CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (USD $) | ||
In Millions, except Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Revenues | ||
Utility Operations | $3,406 | $3,267 |
Other Revenues | 163 | 191 |
TOTAL REVENUES | 3,569 | 3,458 |
Expenses | ||
Fuel and Other Consumables Used for Electric Generation | 1,014 | 929 |
Purchased Electricity for Resale | 238 | 295 |
Other Operation | 673 | 610 |
Maintenance | 271 | 295 |
Depreciation and Amortization | 408 | 382 |
Taxes Other Than Income Taxes | 207 | 197 |
TOTAL EXPENSES | 2,811 | 2,708 |
OPERATING INCOME | 758 | 750 |
Other Income (Expense): | ||
Interest and Investment Income | 3 | 5 |
Carrying Costs Income | 14 | 9 |
Allowance for Equity Funds Used During Construction | 24 | 16 |
Interest Expense | (250) | (238) |
INCOME BEFORE INCOME TAX EXPENSE AND EQUITY EARNINGS | 549 | 542 |
Income Tax Expense | 207 | 179 |
Equity Earnings of Unconsolidated Subsidiaries | 4 | 0 |
NET INCOME | 346 | 363 |
Less: Net Income Attributable to Noncontrolling Interests | 1 | 2 |
NET INCOME ATTRIBUTABLE TO AEP SHAREHOLDERS | 345 | 361 |
Less: Preferred Stock Dividend Requirements of Subsidiaries | 1 | 1 |
EARNINGS ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS | $344 | $360 |
Earnings Per Share | ||
WEIGHTED AVERAGE NUMBER OF BASIC AEP COMMON SHARES OUTSTANDING | 478,429,535 | 406,826,606 |
TOTAL BASIC EARNINGS PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS | 0.72 | 0.89 |
WEIGHTED AVERAGE NUMBER OF DILUTED AEP COMMON SHARES OUTSTANDING | 478,844,632 | 407,381,954 |
TOTAL DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO AEP COMMON SHAREHOLDERS | 0.72 | 0.89 |
CASH DIVIDENDS PAID PER SHARE | 0.41 | 0.41 |
1_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (USD $) | ||||||
In Millions | Common Stock
| Additional Paid-in Capital
| Retained Earnings
| Accumulated Other Comprehensive Income
| Noncontrolling Interest
| Total
|
Shares Issued, Beginning Balance at Dec. 31, 2008 | 426 | |||||
Beginning Balance at Dec. 31, 2008 | $2,771 | $4,527 | $3,847 | ($452) | $17 | $10,710 |
Issuance of Common Stock, Value | 11 | 37 | 48 | |||
Issuance of Common Stock, Shares | 2 | |||||
Common Stock Dividends | (167) | (2) | (169) | |||
Preferred Stock Dividend Requirements of Subsidiaries | (1) | (1) | ||||
Other Changes in Equity | 1 | 1 | ||||
Subtotal - Equity | 10,589 | |||||
Other Comprehensive Income (Loss), Net of Taxes: | ||||||
Cash Flow Hedges, Net of Tax | 3 | 3 | ||||
Securities Available for Sale, Net of Tax | (2) | (2) | ||||
Amortization of Pension and OPEB Deferred Costs, Net of Tax | 5 | 5 | ||||
Net Income | 361 | 2 | 363 | |||
Total Comprehensive Income | 369 | |||||
Ending Balance at Mar. 31, 2009 | 2,782 | 4,564 | 4,040 | (446) | 18 | 10,958 |
Shares Issued, Ending Balance at Mar. 31, 2009 | 428 | |||||
Shares Issued, Beginning Balance at Dec. 31, 2009 | 498 | 498 | ||||
Beginning Balance at Dec. 31, 2009 | 3,239 | 5,824 | 4,451 | (374) | 0 | 13,140 |
Issuance of Common Stock, Value | 5 | 21 | 26 | |||
Issuance of Common Stock, Shares | 1 | |||||
Common Stock Dividends | (196) | (1) | (197) | |||
Preferred Stock Dividend Requirements of Subsidiaries | (1) | (1) | ||||
Other Changes in Equity | 2 | (2) | 0 | |||
Subtotal - Equity | 12,968 | |||||
Other Comprehensive Income (Loss), Net of Taxes: | ||||||
Cash Flow Hedges, Net of Tax | 4 | 4 | ||||
Securities Available for Sale, Net of Tax | 1 | 1 | ||||
Amortization of Pension and OPEB Deferred Costs, Net of Tax | 5 | 5 | ||||
Net Income | 345 | 1 | 346 | |||
Total Comprehensive Income | 356 | |||||
Ending Balance at Mar. 31, 2010 | $3,244 | $5,847 | $4,597 | ($364) | $0 | $13,324 |
Shares Issued, Ending Balance at Mar. 31, 2010 | 499 | 499 |
PARENTHETICAL INFORMATION FOR C
PARENTHETICAL INFORMATION FOR CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME (LOSS) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Statement of Stockholders' Equity [Abstract] | ||
Cash Flow Hedges, Tax | $2 | $1 |
Securities Available for Sale, Tax | 0 | 1 |
Amortization of Pension and OPEB Deferred Costs, Tax | $3 | $3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) | |||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | Dec. 31, 2009
|
Current Assets | |||
Cash and Cash Equivalents | $818 | $710 | $490 |
Other Temporary Investments | 238 | 363 | |
Accounts Receivable: | |||
Customers | 613 | 492 | |
Accrued Unbilled Revenues | 116 | 503 | |
Pledged Accounts Receivable - AEP Credit | 867 | 0 | |
Miscellaneous | 98 | 92 | |
Allowance for Uncollectible Accounts | (38) | (37) | |
Total Accounts Receivable | 1,656 | 1,050 | |
Fuel | 984 | 1,075 | |
Materials and Supplies | 582 | 586 | |
Risk Management Assets | 323 | 260 | |
Accrued Tax Benefits | 460 | 547 | |
Regulatory Asset for Under-Recovered Fuel Costs | 107 | 85 | |
Margin Deposits | 109 | 89 | |
Prepayments and Other Current Assets | 239 | 211 | |
