American Electric Power Company Inc. (AEP) operates as an investor-owned electric public utility holding company in the United States.
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...
American Electric Power Company Inc. (AEP) operates as an investor-owned electric public utility holding company in the United States.
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 (Electric Reliability Council of Texas regional transmission organization) area of Texas have caused AEP public utility subsidiaries in those states to unbundle previously integrated regulated rates for their retail customers.
Service Company Subsidiary
AEPSC (American Electric Power Service Corporation) is a service company subsidiary that provides accounting, administrative, information systems, engineering, financial, legal, maintenance and other services at cost to AEP subsidiaries.
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.
Financing
General
AEP subsidiaries 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 funding. In recent history, short-term funding needs have been provided for by cash from operations, AEP’s commercial paper program and term loan issuances. 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. Sources of long-term funding include issuance of long-term debt, long-term asset securitizations, leasing agreements, hybrid securities or common stock.
AEP’s revolving credit agreements (which backstop the commercial paper program) include covenants and events of default typical for these types of facilities, including a maximum debt-to-total capitalization 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 $100 million, would cause an event of default under the credit agreements. As of December 31, 2024, 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 applicable agreement. A voluntary bankruptcy or insolvency of AEP or one of its significant subsidiaries would be considered an immediate termination event.
AEP’s subsidiaries have also utilized, and expects to continue to utilize, additional financing arrangements, such as securitization financings and leasing arrangements.
Environmental and Other Matters
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 GHG emissions from fossil generation under Section 111 of the CAA.
As of December 31, 2024, AEP’s generating capacity included owned and PPA capacity of approximately 23,200 MWs and 5,300 MWs, respectively.
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 applicable to each public utility subsidiary. 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, and Generation & Marketing.
The remainder of AEP’s activities is presented as Corporate and Other, which is not considered a reportable segment.
Seasonality
The consumption and delivery of electric power is generally seasonal, which impacts the results of operations of AEP’s reportable segments. In addition, AEP has historically sold and delivered less power, and consequently earned less income, when weather conditions are milder.
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, 2024, AEP’s vertically integrated public utility subsidiaries owned approximately 23,200 MWs of generation.
Fuel Supply
Coal and Lignite
AEP’s Vertically Integrated Utilities procure coal under a combination of purchasing arrangements, including long-term contracts, and spot agreements with various producers and marketers.
As of December 31, 2024, through subsidiaries, AEP owned, leased or controlled 2,934 railcars, 296 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.
Natural Gas
The Vertically Integrated Utilities consumed approximately 155 billion cubic feet of natural gas during 2024 for generating power. From a natural gas supply perspective, the Vertically Integrated Utilities secure forward month, fixed price baseload supply, prompt month baseload supply, and pursue daily spot market purchases or sales (to balance daily positions). From a natural gas transportation perspective, the Vertically Integrated Utilities utilize firm and interruptible transportation capacity. Furthermore, SWEPCo and PSO utilize firm natural gas storage, which supports price stability and provides additional surety of natural gas supply. AEP’s natural gas supply, transportation and storage transactions are competitively bid and are based on applicable market prices.
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, mid-term and long-term markets.
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.
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. 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. 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.
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.
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 AEP and SPP OATTs filed with the FERC and the rules of the FERC relating to such tariffs. Pursuant to the TCA, PSO, SWEPCo and AEPSC each have responsibility for monitoring and reporting situations or problems that materially affect the reliability of PSO’s and SWEPCo’s transmission systems. The TCA also provides for the allocation among the parties of revenues collected for transmission and ancillary services as determined by the FERC-approved OATT for the SPP.
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
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 (Indiana Michigan Power Company) is subject to regulation by the NRC (Nuclear Regulatory Commission) 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.
Arkansas
SWEPCo (Southwestern Electric Power Company) provides retail electric service in Arkansas at bundled rates approved by the APSC, with rates set on a historical cost-of-service basis and formula rates. Arkansas provides for timely fuel and purchased power cost recovery through respective annual fuel and purchased power recovery mechanisms.
