8-KOther Events

AMERICAN ELECTRIC POWER CO INC 8-K Report, Corporate Update (Aug 16, 2021)

Filed August 16, 2021For Securities:AEP

Summary

American Electric Power Company (AEP) filed an 8-K on August 16, 2021, to report on a significant legal development concerning its subsidiary, Southwestern Electric Power Company (SWEPCo), and its Turk Plant. The Texas Third Court of Appeals reversed a previous decision, ruling that Allowance for Funds Used During Construction (AFUDC) related to the Turk Plant should be included in a previously imposed capital cost cap. This decision could result in a pre-tax disallowance of $80 million to $100 million for SWEPCo, with potential customer refunds ranging from $0 million to $160 million for past revenues, and an annual reduction in future revenues of approximately $15 million.

Key Highlights

  • 1Texas Court of Appeals ruled that AFUDC for SWEPCo's Turk Plant is included in the Texas Capital Cost Cap.
  • 2This ruling reverses a prior decision that excluded AFUDC from the cap.
  • 3Potential pre-tax net disallowance for SWEPCo estimated between $80 million and $100 million.
  • 4Possibility of customer refunds ranging from $0 million to $160 million related to past collected revenues (February 2013 - July 2021).
  • 5Annual reduction in SWEPCo's future revenues estimated at approximately $15 million.
  • 6SWEPCo disagrees with the ruling and intends to challenge it.
  • 7The case has been remanded to the Public Utility Commission of Texas (PUCT) for further proceedings.

Frequently Asked Questions

The filing concerns a legal dispute over whether Allowance for Funds Used During Construction (AFUDC) related to SWEPCo's Turk Plant should be included in a previously established Texas Capital Cost Cap. The Texas Third Court of Appeals ruled in favor of including AFUDC, reversing prior decisions.

If the ruling stands, SWEPCo could face a pre-tax disallowance of $80 million to $100 million. Additionally, there's a potential for customer refunds between $0 million and $160 million for past revenues and an ongoing annual reduction in future revenues of approximately $15 million.

SWEPCo disagrees with the Court of Appeals' decision and plans to challenge the ruling. The case will be remanded to the Public Utility Commission of Texas (PUCT) for further proceedings.

The dispute dates back to the PUCT's original order on the Turk Plant's base rate filing, with the Texas Capital Cost Cap being imposed previously, and subsequent appeals and court decisions over several years, including a 2014 rehearing and a 2017 district court decision.