Summary
American Electric Power Company (AEP) announced a material impairment related to regulatory disallowances from the Public Service Commission of West Virginia (WVPSC). The WVPSC's final order will result in AEP recording a pre-tax, non-cash disallowance of approximately $222 million in the fourth quarter of 2023. This disallowance stems from under-recovered Expanded Net Energy Cost (ENEC) regulatory asset balances for Appalachian Power Company (APCo) and Wheeling Power Company (WPCo). While a significant portion of the ENEC balance was disallowed, the companies will be permitted to recover the remaining $321 million over a ten-year period starting September 1, 2024. Importantly, AEP has stated that this disallowance will be excluded from its 2023 Operating Earnings (a non-GAAP measure). Furthermore, AEP is reaffirming its previously issued financial guidance for 2024 Operating Earnings, its long-term earnings growth rate projection of 6%-7%, and its FFO/Debt target of 14%-15%, indicating confidence in its ongoing operational and financial targets despite this regulatory setback.
Key Highlights
- 1AEP to record a pre-tax, non-cash disallowance of approximately $222 million due to WVPSC order.
- 2The disallowance is related to under-recovered ENEC regulatory asset balances for APCo and WPCo.
- 3Remaining $321 million of ENEC balance to be recovered over ten years, starting September 2024.
- 4Disallowance will be excluded from AEP's 2023 Operating Earnings (non-GAAP).
- 5AEP reaffirms its 2024 Operating Earnings guidance.
- 6AEP reaffirms its projected long-term earnings growth rate of 6%-7%.
- 7AEP reaffirms its projected FFO/Debt target of 14%-15%.