Indiana
I&M provides retail electric service in Indiana at fully bundled rates approved by the IURC, with rates set on a forecasted cost-of-service basis. Indiana generally allows for timely recovery of fuel expenses through a fuel recovery surcharge mechanism. I&M is subject to a semi-annual Indiana jurisdictional earnings test.
Kentucky
KPCo (Kentucky Power Company) provides retail electric service in Kentucky at bundled rates approved by the KPSC, with rates set on a historical cost-of-service basis.
Louisiana
SWEPCo provides retail electric service in Louisiana at bundled rates approved by the LPSC with rates set on a historical cost-of-service basis and formula rates.
Michigan
I&M provides retail electric service in Michigan at both unbundled standard service and open access distribution service rates approved by the MPSC, with rates set on a forecasted cost-of-service basis. Open access distribution service is limited to 10% of I&M’s retail load.
Oklahoma
PSO (Public Service Company of Oklahoma) provides retail electric service in Oklahoma at bundled rates approved by the OCC. PSO’s rates are set on a historical cost-of-service basis.
Tennessee
KGPCo (Kingsport Power Company) provides retail electric service in Tennessee at bundled rates approved by the TPUC.
Texas
SWEPCo (Southwestern Electric Power Company) provides retail electric service in Texas at bundled rates approved by the PUCT with rates set on a historical cost-of-service basis.
Virginia
APCo (Appalachian Power Company) 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 expenses through a fuel cost recovery surcharge mechanism. In addition to base rates and fuel cost recovery, APCo is permitted to recover transmission expenses provided at OATT (Open Access Transmission Tariff) rates based on rates established by the FERC. APCo is subject to a biennial Virginia retail generation and distribution earnings test.
West Virginia
APCo and WPCo (Wheeling Power Company) provide retail electric service at bundled rates approved by the WVPSC (Public Service Commission of West Virginia) with rates set on a combined APCo and WPCo cost-of-service basis.
FERC
The FERC (Federal Energy Regulatory Commission) regulates rates for interstate power sales at wholesale, transmission of electric power, accounting and other matters, including construction and operation of hydroelectric projects. 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.
AEGCo, APCo, I&M, KGPCo, KPCo and WPCo are members of PJM (Pennsylvania – New Jersey – Maryland regional transmission organization). 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.
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 (AEP Texas Inc.) 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 FERC for OPCo. The FERC 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.
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.
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.
AEP Transmission Holding Company, LLC (AEPTHCo)
AEPTHCo is a holding company for (a) AEPTCo (AEP Transmission Company, LLC), 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. 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. 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 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.
In January 2025, AEP announced a partnership between nonaffiliated entities to acquire a 19.9% noncontrolling interest in OHTCo and IMTCo. The transaction is subject to FERC approval and clearance from the Committee on Foreign Investment in the United States.
AEPTHCo Joint Venture Initiatives
AEP has established joint ventures with nonaffiliated 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).
Transource Energy (Transource Energy, LLC), 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 FERC pursuant to FERC-approved implementation protocols.
Generation & Marketing
General
The AEP Generation & Marketing segment consists of a retail supply business, a wholesale energy trading and marketing business and the rights to Cardinal Plant Unit 1’s power and capacity through 2028. AEP Generation & Marketing previously included AEP OnSite Partners prior to its sale in September 2024 and AEP Renewables prior to its sale in August 2023.
The retail energy supply business provides electricity and/or natural gas to residential, commercial and industrial customers in Illinois, Pennsylvania, Delaware, Maryland, New Jersey, Ohio and Washington, D.C. AEP Energy had approximately 987,000 customer accounts as of December 31, 2024.
This segment also includes rights to Cardinal Plant Unit 1’s power and capacity through 2028 through a PPA with a nonaffiliated electric cooperative.
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.
