

	

	

Other Regulatory Assets Pending Final Regulatory Approval		53.9 			55.1 				
Total Regulatory Assets Currently Not Earning a Return		450.4 			337.9 				
							
Total Regulatory Assets Pending Final Regulatory Approval		806.0 			985.9 				
							
Regulatory assets approved for recovery:							
							
Regulatory Assets Currently Earning a Return							
Plant Retirement Costs - Unrecovered Plant (d)		511.4 			522.2 			24 years	
Long-term Under-recovered Fuel Costs - Oklahoma		252.7 			— 			2 years	
Long-term Under-recovered Fuel Costs - Virginia		223.3 			— 			2 years	
Unrecovered Winter Storm Fuel Costs (e)		148.6 			679.3 			5 years	
Pirkey Plant Accelerated Depreciation - Louisiana		63.0 			— 			10 years	
Rockport Plant Dry Sorbent Injection System and Selective Catalytic Reduction		56.6 			66.6 			6 years	
Plant Retirement Costs - Unrecovered Plant, Dolet Hills Power Station, Louisiana		45.1 			— 			10 years	
Meter Replacement Costs		34.2 			44.9 			5 years	
Environmental Control Projects		33.9 			36.2 			18 years	
Cook Plant Uprate Project		25.3 			27.7 			11 years	
Ohio Distribution Decoupling		19.5 			41.6 			2 years	

	

	

	

	
Other Regulatory Assets Approved for Recovery		99.5 			116.6 			various	
Total Regulatory Assets Currently Earning a Return		1,513.1 			1,535.1 				
Regulatory Assets Currently Not Earning a Return							
Pension and OPEB Funded Status		975.4 			677.0 			12 years	
Plant Retirement Costs - Asset Retirement Obligation Costs		303.2 			293.2 			20 years	
Unamortized Loss on Reacquired Debt		103.8 			111.2 			26 years	
Cook Plant Nuclear Refueling Outage Levelization		81.2 			32.0 			3 years	
Plant Retirement Costs - Unrecovered Plant, Texas		51.7 			51.9 			24 years	
Peak Demand Reduction/Energy Efficiency		41.7 			40.8 			4 years	
Unrealized Loss on Forward Commitments		40.1 			100.8 			10 years	
Fuel and Purchased Power Adjustment Rider		38.1 			12.1 			2 years	
Ohio Enhanced Service Reliability Plan		33.3 			9.5 			2 years	
2017-2019 Virginia Triennial Under-Earnings		30.1 			— 			2 years	
Postemployment Benefits		27.7 			29.1 			3 years	
Vegetation Management		25.8 			29.3 			3 years	
Smart Grid Costs		25.4 			19.3 			2 years	
Plant Retirement Costs - Unrecovered Plant, Arkansas		21.1 			— 			5 years	
PJM/SPP Annual Formula Rate True-up		20.3 			17.6 			2 years	
Virginia Transmission Rate Adjustment Clause		18.7 			37.2 			2 years	
	
Storm-Related Costs		11.9 			25.4 			2 years	
Texas Transmission Cost Recovery Factor		3.8 			30.6 			2 years	

	

	

	

	
	
Other Regulatory Assets Approved for Recovery		108.8 			104.3 			various	
Total Regulatory Assets Currently Not Earning a Return		1,962.1 			1,621.3 				
							
Total Regulatory Assets Approved for Recovery		3,475.2 			3,156.4 				
							
Total Noncurrent Regulatory Assets (f)		$	4,281.2 			$	4,142.3 				
268

(a)In 2022, Unrecovered Winter Storm Costs in the Arkansas and Texas jurisdictions were approved for recovery by the APSC and PUCT. As of December 31, 2022, Unrecovered Winter Storm Fuel Costs in the Louisiana jurisdiction are pending final regulatory approval with the LPSC. The current asset balance represents amounts expected to be recovered in the Arkansas, Louisiana and Texas jurisdiction over the next 12 months. See “February 2021 Severe Winter Weather Impacts in SPP” section of SWEPCo Rate Matters in Note 4 for additional information.
(b)Amounts exclude $23 million and $8 million as of December 31, 2022 and 2021, respectively, of Regulatory Asset for Under-Recovered Fuel Costs assets classified as Assets Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(c)2022 amount includes the FERC jurisdiction. 2021 amounts include Arkansas, Louisiana and FERC jurisdictions.
(d)Northeastern Plant, Unit 3 is approved for recovery through 2040, but expected to retire in 2026. PSO records a regulatory asset for accelerated depreciation. See “Regulated Generating Units to be Retired” section above for additional information.
(e)In February 2022, the OCC approved PSO’s securitization of the Unrecovered Winter Storm Fuel Costs. In September 2022, PSO received proceeds of $687 million from the ODFA which issued ratepayer-backed securitization bonds for the purpose of reimbursing PSO for extraordinary fuel costs and purchases of electricity incurred during the February 2021 severe winter weather event, which were previously recorded as Regulatory Assets on PSO’s balance sheet. See “February 2021 Severe Winter Weather Impacts in SPP” section of PSO Rate Matters in Note 4 for additional information.
(f)Amounts exclude $481 million and $477 million as of December 31, 2022 and 2021, respectively, of Regulatory Assets classified as Assets Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

269

																					
		AEP	
		December 31,		Remaining	
		2022		2021		Refund Period	
Current Regulatory Liabilities		(in millions)			
Over-recovered Fuel Costs - pays a return		$	1.4 			$	— 			1 year	
Over-recovered Fuel Costs - does not pay a return		— 			1.5 				
Total Current Regulatory Liabilities		$	1.4 			$	1.5 				
							
Noncurrent Regulatory Liabilities and
Deferred Investment Tax Credits							
Regulatory liabilities pending final regulatory determination:							
							
Regulatory Liabilities Currently Paying a Return							
Income Taxes, Net (a)		$	148.6 			$	262.2 				
	
Total Regulatory Liabilities Currently Paying a Return		148.6 			262.2 				
Regulatory Liabilities Currently Not Paying a Return							
	
Other Regulatory Liabilities Pending Final Regulatory Determination		2.0 			0.2 				
Total Regulatory Liabilities Currently Not Paying a Return		2.0 			0.2 				
							
Total Regulatory Liabilities Pending Final Regulatory Determination		150.6 			262.4 				
							
Regulatory liabilities approved for payment:							
							
Regulatory Liabilities Currently Paying a Return							
Asset Removal Costs		3,315.3 			3,172.1 			(b)	
Income Taxes, Net (a)		2,479.3 			2,711.4 			(c)	
Rockport Plant, Unit 2 Accelerated Depreciation for Leasehold Improvements		53.8 			4.2 			6 years	
Renewable Energy Surcharge - Michigan		23.2 			14.9 			2 years	

	

Other Regulatory Liabilities Approved for Payment		9.5 			16.1 			various	
Total Regulatory Liabilities Currently Paying a Return		5,881.1 			5,918.7 				
Regulatory Liabilities Currently Not Paying a Return							
Excess Nuclear Decommissioning Funding		1,318.5 			1,939.7 			(d)	
Deferred Investment Tax Credits		237.3 			248.5 			34 years	
OVEC Purchased Power		47.1 			14.8 			2 years	
Spent Nuclear Fuel		45.8 			49.5 			(d)	
Unrealized Gain on Forward Commitments		41.2 			37.2 			2 years	
2017-2019 Virginia Triennial Revenue Provision		39.1 			41.6 			26 years	
PJM Costs and Off-system Sales Margin Sharing - Indiana		34.2 			— 			2 years	
Over-recovered Fuel Costs - Ohio		32.2 			15.2 			10 years	
PJM Transmission Enhancement Refund		32.1 			42.9 			3 years	
Transition and Restoration Charges - Texas		29.4 			26.3 			7 years	
Peak Demand Reduction/Energy Efficiency		28.6 			28.6 			2 years	

	

	

Other Regulatory Liabilities Approved for Payment		82.4 			60.9 			various	
Total Regulatory Liabilities Currently Not Paying a Return		1,967.9 			2,505.2 				
							
Total Regulatory Liabilities Approved for Payment		7,849.0 			8,423.9 				
							
Total Noncurrent Regulatory Liabilities and Deferred Investment Tax Credits (e)		$	7,999.6 			$	8,686.3 				

(a)Predominately pays a return due to the inclusion of Excess ADIT in rate base.
(b)Relieved as removal costs are incurred.
(c)Refunded over the period for which the related deferred income tax reverse, which is generally based on the expected life for the underlying assets. Excess ADIT Associated with Certain Depreciable Property is refunded over the remaining depreciable life of the underlying assets. Excess ADIT that is Not Subject to Rate Normalization Requirements were $237 million and $387 million for the years ended December 31, 2022 and 2021, respectively. The remaining balance of Excess ADIT that is Not Subject to Rate Normalization Requirements as of December 31, 2022 is to be refunded over 6 years.
(d)Relieved when plant is decommissioned.
(e)Amounts exclude $116 million and $148 million as of December 31, 2022 and 2021, respectively, of Regulatory Liabilities and Deferred Investment Tax Credits classified as Liabilities Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

270

																					
		AEP Texas	
		December 31,		Remaining
Recovery
Period	
Regulatory Assets:		2022		2021			
		(in millions)			
Noncurrent Regulatory Assets							
Regulatory assets pending final regulatory approval:							
							
Regulatory Assets Currently Earning a Return							
Texas Mobile Generation Lease Payments		$	17.6 			$	— 				

Total Regulatory Assets Currently Earning a Return		17.6 			— 				
Regulatory Assets Currently Not Earning a Return							
Storm-Related Costs		26.7 			22.4 				
Vegetation Management Program		5.2 			5.2 				
Texas Retail Electric Provider Bad Debt Expense		4.1 			4.1 				

Other Regulatory Assets Pending Final Regulatory Approval		13.4 			9.5 				
Total Regulatory Assets Currently Not Earning a Return		49.4 			41.2 				
							
Total Regulatory Assets Pending Final Regulatory Approval		67.0 			41.2 				
							
Regulatory assets approved for recovery:							
							
Regulatory Assets Currently Earning a Return							
Meter Replacement Costs		16.1 			22.7 			4 years	
Advanced Metering System		— 			10.6 				
Other Regulatory Assets Approved for Recovery		1.4 			2.1 			various	
Total Regulatory Assets Currently Earning a Return		17.5 			35.4 				
Regulatory Assets Currently Not Earning a Return							
Pension and OPEB Funded Status		173.2 			119.0 			12 years	
	
Vegetation Management Program		12.1 			17.4 			3 years	
Peak Demand Reduction/Energy Efficiency		11.9 			14.5 			2 years	
Storm-Related Costs		8.5 			12.8 			2 years	
Texas Transmission Cost Recovery Factor		3.8 			30.6 			2 years	

	

Other Regulatory Assets Approved for Recovery		4.3 			4.3 			various	
Total Regulatory Assets Currently Not Earning a Return		213.8 			198.6 				
							
Total Regulatory Assets Approved for Recovery		231.3 			234.0 				
							
Total Noncurrent Regulatory Assets		$	298.3 			$	275.2 				

271

																					
		AEP Texas	
		December 31,		Remaining
Refund
Period	
Regulatory Liabilities:		2022		2021			
		(in millions)			
	
Noncurrent Regulatory Liabilities and
Deferred Investment Tax Credits							
Regulatory liabilities pending final regulatory determination:							
							
Regulatory Liabilities Currently Paying a Return							
Income Taxes, Net (a)		$	13.0 			$	13.0 				
	
Total Regulatory Liabilities Currently Paying a Return		13.0 			13.0 				
Regulatory Liabilities Currently Not Paying a Return							
Other Regulatory Liabilities Pending Final Regulatory Determination		1.8 			— 				
Total Regulatory Liabilities Currently Not Paying a Return		1.8 			— 				
							
Total Regulatory Liabilities Pending Final Regulatory Determination		14.8 			13.0 				
							
Regulatory liabilities approved for payment:							
							
Regulatory Liabilities Currently Paying a Return							
Asset Removal Costs		766.8 			744.7 			(b)	
Income Taxes, Net (a)		431.6 			445.3 			(c)	

Other Regulatory Liabilities Approved for Payment		4.3 			4.8 			various	
Total Regulatory Liabilities Currently Paying a Return		1,202.7 			1,194.8 				
Regulatory Liabilities Currently Not Paying a Return							
Transition and Restoration Charges		29.4 			26.3 			7 years	

	
Other Regulatory Liabilities Approved for Payment		12.7 			7.9 			various	
Total Regulatory Liabilities Currently Not Paying a Return		42.1 			34.2 				
							
Total Regulatory Liabilities Approved for Payment		1,244.8 			1,229.0 				
							
Total Noncurrent Regulatory Liabilities and Deferred Investment Tax Credits		$	1,259.6 			$	1,242.0 				

(a)Predominately pays a return due to the inclusion of Excess ADIT in rate base.
(b)Relieved as removal costs are incurred.
(c)Refunded over the period for which the related deferred income tax reverse, which is generally based on the expected life for the underlying assets. Excess ADIT Associated with Certain Depreciable Property is refunded over the remaining depreciable life of the underlying assets.
272

																					
		AEPTCo	
		December 31,		Remaining
Recovery
Period	
Regulatory Assets:		2022		2021			
		(in millions)			
Noncurrent Regulatory Assets							
Regulatory assets approved for recovery:							

	
	
Regulatory Assets Currently Not Earning a Return							
PJM/SPP Annual Formula Rate True-up		$	6.8 			$	8.5 			2 years	
Total Regulatory Assets Approved for Recovery		6.8 			8.5 				
							
Total Noncurrent Regulatory Assets (a)		$	6.8 			$	8.5 				

		AEPTCo	
		December 31,		Remaining
Refund
Period	
Regulatory Liabilities:		2022		2021			
		(in millions)			
Noncurrent Regulatory Liabilities							
Regulatory liabilities pending final regulatory determination:							
							
Regulatory Liabilities Currently Paying a Return							
	
Income Taxes, Net (b)		$	8.7 			$	8.7 				
	
Total Regulatory Liabilities Pending Final Regulatory Determination		8.7 			8.7 				
							
Regulatory liabilities approved for payment:							
							
Regulatory Liabilities Currently Paying a Return							
Asset Removal Costs		356.1 			271.4 			(c)	
Income Taxes, Net (b)		350.2 			364.0 			(d)	

Total Regulatory Liabilities Approved for Payment		706.3 			635.4 				

							
Total Noncurrent Regulatory Liabilities (e)		$	715.0 			$	644.1 				

(a)Amounts exclude $346 thousand and $0 as of December 31, 2022 and 2021, respectively, of Regulatory Assets classified as Assets Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(b)Predominately pays a return due to the inclusion of Excess ADIT in rate base.
(c)Relieved as removal costs are incurred.
(d)Refunded over the period for which the related deferred income tax reverse, which is generally based on the expected life for the underlying assets. Excess ADIT Associated with Certain Depreciable Property is refunded over the remaining depreciable life of the underlying assets. Excess ADIT that is Not Subject to Rate Normalization Requirements were $16 million and $26 million for the years ended December 31, 2022 and 2021, respectively. The remaining balance of Excess ADIT that is Not Subject to Rate Normalization Requirements as of December 31, 2022 is to be refunded over 6 years.
(e)Amounts exclude $8 million and $8 million as of December 31, 2022 and 2021, respectively, of Regulatory Liabilities classified as Liabilities Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

273

																					
		APCo	
		December 31,		Remaining
Recovery
Period	
Regulatory Assets:		2022		2021			
		(in millions)			
Current Regulatory Assets							
Under-recovered Fuel Costs - earns a return		$	180.7 			$	127.2 			1 year	
Under-recovered Fuel Costs - does not earn a return		292.4 			74.1 			1 year	
Total Current Regulatory Assets		$	473.1 			$	201.3 				
							
Noncurrent Regulatory Assets							
Regulatory assets pending final regulatory approval:							
							
Regulatory Assets Currently Earning a Return							
COVID-19 - Virginia		$	7.0 			$	6.8 				
	
Total Regulatory Assets Currently Earning a Return		7.0 			6.8 				
Regulatory Assets Currently Not Earning a Return							
Storm-Related Costs - West Virginia		72.6 			53.7 				
2020-2022 Virginia Triennial Under-Earnings		37.9 			15.1 				
Plant Retirement Costs - Asset Retirement Obligation Costs		25.9 			25.9 				

	
Other Regulatory Assets Pending Final Regulatory Approval		1.1 			3.6 				

	
Total Regulatory Assets Currently Not Earning a Return		137.5 			98.3 				
							
Total Regulatory Assets Pending Final Regulatory Approval		144.5 			105.1 				
							
Regulatory assets approved for recovery:							
							
Regulatory Assets Currently Earning a Return							
Long-term Under-recovered Fuel Costs - Virginia		223.3 			— 			2 years	
Plant Retirement Costs - Unrecovered Plant		75.6 			110.0 			21 years	

	
Other Regulatory Assets Approved for Recovery		0.4 			0.4 			various	
Total Regulatory Assets Currently Earning a Return		299.3 			110.4 				
Regulatory Assets Currently Not Earning a Return							
Plant Retirement Costs - Asset Retirement Obligation Costs		303.1 			293.1 			15 years	
Pension and OPEB Funded Status		108.3 			62.7 			12 years	
Unamortized Loss on Reacquired Debt		74.4 			78.2 			23 years	
	
2017-2019 Virginia Triennial Under-Earnings		30.1 			— 			2 years	
Virginia Transmission Rate Adjustment Clause		18.7 			37.2 			2 years	
Virginia Clean Economy Act		16.7 			— 			2 years	
Peak Demand Reduction/Energy Efficiency		15.8 			17.8 			4 years	
	
Postemployment Benefits		13.7 			13.3 			3 years	
Vegetation Management Program - West Virginia		13.7 			11.9 			2 years	
Environmental Compliance Costs		4.3 			13.7 			2 years	

	

	

	

	
Other Regulatory Assets Approved for Recovery		16.0 			14.2 			various	
Total Regulatory Assets Currently Not Earning a Return		614.8 			542.1 				
							
Total Regulatory Assets Approved for Recovery		914.1 			652.5 				
							
Total Noncurrent Regulatory Assets		$	1,058.6 			$	757.6 				

274

																					
		APCo	
		December 31,		Remaining
Refund
Period	
Regulatory Liabilities:		2022		2021			
		(in millions)			
Noncurrent Regulatory Liabilities and
Deferred Investment Tax Credits							
Regulatory liabilities pending final regulatory determination:							
							
Regulatory Liabilities Currently Paying a Return							
	
Income Taxes, Net (a)		$	30.5 			$	4.5 				
	
Total Regulatory Liabilities Pending Final Regulatory Determination		30.5 			4.5 				
							
Regulatory liabilities approved for payment:							
							
Regulatory Liabilities Currently Paying a Return							
Asset Removal Costs		713.5 			703.3 			(b)	
Income Taxes, Net (a)		291.3 			432.9 			(c)	
Deferred Investment Tax Credits		0.3 			0.3 			31 years	
Total Regulatory Liabilities Currently Paying a Return		1,005.1 			1,136.5 				
Regulatory Liabilities Currently Not Paying a Return							
2017-2019 Virginia Triennial Revenue Provision		39.1 			41.6 			26 years	
Unrealized Gain on Forward Commitments		34.5 			28.2 			2 years	
Over-recovered Deferred Wind Power Costs - Virginia		13.6 			8.4 			2 years	
PJM Transmission Enhancement Refund		9.8 			13.0 			3 years	

	
Other Regulatory Liabilities Approved for Payment		11.0 			6.6 			various	
Total Regulatory Liabilities Currently Not Paying a Return		108.0 			97.8 				
							
Total Regulatory Liabilities Approved for Payment		1,113.1 			1,234.3 				
							
Total Noncurrent Regulatory Liabilities and Deferred Investment Tax Credits		$	1,143.6 			$	1,238.8 				

(a)Predominately pays a return due to the inclusion of Excess ADIT in rate base.
(b)Relieved as removal costs are incurred.
(c)Refunded over the period for which the related deferred income tax reverse, which is generally based on the expected life for the underlying assets. Excess ADIT Associated with Certain Depreciable Property is refunded over the remaining depreciable life of the underlying assets. Excess ADIT that is Not Subject to Rate Normalization Requirements were $19 million and $84 million for the years ended December 31, 2022 and 2021, respectively. The remaining balance of Excess ADIT that is Not Subject to Rate Normalization Requirements as of December 31, 2022 is to be refunded over 6 years.

275

																					
		I&M	
		December 31,		Remaining
Recovery
Period	
Regulatory Assets:		2022		2021			
		(in millions)			
Current Regulatory Assets							
Under-recovered Fuel Costs, Michigan - earns a return		$	9.0 			$	6.4 			1 year	
Under-recovered Fuel Costs, Indiana - does not earn a return		38.1 			— 			1 year	
Total Current Regulatory Assets		$	47.1 			$	6.4 				
							
Noncurrent Regulatory Assets							
Regulatory assets pending final regulatory approval:							
							
Regulatory Assets Currently Earning a Return							
	
Other Regulatory Assets Pending Final Regulatory Approval		$	0.1 			$	0.1 				
Total Regulatory Assets Currently Earning a Return		0.1 			0.1 				
Regulatory Assets Currently Not Earning a Return							

	

	

Storm-Related Costs - Indiana		21.6 			— 				
Other Regulatory Assets Pending Final Regulatory Approval		2.0 			3.6 				
Total Regulatory Assets Currently Not Earning a Return		23.6 			3.6 				
							
Total Regulatory Assets Pending Final Regulatory Approval		23.7 			3.7 				
							
Regulatory assets approved for recovery:							
							
Regulatory Assets Currently Earning a Return							
Plant Retirement Costs - Unrecovered Plant		147.0 			170.8 			6 years	
Rockport Plant Dry Sorbent Injection System and Selective Catalytic Reduction		56.6 			66.6 			6 years	
Cook Plant Uprate Project		25.3 			27.7 			11 years	
Deferred Cook Plant Life Cycle Management Project Costs - Michigan, FERC		12.1 			13.1 			12 years	
Cook Plant Turbine - Indiana		9.0 			9.7 			16 years	
Cook Plant Study Costs		8.7 			9.4 			13 years	

Other Regulatory Assets Approved for Recovery		11.9 			6.0 			various	
Total Regulatory Assets Currently Earning a Return		270.6 			303.3 				
Regulatory Assets Currently Not Earning a Return							
Cook Plant Nuclear Refueling Outage Levelization		81.2 			32.0 			3 years	
Pension and OPEB Funded Status		26.9 			— 			12 years	
Unamortized Loss on Reacquired Debt		12.9 			14.2 			26 years	
Peak Demand Energy Efficiency		10.3 			2.8 			2 years	
Postemployment Benefits		7.7 			9.0 			3 years	
Storm-Related Costs - Indiana		3.4 			12.6 			2 years	
	
PJM Costs and Off-system Sales Margin Sharing - Indiana		— 			15.1 				

	

	

	

	
	
Other Regulatory Assets Approved for Recovery		22.9 			18.2 			various	
Total Regulatory Assets Currently Not Earning a Return		165.3 			103.9 				
							
Total Regulatory Assets Approved for Recovery		435.9 			407.2 				
							
Total Noncurrent Regulatory Assets		$	459.6 			$	410.9 				

276

																					
		I&M	
		December 31,		Remaining
Refund
Period	
Regulatory Liabilities:		2022		2021			
		(in millions)			
Current Regulatory Liabilities							
	
Over-recovered Fuel Costs, Indiana - does not pay a return		$	— 			$	1.5 				
Total Current Regulatory Liabilities		$	— 			$	1.5 				
							
Noncurrent Regulatory Liabilities and
Deferred Investment Tax Credits							
Regulatory liabilities pending final regulatory determination:							
							
Regulatory Liabilities Currently Paying a Return							
Income Taxes, Net (a) (b)		$	(87.7)			$	— 				
Total Regulatory Liabilities Pending Final Regulatory Determination		(87.7)			— 				
							
Regulatory liabilities approved for payment:							
							
Regulatory Liabilities Currently Paying a Return							
Asset Removal Costs		170.7 			179.7 			(c)	
Income Taxes, Net (a)		168.6 			182.6 			(d)	
Renewable Energy Surcharge - Michigan		23.2 			14.9 			2 years	
Other Regulatory Liabilities Approved for Payment		3.0 			7.0 			various	
Total Regulatory Liabilities Currently Paying a Return		365.5 			384.2 				
Regulatory Liabilities Currently Not Paying a Return							
Excess Nuclear Decommissioning Funding		1,318.5 			1,939.7 			(e)	
	
Spent Nuclear Fuel		45.8 			49.5 			(e)	
PJM Costs and Off-system Sales Margin Sharing - Indiana		34.2 			— 			2 years	
Deferred Investment Tax Credits		17.4 			22.4 			28 years	
	
Pension OPEB Funded Status		— 			27.6 				
Environmental Cost Rider - Indiana		— 			10.6 				

	

	
Other Regulatory Liabilities Approved for Payment		8.5 			13.9 			various	
Total Regulatory Liabilities Currently Not Paying a Return		1,424.4 			2,063.7 				
							
Total Regulatory Liabilities Approved for Payment		1,789.9 			2,447.9 				
							
Total Noncurrent Regulatory Liabilities and Deferred Investment Tax Credits		$	1,702.2 			$	2,447.9 				

(a)Predominately pays a return due to the inclusion of Excess ADIT in rate base.
(b)Represents an income tax related regulatory asset, which is presented within net regulatory liabilities on the balance sheet.
(c)Relieved as removal costs are incurred.
(d)Refunded over the period for which the related deferred income tax reverse, which is generally based on the expected life for the underlying assets. Excess ADIT Associated with Certain Depreciable Property is refunded over the remaining depreciable life of the underlying assets. Excess ADIT that is Not Subject to Rate Normalization Requirements were $42 million and $90 million for the years ended December 31, 2022 and 2021, respectively. The remaining balance of Excess ADIT that is Not Subject to Rate Normalization Requirements as of December 31, 2022 is to be refunded over 6 years.
(e)Relieved when plant is decommissioned.
277

																					
		OPCo	
		December 31,		Remaining
Recovery
Period	
Regulatory Assets:		2022		2021			
		(in millions)			
Current Regulatory Assets							
	
Under-recovered Fuel Costs - does not earn a return		$	3.8 			$	— 			1 year	
Total Current Regulatory Assets		$	3.8 			$	— 				
							
Noncurrent Regulatory Assets							
Regulatory assets pending final regulatory approval:							

	
Regulatory Assets Currently Not Earning a Return							
Storm-Related Costs		$	33.8 			$	3.8 				

Total Regulatory Assets Pending Final Regulatory Approval		33.8 			3.8 				
							
Regulatory assets approved for recovery:							
							
Regulatory Assets Currently Earning a Return							
Ohio Distribution Decoupling		19.5 			41.6 			2 years	
Ohio Basic Transmission Cost Rider		14.3 			5.2 			2 years	
Ohio Economic Development Rider		1.1 			10.1 			2 years	
	
Total Regulatory Assets Currently Earning a Return		34.9 			56.9 				
Regulatory Assets Currently Not Earning a Return							
Pension and OPEB Funded Status		142.7 			83.3 			12 years	
Unrealized Loss on Forward Commitments		40.0 			92.1 			10 years	
Ohio Enhanced Service Reliability Plan		33.3 			9.5 			2 years	
Smart Grid Costs		25.4 			19.3 			2 years	
Postemployment Benefits		6.2 			6.2 			3 years	
	
PJM Load Service Entity Formula Rate True-up		— 			7.5 				

	
	
Other Regulatory Assets Approved for Recovery		11.0 			14.4 			various	
Total Regulatory Assets Currently Not Earning a Return		258.6 			232.3 				
							
Total Regulatory Assets Approved for Recovery		293.5 			289.2 				
							
Total Noncurrent Regulatory Assets		$	327.3 			$	293.0 				

278

																					
		OPCo	
		December 31,		Remaining
Refund
Period	
		2022		2021			
Regulatory Liabilities:		(in millions)			

	

Noncurrent Regulatory Liabilities and
Deferred Investment Tax Credits							
Regulatory liabilities pending final regulatory determination:							

	
Regulatory Liabilities Currently Not Paying a Return							
Other Regulatory Liabilities Pending Final Regulatory Determination		$	0.2 			$	0.2 				

	

	
	
Total Regulatory Liabilities Pending Final Regulatory Determination		0.2 			0.2 				
							
Regulatory liabilities approved for payment:							
							
Regulatory Liabilities Currently Paying a Return							
Asset Removal Costs		466.5 			467.6 			(a)	
Income Taxes, Net (b)		451.9 			480.6 			(c)	

Total Regulatory Liabilities Currently Paying a Return		918.4 			948.2 				
Regulatory Liabilities Currently Not Paying a Return							
	
OVEC Purchased Power		47.1 			14.8 			2 years	
Over-recovered Fuel Costs		32.2 			15.2 			10 years	
Peak Demand Reduction/Energy Efficiency		23.6 			22.5 			2 years	
PJM Transmission Enhancement Refund		14.7 			19.6 			3 years	

	

	

Other Regulatory Liabilities Approved for Payment		7.8 			0.4 			various	
Total Regulatory Liabilities Currently Not Paying a Return		125.4 			72.5 				
							
Total Regulatory Liabilities Approved for Payment		1,043.8 			1,020.7 				
							
Total Noncurrent Regulatory Liabilities and Deferred Investment Tax Credits		$	1,044.0 			$	1,020.9 				

(a)Relieved as removal costs are incurred.
(b)Predominately pays a return due to the inclusion of Excess ADIT in rate base.
(c)Refunded over the period for which the related deferred income tax reverse, which is generally based on the expected life for the underlying assets. Excess ADIT Associated with Certain Depreciable Property is refunded over the remaining depreciable life of the underlying assets. Excess ADIT that is Not Subject to Rate Normalization Requirements were $162 million and $191 million for the years ended December 31, 2022 and 2021, respectively. The remaining balance of Excess ADIT that is Not Subject to Rate Normalization Requirements as of December 31, 2022 is to be refunded over 6 years.

    
279

																					
		PSO	
		December 31,		Remaining
Recovery
Period	
		2022		2021			
Regulatory Assets:		(in millions)			
							
Current Regulatory Assets							
Under-recovered Fuel Costs - earns a return		$	178.7 			$	194.6 			1 year	
Total Current Regulatory Assets		$	178.7 			$	194.6 				
							
Noncurrent Regulatory Assets							
Regulatory assets pending final regulatory approval:							

	

	
Regulatory Assets Currently Not Earning a Return							

Storm-Related Costs		$	25.5 			$	13.9 				
Other Regulatory Assets Pending Final Regulatory Approval		0.1 			0.3 				
	
Total Regulatory Assets Pending Final Regulatory Approval		25.6 			14.2 				

							
Regulatory assets approved for recovery:							
							
Regulatory Assets Currently Earning a Return							
Long-term Under-recovered Fuel Costs - Oklahoma		252.7 			— 			2 years	
Plant Retirement Costs - Unrecovered Plant (a)		240.6 			227.6 			24 years	
Environmental Control Projects		23.9 			25.2 			18 years	
Meter Replacement Costs		18.1 			22.2 			5 years	
Storm-Related Costs		8.4 			17.4 			2 years	
	
Unrecovered Winter Storm Fuel Costs		— 			679.3 			(b)	
Other Regulatory Assets Approved for Recovery		9.1 			9.8 			various	
Total Regulatory Assets Currently Earning a Return		552.8 			981.5 				
Regulatory Assets Currently Not Earning a Return							
Pension and OPEB Funded Status		55.2 			22.9 			12 years	

	

	

Other Regulatory Assets Approved for Recovery		20.1 			18.8 			various	
Total Regulatory Assets Currently Not Earning a Return		75.3 			41.7 				
							
Total Regulatory Assets Approved for Recovery		628.1 			1,023.2 				
							
Total Noncurrent Regulatory Assets		$	653.7 			$	1,037.4 				

(a)Northeastern Plant, Unit 3 is approved for recovery through 2040, but expected to retire in 2026. PSO records a regulatory asset for accelerated depreciation. See “Regulated Generating Units to be Retired” section above for additional information.
(b)In February 2022, the OCC approved PSO’s securitization of the Unrecovered Winter Storm Fuel Costs. In September 2022, PSO received proceeds of $687 million from the ODFA which issued ratepayer-backed securitization bonds for the purpose of reimbursing PSO for extraordinary fuel costs and purchases of electricity incurred during the February 2021 severe winter weather event, which were previously recorded as Regulatory Assets on PSO’s balance sheet. See “February 2021 Severe Winter Weather Impacts in SPP” section of PSO Rate Matters in Note 4 for additional information.
280

																					
		PSO	
		December 31,		Remaining
Refund
Period	
		2022		2021			
Regulatory Liabilities:		(in millions)			

	

Noncurrent Regulatory Liabilities and
Deferred Investment Tax Credits							
Regulatory liabilities pending final regulatory determination:							
							
Regulatory Liabilities Currently Paying a Return							
	
Income Taxes, Net (a)		$	51.3 			$	56.2 				
	
Total Regulatory Liabilities Pending Final Regulatory Determination		51.3 			56.2 				
							
Regulatory liabilities approved for payment:							
							
Regulatory Liabilities Currently Paying a Return							
Income Taxes, Net (a)		380.1 			423.8 			(b)	
Asset Removal Costs		316.3 			300.2 			(c)	
Total Regulatory Liabilities Currently Paying a Return		696.4 			724.0 				
Regulatory Liabilities Currently Not Paying a Return							
	
Deferred Investment Tax Credits		48.2 			50.8 			22 years	
	
Other Regulatory Liabilities Approved for Payment		13.2 			4.3 			various	
Total Regulatory Liabilities Currently Not Paying a Return		61.4 			55.1 				
							
Total Regulatory Liabilities Approved for Payment		757.8 			779.1 				
							
Total Noncurrent Regulatory Liabilities and Deferred Investment Tax Credits		$	809.1 			$	835.3 				

(a)Predominately pays a return due to the inclusion of Excess ADIT in rate base.
(b)Refunded over the period for which the related deferred income tax reverse, which is generally based on the expected life for the underlying assets. Excess ADIT Associated with Certain Depreciable Property is refunded over the remaining depreciable life of the underlying assets. Excess ADIT that is Not Subject to Rate Normalization Requirements were $21 million and $46 million for the years ended December 31, 2022 and 2021, respectively. The remaining balance of Excess ADIT that is Not Subject to Rate Normalization Requirements as of December 31, 2022 is to be refunded over 2 years.
(c)Relieved as removal costs are incurred.
281

																					
		SWEPCo	
		December 31,		Remaining
Recovery
Period	
		2022		2021			
Regulatory Assets:		(in millions)			
							
Current Regulatory Assets							
Under-recovered Fuel Costs - earns a return (a)		$	257.2 			$	81.2 			1 year	
Unrecovered Winter Storm Fuel Costs - earns a return (b)		95.8 			62.7 			1 year	
Total Current Regulatory Assets		$	353.0 			$	143.9 				
							
Noncurrent Regulatory Assets							
Regulatory assets pending final regulatory approval:							
							
Regulatory Assets Currently Earning a Return							
Pirkey Plant Accelerated Depreciation		$	116.5 			$	87.0 				
Welsh Plant, Units 1 and 3 Accelerated Depreciation		85.6 			45.9 				
Unrecovered Winter Storm Fuel Costs (b)		84.6 			367.5 				
	
Dolet Hills Power Station Fuel Costs - Louisiana		32.0 			30.9 				
Dolet Hills Power Station Accelerated Depreciation (c)		9.7 			72.3 				
Plant Retirement Costs - Unrecovered Plant, Louisiana		— 			35.2 				
Other Regulatory Assets Pending Final Regulatory Approval		2.5 			2.4 				
Total Regulatory Assets Currently Earning a Return		330.9 			641.2 				
Regulatory Assets Currently Not Earning a Return							
Storm-Related Costs - Louisiana		151.5 			148.0 				
Asset Retirement Obligation - Louisiana		11.8 			10.3 				

	
Other Regulatory Assets Pending Final Regulatory Approval		16.0 			18.4 				
Total Regulatory Assets Currently Not Earning a Return		179.3 			176.7 				
							
Total Regulatory Assets Pending Final Regulatory Approval		510.2 			817.9 				
							
Regulatory assets approved for recovery:							
							
Regulatory Assets Currently Earning a Return							
Unrecovered Winter Storm Fuel Costs (b)		148.6 			— 			5 years	
Pirkey Plant Accelerated Depreciation - Louisiana		63.0 			— 			10 years	
Plant Retirement Costs - Unrecovered Plant, Dolet Hills Power Station - Louisiana		45.1 			— 			10 years	
Plant Retirement Costs - Unrecovered Plant, Welsh Plant, Unit 2 - Louisiana		35.2 			— 			10 years	
Plant Retirement Costs - Unrecovered Plant, Arkansas		13.1 			13.7 			20 years	
Environmental Controls Projects		10.0 			11.0 			10 years	
Other Regulatory Assets Approved for Recovery		6.8 			5.2 			various	
Total Regulatory Assets Currently Earning a Return		321.8 			29.9 				
Regulatory Assets Currently Not Earning a Return							
Pension and OPEB Funded Status		96.2 			73.8 			12 years	
Plant Retirement Costs - Unrecovered Plant, Texas		51.7 			51.9 			24 years	
Plant Retirement Costs - Unrecovered Plant, Arkansas		21.1 			— 			5 years	
Dolet Hills Power Station Fuel Costs - Arkansas		8.9 			13.0 			4 years	

	

	

Other Regulatory Assets Approved for Recovery		32.5 			18.8 			various	
Total Regulatory Assets Currently Not Earning a Return		210.4 			157.5 				
							
Total Regulatory Assets Approved for Recovery		532.2 			187.4 				
							
Total Noncurrent Regulatory Assets		$	1,042.4 			$	1,005.3 				

(a)2022 amount includes Arkansas and Texas jurisdictions. 2021 amount includes Arkansas, Louisiana and Texas jurisdictions.
(b)In 2022, Unrecovered Winter Storm Costs in the Arkansas and Texas jurisdictions were approved for recovery by the APSC and PUCT. As of December 31, 2022, Unrecovered Winter Storm Fuel Costs in the Louisiana jurisdiction are pending final regulatory approval with the LPSC. The current asset balance represents amounts expected to be recovered in the Arkansas, Louisiana and Texas jurisdiction over the next 12 months. See “February 2021 Severe Winter Weather Impacts in SPP” section of SWEPCo Rate Matters in Note 4 for additional information.
(c)2022 amount includes the FERC jurisdiction. 2021 amounts include Arkansas, Louisiana and FERC jurisdictions.
282

																					
		SWEPCo	
		December 31,		Remaining
Refund
Period	
		2022		2021			
Regulatory Liabilities:		(in millions)			
							
Current Regulatory Liabilities							
Over-recovered Fuel Costs - pays a return (a)		$	1.4 			$	— 				
Total Current Regulatory Liabilities		$	1.4 			$	— 				
							
Noncurrent Regulatory Liabilities and
Deferred Investment Tax Credits							
Regulatory liabilities pending final regulatory determination:							
							
Regulatory Liabilities Currently Paying a Return							
Income Taxes, Net (b)		$	7.0 			$	— 				

Total Regulatory Liabilities Pending Final Regulatory Determination		7.0 			— 				
							
Regulatory liabilities approved for payment:							
							
Regulatory Liabilities Currently Paying a Return							
Asset Removal Costs		481.2 			461.3 			(c)	
Income Taxes, Net (b)		327.6 			330.2 			(d)	

Other Regulatory Liabilities Approved for Payment		2.2 			2.4 			various	
Total Regulatory Liabilities Currently Paying a Return		811.0 			793.9 				
Regulatory Liabilities Currently Not Paying a Return							

	

Other Regulatory Liabilities Approved for Payment		7.7 			13.0 			various	
Total Regulatory Liabilities Currently Not Paying a Return		7.7 			13.0 				
							
Total Regulatory Liabilities Approved for Payment		818.7 			806.9 				
							
Total Noncurrent Regulatory Liabilities and Deferred Investment Tax Credits		$	825.7 			$	806.9 				

(a)2022 amount includes Louisiana jurisdiction.
(b)Predominately pays a return due to the inclusion of Excess ADIT in rate base.
(c)Relieved as removal costs are incurred.
(d)Refunded over the period for which the related deferred income tax reverse, which is generally based on the expected life for the underlying assets. Excess ADIT Associated with Certain Depreciable Property is refunded over the remaining depreciable life of the underlying assets. Excess ADIT that is Not Subject to Rate Normalization Requirements were $7 million and $7 million for the years ended December 31, 2022 and 2021, respectively. The remaining balance of Excess ADIT that is Not Subject to Rate Normalization Requirements as of December 31, 2022 is to be refunded over 1 year.

283

6.  COMMITMENTS, GUARANTEES AND CONTINGENCIES

The disclosures in this note apply to all Registrants unless indicated otherwise.

The Registrants are subject to certain claims and legal actions arising in the ordinary course of business.  In addition, the Registrants’ business activities are subject to extensive governmental regulation related to public health and the environment.  The ultimate outcome of such pending or potential litigation against the Registrants cannot be predicted.  Management accrues contingent liabilities only when management concludes that it is both probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. When management determines that it is not probable, but rather reasonably possible that a liability has been incurred at the date of the financial statements, management discloses such contingencies and the possible loss or range of loss if such estimate can be made. Any estimated range is based on currently available information and involves elements of judgment and significant uncertainties. Any estimated range of possible loss may not represent the maximum possible loss exposure. Circumstances change over time and actual results may vary significantly from estimates.

For current proceedings not specifically discussed below, management does not anticipate that the liabilities, if any, arising from such proceedings would have a material effect on the financial statements.

COMMITMENTS (Applies to all Registrants except AEP Texas and AEPTCo)

The AEP System has substantial commitments for fuel, energy and capacity contracts as part of the normal course of business. Certain contracts contain penalty provisions for early termination.

In accordance with the accounting guidance for “Commitments”, the following tables summarize the Registrants’ actual contractual commitments as of December 31, 2022:

Contractual Commitments - AEP		Less Than
1 Year		2-3 Years		4-5 Years		After
5 Years		Total	
		(in millions)	
Fuel Purchase Contracts (a)		$	1,499.8 			$	1,711.8 			$	345.4 			$	252.0 			$	3,809.0 		
Energy and Capacity Purchase Contracts		167.8 			377.7 			349.1 			570.5 			1,465.1 		
Total		$	1,667.6 			$	2,089.5 			$	694.5 			$	822.5 			$	5,274.1 		

Contractual Commitments - APCo		Less Than
1 Year		2-3 Years		4-5 Years		After
5 Years		Total	
		(in millions)	
Fuel Purchase Contracts (a)		$	840.9 			$	1,102.9 			$	263.2 			$	9.2 			$	2,216.2 		
Energy and Capacity Purchase Contracts		40.5 			82.7 			79.9 			127.0 			330.1 		
Total		$	881.4 			$	1,185.6 			$	343.1 			$	136.2 			$	2,546.3 		

Contractual Commitments - I&M		Less Than
1 Year		2-3 Years		4-5 Years		After
5 Years		Total	
		(in millions)	
Fuel Purchase Contracts (a)		$	200.9 			$	235.2 			$	53.3 			$	222.4 			$	711.8 		
Energy and Capacity Purchase Contracts		140.9 			290.0 			273.8 			276.8 			981.5 		
Total		$	341.8 			$	525.2 			$	327.1 			$	499.2 			$	1,693.3 		

Contractual Commitments - OPCo		Less Than
1 Year		2-3 Years		4-5 Years		After
5 Years		Total	
		(in millions)	
Energy and Capacity Purchase Contracts		$	34.4 			$	66.5 			$	63.7 			$	169.8 			$	334.4 		
	
284

																																	
Contractual Commitments - PSO		Less Than
1 Year		2-3 Years		4-5 Years		After
5 Years		Total	
		(in millions)	
Fuel Purchase Contracts (a)		$	35.8 			$	14.5 			$	— 			$	— 			$	50.3 		
Energy and Capacity Purchase Contracts		47.1 			116.3 			122.8 			91.4 			377.6 		
Total		$	82.9 			$	130.8 			$	122.8 			$	91.4 			$	427.9 		

Contractual Commitments - SWEPCo		Less Than
1 Year		2-3 Years		4-5 Years		After
5 Years		Total	
		(in millions)	
Fuel Purchase Contracts (a)		$	133.7 			$	84.7 			$	— 			$	— 			$	218.4 		
Energy and Capacity Purchase Contracts		10.1 			31.6 			13.2 			— 			54.9 		
Total		$	143.8 			$	116.3 			$	13.2 			$	— 			$	273.3 		

(a)Represents contractual commitments to purchase coal, natural gas, uranium and other consumables as fuel for electric generation along with related transportation of the fuel.

GUARANTEES

Liabilities for guarantees are recorded in accordance with the accounting guidance for “Guarantees.”  There is no collateral held in relation to any guarantees.  In the event any guarantee is drawn, there is no recourse to third-parties unless specified below.

Letters of Credit (Applies to AEP and AEP Texas)

Standby letters of credit are entered into with third-parties.  These letters of credit are issued in the ordinary course of business and cover items such as natural gas and electricity risk management contracts, construction contracts, insurance programs, security deposits and debt service reserves.

AEP has $4 billion and $1 billion revolving credit facilities due in March 2027 and 2024, respectively, under which up to $1.2 billion may be issued as letters of credit on behalf of subsidiaries. As of December 31, 2022, no letters of credit were issued under the revolving credit facility.

An uncommitted facility gives the issuer of the facility the right to accept or decline each request made under the facility. AEP issues letters of credit on behalf of subsidiaries under five uncommitted facilities totaling, as of December 31, 2022, $400 million. The Registrants’ maximum future payments for letters of credit issued under the uncommitted facilities as of December 31, 2022 were as follows:

Company		Amount		Maturity	
		(in millions)			
AEP		$	287.4 			January 2023 to December 2023	
AEP Texas		1.8 			July 2023	

285

Guarantees of Equity Method Investees (Applies to AEP)

In 2019, AEP acquired a 50% ownership interest in five non-consolidated renewable joint ventures and two renewable tax equity partnerships. Parent issued guarantees over the performance of the joint ventures. If a joint venture were to default on payments or performance, Parent would be required to make payments on behalf of the joint venture. In September 2022, AEP signed a PSA with a nonaffiliate for AEP’s interest in Flat Ridge 2, one of the five non-consolidated joint ventures. The transaction closed in the fourth quarter of 2022. As of December 31, 2022, the maximum potential amount of future payments associated with the remaining guarantees was $59 million, with the last guarantee expiring in December 2035. The non-contingent liability recorded associated with these guarantees was $5 million, with an additional $1 million expected credit loss liability for the contingent portion of the guarantees. In accordance with the accounting guidance for guarantees, the initial recognition of the non-contingent liabilities increased AEP’s carrying values of the respective equity method investees. Management considered historical losses, economic conditions, and reasonable and supportable forecasts in the calculation of the expected credit loss. As the joint ventures generate cash flows through PPAs, the measurement of the contingent portion of the guarantee liability is based upon assessments of the credit quality and default probabilities of the respective PPA counterparties.

Indemnifications and Other Guarantees

Contracts

The Registrants enter into certain types of contracts which require indemnifications.  Typically these contracts include, but are not limited to, sale agreements, lease agreements, purchase agreements and financing agreements.  Generally, these agreements may include, but are not limited to, indemnifications around certain tax, contractual and environmental matters.  With respect to sale agreements, exposure generally does not exceed the sale price.  As of December 31, 2022, there were no material liabilities recorded for any indemnifications.

AEPSC conducts power purchase-and-sale activity on behalf of APCo, I&M, KPCo and WPCo, who are jointly and severally liable for activity conducted on their behalf.  AEPSC also conducts power purchase-and-sale activity on behalf of PSO and SWEPCo, who are jointly and severally liable for activity conducted on their behalf.

Lease Obligations

Certain Registrants lease equipment under master lease agreements.  See “Master Lease Agreements” and “AEPRO Boat and Barge Leases” sections of Note 13 for additional information.

ENVIRONMENTAL CONTINGENCIES (Applies to All Registrants except AEPTCo)

The Comprehensive Environmental Response Compensation and Liability Act (Superfund) and State Remediation

By-products from the generation of electricity include materials such as ash, slag, sludge, low-level radioactive waste and SNF.  Coal combustion by-products, which constitute the overwhelming percentage of these materials, are typically treated and deposited in captive disposal facilities or are beneficially utilized.  In addition, the generation plants and transmission and distribution facilities have used asbestos, polychlorinated biphenyls and other hazardous and non-hazardous materials.  The Registrants currently incur costs to dispose of these substances safely.

Superfund addresses clean-up of hazardous substances that are released to the environment.  The Federal EPA administers the clean-up programs.  Several states enacted similar laws.  As of December 31, 2022, AGR, APCo, OPCo and SWEPCo are named as a Potentially Responsible Party (PRP) for one, one, two and one sites, respectively, by the Federal EPA for which alleged liability is unresolved.  There are 11 additional sites for which APCo, I&M, KPCo, OPCo and SWEPCo received information requests which could lead to PRP designation.  I&M
286

has also been named potentially liable at two sites under state law and AEP Texas and SWEPCo share potential liability under state law at another site. In those instances where a PRP or defendant has been named, disposal or recycling activities were in accordance with the then-applicable laws and regulations. Superfund does not recognize compliance as a defense, but imposes strict liability on parties who fall within its broad statutory categories.  Liability has been resolved for a number of sites with no significant effect on net income.

Management evaluates the potential liability for each Superfund site separately, but several general statements can be made about potential future liability.  Allegations that materials were disposed at a particular site are often unsubstantiated and the quantity of materials deposited at a site can be small and often non-hazardous.  Although Superfund liability has been interpreted by the courts as joint and several, typically many parties are named as PRPs for each site and several of the parties are financially sound enterprises.  As of December 31, 2022, management’s estimates do not anticipate material clean-up costs for identified Superfund sites.

NUCLEAR CONTINGENCIES (APPLIES TO AEP AND I&M)

I&M owns and operates the two-unit 2,296 MW Cook Plant under licenses granted by the NRC.  I&M has a significant future financial commitment to dispose of SNF and to safely decommission and decontaminate the plant.  The licenses to operate the two nuclear units at the Cook Plant expire in 2034 and 2037. Management is currently evaluating applying for license extensions for both units.  The operation of a nuclear facility also involves special risks, potential liabilities and specific regulatory and safety requirements.  By agreement, I&M is partially liable, together with all other electric utility companies that own nuclear generation units, for a nuclear power plant incident at any nuclear plant in the U.S.  Should a nuclear incident occur at any nuclear power plant in the U.S., the resultant liability could be substantial.

Decommissioning and Low-Level Waste Accumulation Disposal

The costs to decommission a nuclear plant are affected by NRC regulations and the SNF disposal program.  Decommissioning costs are accrued over the service life of Cook Plant.  The most recent decommissioning cost study was performed in 2021.  According to that study, the estimated cost of decommissioning and disposal of low-level radioactive waste was $2.2 billion in 2021 non-discounted dollars, with additional ongoing costs of $7 million per year for post decommissioning storage of SNF and an eventual cost of $33 million for the subsequent decommissioning of the SNF storage facility, also in 2021 non-discounted dollars. I&M recovers estimated decommissioning costs for the Cook Plant in its rates.  The amounts recovered in rates were $2 million, $4 million and $4 million for the years ended December 31, 2022, 2021 and 2020, respectively.  Decommissioning costs recovered from customers are deposited in external trusts.

As of December 31, 2022 and 2021, the total decommissioning trust fund balances were $3 billion and $3.5 billion, respectively.  The decrease in the trust fund balance was driven by unfavorable investment performance in 2022. Trust fund earnings increase the fund assets and may decrease the amount remaining to be recovered from customers. Trust fund losses decrease the fund assets and may increase the amount remaining to be recovered from customers.  The decommissioning costs (including unrealized gains and losses, interest and trust funds expenses) increase or decrease the recorded liability.

I&M continues to work with regulators and customers to establish rates designed to collect the estimated costs of decommissioning the Cook Plant.  However, future net income and cash flows would be reduced and financial condition could be impacted if the cost of SNF disposal and decommissioning increases and cannot be recovered.

Spent Nuclear Fuel Disposal

The federal government is responsible for permanent SNF disposal and assesses fees to nuclear plant owners for SNF disposal.  A fee of one-mill per KWh for fuel consumed after April 6, 1983 at the Cook Plant was collected from customers and remitted to the DOE through May 14, 2014. In May 2014, pursuant to court order from the U.S Court of Appeals for the District of Columbia Circuit, the DOE adjusted the fee to $0. As of December 31, 2022
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and 2021, fees and related interest of $286 million and $281 million, respectively, for fuel consumed prior to April 7, 1983 were recorded as Long-term Debt and funds collected from customers along with related earnings totaling $330 million and $329 million, respectively, to pay the fee, were recorded as part of Spent Nuclear Fuel and Decommissioning Trusts on the balance sheets.  I&M has not paid the government the pre-April 1983 fees due to continued delays and uncertainties related to the federal disposal program.

In 2011, I&M signed a settlement agreement with the federal government which permits I&M to make annual filings to recover certain SNF storage costs incurred as a result of the government’s delay in accepting SNF for permanent storage.  Under the settlement agreement, I&M received $3 million, $14 million and $24 million in 2022, 2021 and 2020, respectively, to recover costs and will be eligible to receive additional payment of annual claims for allowed costs that are incurred through December 31, 2022.  The proceeds reduced costs for dry cask storage.  As of December 31, 2022 and 2021, I&M deferred $21 million and $3 million, respectively, in Prepayments and Other Current Assets and $3 million and $21 million, respectively, in Deferred Charges and Other Noncurrent Assets on the balance sheets for dry cask storage and related operation and maintenance costs for recovery under this agreement. See “Fair Value Measurements of Trust Assets for Decommissioning and SNF Disposal” section of Note 11 for additional information.

Nuclear Insurance

I&M carries nuclear property insurance of $2.7 billion to cover a nuclear incident at Cook Plant including coverage for decontamination and stabilization, as well as premature decommissioning caused by a nuclear incident.  Insurance coverage for a nonnuclear property incident at Cook Plant is $500 million.  Additional insurance provides coverage for a weekly indemnity payment resulting from an insured accidental outage.  I&M utilizes industry mutual insurers for the placement of this insurance coverage.  Coverage from these industry mutual insurance programs require a contingent financial obligation of up to $41 million for I&M, which is assessable if the insurer’s financial resources would be inadequate to pay for industry losses.

The Price-Anderson Act, extended through December 31, 2025, establishes insurance protection for public nuclear liability arising from a nuclear incident of $13.7 billion and applies to any incident at a licensed reactor in the U.S.  Commercially available insurance, which must be carried for each licensed reactor, provides $450 million of primary coverage.  In the event of a nuclear incident at any nuclear plant in the U.S., the remainder of the liability would be provided by a deferred premium assessment of $275 million per nuclear incident on Cook Plant’s reactors payable in annual installments of $41 million.  The number of incidents for which payments could be required is not limited.

In the event of an incident of a catastrophic nature, I&M is covered for public nuclear liability for the first $450 million through commercially available insurance.  The next level of liability coverage of up to $13.2 billion would be covered by claim premium assessments made under the Price-Anderson Act. In the event nuclear losses or liabilities are underinsured or exceed accumulated funds, I&M would seek recovery of those amounts from customers through a rate increase. If recovery from customers is not possible, it could reduce future net income and cash flows and impact financial condition.

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OPERATIONAL CONTINGENCIES

Insurance and Potential Losses

The Registrants maintain insurance coverage normal and customary for electric utilities, subject to various deductibles.  The Registrants also maintain property and casualty insurance that may cover certain physical damage or third-party injuries caused by cyber security incidents. Insurance coverage includes all risks of physical loss or damage to nonnuclear assets, subject to insurance policy conditions and exclusions.  Covered property generally includes power plants, substations, facilities and inventories.  Excluded property generally includes transmission and distribution lines, poles and towers.  The insurance programs also generally provide coverage against loss arising from certain claims made by third-parties and are in excess of retentions absorbed by the Registrants.  Coverage is generally provided by a combination of the protected cell of EIS and/or various industry mutual and/or commercial insurance carriers. See “Nuclear Contingencies” section above for additional information.

Some potential losses or liabilities may not be insurable or the amount of insurance carried may not be sufficient to meet potential losses and liabilities, including, but not limited to, liabilities relating to a cyber security incident or damage to the Cook Plant and costs of replacement power in the event of an incident at the Cook Plant.  Future losses or liabilities, if they occur, which are not completely insured, unless recovered from customers, could reduce future net income and cash flows and impact financial condition.

Rockport Plant Litigation (Applies to AEP and I&M)

In 2013, the Wilmington Trust Company filed suit in the U.S. District Court for the Southern District of New York against AEGCo and I&M alleging that it would be unlawfully burdened by the terms of the modified NSR consent decree after the Rockport Plant, Unit 2 lease expiration in December 2022.  The terms of the consent decree allow the installation of environmental emission control equipment, repowering, refueling or retirement of the unit.  The plaintiffs sought a judgment declaring that the defendants breached the lease, must satisfy obligations related to installation of emission control equipment and indemnify the plaintiffs.  

After the litigation proceeded at the district court and appellate court, in April 2021, I&M and AEGCo reached an agreement to acquire 100% of the interests in Rockport Plant, Unit 2 for $116 million from certain financial institutions that own the unit through trusts established by Wilmington Trust, the nonaffiliated owner trustee of the ownership interests in the unit. The transaction closed at the expiration of the Rockport Plant, Unit 2 lease in December 2022 and also resulted in a final settlement of, and release of claims in, the lease litigation.

Subsequent to the end of the Rockport Plant, Unit 2 lease in December 2022, AEGCo’s 50% ownership share of Rockport Plant, Unit 2 is being billed to I&M under a FERC-approved UPA. I&M’s purchased power from AEGCo and I&M’s 50% ownership share of Rockport Plant, Unit 2 electricity generated represent a merchant resource for I&M until Rockport Plant, Unit 2 is retired in 2028. A 2021 IURC order approved a settlement agreement addressing the future use of Rockport Plant, Unit 2 as a short-term capacity resource through the June 2023 - May 2024 PJM planning year. The MPSC issued an order in February 2023 approving the settlement agreement on I&M’s 2022 Integrated Resource Plan (IRP) filing, which included certain cost recovery for the remaining net book value of leasehold improvements made during the term of the Rockport Plant, Unit 2 lease and future use of Rockport Plant, Unit 2 as a capacity resource. If I&M cannot recover its future investment and expenses related to the merchant share of Rockport Plant Unit 2, it could reduce future net income and cash flows and impact financial condition.

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Claims Challenging Transition of American Electric Power System Retirement Plan to Cash Balance Formula 

Four participants in The American Electric Power System Retirement Plan (the Plan) filed a class action complaint in December 2021 in the U.S. District Court for the Southern District of Ohio against AEPSC and the Plan. When the Plan’s benefit formula was changed in the year 2000, AEP provided a special provision for employees hired before January 1, 2001, allowing them to continue benefit accruals under the then benefit formula for a full 10 years alongside of the new cash balance benefit formula then being implemented.  Employees who were hired on or after January 1, 2001 accrued benefits only under the new cash balance benefit formula.  The plaintiffs assert a number of claims on behalf of themselves and the purported class, including that: (a) the Plan violates the requirements under the Employee Retirement Income Security Act (ERISA) intended to preclude back-loading the accrual of benefits to the end of a participant’s career, (b) the Plan violates the age discrimination prohibitions of ERISA and the Age Discrimination in Employment Act and (c) AEP failed to provide required notice regarding the changes to the Plan. Among other relief, the Complaint seeks reformation of the Plan to provide additional benefits and the recovery of plan benefits for former employees under such reformed plan. The plaintiffs previously had submitted claims for additional plan benefits to AEP, which were denied. On February 15, 2022, AEPSC and the Plan filed a motion to dismiss the complaint for failure to state a claim. On August 16, 2022, the district court granted the motion to dismiss the complaint without prejudice. The plaintiffs filed a motion for leave to file an amended complaint, which the Court denied on December 1, 2022. The plaintiffs did not file an appeal by the deadline of January 3, 2023.

Litigation Related to Ohio House Bill 6 (HB 6) (Applies to AEP and OPCo)

In 2019, Ohio adopted and implemented HB 6 which benefits OPCo by authorizing rate recovery for certain costs including renewable energy contracts and OVEC’s coal-fired generating units. OPCo engaged in lobbying efforts and provided testimony during the legislative process in connection with HB 6. In July 2020, an investigation led by the U.S. Attorney’s Office resulted in a federal grand jury indictment of an Ohio legislator and associates in connection with an alleged racketeering conspiracy involving the adoption of HB 6. After AEP learned of the criminal allegations against the Ohio legislator and others relating to HB 6, AEP, with assistance from outside advisors, conducted a review of the circumstances surrounding the passage of the bill. Management does not believe that AEP was involved in any wrongful conduct in connection with the passage of HB 6.

In August 2020, an AEP shareholder filed a putative class action lawsuit in the U.S. District Court for the Southern District of Ohio against AEP and certain of its officers for alleged violations of securities laws. The amended complaint alleged misrepresentations or omissions by AEP regarding: (a) its alleged participation in or connection to public corruption with respect to the passage of HB 6 and (b) its regulatory, legislative, political contribution, 501(c)(4) organization contribution and lobbying activities in Ohio. The complaint sought monetary damages, among other forms of relief. In December 2021, the district court issued an opinion and order dismissing the securities litigation complaint with prejudice, determining that the complaint failed to plead any actionable misrepresentations or omissions. The plaintiffs did not appeal the ruling.

In January 2021, an AEP shareholder filed a derivative action in the U.S. District Court for the Southern District of Ohio purporting to assert claims on behalf of AEP against certain AEP officers and directors. In February 2021, a second AEP shareholder filed a similar derivative action in the Court of Common Pleas of Franklin County, Ohio. In April 2021, a third AEP shareholder filed a similar derivative action in the U.S. District Court for the Southern District of Ohio and a fourth AEP shareholder filed a similar derivative action in the Supreme Court for the State of New York, Nassau County. These derivative complaints allege the officers and directors made misrepresentations and omissions similar to those alleged in the putative securities class action lawsuit filed against AEP. The derivative complaints together assert claims for: (a) breach of fiduciary duty, (b) waste of corporate assets, (c) unjust enrichment, (d) breach of duty for insider trading and (e) contribution for violations of sections 10(b) and 21D of the Securities Exchange Act of 1934; and seek monetary damages and changes to AEP’s corporate governance and internal policies among other forms of relief. The court entered a scheduling order in the New York state court derivative action staying the case other than with respect to briefing the motion to dismiss. AEP filed substantive and forum-based motions to dismiss on April 29, 2022. On September 13, 2022, the New York state court granted the forum-based motion to dismiss with prejudice and the plaintiffs subsequently filed a notice of appeal with the New York appellate court. On January 20, 2023, the New York plaintiff filed a motion to intervene in the pending Ohio federal court action and withdrew his appeal in New York on January 24, 2023. AEP filed a
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brief in opposition to intervention on February 3, 2023. The two derivative actions pending in federal district court in Ohio have been consolidated and the plaintiffs in the consolidated action filed an amended complaint. AEP filed a motion to dismiss the amended complaint on May 3, 2022 and briefing on the motion to dismiss has been completed. Discovery remains stayed pending the district court’s ruling on the motion to dismiss. The plaintiff in the Ohio state court case advised that they no longer agreed to stay the proceedings, therefore, AEP filed a motion to continue the stays of proceedings on May 20, 2022 and the plaintiff filed an amended complaint on June 2, 2022. On June 15, 2022, the Ohio state court entered an order continuing the stays of that case until the resolution of the consolidated derivative actions pending in Ohio federal district court. The defendants will continue to defend against the claims. Management is unable to determine a range of potential losses that is reasonably possible of occurring.

In March 2021, AEP received a litigation demand letter from counsel representing a purported AEP shareholder. The litigation demand letter is directed to the Board of Directors of AEP and contains factual allegations involving HB 6 that are generally consistent with those in the derivative litigation filed in state and federal court. The letter demands, among other things, that the AEP Board undertake an independent investigation into alleged legal violations by directors and officers, and that, following such investigation, AEP commence a civil action for breaches of fiduciary duty and related claims and take appropriate disciplinary action against those individuals who allegedly harmed the company. The shareholder that sent the letter has since withdrawn the litigation demand, which is now terminated and of no further effect.

In May 2021, AEP received a subpoena from the SEC’s Division of Enforcement seeking various documents, including documents relating to the passage of HB 6 and documents relating to AEP’s policies and financial processes and controls. In August 2022, AEP received a second subpoena from the SEC seeking various additional documents relating to its ongoing investigation. AEP is cooperating fully with the SEC’s investigation, which has included taking testimony from certain individuals. Although the outcome of the SEC’s investigation cannot be predicted, management does not believe the results of this investigation will have a material impact on financial condition, results of operations or cash flows.

Claims for Indemnification Related to Damages Resulting from the Federal EPA’s Denial of Alternative Closure Deadline for Gavin Plant and Associated Findings of Compliance

In November 2022, the Federal EPA issued a final decision denying Gavin Power LLC’s requested extension to allow a CCR surface impoundment at the Gavin Power Station to continue to receive CCR and non-CCR waste streams after April 11, 2021 until May 4, 2023 (the Gavin Denial). As part of the Gavin Denial, the Federal EPA made several determinations related to the CCR Rule (see “Environmental Issues - Coal Combustion Residual (CCR) Rule” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information), including a determination that the closure of the 300 acre unlined fly ash reservoir (FAR) is noncompliant with the CCR Rule in multiple respects. The Gavin Power Station was formerly owned and operated by AEP and was sold to Gavin Power LLC and Lightstone Generation LLC in 2017. Pursuant to the PSA, AEP maintained responsibility to complete closure of the FAR in accordance with the closure plan approved by the Ohio EPA which was completed in July 2021. The PSA contains indemnification provisions, pursuant to which the owners of the Gavin Power Station have notified AEP they believe they are entitled to indemnification for any damages that may result from the Gavin Denial, as well as any future enforcement or litigation resulting from the Federal EPA’s determinations of noncompliance with various aspects of the CCR Rule as part of the Gavin Denial. Management does not believe that the owners of the Gavin Power Station have any valid claim for indemnity or otherwise against AEP under the PSA. In addition, Gavin Power LLC, several AEP subsidiaries, and other parties have filed Petitions for Review of the Gavin Denial with the U.S. Court of Appeals for the District of Columbia Circuit. Management is unable to determine a range of potential losses that is reasonably possible of occurring.
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7. ACQUISITIONS, ASSETS AND LIABILITIES HELD FOR SALE, DISPOSITIONS AND IMPAIRMENTS

The disclosures in this note apply to AEP unless indicated otherwise.

ACQUISITIONS

2021

Dry Lake Solar Project (Generation & Marketing Segment) (Applies to AEP)

In November 2020, AEP signed a Purchase and Sale Agreement with a nonaffiliate to acquire a 75% ownership interest in the entity that owns the 100 MW Dry Lake Solar Project (collectively referred to as Dry Lake) located in southern Nevada for approximately $114 million. In March 2021, AEP closed the transaction and the solar project was placed in-service in May 2021. Approximately $103 million of the purchase price was paid upon closing of the transaction and the remaining $11 million was paid when the project was placed in-service. In accordance with the accounting guidance for “Business Combinations,” management determined that the acquisition of Dry Lake represents an asset acquisition. Additionally, and in accordance with the accounting guidance for “Consolidation,” management concluded that Dry Lake is a VIE and that AEP is the primary beneficiary based on its power as managing member to direct the activities that most significantly impact Dry Lake’s economic performance. As the primary beneficiary of Dry Lake, AEP consolidates Dry Lake into its financial statements. As a result, to account for the initial consolidation of Dry Lake, management applied the acquisition method by allocating the purchase price based on the relative fair value of the assets acquired and noncontrolling interest assumed.  The fair value of the primary assets acquired and the noncontrolling interest assumed was determined using the market approach.  The key input assumptions were the transaction price paid for AEP’s interest in Dry Lake and recent third-party market transactions for similar solar generation facilities. See Note 17 - Variable Interest Entities and Equity Method Investments for additional information.

North Central Wind Energy Facilities (Vertically Integrated Utilities Segment) (Applies to AEP, PSO and SWEPCo)

In 2020, PSO and SWEPCo received regulatory approvals to acquire the NCWF, comprised of three Oklahoma wind facilities totaling 1,484 MWs, on a fixed cost turn-key basis. PSO and SWEPCo own undivided interests of 45.5% and 54.5% of the NCWF, respectively. In total, the three wind facilities cost approximately $2 billion and consist of Traverse (998 MW), Maverick (287 MW) and Sundance (199 MW). Output from the NCWF serves retail load in PSO’s Oklahoma service territory and both retail and FERC wholesale load in SWEPCo’s service territories in Arkansas and Louisiana. The Oklahoma and Louisiana portions of the NCWF revenue requirement, net of PTC benefit, are recoverable through authorized riders until the amounts are reflected in base rates. Recovery of the Arkansas portion of the NCWF revenue requirement through base rates was approved by the APSC in May 2022. The NCWF are subject to various regulatory performance requirements. If these performance requirements are not met, PSO and SWEPCo would recognize a regulatory liability to refund retail customers.

In April 2021, PSO and SWEPCo acquired respective undivided ownership interests in the entity that owned Sundance during its development and construction for $270 million, the first of the three NCWF acquisitions. Immediately following the acquisition, PSO and SWEPCo liquidated the entity and simultaneously distributed the Sundance assets in proportion to their undivided ownership interests. Sundance was placed in-service in April 2021.

In September 2021, PSO and SWEPCo acquired respective undivided ownership interests in the entity that owned Maverick during its development and construction for $383 million, the second of the three NCWF acquisitions. Immediately following the acquisition, PSO and SWEPCo liquidated the entity and simultaneously distributed the Maverick assets in proportion to their undivided ownership interests. Maverick was placed in-service in September 2021.
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In March 2022, PSO and SWEPCo acquired respective undivided ownership interests in the entity that owned Traverse during its development and construction for $1.2 billion, the third of the three NCWF acquisitions. Immediately following the acquisition, PSO and SWEPCo liquidated the entity and simultaneously distributed the Traverse assets in proportion to their undivided ownership interests. Traverse was placed in-service in March 2022.

In accordance with the guidance for “Business Combinations,” management determined that the acquisitions of the NCWF projects represent asset acquisitions.  As of December 31, 2022 and 2021, PSO had approximately $901 million and $316 million and SWEPCo had approximately $1.1 billion and $378 million, respectively, of gross Property, Plant and Equipment on the balance sheets related to the NCWF projects. On an ongoing basis, management further determined that PSO and SWEPCo should apply the joint plant accounting model to account for their respective undivided interests in the assets, liabilities, revenues and expenses of the NCWF projects.

The respective Purchase and Sale Agreements (PSAs) include collective interests in numerous land contracts, as originally executed between the nonaffiliated party and the respective owners of the properties as defined in the contracts. These contracts provide for easement and access rights to the land that Sundance, Maverick and Traverse were built upon. The lessee interests in the land contracts were transferred to Sundance, Maverick and Traverse (and subsequently to PSO and SWEPCo) as a part of the closings of the respective PSAs. The current Obligations Under Operating Leases related to the NCWF projects were not material as of December 31, 2022 and 2021 for PSO and SWEPCo. See the table below for the noncurrent Obligations Under Operating Leases for the NCWF projects for PSO and SWEPCo:
																											
		PSO		SWEPCo	
		December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021	
		(in millions)	
Project									
Sundance		$	12.6 			$	12.6 			$	15.1 			$	15.1 		
Maverick		18.0 			18.0 			21.6 			21.6 		
Traverse		39.8 			— 			47.7 			— 		
Total		$	70.4 			$	30.6 			$	84.4 			$	36.7 		

2020

Desert Sky Wind Farm and Trent Wind Farm (Generation & Marketing Segment) (Applies to AEP)

In August 2020, AEP exercised its call right which required the nonaffiliated member of Desert Sky Wind Farm LLC and Trent Wind Farm LLC (collectively the LLCs) to sell its noncontrolling interest to AEP. The exercise price for the call right was determined using a discounted cash flow model with agreed input assumptions as well as updates to certain assumptions reasonably expected based on the actual results of the LLCs. As a result, the LLCs are wholly-owned by AEP and management has concluded that the LLCs are no longer VIEs. AEP paid $57 million in cash, derecognized $63 million of Redeemable Noncontrolling Interest within Mezzanine Equity and recorded an increase of $6 million of Paid-In Capital on the balance sheets. See Note 17 - Variable Interest Entities and Equity Method Investments for additional information.

Santa Rita East (Generation & Marketing Segment) (Applies to AEP)

In November 2020, AEP acquired an additional 10% interest in Santa Rita East for approximately $44 million resulting in AEP having a total interest of 85%. The acquisition of the incremental ownership interest was accounted for as an equity transaction in accordance with the accounting guidance for "Consolidation" and reduced Noncontrolling Interests on the balance sheets by approximately $44 million. See Note 17 - Variable Interest Entities and Equity Method Investments for additional information.

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ASSETS AND LIABILITIES HELD FOR SALE

2022

Disposition of KPCo and KTCo (Vertically Integrated Utilities and AEP Transmission Holdco Segments) (Applies to AEP and AEPTCo)

In October 2021, AEP entered into a Stock Purchase Agreement (SPA) to sell KPCo and KTCo to Liberty Utilities Co., a subsidiary of Algonquin Power & Utilities Corp. (Liberty), for approximately a $2.85 billion enterprise value. In May 2022, the KPSC approved the transfer of KPCo to Liberty subject to certain conditions contingent upon the closing of the sale. AEP has received clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) and the Committee on Foreign Investment in the United States during 2022. Clearance under the HSR expired in January 2023. AEP and Liberty refiled a joint application seeking HSR clearance in February 2023. The sale is also contingent upon FERC approval under Section 203 of the Federal Power Act. The parties to the SPA have certain termination rights if the closing of the sale does not occur by April 26, 2023.

Transfer of Ownership

FERC Proceedings

In December 2021, Liberty, KPCo and KTCo (the applicants) requested FERC approval of the sale under Section 203 of the Federal Power Act. In February 2022, several intervenors in the case filed protests related to whether the sale will negatively impact the wholesale transmission rates of applicants. In April 2022, the FERC issued a deficiency letter stating that the Section 203 application is deficient and that additional information is required to process it. In May 2022, Liberty, KPCo and KTCo supplemented the application. In December 2022, the FERC issued an order denying, without prejudice, authorization of the proposed sale stating the applicants failed to demonstrate the proposed transaction will not have an adverse effect on rates.

In January 2023, AEP, AEPTCo, and Liberty entered into an amendment to the SPA that specified the applicants will submit a new filing for approval under Section 203 of the Federal Power Act. The new filing was submitted to the FERC on February 14, 2023. The applicants requested expedited treatment of the new filing, including an accelerated comment period. In response, the FERC granted a shortened 45 day comment period. The applicants believe the new Section 203 application addresses the concerns raised in the FERC’s December 2022 order. The application contains several additional commitments by Liberty to mitigate potential adverse impacts on FERC jurisdictional rates over the next five years, including: a) maintaining the current return on equity; b) maintaining the current cost cap on equity; c) financing future investments at the current credit rating; and d) capping certain operating and administrative costs. The sale remains subject to FERC approval. The statute requires an order from the FERC within 180 days of the February 14, 2023 filing date in accordance with Section 203 of the Federal Power Act.

KPSC Proceedings

In May 2022, the KPSC approved the transfer of KPCo to Liberty subject to conditions contingent upon the closing of the sale, including establishment of regulatory liabilities to subsidize retail customer transmission and distribution expenses, a fuel adjustment clause bill credit, and a three-year Big Sandy decommissioning rider rate holiday during which KPCo’s carrying charge is reduced by 50%.

Mitchell Plant Operations and Maintenance Agreement and Ownership Agreement

KPCo and WPCo each own a 50% undivided interest in the 1,560 MW coal-fired Mitchell Plant. As of December 31, 2022 and 2021, the net book value of KPCo’s share of the Mitchell Plant, before cost of removal including CWIP and inventory, was $577 million and $586 million, respectively. The SPA includes a condition precedent to closing requiring the issuance of regulatory orders approving new Mitchell Plant agreements.
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The KPSC and WVPSC issued orders proposing materially different modifications to the Mitchell Plant agreements filed by AEP such that the new agreements could not be executed by the parties. In lieu of new agreements, in July 2022, KPCo and WPCo confirmed with the KPSC and WVPSC, respectively, that they will continue operating under the existing Mitchell Agreement, utilizing the Mitchell Agreement Operating Committee’s authority under that agreement to issue appropriate resolutions so the parties can operate in accordance with each state commission’s directives related to CCR and ELG investment. In September 2022, pursuant to resolutions under the existing Mitchell Plant agreement, WPCo replaced KPCo as the Operator of Mitchell Plant.

Summary

As a result of the conditions imposed by the KPSC’s May 2022 order, in the second quarter of 2022, AEP recorded a $69 million loss on the expected sale of the Kentucky Operations in accordance with accounting guidance for Fair Value Measurement.

In September 2022, AEP, AEPTCo and Liberty entered into an amendment to the SPA which reduced the purchase price to approximately $2.646 billion and Liberty agreed to waive, upon FERC approval of the sale, the SPA condition precedent to closing requiring the issuance of regulatory orders approving new proposed Mitchell Plant agreements. Further, as a result of the reduced purchase price from the September Amendment and the change to the anticipated timing of the completion of the transaction, AEP recorded an additional $194 million pretax loss ($149 million net of tax) on the expected sale of the Kentucky Operations in the third quarter of 2022 in accordance with the accounting guidance for Fair Value Measurement.

As a result of the December 2022 FERC order and resulting delay in the anticipated timing of the closing of the transaction, AEP recorded an additional $100 million pretax loss ($79 million net of tax) on the expected sale of the Kentucky Operations in December 2022 in accordance with the accounting guidance for Fair Value Measurement. In total, AEP recorded a $363 million pretax loss of ($297 million net of tax) on the expected sale of the Kentucky Operations for the twelve months ended December 31, 2022.

Management believes it is probable that FERC authorization under Section 203 of the Federal Power Act will be received and closing will occur after receipt of the order. Therefore, the assets and liabilities of KPCo and KTCo were classified as Held for Sale in the December 31, 2022 balance sheets of AEP and AEPTCo. Upon closing, Liberty will acquire the assets and assume the liabilities of KPCo and KTCo, excluding pension and other post-retirement benefit plan assets and liabilities. AEP expects to provide customary transition services to Liberty for a period of time after closing of the transaction. AEP expects cash proceeds, net of taxes and transaction fees, from the sale of approximately $1.2 billion. AEP plans to use the proceeds from the sale to fund its continued investment in regulated businesses, including transmission and regulated renewables projects. If additional reductions in the fair value of the Kentucky Operations occur, it would reduce future net income and cash flows.

Because the depreciation of Kentucky assets will continue to be reflected in revenues through customer rates until the expected closing of the transaction and will be reflected in the carryover basis of the rate-regulated assets once sold, AEP and AEPTCo will continue to recognize depreciation on those assets through the close of the transaction. Depreciation expense of $99 million and $4 million associated with KPCo and KTCo was recognized for the year ended December 31, 2022.

The Income Before Income Tax Expense (Benefit) of KPCo and KTCo were not material to AEP and AEPTCo on their respective statements of income for the twelve months ended December 31, 2022 and 2021.

The major classes of KPCo and KTCo’s assets and liabilities presented in Assets Held for Sale and Liabilities Held for Sale on the balance sheets of AEP and AEPTCo are shown in the table below:
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		AEP		AEPTCo	
		December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021	
		(in millions)	
ASSETS									
Accounts Receivable and Accrued Unbilled Revenues		$	97.7 			$	33.2 			$	1.8 			$	1.5 		
Fuel, Materials and Supplies		48.2 			30.6 			— 			— 		
Property, Plant and Equipment, Net		2,419.4 			2,302.7 			169.8 			165.3 		
Regulatory Assets		504.1 			484.7 			0.3 			— 		
Other Classes of Assets that are not Major		51.3 			68.5 			6.1 			1.1 		
Total Major Classes of Assets Held for Sale		3,120.7 			2,919.7 			178.0 			167.9 		
Loss on the Expected Sale of Kentucky Operations (net of $66.1 million of Income Taxes)		(297.2)			— 			— 			— 		
Assets Held for Sale		$	2,823.5 			$	2,919.7 			$	178.0 			$	167.9 		
									
LIABILITIES									
Accounts Payable		$	57.8 			$	53.4 			$	1.5 			$	1.1 		
Long-term Debt Due Within One Year		490.0 			200.0 			— 			— 		
Customer Deposits		38.8 			32.4 			— 			— 		
Deferred Income Taxes		469.7 			441.6 			16.1 			15.4 		
Long-term Debt		688.4 			903.1 			— 			— 		
Regulatory Liabilities and Deferred Investment Tax Credits		116.0 			148.1 			8.2 			7.6 		
Other Classes of Liabilities that are not Major		95.0 			102.3 			2.8 			3.5 		
Liabilities Held for Sale		$	1,955.7 			$	1,880.9 			$	28.6 			$	27.6 		
296

DISPOSITIONS

2022

Disposition of Cardinal Plant (Generation & Marketing Segment) (Applies to AEP)

In March 2022, AGR entered into an Asset Purchase agreement with a nonaffiliated electric cooperative to sell Cardinal Plant, Unit 1, a competitive generation asset totaling 595 MWs. The FERC approved the sale in May 2022 and the sale closed in the third quarter of 2022. The proceeds from the sale were not material. Concurrent with the closing of the sale, AGR executed a PPA with the nonaffiliated electric cooperative for rights to Unit 1’s power and capacity through 2028. AGR also retained certain obligations related to environmental remediation.

Subsequent to the closing of the sale, AGR continues to recognize Cardinal Plant, Unit 1 on its balance sheet due to continuing involvement through the PPA. As of December 31, 2022, the net book value of Cardinal Plant, Unit 1 was not material.

Disposition of Mineral Rights (Generation & Marketing Segment) (Applies to AEP)

In June 2022, AEP closed on the sale of certain mineral rights to a nonaffiliated third-party and received $120 million of proceeds. The sale resulted in a pretax gain of $116 million in the second quarter of 2022.

2021

Disposition of Racine (Generation & Marketing Segment) (Applies to AEP)

In February 2021, AEP signed an agreement to sell Racine to a nonaffiliated party. The sale of Racine closed in the fourth quarter of 2021 resulting in an immaterial gain which is recorded in Other Operation on AEP’s statements of income.

2020

Conesville Plant (Generation & Marketing Segment) (Applies to AEP)

In June 2020, AEP and a nonaffiliated joint-owner executed an Environmental Liability and Property Transfer and Asset Purchase Agreement with a nonaffiliated third-party related to the merchant Conesville Plant site. The purchaser took ownership of the assets and assumed responsibility for environmental liabilities, including ash pond closure, asbestos abatement and decommissioning and demolition of the Conesville Plant site. In consideration of the transfer of the acquired assets to the purchaser and the purchaser’s assumption of liabilities, AEP paid approximately $98 million over three years, derecognized $106 million in ARO and recorded an immaterial gain on the transaction which is recorded in Other Operation on the statements of income. AEP paid approximately $26 million at closing in June 2020 and made additional payments totaling $72 million in quarterly installments from October 2020 to June 2022.

Oklaunion Power Station (Transmission and Distribution Segment and Vertically Integrated Utilities Segment) (Applies to AEP, AEP Texas and PSO)

In October 2020, AEP Texas, PSO and a nonaffiliated joint-owner executed an Environmental Liability and Property Transfer and Asset Purchase Agreement with a nonaffiliated third-party related to the Oklaunion Power Station site. The purchaser took ownership of the assets and assumed responsibility for environmental liabilities, including ash pond closure, asbestos abatement and decommissioning and demolition of the Oklaunion Power Station site. The sale had an immaterial impact on the financial statements in the fourth quarter of 2020.