TOTAL CURRENT ASSETS | 5,516 | 4,756 | |
Electric: | |||
Production | 23,417 | 23,045 | |
Transmission | 8,313 | 8,315 | |
Distribution | 13,685 | 13,549 | |
Other Property, Plant and Equipment (including coal mining and nuclear fuel) | 3,833 | 3,744 | |
Construction Work in Progress | 2,765 | 3,031 | |
Total Property, Plant and Equipment | 52,013 | 51,684 | |
Accumulated Depreciation and Amortization | 17,487 | 17,340 | |
TOTAL PROPERTY, PLANT AND EQUIPMENT - NET | 34,526 | 34,344 | |
Other Noncurrent Assets | |||
Regulatory Assets | 4,683 | 4,595 | |
Securitized Transition Assets | 1,865 | 1,896 | |
Spent Nuclear Fuel and Decommissioning Trusts | 1,433 | 1,392 | |
Goodwill | 76 | 76 | |
Long-term Risk Management Assets | 449 | 343 | |
Deferred Charges and Other Noncurrent Assets | 1,077 | 946 | |
TOTAL OTHER NONCURRENT ASSETS | 9,583 | 9,248 | |
TOTAL ASSETS | 49,625 | 48,348 | |
Current Liabilities | |||
Accounts Payable | 954 | 1,158 | |
Short-term Debt: | |||
General | 412 | 126 | |
Securitized Debt for Receivables - AEP Credit | 651 | 0 | |
Total Short-term Debt | 1,063 | 126 | |
Long-term Debt Due Within One Year | 1,253 | 1,741 | |
Risk Management Liabilities | 151 | 120 | |
Customer Deposits | 261 | 256 | |
Accrued Taxes | 621 | 632 | |
Accrued Interest | 254 | 287 | |
Regulatory Liability for Over-Recovered Fuel Costs | 38 | 76 | |
Other Current Liabilities | 920 | 931 | |
TOTAL CURRENT LIABILITIES | 5,515 | 5,327 | |
Noncurrent Liabilities | |||
Long-term Debt | 16,281 | 15,757 | |
Long-term Risk Management Liabilities | 193 | 128 | |
Deferred Income Taxes | 6,587 | 6,420 | |
Regulatory Liabilities and Deferred Investment Tax Credits | 3,005 | 2,909 | |
Asset Retirement Obligations | 1,264 | 1,254 | |
Employee Benefits and Pension Obligations | 2,153 | 2,189 | |
Deferred Credits and Other Noncurrent Liabilities | 1,242 | 1,163 | |
TOTAL NONCURRENT LIABILITIES | 30,725 | 29,820 | |
TOTAL LIABILITIES | 36,240 | 35,147 | |
Cumulative Preferred Stock Not Subject to Mandatory Redemption | 61 | 61 | |
Rate Matters (Note 3) | |||
Commitments and Contingencies (Note 4) | |||
Equity | |||
Common Stock Par Value $6.50: | 3,244 | 3,239 | |
Paid-in Capital | 5,847 | 5,824 | |
Retained Earnings | 4,597 | 4,451 | |
Accumulated Other Comprehensive Income (Loss) | (364) | (374) | |
TOTAL AEP COMMON SHAREHOLDERS' EQUITY | 13,324 | 13,140 | |
Noncontrolling Interests | 0 | 0 | |
TOTAL EQUITY | 13,324 | 10,958 | 13,140 |
TOTAL LIABILITIES AND EQUITY | $49,625 | $48,348 |
2_PARENTHETICAL INFORMATION FOR
PARENTHETICAL INFORMATION FOR CONSOLIDATED BALANCE SHEETS (USD $) | ||
Mar. 31, 2010
| Dec. 31, 2009
| |
Equity | ||
Common Stock, Par Value Per Share | 6.5 | 6.5 |
Common Stock, Shares Authorized | 600,000,000 | 600,000,000 |
Common Stock, Shares, Issued | 499,133,697 | 498,333,265 |
Treasury Stock, Shares | 20,278,858 | 20,278,858 |
3_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating Activites | ||
Net Income | $346 | $363 |
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities: | ||
Depreciation and Amortization | 408 | 382 |
Deferred Income Taxes | 121 | 217 |
Carrying Costs Income | (14) | (9) |
Allowance for Equity Funds Used During Construction | (24) | (16) |
Mark-to-Market of Risk Management Contracts | (69) | (46) |
Amortization of Nuclear Fuel | 30 | 13 |
Property Taxes | (53) | (64) |
Fuel Over/Under-Recovery, Net | (97) | (95) |
Change in Other Noncurrent Assets | (28) | 23 |
Change in Other Noncurrent Liabilities | 37 | 18 |
Changes in Certain Components of Working Capital: | ||
Accounts Receivable, Net | (617) | 102 |
Fuel, Materials and Supplies | 83 | (118) |
Margin Deposits | (20) | (39) |
Accounts Payable | (83) | 3 |
Customer Deposits | 5 | 12 |
Accrued Taxes, Net | 80 | (57) |
Accrued Interest | (34) | (44) |
Other Current Assets | (14) | (7) |
Other Current Liabilities | (55) | (321) |
Net Cash Flows from Operating Activities | 2 | 317 |
Investing Activities | ||
Construction Expenditures | (609) | (897) |
Change in Other Temporary Investments, Net | 82 | 111 |
Purchases of Investment Securities | (445) | (179) |
Sales of Investment Securities | 473 | 158 |
Acquisitions of Nuclear Fuel | (38) | (76) |
Proceeds from Sales of Assets | 139 | 172 |
Other Investing Activities | (32) | (16) |
Net Cash Flows Used for Investing Activities | (430) | (727) |
Financing Activities | ||
Issuance of Common Stock | 26 | 48 |
Issuance of Long-term Debt | 652 | 947 |
Borrowings from Revolving Credit Facilities | 24 | 28 |
Change in Short-term Debt, Net | 931 | 0 |
Retirement of Long-term Debt | (638) | (93) |
Repayments to Revolving Credit Facilities | (17) | (28) |
Principal Payments for Capital Lease Obligations | (24) | (23) |
Dividends Paid on Common Stock | (197) | (169) |
Dividends Paid on Cumulative Preferred Stock | (1) | (1) |
Net Cash Flows from Financing Activities | 756 | 709 |
