Summary
This 8-K filing from American Electric Power Company, Inc. (AEP) and its subsidiary AEP Texas Central Company (TCC) provides an update on a legal proceeding concerning a "true-up" order from the Public Utility Commission of Texas (PUCT). Initially, a Texas District Court judge had indicated a reversal on the method used to value TCC's nuclear plant's stranded costs, favoring the Excess Cost Over Market (ECOM) method over the sale of assets method. This had the potential for significant impact on recoverable costs. The court also ruled the PUCT erred in its use of a specific carrying cost rate and improperly reduced stranded costs during a sales process. However, in a subsequent development reported on March 6, 2007, the judge reversed his earlier preliminary determination regarding the valuation method for the nuclear plant. The sale of assets method, as determined by the PUCT, has been reinstated. While this removes the need for further arguments on that specific point, the court's preliminary findings that the PUCT erred in its use of the carrying cost rate and in reducing stranded costs due to the sales process remain unchanged. These remaining issues could still have a material impact, either favorable or unfavorable, on TCC's financial position.
Key Highlights
- 1AEP Texas Central Company (TCC) is involved in a legal dispute regarding a Texas Public Utility Commission (PUCT) true-up order.
- 2The Texas District Court initially indicated it would not uphold the PUCT's method for valuing TCC's nuclear plant stranded costs.
- 3The court's preliminary ruling favored the Excess Cost Over Market (ECOM) method over the PUCT's sale of assets method for nuclear plant stranded costs.
- 4A subsequent court letter on March 6, 2007, reversed the preliminary determination, reinstating the PUCT's sale of assets method for nuclear plant stranded costs.
- 5The court still maintains that the PUCT erred in its determination of the carrying cost rate to be used in the true-up.
- 6The court also preliminarily found that the PUCT improperly reduced stranded costs related to the sales process.
- 7These latter two points could still result in a material favorable or unfavorable change to TCC's recoverable carrying costs and stranded costs.