297

IMPAIRMENTS

2022

Flat Ridge 2 Wind LLC (Generation & Marketing Segment) (Applies to AEP)

In 2019, AEP acquired a 50% ownership interest in five non-consolidated joint ventures, including Flat Ridge 2 Wind LLC (Flat Ridge 2), and two tax equity partnerships. The five non-consolidated joint ventures are jointly owned and operated by BP Wind Energy. Flat Ridge 2 sells electricity to three counterparties through long-term PPAs.

Regarding AEP’s investment in Flat Ridge 2, in June 2022, as a result of deteriorating financial performance, sale negotiations and AEP’s ongoing evaluation and ultimate decision to exit the investment in the near term, AEP determined a decline in the fair value of AEP’s investment in Flat Ridge 2 was other than temporary. In accordance with the accounting guidance for “Investments - Equity Method and Joint Ventures”, in the second quarter of 2022 AEP recorded a pretax other than temporary impairment charge of $186 million which is presented in Equity Earnings (Losses) of Unconsolidated Subsidiaries on AEP’s Statement of Income. AEP’s determination of fair value utilized the accounting guidance for Fair Value Measurement market approach to valuation and was based on negotiations to sell the investment to a non-affiliate. In the third quarter of 2022, AEP recorded an additional $2 million pretax other than temporary impairment charge which is presented in Equity Earnings (Losses) of Unconsolidated Subsidiaries on AEP’s Statement of Income. In September 2022, AEP signed a Purchase and Sale Agreement with a nonaffiliate for AEP’s interest in Flat Ridge 2. The transaction closed in the fourth quarter of 2022 and had an immaterial impact on the financial statements at closing.

2021

2020 Texas Base Rate Case (Vertically Integrated Utilities Segment) (Applies to AEP and SWEPCo)

In January 2022, the PUCT issued a final order which included a return of investment only for the recovery of the Dolet Hills Power Station. As a result of the final order, SWEPCo recorded a disallowance of $12 million associated with the lack of return on the Dolet Hills Power Station. In February 2022, SWEPCo filed a motion for rehearing with the PUCT challenging denial of a reasonable return or carrying costs on the Dolet Hills Power Station among other items. In April 2022, the PUCT denied the motion for rehearing. In May 2022, SWEPCo filed a petition for review with the Texas District Court seeking a judicial review of the several errors challenged in the PUCT’s final order. See “2020 Texas Base Rate Case” section of Note 4 for additional information.
298

8.  BENEFIT PLANS

The disclosures in this note apply to all Registrants except AEPTCo unless indicated otherwise.

For a discussion of investment strategy, investment limitations, target asset allocations and the classification of investments within the fair value hierarchy, see “Fair Value Measurements of Assets and Liabilities” and “Investments Held in Trust for Future Liabilities” sections of Note 1.

AEP sponsors a qualified pension plan and two unfunded non-qualified pension plans.  Substantially all AEP employees are covered by the qualified plan or both the qualified and a non-qualified pension plan.  AEP also sponsors OPEB plans to provide health and life insurance benefits for retired employees.

Due to the Registrant Subsidiaries’ participation in AEP’s benefit plans, the assumptions used by the actuary, with the exception of the rate of compensation increase, and the accounting for the plans by each subsidiary are the same.  This section details the assumptions that apply to all Registrants and the rate of compensation increase for each Registrant.

The Registrants recognize the funded status associated with defined benefit pension and OPEB plans on the balance sheets.  Disclosures about the plans are required by the “Compensation – Retirement Benefits” accounting guidance.  The Registrants recognize an asset for a plan’s overfunded status or a liability for a plan’s underfunded status, and recognize, as a component of other comprehensive income, the changes in the funded status of the plan that arise during the year that are not recognized as a component of net periodic benefit cost.  The Registrants record a regulatory asset instead of other comprehensive income for qualifying benefit costs of regulated operations that for rate-making purposes are deferred for future recovery.  The cumulative funded status adjustment is equal to the remaining unrecognized deferrals for unamortized actuarial losses or gains, prior service costs and transition obligations, such that remaining deferred costs result in an AOCI equity reduction or regulatory asset and deferred gains result in an AOCI equity addition or regulatory liability.

Actuarial Assumptions for Benefit Obligations

The weighted-average assumptions used in the measurement of the Registrants’ benefit obligations are shown in the following tables:

		Pension Plans		OPEB	
		December 31,	
Assumption		2022		2021		2022		2021	
Discount Rate		5.50 	%		2.90 	%		5.50 	%		2.90 	%	
Interest Crediting Rate		4.25 	%		4.00 	%		NA		NA	

NA    Not applicable.

		Pension Plans	
		December 31,	
Assumption – Rate of Compensation Increase (a)		2022		2021	
AEP		5.05 	%		5.10 	%	
AEP Texas		5.15 	%		5.10 	%	
APCo		4.90 	%		4.85 	%	
I&M		5.00 	%		5.00 	%	
OPCo		5.35 	%		5.30 	%	
PSO		5.15 	%		5.10 	%	
SWEPCo		5.00 	%		4.95 	%	

(a)Rates are for base pay only.  In addition, an amount is added to reflect target incentive compensation for exempt employees and overtime and incentive pay for nonexempt employees.
299

A duration-based method is used to determine the discount rate for the plans.  A hypothetical portfolio of high quality corporate bonds is constructed with cash flows matching the benefit plan liability.  The composite yield on the hypothetical bond portfolio is used as the discount rate for the plan.  The discount rate is the same for each Registrant.

For 2022, the rate of compensation increase assumed varies with the age of the employee, ranging from 3% per year to 11.5% per year, with the average increase shown in the table above.  The compensation increase rates reflect variations in each Registrants’ population participating in the pension plan.

Actuarial Assumptions for Net Periodic Benefit Costs

The weighted-average assumptions used in the measurement of each Registrants’ benefit costs are shown in the following tables:

		Pension Plans		OPEB	
		Year Ended December 31,	
Assumption		2022		2021		2020		2022		2021		2020	
Discount Rate		2.90 	%		2.50 	%		3.25 	%		2.90 	%		2.55 	%		3.30 	%	
Interest Crediting Rate		4.00 	%		4.00 	%		4.00 	%		NA		NA		NA	
Expected Return on Plan Assets		5.25 	%		4.75 	%		5.75 	%		5.50 	%		4.75 	%		5.50 	%	

NA    Not applicable.

		Pension Plans	
		Year Ended December 31,	
Assumption – Rate of Compensation Increase (a)		2022		2021		2020	
AEP		5.05 	%		5.10 	%		5.00 	%	
AEP Texas		5.15 	%		5.10 	%		5.05 	%	
APCo		4.90 	%		4.85 	%		4.85 	%	
I&M		5.00 	%		5.00 	%		5.00 	%	
OPCo		5.35 	%		5.30 	%		5.25 	%	
PSO		5.15 	%		5.10 	%		5.05 	%	
SWEPCo		5.00 	%		4.95 	%		4.90 	%	

(a)Rates are for base pay only.  In addition, an amount is added to reflect target incentive compensation for exempt employees and overtime and incentive pay for nonexempt employees.

The expected return on plan assets was determined by evaluating historical returns, the current investment climate (yield on fixed income securities and other recent investment market indicators), rate of inflation, third-party forecasts and current prospects for economic growth.  The expected return on plan assets is the same for each Registrant.

The health care trend rate assumptions used for OPEB plans measurement purposes are shown below:

		December 31,	
Health Care Trend Rates		2022		2021	
Initial		7.50 	%	 	6.25 	%	
Ultimate		4.50 	%	 	4.50 	%	
Year Ultimate Reached		2029	 	2029	

300

Significant Concentrations of Risk within Plan Assets

In addition to establishing the target asset allocation of plan assets, the investment policy also places restrictions on securities to limit significant concentrations within plan assets.  The investment policy establishes guidelines that govern maximum market exposure, security restrictions, prohibited asset classes, prohibited types of transactions, minimum credit quality, average portfolio credit quality, portfolio duration and concentration limits.  The guidelines were established to mitigate the risk of loss due to significant concentrations in any investment.  Management monitors the plans to control security diversification and ensure compliance with the investment policy.  As of December 31, 2022, the assets were invested in compliance with all investment limits.  See “Investments Held in Trust for Future Liabilities” section of Note 1 for limit details.

Benefit Plan Obligations, Plan Assets, Funded Status and Amounts Recognized on the Balance Sheets

For the year ended December 31, 2022, the pension plans had an actuarial gain primarily due to an increase in the discount rate and was partially offset by increases in the assumed lump sum conversion rate and cash balance account interest crediting rate. For the year ended December 31, 2022, the OPEB plans had an actuarial gain primarily due to an increase in the discount rate and updated per capita cost assumptions. The OPEB plans gains were partially offset by a projected reduction in the Employer Group Waiver Program catastrophic reinsurance offset provided to AEP, resulting from the Inflation Reduction Act as well as an increase in the health care cost trend assumption. For the year ended December 31, 2021, the pension plans had an actuarial gain primarily due to an increase in the discount rate, partially offset by less favorable demographic experience than expected, resulting from the updated census information as of January 1, 2021. For the year ended December 31, 2021, the OPEB plans had an actuarial gain primarily due to an increase in the discount rate and an update of the projected reimbursements from the Employer Group Waiver Program under Medicare Part D. The following tables provide a reconciliation of the changes in the plans’ benefit obligations, fair value of plan assets, funded status and the presentation on the balance sheets.  The benefit obligation for the defined benefit pension and OPEB plans are the projected benefit obligation and the accumulated benefit obligation, respectively.

AEP		Pension Plans		OPEB	
		2022		2021		2022		2021	
Change in Benefit Obligation		(in millions)	
Benefit Obligation as of January 1,		$	5,187.0 			$	5,544.5 			$	1,041.3 			$	1,210.9 		
Service Cost		123.1 			129.2 			7.4 			9.5 		
Interest Cost		148.2 			137.2 			29.2 			30.5 		
Actuarial Gain		(983.4)			(173.9)			(109.8)			(120.1)		
Plan Amendments		— 			— 			— 			(5.4)		
Benefit Payments		(402.2)			(450.0)			(140.1)			(126.0)		
Participant Contributions		— 			— 			44.1 			41.3 		
Medicare Subsidy		— 			— 			0.5 			0.6 		
Benefit Obligation as of December 31,		$	4,072.7 			$	5,187.0 			$	872.6 			$	1,041.3 		
									
Change in Fair Value of Plan Assets									
Fair Value of Plan Assets as of January 1,		$	5,352.9 			$	5,556.6 			$	2,044.3 			$	1,946.7 		
Actual Gain (Loss) on Plan Assets		(833.7)			239.2 			(403.6)			176.5 		
Company Contributions (a)		7.7 			7.1 			4.6 			5.8 		
Participant Contributions		— 			— 			44.1 			41.3 		
Benefit Payments		(402.2)			(450.0)			(140.1)			(126.0)		
Fair Value of Plan Assets as of December 31,		$	4,124.7 			$	5,352.9 			$	1,549.3 			$	2,044.3 		
									
Funded Status as of December 31,		$	52.0 			$	165.9 			$	676.7 			$	1,003.0 		

(a)No contributions were made to the qualified pension plan for the years ended December 31, 2022 and 2021, respectively. Contributions to the non-qualified pension plans were $8 million and $7 million for the years ended December 31, 2022 and 2021, respectively.
301

																											
		Pension Plans		OPEB	
		December 31,	
AEP		2022		2021		2022		2021	
		(in millions)	
Deferred Charges and Other Noncurrent Assets – Prepaid Benefit Costs		$	113.4 			$	244.3 			$	699.5 			$	1,040.8 		
Other Current Liabilities – Accrued Short-term Benefit Liability		(6.3)			(7.6)			(2.5)			(2.7)		
Employee Benefits and Pension Obligations – Accrued Long-term Benefit Liability		(55.1)			(70.8)			(20.3)			(35.1)		
Funded Status		$	52.0 			$	165.9 			$	676.7 			$	1,003.0 		

AEP Texas		Pension Plans		OPEB	
		2022		2021		2022		2021	
Change in Benefit Obligation		(in millions)	
Benefit Obligation as of January 1,		$	419.8 			$	453.2 			$	80.5 			$	96.3 		
Service Cost		11.1 			11.8 			0.5 			0.7 		
Interest Cost		12.1 			11.2 			2.2 			2.4 		
Actuarial Gain		(67.8)			(10.9)			(7.1)			(12.3)		
Plan Amendments		— 			— 			— 			(0.5)		
Benefit Payments		(41.1)			(45.5)			(10.9)			(9.3)		
Participant Contributions		— 			— 			3.4 			3.2 		
	
Benefit Obligation as of December 31,		$	334.1 			$	419.8 			$	68.6 			$	80.5 		
									
Change in Fair Value of Plan Assets									
Fair Value of Plan Assets as of January 1,		$	444.9 			$	474.0 			$	168.8 			$	162.3 		
Actual Gain (Loss) on Plan Assets		(69.2)			16.0 			(33.0)			12.5 		
Company Contributions		0.5 			0.4 			— 			0.1 		
Participant Contributions		— 			— 			3.4 			3.2 		
Benefit Payments		(41.1)			(45.5)			(10.9)			(9.3)		
Fair Value of Plan Assets as of December 31,		$	335.1 			$	444.9 			$	128.3 			$	168.8 		
									
Funded Status as of December 31,		$	1.0 			$	25.1 			$	59.7 			$	88.3 		

		Pension Plans		OPEB	
		December 31,	
AEP Texas		2022		2021		2022		2021	
		(in millions)	
Deferred Charges and Other Noncurrent Assets – Prepaid Benefit Costs		$	3.7 			$	28.7 			$	59.7 			$	88.3 		
Other Current Liabilities – Accrued Short-term Benefit Liability		(0.4)			(0.3)			— 			— 		
Deferred Credits and Other Noncurrent Liabilities – Accrued Long-term Benefit Liability		(2.3)			(3.3)			— 			— 		
Funded Status		$	1.0 			$	25.1 			$	59.7 			$	88.3 		

302

																											
APCo		Pension Plans		OPEB	
		2022		2021		2022		2021	
Change in Benefit Obligation		(in millions)	
Benefit Obligation as of January 1,		$	621.7 			$	670.8 			$	167.3 			$	198.2 		
Service Cost		11.4 			11.9 			0.8 			1.0 		
Interest Cost		17.5 			16.4 			4.7 			4.9 		
Actuarial Gain		(123.1)			(28.5)			(16.2)			(21.4)		
Plan Amendments		— 			— 			— 			(0.9)		
Benefit Payments		(41.8)			(48.9)			(23.0)			(21.3)		
Participant Contributions		— 			— 			7.0 			6.6 		
Medicare Subsidy		— 			— 			0.1 			0.2 		
Benefit Obligation as of December 31,		$	485.7 			$	621.7 			$	140.7 			$	167.3 		
									
Change in Fair Value of Plan Assets									
Fair Value of Plan Assets as of January 1,		$	683.3 			$	701.3 			$	302.3 			$	293.0 		
Actual Gain (Loss) on Plan Assets		(109.8)			30.9 			(59.3)			21.9 		
Company Contributions		— 			— 			1.6 			2.1 		
Participant Contributions		— 			— 			7.0 			6.6 		
Benefit Payments		(41.8)			(48.9)			(23.0)			(21.3)		
Fair Value of Plan Assets as of December 31,		$	531.7 			$	683.3 			$	228.6 			$	302.3 		
									
Funded Status as of December 31,		$	46.0 			$	61.6 			$	87.9 			$	135.0 		

		Pension Plans		OPEB	
		December 31,	
APCo		2022		2021		2022		2021	
		(in millions)	
Employee Benefits and Pension Assets – Prepaid Benefit Costs		$	46.6 			$	62.4 			$	106.3 			$	158.1 		
Other Current Liabilities – Accrued Short-term Benefit Liability		— 			— 			(1.6)			(1.8)		
Employee Benefits and Pension Obligations – Accrued Long-term Benefit Liability		(0.6)			(0.8)			(16.8)			(21.3)		
Funded Status		$	46.0 			$	61.6 			$	87.9 			$	135.0 		
303

																											
I&M		Pension Plans		OPEB	
		2022		2021		2022		2021	
Change in Benefit Obligation		(in millions)	
Benefit Obligation as of January 1,		$	612.1 			$	653.3 			$	118.6 			$	141.4 		
Service Cost		16.2 			17.5 			0.9 			1.3 		
Interest Cost		17.0 			16.2 			3.4 			3.5 		
Actuarial Gain		(138.0)			(29.5)			(8.7)			(16.8)		
Plan Amendments		— 			— 			— 			(0.7)		
Benefit Payments		(40.5)			(45.4)			(18.3)			(15.3)		
Participant Contributions		— 			— 			6.0 			5.2 		
	
Benefit Obligation as of December 31,		$	466.8 			$	612.1 			$	101.9 			$	118.6 		
									
Change in Fair Value of Plan Assets									
Fair Value of Plan Assets as of January 1,		$	681.5 			$	698.1 			$	248.7 			$	238.2 		
Actual Gain (Loss) on Plan Assets		(107.4)			28.8 			(45.9)			20.6 		
Company Contributions		0.1 			— 			— 			— 		
Participant Contributions		— 			— 			6.0 			5.2 		
Benefit Payments		(40.5)			(45.4)			(18.3)			(15.3)		
Fair Value of Plan Assets as of December 31,		$	533.7 			$	681.5 			$	190.5 			$	248.7 		
									
Funded Status as of December 31,		$	66.9 			$	69.4 			$	88.6 			$	130.1 		

		Pension Plans		OPEB	
		December 31,	
I&M		2022		2021		2022		2021	
		(in millions)	
Deferred Charges and Other Noncurrent Assets – Prepaid Benefit Costs		$	68.5 			$	71.4 			$	88.6 			$	130.1 		
Other Current Liabilities – Accrued Short-term Benefit Liability		(0.1)			(0.1)			— 			— 		
Deferred Credits and Other Noncurrent Liabilities – Accrued Long-term Benefit Liability		(1.5)			(1.9)			— 			— 		
Funded Status		$	66.9 			$	69.4 			$	88.6 			$	130.1 		

304

																											
OPCo		Pension Plans		OPEB	
		2022		2021		2022		2021	
Change in Benefit Obligation		(in millions)	
Benefit Obligation as of January 1,		$	470.7 			$	510.3 			$	104.9 			$	126.4 		
Service Cost		11.2 			11.4 			0.6 			0.8 		
Interest Cost		13.3 			12.5 			3.0 			3.0 		
Actuarial Gain		(97.9)			(24.1)			(8.9)			(15.6)		
Plan Amendments		— 			— 			— 			(0.6)		
Benefit Payments		(33.7)			(39.4)			(15.5)			(13.6)		
Participant Contributions		— 			— 			4.8 			4.5 		
	
Benefit Obligation as of December 31,		$	363.6 			$	470.7 			$	88.9 			$	104.9 		
									
Change in Fair Value of Plan Assets									
Fair Value of Plan Assets as of January 1,		$	524.8 			$	543.1 			$	220.0 			$	213.0 		
Actual Gain (Loss) on Plan Assets		(84.8)			21.1 			(43.1)			16.1 		
Company Contributions		0.1 			— 			— 			— 		
Participant Contributions		— 			— 			4.8 			4.5 		
Benefit Payments		(33.7)			(39.4)			(15.5)			(13.6)		
Fair Value of Plan Assets as of December 31,		$	406.4 			$	524.8 			$	166.2 			$	220.0 		
									
Funded Status as of December 31,		$	42.8 			$	54.1 			$	77.3 			$	115.1 		

		Pension Plans		OPEB	
		December 31,	
OPCo		2022		2021		2022		2021	
		(in millions)	
Deferred Charges and Other Noncurrent Assets – Prepaid Benefit Costs		$	43.1 			$	54.8 			$	77.3 			$	115.1 		
	
Deferred Credits and Other Noncurrent Liabilities – Accrued Long-term Benefit Liability		(0.3)			(0.7)			— 			— 		
Funded Status		$	42.8 			$	54.1 			$	77.3 			$	115.1 		

305

																											
PSO		Pension Plans		OPEB	
		2022		2021		2022		2021	
Change in Benefit Obligation		(in millions)	
Benefit Obligation as of January 1,		$	252.6 			$	279.9 			$	54.4 			$	64.0 		
Service Cost		7.4 			8.0 			0.4 			0.6 		
Interest Cost		7.0 			6.7 			1.5 			1.6 		
Actuarial Gain		(52.9)			(17.2)			(5.2)			(6.8)		
Plan Amendments		— 			— 			— 			(0.3)		
Benefit Payments		(21.8)			(24.8)			(7.9)			(7.0)		
Participant Contributions		— 			— 			2.5 			2.3 		
	
Benefit Obligation as of December 31,		$	192.3 			$	252.6 			$	45.7 			$	54.4 		
									
Change in Fair Value of Plan Assets									
Fair Value of Plan Assets as of January 1,		$	286.2 			$	299.8 			$	114.0 			$	107.8 		
Actual Gain (Loss) on Plan Assets		(46.0)			11.1 			(23.2)			10.9 		
Company Contributions		0.1 			0.1 			— 			— 		
Participant Contributions		— 			— 			2.5 			2.3 		
Benefit Payments		(21.8)			(24.8)			(7.9)			(7.0)		
Fair Value of Plan Assets as of December 31,		$	218.5 			$	286.2 			$	85.4 			$	114.0 		
									
Funded Status as of December 31,		$	26.2 			$	33.6 			$	39.7 			$	59.6 		

		Pension Plans		OPEB	
		December 31,	
PSO		2022		2021		2022		2021	
		(in millions)	
Employee Benefits and Pension Assets – Prepaid Benefit Costs		$	27.6 			$	35.5 			$	39.7 			$	59.6 		
Other Current Liabilities – Accrued Short-term Benefit Liability		(0.1)			(0.1)			— 			— 		
Deferred Credits and Other Noncurrent Liabilities – Accrued Long-term Benefit Liability		(1.3)			(1.8)			— 			— 		
Funded Status		$	26.2 			$	33.6 			$	39.7 			$	59.6 		
306

																											
SWEPCo		Pension Plans		OPEB	
		2022		2021		2022		2021	
Change in Benefit Obligation		(in millions)	
Benefit Obligation as of January 1,		$	317.7 			$	334.5 			$	65.2 			$	77.1 		
Service Cost		10.6 			11.2 			0.6 			0.8 		
Interest Cost		9.1 			8.5 			1.8 			1.9 		
Actuarial Gain		(57.9)			(3.5)			(6.6)			(9.2)		
Plan Amendments		— 			— 			— 			(0.4)		
Benefit Payments		(28.8)			(33.0)			(8.8)			(7.6)		
Participant Contributions		— 			— 			2.9 			2.6 		
	
Benefit Obligation as of December 31,		$	250.7 			$	317.7 			$	55.1 			$	65.2 		
									
Change in Fair Value of Plan Assets									
Fair Value of Plan Assets as of January 1,		$	308.3 			$	326.9 			$	136.6 			$	129.9 		
Actual Gain (Loss) on Plan Assets		(48.3)			14.3 			(27.7)			11.7 		
Company Contributions		0.1 			0.1 			— 			— 		
Participant Contributions		— 			— 			2.9 			2.6 		
Benefit Payments		(28.8)			(33.0)			(8.8)			(7.6)		
Fair Value of Plan Assets as of December 31,		$	231.3 			$	308.3 			$	103.0 			$	136.6 		
									
Funded (Underfunded) Status as of December 31,		$	(19.4)			$	(9.4)			$	47.9 			$	71.4 		

		Pension Plans		OPEB	
		December 31,	
SWEPCo		2022		2021		2022		2021	
		(in millions)	
Deferred Charges and Other Noncurrent Assets – Prepaid Benefit Costs		$	— 			$	— 			$	47.9 			$	71.4 		
Other Current Liabilities – Accrued Short-term Benefit Liability		(0.1)			(0.1)			— 			— 		
Employee Benefits and Pension Obligations – Accrued Long-term Benefit Liability		(19.3)			(9.3)			— 			— 		
Funded (Underfunded) Status		$	(19.4)			$	(9.4)			$	47.9 			$	71.4 		

307

Amounts Included in Regulatory Assets, Deferred Income Taxes and AOCI

The following tables show the components of the plans included in Regulatory Assets, Deferred Income Taxes and AOCI and the items attributable to the change in these components:

AEP		Pension Plans		OPEB	
		December 31,	
		2022		2021		2022		2021	
Components		(in millions)	
Net Actuarial (Gain) Loss		$	935.6 			$	894.7 			$	300.0 			$	(103.6)		
Prior Service Cost (Credit)		0.2 			0.2 			(90.5)			(161.9)		
									
Recorded as									
Regulatory Assets		$	841.8 			$	878.0 			$	126.0 			$	(195.1)		
Deferred Income Taxes		19.9 			3.6 			17.5 			(14.7)		
Net of Tax AOCI		74.1 			13.3 			66.0 			(55.7)		

																											
AEP		Pension Plans		OPEB	
		2022		2021		2022		2021	
Components		(in millions)	
Actuarial (Gain) Loss During the Year		$	103.9 			$	(183.4)			$	403.6 			$	(205.5)		
Amortization of Actuarial Loss		(63.0)			(101.5)			— 			— 		
Prior Service Credit		— 			— 			— 			(5.5)		
Amortization of Prior Service Credit		— 			— 			71.4 			70.9 		
Change for the Year Ended December 31,		$	40.9 			$	(284.9)			$	475.0 			$	(140.1)		

AEP Texas		Pension Plans		OPEB	
		December 31,	
		2022		2021		2022		2021	
Components		(in millions)	
Net Actuarial (Gain) Loss		$	161.9 			$	144.7 			$	29.7 			$	(5.2)		
Prior Service Credit		— 			— 			(7.6)			(13.7)		
									
Recorded as									
Regulatory Assets		$	151.2 			$	136.7 			$	22.0 			$	(17.7)		
Deferred Income Taxes		2.4 			1.8 			0.1 			(0.2)		
Net of Tax AOCI		8.3 			6.2 			— 			(1.0)		

																											
AEP Texas		Pension Plans		OPEB	
		2022		2021		2022		2021	
Components		(in millions)	
Actuarial (Gain) Loss During the Year		$	22.4 			$	(7.5)			$	34.9 			$	(17.5)		
Amortization of Actuarial Loss		(5.2)			(8.3)			— 			— 		
Prior Service Credit		— 			— 			— 			(0.4)		
Amortization of Prior Service Credit		— 			— 			6.1 			6.0 		
Change for the Year Ended December 31,		$	17.2 			$	(15.8)			$	41.0 			$	(11.9)		
308

																											
APCo		Pension Plans		OPEB	
		December 31,	
		2022		2021		2022		2021	
Components		(in millions)	
Net Actuarial (Gain) Loss		$	95.6 			$	83.9 			$	40.5 			$	(18.9)		
Prior Service Credit		— 			— 			(13.4)			(23.8)		
									
Recorded as									
Regulatory Assets		$	93.6 			$	82.5 			$	14.7 			$	(19.8)		
Deferred Income Taxes		0.4 			0.3 			2.5 			(4.9)		
Net of Tax AOCI		1.6 			1.1 			9.9 			(18.0)		

																											
APCo		Pension Plans		OPEB	
		2022		2021		2022		2021	
Components		(in millions)	
Actuarial (Gain) Loss During the Year		$	19.1 			$	(30.4)			$	59.4 			$	(30.0)		
Amortization of Actuarial Loss		(7.4)			(12.0)			— 			— 		
Prior Service Credit		— 			— 			— 			(0.9)		
Amortization of Prior Service Credit		— 			— 			10.4 			10.3 		
Change for the Year Ended December 31,		$	11.7 			$	(42.4)			$	69.8 			$	(20.6)		

I&M		Pension Plans		OPEB	
		December 31,	
		2022		2021		2022		2021	
Components		(in millions)	
Net Actuarial (Gain) Loss		$	(6.9)			$	(1.6)			$	40.2 			$	(10.7)		
Prior Service Credit		— 			— 			(12.4)			(22.1)		
									
Recorded as									
Regulatory Assets/Liabilities (a)		$	4.8 			$	3.1 			$	22.1 			$	(30.7)		
Deferred Income Taxes		(2.4)			(1.0)			1.2 			(0.4)		
Net of Tax AOCI		(9.3)			(3.7)			4.5 			(1.7)		

(a)Recorded as a Regulatory Asset as of December 31, 2022 and recorded as a Regulatory Liability as of December 31, 2021.

I&M		Pension Plans		OPEB	
		2022		2021		2022		2021	
Components		(in millions)	
Actuarial (Gain) Loss During the Year		$	1.8 			$	(29.4)			$	50.9 			$	(26.3)		
Amortization of Actuarial Loss		(7.1)			(11.7)			— 			— 		
Prior Service Credit		— 			— 			— 			(0.7)		
Amortization of Prior Service Credit		— 			— 			9.7 			9.6 		
Change for the Year Ended December 31,		$	(5.3)			$	(41.1)			$	60.6 			$	(17.4)		
309

																											
OPCo		Pension Plans		OPEB	
		December 31,	
		2022		2021		2022		2021	
Components		(in millions)	
Net Actuarial (Gain) Loss		$	124.3 			$	118.1 			$	27.6 			$	(18.5)		
Prior Service Credit		— 			— 			(9.2)			(16.3)		
									
Recorded as									
Regulatory Assets		$	124.3 			$	118.1 			$	18.4 			$	(34.8)		

																											
OPCo		Pension Plans		OPEB	
		2022		2021		2022		2021	
Components		(in millions)	
Actuarial (Gain) Loss During the Year		$	11.7 			$	(22.8)			$	46.1 			$	(22.1)		
Amortization of Actuarial Loss		(5.5)			(9.1)			— 			— 		
Prior Service Credit		— 			— 			— 			(0.6)		
Amortization of Prior Service Credit		— 			— 			7.1 			7.2 		
Change for the Year Ended December 31,		$	6.2 			$	(31.9)			$	53.2 			$	(15.5)		

PSO		Pension Plans		OPEB	
		December 31,	
		2022		2021		2022		2021	
Components		(in millions)	
Net Actuarial (Gain) Loss		$	38.8 			$	35.0 			$	22.0 			$	(2.1)		
Prior Service Credit		— 			— 			(5.6)			(10.0)		
									
Recorded as									
Regulatory Assets		$	38.8 			$	35.0 			$	16.4 			$	(12.1)		

PSO		Pension Plans		OPEB	
		2022		2021		2022		2021	
Components		(in millions)	
Actuarial (Gain) Loss During the Year		$	6.7 			$	(16.0)			$	24.1 			$	(12.6)		
Amortization of Actuarial Loss		(2.9)			(4.9)			— 			— 		
Prior Service Credit		— 			— 			— 			(0.3)		
Amortization of Prior Service Credit		— 			— 			4.4 			4.4 		
Change for the Year Ended December 31,		$	3.8 			$	(20.9)			$	28.5 			$	(8.5)		
310

																											
SWEPCo		Pension Plans		OPEB	
		December 31,	
		2022		2021		2022		2021	
Components		(in millions)	
Net Actuarial (Gain) Loss		$	77.6 			$	76.4 			$	25.0 			$	(3.5)		
Prior Service Credit		— 			— 			(7.0)			(12.3)		
									
Recorded as									
Regulatory Assets		$	77.6 			$	76.4 			$	11.2 			$	(8.9)		
Deferred Income Taxes		— 			— 			1.5 			(1.4)		
Net of Tax AOCI		— 			— 			5.3 			(5.5)		

																											
SWEPCo		Pension Plans		OPEB	
		2022		2021		2022		2021	
Components		(in millions)	
Actuarial (Gain) Loss During the Year		$	5.0 			$	(4.3)			$	28.5 			$	(15.0)		
Amortization of Actuarial Loss		(3.8)			(6.2)			— 			— 		
Prior Service Credit		— 			— 			— 			(0.4)		
Amortization of Prior Service Credit		— 			— 			5.3 			5.3 		
Change for the Year Ended December 31,		$	1.2 			$	(10.5)			$	33.8 			$	(10.1)		

Determination of Pension Expense

The determination of pension expense or income is based on a market-related valuation of assets which reduces year-to-year volatility.  This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur.  Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return.

Pension and OPEB Assets

The fair value tables within Pension and OPEB Assets present the classification of assets for AEP within the fair value hierarchy. All Level 1, 2, 3 and Other amounts can be allocated to the Registrant Subsidiaries using the percentages in the table below:

		Pension Plan		OPEB	
		December 31,	
Company		2022		2021		2022		2021	
AEP Texas		8.1 	%		8.3 	%		8.3 	%		8.3 	%	
APCo		12.9 	%		12.8 	%		14.8 	%		14.8 	%	
I&M		12.9 	%		12.7 	%		12.3 	%		12.2 	%	
OPCo		9.9 	%		9.8 	%		10.7 	%		10.8 	%	
PSO		5.3 	%		5.3 	%		5.5 	%		5.6 	%	
SWEPCo		5.6 	%		5.8 	%		6.6 	%		6.7 	%	

311

The following table presents the classification of pension plan assets for AEP within the fair value hierarchy as of December 31, 2022:

Asset Class		Level 1		Level 2		Level 3		Other		Total		Year End
Allocation	
		(in millions)			
Equities (a):													
Domestic		$	347.6 			$	— 			$	— 			$	— 			$	347.6 			8.4 	%	
International		398.4 			— 			— 			— 			398.4 			9.7 	%	

Common Collective Trusts (b)		— 			— 			— 			379.9 			379.9 			9.2 	%	
Subtotal – Equities		746.0 			— 			— 			379.9 			1,125.9 			27.3 	%	
													
Fixed Income (a):													
United States Government and Agency Securities		(0.6)			1,071.4 			— 			— 			1,070.8 			26.0 	%	
Corporate Debt		— 			891.7 			— 			— 			891.7 			21.6 	%	
Foreign Debt		— 			140.2 			— 			— 			140.2 			3.4 	%	
State and Local Government		— 			37.0 			— 			— 			37.0 			0.9 	%	
Other – Asset Backed		— 			0.8 			— 			— 			0.8 			— 	%	
Subtotal – Fixed Income		(0.6)			2,141.1 			— 			— 			2,140.5 			51.9 	%	
													
Infrastructure (b)		— 			— 			— 			109.2 			109.2 			2.6 	%	
Real Estate (b)		— 			— 			— 			276.9 			276.9 			6.7 	%	
Alternative Investments (b)		— 			— 			— 			319.7 			319.7 			7.8 	%	

Cash and Cash Equivalents (b)		— 			64.9 			— 			58.3 			123.2 			3.0 	%	
Other – Pending Transactions and Accrued Income (c)		— 			— 			— 			29.3 			29.3 			0.7 	%	
													
Total		$	745.4 			$	2,206.0 			$	— 			$	1,173.3 			$	4,124.7 			100.0 	%	

(a)Includes investment securities loaned to borrowers under the securities lending program. See the “Investments Held in Trust for Future Liabilities” section of Note 1 for additional information.
(b)Amounts in “Other” column represent investments for which fair value is measured using net asset value per-share.
(c)Amounts in “Other” column primarily represent accrued interest, dividend receivables and transactions pending settlement.
312

The following table presents the classification of OPEB plan assets for AEP within the fair value hierarchy as of December 31, 2022:

Asset Class		Level 1		Level 2		Level 3		Other		Total		Year End
Allocation	
		(in millions)			
Equities:													
Domestic		$	414.1 			$	— 			$	— 			$	— 			$	414.1 			26.7 	%	
International		265.0 			— 			— 			— 			265.0 			17.1 	%	
	
Common Collective Trusts (a)		— 			— 			— 			169.1 			169.1 			10.9 	%	
Subtotal – Equities		679.1 			— 			— 			169.1 			848.2 			54.7 	%	
													
Fixed Income:													
Common Collective Trust – Debt (a)		— 			— 			— 			120.3 			120.3 			7.8 	%	
United States Government and Agency Securities		0.1 			155.8 			— 			— 			155.9 			10.1 	%	
Corporate Debt		— 			141.5 			— 			— 			141.5 			9.1 	%	
Foreign Debt		— 			21.0 			— 			— 			21.0 			1.4 	%	
State and Local Government		62.9 			7.8 			— 			— 			70.7 			4.6 	%	
	
Subtotal – Fixed Income		63.0 			326.1 			— 			120.3 			509.4 			33.0 	%	
													
Trust Owned Life Insurance:													
International Equities		— 			46.7 			— 			— 			46.7 			3.0 	%	
United States Bonds		— 			110.3 			— 			— 			110.3 			7.1 	%	
Subtotal – Trust Owned Life Insurance		— 			157.0 			— 			— 			157.0 			10.1 	%	
													
Cash and Cash Equivalents (a)		23.2 			— 			— 			6.7 			29.9 			1.9 	%	
Other – Pending Transactions and Accrued Income (b)		— 			— 			— 			4.8 			4.8 			0.3 	%	
													
Total		$	765.3 			$	483.1 			$	— 			$	300.9 			$	1,549.3 			100.0 	%	

(a)Amounts in “Other” column represent investments for which fair value is measured using net asset value per-share.
(b)Amounts in “Other” column primarily represent accrued interest, dividend receivables and transactions pending settlement.

313

The following table presents the classification of pension plan assets for AEP within the fair value hierarchy as of December 31, 2021:

Asset Class		Level 1		Level 2		Level 3		Other		Total		Year End
Allocation	
		(in millions)			
Equities (a):													
Domestic		$	388.9 			$	— 			$	— 			$	— 			$	388.9 			7.2 	%	
International		465.7 			— 			— 			— 			465.7 			8.7 	%	

Common Collective Trusts (b)		— 			— 			— 			463.9 			463.9 			8.7 	%	
Subtotal – Equities		854.6 			— 			— 			463.9 			1,318.5 			24.6 	%	
													
Fixed Income (a):													
	
United States Government and Agency Securities		0.1 			1,557.6 			— 			— 			1,557.7 			29.1 	%	
Corporate Debt		— 			1,295.9 			— 			— 			1,295.9 			24.2 	%	
Foreign Debt		— 			259.4 			— 			— 			259.4 			4.8 	%	
State and Local Government		— 			57.1 			— 			— 			57.1 			1.1 	%	
Other – Asset Backed		— 			1.3 			— 			— 			1.3 			— 	%	
Subtotal – Fixed Income		0.1 			3,171.3 			— 			— 			3,171.4 			59.2 	%	
													
Infrastructure (b)		— 			— 			— 			92.1 			92.1 			1.7 	%	
Real Estate (b)		— 			— 			— 			232.6 			232.6 			4.4 	%	
Alternative Investments (b)		— 			— 			— 			448.8 			448.8 			8.4 	%	

Cash and Cash Equivalents (b)		— 			64.3 			— 			53.4 			117.7 			2.2 	%	
Other – Pending Transactions and Accrued Income (c)		— 			— 			— 			(28.2)			(28.2)			(0.5)	%	
													
Total		$	854.7 			$	3,235.6 			$	— 			$	1,262.6 			$	5,352.9 			100.0 	%	

(a)Includes investment securities loaned to borrowers under the securities lending program. See the “Investments Held in Trust for Future Liabilities” section of Note 1 for additional information.
(b)Amounts in “Other” column represent investments for which fair value is measured using net asset value per-share.
(c)Amounts in “Other” column primarily represent accrued interest, dividend receivables and transactions pending settlement.
314

The following table presents the classification of OPEB plan assets for AEP within the fair value hierarchy as of December 31, 2021:

Asset Class		Level 1		Level 2		Level 3		Other		Total		Year End
Allocation	
		(in millions)			
Equities:													
Domestic		$	474.0 			$	— 			$	— 			$	— 			$	474.0 			23.2 	%	
International		296.3 			— 			— 			— 			296.3 			14.5 	%	
	
Common Collective Trusts (a)		— 			— 			— 			265.0 			265.0 			13.0 	%	
Subtotal – Equities		770.3 			— 			— 			265.0 			1,035.3 			50.7 	%	
													
Fixed Income:													
Common Collective Trust – Debt (a)		— 			— 			— 			167.7 			167.7 			8.2 	%	
United States Government and Agency Securities		— 			222.4 			— 			— 			222.4 			10.9 	%	
Corporate Debt		— 			233.2 			— 			— 			233.2 			11.4 	%	
Foreign Debt		— 			39.8 			— 			— 			39.8 			2.0 	%	
State and Local Government		91.9 			13.6 			— 			— 			105.5 			5.1 	%	
	
Subtotal – Fixed Income		91.9 			509.0 			— 			167.7 			768.6 			37.6 	%	
													
Trust Owned Life Insurance:													
International Equities		— 			23.4 			— 			— 			23.4 			1.1 	%	
United States Bonds		— 			171.3 			— 			— 			171.3 			8.4 	%	
Subtotal – Trust Owned Life Insurance		— 			194.7 			— 			— 			194.7 			9.5 	%	
													
Cash and Cash Equivalents (a)		33.0 			— 			— 			6.7 			39.7 			1.9 	%	
Other – Pending Transactions and Accrued Income (b)		— 			— 			— 			6.0 			6.0 			0.3 	%	
													
Total		$	895.2 			$	703.7 			$	— 			$	445.4 			$	2,044.3 			100.0 	%	

(a)Amounts in “Other” column represent investments for which fair value is measured using net asset value per-share.
(b)Amounts in “Other” column primarily represent accrued interest, dividend receivables and transactions pending settlement.

Accumulated Benefit Obligation

The accumulated benefit obligation for the pension plans is as follows:

Accumulated Benefit Obligation		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Qualified Pension Plan		$	3,827.4 			$	315.4 			$	470.1 			$	443.8 			$	344.1 			$	179.1 			$	234.0 		
Nonqualified Pension Plans		55.6 			2.5 			0.3 			1.2 			0.1 			1.2 			1.1 		
Total as of December 31, 2022		$	3,883.0 			$	317.9 			$	470.4 			$	445.0 			$	344.2 			$	180.3 			$	235.1 		

Accumulated Benefit Obligation		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Qualified Pension Plan		$	4,822.5 			$	391.4 			$	597.0 			$	575.2 			$	440.0 			$	232.1 			$	291.4 		
Nonqualified Pension Plans		69.7 			3.3 			0.4 			1.2 			0.3 			1.5 			1.3 		
Total as of December 31, 2021		$	4,892.2 			$	394.7 			$	597.4 			$	576.4 			$	440.3 			$	233.6 			$	292.7 		

315

Obligations in Excess of Fair Values

The tables below show the underfunded pension plans that had obligations in excess of plan assets.

Projected Benefit Obligation

	AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
	(in millions)	
Projected Benefit Obligation	$	61.5 			$	2.7 			$	0.6 			$	1.6 			$	0.3 			$	1.5 			$	250.7 		
Fair Value of Plan Assets	— 			— 			— 			— 			— 			— 			231.3 		
Underfunded Projected Benefit Obligation as of December 31, 2022	$	(61.5)			$	(2.7)			$	(0.6)			$	(1.6)			$	(0.3)			$	(1.5)			$	(19.4)		

	AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
	(in millions)	
Projected Benefit Obligation	$	78.4 			$	3.6 			$	0.8 			$	1.9 			$	0.7 			$	1.9 			$	317.7 		
Fair Value of Plan Assets	— 			— 			— 			— 			— 			— 			308.3 		
Underfunded Projected Benefit Obligation as of December 31, 2021	$	(78.4)			$	(3.6)			$	(0.8)			$	(1.9)			$	(0.7)			$	(1.9)			$	(9.4)		

Accumulated Benefit Obligation

	AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
	(in millions)	
Accumulated Benefit Obligation	$	55.6 			$	2.5 			$	0.3 			$	1.2 			$	0.1 			$	1.2 			$	235.1 		
Fair Value of Plan Assets	— 			— 			— 			— 			— 			— 			231.3 		
Underfunded Accumulated Benefit Obligation as of December 31, 2022	$	(55.6)			$	(2.5)			$	(0.3)			$	(1.2)			$	(0.1)			$	(1.2)			$	(3.8)		

	AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
	(in millions)	
Accumulated Benefit Obligation	$	69.7 			$	3.3 			$	0.4 			$	1.2 			$	0.3 			$	1.5 			$	1.3 		
Fair Value of Plan Assets	— 			— 			— 			— 			— 			— 			— 		
Underfunded Accumulated Benefit Obligation as of December 31, 2021	$	(69.7)			$	(3.3)			$	(0.4)			$	(1.2)			$	(0.3)			$	(1.5)			$	(1.3)		

Estimated Future Benefit Payments and Contributions

The estimated pension benefit payments and contributions to the trust are at least the minimum amount required by the Employee Retirement Income Security Act plus payment of unfunded non-qualified benefits.  For the qualified pension plan, additional discretionary contributions may also be made to maintain the funded status of the plan.   For OPEB plans, expected payments include the payment of unfunded benefits.  The following table provides the estimated contributions and payments by Registrant for 2023:

Company		Pension Plans		OPEB	
		(in millions)	
AEP		$	6.3 			$	3.1 		
AEP Texas		0.4 			0.1 		
APCo		— 			1.6 		
I&M		0.1 			— 		
	
PSO		0.1 			— 		
SWEPCo		0.1 			— 		

316

The tables below reflect the total benefits expected to be paid from the plan or from the Registrants’ assets.  The payments include the participants’ contributions to the plan for their share of the cost.  Future benefit payments are dependent on the number of employees retiring, whether the retiring employees elect to receive pension benefits as annuities or as lump sum distributions, future integration of the benefit plans with changes to Medicare and other legislation, future levels of interest rates and variances in actuarial results.  The estimated payments for the pension benefits and OPEB are as follows:

Pension Plans		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
2023		$	369.0 			$	35.4 			$	43.7 			$	38.1 			$	32.3 			$	19.2 			$	24.2 		
2024		373.6 			36.3 			43.6 			39.8 			31.9 			18.9 			25.1 		
2025		368.8 			35.2 			42.5 			40.7 			32.4 			19.0 			25.3 		
2026		369.6 			35.0 			43.0 			40.4 			32.0 			19.2 			25.5 		
2027		364.3 			32.6 			41.8 			41.0 			31.6 			18.4 			25.4 		
Years 2028 to 2032, in Total		1,702.3 			138.9 			202.1 			196.4 			146.0 			81.1 			107.9 		

																																													
OPEB Benefit Payments		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
2023		$	116.0 			$	9.1 			$	19.0 			$	14.9 			$	12.6 			$	6.7 			$	7.5 		
2024		117.6 			9.5 			19.3 			15.0 			12.6 			6.9 			7.8 		
2025		126.9 			10.4 			20.5 			16.1 			13.5 			7.4 			8.5 		
2026		127.4 			10.6 			20.4 			16.3 			13.4 			7.3 			8.6 		
2027		126.8 			10.6 			20.3 			16.1 			13.3 			7.1 			8.5 		
Years 2028 to 2032, in Total		604.0 			48.5 			95.8 			75.1 			62.3 			32.2 			41.2 		

OPEB Medicare
Subsidy Receipts		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
2023		$	0.2 			$	— 			$	0.1 			$	— 			$	— 			$	— 			$	— 		
2024		0.3 			— 			0.1 			— 			— 			— 			— 		
2025		0.3 			— 			0.1 			— 			— 			— 			— 		
2026		0.3 			— 			0.1 			— 			— 			— 			— 		
2027		0.3 			— 			0.1 			— 			— 			— 			— 		
Years 2028 to 2032, in Total		1.6 			— 			0.5 			— 			— 			— 			— 		

Components of Net Periodic Benefit Cost

The following tables provide the components of net periodic benefit cost (credit) by Registrant for the plans:

AEP	Pension Plans		OPEB	
	Years Ended December 31,	
	2022		2021		2020		2022		2021		2020	
	(in millions)	
Service Cost	$	123.1 			$	129.2 			$	111.9 			$	7.4 			$	9.5 			$	10.0 		
Interest Cost	148.2 			137.2 			167.9 			29.2 			30.5 			39.8 		
Expected Return on Plan Assets	(253.4)			(229.7)			(264.9)			(110.0)			(91.1)			(95.6)		
	
Amortization of Prior Service Credit	— 			— 			— 			(71.4)			(70.9)			(69.8)		
Amortization of Net Actuarial Loss	63.0 			101.5 			93.7 			— 			— 			5.9 		
Settlements	— 			— 			— 			— 			— 			— 		
Net Periodic Benefit Cost (Credit)	80.9 			138.2 			108.6 			(144.8)			(122.0)			(109.7)		
Capitalized Portion	(53.8)			(55.7)			(47.0)			(3.2)			(4.1)			(4.2)		
Net Periodic Benefit Cost (Credit) Recognized in Expense	$	27.1 			$	82.5 			$	61.6 			$	(148.0)			$	(126.1)			$	(113.9)		
317

																																				
AEP Texas	Pension Plans		OPEB	
	Years Ended December 31,	
	2022		2021		2020		2022		2021		2020	
	(in millions)	
Service Cost	$	11.1 			$	11.8 			$	10.0 			$	0.5 			$	0.7 			$	0.8 		
Interest Cost	12.1 			11.2 			13.9 			2.2 			2.4 			3.2 		
Expected Return on Plan Assets	(21.0)			(19.5)			(22.7)			(9.1)			(7.5)			(8.0)		
	
Amortization of Prior Service Credit	— 			— 			— 			(6.1)			(6.0)			(5.9)		
Amortization of Net Actuarial Loss	5.2 			8.3 			7.8 			— 			— 			0.5 		
Net Periodic Benefit Cost (Credit)	7.4 			11.8 			9.0 			(12.5)			(10.4)			(9.4)		
Capitalized Portion	(6.2)			(6.6)			(5.5)			(0.3)			(0.4)			(0.4)		
Net Periodic Benefit Cost (Credit) Recognized in Expense	$	1.2 			$	5.2 			$	3.5 			$	(12.8)			$	(10.8)			$	(9.8)		

APCo	Pension Plans		OPEB	
	Years Ended December 31,	
	2022		2021		2020		2022		2021		2020	
	(in millions)	
Service Cost	$	11.4 			$	11.9 			$	10.5 			$	0.8 			$	1.0 			$	1.0 		
Interest Cost	17.5 			16.4 			20.3 			4.7 			4.9 			6.6 		
Expected Return on Plan Assets	(32.3)			(29.1)			(33.6)			(16.3)			(13.5)			(14.4)		
	
Amortization of Prior Service Credit	— 			— 			— 			(10.4)			(10.3)			(10.2)		
Amortization of Net Actuarial Loss	7.4 			12.0 			11.2 			— 			— 			0.9 		
Net Periodic Benefit Cost (Credit)	4.0 			11.2 			8.4 			(21.2)			(17.9)			(16.1)		
Capitalized Portion	(5.0)			(5.2)			(4.5)			(0.4)			(0.4)			(0.4)		
Net Periodic Benefit Cost (Credit) Recognized in Expense	$	(1.0)			$	6.0 			$	3.9 			$	(21.6)			$	(18.3)			$	(16.5)		

I&M	Pension Plans		OPEB	
	Years Ended December 31,	
	2022		2021		2020		2022		2021		2020	
	(in millions)	
Service Cost	$	16.2 			$	17.5 			$	15.4 			$	0.9 			$	1.3 			$	1.4 		
Interest Cost	17.0 			16.2 			19.7 			3.4 			3.5 			4.7 		
Expected Return on Plan Assets	(32.4)			(28.9)			(33.3)			(13.7)			(11.1)			(11.7)		
	
Amortization of Prior Service Credit	— 			— 			— 			(9.7)			(9.6)			(9.5)		
Amortization of Net Actuarial Loss	7.1 			11.7 			10.8 			— 			— 			0.7 		
Net Periodic Benefit Cost (Credit)	7.9 			16.5 			12.6 			(19.1)			(15.9)			(14.4)		
Capitalized Portion	(4.6)			(4.9)			(4.3)			(0.3)			(0.4)			(0.4)		
Net Periodic Benefit Cost (Credit) Recognized in Expense	$	3.3 			$	11.6 			$	8.3 			$	(19.4)			$	(16.3)			$	(14.8)		

318

																																				
OPCo	Pension Plans		OPEB	
	Years Ended December 31,	
	2022		2021		2020		2022		2021		2020	
	(in millions)	
Service Cost	$	11.2 			$	11.4 			$	9.7 			$	0.6 			$	0.8 			$	0.9 		
Interest Cost	13.3 			12.5 			15.4 			3.0 			3.0 			4.2 		
Expected Return on Plan Assets	(24.8)			(22.3)			(26.3)			(12.0)			(9.7)			(10.5)		

Amortization of Prior Service Credit	— 			— 			— 			(7.1)			(7.2)			(7.0)		
Amortization of Net Actuarial Loss	5.5 			9.1 			8.5 			— 			— 			0.7 		
Net Periodic Benefit Cost (Credit)	5.2 			10.7 			7.3 			(15.5)			(13.1)			(11.7)		
Capitalized Portion	(6.1)			(6.2)			(5.0)			(0.3)			(0.4)			(0.5)		
Net Periodic Benefit Cost (Credit) Recognized in Expense	$	(0.9)			$	4.5 			$	2.3 			$	(15.8)			$	(13.5)			$	(12.2)		

PSO	Pension Plans		OPEB	
	Years Ended December 31,	
	2022		2021		2020		2022		2021		2020	
	(in millions)	
Service Cost	$	7.4 			$	8.0 			$	7.3 			$	0.4 			$	0.6 			$	0.7 		
Interest Cost	7.0 			6.7 			8.5 			1.5 			1.6 			2.1 		
Expected Return on Plan Assets	(13.4)			(12.3)			(14.5)			(6.1)			(5.0)			(5.2)		
Amortization of Prior Service Credit	— 			— 			— 			(4.4)			(4.4)			(4.4)		
Amortization of Net Actuarial Loss	2.9 			4.9 			4.7 			— 			— 			0.3 		
Net Periodic Benefit Cost (Credit)	3.9 			7.3 			6.0 			(8.6)			(7.2)			(6.5)		
Capitalized Portion	(3.2)			(3.4)			(2.8)			(0.2)			(0.3)			(0.3)		
Net Periodic Benefit Cost (Credit) Recognized in Expense	$	0.7 			$	3.9 			$	3.2 			$	(8.8)			$	(7.5)			$	(6.8)		

SWEPCo	Pension Plans		OPEB	
	Years Ended December 31,	
	2022		2021		2020		2022		2021		2020	
	(in millions)	
Service Cost	$	10.6 			$	11.2 			$	9.9 			$	0.6 			$	0.8 			$	0.8 		
Interest Cost	9.1 			8.5 			10.2 			1.8 			1.9 			2.5 		
Expected Return on Plan Assets	(14.6)			(13.5)			(15.7)			(7.3)			(6.1)			(6.3)		
Amortization of Prior Service Credit	— 			— 			— 			(5.3)			(5.3)			(5.2)		
Amortization of Net Actuarial Loss	3.8 			6.2 			5.7 			— 			— 			0.4 		
	
Net Periodic Benefit Cost (Credit)	8.9 			12.4 			10.1 			(10.2)			(8.7)			(7.8)		
Capitalized Portion	(4.0)			(4.1)			(3.4)			(0.2)			(0.3)			(0.3)		
Net Periodic Benefit Cost (Credit) Recognized in Expense	$	4.9 			$	8.3 			$	6.7 			$	(10.4)			$	(9.0)			$	(8.1)		

American Electric Power System Retirement Savings Plan

AEP sponsors the American Electric Power System Retirement Savings Plan, a defined contribution retirement savings plan for substantially all employees who are not covered by a retirement savings plan of the UMWA.  This qualified plan offers participants an opportunity to contribute a portion of their pay, includes features under Section 401(k) of the Internal Revenue Code and provides for company matching contributions.  The matching contributions to the plan are 100% of the first 1% of eligible employee contributions and 70% of the next 5% of contributions.

319

The following table provides the cost for matching contributions to the retirement savings plans by Registrant:

		Year Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
AEP		$	81.9 			$	79.9 			$	81.8 		
AEP Texas		6.5 			6.4 			6.4 		
APCo		7.8 			7.6 			7.7 		
I&M		11.1 			10.9 			11.3 		
OPCo		7.7 			7.2 			7.3 		
PSO		4.7 			4.6 			4.9 		
SWEPCo		6.4 			6.4 			6.7 		

UMWA Benefits

Health and Welfare Benefits (Applies to AEP and APCo)

AEP provides health and welfare benefits negotiated with the UMWA for certain unionized employees, retirees and their survivors who meet eligibility requirements. APCo also provides the same UMWA health and welfare benefits for certain unionized mining retirees and their survivors who meet eligibility requirements.  AEP and APCo administer the health and welfare benefits and pay them from their general assets.

Multiemployer Pension Benefits (Applies to AEP)

UMWA pension benefits are provided through the United Mine Workers of America 1974 Pension Plan (Employer Identification Number: 52-1050282, Plan Number 002), a multiemployer plan. The UMWA pension benefits are administered by a board of trustees appointed in equal numbers by the UMWA and the Bituminous Coal Operators’ Association (BCOA), an industry bargaining association. AEP makes contributions to the United Mine Workers of America 1974 Pension Plan based on provisions in its labor agreement and the plan documents. The UMWA pension plan is different from single-employer plans as an employer’s contributions may be used to provide benefits to employees of other participating employers.  A withdrawing employer may be subject to a withdrawal liability, which is calculated based upon that employer’s share of the plan’s unfunded benefit obligations.  If an employer fails to make required contributions or if its payments in connection with its withdrawal liability fall short of satisfying its share of the plan’s unfunded benefit obligations, the remaining employers may be allocated a greater share of the remaining unfunded plan obligations. Under the Pension Protection Act of 2006 (PPA), the UMWA pension plan is in Critical Status for the plan year beginning July 1, 2022 and was in Critical Status for the plan year beginning July 1, 2021.  As required under the PPA, the Plan adopted a Rehabilitation Plan in 2015. The Rehabilitation Plan has been updated annually, most recently in April 2022.

The amount contributed in 2022 was $329 thousand and represented 12.5% of the total contributions in the plan's latest annual report based on the plan year ended June 30, 2021. The amounts contributed in 2021 and 2020 were immaterial and represented less than 5% of the total contributions in the plan years ended June 30, 2020 and June 30, 2019.  The contributions in 2022, 2021 and 2020 did not include surcharges.

Under the terms of the UMWA pension plan, contributions will be required to continue beyond the March 31, 2023 expiration of the current collective bargaining agreement between the Cook Coal Terminal (CCT) facility and the UMWA, whether or not the term of that agreement is extended or a subsequent agreement is entered, so long as both the UMWA pension plan remains in effect and an AEP affiliate continues to operate the facility covered by the current collective bargaining agreement. The contribution rate applicable would be determined in accordance with the terms of the UMWA pension plan by reference to the National Bituminous Coal Wage Agreement, subject to periodic revisions, between the UMWA and the BCOA. If the UMWA pension plan would terminate or an AEP affiliate would cease operation of the facility without arranging for a successor operator to assume its liability, the withdrawal liability obligation would be triggered.

320

AEP records a UMWA pension withdrawal liability on the balance sheet that is re-measured annually and is the estimated value of the company’s anticipated contributions toward its proportionate share of the plan’s unfunded vested liabilities. As of December 31, 2022 and 2021, the liability balance was $12 million and $22 million, respectively. AEP recovers the estimated value of its UMWA pension withdrawal liability through fuel clauses in certain regulated jurisdictions. AEP records a regulatory asset on the balance sheets when the UMWA pension withdrawal liability exceeds the cumulative billings collected and a regulatory liability on the balance sheets when the cumulative billings collected exceed the withdrawal liability. As of December 31, 2022 and 2021, AEP recorded a regulatory asset on the balance sheets for $0 and $1 million, respectively. If any portion of the UMWA pension withdrawal liability is not recoverable, it could reduce future net income and cash flows and impact financial condition.
321

9.  BUSINESS SEGMENTS

The disclosures in this note apply to all Registrants unless indicated otherwise.

AEP’s Reportable Segments

AEP’s primary business is the generation, transmission and distribution of electricity.  Within its Vertically Integrated Utilities segment, AEP centrally dispatches generation assets and manages its overall utility operations on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight.  Intersegment sales and transfers are generally based on underlying contractual arrangements and agreements.

AEP’s reportable segments and their related business activities are outlined below:

Vertically Integrated Utilities

•Generation, transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEGCo, APCo, I&M, KGPCo, KPCo, PSO, SWEPCo and WPCo.

Transmission and Distribution Utilities

•Transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEP Texas and OPCo.
•OPCo purchases energy and capacity to serve standard service offer customers and provides transmission and distribution services for all connected load.

AEP Transmission Holdco

•Development, construction and operation of transmission facilities through investments in AEPTCo. These investments have FERC-approved ROEs.
•Development, construction and operation of transmission facilities through investments in AEP’s transmission-only joint ventures. These investments have PUCT-approved or FERC-approved ROEs.

Generation & Marketing

•Contracted renewable energy investments and management services.
•Marketing, risk management and retail activities in ERCOT, MISO, PJM and SPP.
•Competitive generation in PJM.

The remainder of AEP’s activities are presented as Corporate and Other. While not considered a reportable segment, Corporate and Other primarily includes the purchasing of receivables from certain AEP utility subsidiaries, Parent’s guarantee revenue received from affiliates, investment income, interest income and interest expense, income tax expense and other nonallocated costs.
322

The tables below present AEP’s reportable segment income statement information for the years ended December 31, 2022, 2021 and 2020 and reportable segment balance sheet information as of December 31, 2022 and 2021.  
																																										
	Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		Corporate and Other (a)		Reconciling Adjustments		Consolidated	
	(in millions)	
2022														
Revenues from:														
External Customers	$	11,292.8 			$	5,489.6 			$	357.5 			$	2,448.9 			$	50.7 			$	— 			$	19,639.5 		
Other Operating Segments	184.7 			22.4 			1,319.5 			18.0 			59.2 			(1,603.8)			— 		
Total Revenues	$	11,477.5 			$	5,512.0 			$	1,677.0 			$	2,466.9 			$	109.9 			$	(1,603.8)			$	19,639.5 		
														
Loss on the Expected Sale of the Kentucky Operations	$	— 			$	— 			$	— 			$	— 			$	363.3 			$	— 			$	363.3 		
Asset Impairments and Other Related Charges	24.9 			— 			— 			— 			23.9 			— 			48.8 		
Establishment of 2017-2019 Virginia Triennial Review Regulatory Asset	(37.0)			— 			— 			— 			— 			— 			(37.0)		
Gain on Sale of Mineral Rights	— 			— 			— 			(116.3)			— 			— 			(116.3)		
Depreciation and Amortization	2,007.2 			746.7 			355.0 			93.0 			0.9 			— 			3,202.8 		

Interest Expense	650.9 			328.0 			169.3 			51.8 			308.9 			(112.8)			1,396.1 		
Income Tax Expense (Benefit)	(93.8)			116.9 			193.6 			(83.1)			(128.2)			— 			5.4 		
Equity Earnings (Loss) of Unconsolidated Subsidiaries	1.4 			0.6 			83.4 			(192.4)			(2.4)			— 			(109.4)		

Net Income (Loss)	$	1,296.2 			$	595.7 			$	676.8 			$	274.5 			$	(537.6)			$	— 			$	2,305.6 		
														
Gross Property Additions	$	4,164.6 			$	2,177.3 			$	1,470.8 			$	69.2 			$	25.9 			$	(28.8)			$	7,879.0 		

	

	
	
Total Assets (d)	$	49,761.8 			$	22,920.2 			$	15,215.8 			$	4,520.1 			$	6,834.5 		(b)	$	(5,783.0)		(c)	$	93,469.4 		
														
Investments in Equity Method Investees	$	10.1 			$	3.0 			$	858.3 			$	337.6 			$	67.7 			$	— 			$	1,276.7 		

	

	

	

	

																																										
	Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		Corporate and Other (a)		Reconciling Adjustments		Consolidated	
	(in millions)	
2021														
Revenues from:														
External Customers	$	9,852.2 			$	4,464.1 			$	351.1 			$	2,108.3 			$	16.3 			$	— 			$	16,792.0 		
Other Operating Segments	146.3 			28.8 			1,175.1 			55.4 			55.9 			(1,461.5)			— 		
Total Revenues	$	9,998.5 			$	4,492.9 			$	1,526.2 			$	2,163.7 			$	72.2 			$	(1,461.5)			$	16,792.0 		
														
Asset Impairments and Other Related Charges	$	11.6 			$	— 			$	— 			$	— 			$	— 			$	— 			$	11.6 		
Depreciation and Amortization	1,747.6 			690.3 			306.0 			80.9 			0.9 			— 			2,825.7 		

Interest Expense	574.2 			300.9 			146.3 			15.6 			180.8 			(18.7)			1,199.1 		
Income Tax Expense (Benefit)	(11.2)			77.5 			159.6 			(48.8)			(61.6)			— 			115.5 		
Equity Earnings (Loss) of Unconsolidated Subsidiaries	3.4 			— 			75.0 			(10.6)			23.9 			— 			91.7 		

Net Income (Loss)	$	1,116.7 			$	543.4 			$	682.0 			$	210.2 			$	(64.2)			$	— 			$	2,488.1 		
														
Gross Property Additions	$	2,963.1 			$	1,766.0 			$	1,468.6 			$	232.8 			$	25.5 			$	(29.2)			$	6,426.8 		

	

Total Assets (d)	$	46,974.2 			$	21,120.2 			$	13,873.3 			$	4,263.6 			$	5,846.5 		(b)	$	(4,409.1)		(c)	$	87,668.7 		
														
Investments in Equity Method Investees	$	33.5 			$	2.5 			$	830.4 			$	487.8 			$	93.3 			$	— 			$	1,447.5 		

	

	

	
	
323

																																										
	Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		Corporate and Other (a)		Reconciling Adjustments		Consolidated	
	(in millions)	
2020														
Revenues from:														
External Customers	$	8,753.2 			$	4,238.7 			$	297.4 			$	1,621.0 			$	8.2 			$	— 			$	14,918.5 		
Other Operating Segments	126.2 			107.2 			901.4 			104.6 			88.6 			(1,328.0)			— 		
Total Revenues	$	8,879.4 			$	4,345.9 			$	1,198.8 			$	1,725.6 			$	96.8 			$	(1,328.0)			$	14,918.5 		

Depreciation and Amortization	$	1,600.5 			$	751.1 			$	257.6 			$	72.8 			$	0.8 			$	— 			$	2,682.8 		

Interest Expense	565.0 			289.2 			133.2 			24.0 			196.4 			(42.1)			1,165.7 		
Income Tax Expense (Benefit)	(7.0)			29.7 			130.8 			(108.0)			(5.0)			— 			40.5 		
Equity Earnings of Unconsolidated Subsidiaries	2.9 			— 			82.4 			3.2 			2.6 			— 			91.1 		
Net Income (Loss)	$	1,064.5 			$	496.4 			$	508.5 			$	216.9 			$	(89.6)			$	— 			$	2,196.7 		
														
Gross Property Additions	$	2,291.2 			$	2,108.1 			$	1,649.3 			$	197.0 			$	16.0 			$	(15.3)			$	6,246.3 		

	
Investments in Equity Method Investees	$	37.1 			$	2.1 			$	831.3 			$	467.0 			$	68.8 			$	— 			$	1,406.3 		

	

	

	

(a)Corporate and Other primarily includes the purchasing of receivables from certain AEP utility subsidiaries. This segment also includes Parent’s guarantee revenue received from affiliates, investment income, interest income, interest expense and other nonallocated costs.
(b)Includes elimination of AEP Parent’s investments in wholly-owned subsidiary companies.
(c)Reconciling Adjustments for Total Assets primarily include elimination of intercompany advances to affiliates and intercompany accounts receivable.
(d)Amount includes Assets Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

324

Registrant Subsidiaries’ Reportable Segments (Applies to all Registrant Subsidiaries except AEPTCo)

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business for APCo, I&M, PSO and SWEPCo, and an integrated electricity transmission and distribution business for AEP Texas and OPCo.  Other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

AEPTCo’s Reportable Segments

AEPTCo Parent is the holding company of seven FERC-regulated transmission-only electric utilities. The seven State Transcos have been identified as operating segments of AEPTCo under the accounting guidance for “Segment Reporting.” The State Transcos business consists of developing, constructing and operating transmission facilities at the request of the RTOs in which they operate and in replacing and upgrading facilities, assets and components of the existing AEP transmission system as needed to maintain reliability standards and provide service to AEP’s wholesale and retail customers. The State Transcos are regulated for rate-making purposes exclusively by the FERC and earn revenues through tariff rates charged for the use of their electric transmission systems.

AEPTCo’s Chief Operating Decision Maker makes operating decisions, allocates resources to and assesses performance-based on these operating segments. The State Transcos operating segments all have similar economic characteristics and meet all of the criteria under the accounting guidance for “Segment Reporting” to be aggregated into one operating segment. As a result, AEPTCo has one reportable segment. The remainder of AEPTCo’s activity is presented in AEPTCo Parent. While not considered a reportable segment, AEPTCo Parent represents the activity of the holding company which primarily relates to debt financing activity and general corporate activities.

The tables below present AEPTCo’s reportable segment income statement information for the years ended December 31, 2022, 2021 and 2020 and reportable segment balance sheet information as of December 31, 2022 and 2021.

	State Transcos		AEPTCo Parent		Reconciling Adjustments		AEPTCo
Consolidated	
2022	(in millions)	
Revenues from:								
External Customers	$	340.9 			$	— 			$	— 			$	340.9 		
Sales to AEP Affiliates	1,283.8 			— 			— 			1,283.8 		
Other Revenues	(0.2)			— 			— 			(0.2)		
Total Revenues	$	1,624.5 			$	— 			$	— 			$	1,624.5 		
								
Depreciation and Amortization	$	346.2 			$	— 			$	— 			$	346.2 		
Interest Income	0.7 			177.8 			(176.9)		(a)	1.6 		
Allowance for Equity Funds Used During Construction	70.7 			— 			— 			70.7 		
Interest Expense	162.5 			177.1 			(176.9)		(a)	162.7 		
Income Tax Expense	169.1 			— 			— 			169.1 		
	
Net Income	$	594.2 			$	— 		(b)	$	— 			$	594.2 		
								
Gross Property Additions	$	1,468.3 			$	— 			$	— 			$	1,468.3 		

	

	

	
Total Assets (e)	$	13,875.6 			$	4,817.4 		(c)	$	(4,878.8)		(d)	$	13,814.2 		

	
	
325

																								
	State Transcos		AEPTCo Parent		Reconciling Adjustments		AEPTCo
Consolidated	
2021	(in millions)	
Revenues from:								
External Customers	$	315.1 			$	— 			$	— 			$	315.1 		
Sales to AEP Affiliates	1,153.9 			— 			— 			1,153.9 		
Other Revenues	0.3 			— 			— 			0.3 		
Total Revenues	$	1,469.3 			$	— 			$	— 			$	1,469.3 		
								
Depreciation and Amortization	$	297.3 			$	— 			$	— 			$	297.3 		
Interest Income	0.1 			158.1 			(157.7)		(a)	0.5 		
Allowance for Equity Funds Used During Construction	67.2 			— 			— 			67.2 		
Interest Expense	141.2 			157.7 			(157.7)		(a)	141.2 		
Income Tax Expense	144.1 			— 			— 			144.1 		
	
Net Income	$	591.5 			$	0.2 		(b)	$	— 			$	591.7 		
								
Gross Property Additions	$	1,442.7 			$	— 			$	— 			$	1,442.7 		

	

	
	
Total Assets (e)	$	12,564.3 			$	4,389.5 		(c)	$	(4,429.4)		(d)	$	12,524.4 		

																								
	State Transcos		AEPTCo Parent		Reconciling Adjustments		AEPTCo
Consolidated	
2020	(in millions)	
Revenues from:								
External Customers	$	248.8 			$	— 			$	— 			$	248.8 		
Sales to AEP Affiliates	896.3 			— 			— 			896.3 		
Other Revenue	0.6 			— 			— 			0.6 		
Total Revenues	$	1,145.7 			$	— 			$	— 			$	1,145.7 		
								
Depreciation and Amortization	$	249.0 			$	— 			$	— 			$	249.0 		
Interest Income	0.9 			149.6 			(148.1)		(a)	2.4 		
Allowance for Equity Funds Used During Construction	74.0 			— 			— 			74.0 		
Interest Expense	127.8 			148.1 			(148.1)		(a)	127.8 		
Income Tax Expense	106.5 			0.2 			— 			106.7 		
	
Net Income	$	422.3 			$	1.1 		(b)	$	— 			$	423.4 		
								
Gross Property Additions	$	1,621.9 			$	— 			$	— 			$	1,621.9 		

	
	
(a)    Elimination of intercompany interest income/interest expense on affiliated debt arrangement.
(b)    Includes elimination of AEPTCo Parent’s equity earnings in the State Transcos.
(c)    Primarily relates to Notes Receivable from the State Transcos.
(d)    Primarily relates to elimination of Notes Receivable from the State Transcos.
(e)    Amount includes Assets Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

326

10.  DERIVATIVES AND HEDGING

The disclosures in this note apply to all Registrants unless indicated otherwise. For the periods presented, AEPTCo did not have any derivative and hedging activity.

OBJECTIVES FOR UTILIZATION OF DERIVATIVE INSTRUMENTS

AEPSC is agent for and transacts on behalf of certain AEP subsidiaries, including the Registrant Subsidiaries. AEPEP is agent for and transacts on behalf of other AEP subsidiaries.

The Registrants are exposed to certain market risks as major power producers and participants in the electricity, capacity, natural gas, coal and emission allowance markets.  These risks include commodity price risks which may be subject to capacity risk, interest rate risk and credit risk.  These risks represent the risk of loss that may impact the Registrants due to changes in the underlying market prices or rates.  Management utilizes derivative instruments to manage these risks.

STRATEGIES FOR UTILIZATION OF DERIVATIVE INSTRUMENTS TO ACHIEVE OBJECTIVES

Risk Management Strategies

The strategy surrounding the use of derivative instruments primarily focuses on managing risk exposures, future cash flows and creating value utilizing both economic and formal hedging strategies.  The risk management strategies also include the use of derivative instruments for trading purposes which focus on seizing market opportunities to create value driven by expected changes in the market prices of the commodities.  To accomplish these objectives, the Registrants primarily employ risk management contracts including physical and financial forward purchase-and-sale contracts and, to a lesser extent, OTC swaps and options.  Not all risk management contracts meet the definition of a derivative under the accounting guidance for “Derivatives and Hedging.”  Derivative risk management contracts elected normal under the normal purchases and normal sales scope exception are not subject to the requirements of this accounting guidance.

The Registrants utilize power, capacity, coal, natural gas, interest rate and, to a lesser extent, heating oil, gasoline and other commodity contracts to manage the risk associated with the energy business. The Registrants utilize interest rate derivative contracts in order to manage the interest rate exposure associated with the commodity portfolio. For disclosure purposes, such risks are grouped as “Commodity,” as these risks are related to energy risk management activities. The Registrants also utilize derivative contracts to manage interest rate risk associated with debt financing. For disclosure purposes, these risks are grouped as “Interest Rate.” The amount of risk taken is determined by the Commercial Operations, Energy Supply and Finance groups in accordance with established risk management policies as approved by the Finance Committee of the Board of Directors.

327

The following tables represent the gross notional volume of the Registrants’ outstanding derivative contracts:

Notional Volume of Derivative Instruments
December 31, 2022

Primary Risk
Exposure		Unit of
Measure		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
				(in millions)	
Commodity:																	
Power		MWhs		226.8 			— 			17.9 			4.2 			2.5 			2.9 			2.2 		
	
Natural Gas		MMBtus		77.1 			— 			1.9 			— 			— 			1.9 			2.1 		
Heating Oil and Gasoline		Gallons		6.9 			1.9 			1.0 			0.7 			1.4 			0.9 			1.0 		
Interest Rate		USD		$	99.9 			$	— 			$	— 			$	— 			$	— 			$	— 			$	— 		
																	
Interest Rate on Long-term Debt		USD		$	1,650.0 			$	— 			$	— 			$	— 			$	— 			$	200.0 			$	— 		

December 31, 2021

Primary Risk
Exposure		Unit of
Measure		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
				(in millions)	
Commodity:																	
Power		MWhs		287.9 			— 			33.1 			13.6 			2.7 			11.9 			3.4 		
	
Natural Gas		MMBtus		34.1 			— 			— 			— 			— 			1.3 			5.1 		
Heating Oil and Gasoline		Gallons		7.4 			1.9 			1.1 			0.7 			1.5 			0.8 			1.0 		
Interest Rate		USD		$	116.5 			$	— 			$	— 			$	— 			$	— 			$	— 			$	— 		
																	
Interest Rate on Long-term Debt		USD		$	950.0 			$	— 			$	— 			$	— 			$	— 			$	— 			$	— 		

Fair Value Hedging Strategies (Applies to AEP)

Parent enters into interest rate derivative transactions as part of an overall strategy to manage the mix of fixed-rate and floating-rate debt.  Certain interest rate derivative transactions effectively modify exposure to interest rate risk by converting a portion of fixed-rate debt to a floating-rate.  Provided specific criteria are met, these interest rate derivatives may be designated as fair value hedges.

Cash Flow Hedging Strategies

The Registrants utilize cash flow hedges on certain derivative transactions for the purchase and sale of power (“Commodity”) in order to manage the variable price risk related to forecasted purchases and sales.  Management monitors the potential impacts of commodity price changes and, where appropriate, enters into derivative transactions to protect profit margins for a portion of future electricity sales and purchases.  The Registrants do not hedge all commodity price risk.

The Registrants utilize a variety of interest rate derivative transactions in order to manage interest rate risk exposure.  The Registrants also utilize interest rate derivative contracts to manage interest rate exposure related to future borrowings of fixed-rate debt.  The Registrants do not hedge all interest rate exposure.
328

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND THE IMPACT ON THE FINANCIAL STATEMENTS

The accounting guidance for “Derivatives and Hedging” requires recognition of all qualifying derivative instruments as either assets or liabilities on the balance sheets at fair value.  The fair values of derivative instruments accounted for using MTM accounting or hedge accounting are based on exchange prices and broker quotes.  If a quoted market price is not available, the estimate of fair value is based on the best information available including valuation models that estimate future energy prices based on existing market and broker quotes and other assumptions.  In order to determine the relevant fair values of the derivative instruments, the Registrants apply valuation adjustments for discounting, liquidity and credit quality.

Credit risk is the risk that a counterparty will fail to perform on the contract or fail to pay amounts due.  Liquidity risk represents the risk that imperfections in the market will cause the price to vary from estimated fair value based upon prevailing market supply and demand conditions.  Since energy markets are imperfect and volatile, there are inherent risks related to the underlying assumptions in models used to fair value risk management contracts.  Unforeseen events may cause reasonable price curves to differ from actual price curves throughout a contract’s term and at the time a contract settles.  Consequently, there could be significant adverse or favorable effects on future net income and cash flows if market prices are not consistent with management’s estimates of current market consensus for forward prices in the current period.  This is particularly true for longer term contracts.  Cash flows may vary based on market conditions, margin requirements and the timing of settlement of risk management contracts.

According to the accounting guidance for “Derivatives and Hedging,” the Registrants reflect the fair values of derivative instruments subject to netting agreements with the same counterparty net of related cash collateral.  For certain risk management contracts, the Registrants are required to post or receive cash collateral based on third-party contractual agreements and risk profiles.  AEP netted cash collateral received from third-parties against short-term and long-term risk management assets in the amounts of $481 million and $263 million as of December 31, 2022 and 2021, respectively. The amount of cash collateral from third-parties netted against short-term and long-term risk management assets were immaterial for the Registrant Subsidiaries as of December 31, 2022 and 2021. The amount of cash collateral paid to third-parties netted against short-term and long-term risk management liabilities were immaterial for the Registrants as of December 31, 2022 and 2021.
329

The following tables represent the gross fair value of the Registrants’ derivative activity on the balance sheets. Unless shown as a separate line on the balance sheets due to materiality, Current Risk Management Assets are included in Prepayments and Other Current Assets, Long-term Risk Management Assets are included in Deferred Charges and Other Noncurrent Assets, Current Risk Management Liabilities are included in Other Current Liabilities and Long-term Risk Management Liabilities are included in Deferred Credits and Other Noncurrent Liabilities on the balance sheets.