Net Increase in Cash and Cash Equivalents | 328 | 299 |
Cash and Cash Equivalents at Beginning of Period | 490 | 411 |
Cash and Cash Equivalents at End of Period | $818 | $710 |
Significant Accounting Matters
Significant Accounting Matters | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Significant Accounting Matters | 1. SIGNIFICANT ACCOUNTING MATTERS General The unaudited condensed consolidated financial statements and footnotes were prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC.Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the unaudited condensed consolidated interim financial statements reflect all normal and recurring accruals and adjustments necessary for a fair presentation of our net income, financial position and cash flows for the interim periods.Net income for the three months ended March 31, 2010 is not necessarily indicative of results that may be expected for the year ending December 31, 2010.The condensed consolidated financial statements are unaudited and should be read in conjunction with the audited 2009 consolidated financial statements and notes thereto, which are included in our Form 10-K as filed with the SEC on February 26, 2010. Variable Interest Entities The accounting guidance for Variable Interest Entities is a consolidation model that considers if a company has a controlling financial interest in a VIE.A controlling financial interest will have both (a) the power to direct the activities of a VIE that most significantly impact the VIEs economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.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 we are the primary beneficiary of a VIE, we consider factors such as equity at risk, the amount of the VIEs variability we absorb, guarantees of indebtedness, voting rights including kick-out rights, power to direct the VIE and other factors.We believe that significant assumptions and judgments were applied consistently.Also, see ASU 2009-17 Consolidations section of Note 2 for a discussion of the impact of new accounting guidance effective January 1, 2010. We are currently the primary beneficiary of Sabine, DCC Fuel LLC (DCC Fuel), AEP Credit and a protected cell of EIS.As of January 1, 2010, we are no longer the primary beneficiary of DHLC as defined by new accounting guidance for Variable Interest Entities.In addition, we have not provided material financial or other support to Sabine, DCC Fuel, our protected cell of EIS and AEP Credit that was not previously contractually required.We hold a significant variable interest in Potomac-Appalachian Transmission Highline, LLC West Virginia Series (West Virginia Series) and DHLC. Sabine is a mining operator providing mining services to SWEPCo.SWEPCo has no equity investment in Sabine but is Sabines only customer.SWEPCo guarantees the debt obligations and lease obligations of Sabine.Under the terms of the note agreements, substantially all asset |
New Accounting Pronouncements a
New Accounting Pronouncements and Extraordinary Items | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
New Accounting Pronouncements | 2. NEW ACCOUNTING PRONOUNCEMENTS Upon issuance of final pronouncements, we review the new accounting literature to determine its relevance, if any, to our business.The following represents a summary of final pronouncements that impact our financial statements. Pronouncements Adopted During The First Quarter of 2010 The following standards are effective during the first quarter of 2010.Consequently, their impact is reflected in the financial statements.The following paragraphs discuss their impact. ASU 2009-16 Transfers and Servicing (ASU 2009-16) In 2009, the FASB issued ASU 2009-16 clarifying when a transfer of a financial asset should be recorded as a sale.The standard defines participating interest to establish specific conditions for a sale of a portion of a financial asset.This standard must be applied to all transfers after the effective date. We adopted ASU 2009-16 effective January 1, 2010.AEP Credit transfers an interest in receivables it acquires from certain of its affiliates to bank conduits and receives cash.As of December 31, 2009, AEP Credit owed $656 million to bank conduits related to receivable sales outstanding.Upon adoption of ASU 2009-16,future transactions do not constitute a sale of receivables and are accounted for as financings.Effective January 2010, we record the receivables and related debt on our Condensed Consolidated Balance Sheet. ASU 2009-17 Consolidations (ASU 2009-17) In 2009, the FASB issued ASU 2009-17 amending the analysis an entity must perform to determine if it has a controlling financial interest in a VIE.In addition to presentation and disclosure guidance, ASU 2009-17 provides that the primary beneficiary of a VIE must have both: The power to direct the activities of the VIE that most significantly impact the VIEs economic performance. The obligation to absorb the losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. We adopted the prospective provisions of ASU 2009-17 effective January 1, 2010 and deconsolidated DHLC.DHLC was deconsolidated due to the shared control between SWEPCo and CLECO.After January 1, 2010, we report DHLC using the equity method of accounting. This standard increased our disclosure requirements for AEP Credit, a wholly-owned consolidated subsidiary.See Variable Interest Entities section of Note 1 for further discussion. |
