Summary
American Electric Power (AEP) and its subsidiaries filed this Form 8-K to report on an order issued by the Federal Energy Regulatory Commission (FERC) on November 26, 2008. The FERC order mandates the reallocation of pre-tax trading margins from off-system sales between AEP's East and West operating companies for the period of June 2000 to March 2006. This reallocation is based on the System Integration Agreement. The order requires AEP to issue refunds with accrued interest to the AEP West Companies. Preliminary estimates indicate that AEP East Companies may need to transfer up to approximately $250 million to the AEP West Companies. Of this amount, the AEP West Companies would retain approximately $99 million (before tax), with the remaining approximately $151 million to be returned to ratepayers, subject to filings with respective public service commissions. AEP intends to seek a rehearing of this order.
Key Highlights
- 1FERC order mandates reallocation of off-system sales trading margins from June 2000 to March 2006.
- 2AEP East Companies may transfer up to $250 million to AEP West Companies, including accrued interest.
- 3AEP West Companies will retain an estimated $99 million (pre-tax) of the transferred funds.
- 4Approximately $151 million of the transferred funds will be designated for return to ratepayers.
- 5The consolidated estimated impact on AEP's net income is a decrease of $92 million.
- 6AEP plans to seek a rehearing of the FERC order.