About American Electric Power Co Inc

American Electric Power Company, Inc. (AEP) operates as an electric public utility holding company. The company provides generation, transmission and distribution of electricity services to more than five million retail customers in 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. Service Company Subsidiary AEPSC (American Electric Power Service Corporation, an AEP service subsidiary providing management and professional services to AEP and its subsidiaries) is a service company subsidiary that provides accounting, administrative, information systems, engineering, financial, legal, maintenance and other services at cost to AEP subsidiaries. Segments AEP operates through Vertically Integrated Utilities; Transmission and Distribution Utilities; AEP Transmission Holdco; and Generation & Marketing 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. Seasonality The consumption and delivery of electric power is generally seasonal, which impacts the results of operations of AEP's reportable segments. 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. In addition, AEP has historically sold and delivered 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. Vertically Integrated Utilities 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 (AEP Generating Company, an AEP electric utility subsidiary), APCo, I&M, KGPCo, KPCo, PSO, SWEPCo (Southwestern Electric Power Company, an AEP electric utility subsidiary) 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. SWEPCo engages in the generation, transmission and distribution of electric power to retail customers in northeastern and panhandle of Texas, northwestern Louisiana and western Arkansas. Electric Generation As of December 31, 2023, AEP's vertically integrated public utility subsidiaries owned approximately 23,000 Megawatts (MWs) of generation. 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. As of December 31, 2023, through subsidiaries, AEP owned, leased or controled 3,180 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. Natural Gas The Vertically Integrated Utilities consumed approximately 146 billion cubic feet of natural gas during 2023 for generating power. This represents an increase of 15.8% from 2022. 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. From a natural gas supply perspective, the Vertically Integrated Utilities utilize daily spot market purchases, as well as longer-term arrangements including monthly baseload, forward month baseload, seasonal baseload and long-term firm purchases. From a natural gas transportation perspective, the Vertically Integrated Utilities utilize firm and interruptible transportation capacity. Nuclear Indiana Michigan Power Company, an AEP electric utility subsidiary (I&M). I&M engages in the generation, transmission and distribution of electric power to retail customers in northern and eastern Indiana and southwestern Michigan. 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. Certain Power Agreements 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 Federal Energy Regulatory Commission. The UPA will continue in effect until the debt obligations of AEGCo secured by the Rockport Plant have been satisfied and discharged (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. 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 Megawatts) in proportion to their respective power participation ratios. The aggregate power participation ratio of APCo (Appalachian Power Company, an AEP electric utility subsidiary.), I&M and OPCo is 43.47%. The ICPA terminates in June 2040. APCo engages in the generation, transmission and distribution of electric power to retail customers in the southwestern portion of Virginia and southern West Virginia. Electric Delivery Other than AEGCo, AEP's vertically integrated public utility subsidiaries own and operate transmission and distribution lines and other facilities to deliver electric power. 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. Transmission Agreement APCo, I&M, KGPCo, KPCo (Kentucky Power Company, an AEP electric utility subsidiary (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 has been approved by the Federal Energy Regulatory Commission. KPCo engages in the generation, transmission and distribution of electric power to retail customers in eastern Kentucky. Transmission Coordination Agreement and Open Access Transmission Tariff PSO (Public Service Company of Oklahoma, an AEP electric utility subsidiary), SWEPCo and AEPSC are parties to the 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). Under the TCA, a coordinating committee is charged with the responsibility of overseeing the coordinated planning of the transmission facilities of the parties to the agreement, including the performance of transmission planning studies, the interaction of such subsidiaries with independent system operators and other regional bodies interested in transmission planning and compliance with the terms of the OATT filed with the Federal Energy Regulatory Commission and the rules of the Federal Energy Regulatory Commission 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 Federal Energy Regulatory Commission -approved OATT for the SPP. PSO engages in the generation, transmission and distribution of electric power to retail customers in eastern and southwestern Oklahoma. Regional Transmission Organizations AEGCo, APCo, I&M, KGPCo, KPCo and WPCo (Wheeling Power Company, an AEP electric utility subsidiary) are members of PJM, and PSO and SWEPCo are members of SPP (both Federal Energy Regulatory Commission -approved RTOs (Regional Transmission Organization, responsible for moving electricity over large interstate areas.)). WPCo provides electric service to retail customers in northern West Virginia. Regulation 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 Federal Energy Regulatory Commission 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 Federal Energy Regulatory Commission. 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 respective fuel and purchased power recovery mechanisms. PSO provides retail electric service in Oklahoma at bundled rates approved by the OCC. APCo 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 Federal Energy Regulatory Commission. 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, purchased power costs and transmission expenses through the ENEC which trues-up to actual expenses. The Federal Energy Regulatory Commission regulations require AEP's vertically integrated public utility subsidiaries to provide open access transmission service at Federal Energy Regulatory Commission -approved rates, and AEP has approved cost-based formula transmission rates on file at the Federal Energy Regulatory Commission. AEP's vertically integrated public utility subsidiaries have market-based rate authority from the Federal Energy Regulatory Commission, under which much of their wholesale marketing activity takes place. The Federal Energy Regulatory Commission 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. Additionally, the vertically integrated public utility subsidiaries are subject to mandatory reliability standards promulgated by the NERC, with the approval of the Federal Energy Regulatory Commission, which standards protect the nation's bulk power system against potential disruptions from cyber and physical security breaches. The Federal Energy Regulatory Commission 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. Transmission and Distribution Utilities 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. AEP's transmission and distribution utility subsidiaries own and operate transmission and distribution lines and other facilities to deliver electric power. 