Rate Matters
Rate Matters | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Rate Matters | 3. RATE MATTERS As discussed in the 2009 Annual Report, our subsidiaries are involved in rate and regulatory proceedings at the FERC and their state commissions.The Rate Matters note within our 2009 Annual Report should be read in conjunction with this report to gain a complete understanding of material rate matters still pending that could impact net income, cash flows and possibly financial condition. The following discusses ratemaking developments in 2010 and updates the 2009 Annual Report. Regulatory Assets Not Yet Being Recovered March 31, December 31, 2010 2009 (in millions) Noncurrent Regulatory Assets (excluding fuel) Regulatory assets not yet being recovered pending future proceedings to determine the recovery method and timing: Regulatory Assets Currently Earning a Return Customer Choice Deferrals CSPCo, OPCo $ 57 $ 57 Storm Related Costs CSPCo, OPCo, TCC 48 49 Line Extension Carrying Costs CSPCo, OPCo 46 43 Acquisition of Monongahela Power CSPCo 11 10 Regulatory Assets Currently Not Earning a Return Mountaineer Carbon Capture and Storage Project APCo 111 111 Environmental Rate Adjustment Clause APCo 27 25 Storm Related Costs KPCo 24 24 Transmission Rate Adjustment Clause APCo 21 26 Peak Demand Reduction/Energy Efficiency CSPCo, OPCo 12 8 Special Rate Mechanism for Century Aluminum APCo 12 12 Storm Related Costs PSO 11 - Deferred Wind Power Costs APCo 11 5 Total Regulatory Assets Not Yet Being Recovered $ 391 $ 370 CSPCo and OPCo Rate Matters Ohio Electric Security Plan Filings The PUCO issued an order in March 2009 that modified and approved CSPCos and OPCos ESPs which established rates at the start of the April 2009 billing cycle.The ESPs are in effect through 2011.The order also limits annual rate increases for CSPCo to 7% in 2009, 6% in 2010 and 6% in 2011 and for OPCo to 8% in 2009, 7% in 2010 and 8% in 2011.Some rate components and increases are exempt from these limitations.CSPCo and OPCo collected the 2009 annualized revenue increase over the last nine months of 2009. The order provides a FAC for the three-year period of the ESP.The FAC increase will be phased in to avoid having the resultant rate increases exceed the ordered annual caps described above.The FAC increase is subject to quarterly true-ups, annual accounting audits and prudency reviews.The order allows CSPCo and OPCo to defer any unrecovered FAC costs resulting from the annual caps and to accrue associated carrying charges at CSPCos and OPCos weighted average cost of capital.Any deferred FAC regulatory asset balance at the end of the three-year ESP period will be recovered through a non-bypassable surcharge over the period 2012 through 2018.Management expects to recover the CSPCo FAC deferral during 2010.That recovery will include deferrals associated with the Ormet interim arrangement and is subject to the PUCOs ultimate decision regarding the Ormet interim arrangement deferrals plus related carrying charges.See the Ormet Interim Arrangement section below.The FAC deferrals as of March 31, 2010 |
Commitments, Guarantees and Con
Commitments, Guarantees and Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Commitments, Guarantees and Contingencies | 4. COMMITMENTS, GUARANTEES AND CONTINGENCIES We are subject to certain claims and legal actions arising in our ordinary course of business.In addition, our 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 us cannot be predicted.For current proceedings not specifically discussed below, management does not anticipate that the liabilities, if any, arising from such proceedings would have a material adverse effect on our financial statements.The Commitments, Guarantees and Contingencies note within our 2009 Annual Report should be read in conjunction with this report. GUARANTEES We record liabilities for guarantees in accordance with the accounting guidance for Guarantees. There is no collateral held in relation to any guarantees in excess of our ownership percentages.In the event any guarantee is drawn, there is no recourse to third parties unless specified below. Letters of Credit We enter into standby letters of credit (LOCs) with third parties.These LOCs cover items such as gas and electricity risk management contracts, construction