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.