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 Federal Energy Regulatory Commission for OPCo. The Federal Energy Regulatory Commission regulates and approves the rates for wholesale transmission transactions. 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. 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 Federal Energy Regulatory Commission. 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 has been approved by the Federal Energy Regulatory Commission. Regional Transmission Organizations OPCo is a member of PJM, a Federal Energy Regulatory Commission -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 approved by the PUCO or by the Federal Energy Regulatory Commission. 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 and DCRF filings semi-annually to update its rates to reflect changes in its net invested capital. The Federal Energy Regulatory Commission regulations require AEP to provide open access transmission service at Federal Energy Regulatory Commission -approved rates, and it has approved cost-based formula transmission rates on file at the Federal Energy Regulatory Commission. The Federal Energy Regulatory Commission also regulates unbundled transmission service to retail customers. The Federal Energy Regulatory Commission 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 Federal Energy Regulatory Commission 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 Federal Energy Regulatory Commission 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 mandatory reliability standards as set forth by the NERC, with the approval of the Federal Energy Regulatory Commission, which standards protect the nation's bulk power system against potential disruptions from cyber and physical security breaches. AEP Transmission Holdco AEPTHCo is a holding company for AEPTCo, which is the direct holding company for the State Transcos and 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. Individual State Transcos have obtained the approvals necessary to operate in Indiana, Kentucky, Michigan, Ohio, Oklahoma and West Virginia, subject to any applicable siting requirements; are authorized to submit projects for commission approval in Virginia and has been granted consent to enter into a joint license agreement that will support investment in Tennessee. 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. SWTCo does not currently own or operate transmission assets. 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. AEPTHCO Joint Venture Initiatives AEP has established joint ventures with non-affiliated 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). In April 2023, AEP initiated a strategic evaluation for its ownership in Pioneer Transmission, LLC, Prairie Wind Transmission, LLC and Transource Energy. In July 2023, AEP made a decision to initiate a sales process for its investment in Pioneer Transmission, LLC and Prairie Wind Transmission, LLC. In February 2024, AEP management determined it would retain its ownership of its investment in Pioneer Transmission, LLC and Prairie Wind Transmission, LLC. Transource Energy, and its subsidiaries Transource Missouri, Transource West Virginia, Transource Maryland, Transource Pennsylvania and Transource Oklahoma are consolidated joint ventures by AEP. 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 Federal Energy Regulatory Commission pursuant to Federal Energy Regulatory Commission -approved implementation protocols. 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 Federal Energy Regulatory Commission rate schedule that provides the terms and conditions for transmission and related services on a transmission provider's transmission system. The Federal Energy Regulatory Commission 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 Federal Energy Regulatory Commission (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 mandatory reliability standards promulgated by the NERC, with the approval of the FERC, which standards protect the nation's bulk power system against potential disruptions from cyber and physical security breaches. The rates of ETT, which is located in ERCOT, are determined by the PUCT. Generation & Marketing 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 Energy, AEP OnSite Partners, AEPEP and AGR. AEP Energy Supply, LLC also included AEP Renewables prior to its sale in August 2023. 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, 2023, AEP OnSite Partners owned projects located in 22 states, including approximately 195 Megawatts of installed solar capacity, and approximately 4 Megawatts of solar projects under construction. AEP Energy is a retail energy supplier and energy management business 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 929,000 customer accounts as of December 31, 2023. In April 2023, AEP announced the initiation of a sales process for its ownership in AEP Onsite Partners and AEP Energy. AEP Energy Partners enters into short-term and long-term transactions to buy or sell capacity, energy and ancillary services in ERCOT, SPP, MISO and PJM. In addition, AEP Energy Partners sells power into the market and engages in power, natural gas and emissions allowances risk management and trading activities. 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. The Generation & Marketing segment also includes AGR which holds the rights to Cardinal Plant Unit 1's power and capacity through 2028 through a PPA with a nonaffiliated electric cooperative. Strategy The growth of AEP's regulated renewable generation portfolio reflects the company's strategy to diversify generation resources to provide clean energy to customers that meet both their energy and capacity needs. Properties AEP subsidiaries serve customer electricity needs from these facilities and from purchased power in the PJM and SPP markets based on demand and other economic conditions. AEGCo owns a 50% interest in the Rockport Plant units. I&M owns the remaining 50%. I&M owns a 50% interest in the Rockport Plant units. AEGCo owns the remaining 50%. KPCo owns a 50% interest in the Mitchell Plant units. WPCo owns the remaining 50%. PSO owns a 45.5% interest and SWEPCo owns the remaining 54.5% interest in Sundance, Maverick and Traverse. WPCo owns 50% in the Mitchell Plant units. KPCo owns the remaining 50%. Transmission and Distribution Facilities The AEP System has significant investments in transmission and distribution lines across its Vertically Integrated Utilities, Transmission and Distribution Utilities and AEP Transmission Holdco segments. History American Electric Power Company, Inc. was founded in 1906. The company was incorporated under the laws of the state of New York in 1906 and reorganized in 1925.