8-KOther Events

AMERICAN ELECTRIC POWER CO INC 8-K Report, Corporate Update (Aug 24, 2006)

Filed August 24, 2006For Securities:AEP

Summary

This 8-K filing from AMERICAN ELECTRIC POWER CO INC (AEP) and its subsidiaries (collectively, the "AEP East Companies") addresses a significant development concerning Seams Elimination Cost Allocations (SECA) revenues collected between December 1, 2004, and March 31, 2006. An administrative law judge (ALJ) at the Federal Energy Regulatory Commission (FERC) issued an initial decision on August 10, 2006, finding the SECA rate design flawed and unfairly discriminatory. The ALJ's decision proposes disallowing $126 million of the $150 million in unsettled SECA revenues, which were previously recorded by the AEP East Companies subject to refund. The AEP East Companies strongly disagree with the ALJ's findings, asserting that they conflict with prior FERC decisions or are otherwise without merit. The company plans to vigorously appeal the decision and will file exceptions by September 11, 2006. This matter is material as it directly impacts a substantial amount of previously recognized revenue, and the outcome of the appeal will have financial implications for the company.

Key Highlights

  • 1An ALJ at the FERC issued an initial decision on August 10, 2006, regarding SECA revenues collected by AEP East Companies between December 1, 2004, and March 31, 2006.
  • 2The ALJ found the SECA rate design flawed and unfairly discriminatory, proposing to disallow $126 million of unsettled SECA revenues.
  • 3Approximately $150 million in SECA revenues remain unsettled with customers.
  • 4AEP East Companies recorded approximately $220 million of SECA revenues, all of which were subject to refund.
  • 5The company strongly disagrees with the ALJ's decision and intends to vigorously appeal the findings.
  • 6AEP East Companies will file exceptions to the ALJ's decision by September 11, 2006.

Frequently Asked Questions

SECA revenues are charges collected by the AEP East Companies to replace revenues lost from the FERC's elimination of rates for through-and-out transmission service. These revenues were collected between December 1, 2004, and March 31, 2006, and were subject to refund pending a determination by the FERC on their appropriateness.

The ALJ's initial decision, if upheld, could lead to the disallowance of $126 million of the $150 million in unsettled SECA revenues. This represents a significant portion of the $220 million in SECA revenues that were collected subject to refund.

AEP East Companies believe that major portions of the ALJ's findings conflict with previous FERC decisions or are without merit. They plan to vigorously appeal the decision and will file exceptions by September 11, 2006.

AEP East Companies must file exceptions to the ALJ's initial decision by September 11, 2006. Replies to these exceptions are due by October 2, 2006. The ultimate decision will be made by the FERC.