AEP

		December 31, 2022	
		Risk
Management
Contracts		Hedging Contracts		Gross Amounts
of Risk
Management
Assets/
Liabilities
Recognized		Gross
Amounts
Offset in the
Statement of
Financial
Position (b)		Net Amounts of
Assets/Liabilities
Presented in the
Statement of
Financial
Position (c)	
Balance Sheet Location		Commodity (a)		Commodity (a)		Interest Rate (a)							
		(in millions)	
Current Risk Management Assets (d)		$	956.9 			$	212.2 			$	1.8 			$	1,170.9 			$	(830.5)			$	340.4 		
Long-term Risk Management Assets		565.5 			148.9 			14.3 			728.7 			(444.6)			284.1 		
Total Assets		1,522.4 			361.1 			16.1 			1,899.6 			(1,275.1)			624.5 		
													
Current Risk Management Liabilities (e)		663.7 			60.4 			41.4 			765.5 			(620.3)			145.2 		
Long-term Risk Management Liabilities		412.0 			17.4 			91.1 			520.5 			(175.2)			345.3 		
Total Liabilities		1,075.7 			77.8 			132.5 			1,286.0 			(795.5)			490.5 		
													
Total MTM Derivative Contract Net Assets (Liabilities) (f)		$	446.7 			$	283.3 			$	(116.4)			$	613.6 			$	(479.6)			$	134.0 		

		December 31, 2021	
		Risk
Management
Contracts		Hedging Contracts		Gross Amounts
of Risk
Management
Assets/
Liabilities
Recognized		Gross
Amounts
Offset in the
Statement of
Financial
Position (b)		Net Amounts of
Assets/Liabilities
Presented in the
Statement of
Financial
Position (c)	
Balance Sheet Location		Commodity (a)		Commodity (a)		Interest Rate (a)							
		(in millions)	
Current Risk Management Assets (d)		$	513.4 			$	176.0 			$	1.2 			$	690.6 			$	(496.2)			$	194.4 		
Long-term Risk Management Assets		370.5 			89.1 			— 			459.6 			(192.6)			267.0 		
Total Assets		883.9 			265.1 			1.2 			1,150.2 			(688.8)			461.4 		
													
Current Risk Management Liabilities (e)		395.7 			40.9 			— 			436.6 			(361.2)			75.4 		
Long-term Risk Management Liabilities		243.9 			16.7 			38.1 			298.7 			(68.4)			230.3 		
Total Liabilities		639.6 			57.6 			38.1 			735.3 			(429.6)			305.7 		
													
Total MTM Derivative Contract Net Assets (Liabilities)		$	244.3 			$	207.5 			$	(36.9)			$	414.9 			$	(259.2)			$	155.7 		

330

AEP Texas
																					
		December 31, 2022	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	— 			$	— 			$	— 		
Long-term Risk Management Assets		— 			— 			— 		
Total Assets		— 			— 			— 		
							
Current Risk Management Liabilities		— 			— 			— 		
Long-term Risk Management Liabilities		— 			— 			— 		
Total Liabilities		— 			— 			— 		
							
Total MTM Derivative Contract Net Assets		$	— 			$	— 			$	— 		

		December 31, 2021	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	0.6 			$	(0.6)			$	— 		
Long-term Risk Management Assets		— 			— 			— 		
Total Assets		0.6 			(0.6)			— 		
							
Current Risk Management Liabilities		— 			— 			— 		
Long-term Risk Management Liabilities		— 			— 			— 		
Total Liabilities		— 			— 			— 		
							
Total MTM Derivative Contract Net Assets (Liabilities)		$	0.6 			$	(0.6)			$	— 		

331

APCo
																					
		December 31, 2022	
	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	69.3 			$	(0.2)			$	69.1 		
Long-term Risk Management Assets		0.7 			(0.7)			— 		
Total Assets		70.0 			(0.9)			69.1 		
							
Current Risk Management Liabilities		4.1 			(0.5)			3.6 		
Long-term Risk Management Liabilities		0.7 			(0.6)			0.1 		
Total Liabilities		4.8 			(1.1)			3.7 		
							
Total MTM Derivative Contract Net Assets (f)		$	65.2 			$	0.2 			$	65.4 		

		December 31, 2021	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	47.5 			$	(5.5)			$	42.0 		
Long-term Risk Management Assets		0.2 			(0.2)			— 		
Total Assets		47.7 			(5.7)			42.0 		
							
Current Risk Management Liabilities		7.2 			(6.4)			0.8 		
Long-term Risk Management Liabilities		0.2 			(0.2)			— 		
Total Liabilities		7.4 			(6.6)			0.8 		
							
Total MTM Derivative Contract Net Assets		$	40.3 			$	0.9 			$	41.2 		
332

I&M
																					
		December 31, 2022	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	16.0 			$	(0.8)			$	15.2 		
Long-term Risk Management Assets		0.5 			(0.3)			0.2 		
Total Assets		16.5 			(1.1)			15.4 		
							
Current Risk Management Liabilities		0.9 			(0.9)			— 		
Long-term Risk Management Liabilities		0.3 			(0.3)			— 		
Total Liabilities		1.2 			(1.2)			— 		
							
Total MTM Derivative Contract Net Assets (f)		$	15.3 			$	0.1 			$	15.4 		

		December 31, 2021	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	11.1 			$	(7.8)			$	3.3 		
Long-term Risk Management Assets		0.2 			(0.2)			— 		
Total Assets		11.3 			(8.0)			3.3 		
							
Current Risk Management Liabilities		14.8 			(9.8)			5.0 		
Long-term Risk Management Liabilities		0.2 			(0.2)			— 		
Total Liabilities		15.0 			(10.0)			5.0 		
							
Total MTM Derivative Contract Net Assets (Liabilities)		$	(3.7)			$	2.0 			$	(1.7)		

333

OPCo
																					
		December 31, 2022	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	— 			$	— 			$	— 		
Long-term Risk Management Assets		— 			— 			— 		
Total Assets		— 			— 			— 		
							
Current Risk Management Liabilities		2.1 			(0.3)			1.8 		
Long-term Risk Management Liabilities		37.9 			— 			37.9 		
Total Liabilities		40.0 			(0.3)			39.7 		
							
Total MTM Derivative Net Assets (Liabilities) (f)		$	(40.0)			$	0.3 			$	(39.7)		

		December 31, 2021	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	0.5 			$	(0.5)			$	— 		
Long-term Risk Management Assets		— 			— 			— 		
Total Assets		0.5 			(0.5)			— 		
							
Current Risk Management Liabilities		6.7 			— 			6.7 		
Long-term Risk Management Liabilities		85.8 			— 			85.8 		
Total Liabilities		92.5 			— 			92.5 		
							
Total MTM Derivative Contract Net Liabilities		$	(92.0)			$	(0.5)			$	(92.5)		
334

PSO
																																				
			December 31, 2022	
			Risk Management Contracts		Hedging Contracts		Gross Amounts of Risk Management Assets/Liabilities Recognized		Gross Amounts Offset in the Statement of Financial Position (b)		Net Amounts of Assets/Liabilities Presented in the Statement of Financial Position (c)	
Balance Sheet Location		Commodity (a)		Interest Rate (a)							
		(in millions)	
Current Risk Management Assets		$	24.1 			$	1.6 			$	25.7 			$	(0.4)			$	25.3 		
Long-term Risk Management Assets		— 			— 			— 			— 			— 		
Total Assets		24.1 			1.6 			25.7 			(0.4)			25.3 		
												
Current Risk Management Liabilities		2.1 			— 			2.1 			(0.5)			1.6 		
Long-term Risk Management Liabilities		— 			— 			— 			— 			— 		
Total Liabilities		2.1 			— 			2.1 			(0.5)			1.6 		
												
Total MTM Derivative Contract Net Assets (f)		$	22.0 			$	1.6 			$	23.6 			$	0.1 			$	23.7 		

		December 31, 2021	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	12.4 			$	(0.3)			$	12.1 		
Long-term Risk Management Assets		— 			— 			— 		
Total Assets		12.4 			(0.3)			12.1 		
										
Current Risk Management Liabilities		3.7 			— 			3.7 		
Long-term Risk Management Liabilities		— 			— 			— 		
Total Liabilities		3.7 			— 			3.7 		
										
Total MTM Derivative Contract Net Assets (Liabilities)		$	8.7 			$	(0.3)			$	8.4 		

335

SWEPCo
																					
		December 31, 2022	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	16.8 			$	(0.4)			$	16.4 		
Long-term Risk Management Assets		— 			— 			— 		
Total Assets		16.8 			(0.4)			16.4 		
							
Current Risk Management Liabilities		2.0 			(0.6)			1.4 		
Long-term Risk Management Liabilities		— 			— 			— 		
Total Liabilities		2.0 			(0.6)			1.4 		
							
Total MTM Derivative Contract Net Assets (f)		$	14.8 			$	0.2 			$	15.0 		

		December 31, 2021	
		Risk Management		Gross Amounts Offset		Net Amounts of Assets/Liabilities	
		Contracts -		in the Statement of		Presented in the Statement of	
Balance Sheet Location		Commodity (a)		Financial Position (b)		Financial Position (c)	
		(in millions)	
Current Risk Management Assets		$	10.1 			$	(0.3)			$	9.8 		
Long-term Risk Management Assets		1.1 			— 			1.1 		
Total Assets		11.2 			(0.3)			10.9 		
							
Current Risk Management Liabilities		2.1 			— 			2.1 		
Long-term Risk Management Liabilities		— 			— 			— 		
Total Liabilities		2.1 			— 			2.1 		
							
Total MTM Derivative Contract Net Assets (Liabilities)		$	9.1 			$	(0.3)			$	8.8 		

(a)Derivative instruments within these categories are disclosed as gross.  These instruments are subject to master netting agreements and are presented on the balance sheets on a net basis in accordance with the accounting guidance for “Derivatives and Hedging.”
(b)Amounts include counterparty netting of risk management and hedging contracts and associated cash collateral in accordance with the accounting guidance for “Derivatives and Hedging.”
(c)All derivative contracts subject to a master netting arrangement or similar agreement are offset in the statement of financial position.
(d)Amount excludes Risk Management Assets of $8.5 million and $6 million as of December 31, 2022 and 2021, respectively, classified as Assets Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(e)Amount excludes Risk Management Liabilities of $0 and $0.1 million as of December 31, 2022 and 2021, respectively, classified as Liabilities Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(f)Increase in amounts as of December 31, 2022 are primarily due to increases in commodity prices for power and natural gas and an increase in value of FTRs.
336

The tables below present the Registrants’ amount of gain (loss) recognized on risk management contracts:

Amount of Gain (Loss) Recognized on
Risk Management Contracts
																																													
		Year Ended December 31, 2022	
Location of Gain (Loss)		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Vertically Integrated Utilities Revenues		$	11.1 			$	— 			$	— 			$	— 			$	— 			$	— 			$	— 		
	
Generation & Marketing Revenues		313.8 			— 			— 			— 			— 			— 			— 		
Electric Generation, Transmission and Distribution Revenues		— 			— 			0.5 			10.6 			— 			— 			— 		

Purchased Electricity for Resale		5.0 			— 			4.5 			0.1 			— 			0.2 			— 		
Other Operation		4.8 			1.5 			0.4 			0.5 			0.8 			0.6 			0.8 		
Maintenance		6.7 			1.8 			0.9 			0.6 			1.2 			0.8 			1.1 		
Regulatory Assets (a)		52.6 			0.1 			(0.1)			(0.8)			52.1 			3.6 			(2.1)		
Regulatory Liabilities (a)		299.7 			(0.6)			82.4 			8.6 			3.7 			98.5 			77.9 		
Total Gain on Risk Management Contracts (b)		$	693.7 			$	2.8 			$	88.6 			$	19.6 			$	57.8 			$	103.7 			$	77.7 		

		Year Ended December 31, 2021	
Location of Gain (Loss)		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Vertically Integrated Utilities Revenues		$	(0.6)			$	— 			$	— 			$	— 			$	— 			$	— 			$	— 		
	
Generation & Marketing Revenues		169.1 			— 			— 			— 			— 			— 			— 		
Electric Generation, Transmission and Distribution Revenues		— 			— 			(0.5)			(0.1)			— 			— 			— 		

Purchased Electricity for Resale		2.0 			— 			1.8 			— 			— 			— 			— 		
Other Operation		2.8 			0.8 			0.3 			0.3 			0.5 			0.3 			0.4 		
Maintenance		3.4 			1.0 			0.5 			0.3 			0.6 			0.4 			0.5 		
Regulatory Assets (a)		(9.1)			— 			(2.7)			(14.8)			10.0 			(3.6)			3.6 		
Regulatory Liabilities (a)		156.4 			0.2 			55.9 			(3.9)			— 			48.9 			37.0 		
Total Gain (Loss) on Risk Management Contracts		$	324.0 			$	2.0 			$	55.3 			$	(18.2)			$	11.1 			$	46.0 			$	41.5 		

		Year Ended December 31, 2020	
Location of Gain (Loss)		AEP		AEP Texas		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Vertically Integrated Utilities Revenues		$	0.8 			$	— 			$	— 			$	— 			$	— 			$	— 			$	— 		
	
Generation & Marketing Revenues		9.5 			— 			— 			— 			— 			— 			— 		
Electric Generation, Transmission and Distribution Revenues		— 			— 			0.4 			0.1 			— 			— 			0.1 		
	
Purchased Electricity for Resale		1.4 			— 			1.2 			0.1 			— 			— 			— 		
Other Operation		(2.0)			(0.6)			(0.2)			(0.2)			(0.3)			(0.2)			(0.3)		
Maintenance		(2.9)			(0.8)			(0.4)			(0.3)			(0.5)			(0.3)			(0.4)		
Regulatory Assets (a)		(4.8)			— 			— 			(0.1)			(6.6)			— 			1.4 		
Regulatory Liabilities (a)		114.9 			0.4 			20.3 			12.4 			12.4 			39.1 			20.2 		
Total Gain (Loss) on Risk Management Contracts		$	116.9 			$	(1.0)			$	21.3 			$	12.0 			$	5.0 			$	38.6 			$	21.0 		

(a)Represents realized and unrealized gains and losses subject to regulatory accounting treatment recorded as either current or noncurrent on the balance sheets.
(b)Increase in amounts for the year ended December 31, 2022 are primarily due to increases in commodity prices for power and natural gas and an increase in value of FTRs.
337

Certain qualifying derivative instruments have been designated as normal purchase or normal sale contracts, as provided in the accounting guidance for “Derivatives and Hedging.”  Derivative contracts that have been designated as normal purchases or normal sales under that accounting guidance are not subject to MTM accounting treatment and are recognized on the statements of income on an accrual basis.

The accounting for the changes in the fair value of a derivative instrument depends on whether it qualifies for and has been designated as part of a hedging relationship and further, on the type of hedging relationship.  Depending on the exposure, management designates a hedging instrument as a fair value hedge or a cash flow hedge.

For contracts that have not been designated as part of a hedging relationship, the accounting for changes in fair value depends on whether the derivative instrument is held for trading purposes. Unrealized and realized gains and losses on derivative instruments held for trading purposes are included in revenues on a net basis on the statements of income. Unrealized and realized gains and losses on derivative instruments not held for trading purposes are included in revenues or expenses on the statements of income depending on the relevant facts and circumstances. Certain derivatives that economically hedge future commodity risk are recorded in the same line item on the statements of income as that of the associated risk being hedged. However, unrealized and some realized gains and losses in regulated jurisdictions for both trading and non-trading derivative instruments are recorded as regulatory assets (for losses) or regulatory liabilities (for gains) in accordance with the accounting guidance for “Regulated Operations.”

Accounting for Fair Value Hedging Strategies (Applies to AEP)

For fair value hedges (i.e. hedging the exposure to changes in the fair value of an asset, liability or an identified portion thereof attributable to a particular risk), the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item associated with the hedged risk impacts net income during the period of change.

AEP records realized and unrealized gains or losses on interest rate swaps that are designated and qualify for fair value hedge accounting treatment and any offsetting changes in the fair value of the debt being hedged in Interest Expense on the statements of income.

The following table shows the impacts recognized on the balance sheets related to the hedged items in fair value hedging relationships:

		Carrying Amount of the Hedged Liabilities		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities	
		December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021	
		(in millions)	
Long-term Debt (a) (b)		$	(855.5)			$	(952.3)			$	89.7 			$	(8.5)		

(a)Amounts included on the Balance Sheet within Current and Noncurrent Liabilities line items Long-term Debt Due within One Year and Long-term Debt, respectively.
(b)Amounts include $(38) million and $(46) million as of December 31, 2022 and 2021, respectively, for the fair value hedge adjustment of hedged debt obligations for which hedge accounting has been discontinued.

The pretax effects of fair value hedge accounting on income were as follows:

	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Gain (Loss) on Interest Rate Contracts:						
Fair Value Hedging Instruments (a)	$	(90.4)			$	(35.5)			$	41.1 		
Fair Value Portion of Long-term Debt (a)	90.4 			35.5 			(41.1)		

(a)Gain (Loss) is included in Interest Expense on the statements of income.

338

In June 2020, AEP terminated a $500 million notional amount interest rate swap resulting in the discontinuance of the hedging relationship. A gain of $57 million on the fair value of the hedging instrument was settled in cash and recorded within operating activities on the statements of cash flows. Subsequent to the discontinuation of hedge accounting, the remaining adjustment to the carrying amount of the hedged item of $57 million will be amortized on a straight line basis through November 2027 in Interest Expense on the statements of income.

Accounting for Cash Flow Hedging Strategies (Applies to AEP, AEP Texas, APCo, I&M, PSO and SWEPCo)

For cash flow hedges (i.e. hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the Registrants initially report the gain or loss on the derivative instrument as a component of Accumulated Other Comprehensive Income (Loss) on the balance sheets until the period the hedged item affects net income.  

Realized gains and losses on derivative contracts for the purchase and sale of power designated as cash flow hedges are included in Total Revenues or Purchased Electricity for Resale on the statements of income or in Regulatory Assets or Regulatory Liabilities on the balance sheets, depending on the specific nature of the risk being hedged.  During the years ended 2022, 2021 and 2020, AEP applied cash flow hedging to outstanding power derivatives and the Registrant Subsidiaries did not.

The Registrants reclassify gains and losses on interest rate derivative hedges related to debt financings from Accumulated Other Comprehensive Income (Loss) on the balance sheets into Interest Expense on the statements of income in those periods in which hedged interest payments occur.  During the years ended 2022, 2021 and 2020, AEP applied cash flow hedging to outstanding interest rate derivatives. During the years ended 2021 and 2020, APCo applied cash flow hedging to outstanding interest rate derivatives.  During the year ended 2022, PSO applied cash flow hedging to outstanding interest rate derivatives. During the years ended 2022, 2021 and 2020, the other Registrant Subsidiaries did not have outstanding interest rate derivatives.

For details on effective cash flow hedges included in Accumulated Other Comprehensive Income (Loss) on the balance sheets and the reasons for changes in cash flow hedges, see Note 3 - Comprehensive Income.

Cash flow hedges included in Accumulated Other Comprehensive Income (Loss) on the balance sheets were:

Impact of Cash Flow Hedges on AEP’s Balance Sheets

		December 31, 2022		December 31, 2021	
		Commodity		Interest Rate		Commodity		Interest Rate	
		(in millions)	
AOCI Gain (Loss) Net of Tax		$	223.5 			$	0.3 			$	163.7 			$	(21.3)		
Portion Expected to be Reclassed to Net Income During the Next Twelve Months		119.9 			0.3 			106.7 			(3.3)		

As of December 31, 2022 the maximum length of time that AEP is hedging its exposure to variability in future cash flows related to forecasted transactions is 99 months and 96 months for commodity and interest rate hedges, respectively.
339

Impact of Cash Flow Hedges on the Registrant Subsidiaries’ Balance Sheets

		December 31, 2022		December 31, 2021	
		Interest Rate	
				Expected to be				Expected to be	
				Reclassified to				Reclassified to	
				Net Income During				Net Income During	
		AOCI Gain (Loss)		the Next		AOCI Gain (Loss)		the Next	
Company		Net of Tax		Twelve Months		Net of Tax		Twelve Months	
		(in millions)	
AEP Texas		$	(0.3)			$	(0.2)			$	(1.3)			$	(1.1)		
APCo		6.7 			0.8 			7.5 			0.8 		
I&M		(5.1)			(0.6)			(6.7)			(1.6)		
	
PSO		1.3 			0.1 			— 			— 		
SWEPCo		1.1 			0.2 			1.2 			0.1 		

The actual amounts reclassified from Accumulated Other Comprehensive Income (Loss) to Net Income can differ from the estimate above due to market price changes.

Credit Risk

Management mitigates credit risk in wholesale marketing and trading activities by assessing the creditworthiness of potential counterparties before entering into transactions with them and continuing to evaluate their creditworthiness on an ongoing basis. Management uses credit agency ratings and current market-based qualitative and quantitative data as well as financial statements to assess the financial health of counterparties on an ongoing basis.

Master agreements are typically used to facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Collateral requirements in the form of cash, letters of credit and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. Some master agreements include margining, which requires a counterparty to post cash or letters of credit in the event exposure exceeds the established threshold. The threshold represents an unsecured credit limit which may be supported by a parental/affiliate guaranty, as determined in accordance with AEP’s credit policy. In addition, master agreements allow for termination and liquidation of all positions in the event of a default including a failure or inability to post collateral when required.

Credit-Risk-Related Contingent Features

Credit Downgrade Triggers (Applies to AEP, APCo, I&M, PSO and SWEPCo)

A limited number of derivative contracts include collateral triggering events, which include a requirement to maintain certain credit ratings. On an ongoing basis, AEP’s risk management organization assesses the appropriateness of these collateral triggering events in contracts. The Registrants have not experienced a downgrade below a specified credit rating threshold that would require the posting of additional collateral. AEP had derivative contracts with collateral triggering events in a net liability position with a total exposure of $2 million and $9 million as of December 31, 2022 and 2021, respectively. The Registrant Subsidiaries had no derivative contracts with collateral triggering events in a net liability position as of December 31, 2022 and 2021.
340

Cross-Acceleration Triggers

Certain interest rate derivative contracts contain cross-acceleration provisions that, if triggered, would permit the counterparty to declare a default and require settlement of the outstanding payable. These cross-acceleration provisions could be triggered if there was a non-performance event by the Registrants under any of their outstanding debt of at least $50 million and the lender on that debt has accelerated the entire repayment obligation. On an ongoing basis, AEP’s risk management organization assesses the appropriateness of these cross-acceleration provisions in contracts. AEP had derivative contracts with cross-acceleration provisions in a net liability position of $127 million and $40 million as of December 31, 2022 and 2021, respectively. There was no cash collateral posted as of December 31, 2022 and 2021, respectively. If a cross-acceleration provision would have been triggered, settlement at fair value would have been required. The Registrant Subsidiaries had no derivative contracts with cross-acceleration provisions outstanding as of December 31, 2022 and 2021.

Cross-Default Triggers (Applies to AEP, APCo, I&M, PSO and SWEPCo)

In addition, a majority of non-exchange traded commodity contracts contain cross-default provisions that, if triggered, would permit the counterparty to declare a default and require settlement of the outstanding payable. These cross-default provisions could be triggered if there was a non-performance event by Parent or the obligor under outstanding debt or a third-party obligation that is $50 million or greater.  On an ongoing basis, AEP’s risk management organization assesses the appropriateness of these cross-default provisions in the contracts. AEP had derivative liabilities subject to cross-default provisions in a net liability position of $217 million and $76 million as of December 31, 2022 and 2021, respectively, after considering contractual netting arrangements. There was no cash collateral posted as of December 31, 2022 and 2021, respectively. If a cross-default provision would have been triggered, settlement at fair value would have been required. The Registrant Subsidiaries’ derivative contracts with cross-default provisions outstanding as of December 31, 2022 and 2021 were not material.
341

11.  FAIR VALUE MEASUREMENTS

The disclosures in this note apply to all Registrants except AEPTCo unless indicated otherwise.

Fair Value Measurements of Long-term Debt (Applies to all Registrants)

The fair values of Long-term Debt are based on quoted market prices, without credit enhancements, for the same or similar issues and the current interest rates offered for instruments with similar maturities classified as Level 2 measurement inputs.  These instruments are not marked-to-market.  The estimates presented are not necessarily indicative of the amounts that could be realized in a current market exchange. The fair value of AEP’s Equity Units (Level 1) are valued based on publicly-traded securities issued by AEP.

The book values and fair values of Long-term Debt are summarized in the following table:

		December 31,	
		2022		2021	
Company		Book Value		Fair Value		Book Value		Fair Value	
		(in millions)	
AEP (a)(b)(c)		$	35,622.6 			$	31,767.1 			$	33,454.5 			$	37,564.7 		
AEP Texas		5,657.8 			5,045.8 			5,180.8 			5,663.8 		
AEPTCo		4,782.8 			3,940.5 			4,343.9 			4,968.2 		
APCo		5,410.5 			5,079.2 			4,938.9 			6,037.1 		
I&M		3,260.8 			2,929.0 			3,195.0 			3,748.0 		
OPCo		2,970.3 			2,516.6 			2,968.5 			3,437.5 		
PSO		1,912.8 			1,635.8 			1,913.5 			2,163.7 		
SWEPCo		3,391.6 			2,870.9 			3,395.2 			3,792.9 		

(a)The fair value amounts include debt related to AEP’s Equity Units and had a fair value of $877 million and $1.7 billion as of December 31, 2022 and 2021, respectively. See “Equity Units” section of Note 14 for additional information.
(b)The 2022 and 2021 book value amounts exclude Long-term Debt of $1.2 billion and $1.1 billion, respectively, classified as Liabilities Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(c)The 2022 and 2021 fair value amounts exclude Long-term Debt of $1.1 billion and $1.2 billion, respectively, related to KPCo. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

342

Fair Value Measurements of Other Temporary Investments (Applies to AEP)

Other Temporary Investments include marketable securities that management intends to hold for less than one year and investments by AEP’s protected cell of EIS.  See “Other Temporary Investments” section of Note 1 for additional information.

The following is a summary of Other Temporary Investments and Restricted Cash:

		December 31, 2022	
				Gross		Gross			
				Unrealized		Unrealized		Fair	
Other Temporary Investments and Restricted Cash		Cost		Gains		Losses		Value	
		(in millions)	
Restricted Cash (a)		$	47.1 			$	— 			$	— 			$	47.1 		
Other Cash Deposits		9.0 			— 			— 			9.0 		
Fixed Income Securities – Mutual Funds (b)		152.4 			— 			(8.3)			144.1 		
Equity Securities – Mutual Funds		15.0 			19.4 			— 			34.4 		
Total Other Temporary Investments and Restricted Cash		$	223.5 			$	19.4 			$	(8.3)			$	234.6 		

		December 31, 2021	
				Gross		Gross			
				Unrealized		Unrealized		Fair	
Other Temporary Investments and Restricted Cash		Cost		Gains		Losses		Value	
		(in millions)	
Restricted Cash (a)		$	48.0 			$	— 			$	— 			$	48.0 		
Other Cash Deposits		10.0 			— 			— 			10.0 		
Fixed Income Securities – Mutual Funds (b)		154.3 			0.5 			— 			154.8 		
Equity Securities – Mutual Funds		19.7 			35.9 			— 			55.6 		
Total Other Temporary Investments and Restricted Cash		$	232.0 			$	36.4 			$	— 			$	268.4 		

(a)Primarily represents amounts held for the repayment of debt.
(b)Primarily short and intermediate maturities which may be sold and do not contain maturity dates.

The following table provides the activity for fixed income and equity securities within Other Temporary Investments:

		Years Ended December 31,	
		2022		2021		2020	
		(in millions)	
Proceeds from Investment Sales		$	30.2 			$	15.0 			$	50.9 		
Purchases of Investments		18.8 			26.9 			41.6 		
Gross Realized Gains on Investment Sales		6.1 			3.6 			3.8 		
Gross Realized Losses on Investment Sales		1.3 			— 			0.2 		

343

Fair Value Measurements of Trust Assets for Decommissioning and SNF Disposal (Applies to AEP and I&M)

Securities held in trust funds for decommissioning nuclear facilities and for the disposal of SNF are recorded at fair value.  See “Nuclear Trust Funds” section of Note 1 for additional information.

The following is a summary of nuclear trust fund investments:

	December 31,	
	2022		2021	
			Gross		Other-Than-				Gross		Other-Than-	
	Fair		Unrealized		Temporary		Fair		Unrealized		Temporary	
	Value		Gains		Impairments		Value		Gains		Impairments	
	(in millions)	
Cash and Cash Equivalents	$	21.2 			$	— 			$	— 			$	84.7 			$	— 			$	— 		
Fixed Income Securities:												
United States Government	1,123.8 			(3.1)			(18.8)			1,156.4 			66.3 			(7.9)		
Corporate Debt	61.6 			(7.0)			(9.6)			76.7 			6.7 			(2.1)		
State and Local Government	3.3 			0.1 			(0.1)			7.3 			0.4 			(0.1)		
Subtotal Fixed Income Securities	1,188.7 			(10.0)			(28.5)			1,240.4 			73.4 			(10.1)		
Equity Securities - Domestic (a)	2,131.3 			1,477.3 			— 			2,541.9 			1,901.3 			— 		
Spent Nuclear Fuel and Decommissioning Trusts	$	3,341.2 			$	1,467.3 			$	(28.5)			$	3,867.0 			$	1,974.7 			$	(10.1)		

(a)Amount reported as Gross Unrealized Gains includes unrealized gains of $1.5 billion and $1.9 billion and unrealized losses of $6 million and $4 million as of December 31, 2022 and 2021, respectively.

The following table provides the securities activity within the decommissioning and SNF trusts:

	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Proceeds from Investment Sales	$	2,713.6 			$	1,886.4 			$	1,593.4 		
Purchases of Investments	2,765.4 			1,928.2 			1,637.2 		
Gross Realized Gains on Investment Sales	52.4 			103.2 			26.4 		
Gross Realized Losses on Investment Sales	42.6 			16.5 			26.1 		

The base cost of fixed income securities was $1.2 billion and $1.2 billion as of December 31, 2022 and 2021, respectively.  The base cost of equity securities was $654 million and $641 million as of December 31, 2022 and 2021, respectively.

The fair value of fixed income securities held in the nuclear trust funds, summarized by contractual maturities, as of December 31, 2022 was as follows:

	Fair Value of Fixed	
	Income Securities	
	(in millions)	
Within 1 year	$	365.2 		
After 1 year through 5 years	425.4 		
After 5 years through 10 years	203.0 		
After 10 years	195.1 		
Total	$	1,188.7 		

344

Fair Value Measurements of Financial Assets and Liabilities

For a discussion of fair value accounting and the classification of assets and liabilities within the fair value hierarchy, see the “Fair Value Measurements of Assets and Liabilities” section of Note 1.

The following tables set forth, by level within the fair value hierarchy, the Registrants’ financial assets and liabilities that were accounted for at fair value on a recurring basis.  As required by the accounting guidance for “Fair Value Measurements and Disclosures,” financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.  There have not been any significant changes in management’s valuation techniques.

AEP

		December 31, 2022	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	

	
Other Temporary Investments and Restricted Cash											
Restricted Cash		$	47.1 			$	— 			$	— 			$	— 			$	47.1 		
Other Cash Deposits (a)		— 			— 			— 			9.0 			9.0 		
Fixed Income Securities – Mutual Funds		144.1 			— 			— 			— 			144.1 		
Equity Securities – Mutual Funds (b)		34.4 			— 			— 			— 			34.4 		
Total Other Temporary Investments and Restricted Cash		225.6 			— 			— 			9.0 			234.6 		
											
Risk Management Assets											
Risk Management Commodity Contracts (c) (d) (i)		15.0 			1,197.4 			305.8 			(1,211.3)			306.9 		
Cash Flow Hedges:											
Commodity Hedges (c)		— 			332.7 			26.7 			(52.8)			306.6 		
Interest Rate Hedges		— 			11.0 			— 			— 			11.0 		
	
Total Risk Management Assets		15.0 			1,541.1 			332.5 			(1,264.1)			624.5 		
											
Spent Nuclear Fuel and Decommissioning Trusts											
Cash and Cash Equivalents (e)		11.3 			— 			— 			9.9 			21.2 		
Fixed Income Securities:											
United States Government		— 			1,123.8 			— 			— 			1,123.8 		
Corporate Debt		— 			61.6 			— 			— 			61.6 		
State and Local Government		— 			3.3 			— 			— 			3.3 		
Subtotal Fixed Income Securities		— 			1,188.7 			— 			— 			1,188.7 		
Equity Securities – Domestic (b)		2,131.3 			— 			— 			— 			2,131.3 		
Total Spent Nuclear Fuel and Decommissioning Trusts		2,142.6 			1,188.7 			— 			9.9 			3,341.2 		

	
Total Assets		$	2,383.2 			$	2,729.8 			$	332.5 			$	(1,245.2)			$	4,200.3 		
											
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (d) (j)		$	21.8 			$	870.7 			$	178.9 			$	(731.6)			$	339.8 		
Cash Flow Hedges:											
Commodity Hedges (c)		— 			74.4 			1.7 			(52.8)			23.3 		
	
Fair Value Hedges		— 			127.4 			— 			— 			127.4 		
Total Risk Management Liabilities		$	21.8 			$	1,072.5 			$	180.6 			$	(784.4)			$	490.5 		
345

AEP

		December 31, 2021	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	

	
Other Temporary Investments and Restricted Cash											
Restricted Cash		$	48.0 			$	— 			$	— 			$	— 			$	48.0 		
Other Cash Deposits (a)		— 			— 			— 			10.0 			10.0 		
Fixed Income Securities – Mutual Funds		154.8 			— 			— 			— 			154.8 		
Equity Securities – Mutual Funds (b)		55.6 			— 			— 			— 			55.6 		
Total Other Temporary Investments and Restricted Cash		258.4 			— 			— 			10.0 			268.4 		
											
Risk Management Assets											
Risk Management Commodity Contracts (c) (f) (i)		7.4 			648.5 			226.3 			(642.4)			239.8 		
Cash Flow Hedges:											
Commodity Hedges (c)		— 			242.9 			19.2 			(41.7)			220.4 		
	
Fair Value Hedges		— 			1.2 			— 			— 			1.2 		
Total Risk Management Assets		7.4 			892.6 			245.5 			(684.1)			461.4 		
											
Spent Nuclear Fuel and Decommissioning Trusts											
Cash and Cash Equivalents (e)		77.7 			— 			— 			7.0 			84.7 		
Fixed Income Securities:											
United States Government		— 			1,156.4 			— 			— 			1,156.4 		
Corporate Debt		— 			76.7 			— 			— 			76.7 		
State and Local Government		— 			7.3 			— 			— 			7.3 		
Subtotal Fixed Income Securities		— 			1,240.4 			— 			— 			1,240.4 		
Equity Securities – Domestic (b)		2,541.9 			— 			— 			— 			2,541.9 		
Total Spent Nuclear Fuel and Decommissioning Trusts		2,619.6 			1,240.4 			— 			7.0 			3,867.0 		
											
Other Investments (h)		28.8 			14.9 			— 			— 			43.7 		
											
Total Assets		$	2,914.2 			$	2,147.9 			$	245.5 			$	(667.1)			$	4,640.5 		
											
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (f) (j)		$	5.3 			$	485.0 			$	147.6 			$	(383.2)			$	254.7 		
Cash Flow Hedges:											
Commodity Hedges (c)		— 			54.0 			0.6 			(41.7)			12.9 		
	
Fair Value Hedges		— 			38.1 			— 			— 			38.1 		
Total Risk Management Liabilities		$	5.3 			$	577.1 			$	148.2 			$	(424.9)			$	305.7 		

346

AEP Texas
																																	
		December 31, 2022	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	
											
Restricted Cash for Securitized Funding		$	32.7 			$	— 			$	— 			$	— 			$	32.7 		

	

	

	

																																	
		December 31, 2021	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	
											
Restricted Cash for Securitized Funding		$	30.4 			$	— 			$	— 			$	— 			$	30.4 		
											
Risk Management Assets											
Risk Management Commodity Contracts (c)		— 			0.6 			— 			(0.6)			— 		
											
Total Assets		$	30.4 			$	0.6 			$	— 			$	(0.6)			$	30.4 		

	

APCo
																																	
		December 31, 2022	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	
											
Restricted Cash for Securitized Funding		$	14.4 			$	— 			$	— 			$	— 			$	14.4 		
											
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		— 			0.7 			69.4 			(1.0)			69.1 		

	
											
Total Assets		$	14.4 			$	0.7 			$	69.4 			$	(1.0)			$	83.5 		
											
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	4.6 			$	0.3 			$	(1.4)			$	3.5 		

	

		December 31, 2021	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	
											
Restricted Cash for Securitized Funding		$	17.6 			$	— 			$	— 			$	— 			$	17.6 		
											
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		— 			5.8 			42.0 			(5.8)			42.0 		

	
											
Total Assets		$	17.6 			$	5.8 			$	42.0 			$	(5.8)			$	59.6 		
											
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	7.2 			$	0.3 			$	(6.7)			$	0.8 		

	

347

I&M
																																	
		December 31, 2022	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	
											
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		$	— 			$	11.3 			$	5.3 			$	(1.2)			$	15.4 		
											
Spent Nuclear Fuel and Decommissioning Trusts											
Cash and Cash Equivalents (e)		11.3 			— 			— 			9.9 			21.2 		
Fixed Income Securities:											
United States Government		— 			1,123.8 			— 			— 			1,123.8 		
Corporate Debt		— 			61.6 			— 			— 			61.6 		
State and Local Government		— 			3.3 			— 			— 			3.3 		
Subtotal Fixed Income Securities		— 			1,188.7 			— 			— 			1,188.7 		
Equity Securities - Domestic (b)		2,131.3 			— 			— 			— 			2,131.3 		
Total Spent Nuclear Fuel and Decommissioning Trusts		2,142.6 			1,188.7 			— 			9.9 			3,341.2 		
											
Total Assets		$	2,142.6 			$	1,200.0 			$	5.3 			$	8.7 			$	3,356.6 		
											
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	0.6 			$	0.7 			$	(1.3)			$	— 		

		December 31, 2021	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	
											
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		$	— 			$	3.8 			$	7.6 			$	(8.1)			$	3.3 		
											
Spent Nuclear Fuel and Decommissioning Trusts											
Cash and Cash Equivalents (e)		77.7 			— 			— 			7.0 			84.7 		
Fixed Income Securities:											
United States Government		— 			1,156.4 			— 			— 			1,156.4 		
Corporate Debt		— 			76.7 			— 			— 			76.7 		
State and Local Government		— 			7.3 			— 			— 			7.3 		
Subtotal Fixed Income Securities		— 			1,240.4 			— 			— 			1,240.4 		
Equity Securities - Domestic (b)		2,541.9 			— 			— 			— 			2,541.9 		
Total Spent Nuclear Fuel and Decommissioning Trusts		2,619.6 			1,240.4 			— 			7.0 			3,867.0 		
											
Total Assets		$	2,619.6 			$	1,244.2 			$	7.6 			$	(1.1)			$	3,870.3 		
											
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	6.7 			$	8.3 			$	(10.0)			$	5.0 		

348

OPCo

		December 31, 2022	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	

											
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		$	— 			$	— 			$	— 			$	— 			$	— 		

	
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	— 			$	40.0 			$	(0.3)			$	39.7 		

		December 31, 2021	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	

	
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		$	— 			$	0.5 			$	— 			$	(0.5)			$	— 		

											
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	— 			$	92.5 			$	— 			$	92.5 		

PSO

		December 31, 2022	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	
											
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		$	— 			$	— 			$	24.0 			$	1.3 			$	25.3 		
Cash Flow Hedges:											
Interest Rate Hedges		— 			1.6 			— 			(1.6)			— 		
Total Assets		$	— 			$	1.6 			$	24.0 			$	(0.3)			$	25.3 		
											
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	1.7 			$	0.3 			$	(0.4)			$	1.6 		

		December 31, 2021	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	
											
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		$	— 			$	0.3 			$	12.2 			$	(0.4)			$	12.1 		
											
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	3.7 			$	0.1 			$	(0.1)			$	3.7 		

349

SWEPCo

		December 31, 2022	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	

	
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		$	— 			$	2.2 			$	14.6 			$	(0.4)			$	16.4 		

	
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	1.6 			$	0.4 			$	(0.6)			$	1.4 		

		December 31, 2021	
		Level 1		Level 2		Level 3		Other		Total	
Assets:		(in millions)	

	
Risk Management Assets											
Risk Management Commodity Contracts (c) (g)		$	— 			$	0.3 			$	11.0 			$	(0.4)			$	10.9 		

	
Liabilities:											
											
Risk Management Liabilities											
Risk Management Commodity Contracts (c) (g)		$	— 			$	2.1 			$	0.1 			$	(0.1)			$	2.1 		

(a)Amounts in “Other” column primarily represent cash deposits in bank accounts with financial institutions or third-parties. Level 1 and Level 2 amounts primarily represent investments in money market funds.
(b)Amounts represent publicly-traded equity securities and equity-based mutual funds.
(c)Amounts in “Other” column primarily represent counterparty netting of risk management and hedging contracts and associated cash collateral under the accounting guidance for “Derivatives and Hedging.”
(d)The December 31, 2022 maturities of the net fair value of risk management contracts prior to cash collateral, assets/(liabilities), were as follows: Level 1 matures $(7) million in 2023; Level 2 matures $182 million in 2023, $134 million in periods 2024-2026, $10 million in periods 2027-2028 and $1 million in periods 2029-2033; Level 3 matures $128 million in 2023, $6 million in periods 2024-2026, $6 million in periods 2027-2028 and $(5) million in periods 2029-2033. Risk management commodity contracts are substantially comprised of power contracts.
(e)Amounts in “Other” column primarily represent accrued interest receivables from financial institutions.  Level 1 amounts primarily represent investments in money market funds.
(f)The December 31, 2021 maturities of the net fair value of risk management contracts prior to cash collateral, assets/(liabilities), were as follows: Level 1 matures $1 million in 2022 and $1 million in periods 2023-2025; Level 2 matures $42 million in 2022, $109 million in periods 2023-2025; $10 million in periods 2026-2027 and $3 million in periods 2028-2033; Level 3 matures $82 million in 2022, $10 million in periods 2023-2025, $9 million in periods 2026-2027 and $(17) million in periods 2028-2033.  Risk management commodity contracts are substantially comprised of power contracts.
(g)Substantially comprised of power contracts for the Registrant Subsidiaries.
(h)See “Warrants Held in Investee” section of Note 10 in the 2021 Annual Report for additional information.
(i)Amounts exclude Risk Management Assets of $8.5 million and $6 million as of December 31, 2022 and 2021, respectively, classified as Assets Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(j)Amounts exclude Risk Management Liabilities of $0 million and $0.1 million as of December 31, 2022 and 2021, respectively, classified as Liabilities Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

350

The following tables set forth a reconciliation of changes in the fair value of net trading derivatives classified as Level 3 in the fair value hierarchy:

Year Ended December 31, 2022		AEP		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Balance as of December 31, 2021		$	97.3 			$	41.7 			$	(0.7)			$	(92.5)			$	12.1 			$	10.9 		
Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)		69.5 			3.0 			3.7 			6.5 			24.2 			35.8 		
Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)		(34.9)			— 			— 			— 			— 			— 		
Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income (c)		9.6 			— 			— 			— 			— 			— 		
Settlements		(154.6)			(44.7)			(3.0)			0.3 			(36.3)			(45.0)		
Transfers into Level 3 (d) (e)		1.7 			— 			— 			— 			— 			— 		
Transfers out of Level 3 (e)		0.1 			— 			— 			— 			— 			6.9 		
Changes in Fair Value Allocated to Regulated Jurisdictions (f)		165.9 			69.1 			4.6 			45.7 			23.7 			5.6 		
Assets and Liabilities Held for Sale related to KPCo (g)		(2.7)			— 			— 			— 			— 			— 		
Balance as of December 31, 2022		$	151.9 			$	69.1 			$	4.6 			$	(40.0)			$	23.7 			$	14.2 		

Year Ended December 31, 2021		AEP		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Balance as of December 31, 2020		$	113.3 			$	19.3 			$	2.1 			$	(110.3)			$	10.3 			$	1.6 		
Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)		48.6 			8.3 			(0.1)			2.4 			16.1 			9.5 		
Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)		(45.2)			— 			— 			— 			— 			— 		
Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income (c)		24.2 			— 			— 			— 			— 			— 		
Settlements		(89.0)			(28.0)			(2.2)			6.3 			(26.4)			(15.5)		
Transfers into Level 3 (d) (e)		(3.8)			— 			— 			— 			— 			— 		
Transfers out of Level 3 (e)		(34.4)			— 			— 			— 			— 			— 		
Changes in Fair Value Allocated to Regulated Jurisdictions (f)		89.4 			42.1 			(0.5)			9.1 			12.1 			15.3 		
Assets and Liabilities Held for Sale related to KPCo (g)		(5.8)			— 			— 			— 			— 			— 		
Balance as of December 31, 2021		$	97.3 			$	41.7 			$	(0.7)			$	(92.5)			$	12.1 			$	10.9 		

351

																																							
Year Ended December 31, 2020		AEP		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Balance as of December 31, 2019		$	109.9 			$	37.7 			$	5.8 			$	(103.6)			$	15.8 			$	1.4 		
Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)		39.5 			13.2 			2.5 			(1.6)			11.9 			2.8 		
Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)		35.3 			— 			— 			— 			— 			— 		
Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income (c)		13.8 			— 			— 			— 			— 			— 		
Settlements		(113.1)			(51.6)			(8.6)			8.9 			(27.6)			(6.6)		
Transfers into Level 3 (d) (e)		(3.8)			— 			— 			— 			— 			— 		
Transfers out of Level 3 (e)		5.6 			0.7 			0.4 			— 			— 			— 		
Changes in Fair Value Allocated to Regulated Jurisdictions (f)		26.1 			19.3 			2.0 			(14.0)			10.2 			4.0 		
Balance as of December 31, 2020		$	113.3 			$	19.3 			$	2.1 			$	(110.3)			$	10.3 			$	1.6 		

(a)Included in revenues on the statements of income.
(b)Represents the change in fair value between the beginning of the reporting period and the settlement of the risk management commodity contract.
(c)Included in cash flow hedges on the statements of comprehensive income.
(d)Represents existing assets or liabilities that were previously categorized as Level 2.
(e)Transfers are recognized based on their value at the beginning of the reporting period that the transfer occurred.
(f)Relates to the net gains (losses) of those contracts that are not reflected on the statements of income.  These changes in fair value are recorded as regulatory liabilities for net gains and as regulatory assets for net losses or accounts payable.
(g)Amounts represents Risk Management Assets classified as Assets Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
.

352

The following tables quantify the significant unobservable inputs used in developing the fair value of Level 3 positions:

AEP

December 31, 2022	
					Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input		Low		High		Average (c)	
	(in millions)											
Energy Contracts	$	204.0 			$	167.4 			Discounted Cash Flow		Forward Market Price (a)		$	2.91		$	187.34		$	49.14	
	
FTRs (d) (e)	128.5 			13.2 			Discounted Cash Flow		Forward Market Price (a)		(36.45)		20.72		1.18	
	
Total	$	332.5 			$	180.6 												

December 31, 2021	
					Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input		Low		High		Average (c)	
	(in millions)											
Energy Contracts (f)	$	164.4 			$	135.2 			Discounted Cash Flow		Forward Market Price (a)		$	10.30		$	76.70		$	37.11	
Natural Gas Contracts	3.6 			— 			Discounted Cash Flow		Forward Market Price (b)		3.11		4.02		3.47	
FTRs (d) (e)	77.5 			13.0 			Discounted Cash Flow		Forward Market Price (a)		(23.93)		26.38		0.86	
	
Total	$	245.5 			$	148.2 												

353

APCo

December 31, 2022	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input (a)		Low		High		Average (c)	
	(in millions)											
	
FTRs	$	69.4 			$	0.3 			Discounted Cash Flow		Forward Market Price		$	(2.82)			$	18.88 			$	3.89 		

																																										
December 31, 2021	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input (a)		Low		High		Average (c)	
	(in millions)											
Energy Contracts	$	— 			$	0.3 			Discounted Cash Flow		Forward Market Price		$	32.20 			$	56.54 			$	44.77 		
FTRs	42.0 			— 			Discounted Cash Flow		Forward Market Price		(0.30)			26.38 			2.63 		
Total	$	42.0 			$	0.3 												

I&M

December 31, 2022	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input (a)		Low		High		Average (c)	
	(in millions)											
	
FTRs	$	5.3 			$	0.7 			Discounted Cash Flow		Forward Market Price		$	0.16 			$	18.79 			$	1.23 		

																																										
December 31, 2021	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input (a)		Low		High		Average (c)	
	(in millions)											
Energy Contracts	$	— 			$	0.2 			Discounted Cash Flow		Forward Market Price		$	32.20 			$	56.54 			$	44.77 		
FTRs	7.6 			8.1 			Discounted Cash Flow		Forward Market Price		(5.45)			17.78 			(0.12)		
Total	$	7.6 			$	8.3 												

354

OPCo

December 31, 2022	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input (a)		Low		High		Average (c)	
	(in millions)											
Energy Contracts	$	— 			$	40.0 			Discounted Cash Flow		Forward Market Price		$	2.91 			$	187.34 			$	48.76 		

December 31, 2021	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input (a)		Low		High		Average (c)	
	(in millions)											
Energy Contracts	$	— 			$	92.5 			Discounted Cash Flow		Forward Market Price		$	14.26 			$	52.98 			$	30.68 		

PSO

December 31, 2022	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input (a)		Low		High		Average (c)	
	(in millions)											
FTRs	$	24.0 			$	0.3 			Discounted Cash Flow		Forward Market Price		$	(36.45)			$	3.40 			$	(7.55)		

December 31, 2021	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input (a)		Low		High		Average (c)	
	(in millions)											
FTRs	$	12.2 			$	0.1 			Discounted Cash Flow		Forward Market Price		$	(18.39)			$	1.87 			$	(2.57)		

355

SWEPCo

December 31, 2022	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input (a)		Low		High		Average (c)	
	(in millions)											
	
FTRs	$	14.6 			$	0.4 			Discounted Cash Flow		Forward Market Price		$	(36.45)			$	3.40 			$	(7.55)		

																																										
December 31, 2021	
							Significant		Input/Range	
	Fair Value		Valuation		Unobservable						Weighted	
	Assets		Liabilities		Technique		Input		Low		High		Average (c)	
	(in millions)											
Natural Gas Contracts	$	3.6 			$	— 			Discounted Cash Flow		Forward Market Price (b)		$	3.11 			$	4.02 			$	3.47 		
FTRs	7.4 			0.1 			Discounted Cash Flow		Forward Market Price (a)		(18.39)			1.87 			(2.57)		
Total	$	11.0 			$	0.1 												

(a)Represents market prices in dollars per MWh.
(b)Represents market prices in dollars per MMBtu.
(c)The weighted-average is the product of the forward market price of the underlying commodity and volume weighted by term.
(d)Amounts exclude Risk Management Assets as of December 31, 2022 and 2021 of $8.6 million and $6 million, respectively, classified as Assets Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(e)Amounts exclude Risk Management Liabilities as of December 31, 2022 and 2021 of $0.1 million and $0.5 million, respectively, classified as Liabilities Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(f)Amount excludes Risk Management Liabilities of $0.1 million classified as Liabilities Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

The following table provides the measurement uncertainty of fair value measurements to increases (decreases) in significant unobservable inputs related to Energy Contracts, Natural Gas Contracts, FTRs and Other Investments for the Registrants as of December 31, 2022 and 2021:

Uncertainty of Fair Value Measurements

Significant Unobservable Input		Position		Change in Input		Impact on Fair Value
Measurement	
Forward Market Price		Buy		Increase (Decrease)		Higher (Lower)	
Forward Market Price		Sell		Increase (Decrease)		Lower (Higher)	

	

356

12. INCOME TAXES

The disclosures in this note apply to all Registrants unless indicated otherwise.

Income Tax Expense (Benefit)

The details of the Registrants’ Income Tax Expense (Benefit) as reported are as follows:

Year Ended December 31, 2022		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Federal:																	
Current		$	113.1 			$	29.0 			$	98.0 			$	(61.0)			$	43.4 			$	(27.0)			$	(3.3)			$	(32.3)		
Deferred		(88.8)			41.4 			46.0 			86.6 			(51.3)			73.3 			(50.5)			13.4 		
	
Total Federal		24.3 			70.4 			144.0 			25.6 			(7.9)			46.3 			(53.8)			(18.9)		
																	
State and Local:																	
Current		26.6 			2.2 			8.8 			(0.4)			10.9 			(0.3)			— 			(1.8)		
Deferred		(45.5)			— 			16.3 			(7.0)			1.2 			(1.8)			4.6 			(4.5)		
	
Total State and Local		(18.9)			2.2 			25.1 			(7.4)			12.1 			(2.1)			4.6 			(6.3)		
																	
Income Tax Expense (Benefit)		$	5.4 			$	72.6 			$	169.1 			$	18.2 			$	4.2 			$	44.2 			$	(49.2)			$	(25.2)		

Year Ended December 31, 2021		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Federal:																	
Current		$	(27.8)			$	(1.2)			$	69.8 			$	5.0 			$	26.9 			$	6.8 			$	(109.6)			$	(16.7)		
Deferred		182.6 			40.5 			54.1 			14.9 			(35.5)			25.2 			105.6 			26.2 		
	
Total Federal		154.8 			39.3 			123.9 			19.9 			(8.6)			32.0 			(4.0)			9.5 		
																	
State and Local:																	
Current		6.0 			3.0 			5.8 			2.2 			(0.6)			(3.1)			— 			0.4 		
Deferred		(45.3)			0.8 			14.4 			— 			(1.4)			5.5 			8.1 			(10.5)		
	
Total State and Local		(39.3)			3.8 			20.2 			2.2 			(2.0)			2.4 			8.1 			(10.1)		
																	
Income Tax Expense (Benefit)		$	115.5 			$	43.1 			$	144.1 			$	22.1 			$	(10.6)			$	34.4 			$	4.1 			$	(0.6)		

Year Ended December 31, 2020		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Federal:																	
Current		$	(138.2)			$	5.2 			$	22.2 			$	21.4 			$	11.3 			$	(26.6)			$	(11.4)			$	(13.6)		
Deferred		146.9 			(15.4)			65.4 			(27.1)			(20.6)			74.0 			8.3 			19.6 		
	
Total Federal		8.7 			(10.2)			87.6 			(5.7)			(9.3)			47.4 			(3.1)			6.0 		
																	
State and Local:																	
Current		(16.7)			(0.1)			2.8 			9.3 			1.9 			(5.4)			0.1 			(8.2)		
Deferred		48.5 			(0.9)			16.3 			0.7 			(0.1)			3.2 			8.2 			11.6 		
	
Total State and Local		31.8 			(1.0)			19.1 			10.0 			1.8 			(2.2)			8.3 			3.4 		
																	
Income Tax Expense (Benefit)		$	40.5 			$	(11.2)			$	106.7 			$	4.3 			$	(7.5)			$	45.2 			$	5.2 			$	9.4 		

357

The following are reconciliations for the Registrants between the federal income taxes computed by multiplying pretax income by the federal statutory tax rate and the income taxes reported:

AEP	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Net Income	$	2,305.6 			$	2,488.1 			$	2,196.7 		
Less: Equity Earnings – Dolet Hills	(1.4)			(3.4)			(2.9)		
Income Tax Expense	5.4 			115.5 			40.5 		
Pretax Income	$	2,309.6 			$	2,600.2 			$	2,234.3 		
						
Income Taxes on Pretax Income at Statutory Rate (21%)	$	485.0 			$	546.0 			$	469.2 		
Increase (Decrease) in Income Taxes Resulting from the Following Items:						
Reversal of Origination Flow-Through	17.1 			25.9 			26.5 		
Permanent - Miscellaneous	11.5 			(1.3)			(9.7)		
	
Investment Tax Credit Amortization	(14.3)			(22.0)			(18.8)		
Production Tax Credits	(197.1)			(98.8)			(83.1)		
State and Local Income Taxes, Net	(14.0)			39.4 			25.1 		
Removal Costs	(26.5)			(20.0)			(18.6)		
AFUDC	(29.3)			(30.6)			(32.5)		

	
Tax Adjustments (a)	— 			(55.1)			— 		
Tax Reform Excess ADIT Reversal	(214.5)			(255.6)			(268.2)		
	
Federal Return to Provision	(17.4)			(1.6)			(2.6)		
CARES Act	— 			— 			(48.0)		
	
Other	4.9 			(10.8)			1.2 		
Income Tax Expense	$	5.4 			$	115.5 			$	40.5 		
						
Effective Income Tax Rate	0.2 		%		4.4 		%		1.8 		%	

(a)2021 amount represents an out of period adjustment related to Deferred Income Taxes and Income Tax Expense (Benefit). Management concluded the misstatement and subsequent correction was not material to the 2021 or prior period financial statements.

																											
AEP Texas	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Net Income	$	307.9 			$	289.8 			$	241.0 		
Income Tax Expense (Benefit)	72.6 			43.1 			(11.2)		
Pretax Income	$	380.5 			$	332.9 			$	229.8 		
						
Income Taxes on Pretax Income at Statutory Rate (21%)	$	79.9 			$	69.9 			$	48.3 		
Increase (Decrease) in Income Taxes Resulting from the Following Items:						

	
	
State and Local Income Taxes, Net	1.7 			2.4 			(0.8)		
	
AFUDC	(4.1)			(4.5)			(4.1)		
Parent Company Loss Benefit	— 			(3.2)			(4.5)		

	
Tax Reform Excess ADIT Reversal	(5.5)			(21.3)			(47.9)		

	
	
Other	0.6 			(0.2)			(2.2)		
Income Tax Expense (Benefit)	$	72.6 			$	43.1 			$	(11.2)		
						
Effective Income Tax Rate	19.1 		%		12.9 		%		(4.9)		%	
358

																											
AEPTCo	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Net Income	$	594.2 			$	591.7 			$	423.4 		
Income Tax Expense	169.1 			144.1 			106.7 		
Pretax Income	$	763.3 			$	735.8 			$	530.1 		
						
Income Taxes on Pretax Income at Statutory Rate (21%)	$	160.3 			$	154.5 			$	111.3 		
Increase (Decrease) in Income Taxes Resulting from the Following Items:						

	
	
State and Local Income Taxes, Net	19.8 			19.8 			15.1 		
	
AFUDC	(14.8)			(14.1)			(15.5)		
Parent Company Loss Benefit	— 			(18.3)			(7.0)		

	

	
	
Other	3.8 			2.2 			2.8 		
Income Tax Expense	$	169.1 			$	144.1 			$	106.7 		
						
Effective Income Tax Rate	22.2 		%		19.6 		%		20.1 		%	

																											
APCo	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Net Income	$	394.2 			$	348.9 			$	369.7 		
Income Tax Expense	18.2 			22.1 			4.3 		
Pretax Income	$	412.4 			$	371.0 			$	374.0 		
						
Income Taxes on Pretax Income at Statutory Rate (21%)	$	86.6 			$	77.9 			$	78.5 		
Increase (Decrease) in Income Taxes Resulting from the Following Items:						
Reversal of Origination Flow-Through	4.7 			11.7 			12.7 		

	
State and Local Income Taxes, Net	(5.9)			2.1 			7.9 		
Removal Costs	(9.8)			(7.3)			(5.7)		
AFUDC	(3.7)			(4.6)			(4.5)		
Parent Company Loss Benefit	— 			— 			(6.2)		

Tax Adjustments (a)	— 			4.5 			— 		
Tax Reform Excess ADIT Reversal	(50.9)			(60.5)			(72.3)		
	
Federal Return to Provision	(2.8)			(1.6)			(7.2)		
	
Other	— 			(0.1)			1.1 		
Income Tax Expense	$	18.2 			$	22.1 			$	4.3 		
						
Effective Income Tax Rate	4.4 		%		6.0 		%		1.1 		%	

(a)2021 amount represents an out of period adjustment related to Deferred Income Taxes and Income Tax Expense (Benefit). Management concluded the misstatement and subsequent correction was not material to the 2021 or prior period financial statements.
359

																											
I&M	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Net Income	$	324.7 			$	279.8 			$	284.8 		
Income Tax Expense (Benefit)	4.2 			(10.6)			(7.5)		
Pretax Income	$	328.9 			$	269.2 			$	277.3 		
						
Income Taxes on Pretax Income at Statutory Rate (21%)	$	69.1 			$	56.5 			$	58.2 		
Increase (Decrease) in Income Taxes Resulting from the Following Items:						
Reversal of Origination Flow-Through	2.9 			3.5 			1.6 		
	
Investment Tax Credit Amortization	(3.1)			(6.4)			(4.5)		
	
State and Local Income Taxes, Net	9.6 			(1.3)			1.5 		
Removal Costs	(12.4)			(9.7)			(10.5)		
AFUDC	(2.1)			(2.7)			(2.4)		
Parent Company Loss Benefit	— 			(2.8)			(6.4)		

	
Tax Reform Excess ADIT Reversal	(54.0)			(46.3)			(46.8)		
	
Federal Return to Provision	(6.2)			(0.6)			1.8 		
	
Other	0.4 			(0.8)			— 		
Income Tax Expense (Benefit)	$	4.2 			$	(10.6)			$	(7.5)		
						
Effective Income Tax Rate	1.3 		%		(3.9)		%		(2.7)		%	

OPCo	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Net Income	$	287.8 			$	253.6 			$	271.4 		
Equity Earnings of Unconsolidated Subsidiaries	(0.6)			— 			— 		
Income Tax Expense	44.2 			34.4 			45.2 		
Pretax Income	$	331.4 			$	288.0 			$	316.6 		
						
Income Taxes on Pretax Income at Statutory Rate (21%)	$	69.6 			$	60.5 			$	66.5 		
Increase (Decrease) in Income Taxes Resulting from the Following Items:						
Reversal of Origination Flow-Through	3.0 			2.2 			3.7 		

	
State and Local Income Taxes, Net	(1.6)			— 			(1.7)		
	
AFUDC	(2.9)			(2.3)			(2.6)		

	
Tax Adjustments (a)	— 			8.9 			— 		
Tax Reform Excess ADIT Reversal	(27.5)			(32.6)			(27.2)		
	
Federal Return to Provision	3.5 			(1.2)			6.5 		
	
Other	0.1 			(1.1)			— 		
Income Tax Expense	$	44.2 			$	34.4 			$	45.2 		
						
Effective Income Tax Rate	13.3 		%		11.9 		%		14.3 		%	

(a)2021 amount represents an out of period adjustment related to Deferred Income Taxes and Income Tax Expense (Benefit). Management concluded the misstatement and subsequent correction was not material to the 2021 or prior period financial statements.
360

																											
PSO	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Net Income	$	167.6 			$	141.1 			$	123.0 		
Income Tax Expense (Benefit)	(49.2)			4.1 			5.2 		
Pretax Income	$	118.4 			$	145.2 			$	128.2 		
						
Income Taxes on Pretax Income at Statutory Rate (21%)	$	24.9 			$	30.5 			$	26.9 		
Increase (Decrease) in Income Taxes Resulting from the Following Items:						

Investment Tax Credit Amortization	(1.6)			(1.8)			(2.1)		
Production Tax Credits	(47.7)			(6.0)			— 		
State and Local Income Taxes, Net	4.3 			6.4 			6.5 		

Parent Company Loss Benefit	— 			— 			(0.2)		

	
Tax Reform Excess ADIT Reversal	(25.4)			(25.4)			(25.5)		
	
Federal Return to Provision	(3.7)			0.7 			(0.5)		

Other	— 			(0.3)			0.1 		
Income Tax Expense (Benefit)	$	(49.2)			$	4.1 			$	5.2 		
						
Effective Income Tax Rate	(41.6)		%		2.8 		%		4.1 		%	

SWEPCo	Years Ended December 31,	
	2022		2021		2020	
	(in millions)	
Net Income	$	294.3 			$	242.1 			$	183.7 		
Less: Equity Earnings – Dolet Hills	(1.4)			(3.4)			(2.9)		
Income Tax Expense (Benefit)	(25.2)			(0.6)			9.4 		
Pretax Income	$	267.7 			$	238.1 			$	190.2 		
						
Income Taxes on Pretax Income at Statutory Rate (21%)	$	56.2 			$	50.0 			$	39.9 		
Increase (Decrease) in Income Taxes Resulting from the Following Items:						
Reversal of Origination Flow-Through	2.3 			1.8 			1.9 		
Depletion	(4.0)			(2.7)			(3.4)		
	
Production Tax Credits	(57.1)			(7.2)			— 		
State and Local Income Taxes, Net	(4.9)			(8.0)			2.7 		

Parent Company Loss Benefit	— 			— 			(5.6)		

	
Tax Reform Excess ADIT Reversal	(14.8)			(31.1)			(21.9)		

	
	
Other	(2.9)			(3.4)			(4.2)		
Income Tax Expense (Benefit)	$	(25.2)			$	(0.6)			$	9.4 		
						
Effective Income Tax Rate	(9.4)		%		(0.3)		%		4.9 		%	
361

Net Deferred Tax Liability

The following tables show elements of the net deferred tax liability and significant temporary differences for each Registrant:

AEP	December 31,	
	2022		2021	
	(in millions)	
Deferred Tax Assets	$	3,402.5 			$	3,277.0 		
Deferred Tax Liabilities	(11,895.8)			(11,479.5)		
Net Deferred Tax Liabilities (a)	$	(8,493.3)			$	(8,202.5)		
				
Property Related Temporary Differences	$	(7,531.8)			$	(7,020.3)		
Amounts Due to Customers for Future Income Taxes	921.2 			1,033.0 		
Deferred State Income Taxes	(949.9)			(1,116.7)		
	
Securitized Assets	(98.9)			(128.8)		
	
Regulatory Assets	(756.7)			(645.4)		
Accrued Nuclear Decommissioning	(632.7)			(743.2)		
Net Operating Loss Carryforward	120.7 			285.7 		
Tax Credit Carryforward	611.5 			439.8 		
Operating Lease Liability	143.0 			114.2 		
Investment in Partnership	(338.9)			(392.1)		

	

All Other, Net	19.2 			(28.7)		
Net Deferred Tax Liabilities (a)	$	(8,493.3)			$	(8,202.5)		
(a)2022 and 2021 excludes Net Deferred Tax Liabilities of $469.7 million and $441.6 million, respectively, classified as Liabilities Held for Sale on the balance sheets.  See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

AEP Texas	December 31,	
	2022		2021	
	(in millions)	
Deferred Tax Assets	$	177.0 			$	173.8 		
Deferred Tax Liabilities	(1,321.2)			(1,262.7)		
Net Deferred Tax Liabilities	$	(1,144.2)			$	(1,088.9)		
				
Property Related Temporary Differences	$	(1,130.7)			$	(1,060.2)		
Amounts Due to Customers for Future Income Taxes	111.0 			110.0 		
Deferred State Income Taxes	(36.6)			(32.2)		

Securitized Transition Assets	(65.0)			(84.4)		
Regulatory Assets	(48.9)			(45.1)		

	
Operating Lease Liability	20.3 			15.8 		

	

	
All Other, Net	5.7 			7.2 		
Net Deferred Tax Liabilities	$	(1,144.2)			$	(1,088.9)		

362

												
AEPTCo	December 31,	
	2022		2021	
	(in millions)	
Deferred Tax Assets	$	162.5 			$	158.8 		
Deferred Tax Liabilities	(1,202.9)			(1,121.7)		
Net Deferred Tax Liabilities (a)	$	(1,040.4)			$	(962.9)		
				
Property Related Temporary Differences	$	(1,065.5)			$	(997.0)		
Amounts Due to Customers for Future Income Taxes	116.6 			118.2 		
Deferred State Income Taxes	(106.0)			(94.5)		

	

Net Operating Loss Carryforward	5.5 			8.1 		

	

	

All Other, Net	9.0 			2.3 		
Net Deferred Tax Liabilities (a)	$	(1,040.4)			$	(962.9)		
(a)2022 and 2021 excludes Net Deferred Tax Liabilities of $16.1 million and $15.4 million, respectively, classified as Liabilities Held for Sale on the balance sheets.  See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

												
APCo	December 31,	
	2022		2021	
	(in millions)	
Deferred Tax Assets	$	510.3 			$	495.1 		
Deferred Tax Liabilities	(2,502.5)			(2,299.8)		
Net Deferred Tax Liabilities	$	(1,992.2)			$	(1,804.7)		
				
Property Related Temporary Differences	$	(1,509.8)			$	(1,476.5)		
Amounts Due to Customers for Future Income Taxes	163.0 			182.1 		
Deferred State Income Taxes	(318.5)			(288.8)		
	
Securitized Assets	(33.9)			(39.3)		
	
Regulatory Assets	(301.2)			(177.0)		

	
Operating Lease Liability	15.6 			14.2 		

	

	
All Other, Net	(7.4)			(19.4)		
Net Deferred Tax Liabilities	$	(1,992.2)			$	(1,804.7)		

I&M	December 31,	
	2022		2021	
	(in millions)	
Deferred Tax Assets	$	933.7 			$	1,072.2 		
Deferred Tax Liabilities	(2,090.7)			(2,172.4)		
Net Deferred Tax Liabilities	$	(1,157.0)			$	(1,100.2)		
				
Property Related Temporary Differences	$	(398.0)			$	(286.2)		
Amounts Due to Customers for Future Income Taxes	114.3 			135.5 		
Deferred State Income Taxes	(227.0)			(222.0)		

	
Regulatory Assets	(29.5)			(23.6)		
Accrued Nuclear Decommissioning	(632.7)			(743.2)		

Operating Lease Liability	13.6 			13.5 		

	

	
All Other, Net	2.3 			25.8 		
Net Deferred Tax Liabilities	$	(1,157.0)			$	(1,100.2)		

363

												
OPCo	December 31,	
	2022		2021	
	(in millions)	
Deferred Tax Assets	$	218.8 			$	204.4 		
Deferred Tax Liabilities	(1,319.9)			(1,205.3)		
Net Deferred Tax Liabilities	$	(1,101.1)			$	(1,000.9)		
				
Property Related Temporary Differences	$	(1,133.8)			$	(1,042.0)		
Amounts Due to Customers for Future Income Taxes	112.6 			117.7 		
Deferred State Income Taxes	(59.6)			(58.8)		

	
Regulatory Assets	(57.6)			(39.8)		

	
Operating Lease Liability	15.5 			17.2 		

	

	
All Other, Net	21.8 			4.8 		
Net Deferred Tax Liabilities	$	(1,101.1)			$	(1,000.9)		

PSO	December 31,	
	2022		2021	
	(in millions)	
Deferred Tax Assets	$	225.0 			$	170.0 		
Deferred Tax Liabilities	(1,013.6)			(952.3)		
Net Deferred Tax Liabilities	$	(788.6)			$	(782.3)		
				
Property Related Temporary Differences	$	(763.3)			$	(708.6)		
Amounts Due to Customers for Future Income Taxes	96.0 			111.5 		
Deferred State Income Taxes	(81.9)			(83.2)		

	
Regulatory Assets	(140.2)			(228.0)		
	
Net Operating Loss Carryforward	25.8 			111.4 		
Tax Credit Carryforward	54.3 			6.6 		

	

	
	
All Other, Net	20.7 			8.0 		
Net Deferred Tax Liabilities	$	(788.6)			$	(782.3)		

SWEPCo	December 31,	
	2022		2021	
	(in millions)	
Deferred Tax Assets	$	374.9 			$	336.4 		
Deferred Tax Liabilities	(1,464.6)			(1,424.0)		
Net Deferred Tax Liabilities	$	(1,089.7)			$	(1,087.6)		
				
Property Related Temporary Differences	$	(1,053.8)			$	(989.6)		
Amounts Due to Customers for Future Income Taxes	146.2 			154.8 		
Deferred State Income Taxes	(208.7)			(234.9)		

	
Regulatory Assets	(114.1)			(101.4)		
	
Net Operating Loss Carryforward	42.7 			67.4 		
Tax Credit Carryforward	66.0 			8.5 		

	

	
	
All Other, Net	32.0 			7.6 		
Net Deferred Tax Liabilities	$	(1,089.7)			$	(1,087.6)		

364

Federal and State Income Tax Audit Status

The statute of limitations for the IRS to examine AEP and subsidiaries originally filed federal return has expired for tax years 2016 and earlier. AEP has agreed to extend the statute of limitations on the 2017 and 2018 tax returns to December 31, 2023, to allow time for the current IRS audit to be completed including a refund claim approval by the Congressional Joint Committee on Taxation. The statute of limitations for the 2019 return is set to naturally expire in 2023 as well.

The current IRS audit and associated refund claim evolved from a net operating loss carryback to 2015 that originated in the 2017 return. AEP has received and agreed to two IRS proposed adjustments on the 2017 tax return, which were immaterial. The exam is nearly complete, and AEP is currently working with the IRS to submit the refund claim to the Congressional Joint Committee on Taxation for resolution and final approval.

AEP and subsidiaries file income tax returns in various state and local jurisdictions. These taxing authorities routinely examine the tax returns, and AEP and subsidiaries are currently under examination in several state and local jurisdictions. Generally, the statutes of limitations have expired for tax years prior to 2017. In addition, management is monitoring and continues to evaluate the potential impact of federal legislation and corresponding state conformity.

Net Income Tax Operating Loss Carryforward

As of December 31, 2022, AEP, AEPTCo, OPCo, PSO and SWEPCo have state net income tax operating loss carryforwards as indicated in the table below:

				State Net Income					
				 Tax Operating Loss		Years of	
Company		State/Municipality		Carryforward		Expiration	
				(in millions)					
AEP		Arkansas		$	224.4 			2023	-	2032	
AEP		Colorado		82.6 			NA	
AEP		Illinois		52.4 			2031	-	2041	
	
AEP		Kentucky		231.3 			2030	-	2037	
AEP		Louisiana		586.8 			NA	
AEP		Michigan		58.7 			2029	-	2031	
AEP		New Jersey		13.7 			2036	-	2040	
AEP		New Mexico		22.9 			NA	
AEP		Ohio Municipal		1,257.7 			2023	-	2027	
AEP		Oklahoma		943.3 			2037	-	2037	
AEP		Pennsylvania		64.4 			2030	-	2042	
AEP		Tennessee		77.7 			2030	-	2037	
AEP		Virginia		11.2 			2030	-	2037	
AEP		West Virginia		12.3 			2029	-	2037	
AEPTCo		Oklahoma		33.0 			2037	-	2037	
	
OPCo		Ohio Municipal		190.1 			2024	-	2027	
PSO		Oklahoma		899.6 			2037	-	2037	
SWEPCo		Arkansas		224.2 			2023	-	2032	
SWEPCo		Louisiana		577.2 			NA	

365

Tax Credit Carryforward

Federal and state net income tax operating losses sustained in 2017, 2019 and 2021 resulted in unused federal and state income tax credits.  As of December 31, 2022, the Registrants have federal tax credit carryforwards and AEP and PSO have state tax credit carryforwards as indicated in the table below.  If these credits are not utilized, federal general business tax credits will expire in the years 2036 through 2041 and state tax credits will remain available indefinitely.

	
		Total Federal		Total State	
		Tax Credit		Tax Credit	
Company		Carryforward		Carryforward	
		(in millions)	
AEP		$	612.0 			$	39.2 		
AEP Texas		1.5 			— 		
AEPTCo		0.2 			— 		
APCo		2.0 			— 		
I&M		11.4 			— 		
OPCo		1.0 			— 		
PSO		54.3 			39.2 		
SWEPCo		66.0 			— 		

The Registrants anticipate future federal taxable income will be sufficient to realize the tax benefits of the federal tax credits before they expire unused.

Valuation Allowance

AEP assesses the available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate tax character will be generated to realize the benefits of existing deferred tax assets. When the evaluation of the evidence indicates that it is more-likely-than-not that AEP will not be able to realize the benefits of existing deferred tax assets, a valuation allowance is recorded to reduce existing deferred tax assets to the net realizable amount. Objective evidence evaluated includes whether AEP has a history of recognizing income, future reversals of existing temporary differences and tax planning strategies.

Valuation allowance activity for the years ended December 31, 2022, 2021 and 2020 was not material.

Uncertain Tax Positions

The reconciliations of the beginning and ending amounts of unrecognized tax benefits for AEP and OPCo are presented below. The amount and activity of unrecognized tax benefits for the other Registrant Subsidiaries was immaterial for periods presented:

		AEP	
		2022		2021		2020	
		(in millions)	
Balance as of January 1,		$	14.3 			$	13.2 			$	24.1 		
Increase – Tax Positions Taken During a Prior Period		5.1 			1.2 			0.6 		
Decrease – Tax Positions Taken During a Prior Period		— 			(3.2)			(14.5)		
Increase – Tax Positions Taken During the Current Year		3.8 			3.1 			3.0 		
Decrease – Tax Positions Taken During the Current Year		— 			— 			— 		
	
Decrease – Settlements with Taxing Authorities		— 			— 			— 		
Decrease – Lapse of the Applicable Statute of Limitations		— 			— 			— 		
Balance as of December 31,		$	23.2 			$	14.3 			$	13.2 		

366

																					
		OPCo	
		2022		2021		2020	
		(in millions)	
Balance as of January 1,		$	— 			$	3.2 			$	8.4 		
Increase – Tax Positions Taken During a Prior Period		5.1 			— 			— 		
Decrease – Tax Positions Taken During a Prior Period		— 			(3.2)			(5.2)		
Increase – Tax Positions Taken During the Current Year		— 			— 			— 		
Decrease – Tax Positions Taken During the Current Year		— 			— 			— 		
	
Decrease – Settlements with Taxing Authorities		— 			— 			— 		
Decrease – Lapse of the Applicable Statute of Limitations		— 			— 			— 		
Balance as of December 31,		$	5.1 			$	— 			$	3.2 		
Management believes that there will be no significant net increase or decrease in unrecognized benefits within 12 months of the reporting date.  The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate for AEP as of December 31, 2022, 2021 and 2020 were $23 million, $14 million, and $12 million, respectively.

Federal Tax Legislation

In March 2020, the CARES Act was signed into law. The CARES Act includes tax relief provisions including a 5-year NOL carryback from years 2018-2020. In the third quarter of 2020, AEP requested a $95 million refund of taxes paid in 2014 under the 5-year NOL carryback provision of the CARES Act. AEP carried back a NOL generated on the 2019 Federal income tax return at a 21% federal corporate income tax rate to the 2014 Federal income tax return at a 35% corporate income tax rate. As a result of the change in the corporate income tax rates between the two periods, AEP realized a tax benefit of $48 million during the third quarter of 2020 primarily at the Generation & Marketing segment. AEP received the $95 million refund in the fourth quarter of 2021.

Inflation Reduction Act

In August 2022, President Biden signed H.R. 5376 into law, commonly known as the Inflation Reduction Act of 2022 or IRA. Most notably this budget reconciliation legislation creates a 15% minimum tax on adjusted financial statement income (Corporate Alternative Minimum Tax or CAMT), extends and increases the value of PTCs and ITCs, adds a nuclear and clean hydrogen PTC, an energy storage ITC and allows the sale or transfer of tax credits to third parties for cash. This legislation has no material impact on the current period financial statements. As further significant guidance from Treasury and the IRS is expected on the tax provisions in the IRA, AEP will continue to monitor any issued guidance and evaluate the impact on future net income, cash flows and financial condition.

In November 2022, the IRS released Notice 2022-61 addressing the Prevailing Wage and Apprenticeship Requirements (PWAR) tied to full value PTCs and ITCs for projects that begin construction on or after January 29, 2023. AEP’s future renewable energy projects that begin construction after this date will be required to, and expect to, satisfy the PWAR to receive full value ITCs and PTCs.

In December 2022, the IRS released Notice 2023-7 addressing time sensitive issues related to the CAMT. The notice provided initial guidance that AEP can begin to rely on in 2023 and also stated that additional guidance is expected, of which AEP will continue to monitor and assess. Notably, the interim guidance in Notice 2023-7 confirmed the CAMT depreciation adjustment includes tax depreciation that is capitalized to inventory under §263A and recovered as part of cost of goods sold, providing significant relief to AEP’s potential CAMT exposure.

The enactment of the IRA will have future cash flow and income tax reporting considerations. AEP and subsidiaries expect to be applicable corporations beginning in 2023 and AEP expects to have CAMT cash tax payments beginning in 2024. CAMT cash taxes are expected to be offset by regulatory recovery, the utilization of tax credits and additionally the cash inflow generated by the sale of tax credits. The sale of tax credits will be presented in the operating section of the statements of cash flows consistent with the presentation of cash taxes paid. AEP will present the gain or loss on sale of tax credits through income tax expense. Management believes this
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presentation provides consistency in financial statement reporting as it matches the originating income tax benefit of the tax credits.

State Tax Legislation

In April 2021, West Virginia enacted House Bill (HB) 2026. HB 2026 changes the state income tax apportionment formula from a ratio that includes property, payroll and sales to a single sales factor apportionment regime effective for tax years beginning on or after January 1, 2022. HB 2026 also eliminates the “throw out” rule related to sales of tangible personal property for sales factor apportionment calculation purposes and introduces a market-based sourcing for sales of services and intangible property. During 2021, AEP recorded $23 million in Income Tax Expense as a result of remeasuring West Virginia deferred taxes under the new apportionment methodology. The enacted legislation does not impact AEP Texas, PSO or SWEPCo.

In May 2021, Oklahoma enacted HB 2960. HB 2960 reduces the Oklahoma corporate income tax rate from 6% to 4%. During 2021, AEP recorded an immaterial amount of Income Tax Benefit as a result of remeasuring Oklahoma deferred taxes at the lowered statutory tax rate of 4%. The enacted legislation does not impact APCo, I&M or OPCo.

In November 2021, Louisiana approved Constitutional Amendment 2, thereby also enacting HB 292. HB 292 reduces the Louisiana corporate income tax rate from 8% to 7.5%. In the fourth quarter of 2021, AEP recorded an immaterial amount of Income Tax Expense as a result of remeasuring Louisiana deferred taxes at the lowered statutory tax rate of 7.5%. The enacted legislation does not impact AEP Texas, APCo, I&M, OPCo or PSO.

In December 2021, Arkansas enacted HB 1001. HB 1001 reduces the Arkansas corporate income tax rate from 5.9% to 5.7%, with additional reductions to 5.3% contingent upon future events. In the fourth quarter of 2021, AEP recorded an immaterial amount of Income Tax Expense as a result of remeasuring Arkansas deferred taxes at the lowered statutory tax rate of 5.7%. The enacted legislation does not impact AEP Texas, APCo, I&M, OPCo or PSO.

In August 2022, Arkansas enacted Senate Bill 1.  Senate Bill 1 reduces the Arkansas corporate income tax rate from 5.7% to 5.3%.  In the third quarter of 2022, AEP recorded an immaterial amount of Income Tax Expense as a result of remeasuring Arkansas deferred taxes at the lowered statutory tax rate of 5.3%. The enacted legislation does not impact AEP Texas, APCo, I&M, OPCo or PSO.
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13.  LEASES

The disclosures in this note apply to all Registrants unless indicated otherwise.

The Registrants lease property, plant and equipment including, but not limited to, fleet, information technology and real estate leases. These leases require payments of non-lease components, including related property taxes, operating and maintenance costs. AEP does not separate non-lease components from associated lease components. Many of these leases have purchase or renewal options. Leases not renewed are often replaced by other leases. Options to renew or purchase a lease are included in the measurement of lease assets and liabilities if it is reasonably certain the Registrant will exercise the option.

Lease obligations are measured using the discount rate implicit in the lease when that rate is readily determinable. AEP has visibility into the rate implicit in the lease when assets are leased from selected financial institutions under master leasing agreements. When the implicit rate is not readily determinable, the Registrants measure their lease obligation using their estimated secured incremental borrowing rate. Incremental borrowing rates are comprised of an underlying risk-free rate and a secured credit spread relative to the lessee on a matched maturity basis.

Operating lease rentals and finance lease amortization costs are generally charged to Other Operation and Maintenance expense in accordance with rate-making treatment for regulated operations. The amortization costs related to the Rockport finance lease were charged to Depreciation and Amortization. Interest on finance lease liabilities is generally charged to Interest Expense. Lease costs associated with capital projects are included in Property, Plant and Equipment on the balance sheets. For regulated operations with finance leases, a finance lease asset and offsetting liability are recorded at the present value of the remaining lease payments for each reporting period.  Finance leases for nonregulated property are accounted for as if the assets were owned and financed.  The components of rental costs were as follows:

Year Ended December 31, 2022		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Operating Lease Cost		$	157.5 			$	18.4 			$	1.1 			$	17.9 			$	29.5 			$	16.9 			$	11.8 			$	15.3 		
Finance Lease Cost:																	
Amortization of Right-of-Use Assets		205.5 			6.8 			— 			7.9 			78.7 			4.9 			3.2 			10.8 		
Interest on Lease Liabilities		13.4 			1.3 			— 			2.0 			3.1 			0.8 			0.6 			2.1 		
Total Lease Rental Costs (a)		$	376.4 			$	26.5 			$	1.1 			$	27.8 			$	111.3 			$	22.6 			$	15.6 			$	28.2 		

Year Ended December 31, 2021		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Operating Lease Cost		$	275.3 			$	18.4 			$	1.7 			$	19.3 			$	90.2 			$	19.0 			$	8.7 			$	12.1 		
Finance Lease Cost:																	
Amortization of Right-of-Use Assets		74.7 			6.7 			— 			7.7 			12.9 			4.9 			3.2 			11.0 		
Interest on Lease Liabilities		14.4 			1.4 			— 			2.4 			3.0 			0.8 			0.6 			2.5 		
Total Lease Rental Costs (a)		$	364.4 			$	26.5 			$	1.7 			$	29.4 			$	106.1 			$	24.7 			$	12.5 			$	25.6 		

Year Ended December 31, 2020		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Operating Lease Cost		$	279.6 			$	17.4 			$	2.6 			$	19.1 			$	101.5 			$	17.1 			$	7.8 			$	9.4 		
Finance Lease Cost:																	
Amortization of Right-of-Use Assets		61.9 			6.3 			— 			7.4 			6.5 			4.7 			3.5 			10.9 		
Interest on Lease Liabilities		15.4 			1.5 			— 			2.7 			3.1 			0.9 			0.7 			2.2 		
Total Lease Rental Costs (a)		$	356.9 			$	25.2 			$	2.6 			$	29.2 			$	111.1 			$	22.7 			$	12.0 			$	22.5 		

(a)Excludes variable and short-term lease costs, which were immaterial.