contracts, insurance programs, security deposits and debt service reserves.As the Parent, we issued all of these LOCs in our ordinary course of business on behalf of our subsidiaries.As of March 31, 2010, the maximum future payments for LOCs issued under the two $1.5 billion 5-year credit facilities are $175 million with maturities ranging from May 2010 to June 2011. We have a $627 million 3-year credit agreement.As of March 31, 2010, $477 million of LOCs with maturities ranging from May 2010 to November 2010 were issued by subsidiaries under the 3-year credit agreement to support variable rate Pollution Control Bonds. Guarantees of Third-Party Obligations SWEPCo As part of the process to receive a renewal of a Texas Railroad Commission permit for lignite mining, SWEPCo provides guarantees of mine reclamation in the amount of approximately $65 million.Since SWEPCo uses self-bonding, the guarantee provides for SWEPCo to commit to use its resources to complete the reclamation in the event the work is not completed by Sabine Mining Company (Sabine), a consolidated variable interest entity.This guarantee ends upon depletion of reserves and completion of final reclamation.Based on the latest study, we estimate the reserves will be depleted in 2029 with final reclamation completed by 2036.A new study is in process to include new, expanded areas of the mine.As of March 31, 2010, SWEPCo has collected approximately $45 million through a rider for final mine closure and reclamation costs, of which $2 million is recorded in Other Current Liabilities, $21 million is recorded in Deferred Credits and Other Noncurrent Liabilities and $22 million is recorded in Asset Retirement Obligations on our Condensed Consolidated Balance Sheets. Sabine charges SWEPCo, its only customer, all of its costs.SWEPCo passes these costs to customers through its fuel clause. Indemnifications and Other Guarantees Contracts We enter into several types of contracts which require indemnificat |
Acquisitions, Dispositions, Dis
Acquisitions, Dispositions, Discontinued Operations and Impairments | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Acquisitions and Dispositions | 5. ACQUISITIONS AND DISPOSITIONS ACQUISITIONS 2010 Valley Electric Membership Corporation (Utility Operations segment) In November 2009, SWEPCo signed a letter of intent to purchase the transmission and distribution assets of Valley Electric Membership Corporation (VEMCO). The current estimate ofthe purchase is$99 million, plus the assumption of certain liabilities, subject to adjustments at closing.Consummation of the transaction is subject to regulatory approval by the LPSC, the APSC, the Rural Utilities Service and the National Rural Utilities Cooperative Finance Corporation.In January 2010, the VEMCO members approved the transaction.In April 2010, a joint application between SWEPCo and VEMCO was filed with the LPSC.SWEPCo will seek recovery from Louisiana customers for all costs related to this acquisition.VEMCO services approximately 30,000 customers in Louisiana.SWEPCo expects to complete the transaction in the third quarter of 2010 upon receipt of regulatory and other approvals. 2009 None DISPOSITIONS 2010 Electric Transmission Texas LLC (ETT) (Utility Operations segment) In 2010, TCC and TNC sold $64 million and $71 million, respectively, of transmission facilities to ETT.There were no gains or losses recorded on these transactions. 2009 Electric Transmission Texas LLC (ETT) (Utility Operations segment) In January 2009, TCC sold $60 million of transmission facilities to ETT.There were no gains or losses recorded on these transactions. |
Benefit Plans
Benefit Plans | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Benefit Plans | 6.BENEFIT PLANS Components of Net Periodic Benefit Cost The following table provides the components of our net periodic benefit cost for the plans for the three months ended March 31, 2010 and 2009: Other Postretirement Pension Plans Benefit Plans Three Months Ended March 31, Three Months Ended March 31, 2010 2009 2010 2009 (in millions) Service Cost $ 28 $ 26 $ 12 $ 10 Interest Cost 63 63 28 27 Expected Return on Plan Assets (78 ) (80 ) (26 ) (20 ) Amortization of Transition Obligation - - 7 7 Amortization of Net Actuarial Loss 22 15 7 11 Net Periodic Benefit Cost $ 35 $ 24 $ 28 $ 35 |
Business Segments