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Supplemental information related to leases are shown in the tables below:

December 31, 2022		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
Weighted-Average Remaining Lease Term (years):																	
Operating Leases		12.69		4.33		2.05		5.29		5.79		5.98		23.90		23.55	
Finance Leases		4.61		5.39		0.00		4.25		4.76		5.27		6.02		4.13	
Weighted-Average Discount Rate:																	
Operating Leases		3.54 	%		4.15 	%		1.96 	%		3.61 	%		3.62 	%		3.73 	%		3.43 	%		3.41 	%	
Finance Leases		5.76 	%		4.75 	%		— 	%		7.09 	%		8.99 	%		4.53 	%		4.63 	%		4.80 	%	

December 31, 2021		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
Weighted-Average Remaining Lease Term (years):																	
Operating Leases		10.39		5.91		2.95		5.68		5.87		6.69		20.89		20.24	
Finance Leases		2.95		5.51		0.00		4.97		2.10		5.54		6.18		4.53	
Weighted-Average Discount Rate:																	
Operating Leases		3.35 	%		3.53 	%		0.90 	%		3.42 	%		3.46 	%		3.56 	%		3.35 	%		3.34 	%	
Finance Leases		3.26 	%		4.31 	%		— 	%		7.16 	%		3.02 	%		4.19 	%		4.23 	%		4.68 	%	

Year Ended December 31, 2022		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Cash paid for amounts included in the measurement of lease liabilities:																	
Operating Cash Flows Used for Operating Leases		$	155.1 			$	18.3 			$	1.0 			$	17.9 			$	29.7 			$	17.5 			$	10.5 			$	13.7 		
Operating Cash Flows Used for Finance Leases		13.6 			1.3 			— 			2.0 			3.2 			0.8 			0.6 			2.1 		
Financing Cash Flows Used for Finance Leases		309.5 			6.8 			— 			7.9 			130.7 			4.9 			3.2 			10.8 		
																	
Non-cash Acquisitions Under Operating Leases		$	191.4 			$	36.7 			$	1.7 			$	23.1 			$	19.1 			$	8.4 			$	46.0 			$	53.6 		

Year Ended December 31, 2021		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Cash paid for amounts included in the measurement of lease liabilities:																	
Operating Cash Flows Used for Operating Leases		$	279.9 			$	18.0 			$	1.6 			$	19.3 			$	92.9 			$	19.0 			$	8.7 			$	11.6 		
Operating Cash Flows Used for Finance Leases		14.3 			1.4 			— 			2.4 			2.9 			0.8 			0.6 			2.5 		
Financing Cash Flows Used for Finance Leases		64.0 			6.7 			— 			7.7 			6.8 			4.9 			3.2 			10.9 		
																	
Non-cash Acquisitions Under Operating Leases		$	117.0 			$	4.4 			$	2.1 			$	4.2 			$	2.6 			$	4.2 			$	33.4 			$	42.9 		

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The following tables show property, plant and equipment under finance leases and noncurrent assets under operating leases and related obligations recorded on the balance sheets.  Unless shown as a separate line on the balance sheets due to materiality, net operating lease assets are included in Deferred Charges and Other Noncurrent Assets, current finance lease obligations are included in Other Current Liabilities and long-term finance lease obligations are included in Deferred Credits and Other Noncurrent Liabilities on the balance sheets. Lease obligations are not recognized on the balance sheets for lease agreements with a lease term of less than twelve months.

December 31, 2022		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Property, Plant and Equipment Under Finance Leases:																	
Generation		$	120.5 			$	— 			$	— 			$	41.1 			$	28.0 			$	— 			$	0.6 			$	25.9 		
Other Property, Plant and Equipment		321.2 			53.7 			— 			20.1 			40.6 			32.7 			25.2 			58.3 		
Total Property, Plant and Equipment		441.7 			53.7 			— 			61.2 			68.6 			32.7 			25.8 			84.2 		
Accumulated Amortization		229.3 			23.6 			— 			31.9 			34.8 			13.8 			10.8 			54.6 		
Net Property, Plant and Equipment Under Finance Leases		$	212.4 		(a)	$	30.1 			$	— 			$	29.3 			$	33.8 			$	18.9 			$	15.0 			$	29.6 		
																	
Obligations Under Finance Leases:																	
Noncurrent Liability		$	168.2 			$	23.1 			$	— 			$	21.6 			$	27.1 			$	14.2 			$	11.7 			$	31.3 		
Liability Due Within One Year		57.2 			7.0 			— 			7.7 			6.9 			4.7 			3.3 			10.9 		
Total Obligations Under Finance Leases		$	225.4 		(b)	$	30.1 			$	— 			$	29.3 			$	34.0 			$	18.9 			$	15.0 			$	42.2 		

December 31, 2021		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Property, Plant and Equipment Under Finance Leases:																	
Generation		$	388.8 			$	— 			$	— 			$	42.8 			$	156.8 			$	— 			$	0.6 			$	34.3 		
Other Property, Plant and Equipment		323.8 			50.7 			— 			20.4 			42.1 			32.1 			23.9 			55.7 		
Total Property, Plant and Equipment		712.6 			50.7 			— 			63.2 			198.9 			32.1 			24.5 			90.0 		
Accumulated Amortization		222.4 			19.9 			— 			27.5 			38.2 			12.8 			9.2 			47.8 		
Net Property, Plant and Equipment Under Finance Leases		$	490.2 		(a)	$	30.8 			$	— 			$	35.7 			$	160.7 			$	19.3 			$	15.3 			$	42.2 		
																	
Obligations Under Finance Leases:																	
Noncurrent Liability		$	196.1 			$	24.2 			$	— 			$	28.1 			$	31.7 			$	14.9 			$	12.3 			$	38.9 		
Liability Due Within One Year		304.6 			6.6 			— 			7.6 			130.5 			4.4 			3.0 			10.8 		
Total Obligations Under Finance Leases		$	500.7 		(b)	$	30.8 			$	— 			$	35.7 			$	162.2 			$	19.3 			$	15.3 			$	49.7 		

(a)    Amount excludes $369 thousand and $3 million of Net Property, Plant and Equipment Under Finance Leases classified as Assets Held for Sale on the balance sheet for the years ended December 31, 2022 and 2021, respectively. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(b)    Amount excludes $369 thousand and $3 million of Obligations Under Finance Leases classified as Liabilities Held for Sale on the balance sheet for the years ended December 31, 2022 and 2021, respectively. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
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December 31, 2022		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Operating Lease Assets		$	645.0 		(a)	$	94.7 			$	2.7 			$	73.6 			$	64.3 			$	73.8 			$	106.1 			$	123.4 		
																	
Obligations Under Operating Leases:																	
Noncurrent Liability		$	552.1 			$	67.8 			$	1.5 			$	59.1 			$	48.9 			$	60.3 			$	99.3 			$	120.2 		
Liability Due Within One Year		113.4 			28.6 			1.3 			15.0 			16.0 			13.5 			8.9 			8.4 		
Total Obligations Under Operating Leases		$	665.5 		(b)	$	96.4 			$	2.8 			$	74.1 			$	64.9 			$	73.8 			$	108.2 			$	128.6 		

December 31, 2021		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Operating Lease Assets		$	578.3 		(a)	$	73.6 			$	2.0 			$	66.9 			$	63.5 			$	81.2 			$	68.9 			$	80.1 		
																	
Obligations Under Operating Leases:																	
Noncurrent Liability		$	492.8 			$	61.3 			$	1.3 			$	52.4 			$	48.9 			$	68.6 			$	62.2 			$	77.7 		
Liability Due Within One Year		97.6 			14.0 			0.9 			15.1 			15.5 			13.1 			6.9 			8.1 		
Total Obligations Under Operating Leases		$	590.4 		(b)	$	75.3 			$	2.2 			$	67.5 			$	64.4 			$	81.7 			$	69.1 			$	85.8 		

(a)    Amount excludes $528 thousand and $11 million of Operating Lease Assets classified as Assets Held for Sale on the balance sheet for the years ended December 31, 2022 and 2021, respectively. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(b)    Amount excludes $578 thousand and $11 million of Obligations Under Operating Leases classified as Liabilities Held for Sale on the balance sheet for the years ended December 31, 2022 and 2021, respectively. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

Future minimum lease payments consisted of the following as of December 31, 2022:

Finance Leases		AEP (a)		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
2023		$	67.8 			$	8.3 			$	— 			$	9.6 			$	9.2 			$	5.4 			$	3.8 			$	12.4 		
2024		71.4 			7.2 			— 			8.8 			12.1 			4.6 			3.3 			16.5 		
2025		40.9 			5.5 			— 			7.5 			6.3 			3.2 			2.5 			6.1 		
2026		24.9 			4.4 			— 			2.9 			3.9 			2.6 			2.2 			2.8 		
2027		19.2 			3.5 			— 			1.8 			3.4 			2.1 			1.8 			2.4 		
After 2027		32.6 			5.5 			— 			2.8 			7.6 			3.4 			3.7 			5.6 		
Total Future Minimum Lease Payments		256.8 			34.4 			— 			33.4 			42.5 			21.3 			17.3 			45.8 		
Less: Imputed Interest		31.4 			4.3 			— 			4.1 			8.5 			2.4 			2.3 			3.6 		
Estimated Present Value of Future Minimum Lease Payments		$	225.4 			$	30.1 			$	— 			$	29.3 			$	34.0 			$	18.9 			$	15.0 			$	42.2 		
(a)    Amount excludes $369 thousand of Obligations Under Finance Leases classified as Liabilities Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

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Operating Leases		AEP (a)		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
2023		$	138.5 			$	32.3 			$	1.4 			$	17.5 			$	18.8 			$	16.4 			$	11.5 			$	14.4 		
2024		125.7 			29.7 			0.9 			14.6 			17.7 			14.9 			10.7 			12.7 		
2025		86.6 			13.1 			0.4 			11.8 			9.2 			13.2 			9.5 			11.4 		
2026		75.5 			10.9 			0.2 			10.3 			8.3 			12.0 			8.6 			10.2 		
2027		65.6 			8.3 			— 			9.1 			7.5 			10.7 			7.8 			8.8 		
After 2027		352.0 			11.7 			— 			19.2 			9.8 			15.7 			116.4 			141.8 		
Total Future Minimum Lease Payments		843.9 			106.0 			2.9 			82.5 			71.3 			82.9 			164.5 			199.3 		
Less: Imputed Interest		178.4 			9.6 			0.1 			8.4 			6.4 			9.1 			56.3 			70.7 		
Estimated Present Value of Future Minimum Lease Payments		$	665.5 			$	96.4 			$	2.8 			$	74.1 			$	64.9 			$	73.8 			$	108.2 			$	128.6 		

(a)    Amount excludes $578 thousand of Obligations Under Operating Leases classified as Liabilities Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

Master Lease Agreements (Applies to all Registrants except AEPTCo)

The Registrants lease certain equipment under master lease agreements.  Under the lease agreements, the lessor is guaranteed a residual value up to a stated percentage of the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, the Registrants are committed to pay the difference between the actual fair value and the residual value guarantee.  Historically, at the end of the lease term the fair value has been in excess of the amount guaranteed.  As of December 31, 2022, the maximum potential loss by the Registrants for these lease agreements assuming the fair value of the equipment is zero at the end of the lease term was as follows:
									
Company		Maximum
Potential Loss	
		(in millions)	
AEP		$	46.0 		
AEP Texas		11.1 		
APCo		6.1 		
I&M		4.4 		
OPCo		7.6 		
PSO		4.8 		
SWEPCo		5.3 		

AEPRO Boat and Barge Leases (Applies to AEP)

In 2015, AEP sold its commercial barge transportation subsidiary, AEPRO, to a nonaffiliated party. Certain boat and barge leases acquired by the nonaffiliated party are subject to an AEP guarantee in favor of the respective lessors, ensuring future payments under such leases with maturities up to 2027. As of December 31, 2022, the maximum potential amount of future payments required under the guaranteed leases was $27 million. Under the terms of certain of the arrangements, upon the lessors exercising their rights after an event of default by the nonaffiliated party, AEP is entitled to enter into new lease arrangements as a lessee that would have substantially the same terms as the existing leases. Alternatively, for the arrangements with one of the lessors, upon an event of default by the nonaffiliated party and the lessor exercising its rights, payment to the lessor would allow AEP to step into the lessor’s rights as well as obtaining title to the assets. Under either situation, AEP would have the ability to utilize the assets in the normal course of barging operations. AEP would also have the right to sell the acquired assets for which it obtained title. As of December 31, 2022, AEP’s boat and barge lease guarantee liability was $2 million, of which $1 million was recorded in Other Current Liabilities and $1 million was recorded in Deferred Credits and Other Noncurrent Liabilities on AEP’s balance sheet.

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In February 2020, the nonaffiliated party filed Chapter 11 bankruptcy. The party entered into a restructuring support agreement and has announced it expects to continue their operations as normal. In March 2020, the bankruptcy court approved the party’s recapitalization plan. In April 2020, the nonaffiliated party emerged from bankruptcy. Management has determined that it is reasonably possible that enforcement of AEP’s liability for future payments under these leases will be exercised within the next twelve months. In such an event, if AEP is unable to sell or incorporate any of the acquired assets into its fleet operations, it could reduce future net income and cash flows and impact financial condition.

Lessor Activity

The Registrants’ lessor activity was immaterial as of and for the twelve months ended December 31, 2022 and December 31, 2021, respectively.
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14.  FINANCING ACTIVITIES

The disclosures in this note apply to all Registrants, unless indicated otherwise.

Common Stock (Applies to AEP)

The following table is a reconciliation of common stock share activity:

Shares of AEP Common Stock		Issued		Held in Treasury		
Balance, December 31, 2019		514,373,631 			20,204,160 			
Issued		2,434,723 			— 			
	
Balance, December 31, 2020		516,808,354 			20,204,160 			
Issued		7,607,821 			— 			
	
Balance, December 31, 2021		524,416,175 			20,204,160 			
Issued		683,146 			— 			
Treasury Stock Reissued		— 			(8,970,920)		(a)	
Balance, December 31, 2022		525,099,321 			11,233,240 			

(a)Reissued Treasury Stock used to fulfill share commitments related to AEP’s Equity Units. See “Equity Units” section below for additional information.

ATM Program

In 2020, AEP filed a prospectus supplement and executed an Equity Distribution Agreement, pursuant to which AEP may sell, from time to time, up to an aggregate of $1 billion of its common stock through an ATM offering program, including an equity forward sales component. The compensation paid to the selling agents by AEP may be up to 2% of the gross offering proceeds of the shares. There were no issuances under the ATM program for the year ended December 31, 2022.

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Long-term Debt

The following table details long-term debt outstanding:

				Weighted-Average		Interest Rate Ranges as of		Outstanding as of	
				Interest Rate as of		December 31,		December 31,	
Company		Maturity		December 31, 2022		2022		2021		2022		2021	
AEP										(in millions)	
Senior Unsecured Notes		2022-2052		3.96%		0.75%-7.00%		0.61%-7.00%		$	29,486.2 			$	27,497.3 		
Pollution Control Bonds (a)		2022-2036 (b)		2.76%		0.63%-4.55%		0.19%-4.55%		1,705.3 			1,804.5 		
Notes Payable – Nonaffiliated (c)		2022-2032		4.29%		0.93%-6.37%		0.79%-6.37%		269.7 			211.3 		
Securitization Bonds		2023-2029 (d)		2.91%		2.01%-3.77%		2.01%-3.77%		487.8 			603.5 		
Spent Nuclear Fuel Obligation (e)										285.6 			281.3 		
Junior Subordinated Notes (f)		2024-2027		2.35%		1.30%-3.88%		1.30%-3.88%		2,381.3 			2,373.0 		
Other Long-term Debt		2022-2059		5.52%		1.15%-13.72%		0.91%-13.72%		1,006.7 			683.6 		
Total Long-term Debt Outstanding (g)										$	35,622.6 			$	33,454.5 		
													
AEP Texas													
Senior Unsecured Notes		2023-2052		4.06%		2.10%-6.76%		2.10%-6.76%		$	4,702.7 			$	4,135.5 		
Pollution Control Bonds		2023-2030 (b)		3.42%		0.90%-4.55%		0.90%-4.55%		440.2 			439.9 		
	
Securitization Bonds		2024-2029 (d)		2.50%		2.06%-2.84%		2.06%-2.84%		314.4 			404.7 		
Other Long-term Debt		2025-2059		5.67%		4.50%-5.67%		1.35%-4.50%		200.5 			200.7 		
Total Long-term Debt Outstanding										$	5,657.8 			$	5,180.8 		
													
AEPTCo													
Senior Unsecured Notes		2023-2052		3.83%		2.75%-5.52%		2.75%-5.52%		$	4,782.8 			$	4,343.9 		

	
Total Long-term Debt Outstanding										$	4,782.8 			$	4,343.9 		
													
APCo													
Senior Unsecured Notes		2025-2050		4.68%		2.70%-7.00%		2.70%-7.00%		$	4,581.4 			$	4,083.7 		
Pollution Control Bonds (a)		2024-2036 (b)		2.74%		0.63%-3.80%		0.19%-2.75%		429.4 			529.5 		
	
Securitization Bonds		2023-2028 (d)		3.67%		2.01%-3.77%		2.01%-3.77%		173.3 			198.8 		
Other Long-term Debt		2023-2026		5.34%		4.84%-13.72%		1.24%-13.72%		226.4 			126.9 		
Total Long-term Debt Outstanding										$	5,410.5 			$	4,938.9 		
													
I&M													
Senior Unsecured Notes		2023-2051		4.19%		3.20%-6.05%		3.20%-6.05%		$	2,597.3 			$	2,595.5 		
Pollution Control Bonds (a)		2025 (b)		2.49%		0.75%-3.05%		0.75%-3.05%		189.0 			188.7 		
Notes Payable – Nonaffiliated (c)		2023-2027		4.26%		0.93%-5.93%		0.79%-1.24%		183.8 			122.2 		
	
Spent Nuclear Fuel Obligation (e)										285.6 			281.3 		
Other Long-term Debt		2025		6.00%		6.00%		6.00%		5.1 			7.3 		
Total Long-term Debt Outstanding										$	3,260.8 			$	3,195.0 		
													
OPCo													
Senior Unsecured Notes		2030-2051		3.87%		1.63%-6.60%		1.63%-6.60%		$	2,969.7 			$	2,967.8 		

	
Other Long-term Debt		2028		1.15%		1.15%		1.15%		0.6 			0.7 		
Total Long-term Debt Outstanding										$	2,970.3 			$	2,968.5 		
													
PSO													
Senior Unsecured Notes		2025-2051		3.74%		2.20%-6.63%		2.20%-6.63%		$	1,785.6 			$	1,785.5 		

	
Other Long-term Debt		2025-2027		5.69%		3.00%-5.75%		1.47%-3.00%		127.2 			128.0 		
Total Long-term Debt Outstanding										$	1,912.8 			$	1,913.5 		
													
SWEPCo													
Senior Unsecured Notes		2026-2051		3.57%		1.65%-6.20%		1.65%-6.20%		$	3,297.6 			$	3,295.1 		
	
Notes Payable – Nonaffiliated (c)		2024-2032		5.38%		4.58%-6.37%		4.58%-6.37%		55.9 			59.1 		
	
Other Long-term Debt		2028		4.68%		4.68%		4.68%		38.1 			41.0 		
Total Long-term Debt Outstanding										$	3,391.6 			$	3,395.2 		

(a)For certain series of Pollution Control Bonds, interest rates are subject to periodic adjustment.  Certain series may be purchased on demand at periodic interest adjustment dates.  Letters of credit from banks and insurance policies support certain series. Consequently, these bonds have been classified for maturity purposes as Long-term Debt Due Within One Year - Nonaffiliated on the balance sheets.
(b)Certain Pollution Control Bonds are subject to redemption earlier than the maturity date.
(c)Notes payable represent outstanding promissory notes issued under term loan agreements and credit agreements with a number of banks and other financial institutions. At expiration, all notes then issued and outstanding are due and payable. Interest rates are both fixed and variable. Variable rates generally relate to specified short-term interest rates.
(d)Dates represent the scheduled final payment dates for the securitization bonds. The legal maturity date is one to two years later. These bonds have been classified for maturity and repayment purposes based on the scheduled final payment date.
(e)Spent Nuclear Fuel Obligation consists of a liability along with accrued interest for disposal of SNF. See “Spent Nuclear Fuel Disposal” section of Note 6 for additional information.
(f)See “Equity Units” section below for additional information.
(g)Amount excludes $1.2 billion and $1.1 billion of Total Long-term Debt Outstanding classified as Liabilities Held for Sale on the balance sheet as of December 31, 2022 and 2021, respectively. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
376

As of December 31, 2022, outstanding long-term debt was payable as follows:

		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
2023		$	1,996.4 			$	278.5 			$	60.0 			$	251.8 			$	341.8 			$	0.1 			$	0.5 			$	6.2 		
2024		1,525.2 		(a)	96.0 			95.0 			113.5 			56.4 			0.1 			0.6 			6.2 		
2025		3,253.9 		(b)	524.5 			90.0 			673.3 			220.5 			0.1 			250.6 			6.2 		
2026		1,554.0 			75.0 			425.0 			30.9 			8.5 			0.1 			50.6 			906.2 		
2027		2,211.9 			25.6 			— 			355.6 			1.7 			0.1 			0.3 			6.2 		
After 2027		25,388.8 			4,706.4 			4,166.0 			4,031.8 			2,660.6 			3,000.1 			1,625.0 			2,488.2 		
Principal Amount		35,930.2 			5,706.0 			4,836.0 			5,456.9 			3,289.5 			3,000.6 			1,927.6 			3,419.2 		
Unamortized Discount, Net and Debt Issuance Costs		(307.6)			(48.2)			(53.2)			(46.4)			(28.7)			(30.3)			(14.8)			(27.6)		
Total Long-term Debt Outstanding		$	35,622.6 		(c)	$	5,657.8 			$	4,782.8 			$	5,410.5 			$	3,260.8 			$	2,970.3 			$	1,912.8 			$	3,391.6 		

(a)    Amount includes $805 million of Junior Subordinated Notes. See “Equity Units” section below for additional information.
(b)    Amount includes $850 million of Junior Subordinated Notes. See “Equity Units” section below for additional information.
(c)    Amount excludes $1.2 billion of Total Long-term Debt Outstanding classified as Liabilities Held for Sale on the balance sheet as of December 31, 2022. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

Long-term Debt Subsequent Events

In January and February 2023, I&M retired $8 million and $8 million, respectively, of Notes Payable related to DCC Fuel.

In January 2023, PSO issued $475 million of 5.25% Senior Unsecured Notes due in 2033.

In February 2023, AEP Texas retired $12 million of Securitization Bonds.

In February 2023, APCo retired $13 million of Securitization Bonds.

Equity Units (Applies to AEP)

2020 Equity Units

In August 2020, AEP issued 17 million Equity Units initially in the form of corporate units, at a stated amount of $50 per unit, for a total stated amount of $850 million. Net proceeds from the issuance were approximately $833 million. The proceeds were used to support AEP’s overall capital expenditure plans.

Each corporate unit represents a 1/20 undivided beneficial ownership interest in $1,000 principal amount of AEP’s 1.30% Junior Subordinated Notes (notes) due in 2025 and a forward equity purchase contract which settles after three years in August 2023. The notes are expected to be remarketed in 2023, at which time the interest rate will reset at the then-current market rate. Investors may choose to remarket their notes to receive the remarketing proceeds and use those funds to settle the forward equity purchase contract, or accept the remarketed debt and use other funds for the equity purchase. If the remarketing is unsuccessful, investors have the right to put their notes to AEP at a price equal to the principal. The Equity Units carry an annual distribution rate of 6.125%, which is comprised of a quarterly coupon rate of interest of 1.30% and a quarterly forward equity purchase contract payment of 4.825%.

Each forward equity purchase contract obligates the holder to purchase, and AEP to sell, for $50 a number of shares in common stock in accordance with the conversion ratios set forth below (subject to an anti-dilution adjustment):

•If the AEP common stock market price is equal to or greater than $99.95: 0.5003 shares per contract.
•If the AEP common stock market price is less than $99.95 but greater than $83.29: a number of shares per contract equal to $50 divided by the applicable market price. The holder receives a variable number of shares at $50.
•If the AEP common stock market price is less than or equal to $83.29: 0.6003 shares per contract.

377

A holder’s ownership interest in the notes is pledged to AEP to secure the holder’s obligation under the related forward equity purchase contract. If a holder of the forward equity purchase contract chooses at any time to no longer be a holder of the notes, such holder’s obligation under the forward equity purchase contract must be secured by a U.S. Treasury security which must be equal to the aggregate principal amount of the notes.

At the time of issuance, the $850 million of notes were recorded within Long-term Debt on the balance sheets. The present value of the purchase contract payments of $121 million were recorded in Deferred Credits and Other Noncurrent Liabilities with a current portion in Other Current Liabilities at the time of issuance, representing the obligation to make forward equity contract payments, with an offsetting reduction to Paid-in Capital. The difference between the face value and present value of the purchase contract payments will be accreted to Interest Expense on the statements of income over the three year period ending in 2023. The liability recorded for the contract payments is considered non-cash and excluded from the statements of cash flows. Until settlement of the forward equity purchase contract, earnings per-share dilution resulting from the equity unit issuance will be determined under the treasury stock method. The maximum amount of shares AEP will be required to issue to settle the purchase contract is 10,205,100 shares (subject to an anti-dilution adjustment).

2019 Equity Units

In March 2019, AEP issued 16.1 million Equity Units initially in the form of corporate units, at a stated amount of $50 per unit, for a total stated amount of $805 million. Net proceeds from the issuance were approximately $785 million. The proceeds were used to support AEP’s overall capital expenditure plans including the acquisition of Sempra Renewables LLC.

Each corporate unit represents a 1/20 undivided beneficial ownership interest in $1,000 principal amount of AEP’s 3.40% Junior Subordinated Notes (notes) due in 2024 and a forward equity purchase contract which settled after three years in 2022. In January 2022, AEP successfully remarketed the notes on behalf of holders of the corporate units and did not directly receive any proceeds therefrom. Instead, the holders of the corporate units used the debt remarketing proceeds to settle the forward equity purchase contract with AEP. The interest rate on the notes was reset to 2.031% with the maturity remaining in 2024. In March 2022, AEP issued 8,970,920 shares of AEP common stock and received proceeds totaling $805 million under the settlement of the forward equity purchase contract. AEP common stock held in treasury was used to settle the forward equity purchase contract.

Debt Covenants (Applies to AEP and AEPTCo)

Covenants in AEPTCo’s note purchase agreements and indenture limit the amount of contractually-defined priority debt (which includes a further sub-limit of $50 million of secured debt) to 10% of consolidated tangible net assets. AEPTCo’s contractually-defined priority debt was 1.9% of consolidated tangible net assets as of December 31, 2022. The method for calculating the consolidated tangible net assets is contractually-defined in the note purchase agreement.

Dividend Restrictions

Utility Subsidiaries’ Restrictions

Parent depends on its utility subsidiaries to pay dividends to shareholders. AEP utility subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the subsidiaries to transfer funds to Parent in the form of dividends.

All of the dividends declared by AEP’s utility subsidiaries that provide transmission or local distribution services are subject to a Federal Power Act requirement that prohibits the payment of dividends out of capital accounts in certain circumstances; payment of dividends is generally allowed out of retained earnings. The Federal Power Act also creates a reserve on earnings attributable to hydroelectric generation plants. Because of their ownership of such plants, this reserve applies to APCo and I&M.
378

Certain AEP subsidiaries have credit agreements that contain covenants that limit their debt to capitalization ratio to 67.5%. The method for calculating outstanding debt and capitalization is contractually-defined in the credit agreements.

The most restrictive dividend limitation for certain AEP subsidiaries is through the Federal Power Act restriction, while for other AEP subsidiaries the most restrictive dividend limitation is through the credit agreements. As of December 31, 2022, the maximum amount of restricted net assets of AEP’s subsidiaries that may not be distributed to the Parent in the form of a loan, advance or dividend was $16.2 billion.

The Federal Power Act restriction limits the ability of the AEP subsidiaries owning hydroelectric generation to pay dividends out of retained earnings. Additionally, the credit agreement covenant restrictions can limit the ability of the AEP subsidiaries to pay dividends out of retained earnings. As of December 31, 2022, the amount of any such restrictions were as follows:

		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Restricted Retained Earnings		$	3,023.0 		(a)	$	1,105.7 			$	— 			$	543.1 			$	688.2 			$	— 			$	— 			$	373.0 		

(a)    Includes the restrictions of consolidated and non-consolidated subsidiaries.

Parent Restrictions (Applies to AEP)

The holders of AEP’s common stock are entitled to receive the dividends declared by the Board of Directors provided funds are legally available for such dividends.  Parent’s income primarily derives from common stock equity in the earnings of its utility subsidiaries.

Pursuant to the leverage restrictions in credit agreements, AEP must maintain a percentage of debt-to-total capitalization at a level that does not exceed 67.5%.  The method for calculating outstanding debt and capitalization is contractually-defined in the credit agreements.  As of December 31, 2022, AEP had $8.1 billion of available retained earnings to pay dividends to common shareholders. AEP paid $1.6 billion, $1.5 billion and $1.4 billion of dividends to common shareholders for the years ended December 31, 2022, 2021 and 2020, respectively.

379

Lines of Credit and Short-term Debt (Applies to AEP)

AEP uses its commercial paper program to meet the short-term borrowing needs of its subsidiaries.  The program funds a Utility Money Pool, which funds AEP’s utility subsidiaries; a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries; and the short-term debt requirements of subsidiaries that are not participating in either money pool for regulatory or operational reasons, as direct borrowers.  As of December 31, 2022, AEP had $5 billion in revolving credit facilities to support its commercial paper program.  Securitized Debt for Receivables, for the year ended 2022, had a weighted-average interest rate of 1.84% and a maximum amount outstanding of $750 million. The commercial paper program, for the year ended 2022, had a weighted-average interest rate of 2.74% and a maximum amount outstanding of $2.9 billion. AEP’s outstanding short-term debt was as follows:

				December 31,	
				2022		2021	
Company		Type of Debt		Outstanding
Amount		Interest
Rate (a)		Outstanding
Amount		Interest
Rate (a)	
				(in millions)				(in millions)			
AEP		Securitized Debt for Receivables (b)		$	750.0 			4.67 	%		$	750.0 			0.19 	%	
AEP		Commercial Paper		2,862.2 			4.80 	%		1,364.0 			0.34 	%	
AEP		Term Loan		— 			— 	%		500.0 			0.81 	%	
AEP		Term Loan		125.0 			5.17 	%		— 			— 	%	
AEP		Term Loan		150.0 			5.17 	%		— 			— 	%	
AEP		Term Loan		100.0 			5.23 	%		— 			— 	%	
AEP		Term Loan		125.0 			4.87 	%		— 			— 	%	

	
		Total Short-term Debt		$	4,112.2 					$	2,614.0 				

(a)    Weighted-average rate as of December 31, 2022 and 2021, respectively.
(b)    Amount of securitized debt for receivables as accounted for under the “Transfers and Servicing” accounting guidance.

Corporate Borrowing Program – AEP System (Applies to Registrant Subsidiaries)

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP’s subsidiaries.  The corporate borrowing program includes a Utility Money Pool, which funds AEP’s utility subsidiaries; a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries; and direct borrowing from AEP.  The AEP System Utility Money Pool operates in accordance with the terms and conditions of its agreement filed with the FERC.  The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of December 31, 2022 and 2021 are included in Advances to Affiliates and Advances from Affiliates, respectively, on the Registrant Subsidiaries’ balance sheets.  The Utility Money Pool participants’ money pool activity and corresponding authorized borrowing limits are described in the following tables:

Year Ended December 31, 2022:

		Maximum				Average				Net Loans to				
		Borrowings		Maximum		Borrowings		Average		(Borrowings from)		Authorized		
		from the		Loans to the		from the		Loans to the		the Utility Money		Short-term		
		Utility		Utility		Utility		Utility		Pool as of		Borrowing		
Company		Money Pool		Money Pool		Money Pool		Money Pool		December 31, 2022		Limit		
		(in millions)		
AEP Texas		$	348.8 			$	652.3 			$	173.3 			$	247.8 			$	(96.5)			$	500.0 			
AEPTCo		480.2 			137.0 			189.4 			28.9 			(199.9)		(a)	820.0 		(b)	
APCo		438.4 			214.2 			181.7 			45.4 			(162.4)			500.0 			
I&M		318.6 			23.0 			105.2 			22.3 			(226.9)			500.0 			
OPCo		262.5 			246.1 			101.3 			86.9 			(172.9)			500.0 			
PSO		364.2 			432.5 			224.5 			402.8 			(364.2)			400.0 			
SWEPCo		358.4 			156.6 			219.3 			109.7 			(310.7)			400.0 			

380

Year Ended December 31, 2021:

		Maximum				Average				Net Loans to				
		Borrowings		Maximum		Borrowings		Average		(Borrowings from)		Authorized		
		from the		Loans to the		from the		Loans to the		the Utility Money		Short-term		
		Utility		Utility		Utility		Utility		Pool as of		Borrowing		
Company		Money Pool		Money Pool		Money Pool		Money Pool		December 31, 2021		Limit		
		(in millions)		
AEP Texas		$	355.5 			$	104.7 			$	172.5 			$	40.0 			$	(26.9)			$	500.0 			
AEPTCo		444.9 			117.3 			189.1 			29.7 			(108.0)		(a)	820.0 		(b)	
APCo		199.3 			616.9 			87.5 			118.3 			(178.5)			500.0 			
I&M		166.5 			368.2 			110.4 			67.7 			(71.8)			500.0 			
OPCo		259.2 			622.9 			61.6 			127.2 			42.0 			500.0 			
PSO		267.7 			747.3 			134.0 			113.1 			(72.3)			400.0 			
SWEPCo		280.3 			561.9 			142.4 			287.4 			153.8 			400.0 			

(a)    Amount excludes $4 million of Advances to Affiliates classified as Assets Held for Sale and $1 million of Advances from Affiliates classified as Liabilities Held for Sale on the AEP Transco balance sheet for the years ended December 31, 2022 and 2021, respectively. See “Dispositions of KPCo and KTCo” section of Note 7 for additional information.
(b)    Amount represents the combined authorized short-term borrowing limit the State Transcos have from FERC or state regulatory commissions.

The activity in the above tables does not include short-term lending activity of certain AEP nonutility subsidiaries. AEP Texas’ wholly-owned subsidiary, AEP Texas North Generation Company, LLC and SWEPCo’s wholly-owned subsidiary, Mutual Energy SWEPCo, LLC participate in the Nonutility Money Pool. The amounts of outstanding loans to the Nonutility Money Pool as of December 31, 2022 and 2021 are included in Advances to Affiliates on each subsidiaries’ balance sheets. The Nonutility Money Pool participants’ money pool activity is described in the following tables:

Year Ended December 31, 2022:

		Maximum Loans		Average Loans		Loans to the Nonutility	
		to the Nonutility		to the Nonutility		Money Pool as of	
Company		Money Pool		Money Pool		December 31, 2022	
		(in millions)	
AEP Texas		$	7.0 			$	6.8 			$	6.9 		
SWEPCo		2.1 			2.1 			2.1 		

Year Ended December 31, 2021:

		Maximum Loans		Average Loans		Loans to the Nonutility	
		to the Nonutility		to the Nonutility		Money Pool as of	
Company		Money Pool		Money Pool		December 31, 2021	
		(in millions)	
AEP Texas		$	7.1 			$	6.9 			$	6.9 		
SWEPCo		2.1 			2.1 			2.1 		

381

AEP has a direct financing relationship with AEPTCo to meet its short-term borrowing needs. The amounts of outstanding loans to and borrowings from AEP as of December 31, 2022 and 2021 are included in Advances to Affiliates and Advances from Affiliates, respectively, on AEPTCo’s balance sheets. AEPTCo’s direct financing activities with AEP and corresponding authorized borrowing limits are described in the following tables:

Year Ended December 31, 2022:

Maximum		Maximum		Average		Average		Borrowings from		Loans to		Authorized		
Borrowings		Loans		Borrowings		Loans		AEP as of		AEP as of		Short-term		
from AEP		to AEP		from AEP		to AEP		December 31, 2022		December 31, 2022		Borrowing Limit		
(in millions)		
$	52.4 			$	141.8 			$	6.7 			$	57.5 			$	29.4 			$	— 			$	50.0 		(a)	

Year Ended December 31, 2021:

Maximum		Maximum		Average		Average		Borrowings from		Loans to		Authorized		
Borrowings		Loans		Borrowings		Loans		AEP as of		AEP as of		Short-term		
from AEP		to AEP		from AEP		to AEP		December 31, 2021		December 31, 2021		Borrowing Limit		
(in millions)		
$	14.6 			$	224.2 			$	1.8 			$	118.0 			$	1.5 			$	12.7 			$	50.0 		(a)	

(a)    Amount represents the combined authorized short-term borrowing limit the State Transcos have from FERC or state regulatory commissions.

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool are summarized in the following table:

	Years Ended December 31,	
	2022		2021		2020	
Maximum Interest Rate	5.28 	%		0.48 	%		2.70 	%	
Minimum Interest Rate	0.10 	%		0.02 	%		0.27 	%	

The average interest rates for funds borrowed from and loaned to the Utility Money Pool are summarized in the following table:

		Average Interest Rate for Funds Borrowed
from the Utility Money Pool for the
Years Ended December 31,		Average Interest Rate for Funds Loaned
to the Utility Money Pool for the
Years Ended December 31,	
Company		2022		2021		2020		2022		2021		2020	
AEP Texas		1.08 	%		0.33 	%		1.51 	%		1.99 	%		0.26 	%		0.81 	%	
AEPTCo		1.81 	%		0.32 	%		1.29 	%		2.47 	%		0.10 	%		1.99 	%	
APCo		2.34 	%		0.41 	%		2.12 	%		2.39 	%		0.25 	%		0.85 	%	
I&M		2.57 	%		0.33 	%		1.07 	%		2.20 	%		0.23 	%		1.18 	%	
OPCo		3.51 	%		0.27 	%		0.99 	%		1.22 	%		0.14 	%		2.06 	%	
PSO		2.65 	%		0.34 	%		0.92 	%		0.75 	%		0.07 	%		1.95 	%	
SWEPCo		2.80 	%		0.26 	%		1.27 	%		0.55 	%		0.18 	%		— 	%	

382

Maximum, minimum and average interest rates for funds loaned to the Nonutility Money Pool are summarized in the following table:

			 	Maximum Interest Rate	 	Minimum Interest Rate	 	Average Interest Rate	
Year Ended			 	for Funds Loaned to	 	for Funds Loaned to	 	for Funds Loaned to	
December 31,		Company	 	the Nonutility Money Pool	 	the Nonutility Money Pool	 	the Nonutility Money Pool	
2022		AEP Texas	 	5.28 	%		0.46 	%		2.23 	%	
2022		SWEPCo	 	5.28 	%		0.46 	%		2.23 	%	
									
2021		AEP Texas		0.58 	%		0.21 	%		0.37 	%	
2021		SWEPCo		0.58 	%		0.21 	%		0.37 	%	
									
2020		AEP Texas		2.70 	%		0.27 	%		1.18 	%	
2020		SWEPCo		2.70 	%		0.27 	%		1.18 	%	

AEPTCo’s maximum, minimum and average interest rates for funds either borrowed from or loaned to AEP are summarized in the following table:

 	 	Maximum	 	Minimum	 	Maximum	 	Minimum	 	Average	 	Average	
 	 	Interest Rate	 	Interest Rate	 	Interest Rate	 	Interest Rate	 	Interest Rate	 	Interest Rate	
 	 	for Funds	 	for Funds	 	for Funds	 	for Funds	 	for Funds	 	for Funds	
Year Ended	 	Borrowed from	 	Borrowed from	 	Loaned to	 	Loaned to	 	Borrowed from	 	Loaned to	
December 31,	 	AEP	 	AEP		AEP	 	AEP	 	AEP	 	AEP	
2022	 	5.28 	%		0.46 	%		5.28 	%		0.46 	%		2.08 	%		2.07 	%	
2021	 	0.86 	%		0.25 	%		0.86 	%		0.25 	%		0.38 	%		0.35 	%	
2020		2.70 	%		0.27 	%		2.70 	%		0.27 	%		1.20 	%		1.13 	%	

Interest expense related to short-term borrowing activities with the Utility Money Pool, Nonutility Money Pool and direct borrowing financing relationship are included in Interest Expense on each of the Registrant Subsidiaries’ statements of income. The Registrant Subsidiaries incurred interest expense for all short-term borrowing activities as follows:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
AEP Texas		$	0.9 			$	0.3 			$	0.8 		
AEPTCo		3.5 			0.6 			1.5 		
APCo		5.6 			0.1 			2.8 		
I&M		2.9 			0.2 			1.4 		
OPCo		2.3 			0.1 			1.8 		
PSO		5.5 			0.3 			0.6 		
SWEPCo		4.9 			0.3 			1.5 		

Interest income related to short-term lending activities with the Utility Money Pool, Nonutility Money Pool and direct borrowing financing relationship are included in Interest Income on each of the Registrant Subsidiaries’ statements of income. The Registrant Subsidiaries earned interest income for all short-term lending activities as follows:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
AEP Texas		$	2.6 			$	0.1 			$	0.7 		
AEPTCo		1.6 			0.4 			2.4 		
APCo		2.8 			0.3 			0.7 		
I&M		0.5 			0.2 			0.2 		
OPCo		0.4 			0.1 			— 		
PSO		0.3 			— 			0.1 		
SWEPCo		0.2 			0.1 			— 		

383

Credit Facilities

See “Letters of Credit” section of Note 6 for additional information.

Securitized Accounts Receivables – AEP Credit (Applies to AEP)

AEP Credit has a receivables securitization agreement with bank conduits. Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries.  These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase the operating companies’ receivables and accelerate AEP Credit’s cash collections.

AEP Credit’s receivables securitization agreement provides a commitment of $750 million from bank conduits to purchase receivables and was amended in September 2021 to include a $125 million and a $625 million facility. The $125 million facility was renewed in September 2022 and amended to extend the expiration date to September 2024. The $625 million facility also expires in September 2024. As of December 31, 2022, the affiliated utility subsidiaries, with the exception of SWEPCo, were in compliance with all requirements under the agreement. SWEPCo temporarily eased credit policies from August 2022 through October 2022 to assist customers with higher than normal bills driven by increased fuel costs and, in turn, experienced higher than normal aged receivables. In response, in January 2023, AEP Credit amended its receivables securitization agreement to increase the eligibility criteria related to their aged receivables requirements to bring SWEPCo back into compliance.

Accounts receivable information for AEP Credit was as follows:

	Years Ended December 31,	
	2022		2021		2020	
	(dollars in millions)	
Effective Interest Rates on Securitization of Accounts Receivable	1.84 	%		0.19 	%		0.85 	%	
Net Uncollectible Accounts Receivable Written Off	$	29.5 			$	26.5 			$	15.3 		

	December 31,	
	2022		2021	
	(in millions)	
Accounts Receivable Retained Interest and Pledged as Collateral Less Uncollectible Accounts	$	1,167.7 			$	995.2 		
Short-term – Securitized Debt of Receivables	750.0 			750.0 		
Delinquent Securitized Accounts Receivable	44.2 			57.9 		
Bad Debt Reserves Related to Securitization	39.7 			42.8 		
Unbilled Receivables Related to Securitization	360.9 			307.1 		

AEP Credit’s delinquent customer accounts receivable represent accounts greater than 30 days past due.

Securitized Accounts Receivables – AEP Credit (Applies to Registrant Subsidiaries, except AEP Texas and AEPTCo)

Under this sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit’s financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary’s receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable.  KPCo ceased selling accounts receivable to AEP Credit in the first quarter of 2022, based on the pending sale to Liberty. As a result, in the first quarter of 2022, KPCo recorded an allowance for uncollectible accounts on its balance sheet for those receivables no longer sold to AEP Credit. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries’ statements of income.  The Registrant Subsidiaries manage and service their customer accounts receivable, which are sold to AEP Credit. AEP Credit securitizes the eligible receivables for the operating companies and retains the remainder.

384

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement were:

		December 31,	
Company		2022		2021	
		(in millions)	
APCo		$	194.4 			$	153.1 		
I&M		166.9 			156.9 		
OPCo		478.6 			392.7 		
PSO		155.5 			114.5 		
SWEPCo		194.0 			153.0 		

The fees paid to AEP Credit for customer accounts receivable sold were:

		Years Ended December 31,	
Company		2022		2021 (a)		2020	
		(in millions)	
APCo		$	9.4 			$	4.9 			$	5.2 		
I&M		9.7 			7.0 			7.9 		
OPCo		29.8 			8.3 			24.1 		
PSO		7.4 			3.4 			4.8 		
SWEPCo		9.4 			5.4 			6.7 		
(a)In 2021, due to the successful collection of accounts receivable balances during the COVID-19 pandemic, the allowance for doubtful accounts was reduced, resulting in the issuance of credits to offset the higher fees previously paid and to lower subsequent fees paid.

The proceeds on the sale of receivables to AEP Credit were:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
APCo		$	1,552.9 			$	1,324.1 			$	1,272.9 		
I&M		2,045.6 			1,927.0 			1,891.8 		
OPCo		3,101.3 			2,458.5 			2,366.2 		
PSO		1,809.5 			1,406.4 			1,221.0 		
SWEPCo		1,858.4 			1,636.1 			1,593.8 		
385

15.  STOCK-BASED COMPENSATION

The disclosures in this note apply to AEP only. The impact of AEP’s share-based compensation plans is insignificant to the financial statements of the Registrant Subsidiaries.

Awards under the American Electric Power System 2015 Long-Term Incentive Plan (2015 LTIP), which replaced prior long-term incentive plans effective April 2015, may be granted to employees and directors. The 2015 LTIP was subsequently amended in September 2016. The 2015 LTIP provides for a maximum of 10 million AEP common shares to be available for grant to eligible employees and directors. As of December 31, 2022, 5,249,391 shares remained available for issuance under the 2015 LTIP. No new awards may be granted under the Prior Plan. Awards granted under the 2015 LTIP awards may be made in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. Shares issued pursuant to a stock option or a stock appreciation right reduce the shares remaining available for grants under the 2015 LTIP by 0.286 of a share. Each share issued for any other award that settles in AEP stock reduces the shares remaining available for grants under the 2015 LTIP by one share. Cash settled awards do not reduce the number of shares remaining available under the 2015 LTIP. The following sections provide further information regarding each type of stock-based compensation award granted under these plans.

Performance Shares

Performance units granted prior to 2017 were settled in cash rather than AEP common stock and did not reduce the number of shares remaining available under the 2015 LTIP. Those performance units had a fair value upon vesting equal to the average closing market price of AEP common stock for the last 20 trading days of the performance period. Performance shares granted in and after 2017 are settled in AEP common stock and reduce the aggregate share authorization. In all cases the number of performance shares held at the end of the three-year performance period is multiplied by the performance score for such period to determine the actual number of performance shares that participants realize. The performance score can range from 0% to 200% and is determined at the end of the performance period based on performance measures, which include both performance and market conditions, established for each grant at the beginning of the performance period by the Human Resources Committee of AEP’s Board of Directors (HR Committee).

Certain employees must satisfy a minimum stock ownership requirement. If those employees have not met their stock ownership requirement, a portion or all of their performance shares are mandatorily deferred as AEP career shares to the extent needed to meet their stock ownership requirement.  AEP career shares are a form of non-qualified deferred compensation that has a value equivalent to a share of AEP common stock.  AEP career shares are settled in AEP common stock after the participant’s termination of employment.

AEP career shares are recorded in Paid-in Capital on the balance sheets. Amounts equivalent to cash dividends on both performance shares and AEP career shares accrue as additional shares.  Management records compensation cost for performance shares over an approximately three-year vesting period. Performance shares are recorded as mezzanine equity on the balance sheets until the vesting date and compensation cost is calculated at fair value based on the performance metrics for each grant. Performance shares granted in 2022, 2021 and 2020 have three performance metrics: (a) three-year cumulative operating earnings per-share with a 50% weight, (b) total shareholder return with a 40% weight and (c) non-emitting generation capacity as a percentage of total owned and purchased capacity with a 10% weight. Performance shares granted in 2019 had two equally-weighted performance metrics: (a) three-year cumulative operating earnings per-share and (b) total shareholder return. The three-year cumulative operating earnings per-share and non-emitting generating capacity metrics are adjusted quarterly for changes in performance relative to the metric approved by the HR Committee. The total shareholder return metric is measured relative to a peer group of similar companies and is based on a third-party Monte Carlo valuation. The value related to this metric does not change over the three-year vesting period.

386

The HR Committee awarded performance shares and reinvested dividends on outstanding performance shares and AEP career shares as follows:

		Years Ended December 31,	
Performance Shares		2022		2021		2020	
Awarded Shares (in thousands)		530.3 			565.0 			424.8 		
Weighted-Average Share Fair Value at Grant Date		$	97.61 			$	81.02 			$	116.56 		
Vesting Period (in years)		3		3		3	

Performance Shares and AEP Career Shares
(Reinvested Dividends Portion)		Years Ended December 31,	
		2022		2021		2020	
Awarded Shares (in thousands)		63.3 			74.5 			73.4 		
Weighted-Average Fair Value at Grant Date		$	98.73 			$	84.48 			$	84.87 		
Vesting Period (in years)		(a)		(a)		(a)	

(a)The vesting period for the reinvested dividends on performance shares is equal to the remaining life of the related performance shares.  Dividends on AEP career shares vest immediately when the dividend is awarded but are not settled in AEP common stock until after the participant’s AEP employment ends.

Performance scores and final awards are determined and approved by the HR Committee in accordance with the pre-established performance measures within approximately two months after the end of the performance period.

The certified performance scores and shares earned for the three-year periods were as follows:

		Years Ended December 31,	
Performance Shares		2022		2021		2020	
Certified Performance Score		131.1 	%		102.9 	%		128.2 	%	
Performance Shares Earned		512,660 			537,166 			757,858 		
Performance Shares Mandatorily Deferred as AEP Career Shares		28,282 			14,613 			13,614 		
Performance Shares Voluntarily Deferred into the Incentive Compensation Deferral Program		23,609 			22,915 			26,936 		
Performance Shares to be Settled (a)		460,769 			499,638 			717,308 		

(a)Performance shares settled in AEP common stock in the quarter following the end of the year shown.

The settlements were as follows:

		Years Ended December 31,	
Performance Shares and AEP Career Shares		2022		2021		2020	
		(in millions)	
AEP Common Stock Settlements for Performance Shares		$	43.2 			$	54.7 			$	75.4 		
AEP Common Stock Settlements for Career Share Distributions		5.1 			4.0 			1.9 		

387

A summary of the status of AEP’s nonvested Performance Shares as of December 31, 2022 and changes during the year ended December 31, 2022 were as follows:

Nonvested Performance Shares		Shares		Weighted
Average
Grant Date
Fair Value	
		(in thousands)			
Nonvested as of January 1, 2022		923.8 			$	96.15 		
Awarded		530.3 			97.61 		
Dividends		45.5 			98.73 		
Vested (a)		(395.8)			116.06 		
Forfeited		(91.6)			84.81 		
Nonvested as of December 31, 2022		1,012.2 			90.27 		

(a)The vested Performance Shares will be converted to 461 thousand shares based on the closing share price on the day before settlement.

Monte Carlo Valuation

AEP engages a third-party for a Monte Carlo valuation to calculate the fair value of the total shareholder return metric for the performance shares awarded during and after 2017. The valuations use a lattice model and the expected volatility assumptions used were the historical volatilities for AEP and the members of their peer group. The assumptions used in the Monte Carlo valuations were as follows:

		Years Ended December 31,	
Assumptions		2022		2021		2020	
Valuation Period (in years) (a)		2.86		2.88		2.87	
Expected Volatility Minimum		25.92 	%		25.87 	%		13.67 	%	
Expected Volatility Maximum		40.82 	%		39.90 	%		28.15 	%	
Expected Volatility Average		31.09 	%		31.01 	%		16.39 	%	
Dividend Rate (b)		— 	%		— 	%		— 	%	
Risk Free Rate		1.64 	%		0.19 	%		1.40 	%	

(a)Period from award date to vesting date.
(b)Equivalent to reinvesting dividends.

Restricted Stock Units

The HR Committee grants restricted stock units (RSUs), which generally vest, subject to the participant’s continued AEP employment, over at least three years in approximately equal annual increments.  The RSUs accrue dividends as additional RSUs. The additional RSUs granted as dividends vest on the same date, subject to the participant’s continued AEP employment, as the underlying RSUs. RSUs are converted into shares of AEP common stock upon vesting, except the RSUs granted prior to 2017 to AEP’s executive officers which settled in cash. Executive officers are those officers who are subject to the disclosure requirements set forth in Section 16 of the Securities Exchange Act of 1934. For RSUs that settle in shares, compensation cost is measured at fair value on the grant date and recorded over the vesting period.  Fair value is determined by multiplying the number of RSUs granted by the grant date market closing price.  For RSUs that settled in cash, compensation cost was recorded over the vesting period and adjusted for changes in fair value until vested.  The fair value at vesting was determined by multiplying the number of RSUs vested by the 20-day average closing price of AEP common stock.  The maximum contractual term of outstanding RSUs is approximately 40 months from the grant date.

388

The HR Committee awarded RSUs, including additional units awarded as dividends, as follows:

		Years Ended December 31,	
Restricted Stock Units		2022		2021		2020	
Awarded Units (in thousands)		290.4 			280.0 			268.7 		
Weighted-Average Grant Date Fair Value		$	90.48 			$	80.39 			$	94.38 		

The total fair value and total intrinsic value of restricted stock units vested were as follows:

		Years Ended December 31,	
Restricted Stock Units		2022		2021		2020	
		(in millions)	
Fair Value of Restricted Stock Units Vested		$	17.8 			$	20.5 			$	22.9 		
Intrinsic Value of Restricted Stock Units Vested (a)		20.3 			22.0 			25.2 		

(a)Intrinsic value is calculated as market price at the vesting date.

A summary of the status of AEP’s nonvested RSUs as of December 31, 2022 and changes during the year ended December 31, 2022 were as follows:

Nonvested Restricted Stock Units		Shares/Units		Weighted
Average
Grant Date
Fair Value	
		(in thousands)			
Nonvested as of January 1, 2022		424.3 			$	84.86 		
Awarded		290.4 			90.48 		
Vested		(209.0)			85.15 		
Forfeited		(46.1)			85.80 		
Nonvested as of December 31, 2022		459.6 			88.05 		

The total aggregate intrinsic value of nonvested RSUs as of December 31, 2022 was $44 million and the weighted-average remaining contractual life was 1.8 years.

Other Stock-Based Plans

AEP also has a Stock Unit Accumulation Plan (SUAP) for Non-Employee Directors providing each non-employee director with AEP stock units as a substantial portion of the compensation for their services as a director.  The number of stock units provided is based on the closing price of AEP common stock on the last trading day of the quarter for which the stock units were earned.  Amounts equivalent to cash dividends on the stock units accrue as additional AEP stock units.  The stock units granted to non-employee directors are fully vested on their grant date.  Stock units are paid to directors upon termination of their board service or up to 10 years later if the participant so elects.  Cash settlements for stock units were calculated based on the average closing price of AEP common stock for the last 20 trading days prior to the distribution date. Effective June 30, 2022, the SUAP was amended to pay stock units in AEP common stock rather than cash.

Management records compensation costs for stock units when the units are awarded and prior to June 2022 adjusted the liability for changes in value based on the current 20-day average closing price of AEP common stock on the valuation date.

After five years of service on the Board of Directors, non-employee directors receive subsequent AEP stock units as contributions to an AEP stock fund under the Stock Unit Accumulation Plan. Such amounts may be exchanged into other market-based investment options available to employees that participate in AEP’s Incentive Compensation Deferral Plan. These balances are paid in cash upon termination of board service or up to 10 years later if the participant so elects.
389

Cash settlements for stock unit distributions were immaterial for the years ended December 31, 2022, 2021 and 2020. No stock units were settled in AEP common stock for the years ended December 31, 2022, 2021 and 2020.

The Board of Directors awarded stock units, including units awarded for dividends, as follows:

		Years Ended December 31,	
Stock Unit Accumulation Plan for Non-Employee Directors		2022		2021		2020	
Awarded Units (in thousands)		14.5 			12.6 			12.1 		
Weighted-Average Grant Date Fair Value		$	95.16 			$	84.54 			$	83.80 		

Share-based Compensation Plans

For share-based payment arrangements the compensation cost, the actual tax benefit from the tax deductions for compensation cost recognized in income and the total compensation cost capitalized were as follows:

		Years Ended December 31,	
Share-based Compensation Plans		2022		2021		2020	
		(in millions)	
Compensation Cost for Share-based Payment Arrangements (a)		$	63.3 			$	61.1 			$	53.8 		
Actual Tax Benefit		8.0 			8.7 			7.2 		
Total Compensation Cost Capitalized		16.0 			16.9 			20.4 		

(a)Compensation cost for share-based payment arrangements is included in Other Operation and Maintenance expenses on the statements of income.

As of December 31, 2022, there was $78 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the 2015 LTIP. Unrecognized compensation cost related to unvested share-based arrangements will change as the fair value of performance shares is adjusted each period and as forfeitures for all award types are realized.  AEP’s unrecognized compensation cost will be recognized over a weighted-average period of 1.41 years.

Under the 2015 LTIP, AEP is permitted to use authorized but unissued shares, treasury shares, shares acquired in the open market specifically for distribution under these plans, or any combination thereof to fulfill share commitments. AEP’s current practice is to use authorized but unissued shares to fulfill share commitments. The number of shares used to fulfill share commitments is generally reduced to offset tax withholding obligations.
390

16.  RELATED PARTY TRANSACTIONS

The disclosures in this note apply to all Registrant Subsidiaries unless indicated otherwise.

For other related party transactions, also see “AEP System Tax Allocation” section of Note 1 in addition to “Corporate Borrowing Program – AEP System” and “Securitized Accounts Receivables – AEP Credit” sections of Note 14.

Power Coordination Agreement (Applies to all Registrant Subsidiaries except AEP Texas and AEPTCo)

Effective January 1, 2014, the FERC approved the PCA. Under the PCA, APCo, I&M, KPCo and WPCo are individually responsible for planning their respective capacity obligations. The PCA allows, but does not obligate, APCo, I&M, KPCo and WPCo to participate collectively under a common fixed resource requirement capacity plan in PJM and to participate in specified collective Off-system Sales and purchase activities.

AEPSC conducts power, capacity, coal, natural gas, interest rate and, to a lesser extent, heating oil, gasoline and other risk management activities on behalf of APCo, I&M, KPCo, PSO, SWEPCo and WPCo. Certain power and natural gas risk management activities for APCo, I&M, KPCo and WPCo are allocated based on the four member companies’ respective equity positions, while power and natural gas risk management activities for PSO and SWEPCo are allocated based on the Operating Agreement. AEPSC conducts only gasoline, diesel fuel, energy procurement and risk management activities on OPCo’s behalf.

System Integration Agreement (Applies to APCo, I&M, PSO and SWEPCo)

Under the SIA, AEPSC allocates physical and financial revenues and expenses from transactions with neighboring utilities, power marketers and other power and natural gas risk management activities based upon the location of such activity. Margins resulting from trading and marketing activities originating in PJM generally accrue to the benefit of APCo, I&M, KPCo and WPCo, while trading and marketing activities originating in SPP generally accrue to the benefit of PSO and SWEPCo.  Margins resulting from other transactions are allocated among APCo, I&M, KPCo, PSO, SWEPCo and WPCo based upon the equity positions of these companies.

391

Affiliated Revenues and Purchases

The tables below represent revenues from affiliates, net of respective provisions for refund, by type of revenue for the Registrant Subsidiaries:

Related Party Revenues		AEP Texas		AEPTCo		APCo		I&M (a)		OPCo		PSO		SWEPCo	
		(in millions)	
Year Ended December 31, 2022															
Direct Sales to East Affiliates		$	— 			$	— 			$	169.7 			$	— 			$	— 			$	— 			$	— 		
Direct Sales to West Affiliates		— 			— 			— 			— 			— 			— 			1.3 		

Transmission Revenues		— 			1,276.4 			77.5 			7.7 			(3.6)			— 			51.5 		
Other Revenues		3.5 			7.4 			8.9 			7.6 			22.4 			2.9 			1.1 		
Total Affiliated Revenues		$	3.5 			$	1,283.8 			$	256.1 			$	15.3 			$	18.8 			$	2.9 			$	53.9 		

Related Party Revenues		AEP Texas		AEPTCo		APCo		I&M (a)		OPCo		PSO		SWEPCo	
		(in millions)	
Year Ended December 31, 2021															
Direct Sales to East Affiliates		$	— 			$	— 			$	128.6 			$	— 			$	— 			$	— 			$	— 		

	
Transmission Revenues		— 			1,136.1 			60.3 			(2.5)			(1.1)			— 			39.6 		
Other Revenues		3.9 			17.8 			9.0 			6.3 			25.9 			4.2 			1.4 		
Total Affiliated Revenues		$	3.9 			$	1,153.9 			$	197.9 			$	3.8 			$	24.8 			$	4.2 			$	41.0 		

Related Party Revenues		AEP Texas		AEPTCo		APCo		I&M (a)		OPCo		PSO		SWEPCo	
		(in millions)	
Year Ended December 31, 2020															
Direct Sales to East Affiliates		$	— 			$	— 			$	112.5 			$	— 			$	— 			$	— 			$	— 		
	
Auction Sales to OPCo (b)		— 			— 			5.3 			3.1 			— 			— 			— 		
Direct Sales to AEPEP		87.5 			— 			— 			— 			— 			— 			— 		
Transmission Revenues		— 			885.0 			49.1 			2.9 			16.6 			— 			37.4 		
Other Revenues		3.3 			11.3 			7.8 			4.5 			24.9 			5.2 			1.6 		
Total Affiliated Revenues		$	90.8 			$	896.3 			$	174.7 			$	10.5 			$	41.5 			$	5.2 			$	39.0 		

(a)I&M’s affiliated revenues exclude capacity sales to KPCo from Rockport Plant, Unit 2 and barging, urea transloading and other transportation services to affiliates. See sections “Unit Power Agreements” and “I&M Barging, Urea Transloading and Other Services” below for additional information.
(b)Refer to the Ohio Auctions section below for further information regarding these amounts.

392

The tables below represent the purchased power expenses incurred for purchases from affiliates. AEP Texas, AEPTCo, APCo, PSO and SWEPCo did not purchase any or an immaterial amount of power from affiliates for the years ended December 31, 2022, 2021 and 2020.

Related Party Purchases		I&M		OPCo	
		(in millions)	
Year Ended December 31, 2022					
Auction Purchases from AEPEP (a)		$	— 			$	9.8 		

Direct Purchases from AEGCo		241.8 			— 		
Total Affiliated Purchases		$	241.8 			$	9.8 		

Related Party Purchases		I&M		OPCo	
		(in millions)	
Year Ended December 31, 2021					
	
Auction Purchases from AEPEP (a)		$	— 			$	26.6 		
Auction Purchases from AEP Energy (a)		— 			25.3 		
	
Direct Purchases from AEGCo		217.9 			— 		
Total Affiliated Purchases		$	217.9 			$	51.9 		

Related Party Purchases		I&M		OPCo	
		(in millions)	
Year Ended December 31, 2020					
	
Auction Purchases from AEPEP (a)		$	— 			$	51.0 		
Auction Purchases from AEP Energy (a)		— 			58.7 		
Auction Purchases from AEPSC (a)		— 			10.0 		
Direct Purchases from AEGCo		172.8 			— 		
Total Affiliated Purchases		$	172.8 			$	119.7 		

(a)    Refer to the Ohio Auctions section below for further information regarding this amount.

The above summarized related party revenues and expenses are reported in Sales to AEP Affiliates and Purchased Electricity from AEP Affiliates, respectively, on the Registrant Subsidiaries’ statements of income.  Since the Registrant Subsidiaries are included in AEP’s consolidated results, the above summarized related party transactions are eliminated in total in AEP’s consolidated revenues and expenses.

PJM and SPP Transmission Service Charges (Applies to all Registrant Subsidiaries except AEP Texas)

The AEP East Companies are parties to the TA, which defines how transmission costs through the PJM OATT are allocated among the AEP East Companies on a 12-month average coincident peak basis. Additional costs for transmission services provided by AEPTCo and other transmission affiliates are billed to AEP East Companies through the PJM OATT.

The following table shows the net transmission service charges recorded by APCo, I&M and OPCo:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
APCo		$	345.1 			$	302.0 			$	243.2 		
I&M		220.8 			186.7 			145.9 		
OPCo		608.2 			508.9 			417.4 		

The charges shown above are recorded in Other Operation expenses on the statements of income.
393

PSO, SWEPCo and AEPSC are parties to the TCA in connection with the operation of the transmission assets of PSO and SWEPCo.  The TCA has been approved by the FERC and establishes a coordinating committee, which is charged with overseeing the coordinated planning of the transmission facilities of the parties to the agreement.  This includes the performance of transmission planning studies, the interaction of such companies with independent system operators and other regional bodies interested in transmission planning and compliance with the terms of the OATT filed with the FERC and the rules of the FERC relating to such a tariff.

Under the TCA, the parties to the agreement delegated to AEPSC the responsibility of monitoring the reliability of their transmission systems and administering the OATT on their behalf.  The allocations have been governed by the FERC-approved OATT for the SPP. Additional costs for transmission services provided by AEPTCo and other transmission affiliates are billed to PSO and SWEPCo through the SPP OATT.

The following table shows the net transmission service charges recorded by PSO and SWEPCo:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
PSO		$	110.8 			$	94.7 			$	69.7 		
SWEPCo		62.1 			56.2 			31.3 		

The charges shown above are recorded in Other Operation expenses on the statements of income.

AEPTCo provides transmission services to affiliates in accordance with the OATT, TA and TCA. AEPTCo recorded affiliated transmission revenues in Sales to AEP Affiliates on the statements of income. Refer to the Affiliated Revenues and Purchases section above for amounts related to these transactions.

ERCOT Transmission Service Charges (Applies to AEP and AEP Texas)

Pursuant to an order from the PUCT, ETT bills AEP Texas for its ERCOT wholesale transmission services. ETT billed AEP Texas $28 million, $28 million and $28 million for transmission services for the years ended December 31, 2022, 2021 and 2020, respectively. The billings are recorded in Other Operation expenses on AEP Texas’ statements of income.

Oklaunion PPA between AEP Texas and AEPEP (Applies to AEP Texas)

In 2007, AEP Texas entered into a PPA with an affiliate, AEPEP, whereby AEP Texas agreed to sell AEPEP 100% of AEP Texas’ capacity and associated energy from its undivided interest (54.69%) in the Oklaunion Power Station. The PPA was approved by the FERC. In September 2018, the co-owners of Oklaunion Power Station voted to close the plant in 2020. Effective October 2018, AEP Texas increased depreciation expense to ensure the plant balances are fully depreciated as of September 2020 and recovered through the PPA billings to AEPEP. Under the early termination provisions of the PPA, AEPEP paid AEP Texas the full Property, Plant and Equipment balance through depreciation payments until termination of the PPA due to the plant closing in September 2020. See “Dispositions” section of Note 7 for additional information.

AEP Texas recorded revenue of $88 million from AEPEP for the year ended December 31, 2020. This amount is included in Sales to AEP Affiliates on AEP Texas’ statements of income.

394

Joint License Agreement (Applies to AEPTCo, APCo, I&M, OPCo and PSO)

AEPTCo entered into a 50-year joint license agreement with APCo, I&M, KPCo, OPCo and PSO, respectively, allowing either party to occupy the granting party’s facilities or real property. In addition, AEPTCo entered into a 5-year joint license agreement with APCo and WPCo. After the expiration of these agreements, the term shall automatically renew for successive one-year terms unless either party provides notice. The joint license billing provides compensation to the granting party for the cost of carrying assets, including depreciation expense, property taxes, interest expense, return on equity and income taxes. AEPTCo recorded the following costs in Other Operation expense related to these agreements:

		Years Ended December 31,	
Billing Company		2022		2021		2020	
		(in millions)	
APCo		$	2.5 			$	2.4 			$	0.9 		
I&M		6.1 			4.8 			3.0 		
KPCo		0.6 			0.5 			0.4 		
OPCo		5.2 			4.6 			4.5 		
PSO		0.1 			0.4 			0.4 		
WPCo		0.2 			0.2 			0.2 		

APCo, I&M, KPCo, OPCo, PSO and WPCo recorded income related to these agreements in Sales to AEP Affiliates on the statements of income.

Ohio Auctions (Applies to APCo, I&M and OPCo)

In connection with OPCo’s June 2012 - May 2015 ESP, the PUCO ordered OPCo to conduct energy and capacity auctions for its entire SSO load for delivery beginning in June 2015. AEP Energy, AEPEP, APCo, KPCo, I&M and WPCo participate in the auction process and have been awarded tranches of OPCo’s SSO load. Refer to the Affiliated Revenues and Purchases section above for amounts related to these transactions.

Unit Power Agreements (Applies to I&M)

UPA between AEGCo and I&M

A UPA between AEGCo and I&M (the I&M Power Agreement) provides for the sale by AEGCo to I&M of all the power (and the energy associated therewith) available to AEGCo at the Rockport Plant unless it is sold to another utility. I&M is obligated, whether or not power is available from AEGCo, to pay as a demand charge for the right to receive such power (and as an energy charge for any associated energy taken by I&M) net of amounts received by AEGCo from any other sources, sufficient to enable AEGCo to pay all of its operating and other expenses, including a rate of return on the common equity of AEGCo as approved by the FERC. The I&M Power Agreement will continue in effect until the debt obligations of AEGCo secured by the Rockport Plant have been satisfied and discharged (currently expected to be December 2028).

In April 2021, AEGCo and I&M executed an agreement to purchase 100% of the interests in Rockport Plant, Unit 2 effective at the end of the lease term on December 7, 2022. Beginning December 8, 2022, AEGCo and I&M applied the joint plant accounting model to their respective 50% undivided interests in the jointly owned Rockport Plant, Unit 2 as well as any future investments made prior to the current estimated retirement date of December 2028.

Prior to the termination of the Rockport Plant, Unit 2 lease, I&M assigned 30% of the power to KPCo.  See the “UPA between AEGCo and KPCo” section below for additional information. Beginning December 8, 2022, AEGCo billed 100% of its share of the Rockport Plant to I&M and ceased billing to KPCo. KPCo reached an agreement with I&M, from the end of the lease through May 2024, to buy capacity from Rockport Plant, Unit 2 through the PCA at a rate equal to PJM’s RPM clearing price. I&M’s capacity sales to KPCo were $199 thousand for the year ended December 31, 2022.

395

UPA between AEGCo and KPCo

On December 7, 2022, the UPA between AEGCo and KPCo ended upon the termination of the Rockport Plant, Unit 2 lease. Previously, pursuant to an assignment between I&M and KPCo and a UPA between AEGCo and KPCo, AEGCo sold KPCo 30% of the power (and the energy associated therewith) available to AEGCo from both units of the Rockport Plant.  KPCo paid AEGCo in consideration for the right to receive such power, the same amounts which I&M would have paid AEGCo under the terms of the I&M Power Agreement for such entitlement. As a result of the end of the UPA between AEGCo and KPCo, a prorated bill was recorded from AEGCo to KPCo to reflect costs incurred for the first seven days of December 2022.

Cook Coal Terminal (Applies to I&M, PSO and SWEPCo)

Cook Coal Terminal, which is owned by AEGCo, performs coal transloading and storage services at cost for I&M.  The coal transloading costs were $9 million, $11 million and $12 million for the years ended December 31, 2022, 2021 and 2020, respectively. I&M recorded the cost of transloading services in Fuel on the balance sheets.

Cook Coal Terminal also performs railcar maintenance services at cost for I&M, PSO and SWEPCo.  The railcar maintenance costs were as follows:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
I&M		$	0.6 			$	0.3 			$	0.9 		
PSO		0.6 			0.4 			0.7 		
SWEPCo		2.7 			2.8 			3.0 		

I&M, PSO and SWEPCo recorded the cost of the railcar maintenance services in Fuel on the balance sheets.

I&M Barging, Urea Transloading and Other Services (Applies to APCo and I&M)

I&M provides barging, urea transloading and other transportation services to affiliates.  Urea is a chemical used to control NOx emissions at certain generation plants in the AEP System.  I&M recorded revenues from barging, transloading and other services in Other Revenues – Affiliated on the statements of income.  The affiliated companies recorded these costs paid to I&M as fuel expenses or other operation expenses.  The amounts of affiliated expenses were:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
AEGCo		$	11.3 			$	7.6 			$	10.6 		
	
APCo		36.1 			40.1 			43.7 		
KPCo		2.0 			3.1 			3.2 		
WPCo		4.7 			3.2 			3.3 		

396

Sales and Purchases of Property

Certain AEP subsidiaries had affiliated sales and purchases of electric property individually amounting to $100 thousand or more, sales and purchases of meters and transformers, and sales and purchases of transmission property.  There were no gains or losses recorded on the transactions.  The following tables show the sales and purchases, recorded at net book value:

Sales

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
AEP Texas		$	3.0 			$	0.4 			$	0.9 		
AEPTCo		2.3 			1.4 			0.2 		
APCo		16.0 			6.2 			5.7 		
I&M		5.3 			7.0 			1.5 		
OPCo		7.6 			9.2 			7.0 		
PSO		2.5 			0.5 			1.1 		
SWEPCo		1.0 			0.4 			0.8 		

Purchases

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
AEP Texas		$	1.3 			$	0.4 			$	1.5 		
AEPTCo		11.6 			16.7 			6.0 		
APCo		2.4 			1.0 			1.3 		
I&M		2.0 			0.6 			3.4 		
OPCo		2.0 			1.4 			1.2 		
PSO		7.6 			0.3 			0.4 		
SWEPCo		2.8 			0.3 			2.8 		

The amounts above are recorded in Property, Plant and Equipment on the balance sheets.

AEP Wind Holdings LLC PPAs (Applies to I&M, OPCo and SWEPCo)

Prior to its acquisition, two of the 50% owned joint venture wind farms in the AEP Wind Holdings, LLC portfolio had existing PPAs with I&M, OPCo and SWEPCo. Fowler Ridge 2 has PPAs with I&M and OPCo for a portion of its energy production. The I&M portion totaled $12 million, $10 million and $11 million and the OPCo portion totaled $24 million, $20 million and $23 million respectively, for the years ended December 31, 2022, 2021 and 2020, respectively. The other joint venture wind farm, Flat Ridge 2, has a PPA with SWEPCo for a portion of its energy production which totaled $14 million, $14 million and $14 million of purchased electricity for the years ended December 31, 2022, 2021 and 2020, respectively. AEP disposed of its 50% interest in Flat Ridge 2 in the fourth quarter of 2022. See “Flat Ridge 2 Wind LLC” section of Note 7 for additional information.

397

Intercompany Billings

The Registrant Subsidiaries and other AEP subsidiaries perform certain utility services for each other when necessary or practical.  The costs of these services are billed on a direct-charge basis, whenever possible, or on reasonable basis of proration for services that benefit multiple companies.  The billings for services are made at cost and include no compensation for the use of equity capital.

Charitable Contributions to AEP Foundation

The American Electric Power Foundation is funded by American Electric Power and its utility operating units. The Foundation provides a permanent, ongoing resource for charitable initiatives and multi-year commitments in the communities served by AEP and initiatives outside of AEP’s 11-state service area. Charitable contributions to the AEP Foundation were recorded in Other Operation on the statements of income as follows:

		Year Ended	
Company		December 31, 2022	
		(in millions)	
AEP		$	75.0 		
AEP Texas		9.9 		
AEPTCo		11.1 		
APCo		12.5 		
I&M		11.0 		
OPCo		8.1 		
PSO		5.8 		
SWEPCo		8.8 		

In 2021 and 2020, there were no charitable contributions made to the AEP Foundation.

OKTCo Radial Assets Transfer (Applies to AEP, AEPTCo and PSO)

In August 2020, AEPSC filed a request with FERC, on behalf of PSO and OKTCo, to transfer OKTCo’s interests in its radial assets to PSO. OKTCo had previously constructed radial assets in the PSO service territory and after the radial assets were placed into service, management determined the radial assets were not eligible to be included as part of OKTCo’s SPP OATT formula rates. In October 2020, FERC approved the request and in December 2020, OKTCo completed the transfer of its interest in the radial assets to PSO, through Parent, at net book value. At the transfer date, the net book value of the radial assets were $60 million, before associated tax liabilities.

398

17.  VARIABLE INTEREST ENTITIES AND EQUITY METHOD INVESTMENTS

The disclosures in this note apply to all Registrants unless indicated otherwise.

The accounting guidance for “Variable Interest Entities” is a consolidation model that considers if a company has a variable interest in a VIE.  A VIE is a legal entity that possesses any of the following conditions: the entity’s equity at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support, equity owners are unable to direct the activities that most significantly impact the legal entity’s economic performance (or they possess disproportionate voting rights in relation to the economic interest in the legal entity), or the equity owners lack the obligation to absorb the legal entity’s expected losses or the right to receive the legal entity’s expected residual returns. Entities are required to consolidate a VIE when it is determined that they have a controlling financial interest in a VIE and therefore, are the primary beneficiary of that VIE, as defined by the accounting guidance for “Variable Interest Entities.” In determining whether AEP is the primary beneficiary of a VIE, management considers whether AEP has the power to direct the most significant activities of the VIE and is obligated to absorb losses or receive the expected residual returns that are significant to the VIE. Management believes that significant assumptions and judgments were applied consistently. 

AEP holds ownership interests in businesses with varying ownership structures. Partnership interests and other variable interests are evaluated to determine if each entity is a VIE, and if so, whether or not the VIE should be consolidated into AEP’s financial statements. AEP has not provided material financial or other support that was not previously contractually required to any of its consolidated VIEs. If an entity is determined not to be a VIE, or if the entity is determined to be a VIE and AEP is not deemed to be the primary beneficiary, the entity is accounted for under the equity method of accounting.

Consolidated Variable Interests Entities

Sabine (Applies to AEP and SWEPCo)

Sabine is a mining operator providing mining services to SWEPCo.  SWEPCo has no equity investment in Sabine but is Sabine’s only customer.  SWEPCo guarantees the debt obligations and lease obligations of Sabine.  Under the terms of the note agreements, substantially all assets are pledged and all rights under the lignite mining agreement are assigned to SWEPCo.  The creditors of Sabine have no recourse to any AEP entity other than SWEPCo.  Under the provisions of the mining agreement, SWEPCo is required to pay, as a part of the cost of lignite delivered, an amount equal to mining costs plus a management fee.  In addition, SWEPCo determines how much coal will be mined each year.  Based on these facts, management concluded that SWEPCo is the primary beneficiary and is required to consolidate Sabine.  SWEPCo’s total billings from Sabine for the years ended December 31, 2022, 2021 and 2020 were $168 million, $162 million and $131 million, respectively.  See the tables below for the classification of Sabine’s assets and liabilities on SWEPCo’s balance sheets.

As part of the process to receive a renewal of a Texas Railroad Commission permit for lignite mining, SWEPCo provides guarantees of mine reclamation of $155 million.  Since SWEPCo uses self-bonding, the guarantee commits SWEPCo to complete the reclamation, in the event, Sabine does not complete the work.  This guarantee ends upon completion of reclamation.  The mine end-of-life has been adjusted to March 2023, in order to align with the announced closure of the Pirkey Power Plant. Reclamation is expected to be complete by 2037 at an estimated cost of $135 million.  Actual reclamation costs could vary due to inflation and scope changes to the mine reclamation.  SWEPCo recovers these costs through its fuel clauses. As of December 31, 2022, SWEPCo has recorded $122 million of mine reclamation costs in Asset Retirement Obligations and has collected $89 million through a rider for reclamation costs. The remaining $33 million is recorded in Deferred Charges and Other Noncurrent Assets on SWEPCo’s balance sheets.
399

DCC Fuel (Applies to AEP and I&M)

I&M has nuclear fuel lease agreements with DCC Fuel, which was formed for the purpose of acquiring, owning and leasing nuclear fuel to I&M.  DCC Fuel purchased the nuclear fuel from I&M with funds received from the issuance of notes to financial institutions.  Each DCC Fuel entity is a single-lessee leasing arrangement with only one asset and is capitalized with all debt.  Each is a separate legal entity from I&M, the assets of which are not available to satisfy the debts of I&M.  Payments on the leases for the years ended December 31, 2022, 2021 and 2020 were $84 million, $91 million and $94 million, respectively.  The leases were recorded as finance leases on I&M’s balance sheets as title to the nuclear fuel transfers to I&M at the end of the respective lease terms, which do not exceed 54 months.  Based on I&M’s control of DCC Fuel, management concluded that I&M is the primary beneficiary and is required to consolidate DCC Fuel.  The finance leases are eliminated upon consolidation. See the tables below for the classification of DCC Fuel’s assets and liabilities on I&M’s balance sheets.

Transition Funding (Applies to AEP and AEP Texas)

Transition Funding was formed for the sole purpose of issuing and servicing securitization bonds related to restructuring legislation in Texas. Management has concluded that AEP Texas is the primary beneficiary of Transition Funding because AEP Texas has the power to direct the most significant activities of the VIE and AEP Texas’ equity interest could potentially be significant. Therefore, AEP Texas is required to consolidate Transition Funding. As of December 31, 2022 and 2021, $70 million and $68 million of the securitized bonds were included in Long-term Debt Due Within One Year - Nonaffiliated, respectively, and $71 million and $141 million were included in Long-term Debt - Nonaffiliated, respectively, on the balance sheets. Transition Funding has securitized transition assets of $125 million and $184 million as of December 31, 2022 and 2021, respectively, which are presented separately on the face of the balance sheets. The securitized transition assets represent the right to impose and collect Texas true-up costs from customers receiving electric transmission or distribution service from AEP Texas under-recovery mechanisms approved by the PUCT. The securitization bonds are payable only from and secured by the securitized transition assets. The bondholders have no recourse to AEP Texas or any other AEP entity. AEP Texas acts as the servicer for Transition Funding’s securitized transition assets and remits all related amounts collected from customers to Transition Funding for interest and principal payments on the securitization bonds and related costs. See the tables below for the classification of Transition Funding’s assets and liabilities on the balance sheets.

Restoration Funding (Applies to AEP and AEP Texas)

Restoration Funding was formed for the sole purpose of issuing and servicing securitization bonds related to storm restoration of AEP Texas’ distribution system primarily due to damage caused by Hurricane Harvey. Management has concluded that AEP Texas is the primary beneficiary of Restoration Funding because AEP Texas has the power to direct the most significant activities of the VIE and AEP Texas’ equity interest could potentially be significant. Therefore, AEP Texas is required to consolidate Restoration Funding. As of December 31, 2022 and 2021, $24 million and $23 million of the securitized bonds were included in Long-term Debt Due Within One Year - Nonaffiliated, respectively, and $150 million and $173 million were included in Long-term Debt - Nonaffiliated, respectively, on the balance sheets. Restoration Funding has securitized assets of $161 million and $183 million as of December 31, 2022 and 2021, respectively, which are presented separately on the face of the balance sheets. The securitized restoration assets represent the right to impose and collect Texas storm restoration costs from customers receiving electric transmission or distribution service from AEP Texas under-recovery mechanisms approved by the PUCT. The securitization bonds are payable only from and secured by the securitized assets. The bondholders have no recourse to AEP Texas or any other AEP entity. AEP Texas acts as the servicer for Restoration Funding’s securitized assets and remits all related amounts collected from customers to Restoration Funding for interest and principal payments on the securitization bonds and related costs. See the table below for the classification of Restoration Funding’s assets and liabilities on the balance sheets.

400

Appalachian Consumer Rate Relief Funding (Applies to AEP and APCo)

Appalachian Consumer Rate Relief Funding was formed for the sole purpose of issuing and servicing securitization bonds related to APCo’s under-recovered ENEC deferral balance.  Management has concluded that APCo is the primary beneficiary of Appalachian Consumer Rate Relief Funding because APCo has the power to direct the most significant activities of the VIE and APCo’s equity interest could potentially be significant.  Therefore, APCo is required to consolidate Appalachian Consumer Rate Relief Funding.  As of December 31, 2022 and 2021, $26 million and $26 million of the securitized bonds were included in Long-term Debt Due Within One Year - Nonaffiliated, respectively, and $147 million and $173 million were included in Long-term Debt - Nonaffiliated, respectively, on the balance sheets.  Appalachian Consumer Rate Relief Funding has securitized assets of $160 million and $185 million as of December 31, 2022 and 2021, respectively, which are presented separately on the face of the balance sheets. The phase-in recovery property represents the right to impose and collect West Virginia deferred generation charges from customers receiving electric transmission, distribution and generation service from APCo under a recovery mechanism approved by the WVPSC.  In November 2013, securitization bonds were issued.  The securitization bonds are payable only from and secured by the securitized assets.  The bondholders have no recourse to APCo or any other AEP entity.  APCo acts as the servicer for Appalachian Consumer Rate Relief Funding’s securitized assets and remits all related amounts collected from customers to Appalachian Consumer Rate Relief Funding for interest and principal payments on the securitization bonds and related costs. See the tables below for the classification of Appalachian Consumer Rate Relief Funding’s assets and liabilities on APCo’s balance sheets.

AEP Credit (Applies to AEP)

AEP Credit is a wholly-owned subsidiary of Parent. AEP Credit purchases, without recourse, accounts receivable from certain utility subsidiaries of AEP to reduce working capital requirements. AEP provides a minimum of 5% equity and up to 25% of AEP Credit’s short-term borrowing needs in excess of third-party financings. Any third-party financing of AEP Credit only has recourse to the receivables securitized for such financing. Based on AEP’s control of AEP Credit, management concluded that AEP is the primary beneficiary and is required to consolidate AEP Credit. See the tables below for the classification of AEP Credit’s assets and liabilities on the balance sheets. See “Securitized Accounts Receivables - AEP Credit” section of Note 14.

EIS (Applies to AEP)

AEP’s subsidiaries participate in one protected cell of EIS for six lines of insurance. EIS has multiple protected cells. Neither AEP nor its subsidiaries have an equity investment in EIS. The AEP System is essentially this EIS cell’s only participant, but allows certain third-parties access to this insurance. AEP’s subsidiaries and any allowed third-parties share in the insurance coverage, premiums and risk of loss from claims. Based on AEP’s control and the structure of the protected cell of EIS, management concluded that AEP is the primary beneficiary of the protected cell and is required to consolidate the protected cell of EIS. The insurance premium expense to the protected cell for the years ended December 31, 2022, 2021 and 2020 was $31 million, $30 million and $31 million, respectively. See the tables below for the classification of the protected cell’s assets and liabilities on the balance sheets.  The amount reported as equity is the protected cell’s policy holders’ surplus.

401

Transource Energy (Applies to AEP)

Transource Energy was formed for the purpose of investing in utilities which develop, acquire, construct, own and operate transmission facilities in accordance with FERC-approved rates. AEP has equity and voting ownership of 86.5% with the other owner having 13.5% interest. Management has concluded that Transource Energy is a VIE and that AEP is the primary beneficiary because AEP has the power to direct the most significant activities of the entity and AEP’s equity interest could potentially be significant. Therefore, AEP is required to consolidate Transource Energy. Transource Energy’s activities consist of the development, construction and operation of FERC-regulated transmission assets in Missouri, West Virginia, Pennsylvania, Maryland and Oklahoma. Transource Energy has a credit facility agreement where borrowings are loaned through intercompany lending agreements to its subsidiaries. The creditor to the agreement has no recourse to the general credit of AEP. Transource Energy’s credit facility agreement contains certain covenants and require it to maintain a percentage of debt-to-total capitalization at a level that does not exceed 67.5%. See the tables below for the classification of Transource Energy’s assets and liabilities on the balance sheets.

Apple Blossom Wind Holdings LLC and Black Oak Getty Wind Holdings LLC (Applies to AEP)

AEP holds an equity interest in Apple Blossom Wind Holdings LLC (Apple Blossom) and Black Oak Getty Wind Holdings LLC (Black Oak) (collectively the Project Entities). The Project Entities have long-term PPAs for 100% of their energy production. The Project Entities are tax equity partnerships with nonaffiliated noncontrolling interests to which a percentage of earnings, tax attributes and cash flows are allocated in accordance with the respective limited liability company agreements. Management concluded the Project Entities are VIEs and that AEP is the primary beneficiary of both based on its power as managing member to direct the respective activities that most significantly impact the Project Entities’ economic performance. In addition, AEP has not provided material financial or other support to the Project Entities that was not previously contractually required. See the table below for the classification of Project Entities’ assets and liabilities on the balance sheets.

The nonaffiliated interests in the Project Entities are presented in Noncontrolling Interests on the balance sheets.  As of December 31, 2022 and 2021, AEP recognized $94 million and $108 million, respectively, of Noncontrolling Interests related to the Project Entities in Equity on the balance sheets.

The Project Entities’ tax equity partnerships represent substantive profit-sharing arrangements. The method for attributing income and loss to the noncontrolling interests is a balance sheet approach referred to as the hypothetical liquidation at book value (HLBV) method. Under the HLBV method, the income and loss attributable to the noncontrolling interests reflect changes in the amounts the members would hypothetically receive at each balance sheet date under the liquidation provisions of the respective limited liability company agreements, assuming the net assets of these entities were liquidated at recorded amounts, after taking into account any capital transactions, such as contributions or distributions, between the entities and the members. For the years ended December 31, 2022 and 2021, the HLBV method resulted in a loss of $9 million and $7 million, respectively, allocated to Noncontrolling Interests.

402

Santa Rita East (Applies to AEP)

AEP owns an 85% interest in Santa Rita East Wind Energy Holdings, LLC and its wholly-owned subsidiary, Santa Rita East Wind Energy, LLC (collectively, Santa Rita East). Santa Rita East is a partnership whose sole purpose is to own and operate a 302 MW wind generation facility in west Texas. Santa Rita East delivers energy and provides renewable energy credits through three long-term PPAs totaling 260 MWs. The remaining 42 MWs of energy are sold at wholesale into ERCOT. Management has concluded that Santa Rita East is a VIE and that AEP is the primary beneficiary based on its power as managing member of the partnership to direct the activities that most significantly impact Santa Rita East’s economic performance. See the tables below for the classification of Santa Rita East’s assets and liabilities on the balance sheets.
AEP recognized $24 million, $25 million and $23 million of PTCs attributable to Santa Rita East for the years ended December 31, 2022, 2021 and 2020, respectively, which was recorded in Income Tax Expense (Benefit) on the statements of income. The nonaffiliated interest in Santa Rita East is presented in Noncontrolling Interests on the balance sheets. As of December 31, 2022 and 2021, AEP recorded $58 million and $59 million, respectively, of Noncontrolling Interests related to Santa Rita East in Equity on the balance sheets.
Dry Lake (Applies to AEP)
In November 2020, AEP signed a Purchase and Sale Agreement with a nonaffiliate to acquire a 75% ownership interest in the entity that owns Dry Lake Solar Project (collectively, Dry Lake). Dry Lake is a partnership whose sole purpose is to own, operate and maintain a 100 MW solar generation facility in southern Nevada. In March 2021, AEP closed the transaction and the solar project was placed in-service in May 2021. Dry Lake delivers energy and provides renewable energy credits through a long-term PPA. Management has concluded that Dry Lake is a VIE and that AEP is the primary beneficiary based on its power as managing member to direct the activities that most significantly impact Dry Lake’s economic performance. See the table below for the classification of Dry Lake assets and liabilities on the balance sheets.
The ITC attributable to Dry Lake for the years ended December 31, 2022 and 2021 which was recorded in Income Tax Expense (Benefit) on the statements of income was not material. The nonaffiliated interest in Dry Lake is presented in Noncontrolling Interests on the balance sheets. As of December 31, 2022 and 2021, AEP recognized $34 million and $35 million of Noncontrolling Interest on the balance sheets.

403

The balances below represent the assets and liabilities of the VIEs that are consolidated. These balances include intercompany transactions that are eliminated upon consolidation.

American Electric Power Company, Inc. and Subsidiary Companies	
Variable Interest Entities	
December 31, 2022	
			
	Registrant Subsidiaries		
	SWEPCo
Sabine		I&M
DCC Fuel		AEP Texas Transition Funding		AEP Texas Restoration Funding		APCo
Appalachian
Consumer
Rate
Relief Funding		
	(in millions)		
ASSETS											
Current Assets	$	108.3 			$	90.2 			$	27.0 			$	21.1 			$	13.5 			
Net Property, Plant and Equipment	7.2 			179.1 			— 			— 			— 			
Other Noncurrent Assets	130.0 			94.0 			140.9 		(a)	168.8 		(b)	164.6 		(c)	
Total Assets	$	245.5 			$	363.3 			$	167.9 			$	189.9 			$	178.1 			
											
LIABILITIES AND EQUITY											
Current Liabilities	$	25.4 			$	90.0 			$	73.2 			$	31.3 			$	29.3 			
Noncurrent Liabilities	219.4 			273.3 			90.4 			157.4 			146.9 			
Equity	0.7 			— 			4.3 			1.2 			1.9 			
Total Liabilities and Equity	$	245.5 			$	363.3 			$	167.9 			$	189.9 			$	178.1 			

(a)Includes an intercompany item eliminated in consolidation of $16 million.
(b)Includes an intercompany item eliminated in consolidation of $7 million.
(c)Includes an intercompany item eliminated in consolidation of $2 million.

American Electric Power Company, Inc. and Subsidiary Companies	
Variable Interest Entities	
December 31, 2022	
								
	Other Consolidated VIEs		
	AEP Credit		Protected
Cell
of EIS		Transource Energy		Apple Blossom and Black Oak		Santa Rita East		Dry Lake		
	(in millions)				
ASSETS													
Current Assets	$	1,181.0 			$	194.5 			$	23.5 			$	8.3 			$	21.3 			$	4.0 			
Net Property, Plant and Equipment	— 			— 			482.3 			216.5 			421.6 			142.6 			
Other Noncurrent Assets	9.0 			0.3 			2.7 			13.6 			0.1 			0.3 			
Total Assets	$	1,190.0 			$	194.8 			$	508.5 			$	238.4 			$	443.0 			$	146.9 			
													
LIABILITIES AND EQUITY													
Current Liabilities	$	1,087.8 			$	46.4 			$	22.8 			$	4.5 			$	9.6 			$	1.0 			
Noncurrent Liabilities	0.9 			79.1 			218.6 			5.4 			7.3 			0.7 			
Equity	101.3 			69.3 			267.1 			228.5 			426.1 			145.2 			
Total Liabilities and Equity	$	1,190.0 			$	194.8 			$	508.5 			$	238.4 			$	443.0 			$	146.9 			

404

																																	
American Electric Power Company, Inc. and Subsidiary Companies	
Variable Interest Entities	
December 31, 2021	
											
	Registrant Subsidiaries		
	SWEPCo
Sabine		I&M
DCC Fuel		AEP Texas Transition Funding		AEP Texas Restoration Funding		APCo
Appalachian
Consumer
Rate
Relief Funding		
	(in millions)		
ASSETS											
Current Assets	$	77.2 			$	65.2 			$	24.9 			$	24.3 			$	16.0 			
Net Property, Plant and Equipment	51.8 			118.6 			— 			— 			— 			
Other Noncurrent Assets	104.1 			57.2 			208.3 		(a)	192.6 		(b)	187.8 		(c)	
Total Assets	$	233.1 			$	241.0 			$	233.2 			$	216.9 			$	203.8 			
											
LIABILITIES AND EQUITY											
Current Liabilities	$	18.9 			$	65.1 			$	71.2 			$	36.1 			$	29.0 			
Noncurrent Liabilities	214.3 			175.9 			157.8 			179.6 			172.9 			
Equity	(0.1)			— 			4.2 			1.2 			1.9 			
Total Liabilities and Equity	$	233.1 			$	241.0 			$	233.2 			$	216.9 			$	203.8 			

(a)Includes an intercompany item eliminated in consolidation of $24 million.
(b)Includes an intercompany item eliminated in consolidation of $8 million.
(c)Includes an intercompany item eliminated in consolidation of $2 million.

American Electric Power Company, Inc. and Subsidiary Companies	
Variable Interest Entities	
December 31, 2021	
												
	Other Consolidated VIEs	
	AEP Credit		Protected
Cell
of EIS		Transource Energy		Apple Blossom and Black Oak		Santa Rita East		Dry Lake	
	(in millions)			
ASSETS												
Current Assets	$	996.6 			$	217.3 			$	38.8 			$	9.9 			$	7.6 			$	4.0 		
Net Property, Plant and Equipment	— 			— 			475.4 			217.3 			437.6 			146.1 		
Other Noncurrent Assets	10.4 			— 			3.0 			11.3 			— 			0.3 		
Total Assets	$	1,007.0 			$	217.3 			$	517.2 			$	238.5 			$	445.2 			$	150.4 		
												
LIABILITIES AND EQUITY												
Current Liabilities	$	953.1 			$	37.5 			$	12.5 			$	6.6 			$	5.8 			$	0.9 		
Noncurrent Liabilities	0.9 			82.3 			216.9 			5.2 			7.0 			0.6 		
Equity	53.0 			97.5 			287.8 			226.7 			432.4 			148.9 		
Total Liabilities and Equity	$	1,007.0 			$	217.3 			$	517.2 			$	238.5 			$	445.2 			$	150.4 		

405

Non-Consolidated Significant Variable Interests

DHLC (Applies to AEP and SWEPCo)

DHLC is a mining operator which sells 50% of the lignite produced to SWEPCo and 50% to CLECO.  The operations of DHLC are governed by the lignite mining agreement among SWEPCo, CLECO and DHLC. SWEPCo and CLECO share the executive board seats and voting rights equally. In accordance with the lignite mining agreement, each entity is responsible for 50% of DHLC’s obligations, including debt.  SWEPCo and CLECO equally approve DHLC’s annual budget.  The creditors of DHLC have no recourse to any AEP entity other than SWEPCo.  As SWEPCo is the sole equity owner of DHLC, it receives 100% of the management fee earned by DHLC.  In April 2020, SWEPCo and CLECO jointly filed a notification letter to the LPSC providing notice of the cessation of lignite mining. SWEPCo’s total billings from DHLC for the years ended December 31, 2022 were not material, and for the years ended December 31, 2021 and 2020 were $47 million and $142 million, respectively.  DHLC paid dividends of $25 million, $0 million, and $0 million to SWEPCo for the years ended December 31, 2022, 2021, and 2020, respectively. SWEPCo is not required to consolidate DHLC as it is not the primary beneficiary, although SWEPCo holds a significant variable interest in DHLC.  SWEPCo’s equity investment in DHLC is included in Deferred Charges and Other Noncurrent Assets on SWEPCo’s balance sheets.

SWEPCo’s investment in DHLC was:

	December 31,	
	2022		2021	
	As Reported on
the Balance Sheet		Maximum
Exposure		As Reported on
the Balance Sheet		Maximum
Exposure	
	(in millions)	
Capital Contribution from SWEPCo	$	7.6 			$	7.6 			$	7.6 			$	7.6 		
Retained Earnings	0.4 			0.4 			23.8 			23.8 		
SWEPCo’s Share of Obligations	— 			36.8 			— 			50.3 		
Total Investment in DHLC	$	8.0 			$	44.8 			$	31.4 			$	81.7 		

OVEC (Applies to AEP and OPCo)

AEP and several nonaffiliated utility companies jointly own OVEC.  As of December 31, 2022, AEP’s ownership in OVEC was 43.47%. Parent owns 39.17% and OPCo owns 4.3%. APCo, I&M and OPCo are members to an intercompany power agreement.  The Registrants’ power participation ratios are 15.69% for APCo, 7.85% for I&M and 19.93% for OPCo. Participants of this agreement are entitled to receive and are obligated to pay for all OVEC generating capacity, approximately 2,400 MWs, in proportion to their respective power participation ratios. The proceeds from the sale of power by OVEC are designed to be sufficient for OVEC to meet its operating expenses and fixed costs, including outstanding indebtedness, and provide a return on capital.  The intercompany power agreement ends in June 2040.
 
AEP and other nonaffiliated owners authorized environmental investments related to their ownership interests. OVEC financed capital expenditures in connection with the engineering and construction of FGD projects and the associated waste disposal landfills at its two generation plants.  These environmental projects were funded through debt issuances. As of December 31, 2022 and 2021, OVEC’s outstanding indebtedness was approximately $1.1 billion and $1.1 billion, respectively. Although they are not an obligor or guarantor, the Registrants’ are responsible for their respective ratio of OVEC’s outstanding debt through the intercompany power agreement. Principal and interest payments related to OVEC’s outstanding indebtedness are disclosed in accordance with the accounting guidance for “Commitments.” See the “Commitments” section of Note 6 for additional information.

AEP is not required to consolidate OVEC as it is not the primary beneficiary, although AEP and its subsidiary holds a significant variable interest in OVEC. Power to control decision making that significantly impacts the economic performance of OVEC is shared amongst the owners through their representation on the Board of Directors of
406

OVEC and the representation of the sponsoring companies on the Operating Committee under the intercompany power agreement.

AEP’s investment in OVEC was:

	December 31,	
	2022		2021	
	As Reported on
the Balance Sheet		Maximum
Exposure		As Reported on
the Balance Sheet		Maximum Exposure	
	(in millions)	
Capital Contribution from AEP	$	4.4 			$	4.4 			$	4.4 			$	4.4 		
AEP’s Ratio of OVEC Debt (a)	— 			478.2 			— 			492.0 		
Total Investment in OVEC	$	4.4 			$	482.6 			$	4.4 			$	496.4 		

(a)Based on the Registrants’ power participation ratios APCo, I&M and OPCo’s share of OVEC debt was $173 million, $86 million and $219 million as of December 31, 2022 and $177 million, $89 million and $226 million as of December 31, 2021, respectively.

Power purchased by the Registrant Subsidiaries from OVEC is included in Purchased Electricity for Resale on the statements of income and is shown in the table below:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
APCo		$	119.3 			$	104.3 			$	94.4 		
I&M		59.7 			52.2 			47.2 		
OPCo		151.8 			133.0 			120.8 		

AEPSC (Applies to Registrant Subsidiaries)

AEPSC provides certain managerial and professional services to AEP’s subsidiaries.  Parent is the sole equity owner of AEPSC.  AEP management controls the activities of AEPSC.  The costs of the services are based on a direct-charge or on a prorated basis and billed to the AEP subsidiary companies at AEPSC’s cost.  AEP subsidiaries have not provided financial or other support outside of the reimbursement of costs for services rendered.  AEPSC finances its operations through cost reimbursement from other AEP subsidiaries.  There are no other terms or arrangements between AEPSC and any of the AEP subsidiaries that could require additional financial support from an AEP subsidiary or expose them to losses outside of the normal course of business.  AEPSC and its billings are subject to regulation by the FERC.  AEP subsidiaries are exposed to losses to the extent they cannot recover the costs of AEPSC through their normal business operations.  AEP subsidiaries are considered to have a significant interest in AEPSC due to their activity in AEPSC’s cost reimbursement structure.  However, AEP subsidiaries do not have control over AEPSC.  AEPSC is consolidated by AEP.  In the event AEPSC would require financing or other support outside the cost reimbursement billings, this financing would be provided by AEP.

Total AEPSC billings to the Registrant Subsidiaries were as follows:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
AEP Texas		$	236.8 			$	206.9 			$	199.4 		
AEPTCo		286.6 			267.1 			270.3 		
APCo		347.5 			313.3 			294.9 		
I&M		192.4 			200.9 			210.2 		
OPCo		272.5 			234.9 			232.8 		
PSO		142.3 			123.7 			113.2 		
SWEPCo		192.5 			168.6 			161.8 		
407

The carrying amount and classification of variable interest in AEPSC’s accounts payable were as follows:

		December 31,	
		2022		2021	
Company		As Reported on
the Balance Sheet		Maximum
Exposure		As Reported on
the Balance Sheet		Maximum
Exposure	
		(in millions)	
AEP Texas		$	27.8 			$	27.8 			$	22.2 			$	22.2 		
AEPTCo		31.6 			31.6 			23.3 			23.3 		
APCo		41.5 			41.5 			44.1 			44.1 		
I&M		27.7 			27.7 			21.8 			21.8 		
OPCo		31.1 			31.1 			25.5 			25.5 		
PSO		17.7 			17.7 			13.7 			13.7 		
SWEPCo		23.8 			23.8 			20.5 			20.5 		

AEGCo (Applies to I&M)

AEGCo, a wholly-owned subsidiary of Parent, is consolidated by AEP.  AEGCo owns a 50% ownership interest in Rockport Plant, Units 1 and 2. AEGCo sells all the output from the Rockport Plant to I&M.  AEP has agreed to provide AEGCo with the funds necessary to satisfy all of the debt obligations of AEGCo.  I&M is considered to have a significant interest in AEGCo due to these transactions.  I&M is exposed to losses to the extent it cannot recover the costs of AEGCo through its normal business operations.  In the event AEGCo would require financing or other support outside the billings to I&M, this financing would be provided by AEP. Total billings to I&M from AEGCo for the years ended December 31, 2022, 2021 and 2020 were $242 million, $218 million and $173 million, respectively. The carrying amounts of I&M’s liabilities associated with AEGCo as of December 31, 2022 and 2021 were $17 million and $18 million, respectively. Management estimates the maximum exposure of loss to be equal to the amount of such liability.

Significant Equity Method Investments in Unconsolidated Entities (Applies to AEP)

For a discussion of the equity method of accounting, see the “Equity Investment in Unconsolidated Entities” section of Note 1.

AEP Wind Holdings, LLC

In September 2022, AEP signed a PSA with a nonaffiliate for AEP’s interest in Flat Ridge 2, one of the five joint ventures that were held as of December 31, 2021 by AEP. The transaction closed in the fourth quarter of 2022 and had an immaterial impact on the financial statements. As of December 31, 2022, through AEP Wind Holdings, LLC, AEP holds a 50% interest in four joint ventures in multiple states which own distinct generation facilities. BP Wind Energy holds the other 50% interest in each of these joint ventures. All four wind farms have long-term PPAs for 100% of their energy production. One of the jointly-owned wind farms has PPAs with I&M and OPCo for a portion of its energy production. The joint ventures are not considered VIEs and AEP is not required to consolidate them as AEP does not have a controlling financial interest. However, AEP is able to exercise significant influence over the joint ventures and therefore applies the equity method of accounting.

The following financial figures in the respective periods include the results Flat Ridge 2 prior to its disposal. As of December 31, 2022 and 2021, AEP’s carrying value of the investment in the joint ventures was $247 million and $399 million, respectively. As of December 31, 2022 and 2021, the difference between AEP’s carrying value and the amount of underlying equity in net assets was $62 million and $(3) million, respectively. The investment includes amounts recognized in AOCI related to interest rate cash flow hedges. AEP’s equity earnings (loss) associated with the joint venture wind farms was $(194) million, $(12) million and $2 million for the years ended December 31, 2022, 2021, and 2020, respectively. AEP recognized $39 million, $33 million, and $36 million of PTCs attributable to the joint ventures for the years ended December 31, 2022, 2021, and 2020 respectively, which was recorded in Income Tax Expense (Benefit) on the statements of income. See the “Impairments” section of Note 7 for additional information.
408

ETT

ETT designs, acquires, constructs, owns and operates certain transmission facilities in ERCOT. Berkshire Hathaway Energy, a nonaffiliated entity, holds a 50% membership interest in ETT and AEP Transmission Holdco holds a 50% membership interest in ETT. As a result, AEP, through its wholly-owned subsidiary, holds a 50% membership interest in ETT. As of December 31, 2022 and 2021, AEP’s investment in ETT was $762 million and $733 million, respectively. AEP’s equity earnings associated with ETT were $74 million, $66 million and $68 million for the years ended December 31, 2022, 2021 and 2020 respectively.

409

18.  PROPERTY, PLANT AND EQUIPMENT

The disclosures in this note apply to all Registrants unless indicated otherwise.

Property, Plant and Equipment is shown functionally on the face of the balance sheets. The following tables include the total plant balances as of December 31, 2022 and 2021:

December 31, 2022		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo		
		(in millions)		
Regulated Property, Plant and Equipment																		
Generation		$	22,523.1 		(a)	$	— 			$	— 			$	6,776.8 			$	5,534.6 			$	— 			$	2,394.8 			$	5,476.2 		(a)	
Transmission		32,267.8 			6,301.5 			12,183.2 			4,482.8 			1,842.2 			3,198.6 			1,164.4 			2,479.8 			
Distribution		26,077.2 			5,312.8 			— 			4,933.0 			3,024.7 			6,450.3 			3,216.4 			2,659.6 			
Other		5,700.4 			1,020.4 			451.7 			849.2 			796.1 			1,040.6 			466.0 			582.6 			
CWIP		4,630.8 		(a)	805.2 			1,547.1 			705.3 			253.0 			474.3 			219.3 			369.5 		(a)	
Less: Accumulated Depreciation		21,947.1 			1,759.5 			1,012.2 			5,397.3 			4,117.8 			2,564.3 			1,839.4 			3,314.8 			
Total Regulated Property, Plant and Equipment - Net		69,252.2 			11,680.4 			13,169.8 			12,349.8 			7,332.8 			8,599.5 			5,621.5 			8,252.9 			
Nonregulated Property, Plant and Equipment - Net		2,030.7 			1.2 			0.3 			29.4 			78.7 			9.8 			5.0 			9.3 			
Total Property, Plant and Equipment - Net		$	71,282.9 		(b)	$	11,681.6 			$	13,170.1 		(c)	$	12,379.2 			$	7,411.5 			$	8,609.3 			$	5,626.5 			$	8,262.2 			

December 31, 2021		AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo		
		(in millions)		
Regulated Property, Plant and Equipment																		
Generation		$	21,196.8 		(a)	$	— 			$	— 			$	6,683.9 			$	5,531.8 			$	— 			$	1,802.4 			$	4,734.5 		(a)	
Transmission		29,866.0 			5,849.9 			10,886.3 			4,322.4 			1,783.1 			2,992.8 			1,107.7 			2,316.9 			
Distribution		24,440.0 			4,917.2 			— 			4,683.3 			2,800.1 			6,070.6 			3,004.9 			2,514.3 			
Other		5,249.8 			958.7 			427.2 			668.9 			755.1 			982.2 			433.5 			542.0 			
CWIP		3,632.4 		(a)	551.3 			1,394.8 			469.9 			302.8 			365.0 			156.0 			240.7 		(a)	
Less: Accumulated Depreciation		20,375.5 			1,642.9 			772.9 			5,047.4 			3,885.3 			2,457.4 			1,707.0 			3,002.2 			
Total Regulated Property, Plant and Equipment - Net		64,009.5 			10,634.2 			11,935.4 			11,781.0 			7,287.6 			7,953.2 			4,797.5 			7,346.2 			
Nonregulated Property, Plant and Equipment - Net		1,991.8 			1.2 			0.3 			23.3 			23.3 			9.8 			5.3 			53.9 			
Total Property, Plant and Equipment - Net		$	66,001.3 		(b)	$	10,635.4 			$	11,935.7 		(c)	$	11,804.3 			$	7,310.9 			$	7,963.0 			$	4,802.8 			$	7,400.1 			

(a)AEP and SWEPCo’s regulated generation and regulated CWIP include amounts related to SWEPCo’s Arkansas jurisdictional share of the Turk Plant.
(b)Amount excludes $2.4 billion and $2.3 billion as of December 31, 2022 and 2021, respectively, of Property, Plant and Equipment - Net classified as Assets Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.
(c)Amount excludes $170 million and $165 million as of December 31, 2022 and 2021, respectively, of Property, Plant and Equipment - Net classified as Assets Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

410

Depreciation, Depletion and Amortization

The Registrants provide for depreciation of Property, Plant and Equipment, excluding coal-mining properties, on a straight-line basis over the estimated useful lives of property, generally using composite rates by functional class.  The following tables provide total regulated annual composite depreciation rates and depreciable lives for the Registrants:

AEP																									
		2022		2021		2020	
Functional Class of Property		Annual Composite
Depreciation Rate Ranges		Depreciable
Life Ranges		Annual Composite
Depreciation Rate Ranges		Depreciable
Life Ranges		Annual Composite
Depreciation Rate Ranges		Depreciable
Life Ranges	
						(in years)						(in years)						(in years)	
Generation		2.7%	-	7.6%		20	-	132		2.7%	-	7.8%		20	-	132		2.7%	-	6.3%		20	-	132	
Transmission		2.0%	-	2.7%		24	-	75		2.0%	-	2.6%		15	-	75		2.0%	-	2.6%		15	-	75	
Distribution		2.7%	-	3.6%		7	-	78		2.8%	-	3.6%		7	-	80		2.7%	-	3.7%		7	-	78	
Other		3.1%	-	14.4%		5	-	75		3.0%	-	12.5%		5	-	75		2.8%	-	11.3%		5	-	75	

AEP Texas																			
		2022		2021		2020	
Functional Class of Property		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges	
				(in years)				(in years)				(in years)	
Transmission		2.2%		50	-	75		2.2%		50	-	75		2.0%		50	-	75	
Distribution		2.9%		7	-	70		2.9%		7	-	70		3.1%		7	-	70	
Other		6.2%		5	-	50		5.8%		5	-	50		6.1%		5	-	50	

AEPTCo																			
		2022		2021		2020	
Functional Class of Property		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges	
				(in years)				(in years)				(in years)	
Transmission		2.6%		24	-	75		2.5%		24	-	75		2.4%		24	-	75	
Other		6.6%		5	-	56		6.7%		5	-	56		6.3%		5	-	64	

APCo																			
		2022		2021		2020	
Functional Class of Property		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges	
				(in years)				(in years)				(in years)	
Generation		3.6%		35	-	118		3.6%		35	-	118		3.3%		35	-	118	
Transmission		2.2%		24	-	75		2.1%		15	-	75		2.2%		15	-	75	
Distribution		3.6%		12	-	57		3.5%		12	-	57		3.7%		12	-	57	
Other		7.3%		5	-	55		8.5%		5	-	55		7.8%		5	-	55	

I&M																			
		2022		2021		2020	
Functional Class of Property		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges	
				(in years)				(in years)				(in years)	
Generation		4.9%		20	-	132		4.7%		20	-	132		4.6%		20	-	132	
Transmission		2.5%		44	-	67		2.4%		45	-	70		2.3%		45	-	70	
Distribution		3.1%		14	-	71		3.4%		14	-	71		3.4%		14	-	71	
Other		10.1%		5	-	45		9.0%		5	-	51		10.2%		5	-	51	

OPCo																			
		2022		2021		2020	
Functional Class of Property		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges	
				(in years)				(in years)				(in years)	
Transmission		2.3%		39	-	60		2.3%		39	-	60		2.3%		39	-	60	
Distribution		2.7%		11	-	70		2.9%		11	-	70		3.1%		14	-	65	
Other		6.1%		5	-	50		6.1%		5	-	50		5.0%		5	-	50	
411

																																																									
PSO																			
		2022		2021		2020	
Functional Class of Property		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges	
				(in years)				(in years)				(in years)	
Generation		3.1%		30	-	75		2.8%		30	-	75		3.1%		35	-	75	
Transmission		2.5%		42	-	75		2.4%		42	-	75		2.2%		45	-	75	
Distribution		2.9%		15	-	78		2.9%		15	-	78		2.9%		15	-	78	
Other		6.8%		5	-	56		6.1%		5	-	56		5.7%		5	-	64	

SWEPCo																			
		2022		2021		2020	
Functional Class of Property		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges		Annual Composite
Depreciation Rate		Depreciable
Life Ranges	
				(in years)				(in years)				(in years)	
Generation		2.7%		30	-	65		2.7%		30	-	65		2.7%		35	-	65	
Transmission		2.3%		44	-	70		2.4%		49	-	74		2.3%		47	-	73	
Distribution		2.9%		15	-	75		2.8%		15	-	80		2.7%		15	-	67	
Other		9.0%		5	-	57		8.6%		5	-	58		8.5%		5	-	52	

The following table includes the nonregulated annual composite depreciation rate ranges and nonregulated depreciable life ranges for AEP. Depreciation rate ranges and depreciable life ranges are not meaningful for nonregulated property of AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo for 2022, 2021 and 2020.

		2022		2021		2020		
Functional Class of Property		Annual Composite
Depreciation Rate Ranges		Depreciable
Life Ranges		Annual Composite
Depreciation Rate Ranges		Depreciable
Life Ranges		Annual Composite
Depreciation Rate Ranges		Depreciable
Life Ranges		
						(in years)						(in years)						(in years)		
Generation		3.8%	-	8.7%		3	-	61		3.8%	-	10.4%		10	-	59		3.6%	-	4.0%		15	-	59		
Transmission		2.8%		10	-	62		2.6%		30	-	40		2.5%		30	-	40		
Distribution		NA		NA		NA		NA		NA		NA		
Other		25.2%		5	-	35	(a)	16.5%		5	-	35	(a)	16.1%		5	-	50		

(a)In 2020 management announced plans to retire the Pirkey Plant in 2023 and the related depreciable lives have been adjusted accordingly. See Note 5 - Effects of Regulation for additional information.
NA Not applicable.

SWEPCo provides for depreciation, depletion and amortization of coal-mining assets over each asset’s estimated useful life or the estimated life of each mine, whichever is shorter, using the straight-line method for mining structures and equipment.  SWEPCo uses either the straight-line method or the units-of-production method to amortize mine development costs and deplete coal rights based on estimated recoverable tonnages.  SWEPCo includes these costs in fuel expense.

For regulated operations, the composite depreciation rate generally includes a component for non-ARO removal costs, which is credited to Accumulated Depreciation and Amortization on the balance sheets.  Actual removal costs incurred are charged to Accumulated Depreciation and Amortization.  Any excess of accrued non-ARO removal costs over actual removal costs incurred is reclassified from Accumulated Depreciation and Amortization and reflected as a regulatory liability.  For nonregulated operations, non-ARO removal costs are expensed as incurred. 

412

Asset Retirement Obligations (Applies to all Registrants except AEPTCo)

The Registrants recorded the following revisions to ARO estimates as of December 31, 2022 and 2021:

•As of December 31, 2022 and 2021, I&M’s ARO liability for nuclear decommissioning of the Cook Plant was $2 billion and $1.93 billion, respectively.  These liabilities are reflected in Asset Retirement Obligations on I&M’s balance sheets.  As of December 31, 2022 and 2021, the fair value of I&M’s assets that are legally restricted for purposes of settling decommissioning liabilities totaled $3.01 billion and $3.54 billion, respectively.  These assets are included in Spent Nuclear Fuel and Decommissioning Trusts on I&M’s balance sheets. In December 2021, I&M recorded a $58 million revision for Cook Plant as a result of the latest decommissioning cost study. The ARO liability was updated and changes from the previous study were driven primarily by general increases in the projected cost of labor and materials.
•In 2020, Virginia’s Governor signed House Bill 443 (HB 443) requiring APCo to close certain ash disposal units at the retired Glen Lyn Station by removal of all coal combustion material. In June 2021, management completed fully designed and costed project plans for the Glen Lyn Station site and increased ash disposal ARO liabilities by an additional $79 million. HB 443 provides for the recovery of all costs associated with closure by removal through the Virginia environmental rate adjustment clause. APCo is permitted to record carrying costs on the unrecovered balance of closure costs as a weighted-average cost of capital approved by the Virginia SCC. The legislation provides for regulatory recovery of these costs.
•In September 2022, APCo recorded a $14 million revision due to an increase in estimated ash pond closure costs at the Amos Plant.
•In March 2022, PSO and SWEPCo acquired respective undivided ownership interests in the entity that owned Traverse during its development and construction. Immediately following the acquisition, PSO and SWEPCo liquidated the entity and simultaneously distributed the Traverse assets in proportion to their undivided ownership interests. Traverse was placed in-service in March 2022. As a result, PSO and SWEPCo incurred additional ARO liabilities of $13 million and $15 million, respectively. See the “North Central Wind Energy Facilities” section of Note 7 for additional information.
•In March 2022, SWEPCo recorded a $13 million revision due to an increase in estimated ash pond closure costs at the Pirkey Plant and the Welsh Plant. In June 2022, SWEPCo recorded a $16 million revision due to an increase in estimated reclamation costs at Sabine. In September 2022, SWEPCo recorded a $14 million revision due to an increase in estimated landfill closure costs at Pirkey Plant. In November 2022, SWEPCo recorded an additional $7 million revision related to an increase in estimated reclamation costs at Sabine.

The following is a reconciliation of the 2022 and 2021 aggregate carrying amounts of ARO by Registrant:

Company		ARO as of December 31, 2021		Accretion
Expense		Liabilities
Incurred		Liabilities
Settled		Revisions in
Cash Flow
Estimates (a)		ARO as of December 31, 2022	
		(in millions)	
AEP(b)(c)(d)(e)(f)(g)(h)		$	2,741.7 			$	111.2 			$	37.4 			$	(47.0)			$	100.3 			$	2,943.6 		
AEP Texas (b)(e)		4.4 			0.3 			— 			(0.2)			— 			4.5 		
APCo (b)(e)		404.6 			15.8 			3.0 			(12.7)			17.0 			427.7 		
I&M (b)(c)(e)		1,946.3 			71.5 			3.2 			(0.6)			7.7 			2,028.1 		
OPCo (e)		1.9 			0.2 			3.0 			(0.1)			— 			5.0 		
PSO (b)(e)(g)		57.6 			4.1 			12.8 			(0.7)			1.9 			75.7 		
SWEPCo (b)(d)(e)(g)		222.7 			11.9 			15.4 			(25.8)			56.7 			280.9 		
413

																																							
Company		ARO as of December 31, 2020		Accretion
Expense		Liabilities
Incurred		Liabilities
Settled		Revisions in
Cash Flow
Estimates (a)		ARO as of December 31, 2021	
		(in millions)	
AEP (b)(c)(d)(e)(f)(g)(h)		$	2,516.7 			$	105.0 			$	22.8 			$	(41.4)			$	138.6 			$	2,741.7 		
AEP Texas (b)(e)		4.6 			0.2 			— 			(0.4)			— 			4.4 		
APCo (b)(e)		313.1 			13.7 			— 			(6.9)			84.7 			404.6 		
I&M (b)(c)(e)		1,813.8 			72.9 			0.3 			(0.1)			59.4 			1,946.3 		
OPCo (e)		1.9 			0.1 			— 			(0.1)			— 			1.9 		
PSO (b)(e)(g)		47.4 			3.3 			7.6 			(0.7)			— 			57.6 		
SWEPCo (b)(d)(e)(g)		222.1 			9.8 			9.2 			(20.9)			2.5 			222.7 		

(a)Unless discussed above, primarily related to ash ponds, landfills and mine reclamation, generally due to changes in estimated closure area, volumes and/or unit costs.
(b)Includes ARO related to ash disposal facilities.
(c)Includes ARO related to nuclear decommissioning costs for the Cook Plant of $2 billion and $1.93 billion as of December 31, 2022 and 2021, respectively.
(d)Includes ARO related to Sabine and DHLC.
(e)Includes ARO related to asbestos removal.
(f)Includes ARO related to solar farms.
(g)Includes ARO related to wind farms.
(h)Includes $18 million and $18 million as of December 31, 2022 and 2021, respectively, of ARO classified as Liabilities Held for Sale on the balance sheet. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

Allowance for Funds Used During Construction and Interest Capitalization

The Registrants’ amounts of Allowance for Equity Funds Used During Construction are summarized in the following table:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
AEP		$	133.7 			$	139.7 			$	148.1 		
AEP Texas		19.7 			21.5 			19.4 		
AEPTCo		70.7 			67.2 			74.0 		
APCo		11.7 			15.6 			14.6 		
I&M		9.8 			12.8 			11.5 		
OPCo		13.9 			10.8 			12.5 		
PSO		1.5 			2.4 			4.0 		
SWEPCo		4.9 			7.0 			7.7 		

The Registrants’ amounts of allowance for borrowed funds used during construction, including capitalized interest, are summarized in the following table:

		Years Ended December 31,	
Company		2022		2021		2020	
		(in millions)	
AEP		$	63.0 			$	53.8 			$	66.0 		
AEP Texas		11.5 			10.5 			12.5 		
AEPTCo		22.4 			21.0 			25.5 		
APCo		6.5 			7.5 			7.9 		
I&M		5.7 			5.1 			5.7 		
OPCo		6.7 			4.7 			6.2 		
PSO		2.7 			0.7 			2.0 		
SWEPCo		4.3 			3.0 			3.9 		

414

Jointly-owned Electric Facilities (Applies to AEP, I&M, PSO and SWEPCo)

The Registrants have electric facilities that are jointly-owned with affiliated and nonaffiliated companies.  Using its own financing, each participating company is obligated to pay its share of the costs of these jointly-owned facilities in the same proportion as its ownership interest.  Each Registrant’s proportionate share of the operating costs associated with these facilities is included in its statements of income and the investments and accumulated depreciation are reflected in its balance sheets under Property, Plant and Equipment as follows:

					Registrant’s Share as of December 31, 2022	
	Fuel
Type		Percent of
Ownership		Utility Plant
in Service		Construction
Work in
Progress		Accumulated
Depreciation	
					(in millions)	
AEP										
Flint Creek Generating Station, Unit 1 (a)	Coal		50.0 	%		$	382.9 			$	16.4 			$	149.4 		
Pirkey Plant, Unit 1 (a)	Lignite		85.9 	%		632.0 			— 			632.0 		
Turk Generating Plant (a)	Coal		73.3 	%		1,611.1 			5.1 			314.7 		
Total					$	2,626.0 			$	21.5 			$	1,096.1 		
										
I&M										
Rockport Generating Plant (b)(c)(d)	Coal		50.0 	%		$	1,357.4 			$	9.2 			$	905.1 		
										
PSO										
North Central Wind Energy Facilities (e)(f)	Wind		45.5 	%		$	889.3 			$	9.1 			$	28.1 		
										
SWEPCo										
Flint Creek Generating Station, Unit 1 (a)	Coal		50.0 	%		$	382.9 			$	16.4 			$	149.4 		
Pirkey Plant, Unit 1 (a)	Lignite		85.9 	%		632.0 			— 			632.0 		
Turk Generating Plant (a)	Coal		73.3 	%		1,611.1 			5.1 			314.7 		
North Central Wind Energy Facilities (e)(f)	Wind		54.5 	%		1,066.8 			10.1 			35.2 		
Total					$	3,692.8 			$	31.6 			$	1,131.3 		

415

																														
					Registrant’s Share as of December 31, 2021	
	Fuel
Type		Percent of
Ownership		Utility Plant
in Service		Construction
Work in
Progress		Accumulated
Depreciation	
					(in millions)	
AEP										
Flint Creek Generating Station, Unit 1 (a)	Coal		50.0 	%		$	377.6 			$	6.3 			$	133.5 		
Pirkey Plant, Unit 1 (a)	Lignite		85.9 	%		613.8 			— 			528.3 		
Turk Generating Plant (a)	Coal		73.3 	%		1,598.0 			10.2 			285.6 		
Total					$	2,589.4 			$	16.5 			$	947.4 		
										
I&M										
Rockport Generating Plant (b)(c)(d)	Coal		50.0 	%		$	1,247.2 			$	13.9 			$	794.5 		
										
PSO										
North Central Wind Energy Facilities (e)(f)	Wind		45.5 	%		$	313.7 			$	— 			$	4.2 		
										
SWEPCo										
Flint Creek Generating Station, Unit 1 (a)	Coal		50.0 	%		$	377.6 			$	6.3 			$	133.5 		
Pirkey Plant, Unit 1 (a)	Lignite		85.9 	%		613.8 			— 			528.3 		
Turk Generating Plant (a)	Coal		73.3 	%		1,598.0 			10.2 			285.6 		
North Central Wind Energy Facilities (e)(f)	Wind		54.5 	%		376.2 			— 			5.4 		
Total					$	2,965.6 			$	16.5 			$	952.8 		

(a)Operated by SWEPCo.
(b)Operated by I&M.
(c)Amounts include I&M's 50% ownership of both Unit 1 and capital additions for Unit 2. Unit 2 was subject to a finance lease with a nonaffiliated company. In December 2022, the lease expired at which point I&M and AEGCo acquired 100% of the interests in Unit 2. See the "Rockport Plant Litigation" section of Note 6 for additional information.
(d)AEGCo owns 50%.
(e)PSO and SWEPCo own undivided interests of 45.5% and 54.5% of the NCWF, respectively. Sundance was placed into service in April 2021. Maverick was placed into service in September 2021. Traverse was placed into service in March 2022. See the “Acquisitions” section of Note 7 for additional information.
(f)Operated by PSO.

416

19. REVENUE FROM CONTRACTS WITH CUSTOMERS

The disclosures in this note apply to all Registrants, unless indicated otherwise.

Disaggregated Revenues from Contracts with Customers
The table below represents AEP’s reportable segment revenues from contracts with customers, net of respective provisions for refund, by type of revenue:

		Year Ended December 31, 2022	
		Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		Corporate and Other		Reconciling Adjustments		AEP Consolidated	
		(in millions)	
Retail Revenues:															
Residential Revenues		$	4,498.6 			$	2,497.3 			$	— 			$	— 			$	— 			$	— 			$	6,995.9 		
Commercial Revenues		2,576.5 			1,365.2 			— 			— 			— 			— 			3,941.7 		
Industrial Revenues (a)		2,543.8 			711.3 			— 			— 			— 			(0.9)			3,254.2 		
Other Retail Revenues		212.2 			49.1 			— 			— 			— 			— 			261.3 		
Total Retail Revenues		9,831.1 			4,622.9 			— 			— 			— 			(0.9)			14,453.1 		
															
Wholesale and Competitive Retail Revenues:															
Generation Revenues		958.3 			— 			— 			271.2 			— 			— 			1,229.5 		
Transmission Revenues (b)		442.8 			650.0 			1,700.6 			— 			— 			(1,413.2)			1,380.2 		
Renewable Generation Revenues (a)		— 			— 			— 			129.1 			— 			(8.0)			121.1 		
Retail, Trading and Marketing Revenues (a)		— 			— 			— 			1,713.2 			6.9 			(10.1)			1,710.0 		
Total Wholesale and Competitive Retail Revenues		1,401.1 			650.0 			1,700.6 			2,113.5 			6.9 			(1,431.3)			4,440.8 		
															
Other Revenues from Contracts with Customers (c)		241.1 			247.3 			8.2 			12.1 			93.9 			(104.8)			497.8 		
															
Total Revenues from Contracts with Customers		11,473.3 			5,520.2 			1,708.8 			2,125.6 			100.8 			(1,537.0)			19,391.7 		
															
Other Revenues:															
Alternative Revenue Programs (d)		3.8 			(26.8)			(31.8)			— 			— 			(57.7)			(112.5)		
Other Revenues (a) (e)		0.4 			18.6 			— 			341.3 			9.1 			(9.1)			360.3 		
Total Other Revenues		4.2 			(8.2)			(31.8)			341.3 			9.1 			(66.8)			247.8 		
															
Total Revenues		$	11,477.5 			$	5,512.0 			$	1,677.0 			$	2,466.9 			$	109.9 			$	(1,603.8)			$	19,639.5 		

(a)Amounts include affiliated and nonaffiliated revenues.
(b)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for AEP Transmission Holdco was $1.3 billion. The remaining affiliated amounts were immaterial.
(c)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for Corporate and Other was $59 million. The remaining affiliated amounts were immaterial.
(d)Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over/under collection of related revenues.
(e)Generation & Marketing includes economic hedge activity.

417

																																													
		Year Ended December 31, 2021	
		Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		Corporate and Other		Reconciling Adjustments		AEP Consolidated	
		(in millions)	
Retail Revenues:															
Residential Revenues		$	3,952.6 			$	2,138.2 			$	— 			$	— 			$	— 			$	— 			$	6,090.8 		
Commercial Revenues		2,208.5 			1,081.2 			— 			— 			— 			— 			3,289.7 		
Industrial Revenues		2,168.2 			395.2 			— 			— 			— 			(0.8)			2,562.6 		
Other Retail Revenues		170.6 			43.9 			— 			— 			— 			— 			214.5 		
Total Retail Revenues		8,499.9 			3,658.5 			— 			— 			— 			(0.8)			12,157.6 		
															
Wholesale and Competitive Retail Revenues:															
Generation Revenues		942.6 			— 			— 			137.9 			— 			— 			1,080.5 		
Transmission Revenues (a)		355.5 			572.4 			1,456.4 			— 			— 			(1,206.0)			1,178.3 		
Renewable Generation Revenues (b)		— 			— 			— 			86.9 			— 			(3.6)			83.3 		
Retail, Trading and Marketing Revenues (c)		— 			— 			— 			1,722.6 			1.4 			(51.6)			1,672.4 		
Total Wholesale and Competitive Retail Revenues		1,298.1 			572.4 			1,456.4 			1,947.4 			1.4 			(1,261.2)			4,014.5 		
															
Other Revenues from Contracts with Customers (b)		187.5 			194.2 			17.1 			7.2 			60.1 			(115.2)			350.9 		
															
Total Revenues from Contracts with Customers		9,985.5 			4,425.1 			1,473.5 			1,954.6 			61.5 			(1,377.2)			16,523.0 		
															
Other Revenues:															
Alternative Revenue Programs (d)		13.5 			48.8 			52.7 			— 			— 			(73.6)			41.4 		
Other Revenues (b) (e)		(0.5)			19.0 			— 			209.1 			10.7 			(10.7)			227.6 		
Total Other Revenues		13.0 			67.8 			52.7 			209.1 			10.7 			(84.3)			269.0 		
															
Total Revenues		$	9,998.5 			$	4,492.9 			$	1,526.2 			$	2,163.7 			$	72.2 			$	(1,461.5)			$	16,792.0 		

(a)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for AEP Transmission Holdco was $1.1 billion. The remaining affiliated amounts were immaterial.
(b)Amounts include affiliated and nonaffiliated revenues.
(c)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for Generation & Marketing was $52 million. The remaining affiliated amounts were immaterial.
(d)Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over/under collection of related revenues.
(e)Generation & Marketing includes economic hedge activity.

418

																																													
		Year Ended December 31, 2020	
		Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		Corporate and Other		Reconciling Adjustments		AEP Consolidated	
		(in millions)	
Retail Revenues:															
Residential Revenues		$	3,606.8 			$	2,086.9 			$	— 			$	— 			$	— 			$	— 			$	5,693.7 		
Commercial Revenues		2,016.2 			1,048.6 			— 			— 			— 			— 			3,064.8 		
Industrial Revenues		2,018.0 			390.1 			— 			— 			— 			(0.7)			2,407.4 		
Other Retail Revenues		155.6 			42.5 			— 			— 			— 			— 			198.1 		
Total Retail Revenues		7,796.6 			3,568.1 			— 			— 			— 			(0.7)			11,364.0 		
															
Wholesale and Competitive Retail Revenues:															
Generation Revenues		588.3 			— 			— 			131.9 			— 			— 			720.2 		
Transmission Revenues (a)		334.5 			467.0 			1,257.0 			— 			— 			(1,006.7)			1,051.8 		
Renewable Generation Revenues (b)		— 			— 			— 			60.9 			— 			(1.6)			59.3 		
Retail, Trading and Marketing Revenues (c)		— 			— 			— 			1,486.9 			(5.5)			(103.0)			1,378.4 		
Total Wholesale and Competitive Retail Revenues		922.8 			467.0 			1,257.0 			1,679.7 			(5.5)			(1,111.3)			3,209.7 		
															
Other Revenues from Contracts with Customers (b)		163.2 			157.8 			22.4 			2.3 			92.5 			(148.6)			289.6 		
															
Total Revenues from Contracts with Customers		8,882.6 			4,192.9 			1,279.4 			1,682.0 			87.0 			(1,260.6)			14,863.3 		
															
Other Revenues:															
Alternative Revenue Programs (d)		(3.2)			70.0 			(80.6)			— 			— 			7.5 			(6.3)		
Other Revenues (b) (e)		— 			83.0 			— 			43.6 			9.8 			(74.9)			61.5 		
Total Other Revenues		(3.2)			153.0 			(80.6)			43.6 			9.8 			(67.4)			55.2 		
															
Total Revenues		$	8,879.4 			$	4,345.9 			$	1,198.8 			$	1,725.6 			$	96.8 			$	(1,328.0)			$	14,918.5 		

(a)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for AEP Transmission Holdco was $965 million. The remaining affiliated amounts were immaterial.
(b)Amounts include affiliated and nonaffiliated revenues.
(c)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for Generation & Marketing was $103 million. The remaining affiliated amounts were immaterial.
(d)Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over/under collection of related revenues.
(e)Generation & Marketing includes economic hedge activity.

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The table below represents revenues from contracts with customers, net of respective provisions for refund, by type of revenue for the Registrant Subsidiaries:

		Year Ended December 31, 2022	
		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Retail Revenues:															
Residential Revenues		$	667.2 			$	— 			$	1,558.7 			$	852.4 			$	1,830.2 			$	816.3 			$	820.7 		
Commercial Revenues		417.5 			— 			643.4 			550.2 			947.7 			489.2 			612.3 		
Industrial Revenues (a)		139.6 			— 			664.0 			602.9 			571.7 			372.5 			393.5 		
Other Retail Revenues		35.3 			— 			87.1 			5.0 			13.9 			102.9 			10.1 		
Total Retail Revenues		1,259.6 			— 			2,953.2 			2,010.5 			3,363.5 			1,780.9 			1,836.6 		
															
Wholesale Revenues:															
Generation Revenues (b)		— 			— 			299.9 			490.0 			— 			26.5 			273.2 		
Transmission Revenues (c)		563.8 			1,643.5 			167.0 			36.8 			86.2 			39.2 			148.7 		
Total Wholesale Revenues		563.8 			1,643.5 			466.9 			526.8 			86.2 			65.7 			421.9 		
															
Other Revenues from Contracts with Customers (d)		24.6 			8.2 			100.6 			122.4 			222.4 			29.1 			24.7 		
															
Total Revenues from Contracts with Customers		1,848.0 			1,651.7 			3,520.7 			2,659.7 			3,672.1 			1,875.7 			2,283.2 		
															
Other Revenues:															
Alternative Revenue Programs (e)		(1.2)			(27.2)			(1.3)			10.0 			(25.6)			(1.0)			1.2 		
Other Revenues (a)		— 			— 			0.5 			(0.1)			18.6 			— 			— 		
Total Other Revenues		(1.2)			(27.2)			(0.8)			9.9 			(7.0)			(1.0)			1.2 		
															
Total Revenues		$	1,846.8 			$	1,624.5 			$	3,519.9 			$	2,669.6 			$	3,665.1 			$	1,874.7 			$	2,284.4 		

(a)Amounts include affiliated and nonaffiliated revenues.
(b)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for APCo was $170 million primarily relating to the PPA with KGPCo. The remaining affiliated amounts were immaterial.
(c)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for AEPTCo was $1.3 billion, APCo was $78 million and SWEPCo was $51 million. The remaining affiliated amounts were immaterial.
(d)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for I&M was $62 million primarily relating to barging, urea transloading and other transportation services. The remaining affiliated amounts were immaterial.
(e)Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over/under collection of related revenues.

420

																																													
		Year Ended December 31, 2021	
		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Retail Revenues:															
Residential Revenues		$	550.3 			$	— 			$	1,379.6 			$	805.4 			$	1,587.9 			$	651.9 			$	709.5 		
Commercial Revenues		358.5 			— 			556.3 			507.2 			722.7 			378.9 			529.3 		
Industrial Revenues		108.9 			— 			584.3 			557.0 			286.3 			274.1 			344.4 		
Other Retail Revenues		31.3 			— 			70.8 			5.2 			12.6 			77.7 			10.0 		
Total Retail Revenues		1,049.0 			— 			2,591.0 			1,874.8 			2,609.5 			1,382.6 			1,593.2 		
															
Wholesale Revenues:															
Generation Revenues (a)		— 			— 			302.7 			318.1 			— 			22.9 			386.6 		
Transmission Revenues (b)		497.5 			1,393.9 			128.8 			33.7 			74.9 			37.5 			122.7 		
Total Wholesale Revenues		497.5 			1,393.9 			431.5 			351.8 			74.9 			60.4 			509.3 		
															
Other Revenues from Contracts with Customers (c)		41.2 			17.0 			70.4 			104.1 			153.1 			31.3 			23.5 		
															
Total Revenues from Contracts with Customers		1,587.7 			1,410.9 			3,092.9 			2,330.7 			2,837.5 			1,474.3 			2,126.0 		
															
Other Revenues:															
Alternative Revenue Programs (d)		6.1 			58.4 			12.3 			(4.0)			42.6 			0.1 			5.8 		
Other Revenues (e)		— 			— 			— 			— 			19.0 			— 			— 		
Total Other Revenues		6.1 			58.4 			12.3 			(4.0)			61.6 			0.1 			5.8 		
															
Total Revenues		$	1,593.8 			$	1,469.3 			$	3,105.2 			$	2,326.7 			$	2,899.1 			$	1,474.4 			$	2,131.8 		

(a)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for APCo was $129 million primarily relating to the PPA with KGPCo. The remaining affiliated amounts were immaterial.
(b)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for AEPTCo was $1.1 billion. The remaining affiliated amounts were immaterial.
(c)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for I&M was $60 million primarily relating to barging, urea transloading and other transportation services. The remaining affiliated amounts were immaterial.
(d)Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over/under collection of related revenues.
(e)Amounts include affiliated and nonaffiliated revenues.

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		Year Ended December 31, 2020	
		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo	
		(in millions)	
Retail Revenues:															
Residential Revenues		$	563.6 			$	— 			$	1,250.6 			$	794.1 			$	1,523.4 			$	579.4 			$	630.8 		
Commercial Revenues		366.7 			— 			517.0 			499.3 			682.0 			320.1 			466.7 		
Industrial Revenues		120.1 			— 			553.5 			547.4 			270.0 			221.1 			328.8 		
Other Retail Revenues		29.5 			— 			67.6 			6.6 			13.1 			66.0 			9.1 		
Total Retail Revenues		1,079.9 			— 			2,388.7 			1,847.4 			2,488.5 			1,186.6 			1,435.4 		
															
Wholesale Revenues:															
Generation Revenues (a)		— 			— 			230.2 			274.6 			— 			15.1 			162.0 		
Transmission Revenues (b)		399.9 			1,210.3 			130.8 			29.0 			67.0 			27.5 			111.2 		
Total Wholesale Revenues		399.9 			1,210.3 			361.0 			303.6 			67.0 			42.6 			273.2 		
															
Other Revenues from Contracts with Customers (c)		48.2 			22.4 			59.5 			85.0 			109.5 			34.7 			26.7 		
															
Total Revenues from Contracts with Customers		1,528.0 			1,232.7 			2,809.2 			2,236.0 			2,665.0 			1,263.9 			1,735.3 		
															
Other Revenues:															
Alternative Revenue Programs (d)		3.4 			(87.0)			(13.0)			5.8 			66.6 			2.2 			3.2 		
Other Revenues (e)		87.5 			— 			— 			— 			17.5 			— 			— 		
Total Other Revenues		90.9 			(87.0)			(13.0)			5.8 			84.1 			2.2 			3.2 		
															
Total Revenues		$	1,618.9 			$	1,145.7 			$	2,796.2 			$	2,241.8 			$	2,749.1 			$	1,266.1 			$	1,738.5 		

(a)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for APCo was $112 million primarily relating to the PPA with KGPCo. The remaining affiliated amounts were immaterial.
(b)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for AEPTCo was $952 million. The remaining affiliated amounts were immaterial.
(c)Amounts include affiliated and nonaffiliated revenues. The affiliated revenue for I&M was $69 million primarily relating to barging, urea transloading and other transportation services. The remaining affiliated amounts were immaterial.
(d)Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over/under collection of related revenues.
(e)Amounts include affiliated and nonaffiliated revenues.

Performance Obligations

AEP has performance obligations as part of its normal course of business. A performance obligation is a promise to transfer a distinct good or service, or a series of distinct goods or services that are substantially the same and have the same pattern of transfer to a customer. The invoice practical expedient within the accounting guidance for “Revenue from Contracts with Customers” allows for the recognition of revenue from performance obligations in the amount of consideration to which there is a right to invoice the customer and when the amount for which there is a right to invoice corresponds directly to the value transferred to the customer.

The purpose of the invoice practical expedient is to depict an entity’s measure of progress toward completion of the performance obligation within a contract and can only be applied to performance obligations that are satisfied over time and when the invoice is representative of services provided to date. AEP subsidiaries elected to apply the invoice practical expedient to recognize revenue for performance obligations satisfied over time as the invoices from the respective revenue streams are representative of services or goods provided to date to the customer. Performance obligations for AEP’s subsidiaries are summarized as follows:

422

Retail Revenues

AEP’s subsidiaries within the Vertically Integrated Utilities and Transmission and Distribution Utilities segments have performance obligations to generate, transmit and distribute electricity for sale to rate-regulated retail customers. The performance obligation to deliver electricity is satisfied over time as the customer simultaneously receives and consumes the benefits provided. Revenues are variable as they are subject to the customer’s usage requirements.

Rate-regulated retail customers typically have the right to discontinue receiving service at will, therefore these contracts between AEP’s subsidiaries and their customers for rate-regulated services are generally limited to the services requested and received to date for such arrangements. Retail customers are generally billed on a monthly basis, and payment is typically due within 15 to 20 days after the issuance of the invoice. Payments from REPs are due to AEP Texas within 35 days.

Wholesale Revenues - Generation

AEP’s subsidiaries within the Vertically Integrated Utilities and Generation & Marketing segments have performance obligations to sell electricity to wholesale customers from generation assets in PJM, SPP and ERCOT. The performance obligation to deliver electricity from generation assets is satisfied over time as the customer simultaneously receives and consumes the benefits provided. Wholesale generation revenues are variable as they are subject to the customer’s usage requirements.

AEP’s subsidiaries within the Vertically Integrated Utilities and Generation & Marketing segments also have performance obligations to stand ready in order to promote grid reliability. Stand ready services are sold into PJM’s RPM capacity market. RPM entails a base auction and at least three incremental auctions for a specific PJM delivery year, with the incremental auctions spanning three years. The performance obligation to stand ready is satisfied over time and the consideration for which is variable until the occurrence of the final incremental auction, at which point the performance obligation becomes fixed.

Payments from the RTO for stand ready services are typically received within one week from the issuance of the invoice, which is typically issued weekly. Gross margin resulting from generation sales within the Vertically Integrated Utilities segment are primarily subject to margin sharing agreements with customers and vary by state, where the revenues are reflected gross in the disaggregated revenues tables above.

APCo has a performance obligation to supply wholesale electricity to KGPCo through a PPA. The FERC regulates the cost-based wholesale power transactions between APCo and KGPCo. The purchased power agreement includes a component for the recovery of transmission costs under the FERC OATT. The transmission cost component of purchased power is cost-based and regulated by the Tennessee Regulatory Authority. APCo’s performance obligation under the purchased power agreement is satisfied over time as KGPCo simultaneously receives and consumes the wholesale electricity. APCo’s revenues from the purchased power agreement are presented within the Generation Revenues line in the disaggregated revenues tables above.

Wholesale Revenues - Transmission

AEP’s subsidiaries within the Vertically Integrated Utilities, Transmission and Distribution Utilities and AEP Transmission Holdco segments have performance obligations to transmit electricity to wholesale customers through assets owned and operated by AEP subsidiaries. The performance obligation to provide transmission services in PJM, SPP and ERCOT is partially fixed for a period of one year or less. Payments from the RTO for transmission services are typically received within one week from the issuance of the invoice, which is issued monthly for SPP and ERCOT and weekly for PJM.

AEP subsidiaries within the PJM and SPP regions collect revenues through transmission formula rates. The FERC-approved rates establish the annual transmission revenue requirement (ATRR) and transmission service rates for
423

transmission owners. The formula rates establish rates for a one year period and also include a true-up calculation for the prior year’s billings, allowing for over/under-recovery of the transmission owner’s ATRR. The annual true-ups meet the definition of alternative revenues in accordance with the accounting guidance for “Regulated Operations,” and are therefore presented as such in the disaggregated revenues tables above. AEP subsidiaries within the ERCOT region collect revenues through a combination of base rates and interim Transmission Costs of Services filings that are approved by the PUCT.

The AEP East Companies are parties to the TA, which defines how transmission costs are allocated among the AEP East Companies on a 12-month average coincident peak basis. PSO, SWEPCo and AEPSC are parties to the TCA by and among PSO, SWEPCo and AEPSC, in connection with the operation of the transmission assets of the two AEP utility subsidiaries. AEPTCo is a transmission owner within the PJM and SPP regions providing transmission services to affiliates in accordance with the OATT, TA and TCA. Affiliate revenues as a result of the respective TA and the TCA are reflected as Transmission Revenues in the disaggregated revenues tables above.

Marketing, Competitive Retail and Renewable Revenues

AEP’s subsidiaries within the Generation & Marketing segment have performance obligations to deliver electricity to competitive retail and wholesale customers. Performance obligations for marketing, competitive retail and renewable offtake sales are satisfied over time as the customer simultaneously receives and consumes the benefits provided. Revenues are primarily variable as they are subject to customer’s usage requirements; however, certain contracts mandate a delivery of a set quantity of electricity at a predetermined price, resulting in a fixed performance obligation.

Payment terms under marketing arrangements typically follow standard Edison Electric Institute and International Swaps and Derivatives Association terms, which call for payment in 20 days. Payments for competitive retail and offtake arrangements for renewable assets range from 15 to 60 days and are dependent on the product sold, location and the creditworthiness of customer. Invoices for marketing arrangements, competitive retail and offtake arrangements for renewable assets are issued monthly.

Fixed Performance Obligations (Applies to AEP, APCo and I&M)

The following table represents the Registrants’ remaining fixed performance obligations satisfied over time as of December 31, 2022. Fixed performance obligations primarily include electricity sales for fixed amounts of energy and stand ready services into PJM’s RPM market. The Registrants elected to apply the exemption to not disclose the value of unsatisfied performance obligations for contracts with an original expected term of one year or less. Due to the annual establishment of revenue requirements, transmission revenues are excluded from the table below. The Registrant Subsidiaries amounts shown in the table below include affiliated and nonaffiliated revenues.

Company		2023		2024-2025		2026-2027		After 2027		Total	
		(in millions)	
AEP		$	85.5 			$	157.3 			$	133.9 			$	60.3 			$	437.0 		

APCo		16.1 			32.2 			23.2 			11.7 			83.2 		
I&M		4.6 			9.2 			9.2 			4.5 			27.5 		

	

424

Contract Assets and Liabilities

Contract assets are recognized when the Registrants have a right to consideration that is conditional upon the occurrence of an event other than the passage of time, such as future performance under a contract. The Registrants did not have any material contract assets as of December 31, 2022 and 2021.

When the Registrants receive consideration, or such consideration is unconditionally due from a customer prior to transferring goods or services to the customer under the terms of a sales contract, they recognize a contract liability on the balance sheet in the amount of that consideration. Revenue for such consideration is subsequently recognized in the period or periods in which the remaining performance obligations in the contract are satisfied. The Registrants’ contract liabilities typically arise from services provided under joint use agreements for utility poles. The Registrants did not have any material contract liabilities as of December 31, 2022 and 2021.

Accounts Receivable from Contracts with Customers

Accounts receivable from contracts with customers are presented on the Registrants’ balance sheets within the Accounts Receivable - Customers line item. The Registrants’ balances for receivables from contracts that are not recognized in accordance with the accounting guidance for “Revenue from Contracts with Customers” included in Accounts Receivable - Customers were not material as of December 31, 2022 and 2021. See “Securitized Accounts Receivable - AEP Credit” section of Note 14 for additional information.

The following table represents the amount of affiliated accounts receivable from contracts with customers included in Accounts Receivable - Affiliated Companies on the Registrant Subsidiaries’ balance sheets:

		Years Ended December 31,	
Company		2022		2021	
		(in millions)	
AEP Texas		$	0.1 			$	0.4 		
AEPTCo		113.8 			95.5 		
APCo		64.5 			117.8 		
I&M		75.3 			61.2 		
OPCo		49.9 			51.7 		
PSO		18.8 			18.8 		
SWEPCo		19.1 			24.7 		

Contract Costs

Contract costs to obtain or fulfill a contract for AEP subsidiaries within the Generation & Marketing segment are accounted for under the guidance for “Other Assets and Deferred Costs” and presented as a single asset and are neither bifurcated nor reclassified between current and noncurrent assets on the Registrants’ balance sheets. Contract costs to acquire a contract are amortized in a manner consistent with the transfer of goods or services to the customer in Other Operation on the Registrants’ income statements. The Registrants did not have material contract costs as of December 31, 2022 and 2021.
425

20.  GOODWILL

The disclosure in this note applies to AEP only.

AEP’s carrying amount of goodwill for the years ended December 31, 2022 and 2021 by operating segment are as follows:

		Corporate and Other		Generation
&
Marketing		AEP Consolidated	
	(in millions)	
Balance as of December 31, 2020		$	37.1 			$	15.4 			$	52.5 		
	
Impairment Losses		— 			— 			— 		
Balance as of December 31, 2021		37.1 			15.4 			52.5 		
Impairment Losses		— 			— 			— 		
Balance as of December 31, 2022		$	37.1 			$	15.4 			$	52.5 		

In the fourth quarters of 2022 and 2021, annual impairment tests were performed.  The fair values of the reporting units with goodwill were estimated using cash flow projections and other market value indicators.  There were no goodwill impairment losses.  AEP does not have any accumulated impairment on existing goodwill.

426

21.  SUBSEQUENT EVENTS

Planned Disposition of the Competitive Contracted Renewables Portfolio (Generation & Marketing Segment) (Applies to AEP)

In February 2022, AEP management announced the initiation of a process to sell all or a portion of AEP Renewables’ competitive contracted renewables portfolio within the Generation & Marketing segment.

As of December 31, 2022, the competitive contracted renewable portfolio assets totaled 1.4 gigawatts of generation resources representing consolidated solar and wind assets, with a net book value of $1.2 billion, and a 50% interest in four joint venture wind farms, totaling $247 million, accounted for as equity method investments.

In late January 2023, AEP received final bids from interested parties. In February 2023, AEP’s Board of Directors approved management’s plan to sell the competitive contracted renewables portfolio and AEP signed an agreement to sell the competitive contracted renewables portfolio to a nonaffiliated party for $1.5 billion including the assumption of project debt. As part of the sale agreement, AEP provided the acquirer an indemnification related to certain losses, not to exceed $70 million, which could result from one of the joint venture wind farm’s inability to meet certain minimum performance requirements.

The sale is subject to FERC approval, clearance from the Committee on Foreign Investment in the United States and approval under applicable competition laws. AEP expects to close on the sale in the second quarter of 2023 and receive cash proceeds, net of taxes, transaction fees and other customary closing adjustments, of approximately $1.2 billion.

Management concluded the consolidated assets within the competitive contracted renewables portfolio met the accounting requirements to be presented as Held for Sale in the first quarter of 2023 based on the receipt of final bids, Board of Director approval to consummate a sale transaction and the signing of the sale agreement. AEP anticipates recording an estimated pretax loss ranging from $175 million to $225 million ($100 million to $150 million after-tax), in the first quarter of 2023 as a result of reaching Held for Sale status. Management concluded the impact of any other than temporary decline in the fair value of the four joint venture wind farms was not material to AEP’s December 31, 2022 financial statements. Any changes to the book value or carrying value of these assets, or the anticipated sale price, could further reduce future net income and impact financial condition.
427

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo

Information required by this item is set forth under the caption Proposal to Ratify the Appointment of the Independent Registered Public Accounting Firm in the 2023 Proxy Statement, which is incorporated by reference into this item.

ITEM 9A.   CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

During 2022, management, including the principal executive officer and principal financial officer of each of the Registrants evaluated each respective Registrant’s disclosure controls and procedures.  Disclosure controls and procedures are defined as controls and other procedures of the Registrant that are designed to ensure that information required to be disclosed by the Registrants in the reports that they file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Registrants in the reports that they file or submit under the Exchange Act is accumulated and communicated to each Registrant’s management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As of December 31, 2022, the principal executive officer and financial officer of each of the Registrants concluded that the disclosure controls and procedures in place were effective at the reasonable assurance level.  The Registrants continually strive to improve their disclosure controls and procedures to enhance the quality of their financial reporting and to maintain dynamic systems that change as events warrant.

Changes in Internal Control over Financial Reporting

There have been no changes in the Registrants’ internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter 2022 that materially affected, or are reasonably likely to materially affect, the Registrants’ internal control over financial reporting.

Internal Control over Financial Reporting

See Management’s Report on Internal Control over Financial Reporting for each Registrant under Item 8. As discussed in that report, management assessed and reported on the effectiveness of each Registrant’s internal control over financial reporting as of December 31, 2022.  As a result of that assessment, management concluded that each Registrant’s internal control over financial reporting was effective as of December 31, 2022.

ITEM 9B.   OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.
428

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

AEP

Directors, Director Nomination Process and Audit Committee

Certain of the information called for in this Item 10, including the information relating to directors, is incorporated herein by reference to AEP’s definitive proxy information statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to the 2023 Annual Meeting of Shareholders (the 2023 Annual Meeting) including under the captions “Election of Directors,” “AEP’s Board of Directors and Committees,” “Directors” and “Nominees for Directors.”

Executive Officers

Reference also is made under the caption “Information About our Executive Officers” in Part I, Item 1 of this report.

Code of Ethics

AEP’s Principles of Business Conduct is the code of ethics that applies to AEP’s Chief Executive Officer, Chief Financial Officer and principal accounting officer.  The Principles of Business Conduct is available on AEP’s website at www.aep.com.  The Principles of Business Conduct will be made available, without charge, in print to any shareholder who requests such document from Investor Relations, American Electric Power Company, Inc., 1 Riverside Plaza, Columbus, Ohio 43215.

If any substantive amendments to the Principles of Business Conduct are made or any waivers are granted, including any implicit waiver, from a provision of the Principles of Business Conduct, to its Chief Executive Officer, Chief Financial Officer or principal accounting officer, AEP will disclose the nature of such amendment or waiver on AEP’s website, www.aep.com, or in a report on Form 8-K.

Delinquent Section 16(a) Reports

None.

AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo

Omitted pursuant to Instruction I(2)(c).

ITEM 11.   EXECUTIVE COMPENSATION

AEP

The information called for by this Item 11 is incorporated herein by reference to AEP’s definitive proxy statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to the 2023 Annual Meeting including under the captions “Compensation Discussion and Analysis,” “Executive Compensation”, “Director Compensation” and “2022 Director Compensation Table”.  The information set forth under the subcaption “Human Resources Committee Report” and “Audit Committee Report” should not be deemed filed nor should it be incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent AEP specifically incorporates such report by reference therein.
429

AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo

Omitted pursuant to Instruction I(2)(c).

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

AEP

The information relating to Security Ownership of Certain Beneficial Owners is incorporated herein by reference to AEP’s definitive proxy statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to 2023 Annual Meeting under the caption “Share Ownership of Certain Beneficial Owners” and “Share Ownership of Directors and Executive Officers.”

EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes the ability of AEP to issue common stock pursuant to equity compensation plans as of December 31, 2022:
																					
Plan Category		Number of Securities to be Issued upon Exercise of Outstanding Options Warrants and Rights (a)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining
Available for Future Issuance under Equity Compensation Plans	
Equity Compensation Plans Approved by Security Holders		2,422,526 			— 			5,249,391 		
Equity Compensation Plans Not Approved by Security Holders		— 			— 			— 		
Total		2,422,526 			— 			5,249,391 		

(a)The balance includes unvested performance shares and restricted stock units as well as vested performance shares deferred as AEP career shares, all of which will be settled and paid in shares of AEP common stock. For performance shares, the total includes the target number of shares that could be granted if performance meets target objectives. The number of securities that would be granted, with respect to performance shares, if performance meets the maximum payout level, is two times the amount included in this total.
(b)No consideration is required from participants for the exercise or vesting of any outstanding AEP equity compensation awards.

AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo

Omitted pursuant to Instruction I(2)(c).

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

AEP

The information called for by this Item 13 is incorporated herein by reference to AEP’s definitive proxy statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to the 2023 Annual Meeting under the captions “Transactions with Related Persons” and “Director Independence.”

AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo

Omitted pursuant to Instruction I(2)(c).
430

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

AEP

The information called for by this Item 14 is incorporated herein by reference to AEP’s definitive proxy statement (which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act) relating to the 2023 Annual Meeting under the captions “Audit and Non-Audit Fees,” “Audit Committee Report” and “Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the Independent Auditor.”

AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo

Each of the above is a wholly-owned subsidiary of AEP and does not have a separate audit committee. A description of the AEP Audit Committee pre-approval policies, which apply to these companies, is contained in the definitive proxy statement of AEP for the 2023 Annual Meeting of shareholders. The following table presents directly billed fees for professional services rendered by PricewaterhouseCoopers LLP for the audit of these companies’ annual financial statements for the years ended December 31, 2022 and 2021, and fees directly billed for other services rendered by PricewaterhouseCoopers LLP during those periods. PricewaterhouseCoopers LLP also provides additional professional and other services to the AEP System, the cost of which may ultimately be allocated to these companies though not billed directly to them. For a description of these fees and services, see the description of principal accounting fees and services for AEP above.

 	AEP Texas		AEPTCo		APCo	
 	2022		2021		2022		2021		2022		2021	
Audit Fees	$	1,309,196 			$	1,279,272 			$	1,492,709 			$	1,443,675 			$	1,682,664 			$	1,702,193 		
Audit-Related Fees	65,222 			42,000 			— 			— 			70,294 			47,143 		
Tax Fees	— 			15,122 			— 			15,347 			—		19,603 		
	
Total	$	1,374,418 			$	1,336,394 			$	1,492,709 			$	1,459,022 			$	1,752,958 			$	1,768,939 		

																																				
 	I&M		OPCo		PSO	
 	2022		2021		2022		2021		2022		2021	
Audit Fees	$	1,453,010 			$	1,637,968 			$	1,053,853 			$	1,169,647 			$	861,937 			$	729,463 		
Audit-Related Fees	11,009 			11,143 			11,009 			11,143 			160,294 			5,143 		
Tax Fees	— 			17,848 			— 			12,923 			— 			6,991 		
	
Total	$	1,464,019 			$	1,666,959 			$	1,064,862 			$	1,193,713 			$	1,022,231 			$	741,597 		

												
 	SWEPCo	
 	2022		2021	
Audit Fees	$	1,012,800 			$	1,118,206 		
Audit-Related Fees	26,821 			27,143 		
Tax Fees	— 			11,848 		
	
Total	$	1,039,621 			$	1,157,197 		

431

PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as a part of this report:

(a)(1) FINANCIAL STATEMENTS:

The following financial statements have been incorporated herein by reference pursuant to Item 8.

AEP and Subsidiary Companies:
Report of Independent Registered Public Accounting Firm; Management’s Report on Internal Control over Financial Reporting; Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020; Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020; Consolidated Statements of Changes in Equity for the years ended December 31, 2022, 2021 and 2020; Consolidated Balance Sheets as of December 31, 2022 and 2021; Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020; Notes to Financial Statements of Registrants.

AEP Texas, APCo and I&M:
Report of Independent Registered Public Accounting Firm; Management’s Report on Internal Control over Financial Reporting; Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020; Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020; Consolidated Statements of Changes in Common Shareholder’s Equity for the years ended December 31, 2022, 2021 and 2020; Consolidated Balance Sheets as of December 31, 2022 and 2021; Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020; Notes to Financial Statements of Registrants.

AEPTCo:
Report of Independent Registered Public Accounting Firm; Management’s Report on Internal Control over Financial Reporting; Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020; Consolidated Statements of Changes in Member’s Equity for the years ended December 31, 2022, 2021 and 2020; Consolidated Balance Sheets as of December 31, 2022 and 2021; Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020; Notes to Financial Statements of Registrants.

OPCo:
Report of Independent Registered Public Accounting Firm; Management’s Report on Internal Control over Financial Reporting; Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020; Consolidated Statements of Changes in Common Shareholder’s Equity for the years ended December 31, 2022, 2021 and 2020; Consolidated Balance Sheets as of December 31, 2022 and 2021; Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020; Notes to Financial Statements of Registrants.

PSO:
Report of Independent Registered Public Accounting Firm; Management’s Report on Internal Control over Financial Reporting; Statements of Income for the years ended December 31, 2022, 2021 and 2020; Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020; Statements of Changes in Common Shareholder’s Equity for the years ended December 31, 2022, 2021 and 2020; Balance Sheets as of December 31, 2022 and 2021; Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020; Notes to Financial Statements of Registrants.

432

SWEPCo:
Report of Independent Registered Public Accounting Firm; Management’s Report on Internal Control over Financial Reporting; Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020; Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020; Consolidated Statements of Changes in Equity for the years ended December 31, 2022, 2021 and 2020; Consolidated Balance Sheets as of December 31, 2022 and 2021; Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020; Notes to Financial Statements of Registrants.
									
(a)(2) FINANCIAL STATEMENT SCHEDULES:		Page Number	
Schedule I			
Condensed Financial Information of American Electric Power Company, Inc. (Parent)		 	
Condensed Statements of Income and Comprehensive Income- Years Ended
December 31, 2022, 2021 and 2020		S-2	
Condensed Balance Sheets - December 31, 2022 and 2021		S-3	
Condensed Statements of Cash Flows - Years Ended December 31, 2022, 2021 and 2020		S-5	
Condensed Notes to Condensed Financial Information		S-6	
			
Schedule II			
AEP			
Valuation and Qualifying Accounts and Reserves - Years Ended
December 31, 2022, 2021 and 2020		S-14	
			
Schedule I			
Condensed Financial Information of AEP Transmission Company, LLC (AEPTCo Parent)			
Condensed Statements of Income - Years Ended December 31, 2022, 2021 and 2020		S-16	
Condensed Balance Sheets - December 31, 2022 and 2021		S-17	
Condensed Statements of Cash Flows - Years Ended December 31, 2022, 2021 and 2020		S-19	
Condensed Notes to Condensed Financial Information		S-20	
			
Certain schedules have been omitted because the required information is contained in the notes to financial statements or because such schedules are not required or are not applicable.			
			
(a)(3) EXHIBITS:			
Exhibits for AEP, AEP Texas, AEPTCo, APCo, I&M, OPCo, PSO and SWEPCo are listed in the Exhibit Index beginning on page E-1 and are incorporated herein by reference.		E-1	

ITEM 16.   FORM 10-K SUMMARY

None.

433

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 	American Electric Power Company, Inc.	
 	 	 	
 	By:	/s/   Ann P. Kelly	
 	 	(Ann P. Kelly, Executive Vice President	
 	 	and Chief Financial Officer)	
Date: February 23, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	 	Title	 	Date	
 		 	 	 	 	
(i)	Principal Executive Officer:	 	 	 	 	
 		 	 	 	 	
	 /s/   Julia A. Sloat	 	President, Chief Executive Officer
and Director	 	February 23, 2023	
	(Julia A. Sloat)	 		 	 	
 		 	 	 	 	
(ii)	Principal Financial Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Ann P. Kelly	 	Executive Vice President and Chief Financial Officer	 	February 23, 2023	
	(Ann P. Kelly)	 		 	 	
 		 	 	 	 	
(iii)	Principal Accounting Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Joseph M. Buonaiuto	 	Senior Vice President, Controller and Chief Accounting Officer	 	February 23, 2023	
	(Joseph M. Buonaiuto)	 		 	 	
 		 	 	 	 	
(iv)           	A Majority of the Directors:	 	 	 	 	
 		 	 	 	 	
	*Nicholas K. Akins	 	 	 	 	
	*J. Barnie Beasley, Jr.	 	 	 	 	
	*Benjamin G.S. Fowke, III	 	 	 	 	
	*Art A. Garcia					
	*Linda A. Goodspeed	 	 	 	 	
	*Donna A. James	 	 	 	 	
	*Sandra Beach Lin	 	 	 	 	
	*Margaret M. McCarthy					
	*Oliver G. Richard, III					
	*Daryl Roberts					
	*Julia A. Sloat					
	*Sara Martinez Tucker	 	 	 	 	
	*Lewis Von Thaer					
 		 	 	 	 	
*By: 	/s/   Ann P. Kelly	 	 	 	February 23, 2023	
 	(Ann P. Kelly, Attorney-in-Fact)	 	 	 	 	
434

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

	AEP Texas Inc.	
 	 	 	