Business Segments | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Business Segments | 7. BUSINESS SEGMENTS As outlined in our 2009 Annual Report, our primary business is our electric utility operations.Within our Utility Operations segment, we centrally dispatch generation assets and manage our overall utility operations on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight.While our Utility Operations segment remains our primary business segment, other segments include our AEP River Operations segment with significant barging activities and our Generation and Marketing segment, which includes our nonregulated generating, marketing and risk management activities primarily in the ERCOT market area.Intersegment sales and transfers are generally based on underlying contractual arrangements and agreements. Our reportable segments and their related business activities are as follows: Utility Operations Generation of electricity for sale to U.S. retail and wholesale customers. Electricity transmission and distribution in the U.S. AEP River Operations Commercial barging operations that annually transport coal and dry bulk commodities primarily on the Ohio, Illinois and lower Mississippi Rivers. Generation and Marketing Wind farms and marketing and risk management activities primarily in ERCOT. The remainder of our activities is presented as All Other.While not considered a business segment, All Other includes: Parents guarantee revenue received from affiliates, investment income, interest income and interest expense, and other nonallocated costs. Forward natural gas contracts that were not sold with our natural gas pipeline and storage operations in 2004 and 2005.These contracts are financial derivatives which gradually settle and completely expire in 2011. The tables below present our reportable segment information for the three months ended March 31, 2010 and 2009 and balance sheet information as of March 31, 2010 and December 31, 2009.These amounts include certain estimates and allocations where necessary. Nonutility Operations Three Months Ended March 31, 2010 Utility Operations AEP River Operations Generation and Marketing All Other (a) Reconciling Adjustments Consolidated (in millions) Revenues from: External Customers $ 3,406 $ 121 $ 47 $ (5) $ - $ 3,569 Other Operating Segments 20 5 - 8 (33) - Total Revenues $ 3,426 $ 126 $ 47 $ 3 $ (33) $ 3,569 Net Income (Loss) $ 344 $ 3 $ 10 $ (11) $ - $ 346 Nonutility Operations Utility Operations AEP River Operations Generation and Marketing All Other (a) Reconciling Adjustments Consolidated (in millions) Three Months Ended March 31, 2009 Revenues from: External Customers $ 3,267 (d) $ 123 $ 87 $ (19) $ - $ 3,458 Other Operating Segments - (d) 6 5 22 (33) - Total Revenues $ 3,267 $ 129 $ 92 $ 3 |
Derivatives and Hedging
Derivatives and Hedging | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Derivatives and Hedging | 8. DERIVATIVES AND HEDGING OBJECTIVES FOR UTILIZATION OF DERIVATIVE INSTRUMENTS We are exposed to certain market risks as a major power producer and marketer of wholesale electricity, coal and emission allowances.These risks include commodity price risk, interest rate risk, credit risk and to a lesser extent foreign currency exchange risk.These risks represent the risk of loss that may impact us due to changes in the underlying market prices or rates.We manage these risks using derivative instruments. STRATEGIES FOR UTILIZATION OF DERIVATIVE INSTRUMENTS TO ACHIEVE OBJECTIVES Our strategy surrounding the use of derivative instruments focuses on managing our risk exposures, future cash flows and creating value based on our open trading positions by utilizing both economic and formal hedging strategies. To accomplish our objectives, we primarily employ risk management contracts including physical forward purchase and sale contracts, financial forward purchase and sale contracts and financial swap instruments.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. We enter into electricity, coal, natural gas, interest rate and to a lesser degree heating oil, gasoline, emission allowance and other commodity contracts to manage the risk associated with our energy business.We enter into interest rate derivative contracts in order to manage the interest rate exposure associated with our commodity portfolio.For disclosure purposes, such risks are grouped as Commodity, as they relate to energy risk management activities.We also engage in risk management of interest rate risk associated with debt financing and foreign currency risk associated with future purchase obligations denominated in foreign currencies.For disclosure purposes, these risks are grouped as Interest Rate and Foreign Currency. The amount of risk taken is determined by the Commercial Operations and Finance groups in accordance with our established risk management policies as approved by the Finance Committee of AEPs Board of Directors. The following table represents the gross notional volume of our outstanding derivative contracts as of March 31, 2010 and December 31, 2009: Notional Volume of Derivative Instruments Volume March 31, December 31, Unit of 2010 2009 Measure (in millions) Commodity: Power 523 589 MWHs Coal 72 60 Tons Natural Gas 137 127 MMBtus Heating Oil and Gasoline 7 6 Gallons Interest Rate $ 194 $ 216 USD Interest Rate and Foreign Currency $ 329 $ 83 USD Fair Value Hedging Strategies We