 	By:	/s/   Ann P. Kelly	
 	 	(Ann P. Kelly, Vice President and Chief Financial Officer)	
Date: February 23, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature	 	Title	 	Date	
 		 	 	 	 	
(i)	Principal Executive Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Julia A. Sloat	 	Chair of the Board, Chief Executive Officer and Director	 	February 23, 2023	
	(Julia A. Sloat)	 		 	 	
 		 	 	 	 	
(ii)	Principal Financial Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Ann P. Kelly	 	Vice President, Chief Financial Officer and Director	 	February 23, 2023	
	(Ann P. Kelly)	 		 	 	
 		 	 	 	 	
(iii) 	Principal Accounting Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Joseph M. Buonaiuto	 	Controller and Chief Accounting Officer	 	February 23, 2023	
	(Joseph M. Buonaiuto)	 		 	 	
 		 	 	 	 	
(iv)	A Majority of the Directors:	 	 	 	 	
 		 	 	 	 	
	*Christian T. Beam	 	 	 	 	
	*Paul Chodak, III					
	*David M. Feinberg	 	 	 	 	
	Ann P. Kelly	 	 	 	 	
	*Therace M. Risch					
	*Peggy I. Simmons					
	*Julia A. Sloat					
	*Rajagopalan Sundararajan					
	*Judith E. Talavera					
 	*Toby L. Thomas	 	 	 	 	
	*Phillip R. Ulrich					
						
*By:	/s/   Ann P. Kelly	 	 	 	February 23, 2023	
	(Ann P. Kelly, Attorney-in-Fact)	 	 	 	 	
435

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 	AEP Transmission Company, LLC	
 	 	 	
 	By:	/s/   Ann P. Kelly	
 	 	(Ann P. Kelly, Vice President	
 	 	and Chief Financial Officer)	
Date: February 23, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature	 	Title	 	Date	
 		 	 	 	 	
(i)	Principal Executive Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Julia A. Sloat	 	Chair of the Board, Chief Executive Officer and Manager	 	February 23, 2023	
	(Julia A. Sloat)	 		 	 	
 		 	 	 	 	
(ii)	Principal Financial Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Ann P. Kelly	 	Vice President, Chief Financial Officer and Manager	 	February 23, 2023	
	(Ann P. Kelly)	 		 	 	
 		 	 	 	 	
(iii)	Principal Accounting Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Joseph M. Buonaiuto	 	Controller and Chief Accounting Officer	 	February 23, 2023	
	(Joseph M. Buonaiuto)	 		 	 	
 		 	 	 	 	
(iv)	A Majority of the Managers:	 	 	 	 	
 		 	 	 	 	
	*David M. Feinberg	 	 	 	 	
	Ann P. Kelly					
	*Scott P. Moore	 	 	 	 	
	*Julia A. Sloat					
	*Toby L. Thomas					
						
*By:	/s/   Ann P. Kelly	 	 	 	February 23, 2023	
	(Ann P. Kelly, Attorney-in-Fact)	 	 	 	 	
436

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 	Appalachian Power Company	
 	 	 	
 	By:	/s/   Ann P. Kelly	
 	 	(Ann P. Kelly, Vice President and Chief Financial Officer)	
Date: February 23, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature	 	Title	 	Date	
 		 	 	 	 	
(i)	Principal Executive Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Julia A. Sloat	 	Chair of the Board, Chief Executive Officer and Director	 	February 23, 2023	
	(Julia A. Sloat)	 		 	 	
 		 	 	 	 	
(ii)	Principal Financial Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Ann P. Kelly	 	Vice President, Chief Financial Officer and Director	 	February 23, 2023	
	(Ann P. Kelly)	 		 	 	
 		 	 	 	 	
(iii) 	Principal Accounting Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Joseph M. Buonaiuto	 	Controller and Chief Accounting Officer	 	February 23, 2023	
	(Joseph M. Buonaiuto)	 		 	 	
 		 	 	 	 	
(iv)	A Majority of the Directors:	 	 	 	 	
 		 	 	 	 	
	*Christian T. Beam					
	*Paul Chodak, III					
	*David M. Feinberg	 	 	 	 	
	Ann P. Kelly	 	 	 	 	
	*Therace M. Risch					
	*Peggy I. Simmons					
	*Julia A. Sloat					
	*Rajagopalan Sundararajan					
 	*Toby L. Thomas	 	 	 	 	
	*Phillip R. Ulrich					
	*Aaron D. Walker					
						
*By:	/s/   Ann P. Kelly	 	 	 	February 23, 2023	
	(Ann P. Kelly, Attorney-in-Fact)	 	 	 	 	
437

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 	Indiana Michigan Power Company	
 	 	 	
 	By:	/s/ Ann P. Kelly	
 	 	(Ann P. Kelly, Vice President,	
 	 	and Chief Financial Officer)	
Date: February 23, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature	 	Title	 	Date	
 		 	 	 	 	
(i)	Principal Executive Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Julia A. Sloat	 	Chair of the Board, Chief Executive Officer and Director	 	February 23, 2023	
	(Julia A. Sloat)	 		 	 	
 		 	 	 	 	
(ii)	Principal Financial Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Ann P. Kelly	 	Vice President, Chief Financial Officer and Director	 	February 23, 2023	
	(Ann P. Kelly)	 		 	 	
 		 	 	 	 	
(iii)	Principal Accounting Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Joseph M. Buonaiuto	 	Controller and Chief Accounting Officer	 	February 23, 2023	
	(Joseph M. Buonaiuto)	 		 	 	
 		 	 	 	 	
(iv)	A Majority of the Directors:	 	 	 	 	
 		 	 	 	 	
	*Steven F. Baker					
	*Katherine K. Davis					
	*Nicholas M. Elkins					
	*David S. Isaacson					
	Ann P. Kelly					
	*Peggy I. Simmons					
	*Julia A. Sloat	 	 	 	 	
	*Toby L. Thomas					
	*Andrew J. Williamson					
						
*By:	/s/   Ann P. Kelly	 	 	 	February 23, 2023	
	(Ann P. Kelly, Attorney-in-Fact)	 	 	 	 	
438

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 	Ohio Power Company	
 	 	 	
 	By:	/s/   Ann P. Kelly	
 	 	(Ann P. Kelly, Vice President and Chief Financial Officer)	
Date: February 23, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature	 	Title	 	Date	
 		 	 	 	 	
(i)	Principal Executive Officer:	 	 	 	 	
 		 	 	 	 	
	/s/  Julia A. Sloat	 	Chair of the Board, Chief Executive Officer and Director	 	February 23, 2023	
	(Julia A. Sloat)	 		 	 	
 		 	 	 	 	
(ii)	Principal Financial Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Ann P. Kelly	 	Vice President, Chief Financial Officer and Director	 	February 23, 2023	
	(Ann P. Kelly)	 		 	 	
 		 	 	 	 	
(iii) 	Principal Accounting Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Joseph M. Buonaiuto	 	Controller and Chief Accounting Officer	 	February 23, 2023	
	(Joseph M. Buonaiuto)	 		 	 	
 		 	 	 	 	
(iv)	A Majority of the Directors:	 	 	 	 	
 		 	 	 	 	
	*Christian T. Beam	 	 	 	 	
	*Paul Chodak, III					
	*David M. Feinberg	 	 	 	 	
	Ann P. Kelly	 	 	 	 	
	*Marc D. Reitter					
	*Therace M. Risch					
	*Peggy I. Simmons					
	*Julia A. Sloat					
	*Rajagopalan Sundararajan					
 	*Toby L. Thomas	 	 	 	 	
	*Phillip R. Ulrich					
						
*By:	/s/   Ann P. Kelly	 	 	 	February 23, 2023	
	(Ann P. Kelly, Attorney-in-Fact)	 	 	 	 	
439

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 	Public Service Company of Oklahoma	
 	 	 	
 	By:	/s/   Ann P. Kelly	
 	 	(Ann P. Kelly, Vice President and Chief Financial Officer)	
Date: February 23, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature	 	Title	 	Date	
 		 	 	 	 	
(i)	Principal Executive Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Julia A. Sloat	 	Chair of the Board, Chief Executive Officer and Director	 	February 23, 2023	
	(Julia A. Sloat)	 		 	 	
 		 	 	 	 	
(ii)	Principal Financial Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Ann P. Kelly	 	Vice President, Chief Financial Officer and Director	 	February 23, 2023	
	(Ann P. Kelly)	 		 	 	
 		 	 	 	 	
(iii) 	Principal Accounting Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Joseph M. Buonaiuto	 	Controller and Chief Accounting Officer	 	February 23, 2023	
	(Joseph M. Buonaiuto)	 		 	 	
 		 	 	 	 	
(iv)	A Majority of the Directors:	 	 	 	 	
 		 	 	 	 	
	*Christian T. Beam	 	 	 	 	
	*Paul Chodak, III					
	*David M. Feinberg	 	 	 	 	
	Ann P. Kelly	 	 	 	 	
	*Therace M. Risch					
	*Peggy I. Simmons					
	*Julia A. Sloat					
	*Leigh Anne Strahler					
	*Rajagopalan Sundararajan					
 	*Toby L. Thomas	 	 	 	 	
	*Phillip R. Ulrich					
						
*By:	/s/   Ann P. Kelly	 	 	 	February 23, 2023	
	(Ann P. Kelly, Attorney-in-Fact)	 	 	 	 	
440

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 	Southwestern Electric Power Company	
 	 	 	
 	By:	/s/   Ann P. Kelly	
 	 	(Ann P. Kelly, Vice President and Chief Financial Officer)	
Date: February 23, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature	 	Title	 	Date	
 		 	 	 	 	
(i)	Principal Executive Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Julia A. Sloat	 	Chair of the Board, Chief Executive Officer and Director	 	February 23, 2023	
	(Julia A. Sloat)	 		 	 	
 		 	 	 	 	
(ii)	Principal Financial Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Ann P. Kelly	 	Vice President, Chief Financial Officer and Director	 	February 23, 2023	
	(Ann P. Kelly)	 		 	 	
 		 	 	 	 	
(iii) 	Principal Accounting Officer:	 	 	 	 	
 		 	 	 	 	
	/s/   Joseph M. Buonaiuto	 	Controller and Chief Accounting Officer	 	February 23, 2023	
	(Joseph M. Buonaiuto)	 		 	 	
 		 	 	 	 	
(iv)	A Majority of the Directors:	 	 	 	 	
 		 	 	 	 	
	*Christian T. Beam	 	 	 	 	
	*Paul Chodak, III					
	*David M. Feinberg	 	 	 	 	
	Ann P. Kelly	 	 	 	 	
	*D. Brett Mattison					
	*Therace M. Risch					
	*Peggy I. Simmons					
	*Julia A. Sloat					
	*Rajagopalan Sundararajan					
 	*Toby L. Thomas	 	 	 	 	
	*Phillip R. Ulrich					
						
*By:	/s/   Ann P. Kelly	 	 	 	February 23, 2023	
	(Ann P. Kelly, Attorney-in-Fact)	 	 	 	 	
441

INDEX OF FINANCIAL STATEMENT SCHEDULES

	Page
Number	
The following financial statement schedules are included in this report on the pages indicated:		
 		
American Electric Power Company, Inc. (Parent):		
Schedule I – Condensed Financial Information	S-2	
Schedule I – Index of Condensed Notes to Condensed Financial Information	S-6	
 		
American Electric Power Company, Inc. and Subsidiary Companies:		
Schedule II – Valuation and Qualifying Accounts and Reserves	S-14	

S-1

SCHEDULE I
AMERICAN ELECTRIC POWER COMPANY, INC. (Parent)
CONDENSED FINANCIAL INFORMATION
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Years Ended December 31, 2022, 2021 and 2020
(in millions, except per-share and share amounts)

 		Years Ended December 31,	
 		2022		2021		2020	
REVENUES		 		 		 	
Affiliated Revenues		$	4.5 			$	8.4 			$	8.7 		
Other Revenues		0.8 			0.9 			1.1 		
MTM – Interest Rate Hedge		6.9 			1.4 			(5.4)		
Affiliated MTM – Interest Rate Hedge		(7.1)			(4.0)			5.4 		
TOTAL REVENUES		5.1 			6.7 			9.8 		
							
EXPENSES		 		 		 	
Other Operation		84.9 			42.7 			21.4 		
	
Loss on the Expected Sale of the Kentucky Operations		363.3 			— 			— 		
Depreciation and Amortization		0.4 			0.4 			0.3 		
	
TOTAL EXPENSES		448.6 			43.1 			21.7 		
							
OPERATING LOSS		(443.5)			(36.4)			(11.9)		
							
Other Income (Expense):		 		 		 	
	
Interest Income		80.3 			18.9 			39.2 		
Interest Expense		(275.5)			(169.3)			(178.5)		
							
LOSS BEFORE INCOME TAX BENEFIT AND EQUITY EARNINGS		(638.7)			(186.8)			(151.2)		
							
Income Tax Benefit		(136.3)			(73.5)			(0.6)		
Equity Earnings of Unconsolidated Subsidiaries		2,809.6 			2,601.4 			2,350.7 		

	

NET INCOME		2,307.2 			2,488.1 			2,200.1 		
							
Other Comprehensive Income (Loss)		(101.1)			269.9 			62.6 		
							
TOTAL COMPREHENSIVE INCOME		$	2,206.1 			$	2,758.0 			$	2,262.7 		
							
WEIGHTED AVERAGE NUMBER OF BASIC AEP COMMON SHARES OUTSTANDING		511,841,946 			500,522,177 			495,718,223 		

	
TOTAL BASIC EARNINGS PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS		$	4.51 			$	4.97 			$	4.44 		
							
WEIGHTED AVERAGE NUMBER OF DILUTED AEP COMMON SHARES OUTSTANDING		513,484,609 			501,784,032 			497,226,867 		

	
TOTAL DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS		$	4.49 			$	4.96 			$	4.42 		
							
See Condensed Notes to Condensed Financial Information beginning on page S-6.							

S-2

SCHEDULE I
AMERICAN ELECTRIC POWER COMPANY, INC. (Parent)
CONDENSED FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

 		December 31,	
 		2022		2021	
CURRENT ASSETS		 		 	
Cash and Cash Equivalents		$	254.2 			$	247.3 		
Other Temporary Investments		2.5 			2.3 		
Advances to Affiliates		4,012.1 			2,600.8 		
Accounts Receivable:					
Affiliated Companies		78.6 			17.7 		
General		0.5 			0.4 		
	
Total Accounts Receivable		79.1 			18.1 		
	
Accrued Tax Benefits		39.3 			40.1 		
Assets Held for Sale		706.6 			946.2 		
Prepayments and Other Current Assets		17.7 			3.3 		
TOTAL CURRENT ASSETS		5,111.5 			3,858.1 		
					
PROPERTY, PLANT AND EQUIPMENT		 		 	
General		2.7 			2.3 		
	
Total Property, Plant and Equipment		2.7 			2.3 		
Accumulated Depreciation, Depletion and Amortization		1.2 			1.1 		
TOTAL PROPERTY, PLANT AND EQUIPMENT – NET		1.5 			1.2 		
					
OTHER NONCURRENT ASSETS		 		 	
Investments in Unconsolidated Subsidiaries		30,543.2 			27,984.0 		
	
Affiliated Notes Receivable		85.0 			65.0 		
Deferred Charges and Other Noncurrent Assets		130.4 			130.6 		
TOTAL OTHER NONCURRENT ASSETS		30,758.6 			28,179.6 		
					
TOTAL ASSETS		$	35,871.6 			$	32,038.9 		
					
See Condensed Notes to Condensed Financial Information beginning on page S-6.	
S-3

SCHEDULE I
AMERICAN ELECTRIC POWER COMPANY, INC. (Parent)
CONDENSED FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
LIABILITIES AND EQUITY
December 31, 2022 and 2021
(dollars in millions)

		December 31,	
 		2022		2021	
CURRENT LIABILITIES		 			
Advances from Affiliates		$	919.9 			$	583.0 		
Accounts Payable:					
General		5.1 			5.7 		
Affiliated Companies		34.2 			32.5 		
Short-term Debt		3,362.2 			1,864.0 		
Long-term Debt Due Within One Year – Nonaffiliated		1,050.0 			308.9 		
Accrued Taxes		— 			102.1 		
Other Current Liabilities		126.3 			72.9 		
TOTAL CURRENT LIABILITIES		5,497.7 			2,969.1 		
					
NONCURRENT LIABILITIES		 		 	
Long-term Debt – Nonaffiliated		6,322.5 			6,460.4 		
Deferred Credits and Other Noncurrent Liabilities		112.1 			132.9 		
TOTAL NONCURRENT LIABILITIES		6,434.6 			6,593.3 		
					
TOTAL LIABILITIES		11,932.3 			9,562.4 		
					
MEZZANINE EQUITY					
Contingently Redeemable Performance Share Awards		45.9 			43.3 		
					
COMMON SHAREHOLDERS’ EQUITY		 		 	
Common Stock – Par Value – $6.50 Per Share:		 		 	
 	2022		2021			 		 	
Shares Authorized	600,000,000		600,000,000			 		 	
Shares Issued	525,099,321		524,416,175			 		 	
(11,233,240 and 20,204,160 Shares were Held in Treasury as of December 31, 2022 and 2021, Respectively)		3,413.1 			3,408.7 		
Paid-in Capital		8,051.0 			7,172.6 		
Retained Earnings		12,345.6 			11,667.1 		
Accumulated Other Comprehensive Income (Loss)		83.7 			184.8 		
TOTAL AEP COMMON SHAREHOLDERS’ EQUITY		23,893.4 			22,433.2 		
					
TOTAL LIABILITIES, MEZZANINE EQUITY AND TOTAL EQUITY		$	35,871.6 			$	32,038.9 		

See Condensed Notes to Condensed Financial Information beginning on page S-6.	

S-4

SCHEDULE I
AMERICAN ELECTRIC POWER COMPANY, INC. (Parent)
CONDENSED FINANCIAL INFORMATION
CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

 		Years Ended December 31,	
 		2022		2021		2020	
OPERATING ACTIVITIES		 		 		 	
Net Income		$	2,307.2 			$	2,488.1 			$	2,200.1 		

Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:							
Depreciation and Amortization		0.4 			0.4 			0.3 		
Deferred Income Taxes		(63.3)			(63.9)			8.2 		
Loss on the Expected Sale of the Kentucky Operations		363.3 			— 			— 		
Interest Rate Hedge Settlement		— 			— 			57.5 		
Equity Earnings of Unconsolidated Subsidiaries		(2,809.6)			(2,601.4)			(2,350.7)		
Cash Dividends Received from Unconsolidated Subsidiaries		603.9 			787.2 			454.0 		
Change in Other Noncurrent Assets		(5.0)			(3.5)			1.1 		
Change in Other Noncurrent Liabilities		83.5 			94.0 			39.2 		
Changes in Certain Components of Working Capital:							
Accounts Receivable, Net		(61.0)			18.4 			(24.5)		
Accounts Payable		1.1 			27.2 			2.1 		

Other Current Assets		(6.0)			(0.5)			1.3 		
Other Current Liabilities		(76.6)			77.9 			(55.8)		
Net Cash Flows from Operating Activities		337.9 			823.9 			332.8 		
							
INVESTING ACTIVITIES		 		 		 	

Construction Expenditures		(0.7)			(0.5)			(0.2)		
	
Change in Advances to Affiliates, Net		(1,411.3)			562.9 			(965.8)		
Capital Contributions to Unconsolidated Subsidiaries		(568.3)			(1,185.0)			(436.5)		
Return of Capital Contributions from Unconsolidated Subsidiaries		24.5 			— 			— 		
Issuance of Notes Receivable to Unconsolidated Subsidiaries		(20.0)			— 			(26.0)		
Repayment of Notes Receivable from Unconsolidated Subsidiaries		— 			92.3 			20.0 		
Other Investing Activities		(0.2)			— 			2.7 		
Net Cash Flows Used for Investing Activities		(1,976.0)			(530.3)			(1,405.8)		
							
FINANCING ACTIVITIES		 		 		 	
Issuance of Common Stock, Net		826.5 			600.5 			155.0 		
Issuance of Long-term Debt		986.6 			915.0 			3,113.9 		
Issuance of Short-term Debt with Original Maturities Greater Than 90 Days		833.9 			1,393.3 			1,396.5 		
Change in Short-term Debt with Original Maturities Less Than 90 Day, Net		1,650.4 			(610.3)			(347.1)		
Retirement of Long-term Debt		(300.0)			(400.0)			(500.0)		
Change in Advances from Affiliates, Net		336.9 			135.8 			194.6 		
Redemption of Short-term Debt with Original Maturities Greater Than 90 Days		(986.1)			(771.3)			(1,307.1)		
	
Dividends Paid on Common Stock		(1,628.7)			(1,507.7)			(1,415.0)		
Other Financing Activities		(74.5)			(101.3)			(74.2)		
Net Cash Flows from (Used for) Financing Activities		1,645.0 			(346.0)			1,216.6 		

	

Net Increase (Decrease) in Cash and Cash Equivalents		6.9 			(52.4)			143.6 		
Cash and Cash Equivalents at Beginning of Period		247.3 			299.7 			156.1 		
Cash and Cash Equivalents at End of Period		$	254.2 			$	247.3 			$	299.7 		
							
See Condensed Notes to Condensed Financial Information beginning on page S-6.	
S-5

SCHEDULE I
AMERICAN ELECTRIC POWER COMPANY, INC. (Parent)
INDEX OF CONDENSED NOTES TO CONDENSED FINANCIAL INFORMATION

1.   Summary of Significant Accounting Policies	
 	
2.   Commitments, Guarantees and Contingencies	
 	
3.   Financing Activities	
 	
4.   Related Party Transactions	

S-6

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed financial information of Parent is required as a result of the restricted net assets of AEP consolidated subsidiaries exceeding 25% of AEP consolidated net assets as of December 31, 2022.  Parent is a public utility holding company that owns all of the outstanding common stock of its public utility subsidiaries and varying percentages of other subsidiaries, including joint ventures and equity investments.  The primary source of income for Parent is equity in its subsidiaries’ earnings.  Its major source of cash is dividends from the subsidiaries, which are evaluated for cash flow presentation based on the nature of the distribution.  Parent borrows the funds for the money pool that is used by the subsidiaries for their short-term cash needs. Parent financial statements should be read in conjunction with the AEP consolidated financial statements and the accompanying notes thereto. For purposes of these condensed financial statements, AEP wholly-owned and majority-owned subsidiaries are recorded based upon its proportionate share of the subsidiaries’ net assets (similar to presenting them on the equity method).

Income Taxes

Parent files a consolidated federal income tax return with its subsidiaries. Historically, the allocation of the AEP System’s current consolidated federal income tax to the AEP System companies allocated the benefit of current tax loss of the parent company (Parent Company Loss Benefit) to the AEP System subsidiaries through a reduction of current tax expense. In the first quarter of 2022, AEP and subsidiaries changed accounting for the Parent Company Loss Benefit from a reduction of current tax expense to an allocation through equity. The impact of this change was immaterial to the Subsidiaries’ financial statements. The consolidated NOL of the AEP System is allocated to each company in the consolidated group with taxable income. With the exception of the allocation of the consolidated AEP System NOL, the loss of the Parent and tax credits, the method of allocation reflects a separate return result for each company in the consolidated group.

Disposition of KPCo and KTCo

AEP Parent holds a direct investment in KPCo and an indirect investment in KTCo through its direct investment in AEPTHCo. In October 2021, AEP entered into a Stock Purchase Agreement (SPA) to sell KPCo and KTCo to Liberty Utilities Co., a subsidiary of Algonquin Power & Utilities Corp. (Liberty), for approximately a $2.85 billion enterprise value. In May 2022, the KPSC approved the transfer of KPCo to Liberty subject to certain conditions contingent upon the closing of the sale. AEP has received clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) and the Committee on Foreign Investment in the United States during 2022. Clearance under the HSR expired in January 2023. AEP and Liberty refiled a joint application seeking HSR clearance in February 2023. The sale is also contingent upon FERC approval under Section 203 of the Federal Power Act. The parties to the SPA have certain termination rights if the closing of the sale does not occur by April 26, 2023.

Transfer of Ownership

FERC Proceedings

In December 2021, Liberty, KPCo and KTCo (the applicants) requested FERC approval of the sale under Section 203 of the Federal Power Act. In February 2022, several intervenors in the case filed protests related to whether the sale will negatively impact the wholesale transmission rates of applicants. In April 2022, the FERC issued a deficiency letter stating that the Section 203 application is deficient and that additional information is required to process it. In May 2022, Liberty, KPCo and KTCo supplemented the application. In December 2022, the FERC issued an order denying, without prejudice, authorization of the proposed sale stating the applicants failed to demonstrate the proposed transaction will not have an adverse effect on rates.

S-7

In January 2023, AEP, AEPTCo, and Liberty entered into an amendment to the SPA that specified the applicants will submit a new filing for approval under Section 203 of the Federal Power Act. The new filing was submitted to the FERC on February 14, 2023. The applicants requested expedited treatment of the new filing, including an accelerated comment period. In response, the FERC granted a shortened 45 day comment period. The applicants believe the new Section 203 application addresses the concerns raised in the FERC’s December 2022 order. The application contains several additional commitments by Liberty to mitigate potential adverse impacts on FERC jurisdictional rates over the next five years, including: a) maintaining the current return on equity; b) maintaining the current cost cap on equity; c) financing future investments at the current credit rating; and d) capping certain operating and administrative costs. The sale remains subject to FERC approval. The statute requires an order from the FERC within 180 days of the February 14, 2023 filing date in accordance with Section 203 of the Federal Power Act.

KPSC Proceedings

In May 2022, the KPSC approved the transfer of KPCo to Liberty subject to conditions contingent upon the closing of the sale, including establishment of regulatory liabilities to subsidize retail customer transmission and distribution expenses, a fuel adjustment clause bill credit, and a three-year Big Sandy decommissioning rider rate holiday during which KPCo’s carrying charge is reduced by 50%.

Summary

As a result of the conditions imposed by the KPSC’s May 2022 order, in the second quarter of 2022, Parent recorded a $69 million loss on the expected sale of the Kentucky Operations in accordance with accounting guidance for Fair Value Measurement.

In September 2022, AEP, AEPTCo and Liberty entered into an amendment to the SPA which reduced the purchase price to approximately $2.646 billion and Liberty agreed to waive, upon FERC approval of the sale, the SPA condition precedent to closing requiring the issuance of regulatory orders approving new proposed Mitchell Plant agreements. Further, as a result of the reduced purchase price from the September Amendment and the change to the anticipated timing of the completion of the transaction, Parent recorded an additional $194 million pretax loss ($149 million net of tax) on the expected sale of the Kentucky Operations in the third quarter of 2022 in accordance with the accounting guidance for Fair Value Measurement.

As a result of the December 2022 FERC order and resulting delay in the anticipated timing of the closing of the transaction, Parent recorded an additional $100 million pretax loss ($79 million net of tax) on the expected sale of the Kentucky Operations in December 2022 in accordance with the accounting guidance for Fair Value Measurement. In total, AEP recorded a $363 million pretax loss of ($297 million net of tax) on the expected sale of the Kentucky Operations for the twelve months ended December 31, 2022.

Management believes it is probable that FERC authorization under Section 203 of the Federal Power Act will be received and closing will occur after receipt of the order. Therefore, the assets and liabilities of KPCo and KTCo were classified as Held for Sale in the December 31, 2022 balance sheet of Parent. Upon closing, Liberty will acquire the assets and assume the liabilities of KPCo and KTCo, excluding pension and other post-retirement benefit plan assets and liabilities. AEP expects to provide customary transition services to Liberty for a period of time after closing of the transaction. AEP expects cash proceeds, net of taxes and transaction fees, from the sale of approximately $1.2 billion. AEP plans to use the proceeds from the sale to fund its continued investment in regulated businesses, including transmission and regulated renewables projects. If additional reductions in the fair value of the Kentucky Operations occur, it would reduce future net income and cash flows.

S-8

The major classes of KPCo and KTCo’s assets and liabilities presented in Assets Held for Sale and Liabilities Held for Sale on the balance sheets of Parent as of December 31, 2022 are shown in the table below.
									
		December 31, 2022	
		(in millions)	
ASSETS			
Investment in KPCo		$	918.4 		
Investment in AEPTHCo		85.4 		
Loss on the Expected Sale of Kentucky Operations (net of $66.1 million of Income Taxes)		(297.2)		
Assets Held for Sale		$	706.6 		
S-9

2.  COMMITMENTS, GUARANTEES AND CONTINGENCIES

Parent and its subsidiaries are parties to environmental and other legal matters. Parent has issued guarantees over the performance of certain equity method investees.

Guarantees of Equity Method Investees

In 2019, AEP acquired a 50% ownership interest in five non-consolidated renewable joint ventures and two renewable tax equity partnerships. Parent issued guarantees over the performance of the joint ventures. If a joint venture were to default on payments or performance, Parent would be required to make payments on behalf of the joint venture. In September 2022, AEP signed a PSA with a nonaffiliate for AEP’s interest in Flat Ridge 2, one of the five non-consolidated joint ventures. The transaction closed in the fourth quarter of 2022. As of December 31, 2022, the maximum potential amount of future payments associated with the remaining guarantees was $59 million, with the last guarantee expiring in December 2035. The non-contingent liability recorded associated with these guarantees was $5 million, with an additional $1 million expected credit loss liability for the contingent portion of the guarantees. In accordance with the accounting guidance for guarantees, the initial recognition of the non-contingent liabilities increased AEP’s carrying values of the respective equity method investees. Management considered historical losses, economic conditions, and reasonable and supportable forecasts in the calculation of the expected credit loss. As the joint ventures generate cash flows through PPAs, the measurement of the contingent portion of the guarantee liability is based upon assessments of the credit quality and default probabilities of the respective PPA counterparties.

For further discussion, see Note 6 - Commitments, Guarantees and Contingencies included in the 2022 Annual Report.

S-10

3.  FINANCING ACTIVITIES

The following details long-term debt outstanding as of December 31, 2022 and 2021:

Long-term Debt

 				Weighted-Average		Interest Rate Ranges as of		Outstanding as of	
				Interest Rate as of		December 31,		December 31,	
Type of Debt		Maturity		December 31, 2022		2022		2021		2022		2021	
 				 		 		 		(in millions)	
Senior Unsecured Notes		2022-2050		3.57%		0.75%-5.95%		0.61%-4.30%		$	4,454.0 			$	3,859.7 		
Pollution Control Bonds		2024-2029 (a)		2.26%		1.90%-2.60%		1.90%-2.60%		537.2 			536.6 		
Junior Subordinated Notes		2024-2027		2.35%		1.30%-3.88%		1.30%-3.88%		2,381.3 			2,373.0 		
Total Long-term Debt Outstanding				 		 		 		7,372.5 			6,769.3 		
Long-term Debt Due Within One Year										1,050.0 			308.9 		
Long-term Debt										$	6,322.5 			$	6,460.4 		

(a)Certain Pollution Control Bonds are subject to redemption earlier than the maturity date.

Long-term debt outstanding as of December 31, 2022 is payable as follows:

	2023		2024		2025		2026		2027		After 2027		Total	
 	(in millions)	
Principal Amount (a)	$	1,050.0 			$	805.0 			$	1,249.7 			$	50.0 			$	1,749.7 			$	2,524.9 			$	7,429.3 		
Unamortized Discount, Net and Debt Issuance Costs	 		 		 		 		 		 		(56.8)		
Total Long-term Debt Outstanding	 		 		 		 		 		 		$	7,372.5 		

(a)Amounts reflect the impact of fair value hedge accounting. See “Accounting for Fair Value Hedging Strategies” section of Note 10 included in the 2022 Annual Report for additional information.

Short-term Debt

Parent’s outstanding short-term debt was as follows:

 		December 31, 2022		December 31, 2021	
Type of Debt		Outstanding
Amount		Weighted-Average
Interest Rate		Outstanding
Amount		Weighted-Average
Interest Rate	
 		(in millions)		 		(in millions)		 	
Commercial Paper		$	2,862.2 			4.80 	%		$	1,364.0 			0.34 	%	
Term Loan		— 			— 	%		500.0 			0.81 	%	
Term Loan		125.0 			5.17 	%		— 			— 	%	
Term Loan		150.0 			5.17 	%		— 			— 	%	
Term Loan		100.0 			5.23 	%		— 			— 	%	
Term Loan		125.0 			4.87 	%		— 			— 	%	
Total Short-term Debt		$	3,362.2 					$	1,864.0 			 	

S-11

4.  RELATED PARTY TRANSACTIONS

Payments on Behalf of Subsidiaries

Due to occasional time sensitivity and complexity of payments, Parent makes certain insurance, tax and benefit payments on behalf of subsidiary companies.  Parent is then fully reimbursed by the subsidiary companies.

Short-term Lending to Subsidiaries

Parent uses a commercial paper program to meet the short-term borrowing needs of subsidiaries.  The program is used to fund both a Utility Money Pool, which funds the utility subsidiaries, and a Nonutility Money Pool, which funds certain nonutility subsidiaries.  In addition, the program also funds, as direct borrowers, the short-term debt requirements of other subsidiaries that are not participants in either money pool for regulatory or operational reasons.  The program also allows some direct borrowers to invest excess cash with Parent.

Interest expense related to Parent’s short-term borrowing is included in Interest Expense on Parent’s statements of income.  Parent incurred interest expense for amounts borrowed from subsidiaries of $30 million, $2 million and $4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Interest income related to Parent’s short-term lending is included in Interest Income on Parent’s statements of income.  Parent earned interest income for amounts advanced to subsidiaries of $71 million, $15 million and $36 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Affiliated Notes

Parent issued long-term debt, portions of which were loaned to its subsidiaries.  Parent pays interest on the affiliated notes, but the subsidiaries accrue interest for their share of the affiliated borrowing and remit the interest to Parent.  Interest income related to Parent’s loans to subsidiaries is included in Interest Income on Parent’s statements of income.  Parent earned interest income on loans to subsidiaries of $3 million, $2 million and $2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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5.  SUBSEQUENT EVENTS

Planned Disposition of the Competitive Contracted Renewables Portfolio

In February 2022, AEP management announced the initiation of a process to sell all or a portion of AEP Renewables’ competitive contracted renewables portfolio within the Generation & Marketing segment.

As of December 31, 2022, the competitive contracted renewable portfolio assets totaled 1.4 gigawatts of generation resources representing consolidated solar and wind assets, with a net book value of $1.2 billion, and a 50% interest in four joint venture wind farms, totaling $247 million, accounted for as equity method investments.

In late January 2023, AEP received final bids from interested parties. In February 2023, AEP’s Board of Directors approved management’s plan to sell the competitive contracted renewables portfolio and AEP signed an agreement to sell the competitive contracted renewables portfolio to a nonaffiliated party for $1.5 billion including the assumption of project debt. As part of the sale agreement, AEP provided the acquirer an indemnification related to certain losses, not to exceed $70 million, which could result from one of the joint venture wind farm’s inability to meet certain minimum performance requirements.

The sale is subject to FERC approval, clearance from the Committee on Foreign Investment in the United States and approval under applicable competition laws. AEP expects to close on the sale in the second quarter of 2023 and receive cash proceeds, net of taxes, transaction fees and other customary closing adjustments, of approximately $1.2 billion.

Management concluded the consolidated assets within the competitive contracted renewables portfolio met the accounting requirements to be presented as Held for Sale in the first quarter of 2023 based on the receipt of final bids, Board of Director approval to consummate a sale transaction and the signing of the sale agreement. AEP anticipates recording an estimated pretax loss ranging from $175 million to $225 million ($100 million to $150 million after-tax), in the first quarter of 2023 as a result of reaching Held for Sale status. Management concluded the impact of any other than temporary decline in the fair value of the four joint venture wind farms was not material to AEP’s December 31, 2022 financial statements. Any changes to the book value or carrying value of these assets, or the anticipated sale price, could further reduce future net income and impact financial condition.
S-13

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

																																	
AEP		 		Additions		 		 	
Description		Balance at
 Beginning
of Period		Charged to
Costs and
Expenses		Charged to Other
Accounts (a)		Deductions (b)		Balance at
End of
Period	
 		(in millions)	
Deducted from Assets:		 		 		 		 		 	
Accumulated Provision for Uncollectible Accounts:		 		 		 		 		 	
Year Ended December 31, 2022 (c)		$	55.6 			$	38.4 			$	— 			$	37.9 			$	56.1 		
Year Ended December 31, 2021		71.1 			20.3 			0.6 			36.4 			55.6 		
Year Ended December 31, 2020		43.7 			46.0 			5.9 			24.5 			71.1 		

(a)Recoveries offset by reclasses to other assets and liabilities.
(b)Uncollectible accounts written off.
(c)The 2022 balance excludes Accumulated Provision for Uncollectible Accounts of $1 million classified as Assets Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 included in the 2022 Annual Report for additional information.

Schedule II for the Registrant Subsidiaries is not presented because the amounts are not material.
S-14

INDEX OF AEP TRANSMISSION COMPANY, LLC (AEPTCO PARENT)
FINANCIAL STATEMENT SCHEDULES

	Page
Number	
The following financial statement schedules are included in this report on the pages indicated:		
 		
AEP Transmission Company, LLC (AEPTCo Parent):		
Schedule I – Condensed Financial Information	S-16	
Schedule I – Index of Condensed Notes to Condensed Financial Information	S-20	
S-15

SCHEDULE I
AEP TRANSMISSION COMPANY, LLC (AEPTCo Parent)
CONDENSED FINANCIAL INFORMATION
CONDENSED STATEMENTS OF INCOME
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

 		Years Ended December 31,	
 		2022		2021		2020	
EXPENSES		 		 		 	
Other Operation		$	0.7 			$	0.2 			$	0.2 		
	
TOTAL EXPENSES		0.7 			0.2 			0.2 		
							
OPERATING LOSS		(0.7)			(0.2)			(0.2)		
							
Other Income (Expense):		 		 		 	
	
Interest Income - Affiliated		177.8 			158.1 			149.6 		
Interest Expense		(177.1)			(157.7)			(148.1)		
							
INCOME BEFORE INCOME TAX EXPENSE AND EQUITY EARNINGS OF UNCONSOLIDATED SUBSIDIARIES		— 			0.2 			1.3 		
							
Income Tax Expense		— 			— 			0.2 		
Equity Earnings of Unconsolidated Subsidiaries		594.2 			591.5 			422.3 		
							
NET INCOME		$	594.2 			$	591.7 			$	423.4 		
							
See Condensed Notes to Condensed Financial Information beginning on page S-20.	

S-16

SCHEDULE I
AEP TRANSMISSION COMPANY, LLC (AEPTCo Parent)
CONDENSED FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
ASSETS
December 31, 2022 and 2021
(in millions)

 		December 31,	
 		2022		2021	
CURRENT ASSETS		 		 	

Advances to Affiliates		$	— 			$	12.7 		
Accounts Receivable:		 		 	
	
Affiliated Companies		34.6 			32.4 		
	
Total Accounts Receivable		34.6 			32.4 		

Notes Receivable - Affiliated		60.0 			104.0 		
Assets Held for Sale		149.3 			140.2 		
Other Current Assets		— 			0.5 		
TOTAL CURRENT ASSETS		243.9 			289.8 		

	

	

	
OTHER NONCURRENT ASSETS		 		 	
Notes Receivable - Affiliated		4,659.0 			4,176.1 		
	
Investments in Unconsolidated Subsidiaries		5,935.7 			5,411.1 		
	
TOTAL OTHER NONCURRENT ASSETS		10,594.7 			9,587.2 		
					
TOTAL ASSETS		$	10,838.6 			$	9,877.0 		
					
See Condensed Notes to Condensed Financial Information beginning on page S-20.	
S-17

SCHEDULE I
AEP TRANSMISSION COMPANY, LLC (AEPTCo Parent)
CONDENSED FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
LIABILITIES AND EQUITY
December 31, 2022 and 2021
(in millions)

		December 31,	
 		2022		2021	
CURRENT LIABILITIES		 			
Advances from Affiliates		$	27.8 			$	— 		
Accounts Payable:		 		 	
General		78.1 			83.0 		
Affiliated Companies		42.2 			44.3 		
	
Long-term Debt Due Within One Year – Nonaffiliated		60.0 			104.0 		
	
Accrued Interest		28.8 			28.8 		
	
Other Current Liabilities		5.9 			0.9 		
TOTAL CURRENT LIABILITIES		242.8 			261.0 		
					
NONCURRENT LIABILITIES		 		 	
Long-term Debt – Nonaffiliated		4,722.8 			4,239.9 		

	
	
TOTAL NONCURRENT LIABILITIES		4,722.8 			4,239.9 		
					
TOTAL LIABILITIES		4,965.6 			4,500.9 		
					
MEMBER’S EQUITY		 		 	
Paid-in Capital		3,022.3 			2,949.6 		
Retained Earnings		2,850.7 			2,426.5 		
TOTAL MEMBER’S EQUITY		5,873.0 			5,376.1 		
					
TOTAL LIABILITIES AND MEMBER’S EQUITY		$	10,838.6 			$	9,877.0 		
									
See Condensed Notes to Condensed Financial Information beginning on page S-20.	

S-18

SCHEDULE I
AEP TRANSMISSION COMPANY, LLC (AEPTCo Parent)
CONDENSED FINANCIAL INFORMATION
CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(in millions)

 		Years Ended December 31,	
 		2022		2021		2020	
OPERATING ACTIVITIES		 		 		 	
Net Income		$	594.2 			$	591.7 			$	423.4 		
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:		 		 		 	

	

Equity Earnings of Unconsolidated Subsidiaries		(594.2)			(591.5)			(422.3)		
	
Change in Other Noncurrent Liabilities		9.1 			6.2 			5.6 		
Changes in Certain Components of Working Capital:		 		 		 	
Accounts Receivable, Net		(2.2)			(5.9)			(3.4)		
	
Accounts Payable		(0.6)			4.8 			5.3 		
	
Accrued Interest		— 			4.9 			4.7 		
	
Other Current Liabilities		(0.8)			12.3 			32.5 		
Net Cash Flows from Operating Activities		5.5 			22.5 			45.8 		
							
INVESTING ACTIVITIES		 		 		 	

	
	
Change in Advances to Affiliates, Net		12.7 			96.3 			(40.3)		
Repayment of Notes Receivable from Affiliated Companies		104.0 			50.0 			— 		
Issuance of Notes Receivable to Affiliated Companies		(550.0)			(450.0)			(525.0)		
Return of Capital Contributions from Unconsolidated Subsidiaries		130.0 			— 			5.0 		
Capital Contributions to Subsidiaries		(69.5)			(184.0)			(335.0)		
	
Net Cash Flows Used for Investing Activities		(372.8)			(487.7)			(895.3)		
							
FINANCING ACTIVITIES		 		 		 	
	
Capital Contributions from Member		72.7 			184.0 			335.0 		
Issuance of Long-term Debt – Nonaffiliated		540.8 			443.7 			519.5 		

Retirement of Long-term Debt – Nonaffiliated		(104.0)			(50.0)			— 		
Change in Advances from Affiliates, Net		27.8 			— 			— 		
Dividends Paid to Member		(170.0)			(112.5)			(5.0)		
	
Net Cash Flows from Financing Activities		367.3 			465.2 			849.5 		
							
Net Change in Cash and Cash Equivalents		— 			— 			— 		
Cash and Cash Equivalents at Beginning of Period		— 			— 			— 		
Cash and Cash Equivalents at End of Period		$	— 			$	— 			$	— 		
							
See Condensed Notes to Condensed Financial Information beginning on page S-20.	
S-19

SCHEDULE I
AEP TRANSMISSION COMPANY, LLC (AEPTCo Parent)
INDEX OF CONDENSED NOTES TO CONDENSED FINANCIAL INFORMATION

1.   Summary of Significant Accounting Policies	
 	
2.   Commitments, Guarantees and Contingencies	
 	
3.   Financing Activities	
 	
4.   Related Party Transactions	
S-20

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed financial information of AEPTCo Parent is required as a result of the restricted net assets of AEPTCo consolidated subsidiaries exceeding 25% of AEPTCo consolidated net assets as of December 31, 2022.  AEPTCo Parent is the direct holding company for the seven State Transcos.  The primary source of income for AEPTCo Parent is equity in its subsidiaries’ earnings. AEPTCo Parent financial statements should be read in conjunction with the AEPTCo consolidated financial statements and the accompanying notes thereto. For purposes of these condensed financial statements, AEPTCo wholly-owned and majority-owned subsidiaries are recorded based upon its proportionate share of the subsidiaries’ net assets (similar to presenting them on the equity method).

Income Taxes

AEPTCo Parent joins in the filing of a consolidated federal income tax return with its affiliates in the AEP System.  Historically, the allocation of the AEP System’s current consolidated federal income tax to the AEP System companies allocated the benefit of current tax loss of the parent company (Parent Company Loss Benefit) to the AEP System subsidiaries through a reduction of current tax expense. In the first quarter of 2022, AEP and subsidiaries changed accounting for the Parent Company Loss Benefit from a reduction of current tax expense to an allocation through equity. The impact of this change was immaterial to the Subsidiaries’ financial statements. The consolidated NOL of the AEP System is allocated to each company in the consolidated group with taxable income. With the exception of the allocation of the consolidated AEP System NOL, the loss of the Parent and tax credits, the method of allocation reflects a separate return result for each company in the consolidated group.

Disposition of KTCo

AEPTCo Parent holds a direct investment in KTCo. In October 2021, AEP entered into a Stock Purchase Agreement (SPA) to sell KPCo and KTCo to Liberty Utilities Co., a subsidiary of Algonquin Power & Utilities Corp. (Liberty), for approximately a $2.85 billion enterprise value. In May 2022, the KPSC approved the transfer of KPCo to Liberty subject to certain conditions contingent upon the closing of the sale. AEP has received clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) and the Committee on Foreign Investment in the United States during 2022. Clearance under the HSR expired in January 2023. AEP and Liberty refiled a joint application seeking HSR clearance in February 2023. The sale is also contingent upon FERC approval under Section 203 of the Federal Power Act. The parties to the SPA have certain termination rights if the closing of the sale does not occur by April 26, 2023.

Transfer of Ownership

FERC Proceedings

In December 2021, Liberty, KPCo and KTCo (the applicants) requested FERC approval of the sale under Section 203 of the Federal Power Act. In February 2022, several intervenors in the case filed protests related to whether the sale will negatively impact the wholesale transmission rates of applicants. In April 2022, the FERC issued a deficiency letter stating that the Section 203 application is deficient and that additional information is required to process it. In May 2022, Liberty, KPCo and KTCo supplemented the application. In December 2022, the FERC issued an order denying, without prejudice, authorization of the proposed sale stating the applicants failed to demonstrate the proposed transaction will not have an adverse effect on rates.

In January 2023, AEP, AEPTCo, and Liberty entered into an amendment to the SPA that specified the applicants will submit a new filing for approval under Section 203 of the Federal Power Act. The new filing was submitted to the FERC on February 14, 2023. The applicants requested expedited treatment of the new filing, including an accelerated comment period. In response, the FERC granted a shortened 45 day comment period. The applicants believe the new Section 203 application addresses the concerns raised in the FERC’s December 2022 order. The
S-21

application contains several additional commitments by Liberty to mitigate potential adverse impacts on FERC jurisdictional rates over the next five years, including: a) maintaining the current return on equity; b) maintaining the current cost cap on equity; c) financing future investments at the current credit rating; and d) capping certain operating and administrative costs. The sale remains subject to FERC approval. The statute requires an order from the FERC within 180 days of the February 14, 2023 filing date in accordance with Section 203 of the Federal Power Act.

In September 2022, AEP, AEPTCo and Liberty entered into an amendment to the SPA which reduced the purchase price to approximately $2.646 billion and Liberty agreed to waive, upon FERC approval of the sale, the SPA condition precedent to closing requiring the issuance of regulatory orders approving new proposed Mitchell Plant agreements.

Management believes it is probable that FERC authorization under Section 203 of the Federal Power Act will be received and closing will occur after receipt of the order. Therefore, the assets and liabilities of KTCo were classified as Held for Sale in the December 31, 2022 balance sheet of AEPTCo Parent. Upon closing, Liberty will acquire the assets and assume the liabilities of KPCo and KTCo, excluding pension and other post-retirement benefit plan assets and liabilities. AEP expects to provide customary transition services to Liberty for a period of time after closing of the transaction. AEP expects cash proceeds, net of taxes and transaction fees, from the sale of approximately $1.2 billion. AEP plans to use the proceeds from the sale to fund its continued investment in regulated businesses, including transmission and regulated renewables projects. If additional reductions in the fair value of the Kentucky Operations occur, it would reduce future net income and cash flows.

The major classes of KTCo’s assets and liabilities presented in Assets Held for Sale and Liabilities Held for Sale on the balance sheets of AEPTCo Parent as of December 31, 2022 are shown in the table below.

		December 31, 2022	
		(in millions)	
ASSETS			
Long-term Notes Receivable - Affiliated		$	63.8 		
Investment in KTCo		85.5 		
Assets Held for Sale		$	149.3 		

2.  COMMITMENTS, GUARANTEES AND CONTINGENCIES

AEPTCo Parent and its subsidiaries are parties to legal matters.  For further discussion, see Note 6 - Commitments, Guarantees and Contingencies included in the 2022 Annual Report.

3.  FINANCING ACTIVITIES

For discussion of Financing Activities, see Note 14 - Financing Activities to AEPTCo’s audited consolidated financial statements included in the 2022 Annual Report.

4.  RELATED PARTY TRANSACTIONS

Payments on Behalf of Subsidiaries

Due to occasional time sensitivity and complexity of payments, Parent makes certain insurance, tax and other payments on behalf of subsidiary companies.  Parent is then fully reimbursed by the subsidiary companies. AEPTCo Parent also makes convenience payments on behalf of its State Transcos. AEPTCo Parent is then fully reimbursed by its State Transcos.

S-22

Long-term Lending to Subsidiaries

AEPTCo Parent enters into debt arrangements with nonaffiliated entities. AEPTCo Parent has long-term debt of $4.8 billion and $4.3 billion as of December 31, 2022 and 2021, respectively. AEPTCo Parent uses the proceeds from these nonaffiliated debt arrangements to make affiliated loans to its State Transcos using the same interest rates and maturity dates as the nonaffiliated debt arrangements. AEPTCo Parent has recorded Notes Receivable – Affiliated of $4.7 billion and $4.3 billion as of December 31, 2022 and 2021, respectively. Related to these nonaffiliated and affiliated debt arrangements, AEPTCo Parent has recorded Accrued Interest of $29 million and $29 million as of December 31, 2022 and 2021, respectively. AEPTCo Parent has also recorded Accounts Receivable – Affiliated Companies of $35 million and $32 million as of December 31, 2022 and 2021, respectively. AEPTCo Parent has recorded Interest Income – Affiliated of $177 million, $158 million and $150 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to the Notes Receivable – Affiliated. AEPTCo Parent has recorded Interest Expense of $177 million, $158 million and $148 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to the nonaffiliated debt arrangements.

Short-term Lending to Subsidiaries

Parent uses a commercial paper program to meet the short-term borrowing needs of subsidiaries.  The program is used to fund both a Utility Money Pool, which funds the utility subsidiaries, and a Nonutility Money Pool, which funds certain nonutility subsidiaries.  In addition, the program also funds, as direct borrowers, the short-term debt requirements of other subsidiaries that are not participants in either money pool for regulatory or operational reasons.  The program also allows some direct borrowers to invest excess cash with Parent.

Interest expense related to AEPTCo Parent’s short-term borrowing is included in Interest Expense on AEPTCo Parent’s statements of income.  AEPTCo Parent incurred immaterial interest expense for amounts borrowed from AEP affiliates for the years ended December 31, 2022, 2021 and 2020.

Interest income related to AEPTCo Parent’s short-term lending is included in Interest Income – Affiliated on AEPTCo Parent’s statements of income.  AEPTCo Parent earned interest income for amounts advanced to AEP affiliates of $915 thousand, $400 thousand and $2 million for the year ended December 31, 2022, 2021 and 2020, respectively.
S-23

EXHIBIT INDEX

The documents listed below are being filed or have previously been filed on behalf of the Registrants shown and are incorporated herein by reference to the documents indicated and made a part hereof.  Exhibits (“Ex”) not identified as previously filed are filed herewith.  Exhibits designated with a dagger (†) are management contracts or compensatory plans or arrangements required to be filed as an Exhibit to this Form.  Exhibits designated with an asterisk (*) are filed herewith.
															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
AEP‡   File No. 1-3525	 	 	
 	 	 	 	 	
*3(a)		Composite of the Restated Certificate of Incorporation of AEP, dated April 26, 2022.			
					
3(b)		Composite By-Laws of AEP amended as of December 6, 2022.		Form 8-K, Exhibit 3(b) dated December 8, 2022	
					
4(a)		Indenture (for unsecured debt securities), dated as of May 1, 2001, between AEP and The Bank of New York, as Trustee.		Registration Statement No. 333-86050, Ex 4(a)(b)(c)
Registration Statement No. 333-105532, Ex 4(d)(e)(f)
Registration Statement No. 333-200956, Ex 4(b)
Registration Statement No. 333-222068, Ex 4(b) Registration Statement No. 333-249918, Ex 4(b)(c)	
					
4(a)1		Company Order and Officers Certificate to The Bank of New York Mellon Trust Company, N.A. dated November 20, 2020 establishing terms of 0.75% Senior Notes Series M due 2023, 1.00% Senior Notes, Series N due 2025 and Floating Rate Notes, Series A due 2023.		Form 8-K, Ex 4(a) dated November 18, 2020	
					
4(a)2		Company Order and Officer’s Certificate between America Electric Power Company, Inc. and The Bank of New York Mellon Trust Company, N.A. as Trustee dated August 3, 2021 establishing terms of the 1.80% Senior Notes, Series 2021A due 2028.		Form 10-Q, Ex. 4, September 30, 2021	
					
4(a)3		Company Order and Officer’s Certificate between America Electric Power Company, Inc. and The Bank of New York Mellon Trust Company, N.A. as Trustee dated November 2, 3, 2022 establishing terms of the 5.75% Senior Notes, Series O due 2027 and the 5.95% Senior Notes, Series P due 2032.		Form 8-K, Ex 4(a) dated November 2, 2022	
					
4(b)		Junior Subordinated Indenture, dated March 1, 2008, between the Company and The Bank of New York Mellon Trust Company, N.A., as Trustee for the Junior Subordinated Debentures.		Registration Statement No. 333-156387, Ex 4(c) (d)
Registration Statement No. 333-249918, Ex 4(f)(g)	
					
E-1

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
4(b)1		Supplemental Indenture No. 2 dated August 14, 2020 between American Electric Power Company, Inc. and The Bank of New York Mellon Trust Company, N.A. as Trustee establishing terms of 1.30% Fixed-to-Fixed Reset Rate Junior Subordinated Debentures due 2025.		Form 10-Q Ex 4.3, dated September 30, 2020	
					
4(b)2		Supplemental Indenture No. 3 dated November 15, 2021 between American Electric Power Company, Inc. and The Bank of New York Mellon Trust Company, N.A. as Trustee establishing terms of 3.875% Fixed-to-Fixed Reset Rate Junior Subordinated Debentures due 2062.		Form 8-K, Ex 4(a) dated November 16, 2021	
					
4(b)3		Supplemental Indenture No. 4 dated January 6, 2022 between American Electric Power Company, Inc. and The Bank of New York Mellon Trust Company, N.A. as Trustee establishing terms of 2.031% Junior Subordinated Debentures due 2024.		Form 8-K, Ex 4(a) dated January 6, 2022	
					
4(c)		Purchase Contract and Pledge Agreement, dated as of March 19, 2019, between the Company and The Bank of New York Mellon Trust Company, N.A., as purchase contract agent, collateral agent, custodial agent and securities intermediary.		Registration Statement No. 333-249918, Ex 4(h)	
					
4(c)1		Purchase Contract and Pledge Agreement dated as of August 14, 2020, between the Company and The Bank of New York Mellon Trust Company, N.A., as purchase contract agent, collateral agent, custodial agent and securities intermediary.		Registration Statement No. 333-249918, Ex 4(i)	
					
4(d)		First Amendment to Fourth Amended and Restated Credit Agreement dated June 30, 2016 among AEP, the banks, financial institutions and other institutional lenders listed on the signature pages thereof and Wells Fargo Bank, N.A., as Administrative Agent.		Form 10-Q, Ex 4, September 30, 2018	
 	 	 	 	 	
4(d)1		Credit Agreement among AEP, initial lenders and PNC Bank, National Association as Administrative Agent.		Form 10-Q, Ex 4.3, March 31, 2020	
					
4(d)2		$500,000,000 Credit Agreement dated March 10, 2021 among the Company, Initial Lenders and U.S. Bank National Association as Administrative Agent.		Form 10-Q Ex 4.1 dated March 31, 2021	
					
4(d)3		$4,000,000,000 Credit Agreement dated March 31, 2021 among the Company, Initial Lenders and Wells Fargo Bank National Association as Administrative Agent.		Form 10-Q Ex 4.2 dated March 31, 2021	
					
E-2

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
4(d)3A		April 7, 2022 Amendment and extension to $4,000,000,000 Credit Agreement dated March 31, 2021 among the Company, Initial Lenders and Wells Fargo Bank National Association as Administrative Agent.		Form 10-Q Ex 4(a) dated March 31, 2022	
					
4(d)4		$1,000,000,000 Credit Agreement dated March 31, 2021 among the Company, Initial Lenders and Wells Fargo Bank National Association as Administrative Agent.		Form 10-Q Ex 4.3 dated March 31, 2021	
					
4(d)4A		April 7, 2022 Amendment and extension to $1,000,000,000 Credit Agreement dated March 31, 2021 among the Company, Initial Lenders and Wells Fargo Bank National Association as Administrative Agent.		Form 10-Q Ex 4(b) dated March 31, 2022	
					
4(e)		Distribution Agreement, dated November 6, 2020, between American Electric Power Company, Inc. and Credit Suisse Securities (USA) LLC, Barclays Capital Inc., BofA Securities, Inc., BNY Mellon Capital Markets, LLC, Citigroup Global Markets Inc., Scotia Capital (USA) Inc., Credit Suisse Capital LLC, Barclays Bank PLC, Bank of America, N.A. and Citibank, N.A.		Form 8-K, Ex 1.1, November 6, 2020	
					
4(f)		Description of Securities.		2020 Form 10-K, Ex 4(c)	
					
10(a)		Consent Decree with U.S. District Court dated October 9, 2007, as modified July 17, 2019.		Form 8-K, Ex. 10 dated October 9, 2007
Form 10-Q, Ex 10, June 30, 2013
Form 10-Q, Ex 10, June 30, 2019	
					
†10(b)		AEP Retainer Deferral Plan for Non-Employee Directors, as Amended and Restated effective October 1, 2020.		Form 10-Q, Ex 10.2, September 30, 2020	
					
†10(c)		AEP Stock Unit Accumulation Plan for Non-Employee Directors as amended October 1, 2020.		Form 10-Q, Ex 10.3, September 30, 2020	
					
†10(c)1		AEP Stock Unit Accumulation Plan for Non-Employee Directors as amended June 1, 2022.		2021 Form 10-K, Ex 10(d)1	
					
†10(d)		AEP System Excess Benefit Plan, Amended and Restated as of January 1, 2020.		2019 Form 10-K, Ex 10(e)	
					
†10(d)1		Guaranty by AEP of AEPSC Excess Benefits Plan.		1990 Form 10-K, Ex 10(h)(1)(B)	
					
*†10(e)		AEP System Supplemental Retirement Savings Plan, Amended and Restated as of October 6, 2021 (Non-Qualified).			
					
†10(f)		AEPSC Umbrella Trust for Executives.		1993 Form 10-K, Ex 10(g)(3)	
					
†10(f)1A		First Amendment to AEPSC Umbrella Trust for Executives.		2008 Form 10-K, Ex 10(l)(3)(A)	
E-3

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	

†10(f)2A		Second Amendment to AEPSC Umbrella Trust for Executives.		2018 Form 10-K, Ex 10(g)(2)(A)	
					
†10(g)		AEP System Incentive Compensation Deferral Plan Amended and Restated as of June 1, 2019.		Form 10-Q, Ex 10(1), September 30, 2019	
					
†10(h)		AEP Change In Control Agreement, as Revised Effective January 1, 2017.		Form 10-Q, Ex 10(c), September 30, 2016	
					
†10(i)		Amended and Restated AEP System Long-Term Incentive Plan as of September 21, 2016.		Form 10-Q, Ex 10(a), September 30, 2016	
					
†10(i)1A		Performance Share Award Agreement furnished to participants of the AEP System Long-Term Incentive Plan, as amended.		Form 10-Q, Ex 10(a), March 30, 2018	
					
*†10(i)2A		Restricted Stock Unit Agreement furnished to participants of the AEP System Long-Term Incentive Plan as Amended and Restated effective January 1, 2022.			
					
†10(j)		AEP System Stock Ownership Requirement Plan Amended and Restated effective October 1, 2020.		Form 10-Q, Ex 10.1, September 30, 2020	
					
†10(k)		Central and South West System Special Executive Retirement Plan Amended and Restated effective January 1, 2020.		2019 Form 10-K, Ex 10(l)	
					
†10(l)		AEP Executive Severance Plan Amended effective January 4, 2021.		2020 Form 10-K, Ex 10(n)	
					
*†10(l)(1)		AEP Executive Severance Plan Amended and Restated effective February 20, 2023.			
					
*†10(m)		Severance, Release of All Claims, and Non-competition Agreement between American Electric Power Company, Inc. and Lisa M. Barton.			
					
†10(n)		AEP Aircraft Timesharing Agreement dated October 1, 2019 between American Electric Power Service Corporation and Nicholas K. Akins.		Form 10-Q, Ex 10(2), September 30, 2019	
					
10(o)		Stock Purchase Agreement dated as of October 26, 2021 among AEP, AEPTCo and Liberty Utilities Co.		Form 10-Q, Ex 10, dated September 30, 2021	
					
10(o)1A		First Amendment to Stock Purchase Agreement dated September 29, 2022 among AEP, AEPTCo and Liberty Utilities Co.		Form 10-Q, Ex 10, dated September 30, 2022	
					
E-4

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
*10(o)2A		Second Amendment to Stock Purchase Agreement dated January 16, 2023 among AEP, AEPTCo and Liberty Utilities Co.			
					
*21		List of subsidiaries of AEP.			
					
*23		Consent of PricewaterhouseCoopers LLP.			
					
*24		Power of Attorney.			
					
*31(a)		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*31(b)		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*32(a)		Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
			 	 	
*32(b)		Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
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AEP TEXAS‡   File No. 333-221643			
					
3(a)		Composite of the Restated Certificate of Incorporation, as amended.		Registration Statement No. 333-221643, Ex 3(a)	
					
3(b)		Bylaws.		Registration Statement No. 333-221643, Ex 3(b)	
					
E-5

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
4(a)		Indenture, dated as of September 1, 2017, between AEP Texas Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee.		Registration Statement No. 333-221643, Ex 4(a)-1,4(a)-2
Registration Statement No. 333-228657, Ex 4(a)-4,4(a)-5
Registration Statement No. 333-230613, Ex 4(a)(b)
Registration Statement No. 333-253585, Ex 4(b)(c)(d)	
					
4(b)		Company Order and Officer’s Certificate between AEP Texas Inc. and The Bank of New York Mellon Trust Company, N.A. as Trustee dated May 6, 2021 establishing terms of the 3.45% Senior Notes, Series J, due 2051.		Form 8-K, Ex 4(a) dated May 6, 2021	
					
4(e)		Company Order and Officer’s Certificate between AEP Texas Inc. and The Bank of New York Mellon Trust Company, N.A. as Trustee dated May 18, 2022 establishing terms of the 4.70% Senior Notes, Series K, due 2032 and the 5.25% Senior Notes, Series L, due 2052.		Form 10-Q, Ex 4 dated June 30, 2022	
					
*23		Consent of PricewaterhouseCoopers LLP.			
					
*24		Power of Attorney.			
					
*31(a)		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*31(b)		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*32(a)		Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
*32(b)		Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
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E-6

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
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AEPTCo‡   File No. 333-217143			
					
3(a)		Limited Liability Company Agreement of AEP Transmission Company, LLC dated as of January 27, 2006.		Registration Statement No. 333-217143, Ex 3(a)	
					
3(b)		First Amendment to Limited Liability Company Agreement dated as of May 21, 2013.		Registration Statement No. 333-217143, Ex 3(b)	
					
4(a)		Indenture, dated as of November 1, 2016, between AEP Transmission Company, LLC and The Bank of New York Mellon Trust Company, N.A., as Trustee.		Registration Statement No. 333-217143, Ex 4(a)-1, 4(a)-2
Registration Statement No. 333-225325, Ex 4(b)(c)(d)
Registration Statement No. 333-255605, Ex 4(b)(c)(d)(e)	
					
4(b)		Company Order and Officer’s Certificate between AEP Transmission Company, LLC and The Bank of New York Mellon Trust Company, N.A. as Trustee dated August 4, 2021 establishing terms of the 2.75% Senior Notes, Series N, due 2051.		Form 8-K, Ex 4(a) dated August 4, 2021	
					
4(c)		Company Order and Officer’s Certificate between AEP Transmission Company, LLC and The Bank of New York Mellon Trust Company, N.A. as Trustee dated June 9, 2022 establishing terms of the 4.50% Senior Notes, Series O, due 2052.		Form 10-Q, Ex 4 dated June 30, 2022	
					
4(d)		Note Purchase Agreement, dated as of October 18, 2012 between AEP Transmission Company, LLC and the Initial Purchasers.		Registration Statement No. 333-217143, Ex 4(c)-1	
					
4(e)1		Supplement to Note Purchase Agreement, dated as of November 7, 2013 between AEP Transmission Company, LLC and the Initial Purchasers.		Registration Statement No. 333-217143, Ex 4(c)-2	
					
4(e)2		Supplement to Note Purchase Agreement, dated as of November 14, 2014 between AEP Transmission Company, LLC and the Initial Purchasers.		Registration Statement No. 333-217143, Ex 4(c)-3	
					
10		Stock Purchase Agreement dated as of October 26, 2021 among AEP, AEPTCo and Liberty Utilities Co.		Form 10-Q, Ex 10, dated September 30, 2021	
					
E-7

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
10(1)A		First Amendment to Stock Purchase Agreement dated September 29, 2022 among AEP, AEPTCo and Liberty Utilities Co.		Form 10-Q, Ex 10, dated September 30, 2022	
					
*10(2)A		Second Amendment to Stock Purchase Agreement dated January 16, 2023 among AEP, AEPTCo and Liberty Utilities Co.			
					
*23		Consent of PricewaterhouseCoopers LLP.			
					
*24		Power of Attorney.			
					
*31(a)		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*31(b)		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*32(a)		Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
*32(b)		Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
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APCo‡   File No. 1-3457			
					
3(a)		Composite of the Restated Articles of Incorporation of APCo, amended as of March 7, 1997.		1996 Form 10-K, Ex 3(d)	
					
3(b)		Composite By-Laws of APCo, amended as of February 26, 2008.		2007 Form 10-K, Ex 3(b)	
					
E-8

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
4(a)		Indenture (for unsecured debt securities), dated as of January 1, 1998, between APCo and The Bank of New York, As Trustee.		Registration Statement No. 333-45927, Ex 4(a)(b)
Registration Statement No. 333-49071, Ex 4(b)
Registration Statement No. 333-84061, Ex 4(b)(c)
Registration Statement No. 333-100451, Ex 4(b)
Registration Statement No. 333-116284, Ex 4(b)(c)
Registration Statement No. 333-123348, Ex 4(b)(c)
Registration Statement No. 333-136432, Ex 4(b)(c)(d)
Registration Statement No. 333-161940, Ex 4(b)(c)(d)
Registration Statement No. 333-182336, Ex 4(b)(c)
Registration Statement No. 333-200750, Ex 4(b)(c)
Registration Statement No. 333-214448, Ex 4(b)
Registration Statement No. 333-236613, Ex 4(b)(c)
Registration Statement No 333-268874, Ex 4(b)(c)(d)(e)

10(a)		Inter-Company Power Agreement, dated as of July 10, 1953, among OVEC and the Sponsoring Companies, as amended September 10, 2010.		2013 Form 10-K, Ex 10(a)	
					
10(b)		Consent Decree with U.S. District Court dated October 9, 2007, as modified July 17, 2019.		Form 8-K, Ex. 10 dated October 9, 2007
Form 10-Q, Ex 10, June 30, 2013
Form 10-Q, Ex 10, June 30, 2019	
					
*23		Consent of PricewaterhouseCoopers LLP.			
					
*24		Power of Attorney.			
					
*31(a)		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*31(b)		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*32(a)		Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
*32(b)		Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
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E-9

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	

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I&M‡   File No. 1-3570			
					
3(a)		Composite of the Amended Articles of Acceptance of I&M, dated of March 7, 1997.		1996 Form 10-K, Ex 3(c)	
					
3(b)		Composite By-Laws of I&M, amended as of February 26, 2008.		2007 Form 10-K, Ex 3(b)	
					
4		Indenture (for unsecured debt securities), dated as of October 1, 1998, between I&M and The Bank of New York, as Trustee.		Registration Statement No. 333-88523, Ex 4(a)(b)(c)
Registration Statement No. 333-58656, Ex 4(b)(c)
Registration Statement No. 333-108975, Ex 4(b)(c)(d)
Registration Statement No. 333-136538, Ex 4(b)(c)
Registration Statement No. 333-156182, Ex 4(b)
Registration Statement No. 333-185087, Ex 4(b)
Registration Statement No. 333-207836, Ex 4(b)
Registration Statement No. 333-225103, Ex 4(b)(c)(d)
Registration Statement No. 333-268880 Ex. 4(b)(c)	
					
10(a)		Inter-Company Power Agreement, dated as of July 10, 1953, among OVEC and the Sponsoring Companies, as amended September 10, 2010.		2013 Form 10-K, Ex 10(a)	
					
10(b)		Unit Power Agreement dated as of March 31, 1982 between AEGCo and I&M, as amended.		Registration Statement No. 33-32752, Ex 28(b)(1)(A)(B)	
					
10(c)		Consent Decree with U.S. District Court dated October 9, 2007, as modified July 17, 2019.		Form 8-K, Ex. 10 dated October 9, 2007
Form 10-Q, Ex 10, June 30, 2013
Form 10-Q, Ex 10, June 30, 2019	
					
*23		Consent of PricewaterhouseCoopers LLP.			
					
*24		Power of Attorney.			
					
*31(a)		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
E-10

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
*31(b)		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*32(a)		Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
*32(b)		Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
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OPCo‡   File No. 1-6543			
					
3(a)		Composite of the Amended Articles of Incorporation of OPCo, dated June 3, 2002.		Form 10-Q, Ex 3(e), June 30, 2002	
					
3(b)		Amended Code of Regulations of OPCo.		Form 10-Q, Ex 3(b), June 30, 2008	
					
4(a)		Indenture (for unsecured debt securities), dated as of September 1, 1997, between OPCo and Bankers Trust Company (now The Bank of New York Mellon Trust Company, N.A. as assignee of Deutsche Bank Trust Company Americas), as Trustee.		Registration Statement No. 333-49595, Ex 4(a)(b)(c)
Registration Statement No. 333-106242, Ex 4(b)(c)(d)
Registration Statement No. 333-127913, Ex 4(b)(c)
Registration Statement No. 333-139802, Ex 4(b)(c)(d)
Registration Statement No. 333-161537, Ex 4(b)(c)(d)
Registration Statement No. 333-211192, Ex 4(b)
Registration Statement No. 333-230094, Ex 4(b)
Registration Statement No. 333-255600, Ex 4(b)(c)(d)	
					
E-11

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
4(a)1		Resignation of Deutsche Bank Trust Company Americas, as Trustee and appointment of The Bank of New York Mellon Trust Company, N.A. as Trustee of Indenture with OPCo dated as of September 1, 1997.		Form 8-K, Item 8.01 dated October 8, 2018	
					
4(a)2		Company Order and Officer’s Certificate between Ohio Power Company and The Bank of New York Mellon Trust Company, N.A. as Trustee dated September 9, 2021 establishing terms of the 2.90% Senior Notes, Series R, due 2051.		Form 8-K, Ex 4(a) dated September 13, 2021	
					
4(b)		Indenture (for unsecured debt securities), dated as of February 1, 2003, between OPCo and Bank One, N.A., as Trustee.		Registration Statement No. 333-127913, Ex 4(d)(e)(f)	
					
4(c)		Indenture (for unsecured debt securities), dated as of September 1, 1997, between CSPCo (predecessor in interest to OPCo) and Bankers Trust Company, as Trustee.		Registration Statement No. 333-54025, Ex 4(a)(b)(c)(d)
Registration Statement No. 333-128174, Ex 4(b)(c)(d)
Registration Statement No. 333-150603, Ex 4(b)	
					
4(d)		Indenture (for unsecured debt securities), dated as of February 1, 2003, between CSPCo (predecessor in interest to OPCo) and Bank One, N.A., as Trustee.		Registration Statement No. 333-128174, Ex 4(e)(f)(g)
Registration Statement No. 333-150603, Ex 4(b)	
					
4(e)		First Supplemental Indenture, dated as of December 31, 2011, by and between OPCo and The Bank of New York Mellon Trust Company, N.A., as trustee, supplementing the Indenture dated as of September 1, 1997 between CSPCo (predecessor in interest to OPCo) and the trustee.		Form 8-K, Ex 4.1 dated January 6, 2012	
					
4(f)		Third Supplemental Indenture, dated as of December 31, 2011, by and between OPCo and The Bank of New York Mellon Trust Company, N.A., as trustee, supplementing the Indenture dated as of February 14, 2003 between CSPCo (predecessor in interest to OPCo) and the trustee.		Form 8-K, Ex 4.2 dated January 6, 2012	
					
10(a)		Inter-Company Power Agreement, dated July 10, 1953, among OVEC and the Sponsoring Companies, as amended September 10, 2010.		2013 Form 10-K, Ex 10(a)	
					
10(b)		Consent Decree with U.S. District Court dated October 9, 2007, as modified July 17, 2019.		Form 8-K, Ex. 10 dated October 9, 2007
Form 10-Q, Ex 10, June 30, 2013
Form 10-Q, Ex 10, June 30, 2019	
					
*23		Consent of PricewaterhouseCoopers LLP.			
					
*24		Power of Attorney.			
					
E-12

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
*31(a)		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*31(b)		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*32(a)		Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
*32(b)		Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
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104		Cover Page Interactive Data File. Formatted as inline XBRL and contained in Exhibit 101.			
			
PSO‡   File No. 0-343			
					
3(a)		Certificate of Amendment to Restated Certificate of Incorporation of PSO.		Form 10-Q, Ex 3(a), June 30, 2008	
					
3(b)		Composite By-Laws of PSO amended as of February 26, 2008.		2007 Form 10-K, Ex 3 (b)	
					
4(a)		Indenture (for unsecured debt securities), dated as of November 1, 2000, between PSO and The Bank of New York, as Trustee.		Registration Statement No. 333-100623, Ex 4(a)(b)
Registration Statement No. 333-114665, Ex 4(b)(c)
Registration Statement No. 333-133548, Ex 4(b)(c)
Registration Statement No. 333-156319, Ex 4(b)(c)
Registration Statement No. 333-251378, Ex 4(b)(c)	
					
E-13

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
4(b)		Tenth Supplemental Indenture between Public Service Company of Oklahoma and The Bank of New York Mellon Trust Company, N.A. as Trustee dated August 1, 2021 establishing terms of the 2.20% Senior Notes, Series J, due 2031 and the 3.15% Senior Notes Series K, due 2051.		Form 8-K, Ex 4(a) dated August 12, 2021	
					
4(c)		Eleventh Supplemental Indenture dated as of January 1, 2023 between Public Service Company of Oklahoma. and The Bank of New York Mellon Trust Company, N.A.as Trustee establishing terms of 5.25% Senior Notes Series L due 2033.		Form 8-K, Ex 4(a) dated January 5, 2023	
					
4(d)		Credit Agreement dated as of January 19, 2021 among PSO as Borrower, Initial Lenders and Sumitomo Mitsui Banking Corporation as Administrative Agent.		2020 Form 10-K, Ex 4(d)	
					
4(d)A		April 19, 2022 Amendment and extension to $500,000,000 Credit Agreement dated January 19, 2021 among the Company, Initial Lenders and Sumitomo Mitsui Banking Corporation as Administrative Agent.		Form 10-Q Ex 4(c) dated March 31, 2022	
					
*23		Consent of PricewaterhouseCoopers LLP.			
					
*24		Power of Attorney.			
					
*31(a)		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*31(b)		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*32(a)		Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
*32(b)		Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
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E-14

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	

101.LAB		XBRL Taxonomy Extension Label Linkbase.			
					
101.PRE		XBRL Taxonomy Extension Presentation Linkbase.			
					
104		Cover Page Interactive Data File. Formatted as inline XBRL and contained in Exhibit 101.			
			
SWEPCo‡   File No. 1-3146			
					
3(a)		Composite of Amended Restated Certificate of Incorporation of SWEPCo.		2008 Form 10-K, Ex 3(a)	
					
3(a)(A)		Amendment to Amended Restated Certificate of Incorporation.		Form 8-K Ex 3.1 dated September 1, 2020	
					
3(b)		Composite By-Laws of SWEPCo amended as of February 26, 2008.		2007 Form 10-K, Ex 3(b)	
					
4(a)		Indenture (for unsecured debt securities), dated as of February 4, 2000, between SWEPCo and The Bank of New York, as Trustee.		Registration Statement No. 333-96213
Registration Statement No. 333-87834, Ex 4(a)(b)
Registration Statement No. 333-100632, Ex 4(b)
Registration Statement No. 333-108045, Ex 4(b)
Registration Statement No. 333-145669, Ex 4(c)(d)
Registration Statement No. 333-161539, Ex 4(b)(c)
Registration Statement No. 333-194991, Ex 4(b)(c)
Registration Statement No. 333-208535, Ex 4(b)(c)
Registration Statement No. 333-226856, Ex 4(b)(c)
Registration Statement No. 333-238159, Ex 4(b) Registration Statement No. 333-258961, Ex 4(a)(b)	
					
4(b)		Fifteenth Supplemental Indenture dated November 1, 2021 between Southwestern Electric Power Company and The Bank of New York Mellon Trust Company, N.A. as Trustee establishing terms of 3.25% Senior Notes Series O due 2051.		Form 8-K, Ex 4(a) dated November 3, 2021	
					
*23		Consent of PricewaterhouseCoopers LLP.			
					
*24		Power of Attorney.			
					
*31(a)		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
*31(b)		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			
					
E-15

															
Exhibit
Designation	 	Nature of Exhibit	 	Previously Filed as Exhibit to:	
 	 	 	
*32(a)		Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
*32(b)		Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.			
					
*95		Mine Safety Disclosure.			
					
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104		Cover Page Interactive Data File. Formatted as inline XBRL and contained in Exhibit 101.			
‡ Certain instruments defining the rights of holders of long-term debt of the registrants included in the financial statements of registrants filed herewith have been omitted because the total amount of securities authorized thereunder does not exceed 10% of the total assets of registrants.  The registrants hereby agree to furnish a copy of any such omitted instrument to the SEC upon request.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
E-16

Composite Of Amended

Restated Certificate of Incorporation

of

American Electric Power Company, Inc.

Under Section 807 of the Business Corporation Law

As filed with the Department of State
of the State of New York
on November 5, 1997
and
amended as filed on
February 4, 1999
September 15, 1999
April 28, 2009
April 23, 2015
April 26, 2019
and
May 3, 2022

#2748786v2

COMPOSITE OF AMENDED
RESTATED CERTIFICATE OF INCORPORATION
OF
AMERICAN ELECTRIC POWER COMPANY, INC.
Under Section 807 of the Business Corporation Law

    The undersigned, being respectively the Executive Vice President and Assistant Secretary of American Electric Power Company, Inc., hereby certify that:

    I.     Name. The name of the corporation is AMERICAN ELECTRIC POWER COMPANY, INC. The name under which the corporation was formed is American Gas and Electric Company.

    II.     Date of Filing of Certificate of Incorporation. The certificate of consolidation forming the corporation was filed by the Department of State on February 18, 1925.

    III.    Original Certificate Superseded. The certificate of incorporation, as amended heretofore, is hereby restated without further amendment or change to read as herein set forth in full:
1.The name of the corporation shall be AMERICAN ELECTRIC POWER COMPANY, INC.

2.The purposes for which the corporation is formed are:

    (a)    To acquire, hold and dispose of the stock, bonds, notes, debentures and other securities and obligations (hereinafter called "securities") of any person, firm, association, or corporation, private, public or municipal, or of any body politic, including, without limitation, securities of electric and gas utility companies; and while the owner of such securities, to possess and exercise in respect thereof all the rights, powers and privileges of ownership thereof, including voting power;

    (b)    To aid in any manner permitted by law any person, firm, association or corporation in whose securities the corporation may be interested, directly or indirectly, and to do any other act or thing permitted by law for the preservation, protection, improvement or enhancement of the value of such securities or the property represented thereby or securing the same or owned, held or possessed by such person, firm, association or corporation;

    (c)     To acquire, construct, own, maintain, operate and dispose of real or personal property used or useful in the business of an electric utility company or gas utility company and such other real or personal property as may be permitted by law; and

    (d)    To do everything necessary, proper, advisable or convenient for the accomplishment of the foregoing purposes, and to do all other things incidental to them or connected with them that are not forbidden by law or by this certificate of incorporation.

3.The city and county in which the office of the corporation is to be located are the City

#2748786v2

and County of New York.

    4.1. The aggregate number of shares of all classes of stock that the corporation shall have authority to issue is Six Hundred Fifty Million (650,000,000) shares, which shall be divided into two classes as follows:

    Six Hundred Million (600,000,000) shares of shares of Common Stock, par value of $6.50 per share (“Common Stock”); and

    Fifty Million (50,000,000) shares of Preferred Stock, par value of $0.01 per share (“Preferred Stock”). Preferred Stock may be issued from time to time by the Corporation for such consideration as may be fixed by the Board of Directors of the Corporation (the “Board of Directors”). The Board of Directors is expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for one or more series of Preferred Stock and, with respect to each such series, to fix, without further shareholder approval, the designation of such series, the powers (including voting powers), preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of such series of Preferred Stock and the number of shares of such series, which number the Board of Directors may, except where otherwise provided in the designation of such series, increase (but not above the total number of authorized shares of Preferred Stock) or decrease (but not below the number of shares of such series then outstanding) and as may be permitted by the New York Business Corporation Law. The powers, preferences and relative, participating, optional and other special rights of, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock, if any, may differ from those of any and all other series at any time outstanding. Except as otherwise required by law, holders of any series of Preferred Stock shall be entitled to only such voting rights, if any, as shall be expressly granted thereto by this Amended and Restated Certificate of Incorporation (including any certificate of amendment relating to such series of Preferred Stock).

    4.2. Each share of the Common Stock shall be equal in all respects to every other share of the Common Stock. Every holder of record of the Common Stock shall have one vote for each share of Common Stock held by him or her for the election of directors and upon all other matters. Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of amendment relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of amendment relating to any series of preferred Stock) or pursuant to the New York Business Corporation Law.

    4.3. The corporation may, at any time and from time to time, issue and dispose of any of the authorized and unissued shares of the Common Stock for such consideration as may be fixed by the Board of Directors, subject to any provisions of law then applicable, and subject to the provisions of any resolutions of the stockholders of the corporation relating to the issue and disposition of such shares.

#2748786v2

    4.4. No present or future holder of any shares of the corporation of any class or series, whether heretofore or hereafter issued, shall have any preemptive rights with respect to (1) any shares of the corporation of any class or series, or (2) any other security of the corporation convertible into or carrying rights or options to purchase such shares.

    5. Directors shall hold office after the expiration of their terms until their successors are elected and have qualified. Directors need not be stockholders.

    6. To the fullest extent permitted by the New York Business Corporation Law as it exists on the date hereof or as it may hereafter be amended, no director of the corporation shall be liable to the corporation or its stockholders for damages for any breach of duty as a director. Any repeal or modification of the foregoing sentence by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification.

    7. The Secretary of State of the State of New York is hereby designated as the agent of the corporation upon whom any process in any action or proceeding against it may be served. The address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is: c/o CT Corporation System, 111 Eighth, New York, NY 10011.

    8. The name of the registered agent upon whom and the address of the registered agent at which process against the corporation may be served is: c/o CT Corporation System, 111 Eighth, New York, NY 10011.