enter 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 our exposure to interest rate risk by converting a portion of our fixed-rate debt to a floating rate.Provided specific criteria are met, thes |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Fair Value Measurements | 9.FAIR VALUE MEASUREMENTS Fair Value Hierarchy and Valuation Techniques 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 our 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 contracts where there is insufficient market liquidity to warrant inclusion in Level 1.We verify our price curves using these broker quotes and classify these fair values within Level 2 when substantially all of the fair value can be corroborated.We typically obtain multiple broker quotes, which are non-binding in nature, but are based on recent trades in the marketplace.When multiple broker quotes are obtained, we average the quoted bid and ask prices.In certain circumstances, we may discard a broker quote if it is a clear outlier.We use a historical correlation analysis between the broker quoted location and the illiquid locations and if the points are highly correlated we include these locations 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.Long-dated and illiquid complex or structured transactions and FTRs can introduce the need for internally developed modeling inputs based upon extrapolations and assumptions of observable market data to estimate fair value.When such inputs have a significant impact on the measurement of fair value, the instrument is categorized as Level 3. We utilize our trustees external pricing service in our estimate of the fair value of the underlying investments held in the nuclear trusts.Our investment managers review and validate the prices utilized by the trustee to determine fair value.We perform our own valuation testing to verify the fair values of the securities.We receive audit reports of our trustees operating controls and valuation processes.The trustee uses multiple pricing |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Income Taxes | 10. INCOME TAXES We, along with our subsidiaries, file a consolidated federal income tax return.The allocation of the AEP Systems current consolidated federal income tax to the AEP System companies allocates the benefit of current tax losses to the AEP System companies giving rise to such losses in determining their current tax expense.The tax benefit of the Parent is allocated to our subsidiaries with taxable income.With the exception of the loss of the Parent, the method of allocation reflects a separate return result for each company in the consolidated group. We are no longer subject to U.S. federal examination for years before 2001.We have completed the exam for the years 2001 through 2006 and have issues that we are pursuing at the appeals level.The years 2007 and 2008 are currently under examination.Although the outcome of tax audits is uncertain, in managements opinion, adequate provisions for income taxes have been made for potential liabilities resulting from such matters.In addition, we accrue interest on these uncertain tax positions.We are not aware of any issues for open tax years that upon final resolution are expected to have a material adverse effect on net income. We, along with our subsidiaries, file income tax returns in various state, local and foreign jurisdictions.These taxing authorities routinely examine our tax returns and we are currently under examination in several state and local jurisdictions.We believe that we have filed tax returns with positions that may be challenged by these tax authorities.However, management believesthat the ultimate resolution of these audits will not materially impact net income.With few exceptions, we are no longer subject to state, local or non-U.S. income tax examinations by tax authorities for years before 2000. Federal Legislation The Patient Protection and Affordable Care Act and the related Health Care and Education Reconciliation Act (Health Care Acts) were enacted in March 2010.The Health Care Acts amend tax rules so that the portion of employer health care costs that are reimbursed by the Medicare Part D prescription drug subsidy will no longer be deductible by the employer for federal income tax purposes effective for years beginning after December 31, 2012.Because of the loss of the future tax deduction, a reduction in the deferred tax asset related to the nondeductible OPEB liabilities accrued to date was recorded in March 2010.This reduction did not materially affect our cash flows or financial condition.For the three months ended March 31, 2010, deferred tax assets decreased $56 million, partially offset by recording net tax regulatory assets of $35 million in our jurisdictions with regulated operations, resulting in a decrease in net income of $21 million. |
Financing Activities
Financing Activities | |
3 Months Ended
Mar. 31, 2010 | |
Financing Activities | |
Debt Disclosure | 11. FINANCING ACTIVITIES Long-term Debt March 31, December 31, Type of Debt 2010 2009 (in millions) Senior Unsecured Notes $ 12,423 $ 12,416 Pollution Control Bonds 2,263 2,159 Notes Payable 316 326 Securitization Bonds 1,909 1,995 Junior Subordinated Debentures 315 315 Spent Nuclear Fuel Obligation (a) 265 265 Other Long-term Debt 88 88 Unamortized Discount (net) (45 ) (66 ) Total Long-term Debt Outstanding 17,534 17,498 Less Portion Due Within One Year 1,253 1,741 Long-term Portion $ 16,281 $ 15,757 (a) Pursuant to the Nuclear Waste Policy Act of 1982, IM (a nuclear licensee) has an obligation to the United States Department of Energy for spent nuclear fuel disposal.The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983.Trust fund assets related to this obligation of $306 million at March 31, 2010 and December 31, 2009 are included in Spent Nuclear Fuel and Decommissioning Trusts on our Condensed Consolidated Balance Sheets. Long-term debt and other securities issued, retired and principal payments made during the first three months of 2010 are shown in the tables below. Company Type of Debt Principal Amount Interest Rate Due Date (in millions) (%) Issuances: APCo Pollution Control Bonds $ 18 4.625 2021 CSPCo Floating Rate Notes 150 Variable 2012 OPCo Pollution Control Bonds 86 3.125 2043 SWEPCo Senior Unsecured Notes 350 6.20 2040 SWEPCo Pollution Control Bonds 54 3.25 2015 Total Issuances $ 658 (a) The above borrowing arrangements do not contain guarantees, collateral or dividend restrictions. (a) Amount indicated on statement of cash flows of $652 million is net of issuance costs and premium or discount. Company Type of Debt Principal Amount Paid Interest Rate Due Date (in millions) (%) Retirements andPrincipal Payments: AEP Senior Unsecured Notes $ 490 5.375 2010 SWEPCo Pollution Control Bonds 54 Variable 2019 Non-Registrant: AEP Subsidiaries Notes Payable 4 Variable 2017 AEGCo Senior Unsecured Notes 4 6.33 2037 TCC Securitization Bonds 32 5.56 2010 TCC Securitization Bonds 54 4.98 2010 Total Retirements and Principal Payments $ 638 As of March 31, 2010, trustees held, on our behalf, $303 million of our reacquired auction-rate tax-exempt long-term debt. In April 2010, OPCo retired $400 million of variable rate Senior Unsecured Notes due in 2010 and IM issued $85 million of 4.00% Notes Payable due in 2014. Dividend Restrictions The holders of our common stock are entitled to receive the dividends declared by our Board of Directors provided funds are legally available for such dividends.Our income derives from our common stock equity in the earnings of our utility subsidiaries.Various financing arrangements, charter provisions and regulatory requirements may impose certain restrictions on the ab |
Company-wide Staffing and Budge
Company-wide Staffing and Budget Review | |
3 Months Ended
Mar. 31, 2010 | |
Notes to Financial Statements [Abstract] | |
Company-wide Staffing and Budget Review | 12. COMPANY-WIDE STAFFING AND BUDGET REVIEW In April 2010, we began initiatives to decrease both labor and non-labor expenses with a goal of achieving significant reductions in operation and maintenance expenses.One initiative is to offer a one-time voluntary severance program.Participating employees will receive two weeks of base pay for every year of service.It is anticipated that more than 2,000 employees will accept voluntary severances and terminate employment no later than May 2010.The second simultaneous initiative will involve all business units and departments seeking to identify process improvements, streamlined organizational designs and other efficiencies that can deliver additional lasting savings.There is the potential that actions taken as a result of this effort could lead to some involuntary separations.Affected employees would receive the same severance package as those who volunteered. We expect to record a charge to expense in the second quarter of 2010 related to these initiatives.At this time, we are unable to predict the impact of these initiatives on net income, cash flows and financial condition. |
Document Information
Document Information | |
3 Months Ended
Mar. 31, 2010 | |
Document Information [Text Block] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2010-03-31 |
Entity Information
Entity Information (USD $) | |
3 Months Ended
Mar. 31, 2010 | |
Entity [Text Block] | |
Entity Registrant Name | AMERICAN ELECTRIC POWER CO INC |
Entity Central Index Key | 0000004904 |
Current Fiscal Year End Date | --12-31 |
Entity Well Known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | No |
Entity Filer Category | Large Accelerated Filer |
Entity Public Float | $1,381,099,818 |
Entity Common Stock Shares Outstanding | 478,873,651 |
Document Fiscal Year Focus | 2,010 |
Document Fiscal Period Focus | FY |