***

#2748786v2

American Electric Power Company, Inc.
Stock Unit Accumulation Plan
For Non-Employee Directors
(As Amended Effective June 1, 2022)

Article 1
Purpose

The purposes of this American Electric Power Company, Inc. Stock Unit Accumulation Plan For Non-Employee Directors (the “Plan”) are to enable the Company to attract and retain qualified persons to serve as Non-Employee Directors, to solidify the common interests of its Non-Employee Directors and shareholders by enhancing the equity interest of Non-Employee Directors in the Company, and to encourage the highest level of Non-Employee Director performance by providing such Non-Employee Directors with a proprietary interest in the Company’s performance and progress by providing a portion of the compensation of the Non-Employee Directors in deferred Stock Units.

Article 2
Effective Date

The Plan became effective as of January 1, 1997. The changes made by this amendment and restatement of the Plan were approved by the Board at its meeting held on February 22, 2022 (the “Adoption Date”) and generally take effect as of June 1, 2022.

Article 3
Definitions

Whenever used in the Plan, the following terms shall have the respective meanings set forth below:

3.1“Account” means, with respect to each Participant, the Participant’s separate individual account established and maintained for the exclusive purpose of accounting for the Participant’s awards under the Plan. The Account shall consist of two (2) separate sub-accounts: a Stock Unit Account and an Investment Account.

3.2“Beneficiary” means, with respect to each Participant, the recipient or recipients designated by the Participant who are, upon the Participant’s death, entitled in accordance with the Plan’s terms to receive the benefits to be paid with respect to the Participant.

3.3“Board” means the Board of Directors of the Company.

3.4“Cash Retainer” means the designated annual cash retainer, paid quarterly, for Non-Employee Directors established from time to time by the Board as annual compensation for services rendered, exclusive of compensation for service as a member of any committee designated by the Board or in connection with any meeting of the Board or special

assignment, and exclusive of reimbursements for expenses incurred in performance of service as a Director.

3.5“Code” means the Internal Revenue Code of 1986, as amended.

3.6“Committee” means the Committee on Directors and Corporate Governance of the Board.

3.7“Common Stock” means the common stock, $6.50 par value, of the Company.

3.8“Company” means American Electric Power Company, Inc., a New York corporation, and any successor thereto.

3.9 “Contributions” means contributions made by the Company to a Participant’s Account pursuant to Article 4.

3.10“Director” means an individual who is a member of the Board.

3.11“Equity Retainer” means the designated annual stock retainer, payable quarterly, for Non-Employee Directors established from time to time by the Board as equity compensation for services rendered. An Equity Retainer may be in the form of Stock Units pursuant to Article 4(a) or as an amount credited to the AEP Stock Fund pursuant to Article 4(b).

3.12“First Date Available” means (a) with respect to Specified Directors, the later of (i) the date that is eighteen (18) months following the Adoption Date, or (ii) the date that is six (6) months after the date of the Participant’s Termination; and (b) with respect to all other Participants, the date of the Participant’s Termination.

3.13“Fund” means the same investment options made available to participants in the American Electric Power System Incentive Compensation Deferral Plan, as revised from time to time.

3.14“Investment Account” means that portion of a Participant’s Account attributable to Contributions made by the Company pursuant to Article 4(b).

3.15“Investment Income” means the earnings, gains and losses that would be attributable to the investment of the Investment Account in a Fund or Funds.

3.16“Market Value” means the closing price of the Common Stock, as reported on the NASDAQ Stock Market LLC on the date in question or, if the Common Stock shall not have been traded on such date or if the NASDAQ Stock Market LLC is closed on such date, then the first day prior thereto on which the Common Stock was so traded.

3.17“Non-Employee Director” means any person who serves on the Board and who is not an officer of the Company or employee of its Subsidiaries.

3.18“Participant” means any Non-Employee Director who has received an Equity Retainer award.
2

3.19“Retainer” means Cash Retainer and Equity Retainer.

3.20“Specified Director” means a Participant who is classified as a “specified employee” at the time of Termination in accordance with the policies adopted by the Human Resources Committee of the Board in order to comply with the requirements of Section 409A(a)(2)(B)(i) of the Code and the guidance issued thereunder.

3.21 “Stock Unit” means a measure of value, expressed as a share of Common Stock, credited to a Participant under this Plan. No certificates shall be issued with respect to such Stock Units, but the Company shall maintain a bookkeeping Account in the name of the Participant to which the Stock Units shall relate.

3.22“Subsidiary” means any corporation in which the Company owns directly or indirectly through its Subsidiaries, at least 50 percent of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns at least 50 percent of the combined equity thereof.

3.23“Termination” means retirement from the Board or termination of service as a Director for any other reason.

3

Article 4
Annual Equity Retainer Awards

The Equity Retainer shall be credited quarterly and shall equal the dollar amount of the Equity Retainer payable to the Participant.

(a)For the first twenty quarters of a Participant’s period of service as a Director, the Equity Retainer shall be contributed to the Participant’s Stock Unit Account in the form of Stock Units. The number of such Stock Units to be credited quarterly shall be determined by dividing the amount of the Equity Retainer credited quarterly by the Market Value on such date. The number of whole and fractional Stock Units will be computed to three decimal places.

(b)After the period described in Article 4(a), the Equity Retainer shall be contributed to the AEP Stock Fund maintained in the Participant’s Investment Account.

Article 5
Investments and Adjustments

5.1Stock Unit Account

(a)Dividends. On each dividend payment date with respect to the Common Stock, the Stock Unit Account of a Participant, with Stock Units held pursuant to Article 4(a), shall be credited with an additional number of whole and fractional Stock Units, computed to three decimal places, equal to the product of the dividend per share then payable, multiplied by the number of Stock Units then credited to such Stock Unit Account, divided by the Market Value on the dividend payment date.

(b)Adjustments. The number of Stock Units credited to a Participant’s Stock Unit Account pursuant to Article 4(a) shall be appropriately adjusted for any change in the Common Stock by reason of any merger, reclassification, consolidation, recapitalization, stock dividend, stock split or any similar change affecting the Common Stock.

5.2Investment Account

(a)Investment of Contributions. Contributions added to a Participant’s Investment Account shall be credited to the AEP Stock Fund and credited with earnings as if invested in the AEP Stock Fund.

(b)Changing Investments. A Participant may elect to transfer all or a portion of the amounts credited to the Participant’s Investment Account from any
4

Fund or Funds to any other Fund or Funds by providing notification in accordance with the Plan’s procedures. Such transfers between Funds may be made in any whole percentage or dollar amounts and shall be implemented in accordance with the Plan’s procedures.

(c)Valuation of Account. The balance of each Participant's Investment Account shall be determined daily based upon the fair market value of such Fund or Funds. The fair market value calculation for a Participant's Investment Account shall be made after all distributions, Investment Income and transfers for the day are recorded. A Participant’s Account, as adjusted from time to time, shall continue to be credited with Investment Income until the balance of the Investment Account is zero and no additional Contributions are anticipated for such Participant by the Committee.

Article 6
Payment of Stock Units

6.1Manner of Payment Upon Termination

(a)The Stock Units credited to a Participant’s Stock Unit Account shall paid to the Participant as shares of Common Stock in accordance with the Participant’s effective election as to such Stock Unit Account, and all amounts credited to a Participant’s Investment Account shall paid in cash, to the Participant in one of the following forms:

(i)A single lump sum distribution
(A)as of the First Date Available; or
(B)as of the fifth anniversary of the First Date Available; or

(ii)In five (5) annual installments commencing
(A)as of the First Date Available; or
(B)as of the fifth anniversary of the First Date Available; or

(iii)In ten (10) annual installments commencing as of the First Date Available.

(b)For this purpose, a Participant’s election under Section 6.1 shall not be effective unless all of the following requirements are satisfied.

(i)The election is submitted to the Company in writing in a form determined by the Committee to be acceptable;
5

(ii)The election is submitted timely. For purposes of this Section 6.1(b)(ii), a distribution election will be considered “timely” only if it satisfies the applicable requirements:
(A)As to an election applicable to the Participant’s Stock Unit Account, any of (1), (2) or (3), as may be applicable
(1)Within 30 days after the beginning of his or her initial term of office as a Director; or
(2)During the 2007 Distribution Election Period, but only with regard to the last distribution election form submitted by such Participant during such a period as is applicable to that Participant. For this purpose, the “2007 Distribution Election Period” shall be such period during which one or more Participants are given the opportunity to select among the options set forth in Section 6.1(a), provided that such period shall end no later than December 31, 2007 or, with respect to a particular Participant, such earlier date of such Participant’s Termination; or
(3)At least one year prior to the date of the Participant’s Termination.
(B)As to an election applicable to the Participant’s Investment Account, any of (1), (2) or (3), as may be applicable
(1)No later than the last day of the calendar year immediately preceding the commencement of the twenty-first quarter of the Participant’s period of service as a Director ; or
(2)During the 2012 Distribution Election Period, but only with regard to the last distribution election form submitted by such Participant during such a period as is applicable to that Participant. For this purpose, the “2012 Distribution Election Period” shall be such period during which one or more Participants are given the opportunity to select among the options set forth in Section 6.1(a), provided that such period shall end no later than December 31, 2012; or
(3)At least one year prior to the date of the Participant’s Termination.
6

(iii)Unless submitted under the terms and conditions described in Section 6.1(b)(ii)(A)(1) or (2) or (B)(1) or (2), the election makes a permissible change in the distribution option selected. A change in the distribution option will be considered permissible for purposes of the immediately preceding sentence only if the new distribution election selects an option that results in the deferral of the first scheduled payment by at least 5 years. For purposes of compliance with the rule set forth in Section 409A(a) of the Code (and the regulations issued thereunder), each distribution option described in Section 6.1(a) shall be treated as a single payment as of the first scheduled payment date.

(iv)If the Participant is submitting the election pursuant to paragraph (b)(ii)(A)(2) to change the timing or form of distribution that is then in effect with respect to the Participant’s Career Share Account, the newly selected option may not defer payments that the Participant would have received in 2007 if not for the new distribution election nor cause payments to be made in 2007 if not for the new distribution election.

(c)For purposes of Section 6.1(b), if a Participant’s effective distribution election form with respect to the participant’s Stock Unit Account was submitted using the options that had been made available under the Plan as in effect prior to January 1, 2005 [i.e., as either (A) a single lump-sum payment, or in annual installment payments over not more than ten years; (B) commencing within 10 days after the date of the Participant’s Termination or up to five years after the Participant’s Termination], then:

(i)If the Participant’s Termination occurs prior to the expiration of the 2007 Distribution Election Period last applicable to the Participant, the Participant’s effective distribution election form shall be given full effect; and

(ii)If the Participant’s Termination occurs after the expiration of the 2007 Distribution Election Period last applicable to such Participant, the Participant shall be considered to have elected the corresponding option as set forth in Section 6.1(a).

(d)If a Participant fails to submit an effective distribution election with regard to his Stock Unit Account or Investment Account that satisfies the requirements of Section 6.1(b)(ii)(A)(1) (upon commencement of initial term) or Section 6.1(b)(ii)(A)(2) or (B)(1) or (2) (during an applicable
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Distribution Election Period), as applicable, by the applicable due date, such Participant shall be considered to have elected a distribution of that portion of his or her Account in a single lump sum as of the First Date Available.

6.2Manner of Payment Upon Death

Notwithstanding the Participant’s election, if a Participant dies while amounts remain credited to the Participant’s Account, the balance of the Stock Unit Account will be paid in a lump sum as shares of Common Stock and the balance of the Investment Account will be paid in a lump sum in cash, all as soon as reasonably practicable after the date of the Participant’s death to the Beneficiary or the Participant’s estate, as the case may be.

6.3Determination of Payments in Stock and Cash

The number of shares of Common Stock to be distributed pursuant to Section 6.1 or 6.2 shall be based upon the number of the Stock Units credited to the Participant’s Stock Unit Account determined as of the applicable distribution date and shall be paid to such Participant as soon as administratively practicable thereafter. The amount of cash to be distributed pursuant to Section 6.1 or 6.2 shall be based upon the value of the Funds in the Participant’s Investment Account determined as of the applicable distribution date (or, if that is not a business day, then as of the business day immediately prior thereto) and shall be paid to such Participant as soon as administratively practicable thereafter.

6.4Avoiding Violation of Applicable Law

Notwithstanding any provision of this Article to the contrary, payment to a Participant will be delayed at any time that the Company reasonably anticipates that the making of such payment will violate Federal securities laws or other applicable law; provided however, that any payments so delayed shall be paid at the earliest date at which the Company reasonably anticipates that the making of such payment will not cause such violation.

Article 7
Beneficiary Designation

Each Participant shall be entitled to designate a Beneficiary or Beneficiaries (which may be an entity other than a natural person) who, following the Participant’s death, will be entitled to receive any payments to be made under Section 6.2. At any time, and from time to time, any designation may be changed or cancelled by the Participant without the consent of any Beneficiary. Any designation, change, or cancellation must be by written notice filed with the Company and shall not be effective until received by the Company. Payment shall be made in accordance with the last unrevoked written designation of Beneficiary that has been signed by the Participant and delivered by the Participant to the Company prior to the Participant’s death. If the Participant designates more than one Beneficiary, any payments under Section 6.2 to the Beneficiaries shall be made in equal shares unless the Participant has designated otherwise, in which case the payments shall be made in the proportions designated by the Participant. If no Beneficiary has
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been named by the Participant or if all Beneficiaries predecease the Participant, payment shall be made to the Participant’s estate.

Article 8
Transferability Restrictions

The Plan shall not in any manner be liable for, or subject to, the debts and liabilities of any Participant or Beneficiary. No payee may assign any payment due such party under the Plan. No benefits at any time payable under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, attachment, garnishment, levy, execution, or other legal or equitable process, or encumbrance of any kind.

Article 9
Funding Policy

The Company’s obligations under the Plan shall be totally unfunded so that the Company or any Subsidiary is under merely a contractual duty to make payments when due under the Plan. The promise to pay shall not be represented by notes and shall not be secured in any way.

Article 10
Change in Control

Notwithstanding any provision of this Plan to the contrary, if a “Change in Control” (as defined below) of the Company occurs, amounts credited to a Participant’s Account, whether vested or unvested and forfeitable, will be paid in a lump sum in cash to the Participant not later than 15 days after the date of the Change in Control. For this purpose, the balance in the Stock Unit Account shall be determined by the higher of (a) the average of the Market Value of the Common Stock for the last 20 trading days prior to such Change in Control or (b) if the Change in Control of the Company occurs as a result of a tender or exchange offer or consummation of a corporate transaction, then the highest price paid per share of Common Stock pursuant thereto. Any consideration other than cash forming a part or all of the consideration for the Common Stock to be paid pursuant to the applicable transaction shall be valued at the valuation price thereon determined by the Board.

In addition, the Company shall reimburse a Participant for the legal fees and expenses incurred if the Participant is required to seek to obtain or enforce any right to distribution. In the event that it is determined that such Participant is properly entitled to a cash distribution hereunder, such Participant shall also be entitled to interest thereon at the prime rate of interest as published in The Wall Street Journal plus two percent from the date such distribution should have been made to and including the date it is made. Notwithstanding any provisions of this Plan to the contrary, the provisions of this Article may not be amended by an amendment effected within three years following a Change in Control.
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A “Change in Control” means a change in control of the Company as provided under Section 409A(a)(2)(A)(v) of the Code.

Article 11
Administration

The Plan shall be administered by the Committee. The Committee shall have the authority and discretion to interpret the Plan, and to prescribe, amend and rescind rules and regulations relating to the administration of the Plan, and all such interpretations, rules and regulations shall be conclusive and binding on all Participants. The Committee may employ agents, attorneys, accountants, or other persons (who also may be employees of a Subsidiary) and allocate or delegate to them powers, rights, and duties, all as the Committee may consider necessary or advisable to properly carry out the administration of the Plan.

Article 12
Amendment and Termination

The Company, by resolution duly adopted by the Board, shall have the right, authority and power to alter, amend, modify, revoke, or terminate the Plan; except as provided in Article 10; and provided further, that no amendment or termination of the Plan shall adversely affect the rights of any Participant with respect to any amount then credited to such Participant’s Account, unless the Participant shall consent thereto in writing.

Article 13
Miscellaneous

13.1No Right to Continue as a Director

Nothing in this Plan shall be construed as conferring upon a Participant any right to continue as a member of the Board.

13.2No Interest as a Shareholder

Neither Stock Units nor credits to the AEP Stock Fund shall give a Participant any rights whatsoever with respect to shares of Common Stock.

13.3No Right to Corporate Assets

Nothing in this Plan shall be construed as giving the Participant, the Participant’s designated Beneficiaries or any other person any equity or interest of any kind in the assets of the Company or any Subsidiary or creating a trust of any kind or a fiduciary relationship of any kind between the Company or any Subsidiary and any person. As to any claim for payments due under the
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provisions of the Plan, a Participant, Beneficiary and any other persons having a claim for payments shall be unsecured creditors of the Company or any Subsidiary.

13.4Payment to Legal Representative for Participant

In the event the Committee shall find that a Participant is unable to care for his or her affairs because of illness or accident, the Committee may direct that any payment due the Participant be paid to the Participant’s duly appointed legal representative, and any such payment so made shall be a complete discharge of the liabilities of the Plan.

13.5No Limit on Further Corporate Action

Nothing contained in the Plan shall be construed so as to prevent the Company or any Subsidiary from taking any corporate action which is deemed by the Company or any Subsidiary to be appropriate or in its best interest.

13.6Governing Law

The Plan shall be construed and administered according to the laws of the State of New York to the extent that those laws are not preempted by the laws of the United States of America.

13.7Headings

The headings of articles, sections, subsections, paragraphs or other parts of the Plan are for convenience of reference only and do not define, limit, construe, or otherwise affect its contents.

Signed this 23rd day of February, 2022.

AMERICAN ELECTRIC POWER COMPANY, INC.

By /s/ David C. House
    David C. House, Assistant Secretary
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AMERICAN ELECTRIC POWER SYSTEM
SUPPLEMENTAL RETIREMENT SAVINGS PLAN

(As Amended and Restated Effective July 1, 2021)

ARTICLE I

PURPOSES AND EFFECTIVE DATE

    1.1 The American Electric Power System Supplemental Retirement Savings Plan was established to provide to eligible employees a tax-deferred savings opportunity otherwise not available to them under the terms of the American Electric Power System Retirement Savings Plan because of contribution restrictions imposed by the Internal Revenue Code.

    1.2 The original effective date of the American Electric Power System Supplemental Retirement Savings Plan is January 1, 1994. The Plan was most recently amended and restated effective January 1, 2011 pursuant to a document that was signed on December 15, 2010, and then subsequently amended by documents dated December 4, 2014 and December 30, 2019. Except as otherwise specified herein, the effective date of this Amended and Restated American Electric Power System Supplemental Retirement Savings Plan is July 1, 2021. This amended and restated Plan continues to apply to all deferrals of compensation made under the Plan, unless specifically provided otherwise herein.

ARTICLE II

DEFINITIONS

    2.1 “Account” means the separate memo account established and maintained by the Company or the recordkeeper employed by the Company to record Contributions allocated to a Participant's Account and to record any related Investment Income on the Fund or Funds selected by the Participant. The portion of the Account attributable to Compensation earned and vested prior to January 1, 2005 (excluding, for this purpose incentive compensation attributable to 2004 that was subject to discretionary adjustment and first available for payment subsequent to December 31, 2004) shall be referred to as the Participant’s “Legacy SRSP Account Balance.” The portion of the Account attributable to Compensation other than that described in the immediately preceding sentence shall be referred to as the Participant’s “Active SRSP Account Balance.”

    2.2 “Applicable Federal Rate” means 120% of the applicable federal long-term rate, with monthly compounding (as prescribed under Section 1274(d) of the Code), published for the December immediately prior to the Plan Year.

    2.3 “Claims Reviewer” means the person or committee designated by American Electric Power Service Corporation (or by a duly authorized person) as responsible for the review of claims for benefits under the Plan in accordance with Section 7.1. Until changed, the Claims Reviewer shall be the Director – Compensation and Executive Benefits.

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2.4 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

    2.5 “Committee” means the committee designated by American Electric Power Service Corporation (or by a duly authorized person) as responsible for the administration of the Plan.

2.6 “Company” means the American Electric Power Service Corporation and its subsidiaries and affiliates.

    2.7 “Company Contributions” means the matching contributions made by the Company pursuant to section 3.2.

    2.8 “Compensation” means a Participant's regular straight time pay, or base salary or wage including any base wage or salary lump sum payment made as part of the Company’s regular compensation program that may be paid in lieu of or in addition to a base wage or salary increase, salary or wage reductions made pursuant to sections 125, 402(e)(3) or 132(f) of the Code and contributions to this Plan, sick pay and salary continuation, overtime pay, shift and Sunday premium payments, safety focus payouts and incentive compensation paid pursuant to the terms of annual incentive compensation plans provided that Compensation shall not include (i) annual incentive compensation attributable to years ending on or before December 31, 2019 in excess of a Plan Year maximum of two million dollars ($2,000,000), (ii) non-annual bonuses (such as but not limited to project bonuses and sign-on bonuses), (iii) severance pay, (iv) relocation payments, (v) employee referral pay, (vi) meal allowance pay, (vii) commissions; or (viii) any other form of additional compensation that is not considered to be part of base salary, base wage, overtime pay or annual incentive compensation. For this purpose, safety focus payouts shall be considered paid pursuant to the terms of an annual incentive plan, although such payouts may be determined and paid on a quarterly basis. Notwithstanding anything stated in the preceding sentences to the contrary, Compensation shall be determined after any deferral thereof pursuant to the American Electric Power System Stock Ownership Requirement Plan, as amended, or pursuant to a pay reduction agreement under the American Electric Power System Incentive Compensation Deferral Plan, as amended.

    2.9 “Contributions” means, as the context may require, Participant Contributions and Company Contributions.

    2.10 “Corporation” means the American Electric Power Company, Inc., a New York corporation.

    2.11 “Eligible Employee” means any employee of the Company who is designated by the Company as eligible to participate in this Plan, provided that such employees are limited to a select group of management or highly compensated employees. Individuals not directly compensated by the Company or who are not treated by the Company as an active employee shall not be considered Eligible Employees.

    2.12 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

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2.13 “Executive Officer” means Participant who, with respect to AEP, is subject to the disclosure requirements set forth in Section 16 of the Securities Exchange Act of 1934, as amended.

2.14 “First Date Available” or “FDA” means (a) with respect to Key Employees, the last day of the month coincident with or next following the date that is six (6) months after the date of the Participant’s or Former Participant’s Termination; and (b) with respect to all other Participants and Former Participants, the last day of the month coincident with or next following the date that is one (1) month after the date of the Participant’s Termination; provided, however, that the FDA with respect to an Executive Officer shall be no earlier than the December 31 of the calendar year of such Executive Officer’s Termination.

    2.15 “Former Participant” means a Participant whose employment has Terminated or a Participant who is no longer an Eligible Employee, but whose Account has a balance greater than zero.

    2.16 “Fund” means, except as the Committee may otherwise specify, the Interest Bearing Account and the investment options made available to participants in the Savings Plan, as revised from time to time. The investment options under the Savings Plan were revised effective on or about July 5, 2006 in connection with a transition of the recordkeeping and trustee services from Fidelity Management Trust Company to affiliates of JP Morgan Chase Bank, NA. The investments made available through the self-directed brokerage account option thereupon being offered under the Savings Plan shall not be available to Participants in this Plan.

    2.17 “Investment Income” means with respect to Participant Contributions and Company Contributions the earnings, gains and losses that would be attributable to the investment of such Contributions in a Fund or Funds.    

    2.18 “Interest Bearing Account” means an investment option to be made available to Participants in this Plan in which the Contributions attributed to this option are credited with interest at the Applicable Federal Rate.

    2.19 “Key Employee” means a Participant who is classified as a “specified employee” at the time of Termination in accordance with the policies adopted by the Committee in order to comply with the requirements of Section 409A(a)(2)(B)(i) of the Code and the guidance issued thereunder.

    2.20 “Next Date Available” or “NDA” means the June 30 of the calendar year immediately following the calendar year in which falls the Participant’s Termination.

    2.21 “Participant” means an Eligible Employee who elects to defer part or all of his or her Incentive Compensation. Except to the extent otherwise specified in this Plan, references to a Participant shall be considered to include a Former Participant.

    2.22 “Participant Contributions” means contributions made by the Participant pursuant to an executed Pay Reduction Agreement subject to the Participant Contribution limits contained in Article III.

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2.23 “Pay Reduction Agreement” means an agreement between the Company and the Participant in which the Participant irrevocably elects to reduce his or her Compensation for the Plan Year and the Company agrees to treat the amount of the Compensation reduction as a Participant Contribution to this Plan.

2.24 “Plan” means this American Electric Power System Supplemental Retirement Savings Plan, as amended from time to time.

    2.25 “Plan Year” means the twelve-month period commencing each January 1 and ending the following December 31.

    2.26 “Savings Plan” means the American Electric Power System Retirement Savings Plan, a plan intended to be qualified under section 401(a) of the Code, as amended from time to time.

    2.27 “Termination” means termination of employment with the Company and its subsidiaries and affiliates for any reason; provided that effective with respect to Participants whose employment terminates on or after January 1, 2005, determinations as to the circumstances that will be considered a Termination (including a disability and leave of absence) shall be made in a manner consistent with the written policies adopted by the HR Committee from time to time to the extent such policies are consistent with the requirements imposed under Code 409A(a)(2)(A)(i).

    2.28 “2005 Distribution Election Period” means the period or periods designated by the Committee during which Participants (or Former Participants) are given the opportunity to select among the distribution options set forth in Article V, provided that any such period shall end no later than December 31, 2005.

2.29 “2006 Distribution Election Period” means the period or periods designated by the Committee during which Participants (or Former Participants) are given the opportunity to select among the distribution options set forth in Article V, provided that any such period shall end no later than December 31, 2006.

2.30 “2010 Annual Incentive Compensation” means annual incentive compensation earned from the Company by an Eligible Employee for the 2010 calendar year that would become payable (if not deferred) no later than March 15, 2011, determined after any deferral thereof pursuant to the American Electric Power System Stock Ownership Requirement Plan, as amended, or pursuant to a pay reduction agreement under the American Electric Power System Incentive Compensation Deferral Plan, as amended.

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ARTICLE III

PARTICIPATION

    3.1 An Eligible Employee shall become a Participant by timely submitting a Pay Reduction Agreement during an applicable deferral election period to defer part of the Eligible Employee’s Compensation to which such election relates. Pay Reduction Agreements submitted for Plan Years on or after January 1, 2011 shall not apply with respect to Compensation earned on or after January 1, 2011 except to the extent of such Compensation received by the Eligible Employee that exceeds the amount of the limit imposed by Code Section 401(a)(17) on annual compensation taken into account for purposes of tax qualified retirement plans with respect to such Plan Year; provided, however, that this limitation shall not apply with respect to 2010 Annual Incentive Compensation. The Pay Reduction Agreement shall be in such form as may reasonably be required by the Committee and shall be executed at the time and in the manner prescribed by the Committee.

    3.2 For purposes of Section 3.1, the election period during which Compensation may be subject to an effective deferral election shall be determined as follows:

    (a)    To the extent that the Compensation is “performance-based compensation” (within the meaning of Section 409A(a)(4)(B)(iii) of the Code) that is based on services performed over a period of at least 12 months, the election period shall end no later than six (6) months before the end of the performance period.

    (b)    To the extent that the Compensation is not described in paragraph (a), the election period shall end on or before December 31 of the calendar year prior to the year in which the services on which the Compensation is based are to be performed.

    (c)    Notwithstanding (a) and (b), in the case of the first year in which an Eligible Employee becomes eligible to participate in the Plan, and the Participant has not previously become a Participant in another plan that is required to be aggregated with this Plan under Treasury Regulation Section 1.409A-1(c)(2) or other guidance of the Code, the election period shall end within 30 days after the date such Eligible Employee became eligible to participate and such election shall apply only with respect to Compensation paid for services performed subsequent to the election.

No election shall be effective to defer any Compensation that would otherwise be paid to the Participant before the period for which the Pay Reduction Agreement is effective.

Notwithstanding the foregoing, the deferral election period for an Eligible Employee identified by the Company as having an inadequate opportunity to enroll in the Plan with regard to the 2005 calendar year shall be extended into January 2005, provided that such election shall be applied only to Compensation that had not been paid nor become payable at the time the election is submitted.

    3.3 If a deferral election is not made by the end of the election period prescribed by the Company with regard to certain Compensation that may be earned by an Eligible Employee, no portion of such Compensation shall be deferred for such Eligible Employee.

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3.4 Participant Contributions made by a Participant pursuant to an executed Pay Reduction Agreement shall be made by payroll deductions from such Compensation payable to the Participant to which the Pay Reduction Agreement relates. Participant Contributions are to be made in multiples of one (1) whole percentage of Compensation, not to exceed 50 percent of Compensation for any pay date that is eligible for deferral pursuant to Section 3.1 (or 20% of 2010 Annual Incentive Compensation).

    3.5 Subject to the limitation contained in section 3.6,

(a)    Effective for Plan Years ending on or before December 31, 2008, the Company shall credit to the Plan on behalf of each Participant an amount equal to 75% of the amount contributed to the Plan by the Participant, not in excess of 6% of a Participant's Compensation as of each pay date.

(b)    Effective for Plan Years beginning on or after January 1, 2009, the Company shall credit to the Plan on behalf of each Participant an amount equal to

(i)    100% of the amount contributed to the Plan by the Participant, not in excess of 1% of a Participant's Compensation as of each pay date, plus

(ii)    70% of the amount in excess of 1%, but not in excess of 6%, of such Participant's Compensation, contributed to the Plan by such Participant as of each pay date.

3.6 The amount of Company Contributions credited to the Plan on behalf of a Participant in combination with the contributions made by the Company to the Savings Plan on behalf of the Participant as of each pay date during a Plan Year, shall, in the aggregate be equal to the lesser of (a) (i) 100% of the amount contributed to this Plan and the Savings Plan by the Participant, not in excess of 1% of a Participant's Compensation as of that pay date, plus (ii) 70% of the amount in excess of 1%, but not in excess of 6%, of such Participant's Compensation, contributed to this Plan and the Savings Plan by such Participant as of such pay date, or (b) 4.5% of the Participant's Compensation paid as of that pay date. If the aggregate contributions exceed the lesser limitation described in the preceding sentence, the Company Contributions credited to the Participant's Account under this Plan shall be reduced until the aggregate Company Contributions made under both the Savings Plan and this Plan do not exceed the limitation.

3.7 Participant Contributions and Company Contributions shall be credited to the Participant’s Account as follows:

(a)    Contributions related to Compensation that had been earned and vested prior to January 1, 2005 have been credited to the Participant’s Legacy SRSP Account Balance. No additional Contributions shall be credited to a Legacy SRSP Account Balance.

(b)    Contributions related to Compensation that is earned or vested on or after January 1, 2005 shall be credited to the Participant’s Active SRSP Account Balance. This shall include the Contributions under this Plan relating to incentive compensation attributable to 2004 that was subject to discretionary adjustment and first available for payment subsequent to December 31, 2004.

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3.8    The Termination (or any subsequent re-employment) of a Participant after such Participant has submitted an election to defer any Compensation shall not affect the terms of such election with respect to the Compensation to which such election relates, subject, however, to the provisions for the distribution of any such deferred Compensation pursuant to the provisions of Article V.

ARTICLE IV

INVESTMENT OF CONTRIBUTIONS

    4.1 Participant Contributions and Company Contributions (without regard to whether such Contributions have been allocated to such Participant’s Legacy SRSP Account Balance or Active SRSP Account Balance) shall be credited with earnings as if invested in the Funds selected by the Participant. To the extent the Participant fails to select Funds for the investment of Contributions under the Plan, the Participant shall be deemed to have selected the Interest Bearing Account. The Participant may change the selected Funds by providing notification in accordance with the Plan’s procedures. Any change in the Funds selected by the Participant shall be implemented in accordance with the Plan’s procedures.

    4.2 A Participant may elect to transfer all or a portion of the amounts credited to his Account from any Fund or Funds to any other Fund or Funds by providing notification in accordance with the Plan’s procedures. Such transfers between Funds may be made in any whole percentage or dollar amounts and shall be implemented in accordance with the Plan’s procedures.

    4.3 The amount credited to each Participant's Account shall be determined daily based upon the fair market value of the Fund or Funds to which that Account is allocated. The fair market value calculation for a Participant's Account shall be made after all Contributions, withdrawals, distributions, Investment Income and transfers for the day are recorded. A Participant’s Account, as adjusted from time to time, shall continue to be credited with Investment Income until the balance of the Account is zero and the Committee anticipates no additional Contributions from such Participant or, effective for Participants whose Termination is on or after July 1, 2021, 2021, Investment Income attributable to dividends that had been recorded but not paid.

    4.4 The Plan is an unfunded non-qualified deferred compensation plan and therefore the Contributions credited to a Participant's Account and the investment of those Contributions in the Fund or Funds selected by the Participant are memo accounts that represent general, unsecured liabilities of the Company payable exclusively out of the general assets of the Company. In the event that the Company becomes insolvent, the Participants shall be considered as general unsecured creditors of the Company. The Participant’s rights to benefits under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge encumbrance, attachment or garnishment by creditors of any Participant or any beneficiary.

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ARTICLE V

DISTRIBUTIONS

5.1    Upon a Participant’s termination of employment with the Company and its subsidiaries and affiliates for any reason, the Company shall cause the Participant to be paid the full amount credited to his or her Account in accordance with the following rules:

(a)    Legacy SRSP Account Balance. Amounts that are credited to the Participant's Legacy SRSP Account Balance:

(1)    Shall be distributed to the Participant in one of the following optional forms as selected by the Participant:

(A)    A single lump-sum payment, or

(B)    In annual installment payments over not less than two nor more than ten years.

(2)    Shall be paid in the form of distribution selected by the Participant pursuant to paragraph (1) shall commence within 60 days after the date elected by the Participant on an effective distribution election form. Such date elected by the Participant shall be either (A) the date of the Participant’s Termination (provided, however, if the Participant was an Executive Officer at the time of his or her Termination, the earliest commencement date (for account valuation purposes) shall be December 31 of the year of such Executive Officer’s Termination) or (2) the first, second, third, fourth or fifth anniversary of the Participant’s Termination, as selected by the Participant.

Each Participant shall select the form of distribution [as set forth in paragraph (1)] and benefit commencement date [as set forth in paragraph (2)] with regard to the amounts that are credited to the Participant's Legacy SRSP Account Balance when the Participant first elects to participate in the Plan. The Participant may amend his or her distribution election with regard to amounts that are credited to the Participant's Legacy SRSP Account Balance at any time prior to the date that is at least twelve (12) months prior to the Participant's Termination by submitting a distribution election form in accordance with the Plan’s procedures. If the Participant has not submitted an effective distribution election with regard to amounts that are credited to the Participant's Legacy SRSP Account Balance at the time of his Termination, the distribution of the amounts that are credited to the Participant's Legacy SRSP Account Balance shall be in the form of a single lump sum payment made within 60 days after the Participant's Termination. Notwithstanding the preceding sentence, distribution to a Participant who was an Executive Officer at the time of his Termination, but who has not submitted an effective distribution election with regard to amounts that are credited to the Participant's Legacy SRSP Account Balance at the time of his Termination, shall be in the form of a single lump sum payment within 60 days after the December 31 of the calendar year of the Participant’s Termination.

    (b)    Active SRSP Account Balance. With regard to the Participant’s Active SRSP Account Balance the following rules shall apply:

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(1)    Form of Distribution. The Company shall cause the Participant to be paid the full amount credited to his or her Active SRSP Account Balance in accordance with his or her effective election in one of the following forms:

(A)    A single lump sum distribution

(i)    as of the First Date Available; or

(ii)    as of the Next Date Available; or

(iii)    as of the fifth anniversary of the First Date Available; or

(iv)    as of the fifth anniversary of the Next Date Available; or

(B)    In five (5) annual installments commencing

(i)    as of the First Date Available; or

(ii)    as of the Next Date Available; or

(iii)    as of the fifth anniversary of the First Date Available; or

(iv)    as of the fifth anniversary of the Next Date Available; or

(C)    In ten (10) annual installments commencing.

(i)    as of the First Date Available; or

(ii)    as of the Next Date Available; or

(iii)     as of the fifth anniversary of the First Date Available; or

(iv)     as of the fifth anniversary of the Next Date Available..

(2)    Effective Election. For this purpose, a Participant’s election with respect to the distribution of his or her Active SRSP Account Balance shall not be effective unless all of the following requirements are satisfied.

(A)    The election is submitted to the Company in writing in a form determined by the Committee to be acceptable;

(B)    The election is submitted timely. For purposes of this paragraph, a distribution election will be considered “timely” only if it is submitted prior to the Participant’s Termination and it satisfies the requirements of (i), (ii), (iii) or (iv), below, as may be applicable:

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(i)    Submitted within the applicable election period (as determined in accordance with Section 3.2), but only if the distribution election is submitted in connection with the Participant’s initial deferral election under this Plan; or

(ii)    Submitted during the 2005 Distribution Election Period, but only with regard to the first distribution election form submitted by such Participant during that period; or

(iii)    Submitted during the 2006 Distribution Election Period by a Participant who then has an Active SRSP Account Balance but who was not an Eligible Employee for purposes of a deferral election for 2006 by reason of the change in the definition of Eligible Employee set forth in Section 2.11, but only with regard to the last distribution election form submitted by such Participant during that period; or

(iv)    If the Participant is submitting the election to change the timing or form of distribution that is then in effect with respect to the Participant’s Active SRSP Account Balance other than an effective distribution election submitted as part of the 2005 Distribution Election Period or 2006 Distribution Election Period, such election must be submitted at least one year prior to the date of the Participant’s Termination.

(C)    If the Participant is submitting the election pursuant to paragraph (b)(2)(B)(iv) to change the timing or form of distribution that is then in effect with respect to the Participant’s Active SRSP Account Balance (i.e., the Participant is not submitting an election with his initial deferral election [(B)(i)] nor during the 2005 or 2006 Distribution Election Period [(B)(ii) & (B)(iii)], the newly selected option must result in the further deferral of the first scheduled payment from the Participant’s Active Account balance by at least 5 years. For purposes of compliance with the rule set forth in Section 409A(a) of the Code (and the regulations issued thereunder), each distribution option described in Section 5.1(b)(1) shall be treated as a single payment as of the first scheduled payment date. The requirement included in the prior plan document that the newly elected option not result in the acceleration of any scheduled payment under the replaced option shall be disregarded.

(D)    If the Participant is submitting the election pursuant to paragraph (b)(2)(B)(iii) to change the timing or form of distribution that is then in effect with respect to the Participant’s Active SRSP Account Balance, the newly selected option may not defer payments that the Participant would have received in 2006 if not for the new distribution election nor cause payments to be made in 2006 if not for the new distribution election.

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(3)    If a Participant fails to submit an effective distribution election with regard to his Active SRSP Account Balance that satisfies the requirements of Section 5.1(b)(2)(B)(i) (with his timely initial deferral election) or Section 5.1(b)(2)(B)(ii) (during the 2005 Distribution Election Period) or Section 5.1(b)(2)(B)(iii) (during the 2006 Distribution Election Period), as applicable, by the date of such initial deferral election or the last day of the 2005 or 2006 Distribution Election Period, respectively, as applicable, such Participant shall be considered to have elected a distribution of his or her Active SRSP Account Balance in a single lump sum as of the First Date Available.

(4)    Notwithstanding any other provision of this Plan to the contrary, if a Participant whose Termination occurs on or before June 30, 2005 fails to submit an effective distribution election with regard to his Active SRSP Account Balance that satisfies the requirements of this Section 5.1(b), the deferral election with respect to Contributions credited to such Participant’s Active SRSP Account Balance shall terminated and the entire balance of such Participant’s Active SRSP Account Balance shall be distributed to such Participant in a single lump sum as soon as administratively practicable after the Termination of such Participant.

5.2    (a)    For purposes of this Article, the amount to be distributed to a Participant shall be based upon the value of such individual’s Legacy SRSP Account Balance or Active SRSP Account Balance (as applicable) determined as of the applicable distribution date (or, if that is not a business day, then as of the immediately preceding business day) and shall be paid to such individual as soon as administratively practicable thereafter.

    (b)    Notwithstanding any other provision of this Article,

(1)    if the Participant’s Account is $10,000 or less on the Participant’s First Date Available (determined without regard to any delay by reason of a Participant’s being an Executive Officer), the Committee may require that the full value of the Participant’s Account be distributed as of the First Date Available (determined without regard to any delay by reason of a Participant’s being an Executive Officer) in a single, lump sum distribution regardless of the form elected by such Participant, provided that such payment is consistent with the limited cash-out right described in Treasury Regulation Section 1.409A-3(j)(4)(v) or other guidance of the Code in that the payment results in the termination and liquidation of the entirety of the Participant’s interest under each nonqualified deferred compensation plan (including all agreements, methods, programs, or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan under Treasury Regulation 1.409A-1(c)(2) or other guidance of the Code) that is associated with this Plan; and the total payment with respect to any such single nonqualified deferred compensation plan is not greater than the applicable dollar amount under Code Section 402(g)(1)(B). Provided, however,

(2)    payment to a Participant under any provision of this Plan will be delayed at any time that the Committee reasonably anticipates that the making of such payment will violate Federal securities laws or other applicable law; provided however, that any payments so
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delayed shall be paid at the earliest date at which the Committee reasonably anticipates that the making of such payment will not cause such violation.

5.3 If an annual distribution is selected, the amount to be distributed in any one-year shall be determined by dividing the Participant’s Legacy SRSP Account Balance or Active SRSP Account Balance (as appropriate) by the number of years remaining in the elected distribution period. The Participant electing annual distributions shall have the right to direct changes in the investment of the Account in a Fund or Funds in accordance with Article IV until the amount credited to the Account is reduced to zero.

ARTICLE VI

BENEFICIARIES

    6.1 Each Participant may designate a beneficiary or beneficiaries who shall receive the balance of the Participant's Account if the Participant dies prior to the complete distribution of the Participant's Account. Any designation, or change or rescission of a beneficiary designation shall be made by the Participant’s completion, signature and submission to the Committee of the appropriate beneficiary form prescribed by the Committee. A beneficiary form shall take effect as of the date the form is signed provided that the Committee receives it before taking any action or making any payment to another beneficiary named in accordance with this Plan and any procedures implemented by the Committee. If any payment is made or other action is taken before a beneficiary form is received by the Committee, any changes made on a form received thereafter will not be given any effect. If a Participant fails to designate a beneficiary, or if none of the beneficiaries named by the Participant survive the Participant, the Participant’s Account will be paid to the Participant’s estate. Unless clearly specified otherwise in an applicable court order presented to the Committee prior to the Participant’s death, the designation of a Participant’s spouse as a beneficiary shall be considered automatically revoked as to that spouse upon the legal termination of the Participant’s marriage to that spouse.

    6.2 Distribution to a Participant’s beneficiary shall be in the form of a single lump-sum payment within 60 days after the Committee makes a final determination as to the beneficiary or beneficiaries entitled to receive such distribution.

ARTICLE VII

CLAIMS PROCEDURE

    7.1 The following procedures shall apply with respect to claims for benefits under the Plan.

(a)    Any Participant or beneficiary who believes he or she is entitled to receive a distribution under the Plan which he or she did not receive or that amounts credited to his or her Account are inaccurate, may file a written claim signed by the Participant, beneficiary or authorized representative with the Claims Reviewer, specifying the basis for the claim. The Claims Reviewer shall provide a claimant with written or electronic notification of its determination on the claim within ninety days after
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such claim was filed; provided, however, if the Claims Reviewer determines special circumstances require an extension of time for processing the claim, the claimant shall receive within the initial ninety-day period a written notice of the extension for a period of up to ninety days from the end of the initial ninety day period. The extension notice shall indicate the special circumstances requiring the extension and the date by which the Plan expects to render the benefit determination.

(b)    If the Claims Reviewer renders an adverse benefit determination under paragraph (a), the notification to the claimant shall set forth, in a manner calculated to be understood by the claimant:

(1)    the specific reasons for the denial of the claim;

(2)    specific reference to the provisions of the Plan upon which the denial of the claim was based;

(3)    a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and

(4)    an explanation of the review procedure specified in Section 7.2, and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of the Employee Retirement Income Security Act of 1974, as amended, following an adverse benefit determination on review.

    7.2 The following procedures shall apply with respect to the review on appeal of an adverse determination on a claim for benefits under the Plan.

(a)    Within sixty days after the receipt by the claimant of an adverse benefit determination, the claimant may appeal such denial by filing with the Committee a written request for a review of the claim. If such an appeal is filed within the sixty day period, the Committee, or a duly appointed representative of the Committee, shall conduct a full and fair review of such claim that takes into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The claimant shall be entitled to submit written comments, documents, records and other information relating to the claim for benefits and shall be provided, upon request and free of charge, reasonable access to, and copies of all documents, records and other information relevant to the claimant’s claim for benefits. If the claimant requests a hearing on the claim and the Committee concludes such a hearing is advisable and schedules such a hearing, the claimant shall have the opportunity to present the claimant’s case in person or by an authorized representative at such hearing.

(b)    The claimant shall be notified of the Committee’s benefit determination on review within sixty days after receipt of the claimant’s request for review, unless the Committee determines that special circumstances require an extension of time for processing the review. If the Committee determines that such an extension is required, written notice of the extension shall be furnished to the claimant within the initial sixty-day period. Any such extension shall not exceed a period of sixty days from the end of the initial period. The extension notice shall indicate the special circumstances requiring the extension and the date by which the Plan expects to render the benefit determination.

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(c)    The Committee shall provide a claimant with written or electronic notification of the Plan’s benefit determination on review. The determination of the Committee shall be final and binding on all interested parties. Any adverse benefit determination on review shall set forth, in a manner calculated to be understood by the claimant:

(1)    the specific reason(s) for the adverse determination;

(2)    reference to the specific provisions of the Plan on which the determination was based;

(3)    a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits; and

(4)    a statement of the claimant’s right to bring an action under Section 502(a) of ERISA.

ARTICLE VIII

ADMINISTRATION

    8.1 The Committee shall have full discretionary power and authority (i) to administer and interpret the terms and conditions of the Plan; (ii) to establish reasonable procedures with which Participants must comply to exercise any right or privilege established hereunder; and (iii) to be permitted to delegate its responsibilities or duties hereunder to any person or entity. The rights and duties of the Participants and all other persons and entities claiming an interest under the Plan shall be subject to, and bound by, actions taken by or in connection with the exercise of the powers and authority granted under this Article.

    8.2 The Committee may employ agents, attorneys, accountants, or other persons and allocate or delegate to them powers, rights, and duties all as the Committee may consider necessary or advisable to properly carry out the administration of the Plan.

    8.3 The Company shall maintain, or cause to be maintained, records showing the individual balances of each Participant's Account. Statements setting forth the value of the amount credited to the Participant's Account as of a particular date shall be made available to each Participant no less often than quarterly. The maintenance of the Account records and the distribution of statements may be delegated to a recordkeeper by either the Company or the Committee.

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ARTICLE IX

AMENDMENT OR TERMINATION

    The Company intends to continue the Plan indefinitely but reserves the right, in its sole discretion, to modify the Plan from time to time, or to terminate the Plan entirely or to direct the permanent discontinuance or temporary suspension of Contributions under the Plan. Notwithstanding the foregoing provisions of this Article, no modification, termination, discontinuance or suspension shall reduce the benefits accrued for the benefit of any Participant or beneficiary under the Plan as of the date of such modification, termination, discontinuance or suspension.

ARTICLE X

MISCELLANEOUS

    10.1 Nothing in the Plan shall (a) interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time; nor (b) confer upon a Participant any right to continue in the employ of the Company.

    10.2 In the event the Committee, in its sole discretion, shall find that a Participant or beneficiary is unable to care for his or her affairs because of illness or accident, the Committee may direct that any payment due the Participant or the beneficiary be paid to the duly appointed personal representative of the Participant or beneficiary, and any such payment so made shall be a complete discharge of the liabilities of the Plan and the Company with respect to such Participant or beneficiary.

10.3 Each Participant agrees that as a condition of participation in the Plan, the Company may withhold from any distribution hereunder all amounts determined by the Company as required by law or otherwise as determined by the Company to be then due and payable by the Participant or his beneficiary to the Company.

    10.4 The Company intends the following with respect to this Plan: (1) Section 451(a) of the Code would apply to the Participant's recognition of gross income as a result of participation herein; (2) the Participants will not recognize gross income as a result of participation in the Plan unless and until and then only to the extent that distributions are received; (3) the Company will not receive a deduction for amount credited to any Account unless and until and then only to the extent that amounts are actually distributed; (4) the provisions of Parts 2, 3, and 4 of Subtitle B of Title I of ERISA shall not be applicable; and (5) the design and administration of the Plan are intended to comply with the requirements of Section 409A of the Code, to the extent such section is effective and applicable to amounts deferred hereunder. However, no Eligible Employee, Participant, Former Participant, beneficiary or any other person shall have any recourse against the Corporation, the Company, the Committee or any of their affiliates, employees, agents, successors, assigns or other representatives if any of those conditions are determined not to be satisfied.

    10.5 The Plan shall be construed and administered according to the applicable provisions of ERISA and the laws of the State of Ohio.

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10.6 Neither a Participant nor any other person shall have any right to sell, assign, transfer, pledge, mortgage or otherwise encumber, transfer, alienate or convey in advance of actual receipt, the amounts, if any, payable under this Plan. Such amounts payable, or any part thereof, and all rights to such amounts payable are not assignable and are not transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person. Additionally, no part of any amounts payable shall, prior to actual payment, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise, except that if necessary to comply with a “qualified domestic relations order,” as defined in ERISA Section 206(d), pursuant to which a court has determined that a spouse or former spouse of a Participant has an interest in the Participant’s benefits under the Plan, the Committee shall distribute the spouse’s or former spouse’s interest in the Participant’s benefits under the Plan to such spouse or former spouse in accordance with the Participant’s election under this Plan as to the time and form of payment.

American Electric Power Service Corporation has caused this amendment and restatement of the American Electric Power System Supplemental Retirement Savings Plan to be signed as of the date set forth below.

AMERICAN ELECTRIC POWER SERVICE CORPORATION

By: /s/ Phillip R. Ulrich
Phillip R. Ulrich, SVP & Chief Human Resources Officer    Date October 6, 2021

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RESTRICTED STOCK UNIT AWARD AGREEMENT	

AEP SYSTEM LONG-TERM INCENTIVE PLAN

This award agreement is being furnished to you as a participant in the American Electric Power System 2015 Long-Term Incentive Plan (LTIP) under which the restricted stock units described herein are awarded.

[Participant Name] is hereby granted the number of restricted stock units listed below:

Number of Restricted Stock Units Granted:    <<# Shares Granted>>
Grant Date:    [Grant Date]
Effective Date:    January 1, 2022

						
Vesting Schedule	
Vesting Date
February 21, 2023 (“First Vesting Date”)
February 21, 2024
February 21, 2025	Percentage of Granted Units
33 1/3%
33 1/3%
33 1/3%	

Restricted Stock Units (“RSUs”)
This award agreement entitles you to the aggregate number of RSUs specified above ("Granted RSUs") each of which, if and when it vests, will convert to a single Share of AEP's Common Stock. Upon vesting, RSUs are converted to AEP Common Stock and delivered to you in accordance with the other terms and provisions of this Agreement. RSUs have no voting rights and are not entitled to receive any dividend declared on AEP Common Stock. However, RSUs are entitled to additional RSUs (“Dividend Equivalent RSUs”) of an equal value to dividends paid on AEP Common Stock, as described below.

Dividend Equivalent RSUs
Beginning after the later of the Effective Date or the Grant Date, additional Dividend Equivalent RSUs with a value equal to the value of dividends paid on AEP Common Stock are credited on outstanding (un-canceled) RSUs. The number of additional RSUs awarded due to dividends is calculated as the value of the dividend for a number of Shares of AEP Common Stock equal to the number of outstanding RSUs on the dividend payment date divided by the closing price of AEP Common Stock on the dividend payment date.

No additional RSUs will be awarded as Dividend Equivalent RSUs after conversion of the related RSUs into Shares of AEP Common Stock. See Conversion of Vested Stock Units and Delivery of Shares, below.

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Vesting of Granted RSUs
Your Granted RSUs shall vest, subject to your continuous AEP employment through the vesting date, in accordance with the above vesting schedule, except as otherwise provided for in this Agreement. See also the sections of this award agreement entitled Vesting of Dividend Equivalent RSUs and Accelerated Vesting of RSUs below.

Vesting of Dividend Equivalent RSUs
Dividend Equivalent RSUs vest at the same time as the Granted RSUs to which they relate vest. Also see the sections of this award agreement entitled Vesting of Granted RSUs above and Accelerated Vesting of RSUs below.

Accelerated Vesting of RSUs
RSUs may vest earlier than the dates shown in the Vesting Schedule, above, as follows:

Prorated Vesting for Severance: If you qualify for a Severance Date, as defined below, a fractional portion of your Granted RSUs (and related Dividend Equivalent RSUs) shall vest as of your Severance Date. The portion of your Granted RSUs (and related Dividend Equivalent RSUs) that vest under this provision is determined as follows:
The number of whole months from the Effective Date through the date your employment with AEP Terminates as the direct result of the Triggering Event divided by the number of whole months from the Effective Date until the final Vesting Date specified in the Vesting Schedule, above;
Reduced (but not below zero) by
The cumulative percentage of Granted Units for which the Vesting Date specified in the Vesting Schedule has passed as of the date your employment with AEP Terminates as the direct result of the Triggering Event.

See attached Example.

RSUs that vest as a result of your severance shall be converted to AEP Common Stock and delivered to you as of your Severance Date in accordance with the section of this award agreement entitled Delivery of Shares of AEP Common Stock, below.

Prorated Vesting for Officers who Terminate Due to Mandatory Retirement at Age 65: As of your Mandatory Retirement Date, a fractional portion of your Granted RSUs (and related Dividend Equivalent RSUs) shall vest. The portion of your Granted RSUs (and related Dividend Equivalent RSUs) that vest under this provision is determined as follows:
The number of whole months from the Effective Date through your Mandatory Retirement Date divided by the number of whole months from the Effective Date until the final Vesting Date specified in the Vesting Schedule, above;
Reduced (but not below zero) by
The cumulative percentage of Granted Units for which the Vesting Date specified in the Vesting Schedule has passed as of your Mandatory Retirement Date.

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See attached Example.

RSUs that vest as a result of your Mandatory Retirement Date shall be converted to AEP Common Stock and delivered to you as of your Mandatory Retirement Date in accordance with the section of this award agreement entitled Delivery of Shares of AEP Common Stock, below. If you hold a salary grade 18 or higher position with AEP, the Shares of AEP Common Stock delivered to you by reason of this section shall be subject to transfer restrictions such that you will be required to retain ownership of such Shares until the second anniversary of your Mandatory Retirement Date, except that you will be permitted to cause the sale of so many of such Shares as would allow you to cover your liability for the applicable taxes directly associated with your receipt of those Shares.

Death: Upon your death prior to the Termination of your employment with AEP, the RSUs, to the extent outstanding but not vested, shall vest, be converted into AEP Common Stock and delivered to your designated beneficiary or beneficiaries under the LTIP (or, if you have not effectively designated any beneficiary under the LTIP, to your estate) as soon as administratively practicable following your death.

Change In Control: Upon a Qualifying Termination of your employment with AEP, the RSUs, to the extent outstanding but not vested, shall vest, be converted into Shares and delivered as of the date of the Qualifying Termination in accordance with the section of this award agreement entitled Delivery of Shares of AEP Common Stock, below.

Other Terminations
Except as provided above under the Accelerated Vesting section with respect to a Change in Control and as provided in the following sentence involving circumstances that may give rise to a Severance Date for you, upon the Termination of your employment for any reason prior to your Mandatory Retirement Date or your death, any unvested Granted RSUs and unvested Dividend Equivalent RSUs shall be forfeited, and you shall have no rights or interests in or with respect to such unvested RSUs. If your employment with AEP is Terminated under circumstances that may give rise to a Severance Date for you, to the extent your unvested Granted RSUs and unvested Dividend Equivalent RSUs do not vest by reason of a Severance Date for you, they shall be forfeited as of the date it becomes certain that such Severance Date shall not occur.

Definitions
In addition to the terms defined elsewhere in this Agreement, the following shall be defined terms when used in this Agreement:

“AEP” means American Electric Power Company, Inc.; a New York corporation; and its subsidiaries and affiliates.

“Cause” means any one or more of the following grounds: (i) failure or refusal to perform your assigned duties and responsibilities in a competent or satisfactory manner as determined by your AEP employer; (ii) commission of an act of dishonesty, including, but not limited to, misappropriation of funds or any property of AEP; (iii) engagement in
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activities or conduct injurious to the best interest or reputation of AEP as determined by your AEP employer; (iv) insubordination; (v) a violation of any of the materials terms and conditions of any written agreement or agreements you may from time to time have with AEP; (vi) violation of any of AEP’s rules of conduct of behavior, such as may be provided in any employee handbook or as AEP may promulgate from time to time; (vii) commission of a crime which is a felony, a misdemeanor involving an act or moral turpitude, or a misdemeanor committed in connection with your employment with AEP which is injurious to the best interest or reputation of AEP as determined by your AEP employer; or (viii) disclosure, dissemination, or misappropriation of confidential, proprietary, and/or trade secret information. If you make a disclosure that is inconsistent with the requirements of clause (viii), it shall not be considered “Cause” if your disclosure of confidential, proprietary, and/or trade secret information is done as a part of reporting an act or event, that you in good faith believe is a violation of law, to a relevant law-enforcement agency (such as a federal, state or local law enforcement agency or official), or to a federal, state or local government agency, such as the Securities and Exchange Commission, the Internal Revenue Service, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration or the Department of Labor, or as a part of your cooperating in an investigation conducted by or communicating with such a government agency, or otherwise making disclosures to such an agency, in each case, that are protected under federal, state or local whistleblower laws.

“Disability” or “Disabled” means that you have an illness or injury for which you have been determined to be entitled to benefits under the terms of the LTD Plan. You shall not be considered Disabled for purposes of this Award Agreement effective at any time you are not entitled to benefits under the LTD Plan, under such circumstances that include (but are not limited to) the termination of the LTD Plan or your not being in a classification eligible to participate in the LTD Plan.

“Good Reason” applies if a Change of Control occurred and means
(i)    an adverse change in your status, duties or responsibilities as an employee of AEP as in effect immediately prior to the Change In Control;
(ii)    failure of AEP to pay or provide you in a timely fashion the salary or benefits to which you are entitled under any employment agreement between AEP and you in effect on the date of the Change In Control, or under any benefit plans or policies in which you were participating at the time of the Change In Control;
(iii)    the reduction of your base salary as in effect on the date of the Change In Control;
(iv)    the taking of any action by AEP (including the elimination of a plan without providing substitutes therefor, the reduction of your awards thereunder or failure to continue your participation therein) that would substantially diminish the aggregate projected value of your awards or benefits under AEP’s benefit plans or policies in which you were participating at the time of the Change In Control; provided, however, that the diminishment of such awards or benefits that apply to other
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employees of AEP holding positions in your salary grade or lower in addition to you shall be disregarded; or
(v)    the relocation, without your prior approval, of the office at which you are to perform services on behalf of AEP to a location more than fifty (50) miles from its location immediately prior to the Change In Control.

Any circumstance described in this definition shall constitute Good Reason even if such circumstance would not constitute a breach by AEP of the terms of an employment agreement between AEP and you in effect on the date of the Change In Control. However, such circumstance shall not constitute Good Reason unless (1) within ninety (90) days of the initial existence of such circumstance, you shall have given AEP written notice of such circumstance, and (2) AEP shall have failed to remedy such circumstance within thirty (30) days after its receipt of such notice. Such written notice to be provided by you to AEP shall specify (A) the effective date for your proposed termination of employment (provided that such effective date may not precede the expiration of the period for AEP’s opportunity to remedy), (B) reasonable detail of the facts and circumstances claimed to provide the basis for termination, and (3) your belief that such facts and circumstance would constitute Good Reason for purposes of this Agreement. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder.

“LTD Plan” means the American Electric Power System Long Term Disability Plan, as amended from time to time, or any plan providing continuation of cash payments due to your illness or injury that may reasonably be expected to prevent you from performing the duties of your occupation for a period longer than at least 6 months that is designated as a successor to that plan or as a replacement for that plan with respect to you.

“Mandatory Retirement Date” means the date of your Termination, if all of the following conditions are satisfied: (i) you are an officer of AEP subject to mandatory retirement at age 65, and (ii) your employment with AEP Terminates on the date you attain age 65 or such later date specified by resolution of the Board of Directors of AEP (or such person or committee to whom the Board delegates the authority to make such determinations) adopted prior to the date you attain age 65.

“Qualifying Termination” means, coincident with or within one (1) year after the date of a Change In Control, your Termination for any reason excluding (i) your death, (ii) your Disability, (iii) the exhaustion of your benefits under the terms of an applicable AEP sick pay plan, short-term disability plan or long-term disability plan (other than by reason of the amendment or termination of such a plan), (iv) your attaining your Mandatory Retirement Date, (v) by AEP for Cause or (vi) by you without Good Reason. If your employment is Terminated during the term of this Agreement, but prior to a Change In Control, it shall not be considered a Qualifying Termination even if such Termination was (A) by AEP without Cause, or (B) by you based on events or circumstances that would constitute Good Reason if a Change in Control had occurred.

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“Severance Date” means the date that all of the following conditions are satisfied at least 4 business days before March 15 of the calendar year immediately following the calendar year in which your employment with AEP Terminates: (i) your Termination is not a Qualifying Termination, (ii) your employment with AEP is Terminated prior to your Mandatory Retirement Date in a manner that is the direct result of a Triggering Event and that is either (I) an involuntary Termination by the unilateral authority of AEP without Cause, and not due to your implicit or explicit request, where you are willing and able to continue performing services, or (II) a voluntary Termination by you pursuant to a window program that has been designed and implemented by AEP in a manner that is not inconsistent with the requirements imposed by regulatory or other authoritative guidance issued under Code Section 409A with respect to separation pay plans, (iii) you are presented with and then timely sign and return an effective Severance and Release of All Claims Agreement; (iv) on or before the date your Severance and Release of All Claims Agreement becomes irrevocable by you, you neither receive an offer of employment with a purchaser or successor employer nor an offer of employment with AEP that is at the same or higher base pay (determined without regard to overtime pay, bonuses, premium payments, incentive compensation or any other form of additional compensation) and that does not require relocation of your primary residence. For purposes of clause (ii), your employment will not be considered Terminated as the direct result of a Triggering Event if (A) your employment Terminates following the expiration of a specific term of employment previously identified between you and AEP, regardless of the reason for not extending or renewing your employment, or (B) you fail to continue to provide services to AEP up to and including the date established by AEP for the Termination of your employment pursuant to the Triggering Event, or (C) AEP does not present you with a Severance and Release of All Claims Agreement in connection with the Termination of your employment with AEP. AEP retains sole discretion over any determination of whether and when it will present you with a Severance and Release of All Claims Agreement and the terms of any such agreement.

“Severance and Release of All Claims Agreement” means a Severance and Release of All Claims Agreement in a form acceptable to AEP or its Subsidiary, whereby you agree to waive and release AEP, all AEP System companies and all of their respective officers, directors, employees, agents and representatives of and from any and all claims.

“Termination” means termination of employment with AEP for any reason; provided that determinations as to the circumstances that will be considered a Termination (including a leave of absence other than a leave of absence due to your Disability) shall be made in a manner consistent with the written policies adopted by the HRC from time to time to the extent such policies are consistent with the requirements imposed under Code 409A(a)(2)(A)(i). Your employment with AEP will not be considered Terminated so long as you remain continuously Disabled.

“Triggering Event” means the restructuring, consolidation, downsizing, closing, sale and/or divestiture of AEP or part thereof under circumstances that are not a Change in Control.

“Vesting Date” means each date set forth above in the Vesting Schedule.

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RSUs Are Nontransferable
No RSUs shall be sold, exchanged, pledged, transferred, assigned, or otherwise encumbered, hypothecated or disposed of by you (or any beneficiary).

Recoupment of Incentive Compensation
By accepting this Award, you agree to reimburse AEP for compensation awarded, earned, received or paid to you under this Award agreement with respect to the relevant time period if the Board, in its discretion, determines that:
•You are a Covered Employee (as defined in the American Electric Power Company, Inc. Board Policy on Recouping Incentive Compensation, as amended from time to time), and
•This RSU award or any compensation resulting from it was predicated upon the achievement of financial or other results that were subsequently materially restated or corrected, and
•A payment that is materially lower would have been made to you had achievement been calculated based upon the restated or corrected financial or other results.

Therefore, if and to the extent that, in the Board’s view, the above conditions have been met and such reimbursement is warranted by the facts and circumstances of the particular case or if the applicable legal requirements impose more stringent requirements on AEP to obtain reimbursement of such compensation, then you will be required to reimburse AEP for the value of such compensation paid to you. Any such reimbursement must be paid in full to AEP within ninety (90) days of AEP’s issuance of its notice to you. By entering into this Agreement, you further agree and consent that AEP also may retain any deferred compensation previously credited to you and not paid, provided that AEP will retain such deferred compensation only if, when and to the extent that it otherwise becomes payable to you. This right to reimbursement is in addition to, and not in substitution for, any and all other rights AEP might have to pursue reimbursement or such other remedies against an employee (including a Covered Employee) for misconduct in the course of employment by AEP or otherwise based on applicable legal considerations, all of which are expressly retained by AEP.

Conversion of Vested Stock Units and Delivery of Shares
Conversion to AEP Common Stock: Upon vesting, each vested RSU (including each vested Granted RSU and each vested Dividend Equivalent RSU) shall be converted into a single share of AEP Common Stock for delivery in accordance with the section of this award agreement entitled Delivery of Shares of AEP Common Stock, below. Fractional RSUs that constitute less than a single share may be paid in Shares of AEP Common Stock, cash, as additional income tax withholding or any combination thereof, at AEP’s option.

Delivery of Shares of AEP Common Stock: The Shares of AEP Common Stock resulting from the conversion of your vested RSUs shall be delivered to you or to an account set up for your benefit with a broker/dealer designated by the Company (the “Broker/Dealer Account”) within a reasonable time (generally 3 days) after such shares are converted as described in the section of this award agreement entitled Conversion to AEP Common Stock
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or Cash Payment, above. Such Shares shall be delivered on or before March 15 of the calendar year following the calendar year during which the RSUs became vested.

AEP Common Stock and all LTIP participants remain subject to all applicable legal and regulatory restrictions such as insider trading restrictions and black-out periods and as otherwise specified by this award agreement (see, for example, the section of this award agreement entitled Prorated Vesting for Officers who Terminate Due to Mandatory Retirement at Age 65).

Tax Withholding
AEP retains discretion to withhold any and all applicable income, employment and other taxes required to be withheld in connection with these RSUs. AEP may reduce the number of vested RSUs credited to you or the number of Shares of AEP Common Stock delivered to you to satisfy such tax withholding obligation. The amount of such reduction shall be based upon the Fair Market Value of AEP Common Stock at that time; provided, however, that any reduction to your vested RSUs for applicable tax withholding shall not exceed such limits as may be applicable to comply with the requirements of Code Section 409A.

LTIP Incorporated By Reference
This Agreement is subject in all respects to the terms and provisions of the LTIP, all the terms and provisions of which are made a part of and incorporated in this Agreement (as if they were expressly set forth herein). In the event of any conflict between the terms of this Agreement and the terms of the LTIP, the terms of the LTIP shall control. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto under the LTIP.

No Special Employment Rights
Nothing contained in the LTIP or this Agreement shall be construed or deemed by any person under any circumstances to bind the Company to continue your employment for the Vesting Period or for any other period. Your employment with AEP is and will remain at all times “at-will.”

Cancellation
The RSUs subject to this award agreement shall be canceled and be of no force or effect upon forfeiture in accordance with the terms and provisions of the relevant sections of this award agreement, including the section entitled Other Terminations, above.

Notice
Any Notice that may be required or permitted under this Agreement shall be in writing, and shall be delivered in person or via fax transmission, overnight courier service or certified mail, postage prepaid, properly addressed as follows:

Notice to AEP: If such notice is to AEP, to the attention of the Executive Compensation Department, American Electric Power, 1 Riverside Plaza, Columbus, OH 43215, or at such other address as AEP, by notice to you, may designate in writing from time to time.

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Notice to You: If such notice is to you, at the address as shown on the records of AEP or at such other address as you, by notice to AEP, may designate in writing from time to time.

IN WITNESS WHEREOF, AEP has caused this Agreement to be executed by its duly authorized officer as of the Grant Date specified above. This Agreement will not become effective until you accept it. If you have not properly accepted this Agreement by the day immediately preceding the First Vesting Date (or, if later, by the last day of the second month after the Grant Date), (A) any Granted RSUs (and related Dividend Equivalent RSUs) to the extent not then vested shall be forfeited and (B) you shall be deemed to have accepted this Agreement only with respect to any RSUs and Dividend Equivalent RSUs that vested before the First Vesting Date.

AMERICAN ELECTRIC POWER COMPANY, INC.

By:/s/ Nicholas K. Akins
Nicholas K. Akins
President and Chief Executive Officer

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EXAMPLES
RESTRICTED STOCK UNIT AWARD AGREEMENT

The Restricted Stock Unit Award Agreement includes provisions for prorated vesting for Severance and for Officers who Terminate Due to Mandatory Retirement at Age 65. The following examples assume that the award agreement provides the Effective Date and Vesting Schedule indicated below.

Effective Date:    January 1 of year 1

Vesting Schedule	
Vesting Date
February 21 of year 2
February 21 of year 3
February 21 of year 4	Percentage of Granted Units
33 1/3%
33 1/3%
33 1/3%	

Prorated Vesting for Severance: If you would incur a Severance Date on October 10 of year 2 in connection with the Termination of your employment on September 30 of year 2 as the direct result of a Triggering Event, the fractional percentage of your Granted RSUs would be determined as follows: there are 21 whole months from the Effective Date to the Termination Date divided by 37 whole months in the vesting period (21/37 or 56.8%), reduced by the about 33.3% of your Granted RSUs that vested on February 21 of year 2, such that 23.5% (56.8% - 33.3%) of your Granted RSUs (along with any additional Dividend Equivalent RSUs related to that portion) would become vested as of your Severance Date on October 10th of year 2.

Prorated Vesting for Officers who Terminate Due to Mandatory Retirement at Age 65: If you would incur a Mandatory Retirement Date on December 15th of year 2, the fractional percentage of your Granted RSUs would be determined as follows: there are 23 whole months from the Effective Date to the Mandatory Retirement Date divided by 37 whole months in the vesting period (23/37 or 62.2%), reduced by the 33.3% of your Granted RSUs that vested on February 21 of year 2, such that 28.9% (62.2% - 33.3%) of your Granted RSUs (along with any additional Dividend Equivalent RSUs related to that portion) would become vested as of your Mandatory Retirement Date on December 15th of year 2.
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AMERICAN ELECTRIC POWER
EXECUTIVE SEVERANCE PLAN

(As Amended and Restated Effective February 20, 2023)

This sets forth the American Electric Power Executive Severance Plan (the “Plan”), as amended and restated effective February 20, 2023. The Plan was initially adopted on January 15, 2014.

ARTICLE I
PURPOSE AND TERM OF PLAN

Section 1.1    Purpose of the Plan. The purpose of the Plan is to provide Eligible Employees with certain severance benefits as described in this Plan in the event the Eligible Employee’s employment with an AEP System Company is terminated due to an Involuntary Termination or a Good Reason Resignation.

Section 1.2    Characterization and Interpretation of the Plan. The Plan is intended to comply with the requirements of Code section 409A and its related regulations and guidance. Notwithstanding anything in the Plan to the contrary, distributions may only be made under the Plan upon an event and in a manner permitted by Code section 409A or an applicable exemption. If a payment is not made by the designated payment date under the Plan, the payment shall be made by December 31 of the calendar year in which the designated payment date occurs. To the extent that any provision of the Plan would cause a conflict with the requirements of Code section 409A, or would cause the administration of the Plan to fail to satisfy the requirements of Code section 409A, such provision shall be deemed null and void to the extent permitted by applicable law. All payments to be made upon a termination of employment under this Plan may only be made upon a “separation from service” (as that term is defined under Code section 409A and its related regulations and guidance). For purposes of Code section 409A, any right to receive a particular payment or a series of installment payments under this Plan shall be treated as a right to receive separate (or a series of separate) payments. Any right to receive a reimbursement or in-kind benefit provided under the Plan shall be made or provided in accordance with the requirements of Code section 409A, including, where applicable, the requirement that: (i) any reimbursement shall be for expenses incurred during the Participant’s lifetime (or during a shorter period of time specified in this Plan); (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred; and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

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Section 1.3    Term and Effect of the Plan.

(1)The Plan, as restated by this document, generally shall be effective as of February 20, 2023, and, except to the extent otherwise specified in the Plan, shall supersede any prior plan, program, policy, or agreement under which the AEP System Companies provided severance benefits prior to February 20, 2023 for the Eligible Employees whose employment has not terminated as of February 20, 2023. However, the Plan shall not be construed so as to supersede any prior or existing plan, program, policy or agreement (or any portion of such prior arrangement) pursuant to which an Eligible Employee accrued benefits other than severance benefits.

(2)Notwithstanding the foregoing, the Plan shall not: (i) apply to any Employee who is subject to an existing employment or severance agreement pursuant to which the Company or any of the other AEP System Companies has arranged to provide severance benefits to the Employee until the term of such agreement expires (or, if earlier, such date as the Employee executes an acknowledgement that this Plan supersedes such agreement); or (ii) supersede any plan, program, policy or agreement pursuant to which the Company or any of the other AEP System Companies has arranged to provide severance benefits to an Employee in connection with the occurrence of a change in control.

(3)The Plan shall continue until terminated pursuant to Article VIII of the Plan.

ARTICLE II
DEFINITIONS

Section 2.1    “AEP” shall mean American Electric Power Company, Inc., the Company’s parent; and any successor to all or a major portion of the assets or business of American Electric Power Company, Inc.

Section 2.2    “AEP System Companies” shall mean all subsidiaries, affiliates, divisions, organizations and related entities of American Electric Power Company, Inc., and any successor or assigns of any of the foregoing while under the Control (as defined for purposes of Section 2.26, defining “Purchaser Employer”) of AEP.

Section 2.3    “Annual Base Salary” shall mean the Participant’s regular annual base salary immediately prior to the Participant’s termination of employment, including compensation converted to other benefits under a flexible pay arrangement maintained by the Company or deferred pursuant to a written plan or agreement with the Company, but excluding sign-on bonuses, allowances and compensation paid or payable under any AEP System Company long-term or short-term incentive plans or any similar payments, and any salary lump sum amount paid in lieu of or in addition to a base wage or salary increase.

Section 2.4    “Board” shall mean the Board of Directors of AEP, or any successor thereto.

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Section 2.5 “Cause” shall mean any one or more of the following grounds for the termination of the employment of an Employee: (i) failure or refusal to perform a substantial part of the Employee’s assigned duties and responsibilities following notice and a reasonable opportunity to cure (if such failure is capable of cure); (ii) commission of an act of willful misconduct, fraud, embezzlement or dishonesty either in connection with the Employee's duties to any AEP System Company or which otherwise is injurious to the best interest or reputation of any AEP System Company; (iii) repeated failure to follow specific lawful directions of the Board or any officer to whom the Employee reports; (iv) a violation of any of the material terms and conditions of any written agreement or agreements the Employee may from time to time have with an AEP System Company; (v) a material violation of any of the rules of conduct of behavior of any AEP System Company, such as may be provided in any employee handbook or as an AEP System Company may promulgate from time to time, following notice and a reasonable opportunity to cure (if such violation is capable of cure); (vi) conviction of, or plea of guilty or nolo contendere to, (A) a felony, (B) a misdemeanor involving an act of moral turpitude, or (C) a misdemeanor committed in connection with the Employee’s employment with any AEP System Company which is injurious to the best interest or reputation of any AEP System Company; or (vii) violation of any applicable confidentiality, non-solicitation, or non-disparagement covenants or obligations relating to any AEP System Company (including, without limitation, the covenants set forth in Article VI). The Committee, in its sole and absolute discretion, shall determine Cause.

Section 2.6    “Change in Control Termination” shall mean an Eligible Employee’s termination of employment that occurs in connection with a change in control and that results in the Employee receiving severance payments or other benefits under the American Electric Power Service Corporation Change In Control Agreement or any other plan, program, agreement or arrangement on account of such change in control. For purposes of this Section, the term “change in control” shall have the meaning as defined in the American Electric Power Service Corporation Change In Control Agreement or such other plan, program, agreement or arrangement, as applicable.

Section 2.7    “Code” shall mean the Internal Revenue Code of 1986, as amended.

Section 2.8    “Committee” shall mean the Human Resources Committee of the Board or such other committee to which the Board has delegated the functions of its Human Resources Committee. The Committee may delegate all or a portion of its authority under the Plan to an individual or another committee.

Section 2.9    “Company” shall mean American Electric Power Service Corporation and any successor to all or a major portion of the assets or business of American Electric Power Service Corporation.

Section 2.10    “Disability” or “Disabled” means that the Eligible Employee has an illness or injury for which the Eligible Employee has been determined to be entitled to benefits under the terms of the LTD Plan. An Eligible Employee shall not be considered Disabled for purposes of this Plan effective at any time the Eligible Employee is not entitled to benefits under the LTD Plan, under such circumstances that include (but are not limited to) the termination of the LTD Plan or the Employee not being in a classification eligible to participate in the LTD Plan.

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Section 2.11    “Eligible Employee” shall mean an Employee of the Company, an AEP System Company or AEP who is designated by the Company, in its sole discretion, and approved by the Committee in its sole discretion (or by the Chief Executive Officer of the Company in their sole discretion to the extent so delegated by the Committee) as an employee entitled to benefits, if any, under the terms of this Plan.

Section 2.12    “Employee” shall mean a person who receives salary, wages or commissions from the AEP System Companies that are subject to withholding for the purposes of federal income and employment taxes. The term Employee shall not include an independent contractor or any other person who the Committee or its designee determines is not subject to withholding for purposes of federal income and employment taxes, regardless of any contrary governmental or judicial determination relating to such employment or withholding tax status.

Section 2.13    “Employer” shall mean the Company or any of the AEP System Companies with respect to which this Plan has been adopted.

Section 2.14    “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and regulations thereunder.

Section 2.15    “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

Section 2.16    “General Severance Plan” shall mean the American Electric Power Company, Inc. Severance Plan as amended from time to time.

Section 2.17    “Good Reason Resignation” shall mean an Eligible Employee’s written resignation within 60 days of the occurrence of any reduction in the Eligible Employee’s then-current Annual Base Salary without the Eligible Employee’s consent, unless such events are fully corrected by the Employer within ten days following receipt of written notice from the Eligible Employee; provided, however, that a uniform percentage reduction of 10% or less in the Annual Base Salary of all Eligible Employees determined by the Committee to be similarly situated shall not constitute a basis for a Good Reason Resignation.

Section 2.18    “Involuntary Termination” shall mean an Eligible Employee’s termination of employment initiated by the AEP System Companies for any reason other than Cause as provided under and subject to the conditions of Article III. Involuntary Termination does not include a termination of employment due to Mandatory Retirement, Disability or death. An Eligible Employee’s employment also shall not be considered an Involuntary Termination if, within thirty (30) days before or after the termination, the Eligible Employee receives an offer of employment with a Purchaser Employer, a Successor or an AEP System Company that is at the same or higher Annual Base Salary and Target Bonus, or if the Eligible Employee otherwise becomes employed by a Purchaser Employer within thirty (30) days after the Eligible Employee’s termination.

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Section 2.19    “LTD Plan” means the American Electric Power System Long Term Disability Plan, as amended from time to time, providing continuation of cash payments due to an Eligible Employee’s illness or injury that may reasonably be expected to prevent the Eligible Employee from performing the duties of the Eligible Employee’s occupation for a period longer than at least 6 months or any plan that is designated as a successor to that plan or as a replacement for that plan with respect to the Eligible Employee.

Section 2.20    “LTIP” shall mean the American Electric Power System Long-Term Incentive Plan, as amended from time to time, including any successor or replacement plan under which restricted stock units and performance shares are awarded.

Section 2.21    “Mandatory Retirement” means a Participant’s termination, if all of the following conditions are satisfied: (i) the Participant is subject to mandatory retirement from the AEP System Companies at or after age 65, and (ii) the Participant’s employment with the AEP System Companies terminates on the date the Participant attains age 65 or such later date specified by the Board (or such person or committee to whom the Board delegates the authority to make such determinations) adopted prior to the date the Participant attains age 65.

Section 2.22    “Participant” shall mean any Eligible Employee who meets the requirements of Article III and thereby becomes eligible for benefits under the Plan.

Section 2.23    “Performance Shares” shall have the meaning specified in any document issued by the Company as a Performance Share Award Agreement pursuant to the LTIP and that remain outstanding.

Section 2.24    “Plan” shall mean the American Electric Power Executive Severance Plan as set forth herein, and as the same may from time to time be amended.

Section 2.25    “Plan Administrator” shall mean the individual(s) appointed by the Committee to administer the terms of the Plan as set forth herein and if no individual is appointed by the Committee to serve as the Plan Administrator for the Plan, the Plan Administrator shall be the employee of the Company who heads up the Human Resources department. Notwithstanding the preceding sentence, in the event the Plan Administrator is entitled to Severance Benefits under the Plan, the Committee or its delegate shall act as the Plan Administrator for purposes of administering the terms of the Plan with respect to the Plan Administrator. The Plan Administrator may delegate all or any portion of its authority under the Plan to any other person(s).

Section 2.26    “Purchaser Employer” shall mean any other corporation or unincorporated entity or group of corporations or unincorporated entities that acquires (in one transaction or a series of transactions, whether by purchase, merger, consolidation, reorganization or otherwise) Control of the AEP System Company that employs the Eligible Employee or of an AEP System Company or business unit of an AEP System Company for which such Eligible Employee has significant work responsibility. Solely for purposes of this Section, the term “Control” shall mean
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(i)    ownership, directly or indirectly, of more than 50% of the then outstanding stock or of any class of equity interest or voting interest in such AEP System Company or business unit; or
(ii)    ownership, directly or indirectly, of all or substantially all of the assets of such AEP System Company or business unit.
    
The term “Purchaser Employer” also shall include all entities that control, that are controlled by or that are under common control with any such acquiring corporation or entity.

Section 2.27    “Release” shall mean the Severance, Release of All Claims and Noncompetition Agreement in substantially the form attached as Exhibit A, whereby the Participant agrees (a) to waive and release the Company, AEP, all AEP System Companies and all affiliated persons and entities, including their respective officers, directors, employees, agents, and representatives of and from any and all claims, demands and causes of action; and (b) not to, during the 12-month period (for Tier 2 Employees) or 24-month period (for Tier 1 Employees) following the Participant’s Termination Date (the “Restricted Period”), without the Company’s prior written consent, for any reason, directly or indirectly either as principal, agent, manager, employee, partner, shareholder, director, officer, consultant or otherwise become engaged or involved, in a manner that relates to or is similar in nature to the specific duties performed by the Participant at any time during their employment with any AEP System Company, in any business (other than as a less-than three percent (3%) equity owner of any corporation traded on any national, international or regional stock exchange or in the over-the-counter market) that directly competes with the Company or any of the AEP System Companies in

(i)the business of the harnessing, production, transmission, distribution, marketing or sale of electricity; or the development or operation of transmission facilities or power generation facilities; or

(ii)any other business in which the Company or any of the AEP System Companies is engaged at the termination of the Participant's employment with the AEP System Companies.

The provisions of this Section 2.27(b) shall be limited in scope and be effective only within one or more of the following geographical areas: (A) any state in the United States where the Company, including the AEP System Companies, has at least U.S. $25 million in capital deployed as of the Participant’s Termination Date; or (B) any state or country with respect to which was conducted a business of any of the AEP System Companies, which business, or oversight of which business, constituted any part of the Participant’s employment. The parties intend the above geographical areas to be completely severable and independent, and any invalidity or unenforceability of the Release with respect to any one area shall not render the Release unenforceable as applied to any one or more of the other areas. Nothing in this Section 2.27(b) shall be construed to prohibit the Participant being retained during the Restricted Period in a capacity as an attorney licensed to practice law, or to restrict the Participant from providing advice and counsel in such capacity, in any jurisdiction where such prohibition or restriction is contrary to law.

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Section 2.28    “Restricted Stock Unit” or “RSU” shall have the meaning set forth in the terms of each Restricted Stock Unit Award Agreement issued to the Participant under the LTIP.

Section 2.29    “Severance Benefits” shall mean the severance benefits that a Participant is eligible to receive pursuant to Article IV, subject to adjustment pursuant to Article X.

Section 2.30    “Successor” shall mean any other corporation or unincorporated entity or group of corporations or unincorporated entities which acquires ownership, directly or indirectly, through merger, consolidation, purchase or otherwise, of all or substantially all of the assets of the Company or AEP.

Section 2.31    “Target Annual Incentive Payment” shall mean the award that the Participant would have received under the annual incentive compensation plan applicable to such Participant for the year in which the Participant’s termination occurs, if one hundred percent (100%) of the annual target award has been earned. Participants not participating in an annual incentive compensation plan that has predefined target levels will be treated as though they were participants in an annual incentive plan with such targets and will be assigned the same annual target percent as their participating peers in a comparable salary grade.

Section 2.32    “Termination Date” shall mean the date on which the active employment of the Eligible Employee by the AEP System Companies is severed for any reason, provided that the Termination Date shall not include any date that would not be considered to be a separation from service, determined in a manner consistent with the written policies adopted by the Committee from time to time to the extent such policies are consistent with the requirements imposed under Code Section 409A(a)(2)(A)(i).

Section 2.33    “Tier 1 Employee” shall mean such Eligible Employees who are approved for such classification by the Committee in its sole discretion effective on or after February 20, 2023.

Section 2.34    “Tier 2 Employee” shall mean such Eligible Employees other than Tier 1 Employees who are approved for such classification by the Committee or Chief Executive Officer of the Company in their sole discretion.

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ARTICLE III
PARTICIPATION AND ELIGIBILITY FOR BENEFITS

Section 3.1    Participation. Each Eligible Employee in the Plan who is a Tier 1 Employee or Tier 2 Employee who incurs an Involuntary Termination or a Good Reason Resignation (other than an Involuntary Termination or Good Reason Resignation that constitutes a Change in Control Termination) and who satisfies the conditions of Section 3.2 shall be eligible to receive the Severance Benefits described in the Plan. An Eligible Employee shall not be eligible to receive any other severance benefits from the AEP System Companies on account of an Involuntary Termination or a Good Reason Resignation, unless otherwise provided in the Plan; provided that if the facts and circumstances surrounding the termination of employment of such an Eligible Employee satisfies the requirements to receive the benefits under both this Plan and the General Severance Plan, such Eligible Employee shall not be precluded from receiving benefits under the General Severance Plan, provided that the benefits provided to such a Participant under this Plan shall be adjusted in the manner described in Article X.

Section 3.2    Conditions.

(a)    Eligibility for any Severance Benefits is expressly conditioned on the satisfaction of all of the following conditions:

(i)an Eligible Employee’s written acknowledgment and agreement to comply with the provisions in Article VI during and after the Eligible Employee’s employment with the AEP System Companies within such period as may be requested by the Company;

(ii)to the extent requested by the Company, execution of a written acknowledgement and agreement that this Plan supersedes any existing arrangement that provides severance benefits to the Eligible Employee and/or that the Eligible Employee is no longer entitled to receive severance benefits pursuant to a prior arrangement that has expired;

(iii)execution and return to the Company of the Release (in the form provided by the Company) by the Participant within 60 days following the Participant’s Termination Date (or such shorter period of time specified in the Release); and

(iv)execution by the Participant of a written agreement that authorizes the deduction of amounts owed to the applicable AEP System Company prior to the payment of any Severance Benefits (or in accordance with any other schedule as the Committee may, in its sole discretion, determine to be appropriate); provided, that the Committee determines in its sole discretion that such deduction is not in violation of Code section 409A.

(b)    If the Committee determines, in its sole discretion, that the Participant has not fully complied with any of the terms of the Release, the Committee may deny Severance Benefits not yet in pay status or discontinue the payment of the Participant’s Severance Benefits
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and may require the Participant, by providing written notice of such repayment obligation to the Participant, to repay any portion of the Severance Benefits already received under the Plan. If the Committee notifies a Participant that repayment of all or any portion of the Severance Benefits received under the Plan is required, such amounts shall be repaid within 30 calendar days of the date the written notice is sent. Any remedy under this paragraph (b) shall be in addition to, and not in place of, any other remedy, including injunctive relief, that any AEP System Company may have.

(c)     An Eligible Employee who experiences a termination of employment that is not an Involuntary Termination or a Good Reason Resignation shall not be eligible to receive Severance Benefits under the Plan. Specifically, and without limiting the foregoing, an Eligible Employee shall not be eligible to receive Severance Benefits upon the Eligible Employee’s:

(i)voluntary resignation or retirement (other than a voluntary resignation or retirement that constitutes a Good Reason Resignation);

(ii)Change in Control Termination;

(iii)resignation of employment (other than a Good Reason Resignation) before the job-end date specified by the Employer or while the Employer still desires the Eligible Employee’s services;

(iv)termination for Cause;

(v)termination due to death or Disability;

(vi)failure to return to work within six months of the onset of an approved leave of absence to the extent such failure to return to work itself constitutes a separation from service, determined in a manner consistent with the written policies adopted by the Committee from time to time to the extent such policies are consistent with the requirements imposed under Code Section 409A(a)(2)(A)(i); or

(vii)becoming employed by a Purchaser Employer within thirty (30) days after the Eligible Employee’s termination.

Further, except under circumstances specified in this Plan, an Eligible Employee shall not be eligible to receive Severance Benefits upon their termination of employment if the Eligible Employee receives severance benefits pursuant to another plan, policy, program or arrangement providing benefits upon a termination of employment or other separation from service.

(d)    Except as otherwise set forth herein, the Committee has the sole discretion to determine an Eligible Employee’s eligibility to receive Severance Benefits.

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ARTICLE IV
DETERMINATION OF SEVERANCE BENEFITS

Section 4.1    Amount of Severance Benefits Upon Involuntary Termination or Good Reason Resignation. The Severance Benefits to be provided to a Participant who incurs an Involuntary Termination or a Good Reason Resignation and who satisfies the conditions of Section 3.2 shall be as follows:

(a)    Salary and Bonus Severance. Participants shall receive salary and bonus severance as follows:

(i)Tier 1 Employees shall receive payment equal to 200% of the sum of (A) the Tier 1 Employee’s Annual Base Salary, plus (B) the Tier 1 Employee’s Target Annual Incentive Payment (with both Annual Base Salary and Target Annual Incentive Payment being determined without regard to any decrease in such Annual Base Salary that would constitute a basis for a Good Reason Resignation).

(ii)Tier 2 Employees shall receive payment equal to 100% of the sum of (A) the Tier 2 Employee’s Annual Base Salary, plus (B) the Tier 2 Employee’s Target Annual Incentive Payment (with both Annual Base Salary and Target Annual Incentive Payment being determined without regard to any decrease in such Annual Base Salary that would constitute a basis for a Good Reason Resignation).

(b)    Restricted Stock Unit (RSU) Awards. Participants shall be considered to have vested in a fractional portion of the Participant’s RSUs (and related Dividend Equivalent RSUs) provided that the Participant’s termination may not otherwise lead to the vesting of the same RSUs under the terms of the applicable Restricted Stock Unit Award Agreement issued to the Participant under the LTIP. Capitalized terms related to RSU awards in this Section 4.1(b) and in Section 5.1(b, d) are defined in the applicable Restricted Stock Unit Award Agreement. The portion of Participant’s Granted RSUs (and related Dividend Equivalent RSUs) that vest under this provision is determined as follows:

(i)The number of whole months from the “effective date” defined in the RSU Award Agreement through the Participant’s Termination Date divided by the number of whole months from that effective date until the final Vesting Date specified in the Vesting Schedule set forth at the beginning of such RSU Award Agreement;

(ii)Reduced (but not below zero) by the cumulative Percentage of Granted Units for which the Vesting Date specified in the Vesting Schedule has passed as of the date the Participant’s Termination Date.

(c)    Performance Share Awards. A Participant shall be eligible to receive a pro-rated portion of any outstanding award of performance shares granted to a Participant in accordance with the terms of the LTIP, provided that the Participant’s termination is not due to Termination of Employment Due to the Participant’s Retirement or Triggering Event (as defined in the applicable Performance Share Award Agreement) and provided that the Participant’s termination
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may not otherwise lead to vesting of the same performance shares under the terms of the applicable Performance Share Award Agreement issued to the Participant under the LTIP. Capitalized terms related to performance shares in this Section 4.1(c) are defined in the applicable Performance Share Award Agreement. This pro-rated share of any performance share award shall be calculated by multiplying: (i) the performance share award the Participant would have earned for the full performance period based on the performance of the AEP System Companies as determined at the end of the applicable performance period by (ii) a fraction, the numerator of which is the number of whole months of the Participant’s participation from the Effective Date specified in the performance share award agreement until the Termination Date and the denominator of which is the total number of whole months in the applicable performance period for the performance share award.

(d)    The provisions of this Plan may provide for payments to the Participant under certain compensation or bonus plans of the AEP System Companies under circumstances where such plans would not otherwise provide for payment thereof. It is the specific intention of the Company that the provisions of this Plan shall supersede any provisions to the contrary in such plans, to the extent permitted by applicable law and that such plans not provide benefits that the Company determines to be duplicative of those provided by this Plan, and such plans shall be deemed to have been amended to correspond with this Plan without further action by the Company, the Committee or the Board.

Section 4.2    Other Terminations. If the Eligible Employee’s employment terminates on account of a reason other than an Involuntary Termination or a Good Reason Resignation or the Eligible Employee does not otherwise satisfy the conditions of Section 3.2, the Eligible Employee shall not be entitled to receive Severance Benefits under this Plan and shall be entitled only to those benefits (if any) as may be available under the Company’s then-existing benefit plans and policies at the time of such termination.

Section 4.3    Termination for Cause. If any Eligible Employee’s employment terminates on account of termination by the Company for Cause, the Eligible Employee shall not be entitled to receive Severance Benefits under this Plan and shall be entitled only to those benefits that are legally required to be provided to the Eligible Employee. Notwithstanding any other provision of the Plan to the contrary, if the Committee determines that an Eligible Employee engaged in conduct that constituted Cause at any time prior to the Eligible Employee’s Termination Date, any Severance Benefits payable to the Eligible Employee under Section 4.1 shall immediately cease, and the Eligible Employee shall be required to return any Severance Benefits paid to the Eligible Employee prior to such determination. If the Company has offset other payments owed to the Eligible Employee under any other plan or program, it may, in its sole discretion, waive its repayment right under this Plan solely with respect to the amount of the offset already taken.

Section 4.4    Reduction of Severance Benefits. The Plan Administrator reserves the right to make deductions in accordance with applicable law for any monies owed to the AEP System Companies by the Participant or the value of the property of the AEP System Companies that the Participant has retained in their possession; provided, however, that no such deduction
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shall be made if the Company determines that such would be inconsistent with the requirements of Code section 409A.

ARTICLE V
METHOD AND DURATION OF PAYMENT OF SEVERANCE BENEFITS

Section 5.1    Method of Payment.

(a)    Payment of Cash Severance Benefits. The Severance Benefits described in Sections 4.1(a) to which a Participant is entitled shall be paid to the Participant according to the following payment schedule:

(i)As of the first regular payroll date of the Company that coincides with or immediately follows the date that is six months after the Participant’s Termination Date, a payment equal to 50% (for Tier 2 Employees) or 25% (for Tier 1 Employees) of the amount of the Severance Benefits described in Section 4.1(a); and

(ii)The balance of such benefits shall be paid in 13 (for Tier 2 Employees) or 39 (for Tier 1 Employees) equal bi-weekly installments as of such number of subsequent regular payroll dates of the Company.

Payment under this Section 5.1(a) shall be made by mailing to the last address provided by the Participant to the Company or such other reasonable method as determined by the Plan Administrator.

(b)    Payment of Restricted Stock Unit Award Severance Benefits. The Restricted Stock Unit Award benefit described in Section 4.1(b) shall be satisfied by converting into a single share of AEP Common Stock each RSU (including each Granted RSU and each vested Dividend Equivalent RSU) that thereupon becomes vested. The shares of AEP Common Stock resulting from the conversion of the vested RSUs shall be delivered to the Participant or to an account set up for the Participant’s benefit with a broker/dealer designated by the Company (the “Broker/Dealer Account”) as of the earlier of (i) six months after the Participant’s Termination Date or (ii) the 15th day of the third month after the calendar year in which falls the Participant’s Termination Date (or the immediately preceding business day of such broker-dealer, if that day is not such a business day). AEP Common Stock and all Participants remain subject to all applicable legal and regulatory restrictions such as insider trading restrictions and black-out periods.

(c)    Payment of Performance Share Award Severance Benefits. Except to the extent required to be deferred, (such as pursuant to the terms of the American Electric Power System Stock Ownership Requirement Plan, the American Electric Power System Incentive Compensation Deferral Plan or any similar or successor plan), the Performance Share Award benefit described in Section 4.1(c) shall be paid following the completion of the applicable performance period for the Performance Award, but in no event later than two and one-half months thereafter.

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(d)    Taxes. All payments of Severance Benefits are subject to applicable federal, state and local taxes and withholdings. The Company, in its discretion, may reduce the number of shares of AEP Common Stock delivered to the Participant under Section 5.1(b) to satisfy such tax withholding obligation. The amount of such reduction shall be based upon the Fair Market Value (as defined in the LTIP) of AEP Common Stock at that time; provided, however, that any reduction to a Participant’s vested RSUs for applicable tax withholding shall not exceed such limits as may be applicable to comply with the requirements of Code Section 409A.

(e)    Participant’s Death; No Interest. In the event of the Participant’s death prior to payment being made, the amount of such payment shall be paid in accordance with the terms of an applicable award, or to the extent not specified by such award, to the Participant’s estate. In no event will interest be credited on the unpaid balance for which a Participant may become eligible.

Section 5.2    Termination of Eligibility for Benefits. Eligible Employees shall cease to be eligible to participate in the Plan, and the payment of all Severance Benefits shall cease upon the occurrence of the earlier of: (i) subject to Article VIII, termination or modification of the Plan; or (ii) completion of payment to the Participant of the Severance Benefits for which the Participant is eligible under Article IV. Further, notwithstanding anything in the Plan to the contrary, the Committee shall have the right to cease the payment of all Severance Benefits and to recover payments previously made to the Participant should the Participant at any time breach the Participant’s undertakings under the terms of the Plan (including, without limitation, a determination that the Participant engaged in conduct that constitutes Cause), the Release the Participant executed to obtain the Severance Benefits under the Plan, or the covenants set forth in Article VI.

ARTICLE VI
COVENANTS

Section 6.1    General. Upon the Eligible Employee’s execution of the written acknowledgment and agreement referred to in Section 3.2, the Eligible Employee shall be subject to the covenants described in this Article VI during the Eligible Employee’s period of employment with the AEP System Companies and at any time thereafter (except to the extent the duration of a covenant extending after an Eligible Employee’s termination of employment is specifically limited as described below).

Section 6.2    Confidential Information.

(a)    The Eligible Employee acknowledges that all Confidential Information (as defined below) shall at all times remain the property of the AEP System Companies. For purposes of this Plan, “Confidential Information” means all information including, but not limited to, proprietary information and/or trade secrets, and all information disclosed to the Eligible Employee or known by the Eligible Employee as a consequence of or through the Eligible Employee’s employment, which is not generally known to the public or in the industry
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in which the AEP System Companies are or may become engaged, about the AEP System Companies’ businesses, products, processes, and services, including, but not limited to, information relating to research, development, computer program designs, computer data, flow charts, source or object codes, products or services under development, pricing and pricing strategies, marketing and selling strategies, power generating, servicing, purchasing, accounting, engineering, costs and costing strategies, sources of supply, customer lists, customer requirements, business methods or practices, training and training programs, and the documentation thereof. It will be presumed that information supplied to the AEP System Companies from outside sources is Confidential Information unless and until it is designated otherwise.

(b)    The Eligible Employee will safeguard, to the extent possible in the performance of their work for the AEP System Companies, all documents and things that contain or embody Confidential Information. Except in the course of the Eligible Employee’s duties to the AEP System Companies or as may be compelled by law or appropriate legal process, the Eligible Employee will not, during their employment by the AEP System Companies, or permanently thereafter, directly or indirectly use, divulge, disseminate, disclose, lecture upon, or publish any Confidential Information, without having first obtained written permission from the AEP System Companies to do so; provided, however, that the foregoing shall not prohibit or impede the Eligible Employee from reporting an act or event, that the Eligible Employee in good faith believes is a violation of law, to a relevant law-enforcement agency (such as a federal, state or local law enforcement agency or official), or to a federal, state or local government agency, such as the Securities and Exchange Commission, the Internal Revenue Service, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration or the Department of Labor, or from cooperating in an investigation conducted by or communicating with such a government agency, or otherwise making disclosures to such an agency, in each case, that are protected under federal, state or local whistleblower laws (“Permissible Disclosures”).

Moreover, pursuant to the federal Defend Trade Secrets Act of 2016 (“DTSA”), (i) no individual will be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and made solely for the purpose of reporting or investigating a suspected violation of law; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public; and (ii) an individual who is pursuing a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose trade secret information to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document that contains or reflects the trade secret under seal; and (B) does not disclose any trade secret except as permitted by court order.

An Eligible Employee does not need the prior authorization of (or to give notice to) the AEP System Companies regarding any such Permissible Disclosures or disclosures protected by the DTSA. Notwithstanding the foregoing, no provision in this Plan or in any Release shall be construed or interpreted as authorization from the AEP System Companies for an Eligible
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Employee to disclose any information covered by the AEP System Companies’ attorney-client privilege or work product privilege or a waiver of either such privilege.

Section 6.3    Non-Solicitation. The Eligible Employee agrees that, during their employment with the AEP System Companies and for a period of two years following the termination of their employment, whether the termination is initiated by AEP, an AEP System Company or by the Eligible Employee, the Eligible Employee shall not, directly or indirectly,

(i)solicit or induce, or attempt to solicit or induce, any employee of the AEP System Companies to leave the AEP System Companies for any reason whatsoever,

(ii)solicit the services of any employee of the AEP System Companies, nor

(iii)induce or attempt to induce any customer, client, supplier, agent or independent contractor of the Company or any of the AEP System Companies to reduce, terminate, restrict or otherwise alter its business relationship with the Company or any other AEP System Company,

unless the Company provides the Eligible Employee with its prior, express written consent. Notwithstanding the foregoing, the Participant shall not be subject to the requirements of this Section 6.3 if the Company or any of the AEP System Companies materially breach their obligations under the Plan.

Section 6.4    Return of Confidential Information. Upon termination of the Eligible Employee’s employment, for whatever reason, whether the termination is initiated by AEP, an AEP System Companies or by the Eligible Employee, or upon request by the AEP System Companies, the Eligible Employee will deliver to the AEP System Companies all Confidential Information including, but not limited to, the originals and all copies of notes, sketches, drawings, specifications, memoranda, correspondence and documents, records, notebooks, computer systems, computer disks and computer tapes and other repositories of Confidential Information then in the Eligible Employee’s possession or under the Eligible Employee’s control, whether prepared by the Eligible Employee or by others.

Section 6.5    Cooperation. If the Eligible Employee’s employment with the AEP System Companies is terminated, following the Termination Date, the Eligible Employee agrees to reasonably cooperate with the AEP System Companies and their counsel in connection with any matter that arises from or relates to the Eligible Employee’s relationship with the AEP System Companies by providing information, reviewing documents, answering questions, or appearing as a witness in connection with any administrative proceeding, investigation, or litigation; provided, that such cooperation will not interfere with the Eligible Employee’s commitment and responsibilities with any subsequent employer. The AEP System Companies will pay the Eligible Employee’s reasonable expenses, including travel, incurred in connection with such cooperation if such cooperation is requested in writing and subject to AEP or the applicable AEP System Company’s bylaws where applicable.

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Section 6.6    Non-Disparagement. Each of the Eligible Employees agrees not to make any statements that disparage the AEP System Companies, their respective affiliates, employees, officers, directors, products, or services. Notwithstanding the foregoing, statements made in the course of sworn testimony in administrative, judicial, or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) shall not be subject to this Section 6.6.

Section 6.7    Recoupment. Each of the Eligible Employees acknowledges and agrees that the Board’s Policy on Recouping Incentive Compensation, as amended from time to time, shall survive the Eligible Employee’s separation from employment. Nothing in this Plan or the Release alters the Company’s right to recoup incentive compensation as outlined in that policy which is incorporated herein by reference.

Section 6.8    Equitable Relief.

(a)    By participating in the Plan, the Eligible Employee acknowledges that the restrictions contained in this Article VI are reasonable and necessary to protect the legitimate interests of the AEP System Companies, that the Company would not have established this Plan in the absence of such restrictions, and that any violation of any provision of this Article VI will result in irreparable injury to the AEP System Companies. By agreeing to participate in the Plan, the Eligible Employee represents that their experience and capabilities are such that the restrictions contained in this Article VI will not prevent the Eligible Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as is currently the case.

(b)    The Eligible Employee agrees that the AEP System Companies shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits, and other benefits arising from any violation of this Article VI, which rights shall be cumulative and in addition to any other rights or remedies to which the AEP System Companies may be entitled. It is the intention of the parties that the provisions of this Article VI shall be enforceable to the fullest extent permissible by law. If any of the provisions in this Article VI are hereafter construed to be invalid or unenforceable in any jurisdiction, the same shall not affect the remainder of the provisions in this Article VI or the enforceability therein in any other jurisdiction where such provisions shall be given full effect. If any provision of this Article VI shall be deemed unenforceable, in whole or in part, this Article VI shall be deemed to be amended to delete or modify the offending part so as to alter this Article VI to render it valid and enforceable.

(c)    The Eligible Employee irrevocably and unconditionally: (i) agrees that any suit, action, or other legal proceeding arising out of this Article VI, including without limitation, any action commenced by the AEP System Companies for preliminary and permanent injunctive relief or other equitable relief, may be brought in the United States District Court for the Southern District of Ohio, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Ohio; (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding; (iii) waives any right to a jury trial; and (iv) waives any objection which the Eligible Employee may have to the laying of
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venue of any such suit, action or proceeding in any such court. Eligible Employees also irrevocably and unconditionally consent to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 9.2.

(d)    To the extent a Participant executes a Release as described in Section 2.27, the Eligible Employee’s acknowledgements and agreements in this Section 6.8 apply equally to the noncompetition provisions in said Release. Additionally, AEP and the AEP System Companies shall have all of the rights outlined in this Section 6.8 as pertains to the enforcement of any noncompetition provisions contained in any such Release.

Section 6.9    Survival of Provisions. The obligations contained in this Article VI shall survive the termination of an Eligible Employee’s employment with the AEP System Companies and shall be fully enforceable thereafter.

ARTICLE VII
PLAN ADMINISTRATION; DUTIES OF THE COMPANY, THE COMMITTEE AND
THE PLAN ADMINISTRATOR; AND CLAIMS

Section 7.1    Authority and Duties. It shall be the duty of the Plan Administrator, on the basis of information supplied to it by the Company and the Committee, to properly administer the Plan. The Plan Administrator shall have the full power, authority, and discretion to construe, interpret, and administer the Plan, to make factual determinations, to correct deficiencies therein, and to supply omissions. All decisions, actions, and interpretations of the Plan Administrator shall be final, binding, and conclusive upon the parties, subject only to determinations by the Plan Administrator, with respect to denied claims for Severance Benefits. The Plan Administrator may adopt such rules and regulations and may make such decisions as it deems necessary or desirable for the proper administration of the Plan. The Plan Administrator shall be a “named fiduciary” within the meaning of ERISA.

Section 7.2    Payment. Payments of Severance Benefits to Participants shall be made in such amount as determined by the Committee under Article IV (subject to adjustment as set forth in Article X), from the Company’s general assets, in accordance with the terms of the Plan, as directed by the Committee.

Section 7.3    Discretion. Any decisions, actions or interpretations to be made under the Plan by the Board, the Committee and the Plan Administrator, acting on behalf of either, shall be made in each of their respective sole discretion, not in any fiduciary capacity and need not be uniformly applied to similarly situated individuals and such decisions, actions or interpretations shall be final, binding and conclusive upon all parties. As a condition of participating in the Plan, each Eligible Employee acknowledges that all decisions and determinations of the Board, the Committee, and the Plan Administrator shall be final and binding on the Eligible Employee, their beneficiaries, and any other person having or claiming an interest under the Plan on their behalf; provided, however, that the Eligible Employee shall have the right to challenge any such decisions and determinations in accordance with the claims and appeals procedures set forth in Section 7.4 and applicable law.

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Section 7.4    Claims Administration.

(a)    Each Participant under this Plan may make a claim for benefits under the Plan by completing and filing with the Plan Administrator a written request for review in the manner specified by the Plan Administrator. No person may bring an action for any alleged wrongful denial of Plan benefits in a court of law unless the claims procedures described in this Article VII are exhausted and a final determination is made by the Plan Administrator. If the terminated Participant or interested person challenges a decision by the Plan Administrator, a review by the court of law will be limited to the facts, evidence and issues presented to the Plan Administrator during the claims procedure set forth in this Article VII. Facts and evidence that become known to the terminated Participant or other interested person after having exhausted the claims procedure must be brought to the attention of the Plan Administrator for reconsideration. Issues not raised with the Plan Administrator will be deemed waived.

(b)    Before the date on which payment of Severance Benefits commence, each such application must be supported by such information as the Plan Administrator deems relevant and appropriate. In the event that any claim relating to the administration of Severance Benefits is denied in whole or in part, the terminated Participant or their beneficiary (the “Claimant”) whose claim has been so denied shall be notified of such denial in writing by the Plan Administrator within 90 days after the receipt of the claim for benefits. This period may be extended an additional 90 days if the Plan Administrator determines such extension is necessary and the Plan Administrator provides notice of extension to the Claimant prior to the end of the initial 90-day period. The notice advising of the denial shall specify the following: (i) the reason or reasons for denial; (ii) make specific reference to the Plan provisions on which the determination was based; (iii) describe any additional material or information necessary for the Claimant to perfect the claim (explaining why such material or information is needed); and (iv) describe the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review.

(c)    A Claimant whose claim has been denied shall file with the Plan Administrator a notice of appeal of the denial. Such notice shall be filed within 60 calendar days of notification by the Plan Administrator of the denial of a claim, shall be made in writing, and shall set forth all of the facts upon which the appeal is based. Appeals not timely filed shall be barred. The Plan Administrator shall consider the merits of the Claimant’s written presentations, the merits of any facts or evidence in support of the denial of benefits, and such other facts and circumstances as the Plan Administrator shall deem relevant.

(d)    The Plan Administrator shall render a determination upon the appealed claim which determination shall be accompanied by a written statement as to the reasons therefore. The determination shall be communicated to the Claimant within 60 days of the Claimant’s request for review, unless the Plan Administrator determines that special circumstances require an extension of time for processing the claim. In such case, the Plan Administrator shall notify the Claimant of the need for an extension of time to render its decision prior to the end of the initial 60-day period, and the Plan Administrator shall have an additional 60-day period to make its
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determination. The determination so rendered shall be binding upon all parties. If the determination is adverse to the Claimant, the notice shall: (i) provide the reason or reasons for denial; (ii) make specific reference to the Plan provisions on which the determination was based; (iii) include a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the Claimant’s claim for benefits; and (iv) state that the Claimant has the right to bring an action under section 502(a) of ERISA.

ARTICLE VIII
AMENDMENT, TERMINATION AND DURATION

Section 8.1    Amendment, Suspension and Termination.

(a)    Except as otherwise provided in paragraph (b) hereof, the Committee or its delegee shall have the right, at any time and from time to time, to amend, suspend, or terminate the Plan in whole or in part, for any reason or without reason, and without either the consent of or the prior notification to any Eligible Employee, by a formal written action. No such amendment shall give the Company the right to recover any amount paid to a Participant prior to the date of such amendment or to cause the cessation of Severance Benefits already approved for a Participant who has returned to the Company an executed Release as required under Section 3.2 (except as otherwise contemplated by the terms of the Plan).

(b)    Any amendment, modification or termination of the Plan undertaken pursuant to paragraph (a) hereof that (i) reduces or eliminates Plan benefits, (ii) terminates the participation of one or more Eligible Employees, or (iii) modifies the notice provisions of this Section 8.1(b), shall be effective 12 months (or such longer period as determined by the Committee or its delegee) after the date that each affected Eligible Employee is provided written notice of such amendment, modification or termination.

Section 8.2    Duration. Unless terminated sooner by the Committee or its delegee, the Plan shall continue in full force and effect until termination of the Plan pursuant to Section 8.1; provided, however, that after the termination of the Plan, if any Participant terminated employment on account of an Involuntary Termination or a Good Reason Resignation prior to the termination of the Plan and is still receiving Severance Benefits under the Plan, the Plan shall remain in effect until all of the obligations of the Company are satisfied with respect to such Participant.

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ARTICLE IX
MISCELLANEOUS

Section 9.1    Nonalienation of Benefits. None of the payments, benefits or rights of any Participant shall be subject to any claim of any creditor of any Participant, and, in particular, to the fullest extent permitted by law, all such payments, benefits and rights shall be free from attachment, garnishment (if permitted under applicable law), trustee’s process, or any other legal or equitable process available to any creditor of such Participant. No Participant shall have the right to alienate, anticipate, commute, plead, encumber or assign any of the benefits or payments that they may expect to receive, continently or otherwise, under this Plan.

Section 9.2    Notices. All notices and other communications required hereunder shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service. In the case of the Participant, mailed notices shall be addressed to them at the home address which they most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to the Plan Administrator.

Section 9.3    Successors. Any Successor to the Company or AEP shall assume the obligations under this Plan and expressly agree to perform the obligations under this Plan.

Section 9.4    Other Payments. Except as otherwise provided in this Plan, no Participant shall be entitled to any cash payments or other severance benefits under any of the Company’s then current severance pay policies for a termination that is covered by this Plan for the Participant.

Section 9.5    No Mitigation. Except as otherwise set forth in the Plan, Participants shall not be required to mitigate the amount of any Severance Benefits provided for in this Plan by seeking other employment or otherwise, nor shall the amount of any Severance Benefits provided for herein be reduced by any compensation earned by other employment or otherwise, except if the Participant is re-employed by the AEP System Companies, in which case Severance Benefits shall cease.

Section 9.6    No Contract of Employment. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee or any person whosoever, the right to be retained in the service of the AEP System Companies, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted.

Section 9.7    Severability of Provisions. If any provision of this Plan shall be held invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included.

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Section 9.8    Heirs, Assigns, and Personal Representatives. This Plan shall be binding upon the heirs, executors, administrators, successors and assigns of the parties, including each Participant, present and future.

Section 9.9    Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.

Section 9.10    Gender and Number. Where the context admits: words in any gender shall include any other gender, and, except where otherwise clearly indicated by context, the singular shall include the plural, and vice-versa.

Section 9.11    Unfunded Plan. The Plan shall not be funded. No Participant shall have any right to, or interest in, any assets of the AEP System Companies that may be applied by the AEP System Companies to the payment of Severance Benefits.

Section 9.12    Payments to Incompetent Persons. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipting therefore shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Company, the Committee and all other parties with respect thereto.

Section 9.13    Lost Payees. A benefit shall be deemed forfeited if the Plan Administrator is unable to locate a Participant to whom Severance Benefits are due. Such Severance Benefits shall be reinstated if application is made by the Participant for the forfeited Severance Benefits while this Plan is in operation.

Section 9.14    Controlling Law. This Plan shall be construed and enforced according to the laws of the State of Ohio without regard to the application of choice of law rules to the extent not superseded by Federal law.

ARTICLE X
COORDINATION WITH GENERAL SEVERANCE PLAN

Section 10.1    Coordination Generally. If a Participant becomes entitled to receive the benefits under both this Plan and the General Severance Plan (a “Dual Participant”), the benefits provided under this Plan shall be adjusted in the manner described in this Article X.

Section 10.2    Salary and Bonus Severance. The amount of cash to be paid to the Dual Participant as Severance Benefits described in Section 4.1(a) shall be reduced (but not below $0) by an amount equal to the lump sum severance allowance calculated under the General Severance Plan (currently set forth in Sections 3.1 or 3.2, as appropriate, of the General Severance Plan), and that reduced amount shall be paid in the time and manner described in Section 5.1(a) of this Plan, notwithstanding any different payment schedule that may be specified in the General Severance Plan.

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Section 10.3    Continuation of Medical and Dental Coverage. The provisions of this Plan shall not preclude a Dual Participant from receiving an option to continue medical coverage under the terms and conditions as may then be made available to such Dual Participant (or their surviving covered dependents) under the terms of the General Severance Plan (currently set forth in Section 3.3 of the General Severance Plan).

Section 10.4    Administration of Claims Involving Article X. All determinations of regarding entitlement to benefits described in the General Severance Plan shall be made in accordance with the terms set forth in the General Severance Plan. The Committee and the Plan Administrator under this Plan may, in their sole discretion, consult with any one or more individuals who are involved in the administration of the General Severance Plan in connection with making any determinations regarding the Severance Benefits to be provided under this Plan.

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EXHIBIT A
to
American Electric Power Executive Severance Plan

SEVERANCE, RELEASE OF ALL CLAIMS AND NONCOMPETITION AGREEMENT

1.    This Severance, Release of All Claims and Noncompetition Agreement ("Agreement") is entered into by and between <<FULLNAME>>, herein after referred to, together with their heirs, executors, administrators, successors, assigns and personal representatives, as "Employee", and American Electric Power Company Inc., hereinafter referred to, together with all its past, present and future affiliated, parent and/or subsidiary organizations and divisions, and all past, present and future officers, directors, members, employees and agents of each, in both their individual and representative capacities, as the "Company".

2.    Severance Allowance. Provided the Employee timely executes, returns, and does not revoke this Agreement and continues to provide services to the Company up to and including the Termination Date (also referred to in this Agreement as a “Separation Date”), the Company shall provide the following consideration:

(a)    to Employee (or Employee’s estate) a salary and bonus severance in the amount of $____________ (the “Severance Amount”). The Company shall pay the Severance Amount to Employee according to the following payment schedule:

[describe the amount and timing of payment of applicable Severance Benefits described in Sections 4.1 and 5.1 of the American Electric Power Executive Severance Plan, as amended].

Payment under this Section 2(a) shall be made by direct deposit, by mailing to the last address provided by Employee to the Company, or by such other reasonable method as determined by the Company. Each payment shall be subject to such deductions as required by law including, if applicable, repayment of the pay advance made to Employee on or about April 12, 2001, that is not deducted from other amounts paid or payable to Employee.

(b)    Partial vesting shall apply to Employee’s outstanding Performance Share Awards and RSU Awards, as further described in the Summary of Benefits from [COMPANY REPRESENTATIVE] to Employee, a copy of which is attached hereto as Exhibit A (the “Summary of Benefits”).

3.    Consideration. Employee acknowledges that the benefits described in this Agreement are benefits to which they would not be entitled but for this Agreement.

4.     Release and Waiver of Claims.

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(A) Release and Waiver. Employee hereby releases and forever discharges the Company and the Company’s long-term disability plans (including any trustees, custodians and administrators engaged in connection with the administration of claims or assets maintained in connection with any such plans) of and from any and all legal, equitable, and administrative claims and demands of every name, type, act and nature, arising out of or existing by reason of any known or unknown act or inaction whatsoever and occurring directly or indirectly as a result of or prior to execution of this Agreement. This release includes, but is not limited to, any claims, charges, complaints, grievances, causes of action (known or unknown), demands, injuries (whether personal, emotional or other), unfair labor practices, or suits arising, directly or indirectly, out of Employee's employment with and/or separation of employment from the Company, and includes, but is not limited to claims, charges, complaints, actions, grievances, demands or suits which may be, have, or might have been asserted, whether in contract or in tort, and whether under common law or under federal, state or local statute, regulation or ordinance. Claims, actions and demands released herein include but are not limited to those based on allegations of wrongful discharge, retaliation, personal injury and/or breach of contract; those arising under federal, state or local employment discrimination, fair employment practices, and/or wage and hour laws; and for West Virginia employees, those arising under the West Virginia Human Rights Act; those arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, as amended, the Fair Labor Standards Act, the Age Discrimination in Employment Act of 1967 (“ADEA”), the Older Workers’ Benefit Protection Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act (“ADA”) and Executive Order 11246, (all as amended); those arising under the Uniformed Services Employment and Re-employment Rights Act of 1994 (“USERRA”), the Worker Adjustment and Retraining Notification Act (“WARN”), the Labor Management Relations Act (“LMRA”), the National Labor Relations Act (“NLRA”), and the Family and Medical Leave Act (“FMLA”); and those arising under applicable securities laws. Also released are any claims and demands related to entitlement to long-term disability benefits under any Company long-term disability plan. Employee is waiving any right to recover any individual relief from the Company (including back pay, front pay, reinstatement or other legal or equitable relief) in any charge, complaint, lawsuit or other proceeding brought by Employee or on Employee's behalf against the Company pertaining to events occurring directly or indirectly as the result of or prior to execution of this Agreement. The parties intend that this release and waiver be construed as broadly as the law permits.

(B) Excluded. This release and waiver does not apply to (i) claims for unemployment or worker’s compensation benefits; (ii) any vested rights under Company pension and savings plans (401k); (iii) claims for benefits or reimbursement under any health and welfare benefit plans (medical, dental and vision) under the terms of such plans; (iv) claims for vested balances and payments under non-qualified deferred compensation plans; (v) and claims which controlling law clearly holds cannot be waived or released by private agreement.

5.    Protected Activity. (A) Employee understands and acknowledges that nothing in this Agreement prohibits, penalizes, or otherwise discourages them from reporting, providing testimony regarding, or otherwise communicating any nuclear safety concern, workplace safety concern, or public safety concern to the U.S. Nuclear Regulatory Commission (NRC) or the U.S. Department of Labor (DOL). Employee further understands and acknowledges that the
24

    
provisions of this Agreement are not intended to restrict their communication with, or full cooperation in, proceedings or investigations by any agency relating to nuclear regulatory or safety issues. Employee understands that nothing in the Agreement waives their right to file a claim with the DOL pursuant to Section 211 of the Energy Reorganization Act, but the Employee expressly waives their right to recover any and all damages or other equitable relief, including, but not limited to reinstatement, back pay, front pay, compensatory damages, attorney fees or costs, that may be awarded to the Employee by the DOL as a result of such a claim.

(B) Nothing in this Agreement (including but not limited to the release and waiver of claims and the confidentiality, cooperation, non-disparagement, return of property and any other limiting provisions) (1) affects or limits Employee’s right to challenge the validity of this Agreement under the ADEA or the Older Workers Benefit Protection Act (where Employee is age 40 or older) or (2) prevents Employee from filing a charge or complaint with, from communicating with or from participating in an investigation or proceeding conducted by, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the National Labor Relations Board, the Securities and Exchange Commission, the Internal Revenue Service, the Department of Justice or any other federal, state or local agency charged with the enforcement of any laws, including providing documents or other information. This Agreement does not limit any right Employee may have, where eligible, to receive an award from a government agency (and not the Company) for information provided to the government agency.

6.    Agreement Not to Compete. Without American Electric Power Service Corporation’s prior written consent, Employee agrees not to, during the [12 or 24, as applicable]-month period following the Employee’s Termination Date (the “Restricted Period”), for any reason, directly or indirectly either as principal, agent, manager, employee, partner, shareholder, director, officer, consultant or otherwise, become engaged or involved, in a manner that relates to or is similar in nature to the specific duties performed by the Employee at any time during their employment with any the Company, in any business (other than as a less-than three percent (3%) equity owner of any corporation traded on any national, international or regional stock exchange or in the over-the-counter market) that directly competes with the Company in

(i)    the business of the harnessing, production, transmission, distribution, marketing or sale of electricity; or the development or operation of transmission facilities or power generation facilities; or

(ii)    any other business in which the Company is engaged at the termination of the Employee's employment with the Company.

The provisions of this Section 6 shall be limited in scope and be effective only within one or more of the following geographical areas: (A) any state in the United States where the Company has at least U.S. $25 million in capital deployed as of the Employee’s Termination Date; or (B) any state or country with respect to which the Company conducted a business, which, or oversight of which, constituted any part of the Employee’s employment. The parties intend the above geographical areas to be completely severable and independent, and any invalidity or unenforceability of this Agreement with respect to any one area shall not render this Agreement
25

    
unenforceable as applied to any one or more of the other areas. Nothing in this Section 6 shall be construed to prohibit the Employee being retained during the Restricted Period in a capacity as an attorney licensed to practice law, or to restrict the Employee from providing advice and counsel in such capacity, in any jurisdiction where such prohibition or restriction is contrary to law.

7.    Cessation of Employment and (where applicable) LTD Benefits. If Employee has any claim of any benefit entitlement attributable to a disability of Employee, Employee further acknowledges and understands that, as a consequence of accepting the benefits referenced in this Agreement, and signing this Agreement, Employee’s employment with the Company is terminated, the payment (if applicable) of any long-term disability benefits will cease, any claim of entitlement to long-term disability benefits is released, and that any existing reduction of employee contributions toward the cost of medical, dental, life and any other coverages will also cease, subject to Employee’s rights to continuation of coverages pursuant to applicable law. In any event, Employee acknowledges that Employee shall no longer be entitled to any continued employment with the Company.

8.     Resignation of Director, Officer and Manager Positions. To the extent Employee has retained any director, officer and/or manager positions with the Company subsequent to Employee’s termination of employment, and to the extent Employee has not already done so, Employee, by executing this Agreement on the date set forth below, hereby resigns, effective immediately, from any and all director, officer and/or manager positions with the Company.

9.    Acknowledgement of Covenants. Employee reaffirms that Employee is bound by and shall comply with the provisions in Article VI of the American Electric Power Executive Severance Plan, as amended (the “Executive Severance Plan”), a copy of which is attached hereto as Exhibit B, during and after the Employee’s employment with the Company.

10.    No Admission of Liability. Employee understands that the Company believes that Employee has no valid claim against the Company and that this Agreement is being offered to give Employee a source of income and benefits while they attempt to obtain other employment. The fact that this Agreement is offered to the Employee in the first place will not be understood as an indication that the Company believes that Employee has been injured, discriminated against or treated unlawfully in any respect.

11.    Re-employment. Employee agrees and understands that they will not seek re-employment with the Company, and that this Agreement shall act as a complete bar to any claim of entitlement to employment or re-employment by the Company.

12.    Entire Agreement. Employee and the Company acknowledge that this Agreement and the exhibits hereto contains the entire agreement and understanding of the parties and that no other representation or agreement of any kind whatsoever has been made to Employee by the Company or by any other person or entity to cause Employee to sign this Agreement.    

26

    
13.    Applicable Law . This Agreement shall be governed and interpreted in accordance with the laws of Ohio and applicable federal law.

14.    Severability. If any provision of this Agreement is determined to be invalid or unenforceable, the Company and Employee agree that such determination shall not affect the other provisions and that all other provisions shall be enforced as if the invalid provision were not a part of this Agreement.

15.    EMPLOYEE NOTICE: PLEASE READ CAREFULLY BEFORE SIGNING THIS AGREEMENT.    

You have twenty-one (21) calendar days within which to consider this Agreement. You may not sign this Agreement until after your Separation Date. You may execute (accept) this Agreement at any time after your Separation Date and within the twenty-one (21) day review period by signing and dating this Agreement and then scanning and emailing it to [COMPANY REPRESENTATIVE] at [EMAIL ADDRESS]. Should you sign the Agreement, you have the right to revoke it, in writing, for a period of seven (7) calendar days after you sign it. Any such revocation should be provided to [COMPANY REPRESENTATIVE] at [EMAIL ADDRESS]. This Agreement shall not become effective or enforceable until the seven-day revocation period has expired. However, if you sign this Agreement and do not exercise the right to revoke, this Agreement will immediately become a binding and enforceable contract.

You are advised to consult with an attorney prior to signing this Agreement. You may have rights or claims arising under the Age Discrimination in Employment Act and/or the Older Workers Benefit Protection Act. If you work in West Virginia, you are further advised that the toll-free number of the West Virginia State Bar Association is 1-800-642-3617.

16.    Capitalized Terms and Definitions. Unless specifically defined herein, capitalized terms in this Agreement shall have the definition described in the Executive Severance Plan. Employee acknowledges that they have received a copy of the Executive Severance Plan.

17.    Conclusion. The parties have read the foregoing Severance, and Release of All Claims and Noncompetition Agreement and fully understand it. They now voluntarily sign this Agreement on the date indicated, signifying their agreement and willingness to be bound by its terms.

Employee    American Electric Power Company, Inc.

_________________________________    By     

                        Title: ______________________________

Dated: ____________________________    Dated: _____________________________
27

SEVERANCE, RELEASE OF ALL CLAIMS, AND NONCOMPETITION AGREEMENT

1.This Severance, Release of All Claims and Noncompetition Agreement ("Agreement") is entered into by and between Lisa M. Barton, hereinafter referred to, together with her heirs, executors, administrators, successors, assigns and personal representatives, as "Employee", and American Electric Power Service Corporation, hereinafter referred to, together with all its past, present and future affiliated, parent and/or subsidiary organizations and divisions, and all past, present and future officers, directors, members, employees and agents of each, in both their individual and representative capacities, as the "Company."

2.Severance Allowance. Provided the Employee timely executes, returns, and does not revoke this Agreement and continues to provide services to the Company up to and including November 1, 2022 (the “Termination Date”), the Company shall provide the following consideration:

(a)    Employee (or Employee’s estate) a salary and bonus severance in the amount of $1,520,700 (the “Severance Amount”). The Company shall pay the Severance Amount to Employee according to the following payment schedule:

(i)    As of the first regular payroll date of the Company that coincides with or immediately follows the date that is six months after the Termination Date, a payment equal to 50% of the Severance Amount; and

(ii)    The balance of such Severance Amount shall be paid in 13 equal bi-weekly installments as of such number of subsequent regular payroll dates of the Company.

Payment under this Section 2 shall be made by direct deposit, mailing to the last address provided by Employee to the Company or such other reasonable method as determined by the Company. Each payment shall be subject to such deductions as required by law including, if applicable, repayment of the pay advance made to Employee on or about April 12, 2001, that is not deducted from other amounts paid or payable to Employee.

(b)    Partial vesting shall apply to Employee’s outstanding Performance Share Awards and RSU Awards, as further described in the Summary of Benefits from Andrew R. Carlin to Employee, a copy of which is attached hereto as Exhibit A (the “Summary of Benefits”).

3.Consideration. Employee acknowledges that the benefits described in this Agreement are benefits to which she would not be entitled but for this Agreement.

4.Release and Waiver of Claims. In exchange for the foregoing benefits, subject to Section 10 of this Agreement (Protected Activity), Employee, on behalf of Employee and her heirs, executors, administrators, successors, assigns and personal representatives, hereby releases and forever discharges the Company and the Company’s long-term disability plans (including
AEP CONFIDENTIAL
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any trustees, custodians and administrators engaged in connection with the administration of claims or assets maintained in connection with any such plans) of and from any and all legal, equitable, and administrative claims and demands of every name, type, act and nature, arising out of or existing by reason of any known or unknown act or inaction whatsoever and occurring directly or indirectly as a result of or prior to execution of this Agreement. This release includes, but is not limited to, any claims, charges, complaints, grievances, causes of action (known or unknown), demands, injuries (whether personal, emotional or other), unfair labor practices, or suits arising, directly or indirectly, out of Employee's employment with and/or separation of employment from the Company, and includes, but is not limited to claims, charges, complaints, actions, grievances, demands or suits which may be, have, or might have been asserted, whether in contract or in tort, and whether under common law or under federal, state or local statute, regulation or ordinance. Claims, actions and demands released herein include but are not limited to those based on allegations of wrongful discharge, retaliation, personal injury and/or breach of contract; those arising under federal, state or local employment discrimination, fair employment practices, and/or wage and hour laws; and for West Virginia employees, those arising under the West Virginia Human Rights Act; those arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, as amended, the Fair Labor Standards Act, the Age Discrimination in Employment Act of 1967 (“ADEA”), the Rehabilitation Act of 1973, the Americans With Disabilities Act (“ADA”) and Executive Order 11246, (all as amended); those arising under the Uniformed Services Employment and Re-employment Rights Act of 1994 (“USERRA”), the Worker Adjustment and Retraining Notification Act (“WARN”), the Labor Management Relations Act (“LMRA”), the National Labor Relations Act (“NLRA”), and the Family and Medical Leave Act (“FMLA”); and those arising under applicable securities laws. Also released are any claims and demands related to entitlement to long-term disability benefits under any Company long-term disability plan. Excluded from this Agreement are any pending or as yet unaccrued worker’s compensation/occupational disease claims, vested pension and savings plan (401k) benefits, participation in health and welfare benefits (medical, dental and vision) under the terms of such plans, vested balances and payments under non-qualified deferred compensation plans, and claims which cannot be waived by law.

5.Agreement Not to Compete. Without American Electric Power Service Corporation’s prior written consent, Employee agrees not to, during the 12-month period following the Employee’s Termination Date (the “Restricted Period”), for any reason, directly or indirectly either as principal, agent, manager, employee, partner, shareholder, director, officer, consultant or otherwise, become engaged or involved, in a manner that relates to or is similar in nature to the specific duties performed by the Employee at any time during her employment with the Company, in any business (other than as a less-than three percent (3%) equity owner of any corporation traded on any national, international or regional stock exchange or in the over-the- counter market) that directly competes with the Company in

(i)the business of the harnessing, production, transmission, distribution, marketing or sale of electricity; or the development or operation of transmission facilities or power generation facilities; or

(ii)any other business in which the Company is engaged at the termination of the
AEP CONFIDENTIAL
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Employee's employment with the Company.

The provisions of this Section 5 shall be limited in scope and be effective only within one or more of the following geographical areas: (A) any state in the United States where the Company has at least U.S. $25 million in capital deployed as of the Employee’s Termination Date; or (B) any state or country with respect to which the Company conducted a business, which, or oversight of which, constituted any part of the Employee’s employment. The parties intend the above geographical areas to be completely severable and independent, and any invalidity or unenforceability of this Agreement with respect to any one area shall not render this Agreement unenforceable as applied to any one or more of the other areas. Nothing in this Section 5 shall be construed to prohibit the Employee being retained during the Restricted Period in a capacity as an attorney licensed to practice law, or to restrict the Employee from providing advice and counsel in such capacity, in any jurisdiction where such prohibition or restriction is contrary to law.

6.Cessation of Employment and (where applicable) LTD Benefits. If Employee has any claim of any benefit entitlement attributable to a disability of Employee, Employee further acknowledges and understands that, as a consequence of accepting the benefits referenced in this Agreement, and signing this Agreement, Employee’s employment with the Company is terminated, the payment (if applicable) of any long-term disability benefits will cease, any claim of entitlement to long-term disability benefits is released, and that any existing reduction of employee contributions toward the cost of medical, dental, life and any other coverages will also cease, subject to Employee’s rights to continuation of coverages pursuant to applicable law. In any event, Employee acknowledges that Employee shall no longer be entitled to any continued employment with the Company.

7.Resignation of Director, Officer and Manager Positions. To the extent Employee has retained any director, officer and/or manager positions with the Company subsequent to Employee’s termination of employment, and to the extent Employee has not already done so, Employee, by executing this Agreement on the date set forth below, hereby resigns, effective immediately, from any and all director, officer and manager positions with the Company.

8.Acknowledgement of Covenants. Employee affirms that Employee has received a copy of the American Electric Power Executive Severance Plan, as amended, a copy of which is attached hereto as Exhibit B (the “Plan”) and shall comply with the provisions in Article VI, during and after the Employee’s employment with the Company.

9.No Admission of Liability. Employee understands that the Company believes that Employee has no valid claim against the Company and that this Agreement is being offered to give Employee a source of income and benefits while she attempts to obtain other employment. The fact that this Agreement is offered to the Employee in the first place will not be understood as an indication that the Company believes that Employee has been injured, discriminated against, or treated unlawfully in any respect.

10.Protected Activity. (A) Employee understands and acknowledges that nothing in this Agreement prohibits, penalizes, or otherwise discourages her from reporting, providing
AEP CONFIDENTIAL
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testimony regarding, or otherwise communicating any nuclear safety concern, workplace safety concern, or public safety concern to the U.S. Nuclear Regulatory Commission (NRC) or the U.S. Department of Labor (DOL). Employee further understands and acknowledges that the provisions of this Agreement are not intended to restrict her communication with, or full cooperation in, proceedings or investigations by any agency relating to nuclear regulatory or safety issues. Employee understands that nothing in the Agreement waives her right to file a claim with the DOL pursuant to Section 211 of the Energy Reorganization Act, but the Employee expressly waives her right to recover any and all damages or other equitable relief, including, but not limited to reinstatement, back pay, front pay, compensatory damages, attorney fees or costs, that may be awarded to the Employee by the DOL as a result of such a claim.

(B) Nothing in this Agreement (including but not limited to the release and waiver of claims and the confidentiality, cooperation, non-disparagement, return of property and any other limiting provisions) (1) affects or limits Employee’s right to challenge the validity of this Agreement under the ADEA or the Older Workers Benefit Protection Act (where Employee is age 40 or older) or (2) prevents Employee from filing a charge or complaint with, from communicating with or from participating in an investigation or proceeding conducted by, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the National Labor Relations Board, the Securities and Exchange Commission, the Internal Revenue Service, the Department of Justice or any other federal, state or local agency charged with the enforcement of any laws, including providing documents or other information. This Agreement does not limit any right Employee may have, where eligible, to receive an award from a government agency (and not the Company) for information provided to the government agency.

11.Re-employment. Employee agrees and understands that she will not seek re-employment with the Company, and that this Agreement shall act as a complete defense to any claim of entitlement to employment or re-employment by the Company.

12.Entire Agreement. Employee and the Company acknowledge that this Agreement and the Plan contains the entire agreement and understanding of the parties and that no other representation or agreement of any kind whatsoever has been made to Employee by the Company or by any other person or entity to cause Employee to sign this Agreement.

13.Applicable Law. This Agreement shall be governed and interpreted in accordance with the laws of Ohio and applicable federal law.

14.Severability. If any provision of this Agreement is determined to be invalid or unenforceable, the Company and Employee agree that such determination shall not affect the other provisions and that all other provisions shall be enforced as if the invalid provision were not a part of this Agreement.

15.EMPLOYEE NOTICE: PLEASE READ CAREFULLY BEFORE SIGNING THIS SEVERANCE, RELEASE OF ALL CLAIMS AND NONCOMPETITION AGREEMENT.

AEP CONFIDENTIAL
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You have twenty-one (21) calendar days within which to consider this Agreement. You may not sign this Agreement until after your Termination Date. Should you sign the Agreement, you have the right to revoke it, in writing, for a period of seven (7) calendar days after you sign it. Any such revocation should be provided to Andy Carlin at arcarlin@aep.com. This Agreement shall not become effective or enforceable until the seven-day revocation period has expired. However, if you sign this Agreement but do not exercise the right to revoke, this Agreement will immediately become a binding and enforceable contract.

You are advised to consult with an attorney prior to signing this Agreement. You may have rights or claims arising under the Age Discrimination in Employment Act and/or Older Workers Benefit Protection Act. If you work in West Virginia, you are further advised that the toll-free number of the West Virginia State Bar Association is 1-800-642-3617.

16.Capitalized Terms and Definitions. Unless specifically defined herein, capitalized terms in this Agreement shall have the definition used in the Plan. Employee acknowledges that he has received a copy of the Plan.

17.Conclusion. The parties have read the foregoing Severance, and Release of All Claims and Noncompetition Agreement and fully understand it. They now voluntarily sign this Agreement on the date indicated, signifying their agreement and willingness to be bound by its terms.

LISA M. BARTON    AMERICAN ELECTRIC POWER SERVICE CORPORATION

/s/ Lisa M. Barton    By /s/ Nicholas K. Akins
    
    Name: Nicholas K. Akins
    
    Title: Chairman, President, CEO

Dated: December 20, 2022    Dated: October 29, 2022
AEP CONFIDENTIAL
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Execution Version
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
This SECOND AMENDMENT TO THE STOCK PURCHASE AGREEMENT, is made as of January 16, 2023 (this “Amendment”), by and among American Electric Power Company, Inc. (“AEP”), a New York corporation, AEP Transmission Company, LLC (“AEP TransCo”), a Delaware limited liability company (AEP and AEP TransCo are each referred to individually as a “Seller,” and, collectively, as “Sellers”), and Liberty Utilities Co., a Delaware corporation (“Purchaser”). Sellers and Purchaser are each referred to individually in this Amendment as a “Party” and collectively as the “Parties.” Capitalized terms used herein but not defined herein shall have the meaning assigned thereto in the SPA (as defined below).
RECITALS:
WHEREAS, the Parties are party to that certain Stock Purchase Agreement, dated as of October 26, 2021 (as amended by that certain First Amendment to the Stock Purchase Agreement, dated as of September 29, 2022, and as may be further amended, supplemented or otherwise modified from time to time, the “SPA”).
WHEREAS, pursuant to Section 7.1(b) of the SPA, the respective obligations of each Party to effect the transactions contemplated by the SPA are subject to the receipt of the Required Regulatory Approvals, including the approval of FERC under Section 203 of the FPA (the “FERC 203 Approval”), and such approvals having become Final Orders.
WHEREAS, on December 15, 2022, FERC issued an Order Denying Application for Authorization of Disposition of Jurisdictional Facilities and Acquisition of Securities (181 FERC ¶ 61,212) (the “FERC Order”), denying, without prejudice, the Parties’ application for FERC 203 Approval under Docket No. EC22-26-000 (the “Initial FERC 203 Application”), and, accordingly, the condition to the Parties’ obligations to effect the transactions contemplated by the SPA set forth in Section 7.1(b) of the SPA has not been satisfied.
WHEREAS, in light of the FERC Order, the Parties desire to pursue a strategy of filing a new application for FERC 203 Approval (the “Second FERC 203 Application”) and not filing for rehearing or seeking further appeal or similar action with respect to the FERC Order or Initial FERC 203 Application (collectively, the “FERC 203 Strategy”).
WHEREAS, in connection with the foregoing, the Parties desire to clarify and set forth the understanding and agreement of the Parties with respect to the FERC 203 Approval, Initial FERC 203 Application, FERC 203 Strategy and Second FERC 203 Application.
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Sellers and Purchaser hereby agree as follows:
1.FERC 203 Strategy.
a.The Parties hereby agree to pursue the FERC 203 Strategy, including to file a new application for FERC 203 Approval and not to file for rehearing or seek further appeal or similar action with respect to the FERC Order or Initial FERC 203 Application. In connection with the foregoing, the Parties agree that from and

Execution Version
after the date of this Amendment, Section 4.5 of the SPA shall apply with respect to the FERC 203 Strategy and Second FERC 203 Application; provided, that the Parties shall, and shall cause their respective Affiliates to, cooperate with each other and use reasonable best efforts to submit the Second FERC 203 Application to FERC as promptly as reasonably practicable after the date of this Amendment in light of the strategic regulatory considerations of the Parties with a target submission date of February 3, 2023, but in any event no later than five (5) Business Days following the Parties’ mutually agreed conclusion of any discussions or review, to the extent permitted by Law, of the substance, timing or other material aspect of the Second FERC 203 Application with stakeholders prior to the formal submission of such filing to FERC, as such timeframe may be extended by mutual agreement of the Parties (which may be evidenced by e-mail), acting reasonably.
b.The Parties hereby acknowledge and agree that (i) the failure to file for rehearing or seek further appeal or similar action with respect to the FERC Order or Initial FERC 203 Application is not and shall not be deemed to be any breach or other violation of any Party’s obligations under the SPA and (ii) the fact that the FERC Order may become a final and non-appealable denial of the FERC 203 Approval or a final and non-appealable Legal Restraint shall not trigger, in and of itself, a termination right under Section 8.1(b)(iii) of the SPA or Section 8.1(b)(iv) of the SPA, or give rise to any obligation of Purchaser to pay the Termination Fee.
2.Reference to and Effect on the SPA. Except as modified by the amendments, waivers and agreements set forth herein, all of the terms, provisions and conditions precedent of the SPA shall remain in full force and effect and are hereby ratified and confirmed.
3.Governing Law. This Amendment (as well as any claim or controversy arising out of or relating to this Amendment or the transactions contemplated hereby) shall be governed by and construed in accordance with the Laws of the State of New York.
4.Waiver of Jury Trial; Submission to Jurisdiction; Other Incorporation by Reference. The provisions of Sections 10.1 (Amendment), 10.2 (Waivers and Consents), 10.3 (Notices), 10.4 (Assignment), 10.5 (No Third-Party Beneficiaries), 10.8 (Severability), 10.11 (Waiver of Jury Trial), 10.12 (Submission to Jurisdiction), 10.13 (Specific Performance) and 10.19 (Other Interpretive Matters) of the SPA are hereby incorporated by reference, mutatis mutandis, as if set forth in full herein.

5.Counterparts. This Amendment may be executed in multiple counterparts (each of which shall be deemed an original, but all of which together shall constitute one and the same instrument). Signatures to this Amendment transmitted by facsimile transmission, by electronic mail in “portable document format” (.pdf) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, shall have the same effect as physical delivery of the paper document bearing the original signature.
[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written.

												

 	AMERICAN ELECTRIC POWER COMPANY, INC.	
	 	 	 	
 	By:	/s/ Charles E. Zebula	
 	 	Name:	Charles E. Zebula	
 	 	Title:	Executive Vice President –	
 	 	 	Portfolio Optimization	
		
 	AEP TRANSMISSION COMPANY, LLC	
 	 	 	 	
 	By:	/s/ Charles E. Zebula	
 	 	Name:	Charles E. Zebula	
 	 	Title:	Vice President	

 	LIBERTY UTILITIES CO.	
	 	 	 	
 	By:	/s/ Todd Wiley	
 	 	Name:	Todd Wiley	
 	 	Title:	Treasurer and Secretary	
 	 	 		
 	By:	/s/ Macdara Nash	
 	 	Name:	Macdara Nash	
 	 	Title:	Vice President	

[Signature Page to Second Amendment to Stock Purchase Agreement]

Exhibit 21
Subsidiaries of
American Electric Power Company, Inc.
As of December 31, 2022
Each company shown indented is a subsidiary of the company immediately above which is not indented to the same degree. Subsidiaries not indented are directly owned by American Electric Power Company, Inc.

Name of Company		Location of
Incorporation	
American Electric Power Service Corporation		New York	
AEP Energy Supply LLC		Delaware	
AEP Clean Energy Resources, LLC		Delaware	
AEP Energy Partners, Inc		Delaware	
AEP Generation Resources Inc.		Delaware	
AEP OnSite Partners, LLC		Delaware	
AEP Renewables, LLC		Delaware	
AEP Generating Company		Ohio	
AEP Transmission Holding Company, LLC		Delaware	
AEP Transmission Company, LLC		Delaware	
AEP Indiana Michigan Transmission Company, Inc		Indiana	
AEP Ohio Transmission Company, Inc		Ohio	
AEP Oklahoma Transmission Company, Inc		Oklahoma	
AEP West Virginia Transmission Company, Inc		West Virginia	
AEP Texas Inc.		Delaware	
AEP Texas Central Transition Funding III LLC		Delaware	
AEP Texas North Generation Company LLC		Delaware	
AEP Texas Restoration Funding, LLC		Delaware	
Appalachian Power Company		Virginia	
Appalachian Consumer Rate Relief Funding LLC		Delaware	
Indiana Michigan Power Company		Indiana	
Kentucky Power Company		Kentucky	
Kingsport Power Company		Virginia	
Ohio Power Company		Ohio	
Ohio Valley Electric Corporation		Ohio	
Indiana-Kentucky Electric Corporation		Indiana	
Public Service Company of Oklahoma		Oklahoma	
Southwestern Electric Power Company		Delaware	
Wheeling Power Company		West Virginia	

Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-250106 and 333-249918) and on Form S-8 (Nos. 333-224973, 333-204557 and 333-178044) of American Electric Power Company, Inc. of our report dated February 23, 2023 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-255605) of AEP Transmission Company, LLC of our report dated February 23, 2023 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-253585) of AEP Texas Inc. of our report dated February 23, 2023 relating to the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-268874) of Appalachian Power Company of our report dated February 23, 2023 relating to the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-268880) of Indiana Michigan Power Company of our report dated February 23, 2023 relating to the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio    
February 23, 2023

Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-255600) of Ohio Power Company of our report dated February 23, 2023 relating to the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-251378) of Public Service Company of Oklahoma of our report dated February 23, 2023 relating to the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-258961) of Southwestern Electric Power Company of our report dated February 23, 2023 relating to the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
February 23, 2023

Exhibit 24
POWER OF ATTORNEY

AMERICAN ELECTRIC POWER COMPANY, INC.
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 2022

The undersigned directors of AMERICAN ELECTRIC POWER COMPANY, INC., a New York corporation (the "Company"), do hereby constitute and appoint JULIA A. SLOAT, ANN P. KELLY and JULIE A. SHERWOOD, and each of them, their attorneys-in-fact and agents, to execute for them, and in their names, and in any and all of their capacities, the Annual Report of the Company on Form 10-K, pursuant to Section 13 of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 2022, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform every act and thing required or necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF the undersigned have hereunto set their hands this 14th day of February, 2023.

/s/Nicholas K. Akins		/s/ Sandra Beach Lin	
Nicholas K. Akins		Sandra Beach Lin	
			
/s/ Barnie Beasley, Jr.		/s/ Benjamin G. S Fowke, III	
J. Barnie Beasley, Jr		Benjamin G.S. Fowke, III	
			
/s/ Art A. Garcia		/s/ Linda A. Goodspeed	
Art A. Garcia		Linda A. Goodspeed	
			
/s/ Donna A. James		/s/ Margaret M. McCarthy	
Donna A. James		Margaret M. McCarthy	
			
/s/ Oliver G. Richard, III		/s/ Daryl Roberts	
Oliver G. Richard, III		Daryl Roberts	
			
/s/ Julia A. Sloat		/s/ Sara Martinez Tucker	
Julia A. Sloat		Sara Martinez Tucker	
			
/s/ Lewis Von Thaer			
Lewis Von Thaer			

Exhibit 24
POWER OF ATTORNEY

AEP TRANSMISSION COMPANY, LLC
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 2022

The undersigned managers of AEP TRANSMISSION COMPANY, LLC, a Delaware limited liability company (the "Company"), do hereby constitute and appoint JULIA A. SLOAT, ANN P. KELLY and JULIE A. SHERWOOD, and each of them, their attorneys-in-fact and agents, to execute for them, and in their names, and in any and all of their capacities, the Annual Report of the Company on Form 10-K, pursuant to Section 13 of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 2022, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform every act and thing required or necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF the undersigned have hereunto set their hands this 14th day of February, 2023.

/s/ Julia A. Sloat	/s/ Scott P. Moore	
Julia A. Sloat	Scott P. Moore	
		
/s/ David M. Feinberg	/s/ Toby L. Thomas	
David M. Feinberg	Toby L. Thomas	
		
/s/ Ann P. Kelly		
Ann P. Kelly		

Exhibit 24
POWER OF ATTORNEY

AEP TEXAS INC.
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 2022

The undersigned directors of AEP TEXAS INC., a Delaware corporation (the "Company"), do hereby constitute and appoint JULIA A. SLOAT, ANN P. KELLY and JULIE A. SHERWOOD, and each of them, their attorneys-in-fact and agents, to execute for them, and in their names, and in any and all of their capacities, the Annual Report of the Company on Form 10-K, pursuant to Section 13 of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 2022, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform every act and thing required or necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF the undersigned have hereunto set their hands this 14th day of February, 2023.

/s/ Julia A. Sloat /s/ Ann P. Kelly
Julia A. Sloat Ann P. Kelly

/s/ Christian T. Beam /s/ Rajagopalan Sundararajan
Christian T. Beam Rajagopalan Sundararajan

/s/ Paul Chodak, III /s/ Toby L. Thomas
Paul Chodak, III Toby L. Thomas

/s/ David M. Feinberg /s/ Phillip R. Ulrich
David M. Feinberg Phillip R. Ulrich

/s/ Therace M. Risch /s/ Judith E. Talavera
Therace M. Risch Judith E. Talavera

/s/ Peggy I. Simmons
Peggy I. Simmons

Exhibit 24
POWER OF ATTORNEY

APPALACHIAN POWER COMPANY
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 2022

The undersigned directors of APPALACHIAN POWER COMPANY, a Virginia corporation (the "Company"), do hereby constitute and appoint JULIA A. SLOAT, ANN P. KELLY and JULIE A. SHERWOOD, and each of them, their attorneys-in-fact and agents, to execute for them, and in their names, and in any and all of their capacities, the Annual Report of the Company on Form 10-K, pursuant to Section 13 of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 2022, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform every act and thing required or necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF the undersigned have hereunto set their hands this 14th day of February, 2023.

/s/ Julia A. Sloat /s/ Ann P. Kelly
Julia A. Sloat Ann P. Kelly

/s/ Christian T. Beam /s/ Rajagopalan Sundararajan
Christian T. Beam Rajagopalan Sundararajan

/s/ Paul Chodak, III /s/ Toby L. Thomas
Paul Chodak, III Toby L. Thomas

/s/ David M. Feinberg /s/ Phillip R. Ulrich
David M. Feinberg Phillip R. Ulrich

/s/ Therace M. Risch /s/ Aaron D. Walker
Therace M. Risch Aaron D. Walker

/s/ Peggy I. Simmons
Peggy I. Simmons

Exhibit 24
POWER OF ATTORNEY

INDIANA MICHIGAN POWER COMPANY
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 2022

The undersigned directors of INDIANA MICHIGAN POWER COMPANY, an Indiana corporation (the "Company"), do hereby constitute and appoint JULIA A. SLOAT, ANN P. KELLY and JULIE A. SHERWOOD, and each of them, their attorneys-in-fact and agents, to execute for them, and in their names, and in any and all of their capacities, the Annual Report of the Company on Form 10-K, pursuant to Section 13 of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 2022, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform every act and thing required or necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF the undersigned have hereunto set their hands this 14th day of February, 2023.

/s/ Julia A. Sloat	/s/ Steven F. Baker	
Julia A. Sloat	Steven F. Baker	
		
/s/ Ann P. Kelly	/s/ Katherine K. Davis	
Ann P. Kelly	Katherine K. Davis	
		
/s/ Nicholas M. Elkins	/s/ David S. Isaacson	
Nicholas M. Elkins	David S. Isaacson	
		
/s/ Peggy I. Simmons	/s/ Toby L. Thomas	
Peggy I. Simmons	Toby L. Thomas	
		
/s/ Andrew J. Williamson		
Andrew J. Williamson		

Exhibit 24
POWER OF ATTORNEY

OHIO POWER COMPANY
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 2022

The undersigned directors of OHIO POWER COMPANY, an Ohio corporation (the "Company"), do hereby constitute and appoint JULIA A. SLOAT, ANN P. KELLY and JULIE A. SHERWOOD, and each of them, their attorneys-in-fact and agents, to execute for them, and in their names, and in any and all of their capacities, the Annual Report of the Company on Form 10-K, pursuant to Section 13 of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 2022, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform every act and thing required or necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF the undersigned have hereunto set their hands this 14th day of February, 2023.

/s/ Julia A. Sloat /s/ Ann P. Kelly
Julia A. Sloat Ann P. Kelly

/s/ Christian T. Beam /s/ Rajagopalan Sundararajan
Christian T. Beam Rajagopalan Sundararajan

/s/ Paul Chodak, III /s/ Toby L. Thomas
Paul Chodak, III Toby L. Thomas

/s/ David M. Feinberg /s/ Phillip R. Ulrich
David M. Feinberg Phillip R. Ulrich

/s/ Therace M. Risch /s/ Marc D. Reitter
Therace M. Risch Marc D. Reitter

/s/ Peggy I. Simmons
Peggy I. Simmons

Exhibit 24
POWER OF ATTORNEY

PUBLIC SERVICE COMPANY of OKLAHOMA
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 2022

The undersigned directors of PUBLIC SERVICE COMPANY of OKLAHOMA, an Oklahoma corporation (the "Company"), do hereby constitute and appoint JULIA A. SLOAT, ANN P. KELLY and JULIE A. SHERWOOD, and each of them, their attorneys-in-fact and agents, to execute for them, and in their names, and in any and all of their capacities, the Annual Report of the Company on Form 10-K, pursuant to Section 13 of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 2022, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform every act and thing required or necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF the undersigned have hereunto set their hands this 14th day of February, 2023.

/s/ Julia A. Sloat /s/ Ann P. Kelly
Julia A. Sloat Ann P. Kelly

/s/ Christian T. Beam /s/ Rajagopalan Sundararajan
Christian T. Beam Rajagopalan Sundararajan

/s/ Paul Chodak, III /s/ Toby L. Thomas
Paul Chodak, III Toby L. Thomas

/s/ David M. Feinberg /s/ Phillip R. Ulrich
David M. Feinberg Phillip R. Ulrich

/s/ Therace M. Risch /s/ Leigh Anne Strahler
Therace M. Risch Leigh Anne Strahler

/s/ Peggy I. Simmons
Peggy I. Simmons

Exhibit 24
POWER OF ATTORNEY

SOUTHWESTERN ELECTRIC POWER COMPANY
Annual Report on Form 10-K for the Fiscal Year Ended
December 31, 2022

The undersigned directors of SOUTHWESTERN ELECTRIC POWER COMPANY, a Delaware corporation (the "Company"), do hereby constitute and appoint JULIA A. SLOAT, ANN P. KELLY and JULIE A. SHERWOOD, and each of them, their attorneys-in-fact and agents, to execute for them, and in their names, and in any and all of their capacities, the Annual Report of the Company on Form 10-K, pursuant to Section 13 of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 2022, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform every act and thing required or necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF the undersigned have hereunto set their hands this 14th day of February, 2023.

/s/ Julia A. Sloat /s/ Ann P. Kelly
Julia A. Sloat Ann P. Kelly

/s/ Christian T. Beam /s/ Rajagopalan Sundararajan
Christian T. Beam Rajagopalan Sundararajan

/s/ Paul Chodak, III /s/ Toby L. Thomas
Paul Chodak, III Toby L. Thomas

/s/ David M. Feinberg /s/ Phillip R. Ulrich
David M. Feinberg Phillip R. Ulrich

/s/ Therace M. Risch /s/ D. Brett Mattison
Therace M. Risch D. Brett Mattison

/s/ Peggy I. Simmons
Peggy I. Simmons

EXHIBIT 31(a)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Julia A. Sloat, certify that:

1.I have reviewed this report on Form 10-K of American Electric Power Company, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Julia A. Sloat	
		Julia A. Sloat	
		Chief Executive Officer	

EXHIBIT 31(a)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Julia A. Sloat, certify that:

1.I have reviewed this report on Form 10-K of AEP Transmission Company, LLC;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Julia A. Sloat	
		Julia A. Sloat	
		Chief Executive Officer	

EXHIBIT 31(a)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Julia A. Sloat, certify that:

1.I have reviewed this report on Form 10-K of AEP Texas Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Julia A. Sloat	
		Julia A. Sloat	
		Chief Executive Officer	

EXHIBIT 31(a)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Julia A. Sloat, certify that:

1.I have reviewed this report on Form 10-K of Appalachian Power Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Julia A. Sloat	
		Julia A. Sloat	
		Chief Executive Officer	

EXHIBIT 31(a)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Julia A. Sloat, certify that:

1.I have reviewed this report on Form 10-K of Indiana Michigan Power Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Julia A. Sloat	
		Julia A. Sloat	
		Chief Executive Officer	

EXHIBIT 31(a)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Julia A. Sloat, certify that:

1.I have reviewed this report on Form 10-K of Ohio Power Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Julia A. Sloat	
		Julia A. Sloat	
		Chief Executive Officer	

EXHIBIT 31(a)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Julia A. Sloat, certify that:

1.I have reviewed this report on Form 10-K of Public Service Company of Oklahoma;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Julia A. Sloat	
		Julia A. Sloat	
		Chief Executive Officer	

EXHIBIT 31(a)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Julia A. Sloat, certify that:

1.I have reviewed this report on Form 10-K of Southwestern Electric Power Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date: February 23, 2023	By:           
 	/s/ Julia A. Sloat	
		Julia A. Sloat	
		Chief Executive Officer	

EXHIBIT 31(b)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Ann P. Kelly, certify that:

1.I have reviewed this report on Form 10-K of American Electric Power Company, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Ann P. Kelly	
		Ann P. Kelly	
		Chief Financial Officer	

EXHIBIT 31(b)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Ann P. Kelly, certify that:

1.I have reviewed this report on Form 10-K of AEP Transmission Company, LLC;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Ann P. Kelly	
		Ann P. Kelly	
		Chief Financial Officer	

EXHIBIT 31(b)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Ann P. Kelly, certify that:

1.I have reviewed this report on Form 10-K of AEP Texas Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Ann P. Kelly	
		Ann P. Kelly	
		Chief Financial Officer	

EXHIBIT 31(b)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Ann P. Kelly, certify that:

1.I have reviewed this report on Form 10-K of Appalachian Power Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Ann P. Kelly	
		Ann P. Kelly	
		Chief Financial Officer	

EXHIBIT 31(b)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Ann P. Kelly, certify that:

1.I have reviewed this report on Form 10-K of Indiana Michigan Power Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Ann P. Kelly	
		Ann P. Kelly	
		Chief Financial Officer	

EXHIBIT 31(b)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Ann P. Kelly, certify that:

1.I have reviewed this report on Form 10-K of Ohio Power Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Ann P. Kelly	
		Ann P. Kelly	
		Chief Financial Officer	

EXHIBIT 31(b)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Ann P. Kelly, certify that:

1.I have reviewed this report on Form 10-K of Public Service Company of Oklahoma;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Ann P. Kelly	
		Ann P. Kelly	
		Chief Financial Officer	

EXHIBIT 31(b)
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Ann P. Kelly, certify that:

1.I have reviewed this report on Form 10-K of Southwestern Electric Power Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2023	By:           
 	/s/ Ann P. Kelly	
		Ann P. Kelly	
		Chief Financial Officer	

Exhibit 32(a)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of American Electric Power Company, Inc. (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Julia A. Sloat, the chief executive officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Julia A. Sloat
Julia A. Sloat
Chief Executive Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to American Electric Power Company, Inc. and will be retained by American Electric Power Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(a)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of AEP Transmission Company, LLC (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Julia A. Sloat, the chief executive officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Julia A. Sloat
Julia A. Sloat
Chief Executive Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to AEP Transmission Company, LLC and will be retained by AEP Transmission Company, LLC and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(a)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of AEP Texas Inc. (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Julia A. Sloat, the chief executive officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Julia A. Sloat
Julia A. Sloat
Chief Executive Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to AEP Texas Inc. and will be retained by AEP Texas Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(a)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Appalachian Power Company (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Julia A. Sloat, the chief executive officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Julia A. Sloat
Julia A. Sloat
Chief Executive Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Appalachian Power Company and will be retained by Appalachian Power Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(a)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Indiana Michigan Power Company (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Julia A. Sloat, the chief executive officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Julia A. Sloat
Julia A. Sloat
Chief Executive Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Indiana Michigan Power Company and will be retained by Indiana Michigan Power Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(a)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Ohio Power Company (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Julia A. Sloat, the chief executive officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Julia A. Sloat
Julia A. Sloat
Chief Executive Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Ohio Power Company and will be retained by Ohio Power Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(a)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Public Service Company of Oklahoma (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Julia A. Sloat, the chief executive officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Julia A. Sloat
Julia A. Sloat
Chief Executive Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Public Service Company of Oklahoma and will be retained by Public Service Company of Oklahoma and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(a)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Southwestern Electric Power Company (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Julia A. Sloat, the chief executive officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Julia A. Sloat
Julia A. Sloat
Chief Executive Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Southwestern Electric Power Company and will be retained by Southwestern Electric Power Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(b)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of American Electric Power Company, Inc. (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Ann P. Kelly, the chief financial officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ann P. Kelly
Ann P. Kelly
Chief Financial Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to American Electric Power Company, Inc. and will be retained by American Electric Power Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(b)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of AEP Transmission Company, LLC (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Ann P. Kelly, the chief financial officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ann P. Kelly
Ann P. Kelly
Chief Financial Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to AEP Transmission Company, LLC and will be retained by AEP Transmission Company, LLC and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(b)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of AEP Texas Inc. (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Ann P. Kelly, the chief financial officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ann P. Kelly
Ann P. Kelly
Chief Financial Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to AEP Texas Inc. and will be retained by AEP Texas Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(b)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Appalachian Power Company (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Ann P. Kelly, the chief financial officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ann P. Kelly
Ann P. Kelly
Chief Financial Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Appalachian Power Company and will be retained by Appalachian Power Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(b)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Indiana Michigan Power Company (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Ann P. Kelly, the chief financial officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ann P. Kelly
Ann P. Kelly
Chief Financial Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Indiana Michigan Power Company and will be retained by Indiana Michigan Power Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(b)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Ohio Power Company (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Ann P. Kelly, the chief financial officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ann P. Kelly
Ann P. Kelly
Chief Financial Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Ohio Power Company and will be retained by Ohio Power Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(b)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Public Service Company of Oklahoma (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Ann P. Kelly, the chief financial officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ann P. Kelly
Ann P. Kelly
Chief Financial Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Public Service Company of Oklahoma and will be retained by Public Service Company of Oklahoma and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(b)

This Certification is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  This Certification shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise stated in such filing.

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

In connection with the Annual Report of Southwestern Electric Power Company (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof, I, Ann P. Kelly, the chief financial officer of the Company certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, based on my knowledge (i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ann P. Kelly
Ann P. Kelly
Chief Financial Officer

February 23, 2023

A signed original of this written statement required by Section 906 has been provided to Southwestern Electric Power Company and will be retained by Southwestern Electric Power Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 95

MINE SAFETY INFORMATION

The Federal Mine Safety and Health Act of 1977 (Mine Act) imposes stringent health and safety standards on various mining operations. The Mine Act and its related regulations affect numerous aspects of mining operations, including training of mine personnel, mining procedures, equipment used in mine emergency procedures, mine plans and other matters. SWEPCo, through its ownership of Dolet Hills Lignite Company (DHLC), a wholly-owned lignite mining subsidiary of SWEPCo, is subject to the provisions of the Mine Act.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires companies that operate mines to include in their periodic reports filed with the SEC, certain mine safety information covered by the Mine Act. DHLC received the following notices of violation and proposed assessments under the Mine Act for the quarter-ended December 31, 2022:

Number of Citations for S&S Violations of Mandatory Health or Safety Standards under 104 *	—	
Number of Orders Issued under 104(b) *	—	
Number of Citations and Orders for Unwarrantable Failure to Comply with Mandatory Health or Safety Standards under 104(d) *	—	
Number of Flagrant Violations under 110(b)(2) *	—	
Number of Imminent Danger Orders Issued under 107(a)	—	
Total Dollar Value of Proposed Assessments **	$	— 		
Number of Mining-related Fatalities	—	

* References to sections under the Mine Act.
**    DHLC received no notices of violation and no proposed assessments under the Mine Act during the fourth quarter of 2022.

There are currently no legal actions pending before the Federal Mine Safety and Health Review Commission.